Jeffrey M. Mandler & Nuclear Imaging Sys., Inc. v. Commonwealth, 483 F.R. 2014

• Decision Date: 03 March 2021
• Docket Number: No. 484 F.R. 2014,No. 483 F.R. 2014,483 F.R. 2014
• Citation: 247 A.3d 104
• Parties: Jeffrey M. MANDLER and Nuclear Imaging Systems, Inc., Petitioners v. COMMONWEALTH of Pennsylvania, Respondent Jeffrey M. Mandler and Cardiovascular Concepts, P.C., Petitioners v. Commonwealth of Pennsylvania, Respondent
• Court: Pennsylvania Commonwealth Court

247 A.3d 104

Jeffrey M. MANDLER and Nuclear Imaging Systems, Inc., Petitioners

v.COMMONWEALTH of Pennsylvania, Respondent

Jeffrey M. Mandler and Cardiovascular Concepts, P.C., Petitioners

v.Commonwealth of Pennsylvania, Respondent

No. 483 F.R. 2014

No. 484 F.R. 2014

Commonwealth Court of Pennsylvania.

Submitted on Briefs February 10, 2021

Decided March 3, 2021

Charles L. Potter, Jr., Pittsburgh, for Petitioners.

Elizabeth L. Kinsella, Deputy Attorney General, Harrisburg, for Respondent.

BEFORE: HONORABLE P. KEVIN BROBSON, President Judge, HONORABLE MARY HANNAH LEAVITT, Judge, HONORABLE PATRICIA A. McCULLOUGH, Judge, HONORABLE ANNE E. COVEY, Judge, HONORABLE MICHAEL H. WOJCIK, Judge, HONORABLE CHRISTINE FIZZANO CANNON, Judge, HONORABLE ELLEN CEISLER, Judge

OPINION BY JUDGE COVEY

Before the Court are Jeffrey M. Mandler (Mandler), Nuclear Imaging Systems, Inc. (NIS) and Cardiovascular Concepts, P.C.’s (CVC) (collectively, Taxpayers) exceptions (Exceptions)¹ to this Court's March 2, 2020 Memorandum Opinion and Order (March 2, 2020 Opinion) affirming the Board of Finance and Revenue's (Board) August 27, 2014 orders denying Taxpayers’ Petitions for Refund (Refund Petitions) of the $180,168.46 Taxpayers remitted to the Pennsylvania Department of Revenue (Revenue) on July 31, 2013, to satisfy employer withholding liens.² Therein, Taxpayers present three issues for this Court's review: (1) whether Taxpayers satisfied their burden of proving their entitlement to the $180,168.46 refund; (2) whether the United States Bankruptcy Court for the Eastern District of Pennsylvania (Bankruptcy Court) set aside the funds necessary for Taxpayers to satisfy their payroll tax obligations, and the Commonwealth of Pennsylvania (Commonwealth) was on notice that those funds were available; and (3) whether Taxpayers are entitled to prevail under the doctrine of estoppel by laches or collateral estoppel. After review, this Court en banc overrules Taxpayers’ Exceptions.

Facts

On January 11, 2019, pursuant to Pennsylvania Rule of Appellate Procedure (Rule) 1571(f), Taxpayers and the Commonwealth submitted a joint Stipulation of Facts (Stipulation).³ According to the Stipulation, Mandler owned NIS and CVC, which are Pennsylvania corporations with principal places of business in Malvern, Pennsylvania.⁴ See Stip. ¶¶ 3-4. Pursuant to Sections 316(a) and 320 of the Tax Reform Code of 1971 (Code),⁵ 72 P.S. §§ 7316.1(a),⁶ 7320, Taxpayers were employers responsible for withholding their employees’ payroll taxes in trust for the Commonwealth. See Stip. ¶¶ 2-4. On August 4, 2000, NIS and CVC commenced voluntary reorganization bankruptcy proceedings in the Bankruptcy Court, pursuant to Chapter 11 of the Bankruptcy Code.⁷ See Stip. ¶ 4. On September 18, 2000, the Bankruptcy Court ordered the joint administration of NIS's and CVC's bankruptcy actions. See Stip. ¶ 8. On October 6, 2000, Revenue filed proofs of claim with the Bankruptcy Court seeking, among other taxes,⁸ NIS's and CVC's Pennsylvania employer withholding taxes (Taxes).⁹ See Stip. ¶ 9, Stip. Ex. A.

