Keller v. U.S.

• Decision Date: 30 March 1995
• Docket Number: No. 93-3793,93-3793
• Citation: 46 F.3d 851
• Parties: -721, 95-1 USTC P 50,088, Unempl.Ins.Rep. (CCH) P 14376B Joseph KELLER, Plaintiff/Appellant, v. UNITED STATES of America, Defendant/Appellee, v. Lillian HALSTEAD, Counter-Defendant/Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 851

46 F.3d 851

75 A.F.T.R.2d 95-721, 95-1 USTC P 50,088,

Unempl.Ins.Rep. (CCH) P 14376B

Joseph KELLER, Plaintiff/Appellant, v. UNITED STATES of America, Defendant/Appellee, v. Lillian HALSTEAD, Counter-Defendant/Appellee.

No. 93-3793.

United States Court of Appeals Eighth Circuit.

Submitted Oct. 13, 1994.

Decided Feb. 2, 1995.

Rehearing Denied March 30, 1995.

Gregory C. Larson, Bismarck, ND, for appellant.

Anthony T. Sheehan, Dept. of Justice, Washington, DC, Gary Allen and Kenneth Greene appeared on the brief, for appellee.

Before WOLLMAN, Circuit Judge, JOHN R. GIBSON, Senior Circuit Judge, and HANSEN, Circuit Judge.

WOLLMAN, Circuit Judge.

In this federal tax case, Joseph Keller appeals from the district court's ¹ grant of summary judgment in favor of the United States with respect to his liability under 26 U.S.C. Sec. 6672. We affirm.

I.

Joseph Keller served as the personal representative of the estate of his brother, Wilhelm Keller (Wilhelm). At the time of his death in 1982, Wilhelm was the owner of the Sleepy Hollow Inn (Inn) in Beulah, North Dakota. Wilhelm's will directed the estate's personal representative to operate the Inn until it could be sold. In 1982, Keller sold the Inn under a contract for deed. After the buyers experienced financial difficulties in 1984, Keller renegotiated terms of the contract. The buyers, however, eventually defaulted on the contract in 1985, and the Inn was returned to Wilhelm's estate. Keller then participated in a meeting with the estate's heirs and the estate's attorney. At that meeting, Keller expressed his desire to turn the Inn over to the bank holding the mortgage. After the heirs objected, Keller ultimately agreed to let the heirs operate the Inn.

Keller hired Lillian Halstead as the manager of the Inn. Halstead was employed in that position from January 1986 until the Inn was closed in June 1988. Her duties included maintaining the Inn's checking account, keeping the books, and setting the salaries for employees. She also prepared the Inn's tax returns and paid amounts due for worker's compensation insurance and state withholding taxes. As manager, Halstead was responsible for the day-to-day operation of the Inn.

Keller also authorized the employment of a secretarial service, which was initially retained to manage the Inn's bookkeeping, payroll, and state and federal tax reporting requirements. The service filed the reports and paid the withholding taxes for the first two quarters of 1986. The Inn subsequently defaulted on its payments to the secretarial service, and Keller had to negotiate a settlement for its fees. Thereafter, Halstead and one of the heirs employed at the Inn took over the payroll, and Keller instructed that they consult with the estate's attorney to learn how to comply with payroll tax reporting and payment requirements.

Sometime around October 1987, Keller discovered that the Inn's federal withholding taxes had not been remitted for the third and fourth quarters of 1986. He then filed the quarterly reports for those quarters and made payments toward the amounts due. Again, Keller expressed his desire to shut down the Inn. After attending a meeting to discuss the situation with Halstead, the bank, the estate's attorney, and a Small Business Administration counselor, Keller once again agreed to allow the Inn to continue operating. Keller thereafter instructed Halstead to comply with the reporting requirements and to pay the withholding taxes in the future. Other than periodically inquiring of Halstead whether she was following his instructions, Keller did nothing to ensure that taxes were actually being remitted. In June 1988, Keller finally closed the Inn after discovering that Halstead had continued to fail to pay federal withholding taxes.

