Applicators Of Wisconsin , Inc , Single/Joint Employers And/Or Alter Egos

PERMA COATINGS 803 Perma Coatings, Inc and its Director/Share- holders-Donald R Peterson, Clifford C Lewis, Theodore Zander, and Everette C Liddicoat, and Spartan Group of McFarland, Inc, a/k/a Applicators of Wisconsin, Inc, Single/Joint Employers and/or Alter Egos and Central Wis- consin Carpenters District Council, United Brotherhood of Carpenters and Joiners of America, Construction and General Laborers Union Local No 464, Laborers International Union of North America, AFL-CIO, and, Oper- ative Plasterers' and Cement Masons' Associa- tion of the United States and Canada, Local 204, AFL-CIO Case 30-CA-9292 April 25, 1989 DECISION AND ORDER By CHAIRMAN STEPHENS AND MEMBERS JOHANSEN AND CRACRAFT On April 27, 1988, Administiative Law Judge Robert G Romano issued the attached decision The General Counsel filed exceptions and a sup porting brief, and Respondent Applicators of Wis consin, Inc filed an answering brief The National Labor Relations Board has delegat ed its authority in this proceeding to a three- member panel The Board has considered the decision and the record in light of the exceptions and briefs and has decided to affirm the judge's rulings, findings, I and conclusions and to adopt the recommended Order The record establishes and the judge found that Respondent Perma Coatings, Inc was insolvent and ceased doing business in December 1985, and that on January 15, 1986,2 it sold its equipment and certain other assets to Respondent Spartan Group of Wisconsin, Inc, which in May 1986 became known as Applicators of Wisconsin, Inc On Octo- ber 11 the Company was sold to Eugene Kohl and reorganized under new ownership and officers 3 There is no successorship issue raised by the com- plaint, and the judge found that the Respondents are neither a single or joint employer nor alter egos of each other Accordingly, the judge concluded that the Respondents did not violate Section 8(a)(5) and (1) of the Act by Spartan/Applicators and I The General Counsel has excepted to some of the judge s credibility findings The Board s established policy is not to overrule an administra tive law judge s credibility resolutions unless the clear preponderance of all the relevant evidence convinces us that they are incorrect Standard Dry Wall Products 91 NLRB 544 (1950) enfd 188 F 2d 362 (3d Cir 1951) We have carefully examined the record and find no basis for re versing the findings 2 Unless otherwise indicated all dates are 1986 a Following the terms employed by the judge Spartan/Applicators refers to the corporate entity during the period between January 15 and October 11 1986 and Applicators/Kohl refers to the corporate entity following the stock purchase by Kohl on October 11 1986 Applicators/Kohl failing and refusing to bargain with the Charging Party Unions and adhere to the terms of the collective-bargaining agreements be tween the Unions and Perma Coatings, or by deal- ing directly with employees In so finding, the judge deemed that the Respondents did not share substantially common ownership 4 We agree Perma Coatings was founded and incorporated by Donald Peterson, its president, who owned a 27-percent share of the Company At all material times, the other owners and officers of Perma Coatings were Theodore Zander, vice president, 5 and Clifford Lewis, secretary-treasurer, each of whom owned 27 percent, and Everett Liddicoat, who owned a 19-percent share Peterson and Lewis managed the day-to-day operations of Perma Coat- ings until 1980, when they became involved in the daily management of Insul Crete, a corporation the two formed to market an insulation system that Pe- terson had developed 6 Thereafter, five different individuals were hired successively to manage Perma Coatings and to estimate jobs During peri- ods that Perma Coatings was without an estimator- manager, employee James A Miller estimated jobs, aided occasionally by employee Brian Shields Following Perma Coatings' cessation of business in 1985, Peterson formed Spartan/Applicators He was its president and sole owner At the time of Spartan/Applicators' formation, Peterson met with former Perma Coatings employees Brian Shields, Scott Serstad, and James A Miller and, though the details of ownership were not worked out com- pletely, the latter three agreed to run the Company with the understanding that they would eventually own it Additionally, at the time of the establish- ment of Spartan/Applicators, Peterson was advised by a Dow Chemical representative at Insul-Crete (see fn 6) that he would not be paid his full Insul- Crete salary if he managed Spartan/Applicators By agreement of Miller, Shields, and Serstad, Tim- othy Parrish, who had no prior association with the Respondents, was hired as Spartan/Applicators' estimator-manager in February and the Company commenced operations Also hired at this time were James F Miller and James Duesterbeck and former Perma Coatings employee Zander With the exception of a brief period in August following 4 The judge did find however that Perma Coatings and Spartan/Applicators had substantially identical equipment premises and supervision and some common customers s Zander was employed as a plasterer at Perma Coatings and later was one of Spartan/Applicator s initial hires Despite his being an officer of Perma Coatings there is no evidence that he managed or supervised op erations there ' In 1984 Dow Chemical Company became the principal owner of Insul Crete No party contends that Insul Crete and the Respondents constitute a single employer or alter egos 293 NLRB No 101 804 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD Parrish's discharge, Peterson played no role in the day-to-day management of Spartan/Applicators He did, however, have a hand in managing the Company with respect to certain financial transac- tions, such as the purchase of Perma Coatings' equipment In Superior Export Packing Co, 284 NLRB 1169, 1170 (1987), the Board stated [W]e find that the lack of substantially identi- cal common ownership precludes a finding that Meadowland was an alter ego of Superi- or Although common ownership is not a pre- requisite for an alter ego finding, the Board has found such a relationship absent common ownership only where both companies were either wholly owned by members of the same family or nearly totally owned by the same in- dividual or where the older company contin- ued to maintain substantial control over the business claimed to have been sold to the new company It is evident that Peterson's 27-percent owner- ship of Perma Coatings and his 100-percent owner- ship of Spartan/Applicators is not subtantially identical ownership 7 Moreover, Perma Coatings did not, either itself or through Peterson, control Spartan/Applicators' operations Perma Coatings was operationally defunct at the time Spartan/ Applicators was created and commenced oper- ations Although this Company's purchase of Perma Coatings' equipment helped alleviate a frac- tion of Perma Coatings' debt, receipt of the pay ment by the latter does not establish its control over the former Further, Peterson credibly testi fled that he formed Spartan/Applicators so that it could purchase the defunct Perma Coatings' power scaffolding at a fair price 8 Peterson's limited in- volvement in Spartan's financial management is in sufficient to support a finding that Spartan/ Applicators was controlled by Perma Coatings 9 In ° Compare Campbell Hams Electric 263 NLRB 1143 (1982) enfd 719 F 2d 292 (8th Cir 1983) in which the Board found that an alter ego rela tionship existed between Campbell Electric Inc and its predecessor Campbell Hams Electric Inc Tom Campbell owned 49 percent of Campbell Hams his wife 1 percent and he owned 100 percent of Camp bell Electric Inc His share of the predecessor was substantially greater than Peterson s share of Perma Coatings Cf Hawg N Action Inc 281 NLRB 56 (1986) 8It is uncontroverted that Perma Coatings was the only Company of its type in the State using such scaffolding and that a forced sale would result in little relief of Perma Coatings overwhelming debt Although the sale was not effected through a formal sealed bid procedure there is no suggestion that the equipment was purchased at anything other than a fair price 8 Additionally the sale of Spartan/Applicators to Kohl in October 1986 resulted in a total divestment of Peterson s ownership interest or re sidual involvement in the Company these circumstances, we are persuaded by the ab- sence of evidence of intervention by Peterson or any other Perma Coatings officer in the direction of Spartan/Applicators that the one did not control the other Compare, Hydro Logistics, 287 NLRB 602 (1987) Finally, in affirming the judge's decision that no alter ego relationship exists among the Respond- ents, we find significant the absence of any antiun ion motive in the formation and subsequent sale of Spartan/Applicators The record clearly establishes that Perma Coatings sustained serious losses from 1980 through 1985 when Peterson and Lewis de- voted their energies to Insul-Crete Two unsuccess- ful attempts were made in 1984 and 1985 to trans- fer Perma Coatings to experienced employees, and during the summer of 1985, it ceased bidding jobs in anticipation of closing Among other things, Perma Coatings was being pressured by McFarland Bank to develop a repayment scheme (its second, excluding the original repayment terms) on the $266,000 balance of a loan insured by the Small Business Administration, a tax lien was placed against it in September 1985, and in October 1985, it was sued by union trust funds for arrearages Perma Coatings and the Charging Party Unions ul- timately reached a settlement on the amount to be paid to the trust funds, premised on Perma Coat- ings' assertions that it was closing Furthermore, Peterson's testimony that Perma Coatings and the Unions enjoyed a good relationship over the years is not controverted While it is true that a sincere motivation for the creation or operation of a new corporation does not preclude finding alter ego status, the absence of union animus nevertheless generally militates against finding a "disguised con tinuance' of the predecessor 10 Accordingly, we agree with Judge Romano that the Respondent did not violate the Act ORDER The National Labor Relations Board adopts the recommended Order of the administrative law judge and orders that the complaint is dismissed 10 See Kenmore Contracting Co 289 NLRB 336 339 (1988) Dennis Selby Esq for the General Counsel Nicholas J Loniello Esq of Madison Wisconsin for the Respondent Perma Coatings, Inc, and its named Directors/Shareholders Timothy J Casper Esq (Coyne & Niess) of Madison Wisconsin for Respondent Applicators of Wisconsin, Inc Kurt C Kobelt Esq and Marianne Goldstein Robbins Esq (Previant Goldberg Uelmen Graatz Miller & Brueggman S C) of Milwaukee Wisconsin, for PERMA COATINGS 805 Charging Party Central Wisconsin Carpenters District Council United Brotherhood of Carpenters and Join ers of America DECISION STATEMENT OF THE CASE ROBERT G ROMANO, Administrative Law Judge I heard this case at Madison, Wisconsin on 16-17 April 1987 Central Wisconsin Carpenters District Council United Brotherhood of Carpenters and Joiners of Amer ica (Carpenters District Council) and Construction and General Laborers Union Local No 464, Laborers Inter national Union of North America AFL-CIO (Laborers Local 464), and Operative Plasterers and Cement Masons International Association of the United States and Canada, Local 204 AFL-CIO (Plasterers Local 204), jointly filed an original 8(a)(1) (3), and (5) charge in Case 30-CA-9292 on 8 August 1986 against Perma Coat ings, Inc (Coatings) and Applicators of Wisconsin Inc (Applicators) The original complaint issued on 19 Sep tember 1986, alleging certain violations of Section 8(a)(1) and (5) of the Act, including , inter alia, that Respondent Applicators was a successor employer to Coatings The complaint also alleged that in violation of Section 8(a)(3) Respondent Applicators had discriminatorily refused to employ 10 (named) former employees of Coatings On 3 October 1986, Respondents Coatings and Applicators (jointly) filed an answer denying the commission of any of the above alleged unfair labor practices, and, inter alia, they asserted that on approximately 15 December 1985 Respondent Coatings had ceased its operations, and that on 8 July 1986 Coatings filed petition for chapter 7 bankruptcy, pursuant to which Coatings assets are being liquidated Respondents then asserted that each of the 10 persons named and alleged as discriminatorily denied em ployment by Respondent Applicators (a) were offered employment with Respondent Applicators and (b) they may immediately commence employment with Respond ent Applicators On 9 April 1987, the General Counsel, on behalf of the Board by the Regional Director for Region 30 issued an order essentially approving a request of Charging Party (Unions) on 7 April 1987 to withdraw their charge alle gation that ( 1) Respondent Applicators is a successor to Respondent Coatings, and (2) that Respondent Applica tors earlier had discriminatorily refused to hire the cer tam named employees in violation of Section 8(a)(3) On 10 April 1987 an amended complaint issued in the above captioned manner alleging certain violations of Section 8(a)(1) and (5) of the Act by Respondent Coat ings and Respondent Spartan Group of McFarland, Inc (Spartan) a/k/a Applicators Allegations and Contentions Essentially it is now alleged that Respondent Spartan a/k/a Applicators (Spartan/Applicators) has continued as the employing entity of and for Respondent Coatings and that Respondent Coatings and Respondent Spar tan/Applicators are a single and/or joint employer and/or alter egos It is alleged that Respondents , as such, have failed and refused to bargain collectively and in good faith with Charging Party Unions, in violation of Section 8(a)(5) and (1) that since 7 February 1986 they have failed to abide by and adhere to certain collective bargaining agreements existing between Respondent Coatings and each of the Charging Party Unions respec tively, and that they have bypassed the Charging Party Unions as the exclusive bargaining representatives in their respective appropriate bargaining units by engaging in certain unilateral acts, and by certain direct dealings with bargaining unit employees regarding their hire tenure, and terms and conditions of employment The complaint explicitly alleges that on or about 15 March 1986, with the authorization and consent of Re spondent Coatings (named) director/shareholders, and for their individual benefit, Respondent Spartan pur chased the assets of Respondent Coatings, that on 2 May 1986, Respondent Spartans corporate name was changed to Applicators without any accompanying change in ownership and/or operations and that by virtue of Re spondent Spartan/Applicators maintenance of the em ploying entity to and for Respondent Coatings, the Charging Party Unions have been and continue to be the exclusive bargaining representatives of the respective ap propriate bargaining units At outset of hearing, counsel for the General Counsel further confirmed that in ac cordance with the amended complaints specific naming of directors/shareholders of Coatings, the General Coun sel would seek an imposition of a personal liability on Respondent Coatings named directors/shareholders for any violation of the Act found By answer(s) and affirmative defenses dated 15 April 1987, including as additionally filed at hearing Respond ents Coatings (and essentially its directors/shareholders) and Applicators have denied the commission of any of the unfair labor practices presently alleged in the com plaint Respondents have additionally raised in their answer(s) certain affirmative defenses Firstly it is assert ed that the Unions waived or are estopped to (now) assert an alter ego claim by reason of contended (prior) union delay and neglect of work force At hearing and/or in briefs the Respondents raised related 10(b) issues for resolution as to all (or certain) of Charging Party Unions The General Counsel contends however that the Charging Party Unions were unaware of and could not have reasonably become aware of Respond ents failure to abide by and adhere to the collective bar gaining agreements until on or about 2 July 1986 at which time the Unions received their first notification from Respondents regarding the interrelationship result ing from Respondent Coatings sale of its assets to Re spondent Spartan/Applicators Respondents have otherwise denied they are a single and/or joint employer and/or alter ego, and in support, they raise varied counterclaims and/or dispute the com plaint s related base allegations that Respondents have shared common officers ownership directors, manage ment supervision, equipment, premises, facilities busi ness purposes and have formulated a common labor policy affecting employees of their operations Regarding ownership and otherwise alleged individual liability of Coatings shareholders/directors the Respond 806 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD ents in answer(s) have specifically denied the Coatings asset sale was for the individual benefit of the share holders of Coatings and, affirmatively (first) allege that Coatings was insolvent and that the Coatings asset sale was consummated and structured for the benefit of Spartan/Applicators, and for certain key employees who had an expectation to become controlling owners of Spartan/Applicators under a certain oral stock bonus plan Respondents next defend that Donald R Peterson as a minority (27 percent) shareholder of Respondent Coatings lawfully became the 100 percent owner of Spartan/Applications which purchased the business and assets of Coatings incident to a (prospective) Coatings chapter 7 bankruptcy and after a bona fide business fail ure of Coatings despite earlier good faith efforts of all shareholders at rehabilitation of Coatings Respondents also assert that Peterson has now lawfully divested his ownership of Spartan/Applicators Respondents contend the entire transaction was one motivated by compelling economic consideration, namely to obtain a reasonable value for an insolvent Coatings assets and to complete a planned and eventual transfer of ownership and control to key employees Respondents relatedly contend that (though) the sale of Coatings assets to Spartan/Appli cators and Peterson s divestiture of Spartan/Applicators ownership were separated by 10 months, under the facts and circumstances shown here they are more properly to be viewed as but a single transaction Respondents would have observed that the transaction was not motivated by any antiunion sentiment, but by compelling economic necessity With regard to discrimi natory motive the General Counsel does not now con tend to the contrary Indeed, the General Counsel con cedes a severe economic fiscal position of Coatings at the end of 1985 but counters that in the circumstances of this case the real economic consideration for information of Spartan/Applicators is shown to be one of escape from the union contractors which under applicable Board precedent is not available to Coatings its share holders, or to its alter ego Spartan a/k/a Applicators As stated in brief, it is the General Counsels more spe cific cross contention that the action of Respondent Coatings (and/or its director/shareholders) even if as otherwise claimed economically motivated, was not available to it (them) under longstanding and existing Board precedent of Oak Cliff Golam Baking Co 202 NLRB 614, 616 (1973) With contrary reliance on hold ing of Textile Workers v Darlington Co, 380 US 263 (1965), and on holdings of Board and Court alter ego precedent Respondents essentially advance public policy contentions that (1) as a minority stockholder of Coat ings, Peterson was not precluded by an imposition of alter ego status, from acting as he did to prevent a forced sale of Coatings' assets, in order to effect a great est possible (asset) recovery from a wholly failed bust ness and (2) Spartan/Applicators as long planned and eventually constituted has no commonality of ownership with Coatings, and consequently is should not be found to be Coatings' alter ego Effectively Respondents appear four in possible dispar ate interests Coatings shareholder/directors of Coatings, irdividually Spartan/Applicators and Applicators as presently constituted The case presentment for resolu tion is heavily oriented to financial interest addressments It is convenient to address all the facts chronologically However, certain material events appearing in major conflict are the more conveniently addressed in part II D, infra On the entire record, from my observation of the de meanor of the witnesses and after due consideration of the briefs of General Counsel and Respondents Coatings and its named directors and shareholders and Respond ent Applicators, on or about 5 June 1987, I make the fol lowing FINDINGS OF FACT I JURISDICTION Jurisdiction is not in issue In material times Perma Coatings, Inc in a Wisconsin corporation with an office and place of business in McFarland, Wisconsin, and pn manly engaged in the installation of exterior insulation, and related plaster/construction work During the calen dar year ending 31 December 1985, Coatings purchased and received at its McFarland, Wisconsin facility, prod ucts, goods, and materials valued in excess of $50 000 di rectly from points located outside the State of Wisconsin Spartan Group of McFarland, Inc (Spartan) later (by name change) Applicators of Wisconsin, Inc (Applica tors) is a Wisconsin corporation with an office an place of business in McFarland, Wisconsin, and is primarily en gaged in the installation of exterior insulation and related plaster/construction work During the calendar year ending 31 December 1986 Spartan/Applicators per formed services valued in excess of $50 000 for employ ers located in states other than the State of Wisconsin Apart from (amended) complaint allegations that the same is an alter ego and/or single and/or joint employer with Coatings (each of said allegations being denied by Respondents) the amended complaint has otherwise al leged, and Respondents in answer admit and in any event I presently find that by virtue of its aforesaid busi ness operations conducted in 1985 Coatings is and by virtue of the business operations conducted in 1986 Spartan/Applicators is and employer engaged in com merce within the meaning of Section 2(6) and (7) of the Act The amended complaint has also alleged Respondents answer admitted, and I find that Charging Party Unions, Carpenters District Council, Laborers Local 464 and Plasterers Local 204, are each, respectively, a labor orga nization within the meaning of Section 2(5) of the Act However, here they constitute but one joint charging party II THE UNFAIR LABOR PRACTICE ALLEGATIONS A Coatings 1 Coatings origin stock ownership, and officers Donald R. Peterson founded, and incorporated Coat ings in 1967 The original stockholders were Peterson Everett Liddicoat and Thomas Meinders Coatings PERMA COATINGS 807 stockholders in more material times became, and are now, Peterson, Clifford Lewis and Theodore Zander (each of whom owns 27 percent of Coatings stock), and Liddicoat (who owns 19 percent) Peterson is president, Zander is vice president, and Lewis is secretary treasur er The latter four shareholders are also directors of Coatings Until 1980 Peterson and Lewis jointly ran the day to day business operations of Coatings Coatings has regularly employed Zander as a plasterer Coatings em ployed Carolyn Davis as office manager/secretary through mid 1985 At some point earlier, Davis and Coatings attorney, Loniello, became additional directors of Coatings 2 Coatings business operations Coatings business initially was the spraying of a deco rative cement coating on the inside of swimming pools, and the waterproofing of basements Coatings also ap plied a decorative coating to block buildings At this time Coatings essentially used an epoxy coating in its business In 1971-1972 Peterson developed an exterior insulation system (Insul/Crete) This system involved placement of an exterior coating over styrofoam insulation, a trade product manufactured by the Dow Chemical Company (DOW) The Insul/Crete system essentially involved a three phase construction operation Dow brand styro foam is mechanically fastened to the exterior of a build ing Fiberglass mesh, and other accessories (expansion and control points, and stop beads) are installed as neces sary A basecoat of modified Portland cement is then ap plied, which is later covered by a finished coat (of sever al different types) designed to impart an aesthetically pleasing appearance to the buildings exterior Coatings had to first develop a market for the new Insul/Crete exterior insulation system The oil embargo of the early 1970s helped appreciably By 1973-1974 Coatings' principal business operation related to the Insul/Crete exterior insulation system in both supplying the necessary Insul/Crete products and in construction of the exterior insulation system 3 Coatings business location Peterson and Liddicoat are equal partners in another business, Perm Building Company (PBC) PBC owned a number of properties located (essentially) in one geo graphical area Thereon PBC owned and operated a complex of buildings (including certain mini warehouses) which it rented out to various companies Pertinently, through the end of 1985 Coatings leased from PBC one main building located at 4311 Triangle Street McFar land, Wisconsin (Triangle St Bldg) Coatings rented certain additional storage room as well, in a coi.ple of other (PBC) buildings PBC also rented Coatings a fenced lot located directly across the street from the main building There Coatings kept its various construc tion equipment (power scaffolding, trucks, trailers, etc ) when not in use PBC itself maintained an office in the same Triangle St Building In material times Davis han dled the payroll for Coatings Davis however was also responsible for the collection of rents for PBC It ap pears that Peterson had interests in still other businesses operating at the same location, and the record reflects that definitive business lines amongst the businesses were not always maintained 4 Coatings profit picture, formation of Insul/Crete Peterson and Lewis ran the day to day operations of Coatings until 1980 Peterson recalled that in every year but one, from 1973 until 1980, Coatings had operated at a profit However, from a graph (of Coatings profit and losses) compiled by Peterson and Lewis in 1984 (in evi dence as R Exh 11), it would appear that in addition to an approximate loss of $20,000 in 1975, Coatings had ex perienced an approximate $5000 loss in 1977 Generally, however, Coatings had made a profit, and it did so in 1978 and 1979 Coatings fiscal condition would deterio rate substantially (after the formation of Insul/Crete) in 1980, and in the years that followed Peterson testified that he and Lewis (notably them selves constituting majority stockowners of Coatings) de cided that the marketing of Insul/Crete products should be separated, and Coatings thereafter continue in business as a construction applicator In January 1980 they formed Insul/Crete Company (Insul/Crete) The record does not reveal definitively who the original stockhold ers of Insul/Crete were It was stipulated at hearing that the former shareholders of Coatings, together, presently own 16 67 percent interest in Insul/Crete Since 1984, Dow has owned 50 percent There are now a number of other stockholders discussed further In 1980, Insul/ Crete commenced its business operations in adjacent space in the same Triangle St Building Lewis became the first president of Insul/Crete At that point Lewis left the employ of Coatings and began working fulltime for Insul/Crete Peterson is vice presi dent of Insul/Crete, in charge of technical service and development Peterson testified that at first he had worked only part time for Insul/Crete Peterson recalled it was in the fall of 1980 that he began to work fulltime for Insul/Crete, and that by October-November 1980 Peterson asserts he had ceased his day to day oversight of Coatings business operations Essentially that would have coincided with the date of the end of 1980 con struction season In the period 1980-1985, Coatings employed a half dozen estimator/managers, as to whom Peterson summa rized none worked out There is a substantial measure of conflict in the evidence about Peterson s management participation in Coatings business affairs, particularly in 1985, discussed infra Suffice it to presently observe that since 1980 and clearly through 1985 Coatings has oper ated in business essentially as a construction subcontrac tor (applicator) that bid and installed the exterior insula tion system known as Insul/Crete Commencing in 1980, Coatings has purchased its Insul/Crete Styrofoam prod uct supplies from Insul/Crete 5 Coatings collective bargaining agreements Coatings has always operated as a union company In conducting its (Insul/Crete) application business, Coat ings has regularly employed carpenters, plasterers and la 808 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD borers Coatings has entered into and over the years has renewed, collective bargaining agreements with each of the charging party unions The amended complaint has more definitively alleged Respondents answer (as amended) admitted, and/or the record establishes , and I find (a) Carpenters District Council has represented Coatings carpenters for ap proximately 7 years and has entered into several collec