Steele v. United States, Civ. A. No. 1468.

• Decision Date: 01 May 1959
• Docket Number: Civ. A. No. 1468.
• Parties: R. M. STEELE and F. V. Stubblefield, Plaintiffs, v. UNITED STATES of America, Defendant.
• Court: U.S. District Court — Western District of Arkansas

172 F. Supp. 793

R. M. STEELE and F. V. Stubblefield, Plaintiffs, v. UNITED STATES of America, Defendant.

Civ. A. No. 1468.

United States District Court W. D. Arkansas, Fort Smith Division.

May 1, 1959.

Bethell & Pearce, Fort Smith, Ark., for plaintiff.

Chas. W. Atkinson, U. S. Atty., Robert E. Johnson, Asst. U. S. Atty., Fort Smith, Ark., for defendant.

JOHN E. MILLER, Chief Judge.

The motion of defendant to dismiss the complaint of the plaintiffs for lack of jurisdiction is before the court.

The plaintiffs are citizens of Arkansas and reside in the City of Fort Smith, Sebastian County, Arkansas. Prior to January 1, 1955, and at all times subsequent thereto the plaintiff, F. V. Stubblefield, was President, and the plaintiff, R. M. Steele, was Secretary of Davidson-Steele, Inc., a corporation that was engaged in constructing sewage disposal plants. The corporation contracted to construct disposal plants at Tulsa, Oklahoma, and Hot Springs, Arkansas, and performance bonds for each of the jobs were written by a bonding company. The corporation defaulted in the work, and under the terms of the performance bonds the bonding company took possession of payments received from the contracts of the corporation, including the two jobs above mentioned, and assumed responsibility for and control over payments made for labor, material and all other expenses of such corporation. Contemporaneously with the taking over of the work, the bonding company also obtained a chattel mortgage from the corporation upon substantially all of its equipment except small, isolated items. Under the arrangement between the bonding company and the corporation, all checks of the corporation had to be countersigned by a representative of the bonding company located in St. Louis, Missouri, and during all times material herein, neither of the plaintiffs nor both of them acting together could withdraw funds from the corporation's bank account without the countersignature of a representative of the bonding company.

The plaintiffs assert that the court has jurisdiction of their claims by virtue of the provisions of Title 28 U.S. C.A. Sec. 1346(a) (1), which statute provides:

"(a) The district courts shall have original jurisdiction, concurrent with the Court of Claims, of:

"(1) Any civil action against the United States for the recovery of any internal-revenue tax alleged to have been erroneously or illegally assessed or collected, or any penalty claimed to have been collected without authority or any sum alleged to have been excessive or in any manner wrongfully collected under the internal-revenue laws * * *."

In paragraph 3 of the complaint the plaintiffs allege:

"This is a suit for recovery of so-called `100 per cent penalties' erroneously assessed against and collected from plaintiffs. Such penalties were asserted by the District Director of Internal Revenue for the Arkansas District under Section 6671 of the Internal Revenue Code of 1954 26 U.S.C.A. § 6671. The assessment of such penalties resulted from a finding by said District Director that plaintiff Stubblefield and plaintiff Steele, as President and Secretary respectively of Davidson-Steele, Inc., a corporation, willfully failed to pay over to the Internal Revenue Service income tax withholdings and Federal Old Age Benefit withholdings of Davidson-Steele, Inc. for quarters ended March 31, 1955, and June 30, 1955 "a. The claimed penalties aforesaid were assessed and portions thereof paid as follows:

"$5,186.47 penalties were assessed against plaintiff Stubblefield on May 16, 1958. $50.00 thereof was paid on June 9, 1958.

"$5,186.47 penalties were assessed against plaintiff Steele on May 16, 1958. $50.00 thereof was paid on June 9, 1958."

Title 26 U.S.C.A. § 6671, provides:

"(a) Penalty assessed as tax.— The penalties and liabilities provided by this subchapter shall be paid upon notice and demand by the Secretary or his delegate, and shall be assessed and collected in the same manner as taxes. 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.

"(b) Person defined.—The term `person', as used in this subchapter, includes an officer or employee of a corporation, or a member or employee of a partnership, who as such officer, employee, or member is under a duty to perform the act in respect of which the violation occurs. Aug. 16, 1954, 9:45 a. m., E.D.T., c. 736, 68A Stat. 828."

Section 6672, supra, 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. Aug. 16, 1954, 9:45 a. m., E.D.T., c. 736, 68A Stat. 828."

As heretofore stated, the plaintiffs were officers of Davidson-Steele, Inc., and because of the fact that they were President and Secretary of the corporation they were under the duty to perform any act required of the corporation.

On June 9, 1958, each of the plaintiffs paid $50 on the assessment. On June 20 plaintiff, R. M. Steele, filed a claim for a refund of the $50 paid by him plus interest. Plaintiff, F. V. Stubblefield, on June 30 filed a similar claim for refund. The District Director of Internal Revenue has disallowed such refund claims, but has not mailed official notice of disallowance to plaintiffs or to either of them. However, more than six months have elapsed since such refund claims were filed, and the plaintiffs are not barred from instituting this suit because of not having received official notice of the disallowance of the...