Datlof v. United States

Decision Date29 December 1966
Docket NumberNo. 15932.,15932.
Citation370 F.2d 655
PartiesJoseph DATLOF, Appellant, v. UNITED STATES of America.
CourtU.S. Court of Appeals — Third Circuit

Robert M. Taylor, Philadelphia, Pa., for appellant.

Joseph Kovner, Dept. of Justice, Tax Division, Washington, D. C. (Mitchell Rogovin, Asst. Atty. Gen., Lee A. Jackson, Melva Graney, Robert H. Solomon, Attys., Dept. of Justice, Washington, D. C., Drew J. T. O'Keefe, U. S. Atty., of counsel on the brief), for appellee.

Before GANEY, SMITH and FREEDMAN, Circuit Judges.


GANEY, Circuit Judge.

Appellant, Joseph Datlof, brought a civil action for refund of $81.90 paid by him to the Internal Revenue Service. The appellee, United States, counterclaimed for $31,499.45 representing the balance unpaid from a deficiency assessment against appellant in September of 1957 under § 6672 of the Internal Revenue Code of 1954, 26 U.S.C.A. § 66721 for employees' federal income withholding taxes and the then two percent F.I.C.A. taxes "deducted" during the last three calendar quarters of 1955 from the wages of employees of a manufacturing corporation of which appellant was president and treasurer during the entire period of its existence.

In an opinion in which the evidence was thoroughly analyzed and the findings of fact and conclusions of law were specially set forth with painstaking care, the district court found that appellant was a responsible person whose duty it was to collect and truthfully account for and pay over employees' federal payroll deduction taxes, and that he collected and accounted for such taxes but willfully failed to pay them over to the Service. 252 F.Supp. 11 (E.D. Pa. 1966).

There was substantial evidence to support these findings. They were far from being clearly erroneous. Rule 52 (a) of the Federal Rules of Civil Procedure; Smith v. United States, 121 F.2d 692, 694-695 (C.A. 3, 1941); Bloom v. United States, 272 F.2d 215 (C.A. 9, 1959), cert. den. 363 U.S. 803, 80 S.Ct. 1236, 4 L.Ed.2d 1146.

Despite the fact that between July 14, 1955 and January 3, 1956, the employer paid creditors other than the Service a total of $108,072.09 by checks signed by appellant, and that the employer was forced to cease manufacturing as the result of proceedings instituted by its landlord to collect rents and foreclose on a chattel mortgage covering its operating machinery, appellant contends that he should not be held liable for the assessment because assertedly the Service did not use due diligence in 1955 to collect from the employer the taxes upon which the amount of the assessment is based. This reason is not a ground for permitting him to recover the $81.90, nor a defense to appellee's counterclaim. The personal liability created under § 6672 is separate and distinct from that imposed upon the employer under § 3403 of the Code. Bloom v. United States, supra, at 221; Rosenberg v. United States, 327 F.2d 362, 364-365 (C.A.2, 1964). Also see Spivak v. United States, 254 F.Supp. 517, 527 (S.D.N.Y. 1966). The Service need not have attempted to collect from the employer before assessing a responsible person under § 6672. Cash v. Campbell, 346 F.2d 670 (C.A.5, 1965); Kelly v. Lethert, 362 F.2d 629, 635 (C.A.8, 1966).

Appellant also contends in the alternative that the Service erroneously included in the assessment the then two percent FICA tax required to be paid by the employer under § 3111 of the Code. For the purpose of this case, the appellee does not dispute that appellant is not responsible under § 6672 for that tax. Under this view, the employer's FICA tax is the least secured of the three taxes involved here. The record shows that sums reported due the Service by the employer for each of the calendar quarters of 1955 included three taxes: the employer's two percent FICA tax; the employees' withholding tax and the employees' two percent FICA tax. The amounts were as follows:

                    (1)          (2)           (3)           (4)           (5)            (6)
                                             Percentage Employees' Percentage
                of Total Withholding of Total Totals
                Calendar Employer's Quarterly and Quarterly for each
                Quarter FICA Tax Amount FICA Taxes Amount Quarter
                    1st        $ 3,380.70       16.3       $17,346.74        83.7      $20,727.44
                    2nd          3,437.62       16.4        17,537.99        83.6       20,975.61
                    3rd          3,179.20       16.1        16,581.89        83.9       19,761.09
                    4th          2,513.65       16.0        13,178.95        84.0       15,692.60
                               __________       ____       __________        ____      __________
                  Totals:     $12,511.17       16.2       $64,645.57        83.8      $77,156.74
                                                    (Table I)

According to the four "Certificates of Assessments and Payments" (Forms 899 — Rev. 6-62) attached to the stipulation of facts, the employer, whose principal place of business was in Philadelphia, Pa., made fourteen payments from time to time between March of 1955 and mid-September of 1957, totaling $39,910.20 toward the sums due for the four quarters of 1955. The Service applied each of the fourteen payments to a total sum due for each quarter (See Table I, Column 6) as shown in footnote2 below, without making any distinction as to any one of the three taxes involved. In other words for debit and credit purposes it treated the four sums as though they represented but a single tax. The Service also used a portion of three out of the fourteen payments to offset an equal number of miscellaneous items totaling $457.56 added to the assessment, and for which appellant does not dispute that he is liable. This reduced the total amount of the payments to $39,452.64. Summarized by quarters, the applied payments and balances were as follows:

                Quarter Payments Balances
                  First         $20,727.44        — None —
                  Second         10,343.53       $10,632.08
                  Third           4,962.64        14,798.45
                  Fourth          3,419.03        12,273.57
                                __________       __________
                  Totals:       $39,452.64       $37,704.10
                                 (Table II)

The net effect of the Service's application of the fourteen payments, says the appellee, was to liquidate the entire amount owed for the combined three taxes for the first quarter, the employer's tax for each of the last three quarters (since the balance of the payments after being applied to the first quarter was in excess of $9,130.47 the total of those three sums), and part of the employees' withholding and FICA taxes, leaving a remainder of $37,703.10 for those latter two taxes alone.

In addition this remainder was further reduced to $31,498.45 by subtracting $6,204.65 directly from it. The $6,204.65 consisted of three payments — one of them being the $81.90 item for which he sued to recover, not appearing on Form 899, made after the assessment of September 30, 1957, against appellant. Thus a total of $45,657.29, exclusive of the $457.56 item, has been received by the Service toward $77,156.74, the total amount of the combined three taxes originally owed by the employer. The difference between these two figures is...

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