tive bargaining agreements , the most recent being effec tive for the period 28 September 1984 through 31 May 1987, (b) Laborers Local 464 has represented Coatings tenders and general laborers for approximately 16 years and has entered into several collective bargaining agree ments, the most recent effective for the period 1 June 1984 through 31 May 1987 , and (c) Plasterers Local 204 has represented Coatings' plasterers and cement masons for many years, with the most recent collective bargain ing agreement being effective from 1 June 1984 through 31 May 1987 Peterson has testified generally , but without apparent contradiction, that though from time to time he has had some disagreements with the unions, he (Coatings) has enjoyed good relations with the unions , and he has been welcomed by unions wherever Coatings did business Pe terson has also testified that he has personally served, and continues to serve on a joint apprenticeship board, for which he has received a plaque commemorating 10 years service Though asserting generally that he always had some flexibility (with the unions) in the conduct of Coatings' construction business, Peterson, in the end, has effectively acknowledged that the successive collective bargaining agreements that Coatings has had with the above unions has determined respectively the wages hours, and working conditions of Coatings above em ployees I so find presently at least through 1985 6 Coatings developed indebtedness and deteriorating fiscal condition a very, very inclusive list' of Coatings assets as securi ty for the SBA loan The SBA loan has been also personally guaranteed by Coatings shareholders, and with still other securities pledged by them and their spouses In any event Peter son and Liddicoat further secured the SBA loan with a mortgage of certain part of PBC owned properties Lewis mortgaged his own personal homestead, and Zander pledged two farm properties, one of which was his homestead b Other loans Coatings also has two other loans outstanding with McFarland The first is a $31 ,000 annually renewable loan, and the second a $6000 loan The $31 000 loan itself is secured by further first or second mortgages of remaining PBC properties owned by Peterson and Liddi coat Peterson has testified credibly that there is no real estate presently owned by PBC that is not in some way encumbered by a mortgage to secure a Coatings debt The General Counsel has not contended that Coatings and PBC have been operated as a single integrated em ployer c Business losses Certain uncontested documentary evidence (e g R Exh 11) and related Peterson testimony, wholly per suades that Coatings lost money in the conduct of its business, in 1980 and in each of the following years through 1985 Peterson , in testifying uncontestedly that the graph (R Exh 11 ) accurately portrays Coatings net profit and losses in the years 1973 through 1983, has of fectively testified that Coatings lost between $50 000- $60 000 in its fiscal year ending in October 1980 some $30 000 similarly in 1981 between $130 000-$ 140 000 in 1982 alone and between $50 000-$60 000 in the fiscal year ending in 1983 a The Small Business Administration loan David Locke is president of McFarland State Bank (McFarland), and Richard Southerland is McFarland s vice president and chief loan officer On 2 June 1980, Coatings obtained a $350 000 loan from McFarland, 90 percent of which loan is guaranteed by the United States Small Business Administration (SBA) McFarland serv ices the loan for SBA This loan is hereinafter referred to simply as the SBA loan At the time McFarland made the SBA loan to Coat ings, McFarland obtained a General Business Security Agreement (GBSA) from Coatings The GBSA is a standard Wisconsin Bankers Association form In execut ing it, Coatings effectively secured the SBA loan with a pledge of all of Coatings' accounts receivable , general in tangibles inventory equipment , fixtures, etc This find ing is based on credited testimony of Respondents wit ness attorney, James Sweet Sweet s practice is conduct ed 70 percent in bankruptcy cases (representing both debtors and creditors) and in related matters I credit At torney Sweet s testimony in these respects including that through the GBSA McFarland and SBA had obtained d Coatings ' interim February 1983 corporate officer plan for a recovery In this period Coatings was quite often late in pay ments on the SBA loan Peterson testified to having nu merous related meetings with president Locke of McFar land as to the financial condition of Coatings According to Peterson, following certain such meetings he and Lewis prepared a letter dated 4 February 1983, which Lewis sent to Locke with the purpose to ease Locke s mind by showing Locke that they had a plan that would reasonably allow Coatings to proceed in a profitable manner Lewis advised Locke specifically that Coatings had had a severe problem with its general manager at the time, that the problem did not come to light until year s end (fiscal 1982), and Lewis outlined the problem to be, in general, these problems were in the area of correct bidding and billings and in public relations with old es tablished customers This coupled with the depressed market resulted in a lower volume of good projects espe cially during the last quarter when we generally do the bulk of our profitable work " PERMA COATINGS Lewis then presented Coatings 1983 plan for recov ery, which described (1) changes already effected that projected a reduction of $80 000 in Coatings overhead expenses (2) a viable repay plan for unsecured creditors one already set in place that would give Coatings time to rebuild, (3) new income in form of Coatings present and anticipated construction work for and commissions prospects in Coatings future business as regional agent for a new Foam Home building project being offered by Cubic Structures (another company based in the Tn angle St Building), (4) Coatings intended increased effort at bidding for jobs, urged as being effective by a report ed 2-1/2 present increase in billings accomplished in recent winter months over compared winter months of immediate past year, (5) employee renewed commitment to work effort, inter alia to preserve their jobs, and (6) Coatings' intention to diversify into related markets in a new manner, now deemed cost feasible Although ack nowleged as a matter not within its control, Lewis also pointed to the current help to a recovery being afforded Coatings in the form of lowered interest rates Although Coatings improved substantially on its 1982 net loss posi tion, Coatings, as noted, still experienced a net loss of be tween $50000-$60000 in the fiscal year ending (Octo ber) 1983 7 Insul/Crete ownership developments, asserted as impacting on Peterson s (and Lewis') intentions with regard to continuing their ownership interests in Coatings As of 5 March 1984, Insul/Crete and Dow has an agreement, inter alia, for Dow's optional purchase of Insul/Crete stock Dow s basic interest was in the mar keting of its styrofoam trade product in exterior insula tion systems At that time Insul/Crete had certain indebt edness with The Northern Trust Company (Northern Trust) Dow was guarantor of Insul/Crete s revolving credit agreement with Northern Trust On 5 July 1984 Dow exercised its options to purchase 50 percent of the outstanding shares of Insul/Crete for a purchase price of $800000 The salient features of the Dow Insul/Crete 5 July 1984 memorandum of understanding (R Exh 10) are as follows First Insul/Crete was to repay as much of debt it owed Northern Trust as was possible, consistent with prudent cash management and the needs of Insul/Crete Dow further agreed to certain terms for extending its guarantee on a revolving credit arrangement between Insul/Crete and Northern Trust Second, the board of di rectors of Insul/Crete was to be restructured to nine di rectors with four directors to be Dow nominees, and re movable and replaceable only by Dow One of the re maining five directors was to be a neutral person with the agreement making provisions for that selection Third the agreement provided that the president of Insul/Crete always was to be a Dow nominee, from Dow director designees, but with certain rights of rejec tion and/or removal by the board of directors Dow also agreed to provide certain ongoing accounting assistance to Insul/Crete, and Insul/Crete agreed to the above changing terms The General Counsel does not contend, and from the above recitement other terms of this agree 809 ment, and the record as a whole, it is readily apparent that Insul/Crete, at least from on and after 5 July 1984 was not a joint single (integrated) employer or alter ego of Coatings, nor is it alleged to be In that regard, and perhaps as most materially related to the issues presented here, the Dow Insul/Crete agree ment itself contained the following specific restriction and/or prohibition placed upon Insul/Crete (I/C) 17 I/C will maintain an arm s length relationship with all other corporations individuals, partner ships, and businesses and will keep all of its assets and affairs separate and distinct from those of others I/C shall avoid paying expenses and making other expenditures for, and providing facilities or services to, others except pursuant to written con tracts Proper charges shall be made by I/C for any expenditures made or services or facilities provided for others I/C employees shall not perform services for others in a manner or at a time or place that is inconsistent with this provision Signing the above Dow Insul/Crete agreement, in addi tion to Lewis Peterson, Zander, and Liddicoat, were 17 other individuals, presumably encompassing all (Insul/ Crete) stockowners and/or other parties with interest in Insul/Crete 8 Coatings 1984 financial statements The record reveals that Coatings had financial state ments prepared on 29 February 1984 (notably prior to the Dow executed agreement regarding optional pur chase of Insul/Crete stock) and 31 October 1984 Only the balance sheet and profit/loss statement, prepared by Coatings accounting firm Robert Tormey and Associ ates, as of 31 October 1984 (R Exh 13) has been placed in evidence It shows Coatings as having a negative worth then approximating $285,000, and a net loss for 1984 approximating $52 000 Coatings professional ac countants have made certain disclaimers on the actual fi nancial position as portrayed by the compilations they prepared in the 31 October 1984 statement (the basis for which are not explicated nor appear otherwise adequate ly identified of record) However it appears of record that not only, inter aha was the 31 October 1984 Coat ings financial statement reported in the bankruptcy peti tion, and it submitted to Attorney Sweet earlier in No vember 1985, but Peterson has testified the compilations were accurate and relied upon and that it had served as basis for tax filing Moreover the General Counsel has not only not contended accuracy to be the contrary but seemingly has conceded such 9 Coatings special meeting of stockholders in 1985 and attempted stockholder cash rescue and authorized stock gift plan and provision for an alternative chapter 11 reorganization plan Peterson testified that in 1984, McFarland s Locke was concerned about Coatings getting a real manager for the business, and Locke also wanted Coatings to come up with (another) plan to prove the Company could go for 810 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD ward, or, alternatively, McFarland should not consider some more serious action (Locke did not testify in this proceeding) On 15 January 1985 Coatings' shareholders and direc tors met and ascribed to action (under Wisconsin law) as at special meeting of shareholders and directors Minutes of that meeting (R Exh 14) reflect this meeting was the culmination of a series of meetings with Coatings pri mary secured creditor, McFarland The minutes recite that Coatings was then in substantial financial distress, suffered from a lack of key management personnel, pres ently lacked working capital, and anticipated a cash crunch in its plans for payment of creditors The minutes explicitly state that McFarland therefore considers its loan at risk " This time, in addition to the four shareholder/directors (Peterson, Lewis Zander, and Lid dicoat) Davis and Attorney Loniello are shown as par ticipating directors, but not shareholders, of Coatings On 15 January 1985 Coatings shareholders/directors and directors authorized Peterson to negotiate for a transfer of all Coatings common stock to key employees in return for management and success of Coatings No consideration was to be paid for the stock at the time, but the corporation, under the new ownership had to conversant to pay the debt to McFarland on which the existing shareholders were personally liable Notably, at this time, it was resolved that Peterson was to investigate alternatively a chapter 11 reorganization and a business plan for Coatings rehabilitation Coatings was also significantly authorized to enter a written agreement with all of its shareholders whereby the shareholders would loan Coatings $45,000 $15,000 to be received before 30 June 1985 and $30,000 before 31 December 1985 These loan proceeds were to be used and applied first to obligations on which the (existing) officers/directors/shareholders had personal liability It was also resolved that the shareholders/directors would meet again in January 1986 for the purpose of review ing the corporations prospects for rehabilitation and making final decisions regarding bankruptcy rehabilita tion As of 15 January 1985, it would thus reasonably appear the shareholders/directors of Coatings were at tempting a cash rescue, and they were not then anticipat ing as an alternative a chapter 7 liquidation but rather a continuation of Coatings in business either through a ne gotiation of a stock gift plan to key employees or alter natively a chapter 11 reorganization In either case Coat ings would continue in business to pay off of the SBA loan Each of the four shareholders/directors concurrently executed a loan agreement with Coatings That loan agreement established the proportions to be loaned, with provision for issuance of 10 year Coatings corporate promissory note and 8 percent interest, confirming in tended business continuation, as follows Liddicoat Peterson Lewis Zander Totals 30 June 1985 $2000 50 $4 050 $4050 $4050 $15 000 (sic but clearly 2850 00) 31 December 1985 570000 8100 8100 8100 30000 There were other provisions acknowledging the above loan amounts were estimates in being related to shareholders/directors intention and ability to raise the money by sale of individually owned unencumbered Insul/Crete stock However the shareholders each and all agreed that to the extent they in combination were unable to raise these sums, they would be jointly and severally liable to make up the difference 10 The April 1985 stock plan failure Peterson testified that in 1985 Coatings' stock was worthless Nonetheless Peterson first developed a plan for a gift transfer of controlling stock in Coatings to key employees to motivate the key employees to continue to work for Coatings, and to induce the key employees to take on the task of a successful management of Coatings Peterson defined a key employee as one of who was able to do takeoffs (viz, accomplish bid estimates through footage takeoff from blueprints, discussed fur ther infra), had ability to sell and as an individual who had a strong desire to own his own business Peterson has identified certain Coatings employees (Matthew G Duffy, Brian Shields, James A Miller, Sr and Scott M Serstad) as being qualified as key employees However the April 1985 controlling stock gift plan was one nego hated with Duffy and Shields (Duffy did not testify in this proceeding, but Shields did ) a Duffy and Shields background The record is somewhat confusing regarding Duffy s employment history Peterson recalled that Duffy had first come to work for Coatings right out of high school and worked initially as an apprentice plasterer and later as a journeyman Duffy joined and remained a member of Plasterers Local 204 In 1983-1984 Duffy had an acci dent following which, though he attempted to continue as a plasterer, Duffy was advised (at least at the time) that he should consider another occupation Peterson re lated that Duffy attended a computer programmer school in 1984-1985 While doing so, Duffy continued to work part time for Coatings but then in sales Respond ent s Exh 7 reflects that Coatings employed Duffy in January-February 1985 and in May-September 1985 At this time all of Coatings' records (payroll required union reports financial statements) were being kept in the computer of Coatings accounting firm (Tormey) Duffy had access to a computer and he was able to de velop a computer estimating program for Coatings Ad PERMA COATINGS 811 ditionally Peterson knew Duffy to be a very loyal family man likeable, an excellent employee who was always at work on time, and with no bad habits Brian Shields began working for Coatings part time, a couple of years prior to Shields graduation from high school in 1977 At first, Shields loaded trucks, picked up material, and did various shop work After graduation, Shields began working full time for Coatings as a labor er At this time Shields mixed portland cement at the jobsite for the plasterers Shields joined Laborers Union Local 464, and he remains a member of that union to date Shields has testified that in late 1979 and early 1980, while still working as a general laborer, he also began running jobs for Coatings Shields kept the records of the materials used on the job, knew what was needed to run the job the next day, and kept the job running smoothly However, in this period, Shields relates he also regularly reported to Peterson Shields corroborates Peterson that Peterson was fully involved in both bid ding and scheduling jobs up to 1979-1980, and he gener ally corroborates that Peterson had more limited in volvement thereafter, starting in probably 1980-1981, be cause Peterson was then becoming busy with Insul/Crete Shields has recalled and identified several estimator/managers (Ed O'Dell, Rich Journalan, Jack Schamalowski, and Charles Crawford) who were hired by Peterson in the years 1981 through 1985 Shields con firms they lasted for periods of anywhere from 2 years to 6 months Shields also testified that in 1982-1983, Shields gradually got more responsibility i e, in deciding what job to go to next However, Shields also testified that in periods of manager lapse (in between managers) that it was usually Miller that had kept operations going and did the (bid) takeoffs Shields confirmed that in mid 1985 (with estima tor/manager Crawford s departure) there was (again) no one and Miller did some takeoffs However, Shields had also testified that by Autumn 1985 both Miller and Shields did it (takeoffs) but that it then got real busy and neither could adding, there was a fair amount of work to accomplish before winter This recollection of Shields would appear in conflict with Peterson's recollection that Coatings had ceased bidding jobs earlier, in the summer of 1985 because it was known then that Coat ings would not be in business after 1985 Peterson who lived nearby, could observe Coatings employees report in the morning and he knew Shields was always at work on time In summary Duffy and Shields were deemed qualified, and Peterson sought to have Duffy and Shields agree to undertake to run Coatings in return for a proffered stock gift plan It is clear from how far the plan went, before it failed, that Duffy and Shields were also motivated to own the business, had it been in their view in the end deemed fiscally feasible, under the terms of the stock gift plan then offered to them b The negotiations Peterson developed a plan or proposal to transfer con trolling (but not all) stock in Coatings to the two key employees, Duffy and Shields Peterson describes three related meetings as occurring in 1984, other (including wholly persuasive documentary) evidence convinces me these events occurred in the first half of 1985 The first meeting was in nature a general discussion of a stock gift plan, and it occurred probably in February A draft of the proposal was next drawn up, which Peterson re viewed, more probably in mid April A meeting for the execution of documents was next arranged and held in the directors and/or conference room of McFarland In light of documentary evidence of record, there can be no question but that this meeting was held on 22 April 1985 Nor can there be any question that Peterson fully expect ed the stock gift plan (which rater alia called for Peter son s gift of all his stock) to be executed at that time All the participants and/or representatives of the major parties in interest were present for the meeting held on 22 April 1985 Coatings existing four share holders/directors and its two other directors, prospective controlling stock donees Duffy and Shields, representa tives of McFarland (Locke and Southerland), and a rep resentative of SBA were all present c The essential terms of the proffered stock gift plan Duffy (and Shields) eventual rejection At this time Coatings apparently had issued 1000 of its total (undisclosed) authorized shares The above four named shareholders/directors owed 903 of the issued and outstanding shares Coatings held the remaining 97 shares as treasury shares As reflected in prepared memo randum of understanding (R Exh 15 ),1 Zander, then working for Coatings as plasterer, planned to continue to work for Coatings and he had elected to retain his 251 shares Under the plan, Zander would also remain as vice president of Coatings Transfer of the remaining 652 shares of Peterson and the others (Lewis and Liddicoat) was to be made by irrevocable gift to Duffy and Shields, 50-50 Thus concurrent with execution of the agreements set forth in the memorandum of understanding Coatings was authorized to issue a certificate of 326 fully paid and nonassessable shares to each donee, respectively The agreement explicitly provided that the personal It ability of Peterson Lewis, Liddicoat, and Zander on the SBA loan would continue and also, that all the security they had given to secure the repayment of the SBA loan would survive the transfer of the controlling shares of Coatings to Duffy and Shields A provision that Duffy and Shields would assign all their shares of stock in Coatings as additional security on the SBA loan was de leted Although it appears only Duffy and Shields ini tialled this deletion , they, as well as Peterson and Davis for Coatings and the four Coatings shareholders (sepa rately) signed the Memorandum of Understanding ' R Exh 15 is a serves documentary exhibit which encompasses the various documents that were to be executed by all involved parties in in terest that would have effectuated Peterson s stock gift plan in April 1985 They are a memorandum of understanding for transfer of a con trolling interest in the common stock of Perma Coatings Inc with a (McFarland and SBA) consent to transfer a (related) reaffirmation of personal guarantees personal liabilities and security agreements a (pre pared) record of special meeting of shareholders and directors of Permit Coatings Inc and a separate notice agreement for Duffy and Shields signature 812 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD with the deletion made Moreover Duffy and Shields signed the separate notice agreement providing for a 30 day written notice to McFarland and SBA prior to any future share disposition, encumberance, etc, to be made by them The Memorandum of Understanding explicitly pro vided that Duffy and Shields did not assume any per sonal liability for any of the corporations debt or other financial obligations Peterson testified that it was his understanding that Coatings' unsecured debts, with spe cific reference to $150,000-$160,000 owed to Insul/ Crete, and probably another $200,000 due to other sup pliers, would be passed on to the stock donees In light of the explicit provision that there would be no personal liability imposed on Duffy or Shields for any of Coat ings debt, it seems reasonably clear, that Peterson's testi monial reference here (at best) describes (limitedly) Coat ings unsecured indebtedness continuing as a Coatings in debtedness and thus after the gift stock plan execution, continuing then as a problem, inter alia, for profitable operation of Coatings under the management of the new controlling stock owners Duffy and Shields, but not in the personal liability sense, i e , anymore than for Zander on Coatings' unsecured debt Moreover it is warranted to note this does not mean that Coatings overall obligations on the secured loans to McFarland were to be extin guished, at least no submitted document appears to me to have called for that effect With regard to Coatings' indebtedness to McFarland, at this time, in addition to the secured SBA loan (then standing at between $270 000-$280,000), and the secured loans of $31,000 and $6000, there then existed an addi tional Coatings $71,000 `Spec Home loan with McFar land However, from recitements in the Reaffirmation of Personal Guarantees, Personal Liabilities and Security Agreements, concurrently to be executed by the four Coatings shareholders, it is clear that this Spec Home loan at the time was also secured (see R Exh 15) (The Spec Home loan does not otherwise appear to be of material signifiance and is not to be further referred to ) According to Peterson the Reaffirmation document reaffirming all personal guarantees, personal liabilities and security agreements on all McFarland loans was to be executed by Peterson, Lewis Liddicoat and Zander, to induce McFarland and SBA to themselves execute a Consent to Transfer (of Coatings controlling stock ownership) as provided for in the basic Memorandum of Understanding Agreement Although only Peterson, Lewis, and Zander appear to have signed the Reaffir mation" placed in evidence (R Exh 15), and the absence of Liddicoat signature is not specifically explained of hearing, it would appear more probably oversight, and/or omission in the document entered in evidence in light of all the other circumstances especially the further developments at this meeting Thus Liddicoat and the other three shareholders executed the base memorandum of understanding as did a representative of McFarland (but not SBA) the Consent to Transfer Peterson testi fled he did not know why the SBA representative did not sign, nor does the record otherwise reflect the reason Under the April 1985 stock gift plan, Peterson Lewis, and Liddicoat were to resign as officers and directors However, Peterson and Lewis agreed to remain reason ably available to Duffy and Shields for management con sultations through 31 December 1986 Additionally, Pe terson and Lewis (apparently) each personally agreed to forgive $6000 (and interest) promissory notes of Coatings that they held (Liddicoat and Zander did not agree to release Coatings from certain promissory notes they held ) Peterson testified that he had anticipated all the parties would sign the documents at this meeting, and he asserts they did sign However, Duffy and Shields signed only after Duffy said he wanted his attorney (and/or account ant) to look over the documents At that point there was a further agreement reached that the documents would be presently signed, but conditionally, and then held in escrow to await that review (See R Exh 16) Peterson acknowleged the above stock gift plan in the end was never consummated Peterson asserted this was because Duffy followed the professional advice he received that the unsecured indebtedness of Coatings was simply too much for him to reasonably expect to be able to succeed Shields confirmed, but more generally that Coatings owed too much to creditors and they did not think that they could make a go of it with that (debt) hanging over their heads Peterson learned that Duffy and Shields would not accept the stock gift plan about 2 weeks after the meeting at McFarland, thus about the second week of May 1985 11 Continued buildup of fiscal pressures on Coatings in 1985, other changes a The question of Coatings' cessation of fob bidding There is some conflict whether, as Peterson recalled Coatings ceased bidding jobs in mid 1985 because they had already decided that Coatings would not continue in business after 1985 or as Shields recalled that there was continued bidding after estimator Crawford left, that Miller and Shields had continued to do some bidding through the autumn of 1985 until they got too busy and in circumstances with enough work to be done for the rest of the year In contrast Peterson had recalled that the last person bidding for Coatings was Chuck Craw ford, who left in the summer of 1985 and after the summer of 1985, there was no work bid by Coatings (R Exh 7 confirms that Coatings ceased its employ of Crawford in June 1985) Peterson otherwise testified that Coatings continued its operations in 1985 in order to finish its contracts and to collect as many receivables as possible Ongoing bidding by Miller and/or Shields would be compatible to extent of completable jobs In any event weight of the more credible evidence has con vinced me that it was in September that Coatings has ceased bidding on new jobs PERMA COATINGS 813 b Employment changes (1) Office Davis had been employed by Coatings from 1976 through mid 1985, most recently as Coatings office man ager Peterson recalls that at that point Insul/Crete hired Davis Pat Hoff, a Kelly Girl , had first occasion to work for Insul/Crete as temporary secretarial help Pe terson s additional recollection was