The opinion of the court was delivered by: ROSLING
Defendant, District Director of Internal Revenue (Director), moves for an order pursuant to Fed. R. Civ. P. 12(b) dismissing the complaint for alleged lack of jurisdiction which the complaint bottoms on 28 U.S.C. §§ 1340, 1345 and 26 U.S.C. § 6672
of the Internal Revenue Code of 1954 (IRC).
The action is brought by a taxpayer against the Director and seeks a judgment enjoining him from collecting a 100% penalty assessment purportedly made pursuant to said IRC § 6672 and, additionally, declaring such assessment null and void.
The director cited as barring the injunctive relief sought IRC § 7421
and as precluding a declaratory judgment, 28 U.S.C. § 2201.
Although the reference in the notice of motion to "lack of jurisdiction" suggests that the movant intended to bring himself within the coverage of subsection (1) of Rule 12(b), "lack of jurisdiction over the subject matter," the motion was more broadly based, being in effect one brought under, or, in any event, additionally under, subsection (6). In such situation the court is authorized, as it is not when the subject matter jurisdiction is in question, to treat the motion when "matters outside the pleading are presented to and not excluded by the court * * * as one for summary judgment [to be] disposed of as provided in Rule 56, [in which event] all parties shall be given reasonable opportunity to present all material made pertinent to such a motion by Rule 56."
The government did, in fact, present matters de hors the complaint, and specifically asked in its brief that the motion be converted into one for summary judgment. Plaintiff has filed two opposing affidavits, one preceding and the other following the filing of the government's brief. In these affidavits he goes into factual detail appropriate for submission upon a motion for summary judgment, at the same time remarking somewhat pointlessly that "[there] is no statement in the affidavit [of the Director] concerning the change in motion to consider the same as a motion for summary judgment which is set forth in the [Director's] brief on page '10' * * *." Inasmuch as the affidavit from which the foregoing was excerpted was identified by endorsement as "plaintiff's affidavit in rebuttal of defendant's supplemental affidavit" and in its text acknowledged that it had been made "with the permission of the court in [such] rebuttal," plaintiff has had a reasonable opportunity to present all pertinent Rule 56 material within the intent of Rule 12(b).
The defendant's motion is, accordingly, being treated both as a motion for summary judgment
and as one brought under Rule 12(b)(1) raising the question of subject matter jurisdiction.
The plaintiff, in his complaint makes the following averments as basis for the relief he seeks:
The defendant Director under authority of IRC § 6672 "made a 100% penalty assessment against plaintiff as an alleged responsible officer of David Cooper, Inc., an alleged New York Corporation," whereas "David Cooper, Inc., never was and is not now a domestic or foreign corporation" and plaintiff "never was and is not now an officer of the corporation and was not required to collect, truthfully account for and pay over any tax imposed by the Internal Revenue Code of 1954."
It is further alleged that the assessment was imposed with respect to unpaid withholding, social security and employment taxes of the "corporation" for the 3rd quarter of 1962, in the sum of $1,511.14. The complaint asserts that one David Cooper was engaged in the construction business in the conduct of which he hired laborers at various times, including the period in question, that the taxes were withheld or were payable by Cooper individually and that the corporation "was not in existence." No explanation is offered in the complaint of plaintiff's involvement in the David Cooper/David Cooper, Inc. affairs which led the Director to charge plaintiff with liability for the unpaid tax. In plaintiff's opposing and rebuttal affidavits, however, the following circumstances are recited as in plaintiff's view pertinent:
Plaintiff in the complaint had described himself as a salaried employee of A. & S. Management Corp. (A. & S.). His duties were those of a managing agent of apartment houses. Picking up the thread of the narrative in his affidavits, he alleges that David Cooper, requiring funds to operate his contracting business, applied to A. & S. which agreed to lend him the sum of $5,000. Cooper "represented that he was operating as a corporation under the name of David Cooper, Inc. and the loan was [accordingly] made to said corporation. [Plaintiff] was assigned by A. & S. to watch its investment. The loan was made on September 26, 1962, which was after the last pay day in the third quarter of 1962 * * *.
"In order to safeguard the investment of A. & S. [plaintiff] was directed to countersign checks and in order to do so, he was required by the bank to sign a resolution to enable him to countersign the checks. [He] had no control over the funds and had no authority over the receipt or payment from the checking account opened by David Cooper, Inc."
The corporate resolution giving plaintiff such authority was filed by the corporation with the bank on 9/18/62. It indicates that plaintiff's statement implying an inability on his part to prevent diversion of corporate funds to the satisfaction of its obligations in derogation of the government's preferred claim for taxes is less than completely accurate.
The statement of the Central State Bank which plaintiff submits in proof of his contention that the $5,000 advanced by A. & S. to David Cooper, Inc., and deposited to the credit of the corporation on 9/27/62, was the opening item in the account is less than helpful to his cause. He establishes thereby that funds were available to the corporation immediately after the last payroll period in the third quarter of the year and before the due date for the filing of the return with accompanying payment. The money thus deposited could have been used to satisfy the tax liability. On the other hand, the balance in the account could not have been checked out and applied elsewhere without plaintiff's cooperating signature. That he had contemporaneous knowledge of the tax liability is indisputably clear, for the return for the quarter is signed by plaintiff as "V. Pres." of the taxpayer styled in the return "David Cooper, Inc.", under date of 10/30/62. The "amount of income tax withheld" is reported therein as $1,072.75 and FICA taxes as $882.72. No remittance accompanied the return.
The fact, moreover, that the fund which might have been used to liquidate the tax obligation was derived from advances made by plaintiff's "employer" A. & S. does not dissipate plaintiff's duty, if he was a person within the statutory intent required so to act, to "truthfully account for and pay over such tax." Cf. Frazier v. United States,
an action for refund of penalty under § 6672 which plaintiff had paid. Upon trial of Frazier the district court had directed a verdict for the defendant which was affirmed on appeal. The factual analogy referable to the instant situation is to be found in the circumstance that in Frazier the corporation did not have the money to pay the wages of its employees during the relevant quarters and the ...