The opinion of the court was delivered by: David Stewart Cercone United States District Judge
Plaintiff, Harry E. Crisci ("Harry"), filed this action against the United States of America (the "Government") for the recovery of federal income tax and wage tax assessed or attributed to him. The Government filed a Third Party Complaint against H. Brian Crisci ("Brian") and Carole L. McConnell ("McConnell")(Collectively with Harry Crisci, the "Taxpayers"), alleging Brian and McConnell should be jointly and severally liable for recovery of a trust fund recovery penalty in the amount of $177,145.23 representing certain income and /or employment taxes. The Third Party Complaint has been stayed by stipulation filed with and approved by this Court. (Documents No. 18 and 19).
The Government has filed a motion for summary judgment seeking the dismissal of Harry's claims, and a finding the penalties assessed against Brian and McConnell are proper. The Taxpayers have responded and the motion is now before the Court.
II. STATEMENT OF THE CASE
Brian was the President of Ideas in Motion-Pennsylvania, Inc. ("IIM"). Harry was the majority shareholder and owner of IIM, and McConnell was the Controller of the company. Pl. CSF ¶¶ 1, 3 and 4. Harry, Brian and McConnell were assessed a penalty of $177,145.23 by the Internal Revenue Service (IRS), pursuant to 26 U.S.C. § 6672, representing withheld income and FICA taxes of the employees of IIM that had not been timely paid to the IRS. Def. SUF ¶¶ 1 and 2. IIM had been assessed for unpaid trust fund taxes withheld from its employees' pay, and non-trust fund taxes that were owed by the corporation as employer. Id. ¶ 3. Unlike general taxes, employee trust fund liability taxes, if unpaid, may be assessed personally against the subject company's officers and/or owners.
On or about November 30, 2004, Harry, Brian and McConnell met with IRS Officers Robert Allingham ("Allingham") and William Evans ("Evans") to discuss the delinquent taxes and tax returns, as well as, solutions to the tax problems. Def. SUF ¶¶ 4 and 5; Pl. CSF ¶¶ 7 and 8. The Taxpayers allege that Allingham and Evans told them that the IRS was mainly concerned with collecting the trust fund taxes, as many corporations file for bankruptcy protection to avoid the non-trust fund taxes. PL. CSF. ¶¶ 9 and 10. The Taxpayers were also told to file all delinquent returns and all future returns when due and to make the required deposits moving forward. Pl. CSF ¶ 16. The Taxpayers were given time to come up with a plan to pay the back taxes. Pl. CSF ¶ 17.
Thereafter, the officers of IIM discussed several options to pay the back taxes, and ultimately decided that the best solution was to sell off the assets of IIM. Pl. CSF ¶¶ 19 and 22. Brian alleges that he had several discussions with Allingham regarding the tax liabilities, all of which were in relation to the trust fund taxes. Pl. CSF. ¶¶ 20 and 21. The Taxpayers contend that the sole purpose of the auction to sell IIM's assets was to pay off the trust fund tax liability and avoid personal liability on IIM's delinquency. PL. CSF ¶ 23. Brian further alleges that he informed Allingham of the decision to sell the corporate assets and their intention to pay off the trust fund taxes. Pl. CSF ¶ 24. Allingham indicated that the auction was an acceptable solution to the payment of the trust fund taxes, and emphasized the proceeds from the auction had to be paid directly to the IRS. Pl. CSF ¶ 25.
At the time of the auction, the outstanding tax liability of IIM was $404,197.90 of which $171,087.90 represented trust fund taxes. Def. SUF ¶ 32. After the auction, but before the certified check was issued by the auctioneer, the officers of IIM consulted with their attorney who advised them to request that only IIM's name be on the check in order to ensure that the proceeds were applied to trust fund taxes in order to eliminate as much of the personal liability of the officers of IIM as possible. Pl. CSF. ¶¶ 27 and 28. Though the officers were aware and agreed that the proceeds would be handed directly over to the IRS, Brian asked the auctioneer to make the check for the auction proceeds payable to IIM. Pl. CSF. ¶¶ 30 and 32. The net proceeds from the auction totaled $192, 210.31. Def. SUF ¶ 37.
Allingham issued a notice of tax levy to the auctioneer on March 23, 2005, in order to secure the proceeds for the IRS. Def. SUF ¶ 40. On March 24, 2005, Brian gave written instructions to Allingham stating that the auction proceeds were to be applied to the trust fund liabilities. Pl. CSF ¶ 33. Despite Brian's written instructions, the proceeds from the auction were allocated as follows: $31,119.69 to trust fund taxes from the last quarter of 2003, and the remaining $161,090.62 to non-trust fund taxes from 2003. Def. SUF ¶ 42. Harry, Brian and McConnell were then assessed the balance of the trust fund tax liability in the amount of $177, 145.33. Def. SUF ¶ 1.
III. LEGAL STANDARD FOR SUMMARY JUDGMENT
Pursuant to FED. R. CIV. P 56(c), summary judgment shall be granted when there are no genuine issues of material fact in dispute and the movant is entitled to judgment as a matter of law. To support denial of summary judgment, an issue of fact in dispute must be both genuine and material, i.e., one upon which a reasonable fact finder could base a verdict for the non-moving party and one which is essential to establishing the claim. Anderson v. Liberty Lobby, 477 U.S. 242, 248 (1986). When considering a motion for summary judgment, the court is not permitted to weigh the evidence or to make credibility determinations, but is limited to deciding whether there are any disputed issues and, if there are, whether they are both genuine and material. Id. The court's consideration of the facts must be in the light most favorable to the party opposing summary judgment and all reasonable inferences from the facts must be drawn in favor of that party as well. Whiteland Woods, L.P. v. Township of West Whiteland, 193 F.3d 177, 180 (3d Cir. 1999), Tigg Corp. v. Dow Corning Corp., 822 F.2d 358, 361 (3d Cir. 1987).
When the moving party has carried its burden under Rule 56(c), its opponent must do more than simply show that there is some metaphysical doubt as to the material facts. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). In the language of the Rule, the nonmoving party must come forward with "specific facts showing that there is a genuine issue for trial." FED. R. CIV. P 56(e). Further, the nonmoving party cannot rely on unsupported assertions, conclusory allegations, or mere suspicions in attempting to survive a summary judgment motion. Williams v. Borough of W. Chester, 891 F.2d 458, 460 (3d Cir.1989) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986)). The non-moving party must respond "by pointing to sufficient cognizable evidence to create material issues of fact concerning every element as to which ...