Wall v. U.S.
| Decision Date | 05 January 1979 |
| Docket Number | No. 77-2512,77-2512 |
| Parties | 79-1 USTC P 9154 Harlin J. WALL, Appellant, v. UNITED STATES of America. |
| Court | U.S. Court of Appeals — Third Circuit |
David L. Ketter, Thomas C. Murcko, Kirkpatrick, Lockhart, Johnson & Hutchison, Pittsburgh, Pa., for appellant.
M. Carr Ferguson, Asst. Atty. Gen., Gilbert E. Andrews, William A. Friedlander, Karl P. Fryzel, Attys., Tax Div., Dept. of Justice, Washington, D. C., for appellee; S. John Cottone, U. S. Atty., Scranton, Pa., of counsel.
Before GIBBONS and WEIS, Circuit Judges and DUMBAULD, District Judge. *
This appeal requires us to unravel a procedural web in which the parties became hopelessly, and we find somewhat helplessly, entangled. We vacate the order dated August 29, 1977, granting the United States judgment notwithstanding the verdict and reinstate a final judgment entered on a verdict on special interrogatories and a stipulation as to amount, dated June 20, 1977. The result is to vacate a judgment entered in favor of the government for $179,752.06, the amount of the demand in its counterclaim, and to reinstate a judgment in favor of the government for $14,288.17, the amount which it stipulated was due under the jury's verdict on special interrogatories.
The plaintiff-appellant is Harlin J. Wall. On November 10, 1975, the Commissioner of Internal Revenue made an assessment against Wall, pursuant to §§ 6671 and 6672 of the Internal Revenue Code, 26 U.S.C. §§ 6671, 6672, for penalties in the amount of the tax which should have been withheld from the wages of employees of three corporations and paid over to the government. The assessments were as follows:
Amount which
should have
For quarter been withheld
Corporation ending and paid over
--------------------- ------------------ -------------
General Housing
Industries, Inc. September 30, 1972 $ 50,399.12
Con-Co., Inc. June 30, 1972 67,045.32
September 30, 1972 40,599.10
Highland Construction June 30, 1972 12,890.84
Corp. September 30, 1972 8,817.68
-------------
Total $179,752.06
Wall paid $500 in partial satisfaction of the assessment and made a timely claim for refund, which was denied on February 24, 1976. On June 1, 1976, he filed a suit in the district court for refund of the $500, in order to litigate his contentions (1) that during the quarters in question he was not a "person required to collect, truthfully account for, and pay over" withholding taxes for the named corporations, within the meaning of §§ 6671(b) and 6672, and (2) that he did not willfully fail to collect or account for such taxes.
Before the government was served with the complaint, the district court, Sua sponte entered "Order # 1" fixing a pretrial conference date on January 4, 1977, a date for drawing a jury on January 5, 1977, and a date for completion of discovery on December 21, 1976. The court also entered, Sua sponte "Order # 2", a twenty page document setting forth the practice and procedure governing the case.
The government filed an answer on August 3, 1976, and on a consent motion obtained leave to file a counterclaim and third-party complaint on September 23, 1976. The counterclaim sought to enforce the assessment against Wall. The third-party complaint was against Gene Gorrell, who was alleged to be liable to the United States for withheld taxes in the amount of $250,647.73 and, moreover, liable to the United States for any refund it might owe to Wall. The government attempted to serve Gorrell in West Virginia, but did not locate him. For this and other reasons it moved, on November 30, 1976, for an extension of the discovery period and a continuance of the scheduled pretrial conference and trial. That motion was denied on December 6, 1976. By the time of the scheduled pretrial conference, defendant Gorrell had not been located and served, and the government's motion to dismiss the third-party complaint without prejudice was granted. A jury was drawn as scheduled on January 5, 1977, and the trial commenced on February 17, 1977.
Wall offered testimony tending to show that he had a passive role in the businesses in question, and that the missing Mr. Gorrell was the officer responsible for withholding and paying taxes. The government offered no testimony, but cross-examined Wall's witnesses and introduced several exhibits in evidence. The case was submitted to the jury on special verdict interrogatories which the jury answered as follows:
1. Was the Plaintiff, Harlin J. Wall, a person responsible for collecting, truthfully accounting for, and paying over the income and Social Security taxes withheld from the wages of employees of Con-Co., Inc. and Highland Construction Corporation during the second calendar quarter of 1972? Answer: No.
