United States v. De Beradinis

• Decision Date: 29 May 1975
• Docket Number: Civ. No. 13664.
• Citation: 395 F. Supp. 944
• Court: U.S. District Court — District of Connecticut
• Parties: UNITED STATES of America, Plaintiff, v. Louis D. De BERADINIS, Jr., Defendant.

395 F. Supp. 944

UNITED STATES of America, Plaintiff, v. Louis D. De BERADINIS, Jr., Defendant.

Civ. No. 13664.

United States District Court, D. Connecticut.

May 29, 1975.

Gerald C. Miller, Tax Div. United States Dept. of Justice, Washington, D. C., for the United States of America, plaintiff.

Tobias Weiss, Stamford, Conn., for Louis D. De Beradinis, Jr., defendant.

OPINION, FINDINGS OF FACT and CONCLUSIONS OF LAW.

LEVET, Senior District Judge.^*

This is an action involving a claim of "100% penalties" pursuant to §§ 6672, 6671(b), Internal Revenue Code of 1954. The United States has made 100% penalty assessments against Louis D. De Beradinis, Jr. ("De Beradinis") by reason of allegedly unpaid income withholding and Social Security ("FICA") taxes due for the second quarter of 1959 in the sum of $34,055.59 from McFaddin Express, Inc. ("McFaddin").

The complaint filed on January 23, 1970 bases this 100% penalty tax assessment on the ground that De Beradinis was a "responsible officer" of McFaddin and that he had "willfully" failed to pay the above-mentioned taxes.

Defendant filed his answer to the complaint on January 16, 1975, denying the substantive allegations of the government. Defendant asserts that (1) the complaint was not timely filed; (2) the government improperly applied prior payments to other taxes due from McFaddin rather than to the taxes for which defendant has been penalized; and (3) the government failed to enforce its tax liens on the McFaddin assets after they were transferred to Adley Trucking Company ("Adley") and while said assets remained sufficient to cover any tax deficiencies of McFaddin.

The statutes involved are §§ 3102(a), 3402(a), 6502(a), 6671(b), 6672 and 7501 of the Internal Revenue Code of 1954 (Title 26, United States Code).

Trial was to the court without a jury.

After hearing the testimony of the parties, examining the exhibits, memoranda and the Proposed Findings of Fact and Conclusions of Law submitted by counsel, this court makes the following Findings of Fact and Conclusions of Law:

FINDINGS OF FACT

1. The court has jurisdiction over this action. 28 U.S.C. §§ 1340, 1345; 26 U.S.C. § 7402(a).

2. Defendant De Beradinis was, at the time of the institution of this action, a resident of the State of Connecticut. (Complaint, ¶ 4; Answer, ¶ 2.)

3. (a) Defendant De Beradinis organized McFaddin on January 14, 1953 in the State of Connecticut. (Tr. 13, 14.)¹

(b) This corporation was a common carrier operating in interstate freight covering approximately ten states under a certificate to carry on business issued by the Interstate Commerce Commission ("ICC"). (Tr. 14, 15.) McFaddin filed reports annually and remained in business from the date it was organized through 1958 and into 1959. Defendant, during the years 1953 through 1958, owned practically all of the stock except for two qualifying shares and was president. (Tr. 16.) One Ray Boddy (the bookkeeper) was the treasurer who acted as treasurer and secretary and owned one share of stock. McFaddin's attorney in Washington probably owned one share. Altogether there were three stockholders and three directors. (Tr. 17, 18).

(c) At the beginning of 1959 McFaddin had terminals in Northburg and New Brunswick, New Jersey; in Manhattan; in Stamford, New Haven, Hartford and Norwich, Connecticut; in Springfield, Boston and Worcester, Massachusetts; and in Providence, Rhode Island. There were eleven in all. The "main" office was in Stamford, Connecticut. The company was authorized to operate in the five northern New Jersey counties, Metropolitan New York, Connecticut and Massachusetts and part of New Hampshire. (Tr. 21, 22, 23.)

(d) At the beginning of 1959 McFaddin employed 270 persons, owned approximately 190 vehicles and rented others; some of the vehicles were subject to chattel mortgages. (Tr. 23, 27.)

(e) In January 1959, according to defendant, McFaddin had more than 5,000 customers. The gross revenues of McFaddin in January 1959 "approached" $3,000,000 per year or about $60,000 a week. (Def. Ex. A; Tr. 30, 31.)

(f) During the years 1953 through 1958 defendant selected the vehicles and all the other new equipment to be purchased by McFaddin. Defendant made the decision of the corporation as to whether a particular item of equipment should be purchased. (Tr. 19, 20.)

4. In 1959 McFaddin experienced financial difficulties. As a result thereof, defendant sought to sell McFaddin to Adley. (Tr. 32.)

