Title: Gibson v. Commonwealth

State: virginia

Issuer: Virginia Supreme Court

Document:

Present:  All the Justices 
 
JAMES LEONARD GIBSON 
 
v.  Record No. 072023 
 OPINION BY JUSTICE DONALD W. LEMONS 
 
 
 
JUNE 6, 2008 
COMMONWEALTH OF VIRGINIA 
 
FROM THE COURT OF APPEALS OF VIRGINIA 
 
 
In this appeal, we consider whether a conviction under 
Code § 58.1-1815 requires proof of both a failure to 
truthfully account for and a failure to pay withholding tax. 
I.  Facts and Proceedings Below 
 
In 2000, James Leonard Gibson (“Gibson”) registered 
Leonard Gibson Excavating, Inc. (“Gibson Excavating”) for 
sales and withholding taxes with the Virginia Department of 
Taxation.  Gibson, the president of Gibson Excavating, was the 
person listed as responsible for the sales and withholding 
taxes.  Although the required forms were filed, Gibson failed 
to pay withholding taxes for the periods of October 16, 2001 
through August 22, 2002 in the amount of $278.93, November 22, 
2002 through May 7, 2003 in the amount of $35,314.94, and June 
11, 2003 through November 24, 2003 in the amount of 
$12,464.06.  The underlying taxes for the period of October 
16, 2001 through August 22, 2002 had been paid; however, the 
remaining amount owed was for penalties and interest incurred.  
Gibson testified that the company simply did not have money to 
pay the obligations.  However, there was also evidence that 
Gibson paid himself a salary of $116,592.00 in 2002, yet 
underpaid the tax obligations by over $22,000.00.  
 
Gibson was charged with three misdemeanor counts of 
failure to pay tax, in violation of Code § 58.1-1815, for the 
three periods that withholding taxes were not paid.  He was 
convicted in the General District Court of the County of 
Stafford and then appealed to the Circuit Court of the County 
of Stafford.  In an order entered August 24, 2004 in the 
circuit court, the trial court found “the evidence would 
support a finding of guilty” but “defer[red] final disposition 
until August 15, 2005.”  Deferral was further delayed and on 
December 15, 2005, the trial court entered an order finding 
Gibson guilty of the charges and continued the case for 
sentencing.  Gibson was sentenced to twelve months in jail for 
each of the three convictions.  The entirety of the twelve-
month sentence was suspended for two of the convictions and 
all but 90 days was suspended on the third conviction. 
 
Gibson appealed to the Court of Appeals of Virginia which 
affirmed the trial court’s judgment and Gibson’s convictions.  
Gibson v. Commonwealth, 50 Va. App. 285, 649 S.E.2d 214 
 
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(2007).  Gibson appeals to this Court on four assignments of 
error1: 
1. 
The trial court erred by finding one guilty of a 
violation of section 58.1-1815 of the Code of Virginia 
when the person truthfully accounts for his tax 
obligation, but is unable to pay the obligation and does 
not take any steps to avoid the obligation. 
 
2. 
The Court of Appeals erred by not addressing whether the 
term “tax” in section 58.1-1815 includes penalties and 
interest assessed by the taxing authority.  
 
3. 
The trial court erred by finding that an individual who 
fails to pay penalties and interest assessed by a taxing 
authority, although the underlying tax had been paid, is 
guilty of a violation of section 58.1-1815 of the Code of 
Virginia. 
 
4. 
The courts erred by not recognizing the courts [sic] 
authority to defer findings of guilt absent a specific 
legislative grant of authority. 
 
 
II.  Analysis 
A. Deferral 
 
The circuit court’s August 24, 2004 order stated “that 
the evidence would support a finding of guilt” but “defers 
final disposition until August 15, 2005 . . . to which time 
this case is continued, and the bond is continued.”  The order 
continued the case but did not enter a final disposition.  
Additionally, the record in this case does not reveal any 
particular disposition that would be entered after deferral.  
                     
1 Gibson did not file transcripts of the proceedings 
below; rather he proceeds on appeal with a written statement 
of facts in lieu of a transcript pursuant to Rule 5:11(c). 
 
3
Gibson’s argument that it was understood that the charges 
would be dismissed at the end of the year is unsupported by 
the record. 
 
Gibson received the initial deferral of disposition for 
one year; however, no request for further deferral appears on 
the record.  Although the December 15, 2005 order recites, 
“counsel for the defendant noted his exceptions to the 
ruling,” nothing appears in the order or in the written 
statement of facts revealing what, if any, objections Gibson 
made.  After the December 15th order was entered “find[ing] 
the defendant guilty,” no additional request for deferral was 
made.  Additionally, the final sentencing order does not 
reveal that a request for additional deferral was made.  
Finally, no objection was made to the sentencing order. 
 
Gibson further alleges that he received a “double 
sentence,” namely a deferred sentence and then an adjudication 
of guilt with sentences of confinement in jail.  Gibson 
mischaracterizes what happened in the trial court.  The 
initial August 24, 2004 order did not impose a sentence.  The 
record does not reflect any understanding or agreement that 
the charges would be dismissed at the end of the deferral 
period. 
 