In March 1990, the Internal Revenue Service (IRS), pursuant to 26 U.S.C. Sec. 6672, assessed a penalty against Keller in the amount of $18,485.57 for the third and fourth quarters of 1986, all of 1987, and the first and second quarters of 1988. The IRS charged that Keller was a responsible person who had willfully failed to pay over federal employment taxes withheld from the wages of the Inn's employees. Keller paid a nominal amount and filed a claim for a refund and an abatement. After the IRS denied the claim, Keller filed suit in federal court. The government filed a counterclaim against Keller and Halstead, seeking payment of the remainder of the assessment. The district court granted the government's motion for summary judgment on its counterclaim against both Keller and Halstead and dismissed Keller's complaint. This appeal followed. ²

II.

We review a district court's grant of summary judgment de novo. Willman v. Heartland Hospital East, 34 F.3d 605, 609 (8th Cir.1994). We must inquire whether the record, when viewed in the light most favorable to the nonmoving party, shows that there is no genuine dispute of material fact and that the moving party is entitled to judgment as a matter of law. Id. at 609-10.

Section 6672 provides in pertinent part:

Any person required to collect, truthfully account for, and pay over any tax imposed by this title who willfully fails to collect such tax, or truthfully account for and pay over such tax, or willfully attempts in any manner to evade or defeat any such tax or the payment thereof, shall ... be liable to a penalty equal to the total amount of the tax evaded, or not collected, or not accounted for and paid over.

To incur liability under section 6672 for unpaid employment taxes, an individual must 1) be a responsible person who 2) willfully fails to pay over withholding taxes to the United States. E.g. Jenson v. United States, 23 F.3d 1393, 1394 (8th Cir.1994); Barton v. United States, 988 F.2d 58, 59 (8th Cir.1993). An individual is a responsible person within the meaning of section 6672 if he has "the status, duty and authority to avoid [a] ... default in collection or payment of the taxes." Kenagy v. United States, 942 F.2d 459, 464 (8th Cir.1991). A responsible person acts willfully if he " 'acts or fails to act consciously and voluntarily and with knowledge or intent that as a result of his action or inaction trust funds belonging to the government will not be paid over but will be used for other purposes,' or by proceeding with a 'reckless disregard of a known or obvious risk that trust funds may not be remitted to the government.' " United States v. Honey, 963 F.2d 1083, 1087 (8th Cir.) (quoting United States v. Olsen, 952 F.2d 236, 240 (8th Cir.1991)), cert. denied, --- U.S. ----, 113 S.Ct. 676, 121 L.Ed.2d 598 (1992).

A.

Keller first contends that he is not a responsible person. He argues that Halstead and the heirs of the estate had day-to-day control over operation of the Inn and that he did not direct or control its disbursements. Keller, however, fails to recognize that more than one person may be considered responsible under section 6672. It is not necessary that a responsible person be an actual disbursing officer. Jenson, 23 F.3d at 1394. It suffices if the person "has significant, though not exclusive, authority in the area of corporate decision-making and matters related to federal tax payments." Kenagy, 942 F.2d at 464. Moreover, an otherwise responsible person does not avoid liability under section 6672 by delegating his authority to another. E.g. Thomsen v. United States, 887 F.2d 12, 17 (1st Cir.1989); see also Kizzier v. United States, 598 F.2d 1128, 1132 (8th Cir.1979) (corporate officer was responsible person despite his having delegated day-to-day operations to a manager).

There is no dispute that Keller was at all times the personal representative of Wilhelm's estate, owner of the Inn. As such, Keller was personally vested under state law with the ultimate responsibility for the estate. See N.D. Cent.Code Secs. 30.1-18-01--30.1-18-21 (1976 & Supp.1993). His authority over the Inn was equivalent to that of an absolute owner, holding it in trust for the benefit of creditors and other interested parties. Id. Sec. 30.1-18-11. He controlled the estate's bank accounts, and he was authorized to engage in various transactions on behalf of the estate. See id. Sec. 30.1-18-15. Indeed, Keller in...