City of Philadelphia v. Hertler

Decision Date18 March 1988
Citation539 A.2d 468,114 Pa.Cmwlth. 475
PartiesCITY OF PHILADELPHIA v. Walter R. HERTLER, Officer of Bainbridge Green Corp. t/a Shippens and Morton Malamet, Officer of Bainbridge Green Corp. t/a Shippens. Appeal of Walter R. HERTLER.
CourtPennsylvania Commonwealth Court

Edward A. Taraskus, Philadelphia, for appellant.

Phyllis J. McHale, Philadelphia, for City of Philadelphia.

Morton Malamet, pro se.

Before DOYLE and PALLADINO, JJ., and KALISH, Senior Judge.

DOYLE, Judge.

This is an appeal by Walter Hertler from an order of the Court of Common Pleas of Philadelphia County which granted the motion of the City of Philadelphia (City) for judgment on the pleadings. The effect of the trial court's order was to declare Hertler a trustee ex maleficio and, hence, adjudicate him as personally responsible for delinquent wage taxes collected by a now defunct corporation, Bainbridge Green Corporation t/a Shippens (Corporation), for which he served as president. The sum in dispute is $13,480.61 plus interest and penalties.

In its complaint, the City alleged that pursuant to the City Wage and Income Tax Ordinance, a tax is imposed upon all salaries, wages, commissions and other compensation received for work done or services rendered in the City. Further, Section 19-1504 of the Philadelphia Code provides that each employer who employs one or more persons within the City shall deduct wage taxes, file wage withholding tax returns with the City, and remit the tax due to the City. It is alleged that the Corporation employed one or more persons to whom it paid compensation in the years 1976 to 1980 inclusive, and that wages were withheld from those employees by the Corporation. It is also alleged that such wages were not remitted to the City. According to the City's complaint, the Corporation has failed or refused to pay the sums in dispute. Further, the Corporation at no time filed a petition for review with the Philadelphia Tax Review Board. The City has demanded payment from the Corporation but it has failed to remit said sums. Further, it is specifically alleged in paragraph 14 of the complaint, "Defendant [Hertler] as an officer of [the Corporation] operated and managed said corporation and had control of the withholding and payment of the wage withholding taxes during the relevant time period." Hertler denied this allegation as follows "It is specifically denied that answering defendant had control of the withholding and payment of wage withholding taxes. On the contrary, any control of the withholding and payment of wage withholding taxes, if any, was within the Secretary or Treasurer of the corporation or some other individual." Finally, the complaint alleges that the taxes withheld are the property of the City and prays that the Court declare Hertler as a trustee ex maleficio of the wage taxes due the City.

In his answer to the complaint, Hertler, while admitting that he had been president of the Corporation, responded to virtually every paragraph of the complaint, with the exception of Paragraph 14, by denying each allegation generally, or by pleading that the allegation constituted a conclusion of law to which no answer was required. Further, Hertler, by way of new matter, alleged that the City had failed to state a cause of action, and that its action was barred by Section 5527 of the Judicial Code, 42 Pa.C.S. § 5527, (providing a six year statute of limitations for certain actions), laches, and failure to exhaust administrative remedies. Additionally, in new matter Hertler stated that "At no time relevant herein did answering defendant collect, handle, manage, control or convert to his own use any money or taxes due plaintiff."

Subsequent to the close of the pleadings, the City filed a motion for judgment on the pleadings to which Hertler filed an answer. The trial court granted the City's motion on the theory that Hertler had failed to exhaust his administrative remedies. The lower court also determined that the defenses of the statute of limitations and laches were inapplicable here, and that there were no factual issues in dispute which would preclude the entry of judgment on the pleadings. Accordingly, it granted the City's motion and the instant appeal ensued.

Before us, Hertler raises four questions for our consideration that can be summarized as follows: (1) whether the doctrine of failure to exhaust administrative remedies before the City's Tax Review Board precludes Hertler from raising defenses in the City's complaint in equity, (2) whether the trial court erred in determining that the City's claim was not barred by the statute of limitations, (3) whether the trial court erred in rejecting Hertler's defense of laches, and (4) whether the trial court erred in granting the motion because there allegedly are unresolved factual questions.