that Davis hired Hoff as a Coatings employee (secretary) Peterson relates that after Davis had left Coatings' employ to go to work for Insul/Crete, Hoff continued to work as a secretary, but not as Coatings office manager, though Peterson has also acknowledged in the end that Hoff performed the same work for Coatings that Davis previously had, in cluding handling Coatings' payroll and PBC s rent col lections Peterson has asserted however, that he did not know what work Hoff did in 1986 Coatings Statement of Financial Affairs, as filed later with bankruptcy petition, discussed further infra, reflects that Coatings in house recordkeeping had been per formed by Davis from 1976 to 1985, but also by Roxanne Kohlin, identified in Respondents Exhibit 7 as employed by Coatings, from July to November 1985, and by Hoff from September 1985 to the current date, that as of pets tion filing date of 8 July 1986 While some evidence indi cates Davis had performed the Coatings recordkeeping only through June, Respondents Exhibit 7 indicates that Coatings had employed Davis only through May 1985 and that Coatings first employed Hoff, in September 1985 These entries cause confusion as to when, and under what circumstances, Davis may have hired Hoff The more compatible thus credible evidence of record indicates that Coatings hired Hoff in September, 1985 (2) Asserted work force reductions Peterson s recollection was that a considerable number of Coatings employees began leaving its employ in August-September, 1985 Shields testified only generally that it was in late 1985 that Coatings was going through some pretty hard times, that a lot of employees were leaving us because of a problem with benefits, and that we were faced with a fair amount of work we had to get done with diehards There is more support in Coatings' offered employment complements (R Exh 7) for Shields' general recollection of late 1985 disaffections, though not by any means such as is independently con vincing of a considerable disaffection before October 1985, in light of other circumstances (a) that analysis of employment histories does not lend support to such a considerable disaffection, and the construction season was at that time drawing to its normal close for the year, (b) given Peterson s testimony that one job (The Con course Hotel), contrary to its contract provision that it be completed in 1985, was shut down by the general contractor/owner in October, because of the weather and (c) Miller testimony of termination in December with all the work caught up In general, Respondent regularly worked a crew of two to four on a job, and with regard to the Concourse Hotel job, a full crew is indicated Be that as it may, and even with an allowance made (i e, omission) for two in dividuals listed in Respondents Exhibit 7, as employed by Coatings in 1985, but without any actual period of employment appearing of record, there still appear to be inconsistencies between the total monthly employment complements as there shown complied, compared with the totals as are to be generated on analysis of the com pilation of the individual employees start and ending months of employment, also there shown The same (with Respondents monthly totals from R Exh 7 shown beneath in parenthesis for ready comparison) appears to reveal 1985 Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec plasterers 7 7 8 9 12 12 9 8 8 8 6 5 carpenters 3 3 5 5 6 6 3 3 3 1 1 0 laborers 2 2 4 4 4 4 4 4 4 4 5 5 not shown 2 2 3 4 6 5 5 4 3 2 2 3 estimator 1 1 1 1 1 1 0 0 0 0 0 0 office 1 1 1 1 1 0 1 1 2 2 2 1 Totals 16 16 22 24 30 28 22 20 20 17 16 14 R Exh 7 (16) (12) (22) (24) (30) (28) (20) (16) (17) (16) (16) (14) First, the above projects, if anything shows a con structive seasonal progression Second, the largest drop in employment occurs in the period June 28 to July 22, equally split, three carpenters and 3 plasterers Only one employee (Hewitt) with union membership not shown appears to have left in August and he was hired in August Of five employees shown terminating in Septem ber, two (Bayuk and Neiber) were carpenters two (Duffy and Krantz) are plasterers, and membership of the other (Nelson) is not shown However, in October two plasterers (McCullough and McNally) are newly fired There is thus at best only limited indication of Coatings' employ of two fewer carpenters in October (essentially), coincidental with the Concourse Hotel job shutdown because of weather There is no indication of any other employment increase On this state of the evidence I find Shields recollec tions of late 1985 disaffections the more reliable with 814 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD earliest disaffections in September, in light of the adds tional circumstance that it was on 24 October 1985 that Carpenters and Plasterers filed a lawsuit because of Coat ings' nonpayment of benefits As we shall see there were other factors operative in the initiation of a Coatings September bankruptcy inquiry Before addressing these factors it is warranted to note Peterson s related recol lection of a mid 1985 bankruptcy inquiry, also appears somewhat incongruous as occurring at that time, and far more probably related to Sweet s September contact, and discussions infra c Peterson s asserted recollection of a mid 1985 broach of a McFarland and SBA future release of Coatings' assets Peterson has also testified in apparent confluence with an asserted decision already made that Coatings would cease business, that he first met with McFarland and SBA representatives in the summer of 1985 to discuss the matter of their release of Coatings equipment (in a pro spective bankruptcy) so that Peterson could obtain the highest price for it Peterson further testified that McFar land and SBA agreed, that they liked the idea that they would not have to become involved, and that Peterson was trying to cooperate Attorney Sweet apart from time of occurence, has corroborated Peterson in the sense that Sweet has testified that in bankruptcy circum stances, debtor and secured creditors have frequently so acted, and Sweet credible reasons of record as to the propriety However, in testifying that his recollection of a first contact from Lontello was in the fall Sweet s cor roborative testimony, such as it is, would appear to sup port Peterson s pursuit of the matter with McFarland and SBA later Moreover Sweet s recollections on bank ruptcy inquiry hire and discussion with, inter alia Peter son indicates contact with McFarland and SBA would more likely have occurred even later on in the year There is still other evidence of additional developments that make the same more probable d IRS tax lien Other evidence would support a fall determination to cease business Bankruptcy petition (R Exh 1) reflects that on 5 September 1985, IRS had placed a second tax lien on Coatings for unpaid taxes The first tax lien had been placed on Coatings on 10 June 1984, more than a year earlier (A third tax lien would be registered on 9 May 1986) There is some confusion in the record as to Coatings delinquent tax status Peterson s recollection was that at this time (September 1985) taxes were assessed personal ly against Peterson and Lewis in the amount of $40,000 On other occasion Peterson relates that they (generally) owed between $40000-$80000, and that the taxes were paid by the four shareholders bankruptcy petition as filed on 8 July 1986 reflects under priority claim(s) that Coatings owed $28,895 45 on an IRS Federal tax lien, as well as $1,735 54 in delinquent state withholding taxes and $782 06 in local tax Peterson s testimony on still other occasion appears to be that all state and Federal taxes had been paid (as of the hearing date) In any event, for present purpose, there is no question that in early September 1985, Coatings four shareholders felt an immediate financial pressure stemming from the IRS recent tax lien e Shareholders agreement for orderly payments On 15 September 1985, Coatings' four shareholders en tered a related Agreement Among the Shareholders of Perma Coatings, Inc For the Orderly Payment of Cer tam Joint Obligations (R Exh 17) This agreement in essence, after reciting that Coatings had insufficient assets to pay the secured indebtedness due McFarland on which they were personally liable and, insufficient assets also to pay delinquent state and Federal taxes, on which they are likely personally liable went on to set forth the shareholders' agreed individual undertakings (in equi table proportion to their stock ownership in Coatings) to raise money to meet these pressing obligations of Coat ings to IRS and McFarland in that order Their agree ment provided that they would do so essentially through a present individual sale and later replenishment of Insul/Crete stock amongst them, in an equitable manner The equitable undertakings was occasioned by the cir cumstance that the Insul/Crete shares then owned by Pe terson and Lewis were at this time restricted having in some manner been pledged to Dow, and, thus Peterson s and Lewis Insul/Crete stock was not available for such a sale at this time Broadly viewed, this problem was solved by a mutual agreement that Zander and Liddicoat (albeit by Peterson as their agent) would presently at least attempt to sell their unsecured Insul/Crete stock to raise the money, with Peterson and Lewis committing to distribute later sufficient Insul/Crete stock that they owned to Zander and Liddicoat in such equitable manner as if Peterson and Lewis had participated in the sale originally Peterson and Lewis undertook to do so as soon as they had their stock released by Dow While the terms of this agreement did not explicitly provide that any shortage would be made up proportion ately as before the agreement did provide under differ ent circumstances essentially the equivalent viz for shareholders respective indemnification along the same base of percentage of Coatings stock ownership Though Peterson initially testified that these undertakings were accomplished, on cross examination Peterson acknow leged, they have not been met in toto However Peter son has otherwise confirmed that the money (for tax payments) was raised in part by the sale of Insul/Crete stock and in part by Coatings (continuing) receipt of re ceivables 12 Coatings delinquencies in benefit payments to various union trust funds Coatings bankruptcy schedule of priority claims, as filed on 8 July 1986 records a priority claim of $57 206 47 due to Wisconsin Carpenters Pension Fund [sic] c/o attorney Susan Bauman The nature of the claim is there shown as a Judgement Docketed 5/14/86 It is clear of record however that underlying issues of delinquent payments to several union trust funds had arisen in earlier, and more material time PERMA COATINGS a The lawsuit jointly brought by certain trustee(s) of Carpenters District Council funds and Plasterers Local 204 funds against Coatings and Coatings shareholders/directors On 24 October 1985, the above (separate) funds them selves being in number several, and the funds trustee jointly brought a lawsuit by their attorney Bauman against Coatings and Coatings shareholder/directors, for nonpayment of certain delinquent contributions then due these funds, respectively Attorney Sweet testified relat edly that he as counsel of record, and Attorney Regina M Speichinger, an associate of same law firm, represent ed Coatings (and the shareholders/directors) in defense of the above lawsuit (They also represented Coatings (and shareholders/directors) in a Laborers' trust funds lawsuit subsequently filed in February 1986, as well as in the matter of Coatings later bankruptcy filing discussed infra ) As noted, Attorney Sweet had a recollection that he was initially contacted about a potential bankruptcy matter by Coatings attorney, Lomello, in the autumn of 1985 Though Sweet recalled he was initially made aware the bankruptcy inquiry was being made on behalf of Coatings, Sweet also testified that it was not too much later that he learned the bankruptcy inquiry had related to Coatings However, Sweet recalled that quite some time after that, he actually met with two of Coatings principals Peterson and another shareholder (probably Lewis) (Lomello hired Sweet, but the record is mdefi nite as to time It is likely that it was at time of hire that Sweet was made aware Loniello s first bankruptcy in quiry had related to Coatings, thus no earlier than Sep tember 1985 ) In any event at the later meeting with the two share holders and Lomello, they discussed generally chapter 7 and chapter 11 bankruptcies various matters related to timing of the petition filing and the need for planning Sweet explained that it is generally better for a company to have the freedom of action of not being in bankrupt cy if the Company is attempting to get specific bills paid Sweet broadly explained that conceptually when a bankruptcy petition is filed, the assets of the bankrupt whether in the hands of the (bankrupt) corporation or not flow into the bankrupts estate Claims are then paid out in accordance with an absolute priority rule of the bankruptcy code which states which classes of creditors get paid before others Federal state and local tax claims have priority, as thereafter do wage claims but only those that have accrued within certain time limita tions A creditors interest may have been secured previous ly and a creditor with a first lien on an asset gets paid first out of that asset Questions that apse whether the creditors interest in one actually so secured by asset (i e , properly attached and perfected), are resolved in accord ance with state law, be it by provisions of the Uniform Commercial Code (UCC) as may be adotped by the State, or state mortgage or lien law If in issue the bank ruptcy court judge makes the determination on the basis of the aforesaid state law (Sweet confirmed that the SBA loan had such a first lien on all of Coatings' assets ) b Shareholders' meeting with bankruptcy Attorney Sweet 815 According to Sweet, at the above meeting with the two principal shareholders, they determined there were certain debts the Company and the principals desired to pay, with decision then made that others were less urgent Sweet testified they wanted to get the taxes paid, and they also wanted to pay the union trust funds They determined seemingly at that same time, that the money due the union trust funds, except for a small percentage, would be classified with other unsecured (nonprioritized) creditors From the recalled discussion covering the union trust funds delinquencies, and from the fact that a copy of Coatings last financial statement(s) of 31 Octo ber 1984 was sent to Sweet on 4 November 1985 it would appear again as more probable than not that the above meeting and discussions occurred in November or at least some time after the Carpenters and Plasterers union trust funds lawsuit was filed on 24 October 1985 On the other hand, from the fact that the initial contact with Sweet about a bankruptcy matter had occurred ear her in September it is reasonably indicated that Coatings had a bankruptcy proceeding under activated consider ation at that time Sweet s (apparent) recollection of de termining in the meeting with Coatings stockholders that most of the trust funds delinquencies being claimed in the lawsuit would be unsecured (not occupy priority status), it is fairly indicated that a significant portion of those delinquencies extended in time well back before the end of October lawsuit filing, indeed delinquencies probably existed prior to September 1986 On inquiry made of Sweet as to timing of a bankrupt cy petition filing Sweet informed the shareholders that there was no need to rush to file a bankruptcy, so long as creditors were not taking any actions to repossess re ceivables, or to interfere with activities to collect receiv ables and get bills paid Sweet explained the restrictive effect of the automatic bankruptcy stay if forced to bank ruptcy by creditors or by a judgement creditor Accord ing to Sweet it was decided the filing of a Coatings' bankruptcy would be delayed for several months because of the possibility of Coatings collecting some of its ac counts receivable The hope then was that accounts re ceivable on Coatings books could be collected to pay debts in an order that would provide a maximum benefit to the Company Sweet initially related that in essence they were trying to collect Coatings receivables to pay the taxes, and to pay the union trust funds, but unfortunately the receiv ables were not much of anything and all came to naught In contrast as noted, the record indicates that all of Coatings assets, including accounts receivable were pledged to the payment of the SBA loan Although that loan was also personally, and otherwise secured by Coatings shareholders/directors, and their properties above noted significantly, on further examination and re flection, Sweet then recalled that the source of payments made in settlement of union trust funds claims may have been from personal contributions of the shareholders as Peterson has testified was the case The latter appears the more supported on this record 816 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD c Settlement in principle Coatings bankrupt Peterson testified that in November-December (I find December) 1985 a settlement agreement in principle was reached on the lawsuit filed by the Carpenters and Plas terers trust funds Peterson also testified without subse quent contradiction, that during settlement discussions Peterson had told Carlo Cimino a business agent of Plas terers Local 204, that Coatings was going to go bank rupt At that time Peterson assured Cimino that the agreement reached on the lawsuit would be paid in full even if they (the named shareholders) had to take it out of their own pockets Cimino who was present at the hearing did not testify, nor has there been otherwise a contention made to the contrary Accordingly I find that Plasterers Local 204 had been given direct notice in De cember 1985 that Coatings intended to go bankrupt Negotiations were conducted in December 1985 How ever the (partial) settlement and release was actually ex ecuted in January 1986 The record indicates that Attor ney Susan Bauman, representing the Carpenters and Plasterers' trust funds sent a letter dated 2 December 1985 to Attorney Regina Speichinger (of Sweet s law firm) representing Coatings and Coatings shareholders in the above trust funds lawsuit apparently setting forth the moneys deemed due as then known Sweet has testified relatedly that on some four occasions Attorney Bauman told Sweet directly that a filing of an involuntary bank ruptcy would be brought against Coatings unless Coat rags ceased and desisted from operating or (essentially) paid up The statements of union trust funds Attorney Speichinger directly to Attorney Sweet not shown au thorized otherwise approved or adopted by Charging Party Unions, would appear not attributable to the Charging Party Unions because, as the General Counsel and the Charging Party Unions have correctly argued in other circumstances that they are separate legal identi ties and trustees are not agents of the parties designat ing Neither does it appear that Cimino or others were trustees Cf NLRB v Amax Coal Co, 453 U S 322 337- 338 (1981) and Food & Commercial Workers Local 1439 (Layman s Market 268 NLRB 780 (1984)) However, the evidence offered has no less probative value in its bear mg on the actual circumstances independently facing Coatings shareholders including Peterson at this time It thus has probative value in explaining Peterson s and Coatings subsequent actions In that regard however, I credit Sweet s testimony over any variant nuance (of union approval of subsequent Peterson actions) in Peter son s asserted understanding that there was an agreement that if Coatings ceased doing business the union funds would accept the settlement offered Peterson had a problem with Coatings ceasing to do business as of 31 December 1985 facing alternative in voluntary bankruptcy The problem lay in his anticipa tion that because of circumstances, discussed infra a forced sale of Coatings assets (particularly certain unique power scaffolding equipment) would not be likely to arrive at a reasonable monetary return Peterson testi feed relatedly and credibly that there is not a big demand for plastering equipment used plastering equipment did not have much street value and he was the only plaster ing firm using power scaffolding in the State of Wiscon sin Peterson testified he sought to avoid a forced sale, in order to get as much possible value out of that equip ment as we could (I thus have no doubt that Peter son s plan for a sale of the equipment had the approval of the other Coatings shareholders) Before addressing Peterson s solution the creation of Spartan applicators on 15 January 1986 to purchase the equipment, it is ap propriate to continue with a review of the Carpenters and Plasterers trust fund settlement later effected By letter dated 23 January 1986, Attorney Bauman no tified Attorney Speichinger of additional sums found due after audit The Bauman letter (R Exh 4) reports in final account (purportedly) off all moneys dues as of 31 De cember 1985 to Carpenters trust funds, $5,493 58, to Plasterers' trust funds, $32, 848 19 and, in toto, the sum of $38 341 77 (with interest accumulating as stated and indicated previously reported rate) Notably over 80 per cent of the total contended indebtedness of Coatings and its shareholders to these union trust funds, as of 31 De cember 1985 is thus reflected as due to Plasterers trust funds d Trust funds threat of involuntary bankruptcy Bauman s letter pertinently further stated Inasmuch as you have advised that the company has ceased operations, although apparently contin ues to maintain an office and employ an office worker, this should be a final accounting of the monies due As I have indicated earlier, I will force the company into involuntary bankruptcy should I become aware it has continued operations In addi Lion I wish to remind you, again, that the $7,842 39 in vacation fund contributions represent monies which have been deducted from employee payroll checks Unless the money is paid to the funds through this office rather quickly I will have no choice but to contact the District Attorney regard ing this The above letter was received in evidence over the Charging Party s and the General Counsel s objections based (initially) on authenticity hearsay and relevance The letter on its face reflects that a copy was sent to the Plasterers business agent, Cimino Moreover both coun sels later conceded Cimino s acknowledgement of receipt of a copy of this letter as did the General Counsel as the Charging Party (Laborers Local 464 would shortly thereafter file its own lawsuit in February 1986 infra) Although there was initial similar acknowledgement by the Carpenters an apparent subsequent retraction some what confuses reliance on that concession In any event the objection as to authenticity was withdrawn The objection as to relevancy and hearsay was pressed with basic reliance on contention that Charging Party Unions are not the same legal entity as these trust funds While on the authorities earlier cited in this regard, I agree with the latter contention in gener al once again I do not agree that a relationship of inde pendency of trust funds and Unions is properly disposi tive of the relevancy of hearsay issue here The extent of even the claim of the amount due the union trust funds PERMA COATINGS has relevancy to Coatings overall claim of a forced dis continuance of operations, and certainly the stated vaca tion claim process on moneys deducted from employees being brought to the attention of the district attorney s office no less supports Coatings reasonable view of both making payment thereon, and need to cease doing busi ness, without regard to the truth of the union trust funds actual intentions With the acknowledged receipts of the letter, it seems to me that the Charging Party (through Plasterers Local 204 and Laborers Local 464, if not Car penters) is clearly chargeable with awareness of its con tents, including that the specified union trust funds had flatly declared to Coatings that should it be later deter mined that Coatings had not ceased business as of 31 De cember 1985, the trust funds would visit an involuntary bankruptcy on Coatings The General Counsel and the Charging Party (Carpen ters) argue that the Charging Party Unions awareness of the bankruptcy of Coatings is not the same thing as the Charging Party Unions being aware of a future relation ship between Coatings and Spartan/Applicators What, if any, probative value the letter and union awareness of its contents has on that issue of fact is to be addressed, infra, along with analysis of all related evidence including con tended reports by Spartan/Applicators employees of their employment to certain of the unions infra Suffice it to presently observe, without regard to hearsay decla ration the letter is deemed relevant on the above basis and the ruling of receipt of it in evidence is thus reaf firmed From the uncontested testimony of Peterson of his ear her conversation with Cimino during negotiations it is clear, and it is found that Peterson had openly declared to the Plasterers that Coatings was going to go bankrupt From that declaration and thereafter through Cimino s awareness of the content of the 23 January 1986 letter of trust funds Attorney Bauman, the Plasterers and the La borers also knew that Bauman was confirming a purport ed prior declaration of Coatings to the funds that Coat ings was ceasing business (except for an office clerical) as of 31 December 1985 Moreover, Plasterers Local 204 and Laborers Local 464 were also aware that the trust funds had stated an intention to bung involuntary bank ruptcy on Coatings should it determine Coatings had not gone out of business at that time It would appear to me to be nothing short of naivety not to infer that the Unions, shown to have had knowledge thereof would be attentive to the matter of Coatings continuance in busi ness had Coatings done so openly The question arises only in combination of the circumstances that Coatings business cessation occurred at the end of the construction season and with contention that Coatings did not act openly but has acted through its alleged alter ego Spartan/Applicators However, the weight of evidence convinces me and I find, that Coatings itself ceased all construction activity, if not on 17 December 1985, then on or before 31 December 1985 Sweet has testified that subsequently, in January 1986, through personal payment of certain undisclosed sums Coatings shareholders obtained a release from the Car penters and the Plasterers union trust funds, respective ly Sweet noted that this release did not extend to Re 817 spondent Coatings In that connection the settlement s relationship, if any to the amount of $57,206 47 shown in Coatings bankruptcy schedule as due to the Carpenters on judgment docketed on 14 May 1986 is not definitively shown of record, nor do I make any finding thereon B Spartan/Applicators and Related Developments 1 The formation of Spartan, Coatings conditional sale of assets to Spartan, Spartan's name change to Applicators a Spartan s formation subsequent name change On 15 January 1986, Peterson formed Spartan Group of McFarland, Inc (Spartan) a Wisconsin corporation Peterson is president sole director, and sole shareholder of Spartan, with Peterson to remain so until 11 October 1986 At the outset it is warranted to observe that it is clear from review of various testimony and documents, that Peterson had wanted from the start to incorporate under the name of Applicators (Employees of Spartan referred to employment by Applicators) Peterson was prevented from immediately doing so only because that name was already in some manner in registered use in the State of Wisconsin, and on that account, Peterson was prevented from an immediate use of the name by the State Peterson pursued a use of the name It would not be until 2 May 1986 that Spartan on receipt of permis sion from the registered corporate user, would effect its name change to Applicators of Wisconsin, Inc (Applica tors) To the extent the General Counsel in brief has sought to question these facts, or has advanced an argu ment that there was some intended subterfuge in the name change the only evidence of record is the above, and there is thus no evidence to warrant conclusion that Peterson has not originally sought to incorporate in that name, or that he, key employees, and others (e g, Insul/Crete President William Snodgrass, infra) did not earlier speak in reference to Applicators I conclude and find there was no separately intended subterfuge in the May 1986 name change As used hereinafter, Spartan/Applicators refers to Pe terson s conduct of corporate business both at first under the name Spartan and thereafter under the name Appli cators, until 11 October 1986 Corporate conduct of the business thereafter is referred to as Applicators/Kohl to reflect a contended (and found) complete change in own ership of Spartan/Applicators at that time discussed infra b The terms of Spartan/Applicators' purchase of certain assets of Coatings On 15 January 1986, Peterson as president of Coatings, and Lewis as secretary treasurer of Coatings jointly exe cuted a certain `Agreement For the Purchase and Sale of All Assets of Coatings (Agreement), and a certain Bill of Sale , and Peterson, as president of Spartan/ Applicators executed the Agreement (only) On the same day Peterson, on behalf of Spartan/Applicators also exe cuted a promissory note, and