Heritage Bank for Sav. v. Doran

• Decision Date: 12 May 1987
• Citation: 507 N.E.2d 690,399 Mass. 855
• Parties: HERITAGE BANK FOR SAVINGS v. Harold A. DORAN (and a companion case). MIDDLESEX SAVINGS BANK v. Walter L. VAIL (and a companion case). 1
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 690

507 N.E.2d 690

399 Mass. 855

HERITAGE BANK FOR SAVINGS v. Harold A. DORAN (and a companion case).

MIDDLESEX SAVINGS BANK v. Walter L. VAIL (and a companion case). ¹

Supreme Judicial Court of Massachusetts, Franklin and Middlesex.

Argued March 5, 1987.

Decided May 12, 1987.

Stephen S. Ostrach, Sp. Asst. Atty. Gen., for Commissioner of revenue.

John J. Boyle of the District of Columbia, Atty., Dept. of Justice, for United States.

Before HENNESSEY, C.J., and LIACOS, NOLAN, LYNCH and O'CONNOR, JJ.

LYNCH, Justice.

The Commissioner of Revenue for the Commonwealth of Massachusetts appeals from judgments for the United States entered in the Superior Court in Franklin County and Superior Court in Middlesex County in two cases on the basis of rulings that the Commonwealth had not properly established tax liens against the respective defendants, Harold A. Doran and Walter L. Vail. ² In both cases corporations failed to pay certain withholding taxes due the Commonwealth and the United States. After making assessments against the corporations both the Commonwealth and the United States attempted to collect the corporation withholding tax liabilities from Doran and Vail as "responsible officers," i.e., corporate officials under a duty to collect and pay a corporation's withholding taxes. In both cases the Commissioner made tax assessments against the corporations but failed to make personal assessments against Doran and Vail. The United States, in addition to making tax assessments against the corporations, made penalty assessments against Doran and Vail as the "responsible officer" in each corporation. See 26 U.S.C. § 6672 (1984 ed.). ³

The Superior Court held that the Commonwealth failed to establish its tax lien against either Doran or Vail because the Commissioner, while making tax assessments against the respective corporations, failed to make personal assessments against either individual determined to be the "responsible officer." Accordingly, both judges in the Superior Court granted summary judgment in favor of the United States by virtue of Federal tax liens which arose pursuant to the penalty assessments made against Doran and Vail. We took the two cases on our own motion. We affirm.

Heritage case. The Heritage case involves competing State and Federal tax liens against Harold A. Doran. Doran was an officer of Doran, Inc. of Millers Falls, and he signed corporate withholding and sales tax returns for the corporation. From January, 1979, through January, 1981, Doran, Inc., failed to collect and pay over withholding and sales taxes due to the Commonwealth. The Commissioner determined that Doran "was the officer responsible to withhold and pay over sales and withholding taxes" to the Commonwealth. ⁴ In June, 1981, the Commissioner notified Doran that, pursuant to G.L. c. 62B, § 5 (1984 ed.), he was personally liable for the taxes owed by Doran, Inc., and demanded payment. On July 9, 1981, the Commissioner recorded notices of tax liens with the Franklin County registry of deeds.

On April 12, 1982, the United States assessed Doran, Inc., for unpaid withholding and Social Security taxes for periods in 1979 and 1980, and it also issued a penalty assessment against Doran personally for his failure to collect and pay over the taxes owed by Doran, Inc. On July 23, 1982, the United States recorded a notice of tax lien against Doran with the Franklin County registry of deeds.

The Heritage litigation involves an interpleader action under Mass.R.Civ.P. 22, 365 Mass. 767 (1974), filed by Heritage Bank for Savings seeking a determination as to the disposition of a surplus left after Heritage foreclosed on a mortgage held by Doran.

The Middlesex case. The Middlesex case involves State and Federal tax liens filed against Walter L. Vail, who was the president of Vail-Kenrick, Inc. Vail-Kenrick failed to pay withholding taxes for periods from August, 1980, through July, 1981. Assessments by the Commonwealth against the corporation were made between February and October, 1981. The Commissioner determined that Vail was the responsible officer. ⁵ On November 1, 1982, Vail was notified of his liability for Vail-Kenrick's State taxes under G.L. c. 62B, § 5, and payment was demanded. On December 28, 1982, the Commissioner recorded a tax lien against Vail in the Middlesex County registry of deeds.

The United States assessed Vail-Kenrick for unpaid withholding taxes on September 6, 1982, and on that date also imposed a penalty assessment against Vail for failure to pay the corporation's taxes. On December 14, 1982, the United States recorded a tax lien against Vail in the Middlesex County registry of deeds. ⁶ Middlesex Savings Bank filed an interpleader action in November, 1983, to effect the disposition of a surplus which Middlesex Savings held after foreclosing on a mortgage held in part by Vail.

The Commonwealth maintains that it possesses valid tax liens against Doran and Vail based upon the assessments against Doran, Inc., and Vail-Kenrick, Inc. The Commonwealth concedes that no separate personal assessments were made by the Commonwealth against either individual. Instead, it argues that the assessments made against the respective corporations establish a basis for its liens on the theory that assessments made against the corporations were "deemed" to be assessments against the responsible officers of the corporations. In our view, there is neither express nor implied statutory authority supporting the Commonwealth's theory that the assessment of a corporation's liability for unpaid withholding taxes operates as a deemed assessment against individual corporate officers.

1. General Laws c. 62B, § 2, creates an obligation on the part of an employer to deduct and withhold taxes on wages. ⁷ Where an employer fails to withhold and pay over the required taxes, G.L. c. 62B, § 5, provides for personal liability against the corporate employer and certain other persons as follows: "Every employer who fails to withhold or pay to the commissioner any sums required by this chapter to be withheld or paid shall be personally and individually liable therefor to the commonwealth. The term 'employer', as used in this paragraph and in section eleven, includes an officer or employee of a corporation, ... who as such officer, employee or member is under a duty to withhold and pay over taxes in accordance with this section and section two." Although § 5 provides for personal liability against a responsible officer, G.L. c. 62B, § 6, provides for an assessment of the tax liability only against the employer: "In the event an employer fails to withhold and pay over to the commissioner any amount required to be withheld under section two, such amount shall be assessed against such employer, under the provisions of sections twenty-six and twenty-nine inclusive, of chapter sixty-two C."

A tax liability does not rise to a lien status unless expressly provided for by statute. See Boston v. Barry, 315 Mass. 572, 578, 53 N.E.2d 686 (1944); Boston v. Cable, 306 Mass. 124, 126, 27 N.E.2d 699 (1940). A lien for taxes under Massachusetts law is established by G.L. c. 62C, § 50(a), which provides as follows: "(a) If any person liable to pay any tax neglects or refuses to pay the same after demand, the amount, including any interest, additional amount, addition to tax, assessable penalty or forfeiture, together with any costs that may accrue in addition thereto, shall be a lien in favor of the...