From October 29, 2000 to September 1, 2001, Revenue issued 10 assessment notices to NIS and Mandler (individually, and in his capacity as NIS's president) for their Taxes for consecutive tax periods from January 1, 1999 to June 30, 2001, plus interest and penalties, in the total amount of $110,331.60. See Stip. ¶ 14. Between October 29, 2000 and June 3, 2001, Revenue issued nine assessment notices to CVC and Mandler (individually, and in his capacity as CVC's president) for their Taxes for consecutive tax periods from January 1, 1999 to March 31, 2001, plus interest and penalties, in the total amount of $70,486.89. See Stip. ¶ 15.

On April 17, 2001, Taxpayers entered into an Amended Stipulation of Settlement and Order (Settlement Order) to resolve certain creditor claims, and to allow the sale of NIS's and CVC's assets to Integral Nuclear Associates, LLC (Integral) pursuant to an April 11, 2001 Asset Purchase Agreement¹⁰ (as amended by the Settlement Order), which would facilitate reorganization.¹¹ See Stip. ¶ 10, Stip. Ex. B. Thereunder, Integral agreed to purchase certain of NIS's and CVC's assets out of bankruptcy, and to issue a "promissory note made payable to [Taxpayers] to fund payments to state taxing authorities."¹² Stip. Ex. B at 8. On May 1, 2001, Integral's counsel sent United Savings Bank, inter alia , $66,215.49 to be held in an interest-bearing state tax escrow account. See Stip. ¶¶ 37-38, Stip. Exs. R, S.

On June 8, 2001, Taxpayers filed a proposed Second Amended Joint Plan of Reorganization (Proposed Plan), in which they suggested in Section 4.2.B: "[Taxpayers] shall distribute $66,000[.00] to state taxing authorities. These claims are estimated at $300,000[.00]. ... Mandler shall make monthly payments to [Taxpayers] to pay any deficiency." Stip. Ex. P at 13; see also Stip. ¶ 35. Revenue objected to the Proposed Plan. See Stip. ¶ 36, Stip. Ex. Q.

On August 20, 2001, the Bankruptcy Court converted NIS's and CVC's bankruptcy actions to Chapter 7 liquidation proceedings.¹³ See Stip. ¶ 11. Thereafter, Revenue filed amended proofs of claim - on September 14, 2001, against CVC and on November 15, 2001, against NIS - seeking the Taxes.¹⁴ See Stip. ¶ 12, Stip. Ex. C.

On January 7, 2002, Integral's counsel instructed United Savings Bank to close out the state tax escrow account and forward the proceeds thereof (which was then $67,113.00) to Bankruptcy Trustee Christine Shubert (Trustee). See Stip. ¶ 39, Stip. Exs. T, U. Revenue did not receive any of the escrowed funds.

During 2002 and 2005, Revenue filed liens against Taxpayers in the Chester County Common Pleas Court. See Stip. ¶ 16, Stip. Ex. E. On May 18, 2005, Trustee issued her amended Chapter 7 Proposed Distribution of Property, pursuant to which the Trustee, on August 3, 2005, paid Revenue $1,043.29 relative to claims against CVC and $755.49 for claims against NIS. See Stip. ¶¶ 17-18, Stip. Exs. F, G. Those payments were not made in satisfaction of the Taxes or Taxpayers’ other state tax debts.¹⁵ On April 13, 2006, Trustee certified that the estate was fully administered - all bankruptcy estate money had been distributed to creditors and the bankruptcy estate accounts had zero balances. See Stip. ¶ 40, Stip. Ex. U.