Coatings executed an abso lute assignment of the note (See G C Exh 3) The 818 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD Agreement provided for Coatings sale and Spartan/ Applicators purchase of all assets However, the Agree ment then specifically defined the assets sold (only) to in clusion of A All the tangible physical assets of the Corpo ration which are more particularly described in the annexed exhibit B The trade name Perma Coatings and all of the good will, customers lists customer leads, and work in progress of Perma Coatings Inc C The telephone number and all telephone list rags and trade listings of Perma Coatings Inc It is thus notable the Agreement did not describe nor purport to sell Coatings' accounts receivable Neither was there any provision or a purchase of any Coatings' stock Nor, most notably, was there any provision for Spartan/Applicators assuming Coatings rather consider able outstanding debt For the described assets, Spartan/Applicators agreed to pay $80 000, $60,000 of which was for the listed and indexed tangibles (equipment), and the other $20,000 paid for the described intangibles in B and C above Spartan/Applicators agreed to pay the purchase puce over 7 years, at 10 percent annual interest per terms of a Spartan/Applicators promissory note to be given to Coatings The terms of Spartan/Applicators promissory note provided for periodic payments of $2700 to be made, on the first day of the months June-November, being essentially governed by future construction period considerations The Agreement specifically relates that the bill of sale to be provided is with warranty, except that the sold assets are declared subject to first hen of McFarland on Coatings SBA loan that Coatings relatedly was to exe cute an irrevocable assignment of the Spartan/Apple cators promissory note to McFarland, and, that Spartan/Applicators was to make its note payments di rectly to McFarland to be credited to Coatings SBA loan account Notably there was no provision made for personal liability on the Spartan/Applicators note given to Coatings and to be assigned to McFarland There was then no apparent need Peterson president, sole director, and sole stockholder of Spartan/Applicators was already personally liable on the entire SBA indebtedness There would however be a later McFarland and SBA assump tion request made on 17 September 1986 under differ ent circumstances discussed infra Presently I note this entire transaction was subsequently disclosed in Coatings' bankruptcy filing on 8 July 1986, to all material parties On 15 January 1986, Peterson and Lewis on behalf of Coatings executed the attendant Absolute Assignment and on the same day Peterson on behalf of Spartan/ Applicators executed the attendant promissory note, by the terms of which Spartan/Applicators essentially ack nowleged and agreed to make the above payments di rectly to McFarland The basic agreement itself however also contained the following material terms The transfer of legal title and the transfer of physical possession and control of the assets shall be effective as of the date hereof This entire Agreeement and the annexed Promis sory Note and Bill of Sale are void and of no effect whatsoever unless the U S Small Business Adminis tration executes and delivers the Consent to Sale in the form annexed to this Agreement as an exhibit The consent to sale document is in evidence (R Exh 2) It reveals that neither McFarland or SBA ever executed the above referenced consent to sale Peterson relatedly testified that McFarland and SBA originally said they would sign the consent , later changed their mind c Preliminary analysis of the effect on the agreement of the unmet terms requiring McFarland and SBA consent to sale and purchase of Coatings assets The provision of the basic sale and purchase agree ment did not merely render the agreement voidable by either Coatings or Spartan/Applicators (or both parties) Rather, by its explicit terms is declared the entire agree ment, the bill of sale and the promissory note void, unless the described consent to sale was executed by McFarland and SBA , who never signed the consent form The contract was thereby simply rendered an ex ecutory, or wholly conditional one, with a stated condi tion precedent in my view effectively preventing effec tuation of its other terms for so long as that condition precedent remained unmet , or, until the unfulfilled condi tion itself was effectively removed in some manner by agreement of the contracting parties The latter is in fact what occurred (I make no finding beyond addressment of the rights and obligations of the contracting parties amongst themselves I specifically need not , and do not reach SBA lien right vis a vis Coatings and/or Spar tan/Applicators interest in Coatings assets after trans fer, discussed further infra ) Thus the basic sale and purchase agreement reveals pen and ink notation of Spartan/Applicators (Peterson s) subsequent wavier of the condition to wit, Consent execution by McFarland Bank and SBA waived this 15 da} of March 1986 More definitively the above agree ment bears notation of Attorney Loniello representing both Coatings and Spartan in the matter that conditions [sic] waived and agreement made effective on 3/15/86 Finally bill of sale shown executed by Coatings (Peter son and Lewis) on 15 January 1986 shows an Accept ance by Spartan/Applicators (Peterson) on 15 March 1986 It is clear to me from all the above and I presently conclude and find that Coatings did not complete a sale of its assets, and Spartan did not complete purchase and acceptance of Coatings described assets until 15 March 1986, a date I presently observe that bears significantly, and adversely on Respondents 10(b) arguments (It will be recalled initial charge was filed on 6 August 1986 ) d Spartan/Applicators commencement of operations Coatings has not conducted any construction work after December 1985 Coatings records of employment PERMA COATINGS 819 (R Exh 7) confirm that Coatings has itself employed no bargaining unit employee after ' 12-85' Apart from Hoff, who appears employed by Spartan/Applicators in January 1986, Spartan/Applicators first employees are shown employed in 2-86 They are (with union mem bership shown in parenthesis , if known) Theodore Zander (Plasterers), James F Miller (Plasterers), Timo thy Parrish (union membership undisclosed, but em ployed as estimator/manager), and James R Duesterbeck (undisclosed) Zander and James F Miller had previous ly worked for Coatings in 1985 , indeed in December 1985 Duesterbeck had not worked for Coatings in 1985, and Parrish had never worked for Coatings before It is also material on contended alter ego status and thus worthy of note even at this juncture that in addition to Parrish, other contended key management and poten tial stock owners James A Miller (Plasterers) and Scott Serstad (Laborers) did not commence their employment with Spartan/Applicators until 3-86 " Brian Shields (of asserted similar status) did not commence his employ ment with Spartan/Applicators until "5-86 " e Spartan/Applicators'formation considered in relationship to Coatings bankruptcy A copy of the agreement" (sale and purchase of Coatings assets) was sent to Attorney Speichenger (han dling Coatings bankruptcy) on 23 May 1986 Attorney Sweet has testified relatedly that he was not aware per sonally of the formation of Spartan/Applicators until the sale of the property Sweet testified that if a company (as Coatings) was contemplating bankruptcy, and one of the principals (as Peterson) intended to set up a similar, if not identical company within the next several months, Sweet would want to know that Sweet explained he would first want to know that to be able to plan, and to be able to get to the (bankruptcy) trustee first Secondly he would also want to know because certain debts are not dischargable, inter alia, failure to pay withholding taxes, and he would need to know the debt structure of the person coming out of bankruptcy with regard to its effect on finance of the new business Third there are re sidual tax liabilities, and as he now understands, but was not aware at the time, there is also a consideration to be made as to any residual union problems In that regard Sweet acknowledged that Loniello represented Coatings Spartan/Applicators and Peterson in these matters, while Sweet represented Coatings only in the bankruptcy (and union funds lawsuits) Sweet testified on the related bankruptcy consider ations at length That testimony covered the nature of initial trustee assignment , trustee obligations, procedure, fees, debtor rights and related rights of secured creditors Insofar as ultimately relevant to the facts of Coatings' in dividual circumstances , Sweet has essentially testified that since the secured creditor here (McFarland and SBA) had first lien security on all of Coatings assets which were then substantially less than the outstanding in debtedness owed them and being secured by the assets, a trustee would on satisfying himself of the facts, recog nize there was no asset recovery to be made to benefit any other creditor According to Sweet , the trustee would have no other interest in the matter beyond effect ing a rapid closure, unless the creditor had wanted the trustee to dispose of the assets for the creditor (here un likely) This is because of the practical reason that there would be no additional to be earned by the trustee Sweet thus relates credibly that had this matter of Coat ings sale of equipment assets been held within a bank ruptcy proceeding (which was not done as no filing as of then had occurred), the trustee, on request, would have acquiesced in a lifting of bankruptcy stay , or to an aban donment, of the (equipment) assets to the secured credi tor, who could then dispose of them as state law other wise provided Significantly Sweet summarized that insofar as the sale of the (equipment) assets transaction had impacted on Coatings financial status , the effect was to trade certain assets for a reduction of debt Sweet has testified that the net effect of the transaction was that Coatings was insol vent, and even more significantly , that there is no ques tion Coatings was insolvent immediately prior to its sale of the assets to Spartan/Applicators 2 The interim Laborers trust funds lawsuit, an (apparently) negotiated full release through 31 December 1985 On 3 February 1986, certain Wisconsin Laborers trust funds and Trustee Allen Wild filed complaint in the U S District Court for the Eastern District of Wisconsin, naming Coatings and Peterson (only) as defendants This funds' complaint alleged defendants indebtedness for the entire period of 1985 was in the amount of $9,563 54 (The complaint alleged nonpayment was with a wilful, malicious intent , and it accordingly sought punitive damages in the amount of $100,000) More materially, the Laborers funds complaint related information and belief that defendant(s) have been disposing of assets to the benefit of other nonprionty creditors and to the prej udice of plaintiff Laborers trust funds Finally the relief sought, inter alia included that defendant(s) be perma nently restrained from a Transferring or disposing of assets [sic] accounts receivable and/or equipment to any party pending further order of the Court If granted in form requested the order would have effec tively precluded the transfer of the (equipment) assets from Coatings to Spartan/Applicators on 15 March 1986 In the interim on 18 February 1986 in return for a set tlement (of $6000), the Laborers trust funds executed a release to Coatings, and to all of its shareholders, officers and directors (and to the same personally), for all claims arising `for the tend through December 31, 1985 3 Coatings indebtedness following sale of its assets to Spartan/Applicators indebtedness as compared thereto As of 15 January 1986 Coatings outstanding indebted ness on the SBA loan was approximately $266,000 With Spartan/Applicators acceptance (on 15 March 1986) Spartan/Applicators did not take on any indebtedness beyond the $80,000 agreed price for Coatings assets 820 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD Following Coatings sale of its assets to Spartan/ Applicators, Coatings still owed McFarland (essentially) the $266,000 remaining due, but Spartan/Applicators was obligated to make (only) the periodic payments on the $80,000 note to McFarland, albeit it would reduce the $260,000-$270,000 SBA loan According to Peterson s uncontradicted testimony the payments of Spartan/ Applicators (and Applicators later as shown infra) are not sufficient to meet the full periodic payments due on the entire SBA loan The (undisclosed) difference has been made up by Coatings four shareholders Some of the money the Coatings' shareholders have produced for continued payments of Coatings indebtedness on the SBA loan has come from the sale of their (personally) owed Insul/Crete stock, or from the sale of other per sonal properties (In August 1986, PBC sold the building and premises at 4311 Triangle St to Insul/Crete) In passing, I credit Peterson s additional testimony that as to Coatings other McFarland loans (a) the $30,000 loan is an annually renewable loan, and Peterson (personally) has been paying the interest on it (only), and (b) princi pal and interest on the $6000 loan is (at least) supposed to be paid monthly, by the four Coatings shareholders, equally Finally, as of hearing, Peterson testified credibly that the four shareholders of Coatings (on a shared pro portional basis) are current on their obligations to McFar land 4 Coatings indebtedness as of bankruptcy filing Coatings bankruptcy schedule, as filed on 8 July 1986, reflects a total of unsecured claims in the amount of $280,292 02, inclusive, inter alia of the following Insul/Crete (material) $169 597 99 (lease) 393 76 $169 991 75 PBC1 (Service) 6 709 55 (Rents) 19 07900 25 788 55 Shareholder loans (apart from undetermined officer claim) Peterson 2 390 90 Lewis 12 390 90 Zander 12 390 90 Liddicoat 8 719 52 45 892 22 The principal areas of factual conflict apse in regard to Spartan/Applicators 1986 operations They are more conveniently addressed infra at I D It is deemed helpful to first address Peterson s divestiture of ownership in Spartan/Applicators C Peterson's Divestiture of Spartan/Applicators Stock 1 The reorganization agreement Peterson interviewed and hired Eugene R Kohl as Spartan/Applicators estimator in mid September 1986 Prior estimator Timothy Parrish, part of Spartan/ Applicators management since being hired in February 1986, had been fired in August 1986 for certain impropri eties, not otherwise material to this proceeding Kohl had obtained his college degree in 1982, with a major in construction administration and/or management Kohl relates that within 2 weeks of his hire, Peterson told Kohl of Peterson s desire to get out of Spartan/ Applicators Kohl felt it was a great opportunity for him, and pursued it Pursuant to Peterson's direction, Attor ney Loniello negotiated with Kohl the terms for Kohl s purchase of a controlling interest in Spartan/Applicators Kohl had his own accountant review Spartan/Apple cators financial statement of 30 September 1986 Kohl s accountant advised Kohl that Kohl was making a very good decision The General Counsel does not contest Pe terson's good faith sale of Spartan/Applicators to Kohl On 11 October 1986, Peterson as outgoing president, Kohl as newly elected president, and Shields as newly elected secretary treasurer executed an Agreement for the Reorganization of Applicators of Wisconsin, Inc (Reorganization Agreement) In addition to the above, James A Miller Sr and Scott Serstad signed in accord The reorganization agreement (R Exh 6) declares its purpose is intended to satisfy and terminate a prior oral stock bonus plan and agreement bewteen Spartan/ Applicators and its key employees, and, it recites also an agreement of Peterson to sell all of his shares in Spartan/Applicators, one half by a corporate redemption of stock, and one half by sale to Kohl The pertinent facts are that Spartan/Applicators then had 2000 shares authorized The reorganization agree ment recites 1000 shares as issued to Peterson The book value of this issued stock is computed to be (essentially) $50 In that regard Respondents Exhibit 6 includes the 30 September 1986 balance sheet perpared by James L Nicholson CPA This balance sheet shows Spartan/ Applicators total stockholder equity at that time as $51,560 28, of which year to date profit is recorded as $49 560 28 The reorganization agreement declares that Miller Shields, and Scott have earned and are then due 100 shares each for services they have rendered Spartan/ Applicators under terms of a prior oral stock bonus agreement (the background of which is in conflict) Their present share entitlement effects a recalculation of book value to $40 a share The reorganization agreement then declares 100 shares at $40 book value are presently to be issued to Shields and to Serstad It recites that Miller has elected to receive monetary value in lieu of an issuance of his 100 earned shares (In this regard, and contrary to argument advanced by the General Counsel in brief that Miller never intended to be a stock owner, it is clear of record that Miller, in January 1986, was agree able to participation in a new business with Peterson Shields and Serstad) Thus $4000 is declared payable (without interest) to Miller in weekly minimum install ments of $25 Miller has acknowledged that he has not received any of that money to date Miller however has also testified that he subsequently sold some scaffolding to Applicators/Kohl, for which he also has not been paid to date Miller stands as a creditor of Applicators/Kohl PERMA COATINGS Under the reorganization agreement Kohl subscribed to purchase 100 shares at $40 a share for a total of $4000, which Kohl has paid to the Corporation in cash The reorganization agreement then declares Peterson s desire is to sell and liquidate his entire interest as a share holder, and to resign as officer and director Under terms of the agreement, the Corporation redeems 500 shares from Peterson at $40 book value for a total redemption cost of $20,000 which is offset by $3,657 47 The offset is in an accounting for $2000 due the Corporation on Pe terson s onginal subscription cost, and his return of $1,657 47 for officer advances received from the corpora tion The balance of the redemption puce, $16,342 53, is to be paid by Spartan/Applicators, as follows $1,342 53 at execution of the agreement, and the remainder of $15,000, per terms of a promissory note of the Corpora tion Under terms of the Corporations s note, essentially, a $3000 payment is due Peterson from the Corporation on 15 January 1988 $6000 on January 15, 1989, and a final installment of $6000 is due on 15 January 1990 The note provides for nondefault interest at 7 percent, in liq uidated sums, and payable on the same above dates, re spectively In case of default, accrued interest is first added to principal, and future interest is then set at 12 percent The note is solely that of the Corporation and it is not personally secured The 500 shares thus redeemed by the Corporation are returned to unissued status Under the terms of the reorganization agreement Pe terson also sells his remaining 500 shares to Kohl at a price of $45 per share That price reflects a $5 premium paid Peterson for his sale of a controlling stock interest to Kohl Total price to Kohl is thus $22 500 Kohl pays for these shares by a personal promissory note, with principal to be paid in two installments, viz $10,000 in 3 years, and $12,500 in 5 years There is 7 percent annual interest, with similar provision for payment of 12 percent interest on default Peterson transfers the 500 shares to Kohl at agreement execution Kohl immediately pledges the 500 shares back to Peterson as security on Kohl's promissory note Under this agreement Kohl effectively at first holds a 75 percent stock share interest, with Shields and Serstad each then holding 12 5 percent of issued stock However, the reorganization agreement also declares a (future) 200 share stock bonus plan for Shields with 50 shares of stock to be issued to Shields beginning on 31 March 1987, and the same number of shares to be issued in each successive year through 1990, all in return for similar services to be performed annually by Shields Essentially the reorganization agreement, if fully implemented, pro vides for an eventual stock ownership of 10 percent by Serstad, 30 percent by Shields and 60 percent by Kohl who thus at all times retains controlling interest On execution of the reorganization agreement on 11 October 1986 (I find) Peterson owed no stock in the Corporation, and Kohl has owned controlling stock in terest in the Corporation at all times thereafter Hence operation of the Corporation thereafter is referred to as Applicators/Kohl herein It is noted that Kohl received and retains voting and dividend rights of the now pledged stock, so long as he is not in default on his note, for payment of which the stock is pledged On such a 821 default both voting and dividend privilege revert to Pe terson Applicators/Kohl and Kohl are current in their obligations, although none of the subsequent note pay ments had, as of hearing, yet become due Kohl testified that he expects to make all payments timely, and, there is no evidence submitted to warrant a conclusion to the contrary Peterson has testified that he finally has no concern about the running of this applicator construction busi ness Insul/Crete s president, William Snodgrass cor roborates that Peterson s noninvolvement in the applica tor business is where he has wanted it to be That the transition was one long intended is central to certain of Respondents contentions There is conflict in the wit nesses' accounts D The Evidence in Conflict and/or Confusion 1 General observations There is some degree of confusion, if not conflict, in the evidence in regard to the extent of Peterson's mana gerial involvement in the conduct of Coatings' business affairs in 1985 as compared with the conduct of Spartan/ Applicators affairs in 1986, and is to Insul/Crete s posi tion on both There is appreciable confusion, if not out right conflict in the evidence as to Peterson s intentions in his original formation of Spartan/Applicators, and, re latedly, confusion as to the origin and timing of Peter son s oral agreement with certain employees on the stock bonus plan There is confusion as to certain other oper ational elements bearing on the central alter ego conten tions Finally, there is some conflict as to Charging Party Unions first chargeable awareness of Spartan/Appli cators relationship to Coatings such as it is shown here to be 2 Background of Peterson's motivations and intentions Peterson has testified that his divestiture of Coatings was an ongoing thing raised from the time Dow bought into Insul/Crete in July 1984 Peterson has more defini tively testified that it was brought up at Insul/Crete Board meetings, by other stockholders and by Insul/ Crete local (sales) representatives who thought the Company (Coatings) was getting unfair treatment be cause of Peterson s involvement in it Peterson has also testified that Insul/Crete s president Snodgrass told Pe terson to divest his interest in this company, that Peter son told his attorney, Loniello, that he wanted to get out, and that the attorney handled the transaction for him Some of this testimony is notably imprecise in its rela tionship to Coatings and/or Spartan/Applicators How ever I am persuaded by weight of the evidence presented that Insul/Crete concerns applied to Peterson s involve ment with both Coatings and Spartan/Applicators con duct of a local applicator business but in a significantly varying degree It is clear of record it is not so as to the business affairs as now conducted by Applicators/Kohl However as to conduct of business affairs previously by 822 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD Coatings and Spartan/Applicators there are some signifi cant disparaties in Peterson's and Snodgrass accounts Since incorporation of Insul/Crete, Peterson and Lewis have been and are now directors of Insul/Crete Peterson testified credibly that Dow was fully aware of Peterson s involvement with Coatings (in 1984) Accord ing to certain more specific testimony of Peterson at time of purchase, Dow had said they would like to see Peterson (and Lewis) divest, and/or consider a divesti ture of his (their) interest in Coatings, at earliest conven ience Peterson asserts that his goal in 1985 was to rid himself of a financial connection to Coatings Peterson recalls there was not a lot of pressure placed upon him to do so until about 6 to 8 months later (after Dow purchase) when they (Insul/Crete) started getting complaints Peterson would thus place commencement of the complaints in early 1985, which would roughly cor respond with Peterson s initially developed plan for a total divestiture of his stock in Coatings through the in tended stock gift to Duffy and Shields That plan, as noted, proved to be too overburdened by the large in debtedness of Coatings (including the substantial unse cured indebtedness to Insul/Crete), and the plan ulti mately failed in May 1985 Peterson asserts that by June- July 1985, Peterson felt Dow was serious, and at that time they made a decision that we (whether Coatings, or Peterson and Lewis, or all four shareholders, is not clear), would be out of business in December, 1985 Insul/Crete s president Snodgrass has corroborated Pe terson in some respects, but not wholly and not so on some rather significant points Respondent's witness, William Snodgrass, is a Dow designee director, and he has been the Board approved president of Insul/Crete since September 1984 Snod grass has testified significantly that he never made a re quest to Peterson that he completely terminate all his ac tivities with Coatings From the outset however Snod grass wanted all of Insul/Crete s business affairs with other companies conducted at arm s length Snodgrass also wanted Peterson to be able to fully perform his as signed tasks for Insul/Crete, particularly as Insul/Crete expanded and he wanted Peterson to work towards being less involved with the affairs of Coatings But he was also concerned that Coatings pay its large indebted ness to Insul/Crete Snodgrass confirmed that Insul/Crete is a marketer of the exterior insulation system (as developed by Peterson) and he testified definitively that Insul/Crete is strictly a supplier of this product to the construction industry It is not in the applicator business itself Dow s basic interest in Insul/Crete is in its marketing of Dow's trade product, styrofoam Insul/Crete (currently) has a network of ap proved applicators Coatings (and Spartan/Applicators) was and Applicators/Kohl is an important local applica tor They, inter alia, have been used to try out a new product and have served for a job display to visiting customers Insul/Crete currently does its supply business with some 275 contractors nationally In the 2 years (1985-1986) essentially being addressed here, Insul/Crete effectively has expanded from being a regional to a national supplier of the Insul/Crete prod uct As a result of its continued expansion, Insul/Crete now owns and solely occupies the premises located at 4311 Triangle St, McFarland, Wisconsin, having, as noted purchased these premises from PBC in August or September 1986 Snodgrass confirms his own early awareness of Peter son s involvement with Coatings, but not as uniquely so Thus, Snodgrass testified that at the time of his arrival in September 1984, Coatings (and certain other businesses) had its (their) offices in the same building (located at 4311 Triangle St) as did Insul/Crete Snodgrass relates that he knew that some of Insul/Crete s employees were involved in various arrangements with the companies lo cated there, including Peterson specifically with Coat ings Snodgrass however explained that Dow s concern (at the time) was not with Peterson (as such) but with all the various informal arrangements that existed between the conglomerate of businesses that were operated there This extended not only to Coatings, but to all the other businesses alike, e g, Cubic Structures (foam homes) and Broken Rocker, another company selling adhesives for the repair of antiques), and to PBC itself, from whom Insul/Crete rented certain space adjacent to Coatings Snodgrass however has candidly testified that Dow also had a real concern about the large indebtedness that Coatings had with Insul/Crete at the time, which he re lates grew to about $150,000 (The difference between the $170,000 shown as owed by Coatings to Insul/Crete in Coatings 8 July 1986 bankrutpcy schedule and his recollection here of about $150,000 owed, is probably in principal part to be accounted for by consideration of a Coatings account receivable ($11,867 23) due from Insul/Crete shown on the schedule as being used as in terest) In any event, Snodgrass has also candidly testi feed that Insul/Crete was asked to make purchases for Coatings because Coatings has a problem with credit Insul/Crete made the purchases for Coatings, and then recharged the same to Coatings account with Insul/ Crete It is readily apparent to me from the above, and I find that at least to that extent, and in this period Insul/Crete's own interests then appeared to be best served by Coatings continuance in the applicator con struction business in hope that Coatings would remain both a principal local purchaser of Insul/Crete product, and (eventually) be able to pay off its large indebtedness to