Turnbull v. U.S., 90-1213

• Citation: 929 F.2d 173
• Decision Date: 22 April 1991
• Docket Number: No. 90-1213,90-1213
• Parties: -895, 91-1 USTC P 50,196, 19 Fed.R.Serv.3d 689, Unempl.Ins.Rep. CCH 15959A Dennis J. TURNBULL, Plaintiff, v. UNITED STATES of America, Defendant-Counter Plaintiff-Appellee, v. Johnny FOSTER, Counter Defendant-Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

Page 173

929 F.2d 173

67 A.F.T.R.2d 91-895, 91-1 USTC P 50,196,

19 Fed.R.Serv.3d 689,

Unempl.Ins.Rep. CCH 15959A

Dennis J. TURNBULL, Plaintiff, v. UNITED STATES of America, Defendant-Counter Plaintiff-Appellee, v. Johnny FOSTER, Counter Defendant-Appellant.

No. 90-1213.

United States Court of Appeals Fifth Circuit.

April 22, 1991.

Rehearing Denied May 23, 1991.

David L. Hooper, Abilene, Tex., for Turnbull.

Marvin Collins, U.S. Atty., Dallas, Tex., for the U.S.

Gilbert S. Rothenberg, Gary R. Allen, Chief Appellate Section, Tax Div., Kevin M. Brown, Washington D.C., for Foster.

Appeal from the United States District Court for the Northern District of Texas.

Before GOLDBERG, JOLLY and WIENER, Circuit Judges.

GOLDBERG, Circuit Judge:

In November 1985, the Internal Revenue Service (the "IRS") assessed Johnny Foster and Dennis J. Turnbull $214,270.37 in unpaid payroll taxes for all four quarters in 1981. In 1987 Turnbull paid one hundred dollars in partial satisfaction of the IRS assessment and then filed this action seeking a refund. The government counterclaimed against Foster and Turnbull to recover the balance of the assessments levied against them. The jury found Foster liable as a responsible party who willfully failed to pay unpaid payroll taxes. The district court denied Foster's motion for a new trial, finding that the jury's verdict was not against the weight of the evidence and Foster appeals. Foster claims that the jury's verdict finding him a responsible party who willfully failed to pay DJT Management, Inc.'s ("DJT") 1981 payroll taxes is against the great weight of the evidence. We disagree and therefore affirm the district court.

I. FACTS AND PROCEEDINGS BELOW

In December 1978, Foster, Turnbull, and Ray B. King formed Big Sky Joint Venture ("Big Sky") for the purpose of operating facilities for mentally retarded patients. The State of Texas placed patients in these facilities and paid Big Sky for the cost of their care. Sometime prior to July 1980, ¹ Turnbull organized DJT, a Texas corporation whose sole stockholders were Turnbull and his wife. DJT served as the financial arm of Big Sky; it performed all of the accounting functions for Big Sky, obtained financing for Big Sky, received state funds for housing the patients, and paid all Big Sky's bills, including payroll. Like all employers, DJT was required to withhold federal income and social security taxes from the wages of its employees, and to pay those taxes periodically to the United States.

Foster served as DJT's president throughout 1980 and for at least a portion of 1981. He was responsible for managing, hiring, and firing all of DJT's and Big Sky's key personnel. He was also responsible for both entities' budgets, and had the final authority in determining which creditors were paid and in what order.

In 1980 Foster learned that DJT had not paid its payroll taxes, and on January 8, 1981, he signed a check on DJT's behalf to the IRS to cover the overdue taxes. Foster testified at trial that this episode with the IRS had greatly upset him as "you could go to jail or they could shut us down for that type of stuff." Turnbull then apparently assured Foster that he would ensure that DJT's payroll taxes were promptly paid in the future.

Foster testified at trial that he resigned as president of DJT in February 1981. Turnbull disputes this testimony, claiming Foster never resigned as president of DJT. In support of his position, Turnbull points to two letters dated May 5, 1981, addressed to the Texas Department of Human Resources, which Foster signed in his capacity as the president of DJT. Regardless, Foster's duties at DJT did not apparently change after February 1981, when he allegedly resigned as president of DJT. Foster continued to manage DJT's and Big Sky's employees throughout 1981.

It is unclear from the record when Foster learned that DJT had failed to pay its 1981 payroll taxes. Turnbull testified that he told Foster in April 1981, and then again in July 1981, that DJT had an outstanding payroll tax liability. Foster contends that he did not learn of DJT's unpaid payroll taxes until October 1981 when an IRS officer called and notified him of the liability. Foster's testimony was supported by King, another Big Sky partner, and by a second Big Sky employee.