Considering first the question of failure to exhaust administrative remedies, Hertler takes the position that the Corporation may have had a right to petition the Tax Review Board of the City to contest the assessment, but that, absent an allegation by the City that he had notice of the assessment, he had no obligation to do so. We agree. The City assumes Hertler to be a controlling officer with knowledge of the Corporation's tax responsibilities. Hertler denies this. The City's position that notice to the Corporation was notice to Hertler must, therefore, fail. 1 We believe that where the complaint is one in equity and is brought by the City and where the City does not allege notice of the assessment as to a corporate officer, but only as to the Corporation, the officer has the right in his answer to question both the amount due and his ultimate liability for the taxes, and need not have filed a petition with the Tax Review Board. Accord City of Philadelphia v. ABC Express Co., 84 Pa.Commonwealth Ct. 1, 478 A.2d 527 (1984). 2

Next, Hertler contends that the City's claim is barred by the statute of limitations. We, however, agree with the trial court that, pursuant to Section 19-510(1)(c) of the Philadelphia Code, a six-year statute of limitations is not applicable to the wage withholding taxes where one who is alleged to be a trustee has failed to remit sums due the City. Section 19-510(1)(c) of the Philadelphia Code specifically limits a suit to recover any tax authorized by Section 19-1504 to six years after the tax is due or within six years after a report has been filed. Subsection (c), however, provides that the six year limitation shall not apply "where the taxpayer has collected or withheld tax funds or monies of any nature or description under this Title as an agent or trustee for the City, and has failed, neglected or refused to pay the amount so collected or so withheld to the City." Although the sums due here were for the period between 1976 and 1980, the City did not file its complaint until January 14 of 1985. Nonetheless, we believe that the allegations of the complaint fit this case squarely within Section 19-510(1)(c) of the Philadelphia Code and, accordingly, conclude that the statute of limitations defense is inapplicable here.

In a related argument, Hertler contends that the defense of laches is applicable to this case. We, however, believe that Section 19-510(1)(c) operates in this case in such a manner so as to preclude Appellant from raising the defense of laches. Further, we note that Hertler in his answer merely alleged generally that the defense of laches existed without explaining in any manner why such...

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4 cases
  • First Wisconsin Trust Co. v. Strausser
    • United States
    • Pennsylvania Superior Court
    • January 27, 1995
    ...factual allegations when it is clear that the pleader must know if the allegations are true or not." City of Philadelphia v. Hertler, 114 Pa.Commw. 475, 482, 539 A.2d 468, 472 (1988) (emphasis added). We agree with the trial court that this particular denial by Strausser, as well as her rem......
  • Krug v. City of Philadelphia
    • United States
    • Pennsylvania Commonwealth Court
    • January 5, 1993
    ...shall be strictly pursued....3 Our decisions in Santoro and Kenny must be compared to our decision in City of Philadelphia v. Hertler, 114 Pa.Commonwealth Ct. 475, 539 A.2d 468 (1988). In Hertler, we held that a corporation's failure to appeal a City wage tax assessment to the Board did not......
  • City of Philadelphia v. Petherbridge
    • United States
    • Pennsylvania Commonwealth Court
    • July 24, 2001
    ...officer had the responsibility or control over the collection and remitting of taxes is a question of fact. City of Philadelphia v. Hertler, 114 Pa.Cmwlth. 475, 539 A.2d 468 (1988). Here, the trial court found that, as president of Janbridge from 1989 to October 1993, Appellant was responsi......
  • Com. by Preate v. Rainbow Associates, Inc.
    • United States
    • Pennsylvania Commonwealth Court
    • January 31, 1991
    ...factual allegations when it is clear that the pleader must know if the allegations are true or not. City of Philadelphia v. Hertler, 114 Pa.Commonwealth Ct. 475, 539 A.2d 468 (1988). In the present context, we must determine based on the pleadings whether it is clear that Defendants knew if......

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