Insul/Crete Coatings continued position in the appli cator construction business locally was also utilitarian to Insul/Crete s broader interests, viz in Coatings trying out new products as they were developed by Insul/ Crete, and in serving as job model for viewing by Insul/ Crete s visiting prospective customers As it would turn out when Coatings eventually went bankrupt Coatings still owed a very substantial sum ($150 000-$170,000) to Insul/Crete Insul/Crete has since written that debt off as a bad debt The present point however is not one to be lost, namely that Insul/Crete at this time was motivated, in a pursuit of its own financial and business growth interests to allow Peterson some degree of reasonable leeway when it came to evolving a managerial extrication from Coatings business affairs in a manner favorable to PERMA COATINGS Insul/Crete s own real interests In short, Insul/Crete (I find) had its own financial and other business interests at stake in Coatings continuation in business as a local con struction applicator, not the least of which was Insul/ Crete s base interest in a recovery of Coatings rather large indebtedness to Insul/Crete 3 Peterson's involvement in the management of Coatings in 1985 Insul/Crete s approach to i* Peterson has asserted that in 1985 he had no duties with Coatings He acknowledges that he knew what was happening with Coatings, but he asserts he was aware of it from reports from Coatings secretary, and, he was also aware of it because it was part of his job with Insul/Crete to know what was happening with its (ap proved) applicators This function included visiting Coat rags jobs locally However, Peterson has asserted the he was not personally involved with the everyday running of his Coatings business, that he worked 100 percent of normal hours for Insul/Crete and that he was on the road 60 percent to 70 percent of his time Peterson other wise acknowledged, generally, that when in town, he might stop by Coatings to talk to the men to keep abreast Peterson relates that he was not active in manag ing Coatings jobsites in 1985 Indeed, Peterson has as serted that the biggest reason for all of the headaches of Coatings in 1985 was that nobody was managing the Company Peterson however has otherwise acknowledged that he had hired Chuck Crawford, who did the estimating and bidding for Coatings from January to June 1985, and, that Jim Miller handled all the jobs did all the hiring, and as far as he knew Miller did the assigning of men to all the jobs Miller has essentially confirmed the above, and he has also testified in detail as to his supervisory job functions, inter alia of seeing to it that the required men were hired assigned, and that the jobs were timely sup plied, and run properly Miller in this regard has de scribed himself as Coatings job superintendent On the basis of the above and other supportive and credible evi dence of record I conclude and find that James A (Jim) Miller functioned in Coatings management in 1985 as job superintendent over all of Coatings jobs, whether titled as such or not However, I also find in light of credited testimony of Shields earlier noted and other credited evidence of record including certain essentially corroborative testimony of Miller, that Shields in 1985 was also part of Coatings management team (apparently also without job title) performing (at least) as a working foreman, with various assigned supervisory duties and re sponsibihties for and exercising independent judgment in the running and staffing of certain jobsites Thus I also credit Shields that in 1985, Shields along with Miller de cided who went to certain jobs In light of all the above, I do credit Peterson general testimony that in 1985 he did not participate in Coatings on jobsite management However I do not fully accept his testimony otherwise, e g , to the extent it projects disavowal of any significant participation in the management of Coatings daily busi ness affairs in 1985 for reasons soon to be made appar ent 823 Snodgrass testified that as Insul/Crete s vice president in charge of research and development, Peterson report ed directly to Snodgrass According to Snodgrass, Peter son s assigned duties for Insul/Crete were, and are in product development, in certain manufacturing oper ations, but with principal responsibility for running Insul/Crete s technical department which includes selec tion and training of applicators, and in dealing with any related job problems Snodgrass confirms that in per forming these duties for Insul/Crete Peterson spends 60 to 70 percent of his time traveling around the country, and that as part of his job, Peterson visits jobsites How ever, Snodgrass also testified that Peterson's first assign ment was to get Insul/Crete's production plant built, and his second was to organize Insul/Crete s technical de partment Snodgrass explains that since Dow purchased stock in Insul/Crete, the nature of Insul/Crete has markedly changed As noted, one immediate goal that Snodgrass has was to separate all the different businesses being in formally conducted (at the Triangle Street Building) from Insul/Crete Insul/Crete wanted to put them all at arms length to conduct its own business on a more formal basis e g, to convert to formal contracts and to ensure that work performed by employees of Insul/Crete would be charged properly to the other companies Snodgrass testified that since September 1984 he has worked towards that goal In that general sense, of want ing to keep all chargeable Insul/Crete business affairs separate from the start, Snodgrass supports Peterson s testimony Snodgrass also testified that from the time of his arriv al in September 1984, Insul/Crete s business began to change profoundly Snodgrass recalls that very quickly Peterson was spending 80 percent of his time on Insul/Crete matters However, in describing that other 20 percent, Snodgrass testimony then recounts that most of that time was spent by Peterson in meeting with Coat rags' work crews in the morning before 7 a in or 7 30 am after which the crews left for the jobs and also meeting with them after hours, or on Saturday It is in that sense that Snodgrass confirmed that Peterson essen tially put in normal 8 am to 5 p in hours for Insul/ Crete and Snodgrass further testified that at the time he felt Peterson was making a strong effort to keep his in volvement with Coatings separate from and on a nonin terfering basis with Peterson s performance of his as signed duties for Insul/Crete Again the emphasis was on keeping Peterson s conduct of Insul/Crete s business of fairs separate from his involvement with Coatings buss ness affairs but not to the extent of a prohibition of any Peterson involvement with the latter, and as we shall see, not even during the day Thus Snodgrass has again candidly testified that while Coatings was located at the same business address as Insul/Crete (through December 1985 infra), it was easy for Peterson to move between the operations of Coatings and Insul/Crete Peterson only had to walk across the hall Snodgrass also candidly testified that Insul/Crete did not try to obstruct Peterson nor did they screen the calls that he received on Coatings business during the 824 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD day I have little doubt that Peterson had continued to sign some contracts for Coatings in 1985 as he acknow leges he may have done I also have no doubt it was viewed in Insul/Crete s best interests that he be able to do so so, so long as there was progress towards minimi zation of his involvement and Coatings remained viable In that regard Snodgrass was aware of the develop ment of Peterson s proposal in 1985 to turn Coatings over to a group of employees, and get completely out of Coatings Indeed, Snodgrass revealingly relates that he and Peterson had written out a fairly detailed arrange ment on how Insul/Crete would do business with Coat ings when Coatings (anticipatedly) would be run by the (donee) employees Although Snodgrass confirms that the effort fell through, it is clear that Coatings Insul/Crete credit arrangements were made by Peterson and Snodgrass before the stock gift plan to Duffy and Shields fell through As noted, Snodgrass has testified that he never made a request to Peterson that Peterson completely terminate all his activities with Coatings Snodgrass (I find) credi bly relates it was more of an agreement that Peterson would work towards becoming personally less involved in management An important double distinction appears thus to be made first between Dow s concern that Peter son s involvement with Coatings not detract from Peter son's ability to perform his assigned duties for Insul/ Crete, and a second distinction between Peterson s con tinued management involvement vis a vis ownership in terest in Coatings, and their concurrent mutual interests that Coatings continue as a viable business operation Nonetheless I credit Snodgrass further testimony corroborative of certain Peterson assertions, that poten tial conflicts were recognized , and actual conflicts did develop in 1985 though according to Snodgrass more significantly so in 1986 In any event I credit Snodgrass specific testimony recalling early recognized potential problems or conflict that would and/or did arise where Insul/Crete developed a new product and had Coatings use it Such potential problem or conflict arose if the new product itself developed an unforeseen problem that would obligate Insul/Crete to do something about it After discussion with Peterson it was agreed between them that Snodgrass would make all those decisions Snodgrass testified relatedly albeit generally that they basically agreed to work towards a goal of separating all potential conflicts of interest out but there was no formal timetable set to do it Although Snodgrass has also recalled that a couple of problems did arise for Insul/Crete with another applicator that sought technical advice on matters of bidding , but was reluctant to pursue their resolution with Peterson Snodgrass testified that those problems had arisen last year (1986) The problems are discussed infra 4 Coatings move from the Triangle Street Building to Meinders Road There is confusion as to precisely when Coatings moved, indeed confusion as to the extent it had (wholly) moved out of the Triangle Street Building prior to its bankruptcy filing in July 1986 Snodgrass testified that Coatings was located at the same 4311 Triangle Street Building address as Insul/Crete until Coatings moved about a half of block away to 4931 Meinders Road At first Snodgrass recalled the move as taking place I to I- 1/2 years prior (to hearing) which would appear to place the move (generally) as early as November 1985, or as late as April 1986 However , Snodgrass also had other somewhat more illuminating recollections that Coatings had ceased its operations as of 31 December 1985, and, that Coatings move had occurred while Coat rags was in existence Snodgrass testimony considered overall indicates that Coatings had moved some time prior to 31 December 1985 Thus Snodgrass also has recollections of Coatings phones being operative in the same building as Insul/ Crete in December 1985 That would indicate Coatings had continued some presence there in December 1985 Snodgrass could not recall exactly when the Coatings phones were removed However Snodgrass had no recollection of Spartan/Applicators ever having phone lines at the Triangle Street Building Shields also recalled that Coatings office location was at the Triangle Street Building and Shields has testified it did not change from 1979 through December 1985 Although on one occasion Miller appears of record to relate that he and other em ployees had generally reported at the Meinders Road lo cation in 1985, other Miller testimony indicates the con trary E g , Miller otherwise testified as to his (direct) pickup of material at the Insul/Crete warehouse in 1985, in comparison with now being at a greater distance (at Meinders Road), a good block away, and that he now first phones and picks up the material from Insul/Crete the next day The latter convinces me, particularly in its compatibility with other credible evidence of Snodgrass and Shields that it is the more reliable I conclude and find that Coatings had continued its construction business presence at the Triangle Street Building at least into but not beyond December 1985 There is however an additional question whether Coatings as a corporation had fully removed its offices from that location prior to bankruptcy filing Thus, Coat ings bankruptcy petition filing of 8 July 1986 (to be noted as pre Insul/Crete purchase of the premises) re flects Coatings official place of business as (still) at the Triangle Street Building address Even Hof 's address also there supplied in regard to location of Coatings records is shown as being at the Triangle Street Build ing address, although there appears otherwise to be no question that Hoff had been employed at Meinders Road by Spartan/Applicators beginning in January 1986, and by Applicators/Kohl there through January 1987 What is indicated by the above and the record as a whole is that Coatings had moved (at least) its equipment and phone lines to Meinders Road location some time prior to 31 December 1985 What is clear of record is that since incorporation Spartan/Applicators has itself always been located at Meinders Road and that Spartan/Applicators has used Coatings' same phone numbers there It is further clear to me that while in town Peterson had essentially free movement between Insul/Crete and Coatings operations, effectively through all of 1985 PERMA COATINGS 825 In that regard, Snodgrass has confirmed his own awareness of a continuing involvement of Peterson in the affairs of Coatings in 1985 albeit in a manner such as had satisfied Snodgrass overall that Peterson was making an effort to keep his involvement with Coatings separate and nondisruptive of the accomplishment of his assigned basic duties for Insul/Crete Although Shields at one point testified in seeming support of Peterson, that Peter son was not then real active in the business, and that Shields felt that that had caused problems for Coatings because no one was there everyday to report to, on other occasion, Shields clearly placed Peterson s actual involvement with Coatings at 60 percent in 1985, as compared with 5 percent (with Spartan/Applicators) in 1986 The recollections of Snodgrass and Shields are the more compatible , and I find them the more reliable Cir cumstances of real conflict also anse as to Peterson s in tentions in setting up Spartan/Applicators, and in the timing of his development of a specific stock bonus plan for key employees 5 The remaining alter ego evidence a Coatings cessation of operations Spartan/Applicators commencement of operations Peterson testified that Coatings had no unit employees at the end of December 1985 Respondents Exhibit 7, a compilation of Coatings employee employment records, supports the same, as does further corroborative testimo ny of Miller and Shields There is some confusion as to the commencement of operations by Spartan/Apph cators Peterson asserted generally that employees were not doing anything until Spartan/Applicators started looking for work in February 1986 On other occasion Peterson related the start of bidding was probably in Jan uary On still other ocassion, Peterson testified that Spartan/Applicators had started its bidding with the em ployment of Timothy Parrish, whom Peterson then re called had bid work probably from March-Apnl to July-August 1986 Employment records establish that Parrish was hired in February 1986, and terminated in August 1986 Peterson also testified that it was in Febru ary-March (1986) that Spartan/Applicators began paying monthly rent to PBC for the Meinders Road location in the amount of $650-$675 (probably $675, as Apphca tors/Kohl pays $675 and Kohl testified the rent did not change) In light of findings as to Spartan/Applicators actual acceptance of the Coatings equipment on 15 March 1986 rental payments beginning in March would appear fiscally more likely However Spartan/Apple cators rental payment of $675 itself compares favorably with $700-$750 monthly rent previously charged to (if not actually paid by) Coatings The record reveals that Spartan/Applicators had leased proportionately less space than had Coatings b Comparable bidding procedures Spartan/Applicators completion of Coatings lastjob Essentially the bidding procedures utilized by Spar tan/Applicators (and by Applicators/Kohl) were the same as Coatings had used, though Spartan/Applicators estimator/bidder Parrish had never previously worked for Coatings Thus, Spartan/Applicators subscribed to the Dodge Reports service as had Coatings before it as does Applicator/Kohl now, and as do any number of other unrelated construction firms or contractors, gener ally The Dodge Reports service , lists, or attempts to list daily for contractors , all the jobs that are being put out for bid in a given area The usual procedure is that an interested applicator estimator calls either the general contractor or the architect of a newly listed job to deter mine if there is an exterior insulation system in the job specifications If there is, and if the estimator desires to submit a bid on the job, the estimator will take off the footages from the blueprints made available for that pur pose, and submit a bid on the job Some general contrac tors may call the applicator subcontractor, and solicit a bid Some minor amount of work may involve an estima tor pricing jobs obtained as a result of customer response to ads in the yellow pages However, it is clear that the principal amount of the applicator construction work is obtained through use of the Dodge Reports service, and its related procedures The record reveals that Spartan/Applicators has per formed applicator ocnstruction work for at least some of the same general contractors/developers that Coatings had before it (Until recently , Applicators/Kohl conduct ed the same operations and used the same service as did Spartan/Applicators before it , and clearly, in the main, Applicators/Kohl has continued to do so ) As noted because of bad weather , and owner general contractor related determinations , Coatings did not finish one job (the Concourse Hotel) that Coatings had con tracted to complete in 1985 Spartan/Applicators finished this job Peterson placed the finish of this job to be ac comphshed in the spring of 1986 However , Spartan/ Applicators did so under a separate , new contract, signed in the Spring albeit one seemingly negotiated by Peter son Be that as it may this is the only Coatings previous ly contracted job that Spartan/Applicators (or Apph cators/Kohl) has performed (There was no break in Ap plicators contracts ) c The conflicting evidence as to Spartan/Applicators business purposes When called initially as a witness by the General Counsel Peterson had testified that he established Spartan/Applicators and, that the purpose of Spartan/ Applicators was to become a contracting firm, to get into exterior installation systems, and to bid the work Peterson acknowledged that to a certain extent it was the same work as had been done by Coatings However, Peterson then added that it was obvious that Coatings was doing something wrong, or Coatings would not have been in the financial condition it was in Peterson then testified that the intention of the new corporation was to do things differently to bid different types of work, and to act differently The essential thrust of the above testimony would project Peterson s intention that Spartan/Applicators would essentially operate as a new construction applicator subcontractor , but in the same business as had Coatings performed before it The ques 826 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD tion is whether Peterson (and/or all Coatings sharehold ers) intended the new company to be set up to operate as an alter ego of Coatings, or, the new company was formed for other purpose, and with intention always that eventual ownership of the new company in the future would be in others, as is urged to have been the joint purpose from the start Peterson has testified that at this time basically he was trying to avoid a forced sale of Coatings equipment assets Yet, when subsequently called as Respondent's witness, on cross examination, Peterson appears to have specifically denied that his intention at the time was to try to sell the Coatings equipment through the sale of an ongoing business (Spartan/Applicators) In passing it is observed that to the extent Coatings sold its equipment assets to Spartan/Applicators (I have found) the same clearly had the approval of Coatings four shareholders, and, to the extent the new company Spartan/Applicators agreed to pay the purchase price of $80,000 directly to McFarland, to be applied to the SBA loan, all four shareholders of Coatings potentially will benefit by the reduction (to that extent) of the amount owed on the SBA loan upon which they remain personally liable However, it is also observed in passing that benefit is limited to recovery of fair value of assets and in con trast, that (at least) in the sense limited to Peterson s pro spective recovery of essentially 80 percent of the year to date profit of Spartan/Applicators through 30 Septem ber 1986 recovery will enure, on this record, to Peterson (alone), and not to Coatings four shareholders equally It is Respondent's further contention that Peterson had at all times intended to divest himself of his ownership of Spartan/Applicators business In that regard, contention of simultaneous existence and/or commencement of a certain stock bonus plan for key employees is principally relied on by Respondents It urges that that plan s exist ence taken in conjunction with Peterson s earlier effort to wholly divest through the (failed) stock gift plan in April 1985, and viewed in combination with asserted pressure from Insul/Crete for a divestiture, warrants a finding that no legitimate inference lies that Peterson s actual divestiture in October 1986 was occasioned only because of the unfair labor practice charges filed by the Unions in the interim on 8 August 1986 In these matters, there is also confusion d Stock bonus or benefit plan Peterson s assertions as to his intent in establishing Spartan/Applicators and to existence of an oral agree ment with key employees on a stock bonus plan, are at best confusing Some aspects are simply left in actual conflict While asserting there may have been more dis cussions, Peterson has asserted that there was one meet mg with Miller Shields and Serstad, which he placed in November or December 1985 and clearly before Coat ings had ceased business According to Peterson at this meeting there was a general discussion about what might take place after Coatings bankruptcy, and Peterson in quired if they (Miller, Shields and Serstad) were inter ested in trying from a company in the plastering busi ness, but not with reference specifically to Spartan/ Applicators as the company Peterson initially testified that an agreement was not reached at that time but he asserts he did determine there was enough interest shown by the employees in trying to be involved in some way with a new company On later occasion, and in marked contrast, Peterson then asserted that not only did the above three named key employees know before January 1986 that it (the new enterprise) was going to be their company, but Pe terson then also asserted that they had reached a verbal agreement prior to 1986 some time in November 1985 According to Peterson, the agreement was that these in dividuals, over a period of 5 to 7 years, would become 100 percent owners of production and work for the com pany There is thus clear conflict in Peterson s own ac counts as to origin and key employee agreement on a stock benefit plan However, on other occasion Peterson has asserted (this time, seemingly more compatible with Miller and Shields accounts) that the decision to set up the new company was one jointly made in early 1986 by Peterson and the above three key employees In that respect, Pe terson asserts that Parrish was later included as part of his (February) hire arrangement, but with the agreement of the other key employees On still other occasion Pe terson has referenced a rough draft of an agreement (on stock bonuses) in the spring 1986, albeit one admittedly never signed Peterson however has relatedly testified that the stock benefit plan was effective in January 1986 (No attempt was made to offer the rough draft of an agreement in evidence) Peterson also acknowledged that he did not try to ar range for an immediate stock distribution to the four key employees (Parrish, Miller, Shields, and Serstad) when Spartan/Applicators started up in business Peterson ex plained this was because, as they knew, they would have to be there a year before there would be a stock issu ance Peterson offered further explanation that his attor ney has advised him that he could not issue shares of stock in exchange for services performed until the serv ices were actually performed However persuasive the consideration of the relation ship of performance of service to actual stock issuance may be the same does not serve to adequately explain the absence of any earlier formalized stock benefit plan agreement between Peterson and the four key employ ees The fact is that it more appears of record that Peter son's recollections of the details of an oral agreement are not only as above noted, at least confused as to both timing, and nature of discussion(s), but appear in conflict as to timing of an actual full and specific agreement reached with key employees At best what is portrayed are preliminary explorations with some degree of pre liminary approvals reached in early 1986 as to which there is some degree of corroboration, discussed further infra However, the same appears no less to stand in stark contrast with the formalized prior (April 1985) Coatings' stock gift plan that failed and the formalized (October 1986) Spartan/Applicators reorganization plan that succeeded On the other hand no requirement that an agreement on a stock bonus plan be in writing ap pears of record, and, the reorganization plan itself does PERMA COATINGS 827 appear to formally implement certain terms of a stock bonds plan described as previously existing Other evi dence bearing on the origins of the stock bonus agree ment must be scrutinized Such review reveals there is convincing support generally, of a plan for key employee ownership (with Peterson) in Spartan/Applicators, in January 1986, but of specifically a stock bonus plan, not apparently before April 1986 Peterson identifies the key employees as originally Miller, Shields and Serstad, and later Parrish Only Miller and Shields have testified The absence of Parrish as a witness is adequately explained of record, that of Serstad is not The testimonies of Miller and Shields, al though not wholly congruous are more consistent among themselves than with Peterson s account Yet they are revealing of credible probabilities in certain import of Peterson s apparent vacillating recollections It will be recalled that Shields was one of the pnnci pals in the failed stock gift plan presented in April 1985 (seemingly from Crawford s nonreplacement), Shields testified (I find) even more convincingly that he knew Coatings would cease business on 31 December 1985, but he always knew something could happen Shields credi bly explains, and (partially) confirms Peterson, that Pe terson talked to him in December 1985 about it Peterson asked Shields if Shields would be interested in another company According to Shields at that time he expressed both interest and concern Shields recounts that Peterson then asked who Shields would be interested in working with, and Shields replied, Miller and Serstad James A Miller Sr had worked for Coatings off and on, for 3 years, but in 1985 clearly regularly (R Exh 7) Miller confirmed that Coatings had terminated him in December 1985, but only when Coatings work was caught up Miller testified that he then drew unemploy ment through February 1986, until hired by Spartan/ Applicators in March 1986 Contrary to Peterson s asser tions as to the nature of discussions purportedly held with the three original key employees in 1985, Miller has testified that when he went on unemployment (in De cember 1985) he was not really aware that Peterson was setting up another company Rather Peterson relates that he learned of it later in January or February 1986 Miller testified that at that time Peterson called a meeting at Spartan/Applicators office on Meinders Road Miller confirmed that Miller, Shields, and Serstad were in attendance along with Peterson Miller corrobo rates that the purpose of this meeting was to see if they (the kev employees) wanted toy go into business with Pe terson It was not to be for Peterson in the business but the four going into business together They were all agreeable According to Miller, the only thing that both ered Miller was the matter of (start up) equipment, and finances Miller did not believe that Peterson had mentioned Coatings bankruptcy at this meeting, but Miller did recall that Peterson had said the equipment could he ob tamed from the bank for a certain amount of money and, Peterson said he would look into it Miller also re called that Peterson said he was just getting a feeling of what we could do, if we were interested and how we would go about it Shields testified that he was involved in discussions with Peterson Miller and Serstad on (seemingly) 1 January 1986 Shields otherwise