4. Was the Plaintff, Harlin J. Wall, a person responsible for collecting, truthfully accounting for, and paying over the income and Social Security taxes withheld from the wages of employees of General Housing Industries, Inc., Con-Co., Inc. and Highland Construction Corporation during the third calendar quarter of 1972? Answer: Yes.
5. If your answer to the preceding question is "yes", was Mr. Wall's failure to collect, account for, and pay over the withheld taxes willful during the period July 1, 1972 to July 9, 1972? Answer: No.
6. If your answer to Question 4 is "yes", was Mr. Wall's failure to collect, account for, and pay over the withheld taxes willful during the period July 10, 1972 to August 9, 1972? Answer: No.
7. If your answer to Question 4 is "yes", was Mr. Wall's failure to collect, account for, and pay over the withheld taxes willful during the period August 10, 1972 to September 6, 1972? Answer: Yes.
8. If your answer to Question 4 is "yes", was Mr. Wall's failure to collect, account for, and pay over the withheld taxes willful during the period September 7, 1972 to September 30, 1972? Answer: Yes.
Thus, the jury found that Wall did not become a person responsible for collecting and accounting for withheld taxes until July 1, 1972, and that his failure to collect and account for such taxes was not willful prior to August 10, 1972.
Since no special verdict interrogatories were submitted as to the amounts which should have been withheld and paid over, no judgment could be entered on the verdict. The court, on February 23, 1977, entered an order:
1. If the parties can agree upon the amount of tax due (on the verdict), they shall certify the same to the Court by April 18, 1977 so that judgment in a monetary amount may be entered.
2. If the parties cannot agree by April 18, 1977 upon the amount of the tax due, they shall notify the Court and the case will be tried in Lewisburg, in June, 1977 as to the monetary amounts involved by the same jury.
On April 19, 1977, the court directed the Clerk to notify the jurors that the trial would reconvene in June, 1977. However, before the case was reached for completion of the trial, the following stipulation was filed:
Counsel for plaintiff and defendant in this action do hereby agree and stipulate that the amount of taxes (income and FICA) withheld by the subject corporations from the earnings paid to their employees from August 10, 1972 to September 30, 1972, and not paid over to the government is $24,326.51.
The plaintiff has made payments in the total amount of $11,998.00 to the defendant in partial satisfaction of the penalty assessments made against him. Therefore, the net amount of the judgment to be entered against plaintiff in accordance with the jury's verdict (including statutory interest to June 16, 1977) is $14,288.17. It is thus agreed that the Court may enter judgment for the defendant in the amount of $14,288.17, plus interest after judgment as provided by law.
On June 20, 1977, the court directed entry of judgment in accordance with the stipulation, and on that same day a final judgment was entered in favor of the United States and against Wall in the amount of $14,288.17 plus interest. There is nothing in the record amounting to a finding as to the amount due under the verdict. A judgment for any specific amount thus rests entirely upon the stipulation quoted above.
On June 29, 1977, the government Filed a motion for judgment notwithstanding the verdict, asking that the court "set aside so much of the jury's verdict as was rendered in favor of the plaintiff and to enter judgment against the plaintiff and in favor of the defendant in the full amount of the defendant's counterclaim." The date of service of this motion does not appear of record. On June 28, 1977, as established in a proof of service filed in the cause, Wall served by mail a motion for a judgment notwithstanding the verdict or alternatively for a new trial. Although served by mail on June 28, 1977, and mailed to the district court the same day, this motion was not marked Filed by the Clerk until July 1, 1977. Oddly, the proof of service, mailed to the Clerk on July 29, was also marked filed on July 1, 1977.
Neither the government's motion nor Wall's was ever listed for argument. On August 29, 1977, the district court, without informing either party of his intention to do so, ruled on both motions. The court held: (1) the government's motion for judgment notwithstanding the verdict, governed by the time limit in Fed.R.Civ.P. 50(b), was timely, because it was filed within ten days of the entry of the June 20, 1977 judgment; (2) Wall's motion for judgment notwithstanding the verdict, although served within ten days of the June 20, 1977 judgment, was not filed until the eleventh day, and was thus untimely; (3) Wall's motion for a new trial,...
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