5. Defendant De Beradinis, as president of McFaddin, entered into two written contracts with Adley on April 20, 1959. One contract was a management contract which provided that management and control of McFaddin would pass to Adley ". . . from the effective date of any order of the Commission authorizing the same, or to such earlier or later date as shall be ordered by said Commission, and unless otherwise ordered by said Commission until a final order is made by said Commission disposing of the Third Party's application for authority to acquire through ownership of capital stock control of the First Parties." (Def. Ex. A-2, p. 5.) The other contract was a contract of sale which was conditioned upon approval of the ICC of the temporary management of McFaddin by Adley and upon ICC approval of the contract of sale. (Def. Ex. A-2, p. 1; Tr. 42-48.)

6. Neither agreement made provisions for payment of McFaddin's withholding and FICA taxes for the period April 1, 1959 to May 21, 1959. (Def. Exs. A-1, A-2; Tr. 56, 57.)

7. On or about April 1, 1959 defendant signed his resignations as president and director of McFaddin. On or about the same day defendant signed the stock certificates representing all of his shares in McFaddin, filled in Adley's name and transferred the certificates and resignations to the Fairfield County Trust Company as escrow agent. (Tr. 151-161.)

8. On or about May 7, 1959 Adley filed an application with the ICC to permit a management arrangement with McFaddin. The application also requested approval of the sale of McFaddin to Adley. The sale was never consummated because Adley eventually opposed its own application and the ICC thereupon refused to grant its approval. (Def. Ex. A.; Tr. 28, 29, 49, 180.)

9. On May 21, 1959 the ICC entered an order authorizing Adley ". . . to control McFaddin Express, Inc., through management, but for a period not exceeding 180 days, beginning with the date hereof, . . ." (i. e. May 21, 1959). (Def. Ex. B; Tr. 52, 178, 179.)

10. Subsequent to the granting of the order by the ICC, De Beradinis, as president of McFaddin, did on May 25, 1959 suffer a transfer of the assets, management and control of McFaddin to Adley, this being done without specifically providing for the deposit, payment or segregation of funds necessary to liquidate McFaddin's withholding and FICA liability which had accrued since April 1, 1959. (Pl. Ex. 6; Tr. 52, 54.)

11. For the period April 1, 1959 to May 21, 1959, withholding and FICA taxes amounting to $34,055.59 became due the United States from McFaddin. That amount, here claimed by the government, was not withheld and paid over to the government when due. (Pl. Exs. 5, 9.)

12. (a) On or about September 9, 1959 defendant De Beradinis, as president of McFaddin, signed Internal Revenue Form 7004, which was an application for an extension of time to file McFaddin's corporate income tax return for the fiscal year July 1, 1958 to June 30, 1969. (Pl. Ex. 8.)

(b) On December 8, 1959 defendant De Beradinis, as president of McFaddin, signed Internal Revenue Form 1120, which is the corporate income tax return for McFaddin for the fiscal year July 1, 1958 to June 30, 1959. (Pl. Ex. 7.)

(c) Defendant De Beradinis was a responsible person whose duty it was to collect and pay over the withholding and FICA taxes here involved. Prior to April 1, 1959 and through at least December 8, 1959 he was director, president and principal shareholder of the stock of McFaddin. He continued to have the authority to sign checks for McFaddin after April 1, 1959 until May 25, 1959. He was aware that taxes had to be paid for the period April 1, 1959 to May 21, 1959 and that they were not paid by either himself or by Ray Boddy. (Pl. Exs. 6, 7, 8; Tr. 39, 40, 41, 98, 99, 162, 163.)

13. At the time of the transfer of assets from McFaddin to Adley, said assets had sufficient equity, if liquidated, to pay the amount of withholding and FICA taxes here claimed by the government. (Tr. 137, 138.)

14. Subsequent to the transfer of assets from McFaddin to Adley, the assets, income and business of McFaddin rapidly declined. (Tr. 86, 96-98.) McFaddin's gross income for the entire calendar year 1960 was only $60,854 as compared to gross income of about $3,000,000 the previous year. (Def. Ex. A, Def. Ex. H, (for identification); Tr. 30, 31.)

15. (a) On January 13, 1961 a delegate of the Secretary of the Treasury made an assessment against De Beradinis as a responsible officer of McFaddin for unpaid withholding and FICA taxes for the second quarter of 1959 in the amount of $34,055.59. This amount represented the unpaid withholding and McFaddin's employees' share of FICA taxes for the period April 1, 1959 through May 21, 1959. (Pl. Exs. 5, 9.)

(b) On August 10, 1961 De Beradinis submitted a form 656 "Offer in Compromise" to the Internal Revenue Service. This offer was rejected on April 27, 1962. (Pl. Ex. 3; Tr. 5, 8.)

(c) On June 7, 1964, De Beradinis submitted a form 656 "Offer in Compromise" to the Internal Revenue Service. This offer was withdrawn on May 12, 1964. (Pl. Ex. 4; Tr. 5, 8.)

(d) Each of the above-mentioned Offers in Compromise contains the following language with respect to the statute of limitations:

"The undersigned proponent waives the benefit of any statute of limitations applicable to the assessment and/or collection of the liability sought to be compromised, and agrees to the suspension of the running of the statutory period of limitations on assessment and/or

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