also con firms the discussions were about potential ownership of the business what could be done, what they would like done, how to do it, and that Shields had input on what they were planning to do As noted, attached to the Coatings and Spartan/ Applicators sale and purchase agreement (the latter with an original date of 15 January 1986) there is a listing or inventory of Coatings equipment with valuations (see G C Exh 3) Peterson has testified that Miller made the inventory listing of Coatings equipment, and that Miller and Shields later put the values on the items of equip ment According to this Peterson recollection, at the time Miller and Shields appraised Coatings equipment, they knew, or had an understanding, or an agreement to be the eventual potential owners of a new company Pe terson did not change their evaluation, becuase he thought it was an honest appraisal Neither Miller nor Shields appears to have been di rectly questioned as to their preparation of the inventory list of Coatings equipment, and/or the related evalua tion Moreover, Peterson s testimony appears both docu mentanly supported, and uncontested I credit Peterson s account as to both preparation, and evaluation of the in ventory list of Coatings equipment I further find that both these events occurred on or before 15 January 1986 However, I am not persuaded by the evidence, and I do not find that the key employees were then aware of Pe terson s 100 percent ownership of Spartan/Applicators, or that the terms of the stock benefit plan was then clearly defined to them According to Miller there were no other meetings With regard to definitive terms of stock benefit plan, Miller has testified that when the business started up, they were still in the drawing up stage Miller further ac knowledged that he has never signed anything, nor was he ever shown any papers (e g , the rough draft of the stock benefit plan) Indeed Miller has significantly testa feed he did not know in the spring of 1986 that Peterson owned 100 percent of Spartan/Applicators There is some suggestion of record stock was not actually issued to Peterson until October 1986 Miller testified that his own understanding was that the owners were Peterson Miller Shields and Serstad Shields has as much as con firmed the same in testifying that he felt he was an owner from 1 January 1986 whether he was, or was not so legally on paper Otherwise, Miller has testified that it was eventually worked out that he would get so many shares over a number of years and he recalled that it would start at 5 percent In light of the subsequent declaration of 100 shares earned it would reasonably appear to the 5 percent stock benefit, whenever first announced, had application to Spartan/Applicators total authorized shares Be that as it may, and in any event it is clear of record that under any such Spartan/Applicators stock benefit plan to be on the evidence such as is presented here, that Pe terson would continue as majority stock owner of Spartan/Applicators for a significant period e g for at least 3 years, and more probably longer, particularly in 828 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD light of Peterson s own recollection of the plan operating over a period of 5-7 years e The conflict as to key employees 'first employment by Spartan/Applicators and the related question of the extent of key employees determination of wages Peterson has asserted that when Spartan/Applicators started, only the four key employees (Parrish, Miller Shields, and Sertad) were employed , and that other em ployees were hired later , as needed Respondents prof fered employment records simply do not bear this out, infra Peterson also testified that the four key employees determined their own wages , hours and working condi tions, because they were going to be eventual owners of Spartan/Applicators and, that the four key employees determined the wages of the other employees hired later in the year The evidence offered as to key employees determination of wages etc again appears confusing On the matter of key employees initial employment, apart from Hoff (office) who alone was hired by Spartan/Applicators in January 1986, Respondents sub matted a compilation of Spartan/Applicators actual em ployee complements (R Exh 8) This exhibit reveals that the key employees (shown below italicized) and others employed in relevant February-May periods (with union membership appearing in parenthesis), were as fol lows (Union Membership) Feb Mar Apr May Brown Marvin (Temp ( ) X l day X l day help) Duesterbeck James R ( ) X X X X Hornung Gerald (laborers) X Miller Francis ( ) X X X Miller James A (Plasterers) X X X Miller James F ( ) but (elsewhere X shown a plasterer) Parrish Timothy ( ) X X X X estimator Ree Dwayne (1) X X Serstad Scott (laborers) X X X Shields Brian (laborers) X Zander Ted (Plasterers) X X X X Even excluding Brown from consideration, as being but 1 day temporary help still three of the first four em ployees hired by Spartan/Applicators were non key em ployees, and only the described fourth key employee Parrish was actually first employed at this time At least two of the initially hired non key employees were regu larly employed thereafter To be sure, in the following month of March, Miller and Serstad were employed, along with Parrish But even then Shields would not be employed until 2 months later in May 1986 Peterson s recollection that all four key employees were the first employed by Spartan/Applicators is simply erroneous at least in terms of actual payroll record appearance of em ployment His further assertion that they hired all the other employees later in the year, and set the employees wages, fails of full acceptance with that indicated base error, and because of the contrary effect of other more credible evidence of record On other occasion Peterson testified that the (original) three key employees had set their own salaries (This recollection, selectively, raises closer issue of whether the matter of wages of key employees were discussed in the early January meeting) At the hearing, Peterson tes tified that he did not know what their salaries were The General Counsel established in a prior affidavit of 27 June 1986 Peterson has there recorded the weekly sala nes of Miller, Shields, and Serstad were $688 80 each, re spectively (Parrish s salary was $475) Peterson then ex plained that his awareness of the salaries at time of giving affidavit was because he then had stubs (records) available to him Peterson denied that he had discussed Coatings union contracts either with the key employees, or (later) with Kohl (Kohl testified that union contracts were not a concern to him at the time Kohl also con firmed there were no changes in wages when he took over controlling interest ) Significantly both Miller and Shields have (partially) corroborated Peterson that Peterson did not mention the union contracts in their discussions In regard to salary however, Miller testified that when he began to work (in March) he was paid a weekly salary of $668 09 Miller explains that sum represented his regular union scale and benefits Indeed Miller has testified that he has always been paid (his) union scale and benefits On this record it is also clear and I find that Miller was otherwise paid for his worktime in a given week under terms of Spartan/Applicators employment in the same manner as he had been previously while in Coatings employ Miller however does confirm (generally) that he and Shields and Serstad talked it (pay) over, and determined the amounts to be paid other employees But there is confusion of record as to when this procedure first com menced Miller testified that in the spring of 1986, Spartan/Applicators employed carpenters laborers and PERMA COATINGS plasterers, and, that as they obtained more work more were hired With regard to what other employees were paid Miller has testified (ambiguously) that when Spartan/Applicators started, that it (pay) depended on their experience, and/or what they knew or could do, and not on (what was then) union scale and fnnges Mil ler s testimony is confusing because he clearly was not employed until March and a number of regular employ ees, four, were already employed in February (including only Parnsh of the purported four key employees), none of whom have testified Moreover Miller has also testa feed that there were no other meetings after the first meeting he had attended with Shields, Serstad, and Pe terson In that very respect, Miller has additionally testa feed specifically, and significantly (e g, in comparison with the content of the discussions in the first meeting), that he, Shields and Serstad talked it (pay to other em ployees) over, and set the amounts, not Peterson Miller has testified explicitly that they did not run it (pay) by Peterson I am convinced that pay discussions (at least) for other employees did not come up in the January meeting that was attended by Peterson Shields has testified (again generally) that they pretty much set their own wages, and, that it was a joint agree ment between the three Shields however then went on to assert that they each took the highest wages (and fnnges) that was being paid under the highest union con tract (seemingly, on this record, the plasterers) (That did not apply to Parrish ) Shields however then relates being paid so (thus again ambiguously) from some time in May The reference in important because Shields was remodel ing a home since January 1986, and he, personally, did not start work for Spartan/Applicators until May 1986 Serstad was first employed in March 1986 as was Miller, but Serstad has not testified, and there is no direct and credible evidence as to what Serstad was initially paid With regard to setting wages for new employees, Shields recollections of Miller Serstad and Shields in volvement would indicate the same occurred when all three were employed The first time that would have oc cured would be May 1986 Shields relates that when the new employee was hired they asked the employee what the employee would like to get paid, and what they knew, and, according to Shields, most of the time they gave the employee what the employee asked There was only one employee (Gerald Hornung a laborers union member) additionally hired in May and (again) only one additional employee (Henry Reuben) hired in June The major additional employments (10) commenced in July 1986 Shields other asserted involvements with Spartan/ Applicators, in March and April, offer no definitive help in this matter The matter of setting wages need not be belabored by an addressment of further unconvincing proof In the end the weight of the above evidence does not persuade or convince me that from the start Miller, Shields and Serstad, together set non key employees wages as they were employed I have no doubt that Miller drew the equivalent of union wage scale and fringes from the start, because that is what he was always paid I also find that Shields was paid higher wages in May than the Laborers contract called for 829 Indeed, I am persuaded that Shields and Serstad elected, with Miller agreement, to pay themselves the highest union wages (and fringes), but mostly likely the discus sions were in May, and paid from May on I further find that these three key employees collectively thereafter set the wages of newly hired employees probably beginning in May, but in any event surely in July 1986 I further find they did not always pay wages and benefits consist ent with existing contracts, and on 8 August the Unions jointly filed the instant charges (It is clear that they were involved in the managerial conduct of the financial interests of Spartan/Applicators in July 1986, discussed further infra Before proceeding to the consideration of Spartan/Applicators handling of financial matters, chron ologically, certain other material events had occurred, some even prior to May 1986) f Contended union notice of Spartan/Applicators operations union investigatory action (1) Union notice Peterson and Kohl both acknowledge they did not provide the Unions notice of their respective business op erations Miller has testified to an occasion of his going to the union hall of Plasterers Local 204 to pay his dues Miller relates that he had a conversation there with either (past) Plasterers Local 204 Business Agent Jim O'Connell, or (present) Business Agent Cimino Accord ing to Miller, Miller was asked (by one or the other) where he was working Miller replied, Applicators The General Counsel relatedly established that Miller paid his dues on 11 February 1986 (for January and February), and on 1 April 1986 (for March and April) Inasmuch as Miller has also testified that his conversation with the business agent occurred after he had started working for Applicators, it is clear, and it is found that this incident occurred no earlier than 1 April 1986 (Since such notice would be well within 10(b) period I need not address the General Counsels other evidentiary attack on wheth er Respondent by such evidence offering has actually proven a Plasterers union notice of Spartan/Applicators operations in unfair labor practice context ) Shields has testified that Laborers Local 464 also knew where he was working Thus Shields relates that on an occasion of his paying dues Local 464 s treasurer Gordy Kraut, had asked Shields who he was working for Shields replied that he was working for Applicators (adding, or it may have been Spartan/Applicators) and that he was doing stucco work Shields placed the date as 4 March 1986 Kraut did not testify, and the General Counsel did not seek to establish an other date of pay ment of dues (The record does establish that Shields has continued him membership in Laborers Local 464) However, the General Counsel correctly would have it observed that since Shields did not go to work Spartan/Applicators before May 1986 he would not have had an occasion on 4 March 1986 (when he paid dues) to tell Kraut at that time that Shields was working, and more pointedly, specifically working on a stucco job, for Spartan/Applicators I am convinced that any such conversation Shields may have had with Laborers 830 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD Local 464 Treasurer Kraut , would have occurred later, at time of stucco job assignment, and (at least) after Shields had actually started his employment in May 1986 Moreover, even clear notice given to Laborers Local 464 on 4 March 1986 would effect a 10(b) bar (2) The Carpenters' questionnaire The General Counsel has in turn established that in April 1986, Carpenters District Council sent a question naire to Peterson The questionnaire (G C Exh 5) probes Coatings' and Spartan/Applicators business rela tionships, including their places of business, banking, credit arrangements, tax and unemployment matters, equipment use, customers, estimators, number and nature of employees, wages and fringe benefit programs, man agement, owners officers, directors, shareholders, and persons involved in labor relations policies Peterson acknowledged that he received the question naire on return from a trip made for Insul/Crete Peter son forwarded it to his attorney (Loniello) Peterson tes tified that he did not hear back from his attorney, and Peterson acknowledged that he did not contact the Union about the questionnaire Indeed, Peterson has ac knowledged that he has not notified the Union (s) at all about the circumstances of his startup of Spartan/ Applicators g Financing Spartan/Applicators (1) Bank accounts, bank financing Peterson testified that during the formation of Spartan/Applicators, he did not immediately secure loans or credit from an institution From the start Spar tan/Applicators had a separate bank account albeit in McFarland, as did Coatings However Spartan/Appli cators subsequently closed its bank account at McFar land and opened a new account in Community National Bank Spartan/Applicators obtained a $10 000 revolving operating loan from Community National Bank with a security pledge of Spartan/Applicators accounts receiv able Spartan/Applicators other (equipment) assets were clearly subject to the first lien pledge on the SBA loan Peterson s recollection was that it was in the spring of 1986 that he cosigned a 60-90 day, renewable type $ 10,000 operating note for Spartan/Applicators, along with Parrish Miller, Shields, and Serstad, who all signed personally The executed loan document (Continuing Guaranty, R Exh 18) confirms a credit loan cosigning As noted, it provides the first convincing documentary support for established key employee interests in the business exiting at that time However, the loan docu ment is dated 31 July 1986 (2) Extension of Insul/Crete credit to Spartan/Applicators Snodgrass relates that he was aware that Peterson had developed a new company Applicators" as he then heard it called Snodgrass has testified that Peterson s in volvement with Spartan/Applicators was limited namely that Peterson agreed to help with Spartan/Applicators line of credit with Insul/Crete According to Snodgrass, Peterson signed a personal guaranty Thus Snodgrass has confirmed that Insul/Crete has supplied goods to Spartan/Applicators on Peterson credit In that regard Snodgrass has testified significant ly, and wholly credibly, that after the $150,000, or more loss experience that Insul/Crete had with Coatings, they (Insul/Crete) were cautious, as Snodgrass did not want to have to report to his shareholders that Insul/Crete had bad business relations with some of the same compa ny, or people As Snodgrass initially recalled, it was probably in the spring of 1986 , when the weather im proved and sales picked up, that Snodgrass asked Peter son (only) to sign as guarantor of a line of credit to Spartan/Applicators, at that time limited to $30,000 Snodgrass otherwise recalled that there were but two guarantees made to Insul/Crete, one initially by Peterson alone, and one later executed by Peterson , Kohl and Shields, but not Serstad The General Counsel has established that the first guaranty by Peterson alone was also executed later than Snodgrass had recalled , viz, on 30 July 1986 (See G C Exh 1) This first guaranty was executed actually after Coatings had filed for Chapter 7 bankruptcy Apart from erroneous recalled time of execution , Snodgrass remain ing recollection as to this first guaranty appear wholly congruous with the actual later July date , and its circum stances Although Snodgrass also confirmed some earlier awareness of future employee ownership in Spartan/ Applicators, there was no requirement by him at that time that any future stock benefit owner sign the person al pledge as there was with extension of (additional) credit to Applicators/Kohl the following year, when there was such other ownership, discussed infra h The SBA assumption agreement request On 17 September 1986 McFarland s Locke sent Peter son a letter with an enclosed assumption agreement In the letter, Locke informed Peterson that SBA attorneys wanted Peterson (Spartan/Applicators) to execute the enclosed assumption agreement by 1 October 1986 be cause of Spartan/Applicators assumption of the (essen tially equipment) assets of Coatings previously pledged on the SBA loan The letter also requested financial statements from Spartan/Applicators at this time Peter son has testified that he was upset on receipt of this letter, initially asserting the reason was that he believed they (McFarland and/or SBA) were asking for double collateral because Coatings stockholders were still guar anteeing payment of the SBA loan, along with their pledged security Peterson called Attorney Loniello, and Peterson then notified Locke that he would not sign as sumption agreement Peterson later acknowledged that he also felt the Spartan/Applicators people, then identifying them to be, in addition to himself Miller, Shields and Serstad, were all being asked to sign something already covered by previous collateral The letter itself does not on its face appear to seek any signature other than Peterson It is clear that certain pledged assets as primarily here relevant, Coatings equipment, although assumed by PERMA COATINGS Spartan/Applicators subject to Coatings' pledge or SBA lien, were no less in the possession and use of a company other than Coatings who had pledged them to McFar land on the SBA loan To be sure, Peterson had testified relatedly that McFarland and SBA had originally agreed to Coatings (insolvency) sale (on their behalf) and Spartan/Applicators' purchase of the pledged Coatings equipment was with accepted obligation to pay fair pur chase price to direct credit on SBA loan It also fairly appears that if Peterson (and/or others) executed the as sumption agreement as presented, effectively Spartan/ Applicators thereby would appear to assume an obliga tion for the entire remaining sum ($261,000) due on the SBA loan, well beyond, on this record the negotiated fair purchase puce of the Coatings sale assets transferred (at best $80,000), and thus well beyond the determined value of those specific assets pledged in security of the SBA loan The assumption agreement remains unsigned All payments due on the SBA loan are current As it is unnecessary to do so, I consequently make no finding about whether Coatings formal sale of its re maiming recoverable assets, in value principally its equip- ment, as made to Spartan/Applicators without formaliza tion of SBA execution of a consent to such sale, effec tively constituted a substantial breach of the basic McFarland GBSA security agreement, which itself is not in evidence before me Neither do I make or imply find ing on Peterson's claim of their (McFarland and SBA) initial agreement and/or of the effect thereon of any Coatings' sale payments made by Spartan/Applicators to McFarland and credited to Coatings' SBA loan account (See generally on treatment of postpetition effect of a se cured creditor's arrangements with debtor made prepeti tion filing in bankruptcy, U S C A Title 11 Bankruptcy § 552(b) (1987 CAPP)) I specifically make no finding in resolution of the effect of either on the substantial earn ings that Spartan/Applicators achieved by virtue of its interim operations through 30 September 1986, beyond observing that, vis a vis Coatings' shareholders, Peterson (alone) stand to essentially recover the same if Applicators/Kohl and Kohl meet their respective note obligations on the redemption and purchase of Peterson s stock in Spartan/Applicators What thus appears material and significant in these re spects in bearing on the issue before me of Spartan/ Applicators being alleged as an alter ego of Coatings, it seems to me is that Peterson has not only confirmed that Miller, Shields and Serstad were entitled to prospective issuance of an earned stock benefit, but he could also reasonably perceive that his own prospects for divesti ture were related to his ownership claim on the substan tial earnings of Spartan/Applicators which were then of an amount substantially in excess of the monetary value of the stock bonuses earned Consequently Peterson could reasonably contend that Coatings other sharehold ers interests, e g beyond the viability of Spartan/ Applicators to timely make the payments of Coatings' asset purchase price (at least potentially) did not track his own interest in Spartan/Applicators' current net worth In brief, Respondents, but seemingly Peterson in particular, has urged that Peterson had refused to sign the assumption agreement as requested by McFarland 831 and SBA, because he wanted the strict independence of Applicators from the pocketbook interests of Perma Coatings shareholders " It is there also pertinently claimed (in regard to divesture) that "Peterson knew he could not relinquish control to key employees on the terms demanded by the bank and SBA' Before address ing Insul/Crete's later (1987) credit arrangements made with Kohl/Applicators, it is appropriate to preview the conflicting evidence in regard to the degree of change in Peterson's managerial involvement in Spartan/Appli cators in 1986, as compared with his 1985 involvement with Coatings i Interim management developments Peterson testified that the four key employees were the management committee for Spartan/Applicators, while Peterson owned that Company More precisely, Parrish was clearly part of the management team from February 1986, only until August 1986, at which time he was fired Kohl became part of Spartan/Applicators management team on initial hire as its estimator and office manager in mid September 1986, and served as such until he purchased controlling stock interest in Applicators/Kohl on 11 October 1986 Since that time, Kohl s management responsibilities have increased to general management Peterson has testified (generally) that the four key em ployees ran Spartan/Applicators in 1986 on a day to day basis, that they made all the key supervisory and business decisions, and, that Peterson had very little discussion with the four key employees In the main in 1Q86, and apart from the special findings on setting wages earlier made, Peterson is substantially corroborated E g, Miller confirmed that he, Shields, and Serstad have each run the separate jobs outside Madison, Wisconsin, for Spartan/Applicators in this period, and Snodgrass testi feed to general manager assignment to Parrish, infra Peterson has also asserted that it (management of Spartan/Applicators) probably did not differ much from 1985 (Coatings) management In addition to the contrary findings I have made on the differences in Peterson s management role in 1985 vis a vis 1986, I also note that Parrish was never previously employed by, and never part of Coatings management and that Peterson has otherwise acknowledged that he did not actually know what Serstad did in 1985 (Kohl refers to Serstad as quiet) Otherwise considered, I conclude and find that the management functions and responsibilities of Miller and Shields appear of record to be substantially the same under Spartan/Applicators, as they were under Coatings, mostly as to jobsite management though with advent of Kohl in management, particularly after Kohl s taking over controlling stock interest in Applicators/Kohl, Miller and Shields' management responsibilities appear to be even more so confined in nature to jobsite manage ment, and with clear reversal of prior Miller job superin tendent prominence over Shields Snodgrass relatedly testified that (in early 1986) from general conversations he knew, or had a general aware ness that Coatings went bankrupt, and that there was an effort to transfer assets, recalling something was worked 832 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD out favorably under the bankruptcy laws I presently ob serve that Snodgrass apparent adoption of a more stn dent approach to Peterson s involvement with Spartan/ Applicators vis a vis Peterson s prior involvements with Coatings is wholly compatible with Insul/Crete s imme diate discernment of divergent interests, and with Snod grass acknowledgement of a substantial debt loss to Coatings I have no doubt that Snodgrass was fully aware not only that Coatings was bankrupt but that Coatings (equipment) assets were not available to extin guish any of Coatings existing ($150,000, or more) in debtedness to Insul/Crete As earlier noted Insul/Crete eventually had to write off the Coatings debt as a loss However, it in that connection that Snodgrass has oth erwise given what is very revealing, and convincing tes timony Thus Snodgrass has related that after Coatings ceased doing business, Snodgrass specifically told Peter son in early 1986 that Peterson would have to have a general manager for the new company (Spartan/Appli cators), and, that if there was not a general manager for the new company Insul/Crete would not continue to pay Peterson a full salary as an Insul/Crete employee According to Snodgrass Peterson agreed to employ a general manager for Spartan/Applicators, and Parrish was it In that regard Snodgrass has also testified (I find) cre dibly that any prior confusion over Peterson s presence on a jobsite i e as representative of Coatings or as rep resentative of Insul/Crete did not continue (e g, as in volving Spartan/Applicators) into the spring or summer of 1986 Rather Snodgrass testified, credibly, that Peter son put Parrish in as manager and, whether so entitled or not, as far as Snodgrass knew Parrish basically ran Spartan/Applicators Shield s testimony that Peterson s management involvement in 1986 was at best 5 percent is wholly supportive Snodgrass does confirm Peterson that when Peterson had to fire Parrish Peterson came to Snodgrass and asked for some understanding of Peterson s need to tem poranly become more involved in the management of Spartan/Applicators business affairs Snodgrass confirms that since Peterson was being above board with him, Snodgrass made such allowance, and it was soon thereaf ter, that Kohl was hired to replace Parrish Otherwise Snodgrass has significantly related that he (also) was not aware that Peterson was the sole share holder of Spartar/Applicators, and generally, that it was in early 1986 that he first learned that employees who had been associated with Coatings, were going to be owners (naming Miller, Shields, and maybe Serstad) Snodgrass also testified that he was also not aware of the stock sale arrangements that Peterson entered (seeming ly) in the reorganization plan (in regard to Appli cators/Kohl) but that as a result of that arrangement, Peterson s management noninvolvement is now where he has wanted it to be In regard to the latter consideration, and in contrast with Peterson s seeming placement of all Insul/Crete customer complaints as occurring