The opinion of the court was delivered by: BYERS
Two motions are before the court in this case, the first being by the plaintiff for summary judgment, and the second, to dismiss the second defense pleaded in the answer.
The action is for a refund of $ 5,962.60 levied against the plaintiff as President of Noring Machine Corporation, a bankrupt. The basis of the penalty assessment was the alleged failure of the corporation to withhold income and Social Security taxes during the second, third and fourth quarters of 1953 and the first quarter of 1954. The corporation became a bankrupt on February 4, 1954, and the purpose of the assessment was to hold this plaintiff personally liable for the sums which it is alleged should have been withheld.
It was stated on the argument that this case does not involve actual withholdings which were applied to the corporate purposes illegally, but that it is the failure to withhold at all which was thus sought to be visited upon the plaintiff.
The plaintiff relies upon the decisions in Levy v. United States, D.C., 140 F.Supp. 834, and United States v. Fago, D.C., 162 F.Supp. 125, which are to the effect that where the evidence does not disclose that there was a wilful failure to pay, collect, or truthfully account for such funds (26 U.S.C. § 2707), the plaintiff was not liable for the amount of the penalty assessments.
The argument is that while he was a corporate officer, namely, president, his status was purely nominal, and that he was not actually employed by the corporation and drew no salary or other compensation, being engaged in an unrelated enterprise. That he did not hire or fire employees, or have anything to do with their payment, nor had he any connection with the payroll matters of the bankrupt.
He asserts that the foregoing facts are known to the Internal Revenue Service, and have not been denied by any opposing affidavit on this motion.
If the facts indeed are as the plaintiff alleges them to be, it would seem that he has a meritorious cause of action, but this does not justify the court in granting a motion for summary judgment, since the question of intent must be decided in light of all of the evidence that can be brought to bear on the subject.
The following cases seem to require that the issue be permitted to go to trial: Colby v. Klune, 2 Cir., 178 F.2d 872; Subin v. Goldsmith, 2 Cir., 224 F.2d 753; Sarkes Tarzian, Inc. v. United States, 7 Cir., 240 F.2d 467.
Motion for summary judgment is denied.
The second motion is addressed to the second defense which is in the following form:
'Defendant respectfully asks that either party defendant be dropped, and the plaintiff be required to elect the defendant against whom he desires to proceed.'
The foregoing applies to the defendant United States of America.
Why this should be called a defense has not been disclosed on oral argument or otherwise.
In this connection, the technical attitude assumed by the Government in such matters has been clearly commented upon in an opinion by Judge Waterman in the case of Wolinsky v. ...