The opinion of the court was delivered by: SHAPIRO
Before the court is plaintiff's motion for attorneys' fees and costs pursuant to 26 U.S.C.A. § 7430 (West Supp. 1986). The court has subject matter jurisdiction pursuant to 28 U.S.C.A. § 1346(a) (West 1976 & Supp. 1986).
Plaintiff initially filed this action under 26 U.S.C.A. § 6672 (West 1967 & Supp. 1986), to recover internal revenue taxes, costs, and attorneys' fees. The parties subsequently stipulated to the dismissal of the complaint with prejudice on the merits but without prejudice to plaintiff's claim for attorneys' fees and costs. An evidentiary hearing on the motion for attorneys' fees and costs was held on July 11, 1986. For the reasons stated below, the motion will be denied.
1. Plaintiff, Nicholas E. Batula ("Batula"), is an adult individual residing at 3847 Buck Road, Huntingdon Valley, Pennsylvania 19006.
2. Batula was one of eight individuals who formed a corporation known as Health Care Linen Systems, Inc. ("HCLS") in November, 1978.
3. At all times relevant to this proceeding, Batula was the owner of ten percent (10%) of the outstanding shares of HCLS.
4. During the period of November, 1978 until October, 1979, Batula held the position of Secretary/Treasurer of HCLS.
5. Under the HCLS By-Laws, the Secretary/Treasurer was responsible for books and records.
6. From November, 1978 to October, 1979, Batula did not at any time exercise control over HCLS bills paid, the amount of those payments, or the corporate books. Batula's "job" was fixing the laundry machines.
7. Checks drawn on the HCLS corporate checking account required the signature of Batula and one other person.
8. By letter dated April 25, 1979, three shareholders of HCLS demanded that Batula, in his capacity as Secretary/Treasurer, "produce all books, records, accounts, cancelled checks, invoices, bills, tax records, correspondence, payroll records, etc., and to have them available for inspection. . . ." (Ex. D-A).
9. On April 30, 1979, HCLS had sufficient funds in its checking account to make full payment of the taxes at issue. On May 2, 1979, $10,000.00 was withdrawn from the corporation's checking account by a check to which Batula was a signatory.
10. In the spring of 1979, Batula sought to terminate his involvement with HCLS. By July, 1979, an initial agreement for the dissolution of HCLS was reached but under the terms of this agreement, Batula remained in business with Joseph Snively ("Snively").
11. A subsequent agreement, executed in December, 1979, provided that Snively would purchase Batula's interest in HCLS; Batula never submitted his resignation as Secretary/Treasurer of HCLS. He went to work for Total Linen Care ("TLC"), a corporation formed by Snively. Batula owned twenty percent (20%) of the TLC shares of stock and served as its Secretary/Treasurer.
12. HCLS failed to make full payment of its Federal Insurance Contributions Act ("FICA") taxes and employee income taxes withheld for the periods ending September 30, 1979, December 31, 1979, December 31, 1980, March 31, 1981, and June 30, 1981. The total deficiency is $5,853.07.
13. A final agreement for dissolution of HCLS was signed on December 6, 1979. In the dissolution agreement, Batula authorized payment of $6,000.00 from the funds of the corporation to Walsh Equipment Co. Inc. ("Walsh").
14. In that agreement, Batula, "with full intent to be legally bound" represented that "all payroll taxes and any and all other tax obligations of Linen have been fully paid." (Ex. D-B).
15. On May 22, 1980, Batula co-signed a check drawn on the HCLS account.
16. Batula filed suit against Snively for failure to make payments provided for under their agreement in New Jersey District Court, Burlington County, Docket No. 1181-6869.
17. On October 22, 1981, an Internal Revenue Service ("IRS") officer, Lillian Ford ("Ford"), interviewed Snively, in the IRS Office.
18. At the October 22, 1981 meeting, Snively told Ford that HCLS was a one-man corporation and that he was totally responsible "for every phase ...