in 1985 Snodgrass has testified that it was not until last year (1986) that Peter son s involvement became a problem for Insul/Crete At that time a couple of problems arose with another cus tomer of Insul/Crete The problem related to the roll to be played by Insul/Crete s technical department (specifi cally Peterson) with other customers Essentially one particular regular customer complained that it was reluc tant to talk to Insul/Crete s technical department (Peter son) about how to bid a job or how to treat job details because the customer felt it was revealing a job lead, etc to a Peterson associated company Snodgrass asserts that Insul/Crete than had its own concern that a cus tomer might not ask a question it should ask I have no doubt that it was at that time (if ever) Snodgrass mount ed what Peterson described as real pressure on Peterson to disentangle himself from management (not ownership) of the applicator business in 1986, most probably in the early spring, with the anticipated advent of good weath er and increased job bidding in general j Extension of Insul/Crete credit to Applicators/Kohl The General Counsel has established that a second guaranty (G C Exh 6) to Insul/Crete was executed by Kohl on 8 April 1987 and by Peterson on 16 April 1987, thus well after Peterson s October 1986 sale of all of his stock interest in Spartan/Applicators Although Snod grass could not compare (from memory) the volume of business of Spartan/Applicators in the spring of 1986 to Coatings 1985 sales (nor Spartan/Applicators' sales to Applicators/Kohl also thereafter) Snodgrass has ac knowledged generally that Applicators/Kohl has now gone beyond the original $30,000 line of credit extension to Spartan/Applicators and Applicators/Kohl (hereto fore guaranteed by Peterson only) to an extension of Insul/Crete credit in the amount of $60,000 presently to Applicators/Kohl (Kohl testified that he wanted this ad ditional line of credit to be able to take advantage of volume discounts) Snodgrass acknowledges that Appli cators/Kohl is currently one of Insul/Crete s bigger cus tomers The extension of such credit to Kohl/Applicators was passed on by Insul/Crete s credit committee That com mittee is composed of Insul/Crete President Snodgrass Security Treasurer Jill Donchek and Credit Manager Lisa Bedford None have ownership interest in Coatings Spartan/Applicators or Applicators/Kohl In that regard Snodgrass testified that Applicators/Kohl is less than $8000 in account owed past 30 days and that it had been handling its receivables in a very normal fashion Snodgrass has also testified that Insul/Crete extends credit to other applicator contractors through various forms of security enumerated of record Although Snod grass (seemingly) did not know of a security arrange ment that Insul/Crete had involving a nonowner's per sonal guaranty, Snodgrass was aware that some of Insul/Crete s extensions of credit were made to com panies/dealers for whom others (but in some manner business related) stood as guarantor Be that as it may in urged similarity, it seems to me that the General Counsel in any event can garner little further support for his alter ego contention from the mere circumstances of Peter son s involvement in the 1987 guaranty on behalf of Applicators/Kohl PERMA COATINGS 833 Request for expanded credit was Kohl s Grant of ex panded credit was a decision for Insul/Crete Willingness to jointly stand as guarantor of an increased credit was for Peterson That Insul/Crete wanted Peterson as adds tional surety before doubling Applicators/Kohl credit line is one thing Explanation for Peterson s willingness to continue, indeed increase his guaranty in 1987 is an other Peterson s willingness to do so is wholly consist ent with his interest in attaining a full recovery from Applicators/Kohl and Kohl of their outstanding substan tial monetary obligations continuing to be due to Peter son from the corporation and Kohl, for stock redeemed and purchased respectively In my view, the reorganiza tion plan is related to, and in the end, is substantially de pendent on the determination of the more fundamental issue of the earlier status of Spartan/Applicators as con tended alter ego of Coatings Analysis, Conclusions, and Findings Respondents 10(b) arguments are without ment Pe terson gave direct notice to Plasterers Local 204, that Coatings was bankrupt and would cease all construction operation on 31 December 1985 Both Plasterers Local 204 and Laborers Local 464 were otherwise timely made well aware of the same I conclude and find that (joint) Charging Party had effective notice of the above More over I have found that Coatings had ceased all construc tion operations by the end of December 1985 However, Peterson gave no notice to any of the unions that he also intended to, nor that he thereafter in January 1986 had actually established another company Spartan/ Applicators, which could subsequently purchase all of Coatings equipment, and thereafter operate as an appli cators contractor Indeed, between Coatings as seller, and Spartan/ Applicators as purchaser of Coatings equipment, Spartan/Applicators did not even accept the transfer of Coatings equipment until 15 March 1986, which is well within the 10(b) period There is no direct evidence that Spartan/Applicators had placed Coatings' equipment in use earlier, let alone that Charging Party Unions or any of them were aware of either a pending sale or interim use Some time after Coatings ceased business, Coatings had blanked out its name on (at least) much of the used equipment, and it appears a new name (Applicators) was not put on any of the equipment until Kohl did so, after his own purchase of controlling stock interest in October 1986 There is no definite evidence that any of the con struction employees first shown employed by Spartan/ Applicators in February 1986 were definitively em ployed on 7 February 1986, let alone that any of the unions were aware of their employment at that time Section 10(b) of the Act does not begin to run on and unfair labor practice until the party `adversely affected is actually or constructively put on notice of the alleged ly offending act ' Truck & Docks Services, 272 NLRB 592 (1984) Even assuming without so finding that Mil let's communication of his new employment of Plasterers Local 204 s hall was made to a currently designated agent of that Union, and, that both Miller s and Shields communication were also of nature sufficient to some how charge Plasterers Local 204 and Laborers Local 464 with actual or constructive notice of (at least ) the possi bility of an alter ego relationship then existing between Spartan/Applicators and Coatings, the communications, and thus any such related notice, are shown to have oc curred well within the 10(b) period Even more clearly so is Carpenters District Councils April 1986 question naire which itself went unanswered Accordingly, it is concluded and found that all of Respondents advanced 10(b) arguments are without ment, in that there is no evidence presented sufficient to warrant conclusion joint Charging Party unions had actual , or constructive notice of the alleged offending conduct at a point prior to the commencement of the 10(b) period The complaints allegations that Coatings and Spar tan/Applicators are a single , or joint employer are to be similarly readily dismissed Coatings ceased all construc tion business as of 31 December 1985, if not earlier on 17 December 1985 No credible or persuasive evidence is presented that warrants an inference that Coatings had continued to conduct any union s unit construction work after 31 December 1985, either with Spartan/ Applicators, or at all otherwise Coatings mere contra ued corporate existence did not serve to make it a single or joint employer with Spartan/Applicators This is simply not a single employer case , integrated or other wise, Iowa Express Distribution v NLRB, 739 F 2d 1305 (8th Cir 1984), Glory Sheet Metal, 280 NLRB 1075 fn 1 (1986) Neither is it a joint employer case, NLRB v Browning Ferris Industries, 691 F 2d 1117, 1122-1124 (3d Cir 1982) The General Counsel has effectively withdrawn all other prior complaint allegations of successorship and of discrimination , and, apart from the remaining base alter ego allegation(s) to be considered infra, there is no other derivative liability issue that is presently before me for resolution, cf Williams Motor Transfer, 284 NLRB 1496- 1497 (1987) This is an alter ego case, or it is nothing The parties have however advanced background re hances which do occasion some revisit of other funda mental principles involved to wit as applicable to an employers contractual obligations to the unions, in face of economic distress , Oak Cliff Golman Baking Co 202 NLRB 614 (1973) enfd 505 F 2d 302 (5th Cir 1974), cert denied 423 US 826 (1975) and the paramount nature of entrepreneurial decisions on whether to stay in business or not, Textile Workers v Darlington Co 380 US 263 (1965) The General Counsel argues and the Board has previ ously clearly so held that an employers severe financial distress, or other economic necessity claims even if proven do not constitute an adequate defense to an alle gation that an employer has violated Section 8(a)(5) and 8(d) of the Act as when the employer fails to abide with applicable provisions of an existing collective bargaining agreement, Oak Cliff Golman Baking Co, supra at 615- 616 Member Johansen would appear to deem it appro priate in certain such cases to additionally address a question of whether an employers particular default action is such as to have constituted an actual repudi ation of the collective bargaining contract, or of the col 834 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD lective bargaining obligation itself, or constituted more a delinquency only in meeting a specific contractual obli gation, an act more in simple breach of a term of the contract, cf International Distribution Centers, 281 NLRB 742, 743 and fn 5 (1986) Such a case presentment dis tinction ^s clearly not involved here Coatings completely ceased its construction applicator business on 31 December 1985, and, Coatings is not charged with acting unilaterally in any manner prior thereto in violation of Section 8(a)(5) and/or 8(d) Thus, I observe in passing that this case does not involve an issue of Spartan/Applicators responsibility for an earlier unfair labor practice committed by Coatings The es sence of the multiple issues presented here , in final analy sis is whether Peterson's thereafter established Spartan/ Applicators is an alter ego of Coatings There is no ques tion that Spartan/Applicators , since formation and to date, does not recognize the Unions as the representative of its employees, nor does it acknowledge that the Unions contracts, heretofore found binding upon Coat ings through 1985, are binding upon Spartan/Applicators in 1986, nor upon Applicators/Kohl presently Respondents essentially advance the position , that con trary to the General Counsel's urged reliance on Oak Cliff Golman, supra, in certain circumstances, such as are urged present here, other important policies have para mount standing, primarily those effecting free flow of capital Thus Respondents essentially have asserted a basic reliance on an employers prerogatives of deter-min ing when and how long to continue in business Re spondents urge in that regard that if even when motivat ed by antiunion considerations, an employer may simply go out of business, then certainly it may do so when mo tivated by severe economic circumstances Respondents further contend that in the process of going out of busi ness, they may sell their business assets to a new owner, free of a collective bargaining agreement with stated re liance on Textile Workers v Darlington Co supra 380 U S at 272 Moreover Respondents would have it ob served that a new employers continuance in the same business at the same place, even with the same employ ees is not indicative , as a matter of law of alter ego status NLRB v Burns Security Services 406 US 272 (1972) Apart from the additional single employer and partial closing considerations in the Darlington case, supra, none of which are involved here the Darlington case itself ad dressed an employer intended permanent closing and liq uidation of the business, with specific circumstances noted of equipment there necessarily sold piecemeal, but with a number of other ongoing business circumstances noted as to be distinguished from the scope of that hold ing E g see and compare fn 14 with 15 relating to runaway shop and see notation made of distinction ap plicable as to sale of an on going business " as to which other considerations might apply Perhaps even more pertinently the Supreme Court in Darlington itself had specifically first observed the Court s own much earlier holding in Southport Petroleum Co Y NLRB 315 U S 100 (1942) itself more in genre of the case issue present ment here The parties appear generally in agreement that the Board s alter ego doctrine had its genesis in Southport Pe troleum, supra There, in a reinstatement order case pre sentment, involving a purported liquidated business and a newly incorporated company, it was first observed Whether there was a bona fide discontinuance and true change of ownership-which would terminate the duty of reinstatement created by the Board s order-or merely a disguised continuance of the old employer, does not clearly appear Id 106 It has long been clear that an employer cannot evade its bargaining obligations under the Act, or specific obli gations under a binding contract, by an expedient forma tion of what appears to be a new company but what in fact is but a disguised continuance , or alter ego of the original employer, Howard Johnson Co v Hotel Employ ees, 417 US 249, 259, fn 5 and see cases cited (1974), Marino Electric, 285 NLRB 344, 351 (1987) The Board has generally found such an alter ego stat ues exists, where two enterprises have substantially identical management business purpose operation, equipment, customers, and supervision, as well as owner ship Nabco Corp, 266 NLRB 687, 693 (1983), Crawford Door Sales Co, 226 NLRB 1144 (1976) It has been said that no one factor is determinative, Continental Radiator Corp, 283 NLRB 234 (1987), Fugazi Continental Corp 265 NLRB 1301 (1982), enfd 725 F 2d 1416 (D C Cir 1984), and that each case must turn on its own set of facts, Nabco Corp, supra Crawford Door Sales Co supra Neither animus or discriminatory motive is a prerequi site but presence, or absence, merely a factor to be con sidered, Goodman Piping Products v NLRB, 741 F 2d 10 (2d Cir 1984), Oklahoma City Eastern Express 281 NLRB 921 (1986), Gilroy Sheet Metal supra at fn 1 (1986), Apex Decorating Co, 275 NLRB 1459 fn 3 (1985) and Watt Electric Co 273 NLRB 655 658 (1984) The Board will however address and consider whether the real purpose behind the creation of a new company is legitimate or is one accomplished with a prohibited purpose of evading responsibilites under the Act Mar Kay Cartage 277 NLRB 1335, 1341 (1985) [T]he focus of the alter ego doctrine, unlike that of the single em ployer doctrine is on the existence of a disguised con tinuance or an attempt to avoid the obligations of a col lective bargaining agreement through a sham transaction or technical change in operations (Cases and examples cited omitted) Carpenters Local Union No 1846 v Pratt Farnsworth, 690 F 2d 489, 491 (5th Cir 1982), Marino Electric, supra at 351 The intent to evade may be readily discerned and appear clear as where an employer readily acknowl edges the action taken is to escape the economic burden of the union contract, Watt Electric Co, supra at 658, Ad vance Electric, 268 NLRB 1001 (1984) However the fac tual patterns that may arise in contested cases are also myriad and in some the determinative thrust of the combination of divergent factors to be considered may be much less clear in evaluation Thus hard cases par ticularly arise where the enumerated factors to be con sidered present an appearance of being closer in balance, PERMA COATINGS or, where the advanced business purpose or justification for the second enterprise itself appears legitimate, albeit accompanied by some measure of commonality in own ership, along with some degree of initially secretive non acquiescence of the second enterprise in the union s con tractual relationship with the precedent enterprise There are a number of business factors presented in this case that would readily support a finding that Spartan/Applicators is an alter ego of Coatings Some other factors do less so Some simply strongly indicate such relationship did not exist Thus, substantially identical use of equipment, prem ises, phones, business service provided, mode of oper ation, and similar use of supplies and customer service, all would support a finding of alter ego Unquestionably the equipment that Spartan/Applicators eventually used in 1986 is the very same equipment that Coatings had used in 1985 It is also the same equipment that Applicators/Kohl had used, and presently does use, at least clearly in the main The related fact that both Kohl and Shields have each subsequently purchased a vehicle, which each has placed in the service of Applicators/ Kohl, does not substantially alter the broader underlying assessment of Applicators/Kohl s continued usage of the same equipment This is so whether Kohl and Shields have recently purchased the vehicles in the name of the corporation or not and irrespective of the consideration of their personal liability for the purchase price of the vehicles The fact that they have each placed vehicles in the service of Applicators/Kohl is of course further cor roborative support of their having real ownership inter ests in Applicators/Kohl, at that time Although it seems that Coatings may not have long earlier occupied the premises that Spartan/Applicators has occupied, the fact is also clear that it did for some period of time, and thus the two companies have occu pied the same premises at some time (at least successive ly) They have each rented the premises from PBC Spartan/Applicators, while paying less rent than that charged Coatings, in paying rent proportionate to the space it used as compared with Coatings use, has paid the same amount as Coatings had (or as Coatings was charged) and, it paid the same amount as does Applicators/Kohl now, despite any present intent of Applicators/Kohl to renegotiate or relocate All three respectively in their operations as an appli cators construction subcontractor have used Insul/Crete as their principal supplier of applicators product They have (successively) used the same phones, trade names/ listings/directories and advertisements, saving only vehi cle and equipment name identification All three have (successively) engaged in basically the same applicators construction business All three have proved to be will ing users of Insul/Crete's new products, and to willingly serve as job models for Insul/Crete s prospective appli cator contractor affiliates While there are record indica tions of Applicators/Kohl more recent use of Insul/ Crete competitor product, and of declared intent to change business location in the future, an alter ego status is one to be determined at time of formation of the busi ness, and not at some later date, Rogers Cleaning Contrac tors, 277 NLRB 482 fn 42 (1985) Even were it to be 835 considered otherwise, Applicators/Kohl even now is still at the same location and is an even bigger customer of Insul/Crete, which remains its clear principal supplier The additional fact that apparently Applicators/Kohl has not been able to use all of Coatings prior suppliers, be cause of Coatings poor credit, certainly does not call for a contrary conclusion Of discernible lesser import on alter ego status is the fact that all three business operations have employed es timators, and all three have basically used the Dodge Report service rather than prior business customer lists, as do any number of unrelated construction firms Spartan/Applicators has also completed the one job left unfinished by Coating, though it did so much later, and pursuant to a separate contract, negotiated in the spring of 1986 in Spartan/Applicators name Spartan/Apple cators has in general, performed construction applicators work for a number of customers (owner/developers and/or general contractors) that Coatings had previously serviced , though again, essentially through the Dodge Report service, and not through a Coatings customer list, and not for all of them (The actual percentages of continued service to customers previously serviced by Coatings, or nonservice to same, or different service (to others) does not definitively appear of record) There is however no question on this record that Applica tors/Kohl (following a change of stock ownership) con tinued to service Spartan/Apphcdtors current and/or uncompleted contracts On balance, it is concluded and thus found that the factors of conduct of same business, mode of operations service to essentially the same cus tomers and use of essentially the same suppliers all tend to be additionally supportive of a finding that Spartan/ Applicators is an alter ego of Coatings Factors of substantially identical management and su pervision, while in some respects appearing close, are still deemed overall as supportive of alter ego status Be cause of retrenchment in Coatings business purposes to that of a construction applicator only, and due to related demands placed upon Peterson for increased involve ment in the management of plant expansion and technical affairs of Insul/Crete Peterson had reduced involvement in the actual management of Coatings (at least) from the fall of 1984 and in 1985 However I have found Peter son s management involvement with Coatings in 1985 was not insubstantial in manner and for reasons earlier detailed, that need not be repeated here The record es tablishes that Peterson, a 27 percent minority stockholder in Coatings was the driving force in the formation of Spartan/Applicators, whatever his ultimate intention is determined to be The fact is, however, that Peterson s involvement in managing Spartan/Applicators in 1986 was considerably different in kind, and much less in degree than it had been with Coatings in 1985, for different reasons, viz Snodgrass approach Nonetheless in certain important business aspects, Peterson discernibly remained in active overall managerial control, e g by virtue of his 100 per cent stock ownership in making the initial credit ar rangements with Insul/Crete as major supplier for Spartan/Applicators, and with Community National 836 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD Bank for necessary operating funds and also in filling in, however briefly, as estimator/manager on the occasion of the required termination of Parnsh In contrast, with regard to day to day management of Spartan/Applicators in 1986, and whether functioning as estimator/manager or more as general manager of the new company, as pressed for and understood by Snod- grass, it is in either event clear that Parnsh had never before worked for Coatings, nor had his eventual replace ment Kohl, as estimator/office manager On the other hand, the jobsite managerial responsibilities of Miller and Shields remained essentially the same for Spartan/ Applicators in 1986, as they had been for Coatings in 1985 albeit with some degree of appreciable managerial role reversal more recently for Applicators/Kohl Thus with Miller declining a stock ownership in October 1986, and Shields developed stock ownership interests (present and future) and Shields ascendancy to positions of secre tary treasurer and director of the Corporation, Kohl now puts Shields in charge of jobs to be commonly worked by Shields and Miller On balance, I conclude that con siderations of substantially identical management and su pervasion tend to more support a finding that Spartan/ Applicators is an alter ego of Coatings, than not But the balance would appear to be not so as to Applicators/ Kohl Addressment and evaluation of the dual important factors of ownership and other lawful business purpose, in my view, more warrants contrary conclusions, namely that neither Applicators/Kohl, nor, dispositively, Spar tan/Applicators is an alter ego of Coatings Substantially identical ownership, whether based on ownership of individual(s), or on closed family owner ship considerations, and considerations of distinct busi ness purposes served by a new enterprise, are both im portant factors in the overall assessment of an alter ego claim There are major changes in both ownership and general management of Applicators/Kohl as compared with Spartan/Applicators The substantial changes are seen in (a) Peterson s sale of his entire stock ownership half by a corporate redemption, and the other half by direct sale to Kohl with total Kohl purchases constitut ing a permanently controlling stock ownership (b) Peter son s contemporaneous surrender of his prior (sole) offi cer and director positions (c) Peterson s related general cessation of all managerial responsibility, and (d) in Kohl s and Shield s ascendancy to same commencing with the reorganization plan execution on 11 October 1986 However, with regard to Applicators/Kohl's readily determined different ownership it is important to note that while it has been convenient here to present the facts in terms of operations of Spartan/Applicators and Applicators/Kohl, a mere name change, as in Spartan/Applicators is in no sense a determinative con sideration, Nabco Corp 266 NLRB 687, 694 (1983) and, there is not a corporation change evidence in Applica tors/Kohl but merely a change in the ownership of the corporation, a nondispositive factor where the employ- ing entity remains the same, as charging party would have correctly observed, Topinka s Country House 235 NLRB 72, 74-75 (1978), enfd 624 F 2d 770 (6th Cir 1980), Western Boot & Shoe, 205 NLRB 999 1005 (1973) The holding of Golden State Bottling Co 414 U S 168 176 (1973), applicable to a bona fide successor employ er's obligation to remedy an unfair labor practice com matted by a predecessor employer, would appear inappo site to Applicators/Kohl status which reflects only a change in stock ownership of the same corporation Spartan/Applicators, and it would appear to find no ap placation to Spartan/Applicators where Coatings ceased operations earlier without commission of earlier unfair labor practice (There is no question that Shields, the new secretary treasurer and a director of Applicators/ Kohl had earlier particiapted in the alleged offending acts of Spartan/Applicators but only as the same is the contended alter ego of Coatings ) The central issue, in my view evolves to be solely the questioned relationship of Spartan/Applicators as alter ego of Coatings Again this is clearly not a closed family ownership case The very significant element of substan tially identical ownership of Coatings and Spartan/ Applicators, is a matter most heatedly contested by the parties, understandably so in the end, with claims of Board precedent being respectively advanced as support ive of the contrary positions the parties have taken on that issue The parties are further much at odds in evalu ating the presence of claimed different and legitimate purposes in the formation of Spartan/Applicators The centrally contested question of substantially identical ownership existence of legitimate business purpose and other factors urged as not supportive that Spartan/Apph cators is alter ego of Coatings With a heavy reliance on an established background of Coatings unique and dire financial history, and the four Coatings shareholders ear her multiple unsuccessful efforts, to preserve Coatings as a viable business Respondents present in defense four contentions First Respondents argue that despite over a significant number of years every possible reasonable effort being made and undertaken by Coatings and its four shareholders to remain in business Respondent Coatings and its four shareholders whom this record es tablishes harbored no ill will to the unions were in the end unequivocally and inexhorably driven and forced to go out of business by fiscal pressures that had mounted on multiple sides and which in the end included an in sistence of Union Trust Funds if not the Charging Party Unions themselves Secondly Respondents argue that since an issue in alter ego cases is whether a new enterprise is a disguised continuance of the old, actual ownership, or substantial identity of ownership is a very important factor In that regard, Respondents contend that Peterson was but a 27 percent minority stockholder in Coatings, and that exist ing Board precedent as is to be found controlling in Clin ton Foods, 240 NLRB 1246 (1979) end denied 663 F 2d 223 (D C Cir 1980), and in Jersey Juniors Inc 230 NLRB 329 (1979) are determinative on that account of the issue of an alter ego relationship existing between Coatings and Spartan/Applicators On the basis of such precedent Respondents urge the Board to find that Pe terson s minority (27 percent) stock ownership in Coat ings and subsequent full (100 percent) ownership in Spartan/Applicators is not substantial identical owner PERMA COATINGS 837 ship such as to warrant the finding that Spartan/ Applicators is an alter ego of Coatings Third, Respondents have argued that the record s showing of the existence of a key employee stock benefit plan in 1986, in the background of a prior unsuccessful effort by Peterson to give away entirely his own Coat ings stock in 1985, and, in light of Peterson 's subsequent complete divestiture of his sole stock in Spartan/ Applicators in October 1986 and as then coupled with Spartan/Applicators concurrent stock issuances in im plementation of a prior stock benefit plan for key em ployees, further warrants a finding that ownership of Spartan/Applicators was never intended to be the same as Coatings To the contrary , it is urged that Peterson had formed Spartan/Applicators for a joint purpose, namely, to dispose of the assets (equipment) of the failed Coatings business at a fair or full value , and to eventual ly transfer ownership and control of Spartan /Applicators from himself to key employees Fourth and finally, Respondents centrally argue that under the unique circumstances that are presented here, Spartan/Applicators should not be found to be but a merely disguised continuance" of Coatings In that regard, Respondents have argued that the General Coun sel s position to the contrary ,is fatally flawed , in that the General Counsel has focused only on the sale of certain of Coatings' assets to Peterson s new enterprise , but the urged position fails to take into sufficient account the massive debt of Coatings that did not transfer, and which remains that of Coatings In that regard , I observe (as the parties stipulated ) chapter 7 proceedings do not dis charge a corporation from its debts , nor do they dissolve the corporation, NLRB v Better Bldg Supply Corp 837 F 2d 377 (9th Cir 1988) Respondents summary argument here essentially is that Coatings was indisputably in a state of complete in solvency, and it was forced to go out of business In those circumstances, Respondents argue that Peterson, specifically as but a 27 percent minority shareholder of Coatings, and the other shareholders of Coatings , should not be precluded by an alter ego imposition from an of fectuation of the salutory action that Peterson took for the lawful business purpose of accomplishing Coatings recovery of at least fair value through a sale of those assets to a new enterprise , for the benefit of third party creditors Respondents would have it relatedly found that the very structure of the Coatings assets sale to Spar tan/Applicators is itself inconsistent with the pocketbook interests of Coatings four shareholders , in that it did not provide for payment to be made to McFarland in amounts that would fully meet Coatings' required pen odic payments on the SBA loan, and, as a consequence, the shareholders have had to make up the periodic pay ment difference It is relatedly argued that the terms of the sale and purchase agreement were set up to primarily benefit the new company, Spartan/Applicators Finally Respondents have essentially argued that had not Peter son acted as he did, when he did, a forced sale of Coat ings' assets at that time would have benefited no one, certainly not the failed Coatings enterprise , and also not the third party creditors and the real party in interest with respect to those assets The short answer to all of these contentions based on argument that the Coatings sale did not benefit the share holder as much as it did third party creditors of course must be, and is, that the sale did benefit the four share holders, including Peterson, and it did so substantially It benefits them directly to the extent Spartan/Applicators has paid, and Applicators/Kohl now has paid, and will continue to periodically pay the previously agreed Coat ings assets purchase price , a substantial sum ($80 ,000), to the McFarland bank to credit on the SBA loan To that extent the SBA loan has been and is being steadily re duced, thus benefiting the four Coatings shareholders who would remain otherwise personally liable on the full SBA loan amount still due However, they do not benefit exclusively The third party creditor clearly receives the same benefit, on this record a fair value benefit In passing I observe that to the extent the General Counsel has additionally mounted an attack on the actual fair value of the purchase price that was arrived at, I find that the arguments advanced are simply without persuasion Here the argument made appears to centrally rest on observations that the asset evaluation and the sale were not accomplished by independent parties and/or by a sealed bid, as in bankruptcy In my view the issue of a valid sale procedure as thus presented is not a question of law, as to which there can be only one answer , and, in terms of resting on factual base the deficiency conten tion is simply one not adequately supported of record Thus the General Counsels stated reliance is on lack of use of sealed bids absence of an appraisal by a disin terested third party, and/or a vague claims the Respond ent could have waited to sell the assets in season That position fails to take into account that the uncontradicted testimony of Peterson is that there was no market for Coatings' used equipment, which in general had no street value, and not just that there was no market for it in De cember 1985 Neither does it take into account Peterson s testimony of a concern that Coatings obtain a fair value return on the substantial ($45,000) power scaffolding equipment in circumstances where , on this record Coat ings had been heretofore the only plasterer using such equipment in Wisconsin Essentially the General Counsel does no more than argue for a preference for a sealed bid in a bankruptcy proceeding and a sale in season More is required to support the contention that a sale in other manner is inappropriate and/or improper E g some showing must be made that the assets were in fact not fairly evaluated, or the sale procedure is irregular in some other fatal respect Here the equipment assets were formally listed They were evaluated by two individuals who knew they were to have opportunities for future ownership interests in the new enterprise They were aware that the new enterprise in which they were to be part owners, would likely purchase the assets at the eval uated fair price, and become obligated in that amount There is no record showing of deficiency in the evalua tion I remain unpersuaded of the General Counsels late questioning thereof Indeed , on the state of the evidence as presented on this record , I find the asset evaluations 838 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD were both fair, and orderly under the circumstances Contrary to the General Counsel's assertion that Miller never intended to be a stock owner, I have found that he was agreeable at the outset to be a participant in a new business venture with Peterson, as well as with Shields and Serstad Respondents' central contentions remain otherwise that Peterson, as a 27 percent minority stockholder, should not be effectively precluded from taking the en trepreneunal action of forming a new enterprise to pur chase the assets of the failed Coatings at a fair price, by Board imposition of an alter ego status because Peterson at first owned 100 percent of the stock of the new enter prise that he always intended to eventually turn over to others, nor should the Coatings' shareholders be visited with directed personal liability for their part in (i e, be cause they approved of) a sale of Coatings' assets that obtained a fair recoupment on the assets of the failed corporation to the benefit of third party creditors, and more then they would likely have recouped otherwise Before making a final evaluation of the parties above central positions, certain other related positions and/or contentions advanced by the parties are more readily dis posed of, and/or serve to improve focus on the remain ing central issues First, in advancing certain contentions in brief, Respondents appear to have urged for an exten sion of the holdings of NLRB v Bildisco & Bildisco, 465 U S 513 (1984), and In re Continental Airlines, 115 LRRM 2364 (1984), for contract relief in Board unfair labor practice proceedings In general, it is well established that Board proceed ings fall within exceptions to automatic stay bankruptcy provisions Cf Custom Restaurant Corp, 283 NLRB No 14 slip op at 5 (Feb 23, 1987), not reported in Board volumes To the extent the Respondents would appear to have urged for a Board stay on judgment of unfair labor practice committed in period prepetition filing in bank ruptcy or here essentially urge a Board release of an employer from burdensome contractual terms on eco nomic survival principles, similar to that enumerated in In re Continental Airlines, supra, it appears the same is to be rejected Cf General Split Corp 284 NLRB 418 fn 2 (1987) When, and under what circumstances an employ ee may be released from burdensome terms of collective bargaining agreement during term of bankruptcy in order to remian viable, or because balance of the equi ties clearly favors it, is a matter of orderly procedure for the bankruptcy court Image Systems 285 NLRB 370, 371-372 (1987), cf Edward Cooper Painting 273 NLRB 1870, 1871 (1985), enfd 804 F 2d 934 (6th Cir 1986), and see also Pub L 98-353, § 541, 98 Stat 333 390-391 (1984) Thus, here it is important to distinguish that the dire economic straits of Coatings are not being addressed on any such urged claim of economically excused perform ance of an otherwise binding contract, but rather they are addressed solely as determined economic facts and relevant history of Coatings' business operation that have bearing on the real issue presented the Board, namely, the contested alter ego status that is whether Coatings actually went out of business, or whether Coatings has really continued in business, under the operational guise of Spartan/Applicators In regard to the propriety of alter ego issue addressment of a bankrupt corporation, but as to one not shown subject to the supervision of the bankruptcy court, any indicated contention of Respond ent for preclusion on that basis cannot prevail, as the Board appears to have already addressed that very issue, and held to the contrary, Otten Truck Line, 282 NLRB 494 (1986), see Allis Chalmers Corp, 286 NLRB 219 fn 1 (1987) Respondents have relatedly urged that there is a lack of substantial identity, or continuity in the persons who had worked for Coatings, later working for Spartan/Applicators and or Applicators/Kohl I do not agree that it was so at first, though it appears clearly so later However the fact is that Spartan/Applicators' em ployment started limitedly in February 1986, and re mained limited until July 1986 I have earlier found, with certain exclusions (viz Office Hoff, 1 day help Brown, and estimator/manager Parrish), that two of the three in dividuals initially hired by Spartan/Applicators in Febru ary 1986, had previously worked for Coatings, and at least two were members of union The character of the majority of the employees employed in ensuing months through June, then a total of eight (with/exclusions) re mained in character as having been both principally pre viously employed by Coatings, and members of the Unions (plasterers and laborers ) It was only in July that the character of the majority of those employed changed in being then both not previ ously employed by Coatings, and not shown to be mem bers of the Unions Overall, of the individuals employed in 1986 two thirds had not previously been employed by Coatings in 1985, and approximately three fourths do not appear as members of the Unions As noted, allegations of discrimination and successorship have been with drawn I do not find this July employment factor very helpful in determining alter ego status in February par ticularly as I am in the end convinced that it was in July that Miller, Shields, and Serstad were actively establish ing wages for the new employees and at a time they had prospective ownership interests declared Moreover, I reject Respondents related assertions that the Unions for a significant period had failed to be attentive to the em ployees and, that the evidence presented as a whole has established that Charging Party Unions have taken posi tions in this matter that reveal an intent to misuse Board alter ego processes and to simply put Spartan/Appli cators and/or Applicators/Kohl out of business Unions may act on a timely discovery of a reasonably perceived alter ego noncompliance with their existing contracts, and they may timely pursue lawful contractual claims and/or unfair labor practice charge determination indeed they may well have obligation to do so In turn however I reject Charging Party Unions contention that Kohl is shown by the evidence to be but a nominal owner As clearly evidenced of record, Kohl has not only committed to a cash (capital) risk by his $4000 stock subscription, Kohl has also committed to a personal obligation on a $22,500 promissory note to Pe terson on Kohl's concurrent purchase of the controlling stock from Peterson Moreover Kohl stands at risk over PERMA COATINGS 839 all in his endeavor in that he has purchased a majority stock interest in an enterprise which itself has substantial remaining debt obligation to Peterson ($ 16,342 53, plus interest) for corporate redeemed stock, as well as cur rently some $65,000 remaining due on the Corporation's prior purchase of Coatings' equipment, to be paid to McFarland, for credit on Coatings ' SBA loan Some $38,000 in accounts receivable at time of purchase does not minimize Kohl's risk Kohl owes nothing on the re maining debt due on the SBA I thus conclude and find that Kohl is not but a nominal player in his entrepreneur ial endeavor, and I further conclude and find that Kohl's ownership interest is not in any sense substantially identi cal with that of Peterson before him in the Spartan/ Applicators enterprise, but separate, and distinct In the end I have thus found myself persuaded to Respondents Spartan/Applicators further contention in brief that one issue and one issue only ultimately controls the outcome of the case, namely is their such continuity of ownership between the old enterprise Coatings , and the new enter prise Spartan/Applicators that Spartan/Applicators is to be held bound by the old enterprise s collective bargain ing agreement As to Respondents first and basic argument, the Gen eral Counsel at hearing and in brief had conceded that Coatings was undergoing severe financial distress at the time, but argues that this is simply not a sufficient show ing to justify an avoidance of contractual obligations, with a central reliance on Oak Cliff Golman Baking Co, supra The General Counsel further argues that is the re quired result even where the individual does the only thing the individual knows to do to support himself, with stated reliance on Rogers Cleaning Contractors, 277 NLRB 482 (1985) I note in passing that the Rogers Cleaning case involved a family owned business that never lost its basic character as such , and, that the new company had apparently purchased the assets of the old company, at very favorable terms , id at 488-489 The General Counsel has secondly argued that the cases relied on by Respondents in support of contended nonsubstantial identity of ownership do not do so, and, that they are distinguishable on the basis of the nature of the ownerships involved in the old and new companies Thus the General Counsel argument is that in Clinton Foods, supra there was only one individual who was a common owner, and he an 18 percent minority stock holder in the old enterprise, and but a 30 percent minori ty stockholder in the new enterprise Similarly , the Gen eral Counsel would distinguish the ownership in the Jersey Juniors case supra in that in Jersey Juniors there was but a 9 percent minority stockholder (albeit also with a $50,000 secured loan to the old company), who subsequently became a 70 percent stockholder in a new company, which eventually purchased the assets of the old company, but unlike here, did so as a result of an award made by a disinterested party , upon a sealed bid submitted in bankruptcy It is the General Counsel's contention that the instant matter is more controlled by Board finding of substantial identical ownership as made in Hawg N Action, 281 NLRB 56 fn 2 (1986), where a 50 percent owner in the old enterprise became a 100 percent owner in the new enterprise, and there, an alter ego relationship was found by the Board I have earlier observed that the formalized evaluations of Coatings' assets appear fair, and properly arrived at in this case presentment While otherwise ac knowledging that Peterson s 27 percent stock ownership in Coatings is not a ma jority (nor is it in amount the 50 percent ownership found in Hawg-N Action , supra), the General Counsel basically argues it is a significant stock holding in the old company, which, in combination with Peterson s 100 percent ownership in the new company and the other substantially identical business factors of record is sufficient to warrant finding that Spartan/ Applicators is an alter ego of Coatings The fact is that Peterson s 27 percent ownership in the old enterprise rests essentially between the case authorities advanced by the parties The General Counsel alternatively attacks the validity of Peterson's 100 percent ownership in the new enter prise Thus, the General Counsel first argues that Coat rags' sale and Spartan/Applicators purchase of Coatings' (equipment) assets was actually a mere paper transac tion with stated reliance on Royal T Meat, 238 NLRB 245, 249 (1978), enfd 614 F 2d 777 (9th Cir 1980) In passing I observe however, that in Royal T Meat, id , the evidence was determined not sufficient to conclude that the old company had been forced or compelled to terms nate the business by external or internal fiscal force, there was no ownership transfer of premises and equip ment from the old to the new enterprise, and, while a sole owner of the old employer had appearance of no ownership in the new , the arrangement disclosed was that the old owner was to receive 60 percent of the prof its of the new enterprise The General Counsels position here rests on an obser vation (seemingly correct, insofar as it goes) that at the time of purchase Peterson had paid nothing for his sub scribed Spartan/Applicators stock However to the extent that the General Counsel appears to have alluded in brief that Spartan/Applicators itself paid nothing for Coatings equipment , that assertion can be viewed as ac curate only in sense of immediate cash outlay Clearly Spartan/Applicators had formally purchased Coatings' assets for a substantial amount ($80,000) and it did so in elusive of the substantial amount ($60,000) attributable specifically to equipment purchase Spartan/Applicators also formally executed a corporate promissory note in the full purchase amount, with provision for interest and it accepted Coatings equally formalized equitable assign ment of the note s proceeds to McFarland, for credit on the SBA loan in acknowledgment of its purchase of assets subject to first lien of SBA loan Moreover, sub stantial (apparently $ 15,000) payments have been made to date (at least) most pursuant to the terms of the note The General Counsel has secondly argued that Peter son was an agent for the three (other) Coatings share holders in the transaction , which was clearly accom plished for their benefit, and that in reality Peterson was only a straw man," or front for all Coatings' share holders The General Counsel on that account would discount Peterson s surface 100 percent ownership of Spartan/Applicators, and essentially argues there is con 840 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD tinuity of identical ownership, or, at least a continuity of beneficial ownership A problem with this assertion is however, that I have earlier found that Coatings other shareholders have not been shown to share in Spartan/Applicators profits from the conduct of its busi ness affairs, beyond Spartan/Applicators payments made to McFarland solely related to purchase price of Coat ings assets They are not shown to share in Spartan/ Applicators' earnings for its operations through 30 Sep tember 1986, substantial amount (e g, approximately $40,000, with allowance for earned stock issuance) In the absence of even a claim raised by the other Coatings' shareholders thereto, the same, it seems to me, projects persuasive probative support that Spartan/Applicators, vis a vis other Coatings shareholders interests, was truly Peterson's sole endeavor, irrespective of whether under taken initially with promise of key employee prospective ownership interest, and with approval of shareholders for sale of Coatings assets at an established fair value Accordingly, I conclude and find that Peterson in this endeavor was not just a front or straw man for all the shareholders of Coatings Rather, I find that as a mi nonty shareholder of Coatings he acted on his own in setting up Spartan/Applicators though with purpose, at least inter alia, of purchasing Coatings assets for a fair value, which had the approval of the other shareholders, and worked to their benefit, as well as his own In passing however, I am not persuaded that the ulti mate conclusion on ownership interest should rest on Re spondents claim that Spartan/Applicators was set up in part to benefit key employees, or to impart ownership to them Rather I am persuaded that key employees were involved to make operation of a new enterprise the more feasible Primarily I have reluctance to conclude there was such significant key employee divergent stock bonus ownership interests at play This is not because the of fered evidence has failed to convince me that a promise of some common venture ownership was not offered to key employees at the outset, e g in January 1986 but because I am convinced it was then but in a drawing up stage was not then sufficiently defined and remained probably not so until April, and because, even then the proposed plan when announced in any event clearly en visioned a very substantial period of new enterprise oper ation before Peterson's initial 100 percent ownership would be less than a majority and he potentially lose control of the enterprise The weight of evidence has convinced me that the key employees set wages for new employees at the earliest in May but far more likely and principally in July But even if it were to be considered otherwise the ownership observations above would still exist For all of these reasons I now am of the view that the ultimate and diapositive issue is whether under all of the circumstances Peterson s 27 percent minority owner ship interest in Coatings and 100 percent ownership of Spartan/Applicators constitutes the substantial identical ownership required of an alter ego I think not First, the General Counsels concession that Coatings was undergoing severe financial stress at the end of 1985, it seems to me misses the mark in the degree of its under statement It is difficult to imagine a stronger factual background to support Respondents basic contentions that Coatings in 1985 was a business going out of buss ness and an enterprise which actually went out of busi ness on 31 December 1985 For 6 straight years (1980- 1985) Coatings had suffered substantial net losses There is no evidence that Coatings, as part of a single employer or other conglomerate, was being intentionally operated at a loss, for some perceived and/or directed good of the whole To the contrary an early February 1983 corpo rate officer plan then called for a severe expense re trenchment, for a program of renewal of employee moti vation to preserve their jobs and for vigorous pursuit of old and new business That effort simply failed Coatings operational failure continued as a substantial one in 1984, and, by the end of 1984, McFarland Bank (and presum ably the SBA) viewed their still very substantial SBA loan at risk In the ensuing period stretching from January 1985 through the end of December 1985, additional plans for a Coatings stockholder cash rescue failed to fully material ize, and in any event, failed to effect a rescue of the en terpnse Authorization for a plan initially for an entire stock gift, and then implementation of an actual (April) formalized plan calling for gift of controlling (and all of Peterson s) stock, failed at the last moment for fiscal rea sons Clearly the failure was because of the even then overburdening debt load of Coatings, and not only from the SBA loan, but from other loans to McFarland and even more so to other major creditors By September, Coatings external fiscal pressures were still mounting They culminated at that time with an IRS tax lien filing, and with an acknowledged present inability on the part of Coatings to pay the taxes, or to meet its SBA loan payments At least by this time (I have found) Coatings was forced to cease bidding new jobs An internal stock holder cash plan for an orderly payment of taxes and SBA loan could not in the end be fully implemented and it also proved unavailing External union trust funds law suits ensued in October 1985 and the union trust funds themselves subsequently unequivocally threatened Coat ings with an involuntary bankruptcy even at the moment they were settling claims only through 31 December 1985 Such settlements as were accomplished were ac complished (at best) in the main by but additional cash outlays of the four Coatings shareholders, and ironically at a time when the General Counsel would call into question Peterson s failure to immediately pay stock sub scription in the new enterprise What Coatings shareholders/directors perceived at the start of the last year of operation might call for an alternative plan of chapter 11 reorganization, by the end of the year had become a situation deemed to warrant a chapter 7 liquidation with such filing held off until July 1986 only in final hope of collecting some additional ac counts receivable an action that only continued in a lack of success The foregoing in the end has wholly persuaded me, and I resultingly find, Coatings was a business irretneva bly going out of business and it went out of business on 31 December 1985 as a grossly insolvent company It is thus only properly in that established context of a wholly failed business that Peterson s actions may properly be PERMA COATINGS evaluated in regard to sale of certain assets of Coatings, and in regard to his establishment of Spartan/Applicators to purchase them, and engage in business with them Re spondents have stated the same basic ownership issue as follows Can a 27 percent minority owner of a bankrupt enterprise become a 100 percent owner in a new enter prase, purchase the old company s remaining assets, in good faith, at fair value, and thereafter start a similar (or same) enterprise, free of the collective bargaining agree ments of the old? In the circumstances presented here, I think it may Thus I am of the view that a real minority stock owner, such as shown here (27 percent), may engage in the same business in a new enterprise that is wholly owned (100 percent), where, as here there is both a lack of substantial identical ownership between the old and new enterprises, and it is clear that the old enterprise does not control the new enterprise Given the central established facts here that the old enterprise Coatings, because of external and internal forces actually went out of business in a state of insolvency, that Peterson owned a clearly separate and minority (27 percent) interest in Coatings, that Peterson established a separate enterprise with 100 percent ownership initially in himself, that the new enterprise purchased the assets of the old enterprise for lawful purpose, did so formally, at fair value, and in good faith, and finally given that the new enterprise has engaged in the same business, but has done so without any evidenced actual control by the old enterprise, I conclude and find that Spartan/Applicators was not an alter ego of Coatings, Superior Export Packing, 284 NLRB 1169, 1170 (1987) Marino Electric, 285 NLRB 344 (1987) Accordingly, I shall dismiss the allegations that by Pe terson's setting up and operating Spartan/Applicators Respondents Coatings, Peterson and Coatings other named shareholders Spartan/Applicators, or any of them, have violated Section 8(a)(5) and (1) of the Act by 841 any direct dealing with key employees and/or by an un lawful refusal to apply Coatings existing contracts with the Unions It follows only the more readily that Applicators/Kohl has not violated the Act in any of the above respects CONCLUSIONS OF LAW 1 Perma Coatings, Inc, and Spartan Group of McFar land, Inc now by name change Applicators of Wiscon sin, Inc, is each an employer within the meaning of Sec tion 2(2), (6), and (7) of the Act, and not an alter ego of each other 2 Central Wisconsin Carpenters District Council, United Brotherhood of Carpenters and Joiners of Amer ica and Construction and General Laborers Union Local No 464, Laborers International Union of North Amer ica, AFL-CIO, and Operative Plasterers and Cement Masons International Association of the United States and Canada Local 204 AFL-CIO are all a joint Charg ing Party herein and each, respectively, is a labor orga nization within the meaning of Section 2(5) of the Act 3 Neither Perma Coatings, Inc or its four named shareholders or any of them, nor Spartan Group of McFarland, Inc, by name change Applicators of Wis consin Inc, or the latter as now under different owner ship, has in any manner violated Section 8(a)(5) and (1) of the Act On the basis of these findings of fact and conclusions of law, I issue the following recommended2 ORDER The complaint is dismissed in its entirety 2 If no exceptions are filed as provided by Sec 102 46 of the Board s Rules and Regulations the findings conclusions and recommended Order shall as provided in Sec 102 48 of the Rules be adopted by the Board and all objections to them shall be deemed waived for all pur poses