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RUBIN v. UNITED STATES

September 3, 1974

Gabriel G. RUBIN
v.
UNITED STATES of America


Knox, District Judge.


The opinion of the court was delivered by: KNOX

The question in this civil action is whether the plaintiff Gabriel G. Rubin is liable under Internal Revenue Code, Section 6672 *fn1" as a person who willfully failed to collect, truthfully account for and pay over to the United States certain withholding taxes of the Minnesota Pipers, Inc., a Minnesota corporation. The Commissioner of Internal Revenue assessed a 100% penalty of $44,213.92 against Rubin for the fourth quarter of 1968 and the first three quarters of 1969. *fn2" Rubin paid $25.00 of the penalty for each quarter, filed a claim for refund which was denied, and brought suit. The United States counterclaimed for $44,113.92, the unpaid balance of the assessment. After a week long trial, a jury found Rubin liable for the third quarter of 1969, but not liable for the three previous quarters. *fn3" The result of all this was that Rubin was held liable for $85.41, out of the total assessment of $44,213.92.

 Both the United States and Rubin have moved to alter or amend judgment, or alternatively, for judgment notwithstanding the verdict or a new trial. The United States contends that since the jury found Rubin to be a "responsible person" acting "willfully" for the third quarter of 1969, then preferences by Rubin to creditors other than the government make him liable for whatever taxes were then due, without regard to whether the preferences occurred in the same or a later period than that in which the tax liability arose and regardless of whether Rubin at any time during these quarters had corporate funds in his hands to pay these taxes. The government urges that on the record before us Rubin must be found liable for the entire tax, and that the jury's verdict of liability only for the third quarter of 1969 is inconsistent and contrary to the court's charge. Rubin disputes the government's interpretation of the facts and the law and further urges that the jury's findings of "responsibility" and "willfullness" for the third quarter of 1969 are not supported by the evidence and are conjectural in light of the jury's implicit finding for the three prior quarters that Rubin was not responsible or did not act willfully.

 Not without difficulty, the court has determined that the jury verdict is proper and that the judgment entered pursuant to that verdict will stand.

 In our charge to the jury, we incorporated defendant's Requested Jury Instruction No. 19:

 
"Even if you determine that Gabriel G. Rubin became a responsible person only at the time that the Minnesota Pipers returned to Pittsburgh in July of 1969, I charge you that he may still be liable for the taxes in dispute for the fourth quarter of 1968, and the first three quarters of 1969. The plaintiff is liable for such taxes if after the Minnesota Pipers returned to Pittsburgh, he became a responsible person of the company, as I have previously defined 'responsible' for you. If you determine that Gabriel G. Rubin became a responsible person at that time, you must then go on to determine whether Mr. Rubin acted 'willfully'. He acted willfully, if after July of 1969, he had knowledge of the delinquent withholding taxes of the Minnesota Pipers, Inc., but nonetheless directed funds to pay suppliers, employees' net take home salaries, rent, or any creditor, other than the government."

 The court also gave the defendant's Requested July Instruction No. 20:

 
"If you find that, as Gabriel G. Rubin contends, that he had no knowledge of the delinquent withholding tax liability of the Minnesota Pipers, Inc. until the first week of July, 1969, you must still determine that he acted willfully, if you find that after that date, he decided to use funds of the Minnesota Pipers, Inc. to pay suppliers, employees' net take home salaries, rent, or any creditor, other than the government."

 These charges do not preclude a finding of nonliability for earlier quarters despite a finding of liability for the third quarter of 1969. The jury was told that the plaintiff "may" be liable. The charge read as a whole allows the possibility of judgment for the United States for some, but not all, of the four periods in question. The defendant not only submitted the points for charge Nos. 19 and 20 but also failed to object to the form of the special interrogatories *fn4" which on their face permitted the jury to find liability for any combination of the four tax quarters. Regarding the form of the verdict, the court instructed the jury as follows:

 
"Now, if you answer these questions [Nos. 1 and 2] 'no' why, that is the end of the case and you need not bother with number 3. If, however, your answers on both of the above two questions are 'yes', then for which quarters do you find him to be liable? I am asking you to take up each quarter, the last quarter of 1968 and the first three quarters of 1969, and answer 'yes' or 'no' as to each one of those quarters, whether you find him liable in the event you have answered questions 1 and 2 'yes'." Transcript, page 446.

 Some federal courts have indicated that a failure to object to interrogatories before the jury retires precludes a later challenge that the interrogatories were erroneous. Kirkendoll v. Neustrom, 379 F.2d 694 (10th Cir. 1967); cf., Bernstein v. Olian, 77 F. Supp. 672 (S.D.N.Y.1948) (explicit charge without objection that jury could find against one or more of the defendants precluded challenge of inconsistency to verdict exonerating two defendants but not the third). That rule is implied through the more general statement in Rule 51, F.R.C.P.:

 
"No party may assign as error the giving or the failure to give an instruction unless he objects thereto before the jury retires to consider its verdict, stating distinctly the matter to which he objects and the grounds of his objection."

 We realize, of course, that the United States does not purport to challenge the instructions or special interrogatories as erroneous. Their position is that the answers are inconsistent in light of the charge. Nevertheless, where the United States insists that Rubin cannot be found liable only for the third quarter of 1969 but the charge and interrogatories permitted that result, the net effect is a challenge to the interrogatories. The United States cannot have the best of both worlds by sitting back and allowing the jury to deliberate and to reach a verdict, perhaps through compromise, with the jury believing that they can find the plaintiff liable for only one of the quarters in question, only to later stand up and ask for judgment for all four quarters on the basis of the jury's determination of liability for one quarter alone.

 We do not, however, rest our decision on this technical, narrow basis. As we have stated, the court believes the verdict to be ...


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