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STEELE v. UNITED STATES

May 1, 1959

R.M. STEELE AND F.V. STUBBLEFIELD, PLAINTIFFS,
v.
UNITED STATES OF AMERICA, DEFENDANT.



The opinion of the court was delivered by: John E. Miller, Chief Judge.

The motion of defendant to dismiss the complaint of the plaintiffs for lack of jurisdiction is before the court.

The plaintiffs are citizens of Arkansas and reside in the City of Fort Smith, Sebastian County, Arkansas. Prior to January 1, 1955, and at all times subsequent thereto the plaintiff, F.V. Stubblefield, was President, and the plaintiff, R.M. Steele, was Secretary of Davidson-Steele, Inc., a corporation that was engaged in constructing sewage disposal plants. The corporation contracted to construct disposal plants at Tulsa, Oklahoma, and Hot Springs, Arkansas, and performance bonds for each of the jobs were written by a bonding company. The corporation defaulted in the work, and under the terms of the performance bonds the bonding company took possession of payments received from the contracts of the corporation, including the two jobs above mentioned, and assumed responsibility for and control over payments made for labor, material and all other expenses of such corporation. Contemporaneously with the taking over of the work, the bonding company also obtained a chattel mortgage from the corporation upon substantially all of its equipment except small, isolated items. Under the arrangement between the bonding company and the corporation, all checks of the corporation had to be countersigned by a representative of the bonding company located in St. Louis, Missouri, and during all times material herein, neither of the plaintiffs nor both of them acting together could withdraw funds from the corporation's bank account without the countersignature of a representative of the bonding company.

The plaintiffs assert that the court has jurisdiction of their claims by virtue of the provisions of Title 28 U.S.C.A. Sec. 1346(a)(1), which statute provides:

    "(a) The district courts shall have original
  jurisdiction, concurrent with the Court of Claims,
  of:
    "(1) Any civil action against the United States for
  the recovery of any internal-revenue tax alleged to
  have been erroneously or illegally assessed or
  collected, or any penalty claimed to have been
  collected without authority or any sum alleged to
  have been excessive or in any manner wrongfully
  collected under the internal-revenue laws * * *."

In paragraph 3 of the complaint the plaintiffs allege:

    "This is a suit for recovery of so-called `100 per
  cent penalties' erroneously assessed against and
  collected from plaintiffs. Such penalties were
  asserted by the District Director of Internal Revenue
  for the Arkansas District under Section 6671 of the
  Internal Revenue Code of 1954 [26 U.S.C.A. § 6671].
  The assessment of such penalties resulted from a
  finding by said District Director that plaintiff
  Stubblefield and plaintiff Steele, as President and
  Secretary respectively of Davidson-Steele, Inc., a
  corporation, willfully failed to pay over to the
  Internal Revenue Service income tax withholdings and
  Federal Old Age Benefit withholdings of
  Davidson-Steele, Inc. for quarters ended March 31,
  1955, and June 30, 1955.
    "a. The claimed penalties aforesaid were assessed
  and portions thereof paid as follows:
    "$5,186.47 penalties were assessed against
  plaintiff Stubblefield on May 16, 1958. $50.00
  thereof was paid on June 9, 1958.
    "$5,186.47 penalties were assessed against
  plaintiff Steele on May 16, 1958. $50.00 thereof was
  paid on June 9, 1958."

Title 26 U.S.C.A. § 6671, provides:

    "(a) Penalty assessed as tax. — The penalties and
  liabilities provided by this subchapter shall be paid
  upon notice and demand by the Secretary or his
  delegate, and shall be assessed and collected in the
  same manner as taxes. Except as otherwise provided,
  any reference in this title to `tax' imposed by this
  title shall be deemed also to refer to the penalties
  and liabilities provided by this subchapter.
    "(b) Person defined. — The term `person', as used
  in this subchapter, includes an officer or employee
  of a corporation, or a member or employee of a
  partnership, who as such officer, employee, or member
  is under a duty to perform the act in respect of
  which the ...

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