Mulcahy v. United States

Decision Date21 December 1964
Docket NumberCiv. A. No. 64-H-212.
PartiesDaniel J. MULCAHY, Plaintiff, v. UNITED STATES of America, R. L. Phinney, District Director of Internal Revenue, Austin, Texas, Arnold C. Spencer, Mervin G. Osby, and Weldon C. Arner, Defendants.
CourtU.S. District Court — Southern District of Texas

Daniel J. Mulcahy, Houston, Tex., pro se.

Woodrow Seals, U. S. Atty., and John H. Baumgarten, Asst. U. S. Atty., Houston, Tex., Louis F. Oberdorfer, Asst. Atty. Gen., and Fred B. Ugast and Joel P. Kay, Attorneys, Department of Justice, Washington, D. C., for defendants.

INGRAHAM, District Judge.

This case is before the court on the defendants' motion to dismiss the complaint for failure to state a cause of action for which relief may be granted.

Plaintiff, Daniel J. Mulcahy, filed suit to restrain and enjoin the defendants from filing federal tax liens against plaintiff in accordance with 26 U.S.C.A. § 6323, and to obtain an abatement of assessments issued against him out of which the federal tax liens might develop. The assessments were issued out of the Elizabeth, New Jersey, office of the Internal Revenue Service on April 2, 1964, in the amount of $4,610.76. That amount is equal in amount to taxes withheld from the employees of Houston Steel Drum Company and which were not paid over to the Internal Revenue Service by that corporation. The taxing authorities claimed that plaintiff was a responsible officer and liable to the Internal Revenue Service for the 100-Percent Penalty assessable under Section 6672 of the Internal Revenue Code. That section provides:

"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, in addition to other penalties provided by law, be liable to a penalty equal to the total amount of the tax evaded, or not collected, or not accounted for and paid over. No penalty shall be imposed under section 6653 for any offense to which this section is applicable."

Oral demand for payment of the assessments was made upon the plaintiff on April 21, 1964, and plaintiff was advised that if payment was not immediately forthcoming, federal tax liens would be filed by the Internal Revenue Service against him in Harris County, Texas, and his property seized and sold in satisfaction thereof. Plaintiff then filed this suit, and the defendants moved to dismiss.

Defendants' motion is predicated on two statutory provisions. First, it is urged that Section 7421(a) of the Internal Revenue Code is a bar to the injunctive relief sought, and second that the court has no jurisdiction to enter a declaratory judgment with regard to federal taxes pursuant to the provisions of Section 2201 of Title 28 United States Code. The court agrees.

Section 7421(a) of the Code, with exceptions not relevant here, prohibits all suits "for the purpose of restraining the assessment or collection of any tax * * *." Plaintiff argues that assessments under Section 6672 are in the nature of a "penalty" and that they do not come within the prohibition of Section 7421(a) against suits to restrain the collection of a "tax". This is incorrect. It is expressly provided in Section 6671(a) that "except as otherwise provided, any reference in this title to `tax' imposed by this title shall be deemed also to refer to the penalties and liabilities provided by this subchapter (including Section 6672)." There is no provision to the contrary applicable to Section 6672. The nature of the penalty imposed, which is an assessment equal to the amount of the tax not paid, shows that Section 6672 is simply a means for ensuring that the tax is paid, and does not impose a criminal liability. Compare Section 7202 of the Code, which provides a criminal penalty for the willful failure to collect and pay over taxes. In a case like the present, where the amount of the tax was withheld from the employees but not paid over to the government by the corporation, so that the assessment brings to the government only the same amount as that to which it was entitled by way of the tax, there is no reason to doubt that Congress meant what it said in Section 6671 and that collection of the assessment can no more be prevented by injunction than could the original tax.

Nor does the argument of the plaintiff that this is an attempt to satisfy the tax obligation of one out of the property of another withstand close analysis. The assessment was made against plaintiff and the government is threatening to satisfy the obligation from plaintiff. It is urged, however, that the letter from the New Jersey office of the Internal Revenue Service which notified plaintiff of the Treasury Department's intent to proceed against him under the penalty provisions was really intended for the president of the corporation since it referred to plaintiff as "president and counsel". The alternative possibility is more likely. The letter was intended for the plaintiff and the designation of Mulcahy as "president" was only a mistake as to what office the plaintiff held....

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4 cases
  • Pacific National Insurance v. United States
    • United States
    • United States Courts of Appeals. United States Court of Appeals (9th Circuit)
    • June 1, 1970
    ...See also Botta v. Scanlon, 314 F.2d 392 (2d Cir. 1963); (substantial stockholders and possibly a director); Mulcahy v. United States, 237 F.Supp. 656 (S.D.Tex.1964) (counsel). 11 Section 6672 liability was imposed upon persons formally outside the corporate structure in Walker v. United Sta......
  • SOUTH END OIL COMPANY v. Texaco, Inc.
    • United States
    • U.S. District Court — Northern District of Illinois
    • January 19, 1965
    ......650. SOUTH END OIL COMPANY, Inc., Plaintiff,. v. TEXACO, INC., Defendant. No. 64 C 519. United States District Court N. D. Illinois, E. D. January 19, 1965.237 F. Supp. 651         ......
  • Mulcahy v. United States, 24052.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (5th Circuit)
    • January 10, 1968
    ...— and by section 2201 of 28 U.S.C. — providing for declaratory judgments "except with respect to Federal taxes". Mulcahy v. United States, S.D.Tex.1964, 237 F. Supp. 656. The federal tax lien arising from the assessment was then secured by the filing of notice in Harris County, Texas, and e......
  • Mulcahy v. United States
    • United States
    • U.S. District Court — Southern District of Texas
    • March 11, 1966
    ...to plaintiffs. The case is here on defendants' motion to dismiss. Defendants assert that this action is barred by Mulcahy v. United States, 237 F.Supp. 656 (S.D.Tex.1964), in which an action brought by the husband to contest the same assessment was dismissed for want of jurisdiction. Plaint......

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