Despite the fact that Foster maintains that he did not learn that the 1981 payroll taxes had not been paid until October 1981, Foster conceded at trial that sometime after August 1981 he entered into a verbal agreement with the IRS to pay $10,000 per month towards reducing this payroll tax liability. Foster subsequently failed to fulfill this agreement. Turnbull testified that on October 20, 1981, Foster informed him that he had restructured the payment plan with the IRS and that he would need money to repay the outstanding payroll taxes. On November 2, 1981, Foster wrote Turnbull, explaining that a portion of the state funds paying Big Sky for patient care were needed to repay the outstanding payroll taxes.

In the summer of 1981, Foster instructed the state to send the Big Sky checks directly to Big Sky, instead of sending them to DJT. Foster then opened a new bank account for Big Sky. Foster continued to write checks on the new account for DJT's payroll expenses. In August 1981, Foster moved out of DJT offices to a new location. The government contends that throughout each of the quarters of 1981, Foster authorized the payment of net payroll and other creditors, while the payroll taxes were left unpaid. Indeed, in December 1981 Foster directed that Big Sky send a check to DJT, specifying that only specific employees were to be paid. Foster admits that he told DJT employees to pay the payroll first, but maintains that everyone understood the term "payroll" to include payroll taxes.

In November 1985, the IRS assessed Foster and Turnbull $214,270.37 in unpaid payroll taxes for all four quarters of 1981. This assessment represented the one hundred percent penalty available under 26 U.S.C. Section 6672. ² In April 1987, Turnbull paid $100 in partial satisfaction of the penalty and filed this action, seeking a refund of the amount paid. The government counterclaimed against Turnbull and Foster to recover the balance of the assessments levied against them.

At the conclusion of the trial, the jury found that Foster, but not Turnbull, was a "responsible person" for payment of DJT's employment taxes and that he willfully failed to account for and pay such taxes. After the district court entered judgment on the jury verdict, the United States filed a JNOV motion against Turnbull, which the district court granted. The district court denied, however, Foster's motion for a new trial. Foster then filed a timely notice of appeal from "the Order of the Court denying Motion for New Trial...."

II. DISCUSSION

A. Jurisdiction

Initially, this court must determine whether Foster's appeal from the district court's denial of his motion for a new trial, rather than from the final judgment, renders his appeal jurisdictionally defective under Federal Rule of Appellate Procedure 3(c). This court may determine, sua sponte, whether it has jurisdiction over Foster's appeal. MCG, Inc. v. Great W. Energy Corp., 896 F.2d 170, 173 (5th Cir.1990). It is well settled that although an order denying new trial is reviewable, it is not appealable; appeal should be taken from the final judgment instead. Osterberger v. Relocation Realty Serv. Corp., 921 F.2d 72, 73 (5th Cir.1991).

Under Rule 3(c), a notice of appeal "shall specify the party or parties taking the appeal" and "shall designate the judgment, order or part thereof appealed from." Foster filed a timely notice of appeal from "the Order of the Court denying Motion for New Trial...." Consequently, the notice of appeal filed by Foster did not "designate the judgment ... appealed from," i.e., the final judgment. See Fed.R.App.P. 3(c).

In past decisions, however, this court has liberally construed Rule 3(c), holding that "where the intent to appeal an unnamed or mislabeled ruling is apparent and there is no prejudice to the adverse party," the appeal is not jurisdictionally defective. Fed.R.App.P. 3(c). This circuit's treatment of technically deficient notices of appeal is in accord with the Supreme Court's decision in Foman v. Davis, 371 U.S. 178, 83 S.Ct. 227, 9 L.Ed.2d 222 (1962). In Foman, the Supreme Court held that an appeal from a denial of a motion to vacate and amend a judgment "should have [then] treated ... as an effective, although inept, attempt to appeal from the judgment sought to be vacated." Foman, 371 U.S. at 181, 83 S.Ct. at 229. Therefore, relying on Foman, this court has rendered numerous decisions concluding that so long as the failure to designate the judgment appealed from did not mislead or prejudice the responding party, the appellant did not forfeit his right of appeal. ³

Recently, however, the Supreme Court held that failure to comply with Rule 3(c) by failing to include a party's name was a jurisdictional bar to appeal. Torres v. Oakland Scavenger Co., 487 U.S. 312, 108 S.Ct. 2405, 2408, 101 L.Ed.2d 285 (1988). In Torres, the name of one of the sixteen intervening plaintiffs was inadvertently omitted in the notice of appeal. Id., 108 S.Ct. at 2407. According to the Court, permitting an appeal by an unnamed litigant was tantamount to waiving Rule 3(c); therefore, it was irrelevant whether there was a clear intent to appeal or whether an opposing party was prejudiced as a result of the omission. Id. at 2408-09.

The Torres Court did not, however, view its decision as inconsistent with its decision in Foman. The Court distinguished Foman on the grounds that it dealt with the judgment-designation provision rather than the party-specification provision of Rule 3(c) and because Foman merely forgave a technical noncompliance with Rule 3(c). Id., 108 S.Ct. at 2408. As the Court explained, "[w]e do not dispute the...