Dudley v. United States
| Decision Date | 07 November 1967 |
| Docket Number | No. 43198.,43198. |
| Parties | Robert G. DUDLEY, Plaintiff, v. UNITED STATES of America, Defendant. |
| Court | U.S. District Court — Northern District of California |
Heisler & Stewart, Carmel, Cal., with Francis Hesiler, Carmel, Cal., for plaintiff.
Cecil F. Poole, U. S. Atty., San Francisco, Cal., with Barbara Ashley Phillips, San Francisco, Cal., for defendant United States.
Plaintiff has brought this action to recover funds in the amount of $3,734.24 assessed against and collected from him by the Internal Revenue Service as penalties under Title 26 U.S.C. Section 6672. The United States has counterclaimed for $9,258.37, representing the difference between the total amount assessed and the amount collected from plaintiff.
The assessment against plaintiff arose out of the alleged failure of plaintiff to collect and pay over to the Internal Revenue Service funds representing income and social security taxes withheld during the first two quarters of 1960 from employees of the Dudley Industrial Corporation of which plaintiff was the president and, along with his wife, owner of 90% of the stock.
The case was tried before this Court without a jury.
Section 6672, supra, requires that before a person can be assessed a penalty, it must be found that he is the person responsible for collecting, accounting for and paying over the taxes due from the corporation, and that he wilfully failed to do so. Bloom v. United States, 272 F.2d 215 (9th Cir. 1959) cert. denied 363 U.S. 803, 80 S.Ct. 1236, 4 L.Ed.2d 1146 (1960); United States v. Graham, 309 F.2d 210 (9th Cir. 1962).
Plaintiff does not dispute the fact that up until June 10, 1960, he was a person in charge of collecting, accounting for and paying over the withheld income and social security taxes of the Dudley Industrial Corporation. However, he argues that his failure to pay over the taxes was not wilful and that after June 10, he was no longer the person in charge within the meaning of Section 6672, supra.
With respect to the withheld taxes for the first quarter of 1960, plaintiff sought to prove that he mailed a check to the Service for the full amount on or about May 1, 1960; that due to a conspiracy among several inside employees and outside creditors, payment on that check was ordered stopped on or about June 10, 1960, without any authority from plaintiff or the board of directors or anyone else having authority to do so. In addition, he sought to prove that he was forced out of any effective control over the affairs of the corporation by the same group of conspirators when they arranged for the bank to cease honoring plaintiff's signature and when they arranged to lock him out of the Hemet plant.
Assuming the foregoing to be true, plaintiff would still not be exonerated from the Section 6672 penalty assessed for the first quarter of 1960. Plaintiff became responsible for the payment to the Government of funds withheld as soon as any further funds became available and these funds were used to pay creditors other than the Government, and upon the contingency that the corporation eventually failed to pay the taxes. In re Serignese, 214 F.Supp. 917 (D.Conn.1963); Tiffany v. United States, 228 F.Supp. 700 (D.N.J.1963). The evidence shows that as funds became available for payment of amounts withheld from employees, these funds were paid to creditors other than the Government, with the end result that the Government never received the funds withheld. Hence, plaintiff was contingently liable for taxes due for the first quarter of 1960 under 26 U.S.C. § 6672 long before the check to the Internal Revenue was dishonored and before the earliest date he was allegedly eased out of control over the corporation.
Plaintiff's argument that the wilfulness requirement of § 6672 amounts to something more than a knowing preference of...
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Dudley v. United States
...between the amount of tax assessed against appellant and the amount collected. The District Court's opinion is reported at 285 F.Supp. 979 (N.D.Cal.1967). In 1960, appellant was president and, along with his wife, principal stockholder of the Dudley Industrial Corporation, a manufacturer of......
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Moats v. United States, 82-0455-CV-W-1.
...of collecting, accounting for, and paying over withheld income and Social Security taxes of the Dudley Industrial Corporation." 285 F.Supp. 979 at 980. It was equally undisputed that after that date Dudley lost control of the corporation and that persons other than Dudley "exercised full co......
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