By July 30, 2013 letter, Revenue notified Taxpayers’ counsel (Counsel) that Taxpayers’ lien payoff figure was $180,168.46. See Stip. ¶ 19, Stip. Ex. H. Taxpayers remitted $180,168.46 to Revenue on July 31, 2013. See Stip. ¶ 20, Stip. Ex. I. On August 20, 2013, Revenue asked the Chester County Common Pleas Court to mark Taxpayers’ liens as satisfied. See Stip. ¶ 21, Stip. Ex. J.

However, on November 13, 2013, Taxpayers filed the Refund Petitions with Revenue's Board of Appeals (BOA) seeking return of their $180,168.46, arguing that the Taxes had already been paid from the escrow account. See Stip. ¶¶ 22-24. On January 23, 2014, the BOA denied the Refund Petitions, stating relative to both NIS and CVC:

[Taxpayers] filed for bankruptcy and [ ] an escrow account was established for the payment of state taxes. The record does not provide any evidence that notice of the escrow account was provided to [Revenue]. There is no evidence indicating that these funds were used to pay the outstanding state tax liabilities. In fact, [Revenue's] records indicate that [Revenue] did not receive payment from these escrowed funds. Accordingly, [Taxpayers] ha[ve] failed to prove that [they are] entitled to a refund.

Stip. Exs. K (BOA NIS Dec. at 2), L (BOA CVC Dec. at 2);¹⁶ see also Stip. ¶¶ 25-26. On April 4, 2014, Taxpayers appealed to the Board. See Stip. ¶¶ 27-29.

On August 27, 2014, the Board denied the Refund Petitions. See Stip. Exs. M (Board NIS Dec. at 5), L (Board CVC Dec. at 4-5); see also Stip. ¶¶ 30-31. On September 24, 2014, Taxpayers appealed to this Court, which affirmed the Board's orders on March 2, 2020.¹⁷ Mandler v. Commonwealth (Pa. Cmwlth. Nos. 483, 484 F.R. 2014, filed March 2, 2020). On April 1, 2020, the Commonwealth filed an Application to Redesignate the Court's Unreported Memorandum Opinion as a Reported Opinion (Application), to which no response was filed. Taxpayers timely filed the Exceptions seeking to reverse the Court's March 2, 2020 Opinion and grant their refund request.¹⁸ The Commonwealth filed a brief in opposition to Taxpayers’ Exceptions.¹⁹

Discussion

1. Waiver

Preliminarily, in their initial appeal to this Court, Taxpayers "request[ed] relief pursuant to [Section 1983 of the United States Code,] 42 U.S.C. § 1983 [(relating to civil rights deprivation actions)] and attorney's fees pursuant to [Section 1988 of the United States Code,] 42 U.S.C. § 1988 [(relating to proceedings in vindication of civil rights)]." See Taxpayers’ Initial Br. at 23. However, because Taxpayers failed to mention any civil rights violations in their Statement of Questions Involved and did not develop arguments in their brief to support any such claims, this Court ruled that Taxpayer waived those claims. See Commonwealth v. Spotz , 610 Pa. 17, 18 A.3d 244 (2011) (such waiver applies to undeveloped constitutional rights claims); Mun. of Mt. Lebanon v. Gillen , 151 A.3d 722, 727 n.5 (Pa. Cmwlth. 2016) ("Appeal of an issue is waived where the appellant fails to include it in the statement of questions involved section of [his/]her brief and fails to address the issue in the argument section of the brief.").

Notwithstanding, in their brief in support of Exceptions, Taxpayers again

request[ ] relief pursuant to [Section 1983 of the United States Code,] 42 U.S.C. § 1983 [,] [ ] attorney's fees pursuant to [Section 1988 of the United States Code,] 42 U.S.C. § 1988 [ ] and ... fees and expenses pursuant to [the statute commonly known as the Costs Act (relating to fees and expenses for administrative agency actions)²⁰ ].

Taxpayers’ Exceptions Br. at 18. Therein, Taxpayers also include the following limited general argument:

1. The [ ] actions of the

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