Liddon v. United States
| Decision Date | 29 October 1971 |
| Docket Number | No. 29373.,29373. |
| Citation | 448 F.2d 509 |
| Parties | J. F. LIDDON, Plaintiff-Appellant-Cross Appellee, v. UNITED STATES of America, Defendant-Appellee-Cross Appellant. |
| Court | U.S. Court of Appeals — Fifth Circuit |
T. H. Campbell, Yazoo City, Miss., J. F. Liddon, L. Lamar Beacham, Jackson, Miss., for appellant.
Robert E. Hauberg, U. S. Atty., Joseph E. Brown, Jr., Asst. U. S. Atty., Jackson, Miss., Johnnie M. Walters, Asst. Atty. Gen., Lee A. Jackson, Stephen Schwarz, Attys., Meyer Rothwacks, Bennet N. Hollander, Attys., Tax Division, Department of Justice, Washington, D. C., for the United States.
Before RIVES, THORNBERRY and COLEMAN, Circuit Judges.
This appeal and cross-appeal are from a judgment that the United States recover from Liddon the sum of $21,014.94 with 6% interest from and after the date of the judgment, September 26, 1968. The judgment was based on a special verdict which we quote:
The verdict and judgment are for the 100% penalty assessed against Liddon, under 26 U.S.C. § 6672, as a responsible "person" who willfully failed to pay over the portion of withholding and social security taxes collected by Jax Construction Company from its employees in the amount of $21,037.28 for the fourth quarter of 1962. As originally entered, the judgment included interest from January 7, 1966, the date of the assessment of penalty. The district court granted Liddon's post-trial motion to alter or amend the judgment by deleting the prejudgment interest and providing for interest from the date of the judgment.
On appeal Liddon contends: (1) that he was entitled to a directed verdict or to judgment notwithstanding the verdict because, (a) the evidence established that he was not a responsible person required to pay over the portion of the withholding and social security taxes collected from Jax's employees, and (b) the evidence further established that Liddon's failure to pay over such taxes to the United States was not willful; (2) that the district court should have held as a matter of law that the withheld taxes for the last quarter of 1962 had been paid by the corporation or, in the alternative, should have submitted that issue to the jury; and (3) that the district court erroneously instructed the jury on burden of proof and on the meaning of "willfully." We find no merit in any of Liddon's contentions and affirm on his original appeal.
The Government's cross-appeal challenges the amendment to the original judgment which deletes prejudgment interest. In the alternative, the Government insists that interest should be calculated from April 13, 1967, the date the Government's counterclaim was filed. We hold with the Government on its alternative contention and modify the judgment accordingly.
Liddon's Appeal.
1(a). The district court refused to direct a verdict for either party. The evidence established without dispute that Jax Construction Company had collected but had failed to pay over to the Government the employees' portion of withholding and social security taxes in the amount of $21,037.28 for the fourth quarter of 1962. As indicated by the special verdict, the district court submitted to the jury two issues — (1) whether Liddon was a responsible "person" required to pay over the taxes and (2) whether he "willfully" failed to do so.
Liddon had been in the automobile business all of his adult life. In 1961 he held the Chevrolet franchise in Yazoo City, Mississippi. Because of certain health problems, he became interested in taking a less active part in business. A friend persuaded him to invest in Jax Construction Company, a corporation to be organized to engage in the business of "pole line" construction for electrical power lines.
Liddon was to furnish or obtain most of the financing for the corporation. From the organization of the corporation in 1961 until Liddon sold his interest in early February 1963, Liddon was a 50% shareholder and director of the Jax Construction Company. In early 1962 he also became an employee and thereafter drew a salary of $125.00 per week. Liddon's duties related primarily to inspection and purchasing of equipment, renovating and building an office, and financing or securing financing for Jax Construction Company and its affiliate, Mississippi Utilities Equipment Company. He personally endorsed loans made to Jax Construction Company.
At the suggestion of his banker, he had a resolution adopted at the first meeting of the Jax Board of directors in January 1961, authorizing him to execute contracts, arrange loans, sign checks, draw on corporate funds, pay debts and affix the corporate seal to all contracts and agreements. Liddon and J. C. Williams, the secretary-treasurer, were the only persons at the home office vested with authority to sign checks or make withdrawals from the corporate bank account. Actually, Liddon signed few, if any, checks.
Williams attended to almost all of the check signing, functioned as office manager and supervised the work of two clerical assistants. Williams had been associated with Liddon for about five years and was employed by him as the bookkeeper at his Chevrolet dealership. Liddon hired Williams to work at Jax upon its inception and Williams left Jax's employ in March of 1963, a month after Liddon sold his interest.
Liddon's contention that he was not a "responsible person" required to withhold and pay over the taxes is based upon 26 U.S.C. § 6671(b), which defines a responsible "person" as including an officer or employee of a corporation who "is under a duty" to correct and pay over the tax. Liddon's counsel emphasizes the word "duty".
That contention overlooks the basic purpose of the so-called penalty imposed by section 6672. As this Court has heretofore noted, that purpose is simply to provide a remedy to prevent the unnecessary loss of tax funds. Newsome v. United States, 5 Cir. 1970, 431 F.2d 742, 745.
A similar contention was answered by the Ninth Circuit, as follows:
United States v. Graham, 9 Cir. 1962, 309 F.2d 210, 212.
Likewise, the Seventh Circuit in Monday v. United States, 421 F.2d 1210, 1214, 1215, said:
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