Finally, Gibson argues that he is entitled to “the 
suspended imposition of sentence initially ordered” on August 
 
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24, 2004 pursuant to “the plethora of options available to a 
trial court to dispense justice” under Code § 19.2-303.  
However, Code § 19.2-303 is inapplicable to this case because 
its terms only apply “[a]fter conviction.”  Gibson was not 
convicted on August 24, 2004; rather, he was convicted on 
December 15, 2005. 
 
Gibson’s fourth assignment of error is based upon a 
faulty premise concerning what actually transpired in the 
trial court.  On the only occasion that Gibson requested a 
deferral of disposition to a later date, it was granted by the 
trial court.  The record reveals no additional requests or 
motions for deferral.  Consequently, the trial court never 
denied such a request or motion.  Accordingly, the issue 
presented in Gibson’s fourth assignment of error, namely that 
the trial court “erred by not recognizing the courts [sic] 
authority to defer findings of guilt absent a specific 
legislative grant of authority” is not properly before us 
because the record reflects no ruling of the trial court to 
that effect.  We note that although the Court of Appeals 
addresses this issue in its opinion, the question was not 
properly before the Court of Appeals for the same reason.2 
                     
2 See also Moreau v. Fuller, 276 Va. ___, ___ n.5, ___ 
S.E.2d ___, ___ n.5 (2008) (this day decided) (overruling 
Gibson v. Commonwealth, 50 Va. App. 285, 649 S.E.2d 214 (2007) 
 
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B.  Tax Issues 
1. Definition of “Tax” 
 
Gibson’s second and third assignments of error are based 
upon arguments that were not made in the trial court.  
Gibson’s argument that the term “tax” as used in Code § 58.1-
1815 does not include penalties and interest was not preserved 
in the statement of facts or in the circuit court’s orders and 
no transcript was filed.  There is no indication in the record 
that Gibson made these arguments to the circuit court.  
Therefore, Gibson waived these arguments pursuant to Rule 
5:25.  “The purpose of Rule 5:25 is to afford the trial court 
the ability to address an issue.  If that opportunity is not 
presented to the trial court, there is no ruling by the trial 
court on the issue, and thus no basis for review or action by 
this Court on appeal.”  Riverside Hospital v. Johnson, 272 Va. 
518, 526, 636 S.E.2d 416, 420 (2006). 
2.  Effect of Bankruptcy 
 
Gibson Excavating filed for bankruptcy protection under 
Chapter 11 of the United States Bankruptcy Code.  11 U.S.C. 
§ 1101 et seq.  The proceeding was converted to a Chapter 7 
proceeding and it “was during this liquidation process that 
the withholding tax assessments for the final charge were 
                                                                
to the extent that it is inconsistent with the holding of that 
case). 
 
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accumulated.”  Gibson argues that he “clearly had no authority 
or control, and consequently ‘willfulness’ for the failure for 
withholding taxes to be paid when a corporation was in the 
control of a bankruptcy trustee.” 
 
This argument is made for the first time before this 
Court.  The argument was not made at the trial court nor was 
it made in the Court of Appeals.  Accordingly, we will not 
consider the argument made for the first time before this 
Court.  Rule 5:25. 
3. Scope of Code § 58.1-1815 
 
Code § 58.1-1815 provides, in pertinent part, “Any . . . 
person required to collect, account for and pay over any 
sales, use or withholding tax, who willfully fails to collect 
or truthfully account for and pay over such tax . . . shall 
. . . be guilty of a Class 1 misdemeanor.” 
Under well-established principles, an issue of 
statutory interpretation is a pure question of law 
which we review de novo. When the language of a 
statute is unambiguous, we are bound by the plain 
meaning of that language. Furthermore, we must 
give effect to the legislature's intention as 
expressed by the language used unless a literal 
interpretation of the language would result in a 
manifest absurdity. If a statute is subject to 
more than one interpretation, we must apply the 
interpretation that will carry out the legislative 
intent behind the statute.  
 
Conyers v. Martial Arts World of Richmond, Inc., 273 Va. 96, 
104, 639 S.E.2d 174, 178 (2007) (citations omitted). 
 
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Gibson argues that to violate the statute one would have 
to fail to collect or truthfully account for and fail to pay 
over the tax.  We have not previously addressed the elements 
of the crime proscribed in Code § 58.1-1815.  However, a 
federal statute is worded in much the same way: “any person 
required under this title to collect, account for, and pay 
over any tax imposed by this title who willfully fails to 
collect or truthfully account for and pay over such tax shall 
. . . be guilty of a felony.”  26 U.S.C § 7202 (2000).  The 
United States Courts of Appeals for the Second Circuit, the 
Third Circuit, and the Ninth Circuit have interpreted the 
language of 26 U.S.C. § 7202 in the conjunctive.  United 
States v. Gilbert, 266 F.3d 1180, 1183-84 (9th Cir. 2001); 
United States v. Thayer, 201 F.3d 214, 220-21 (3rd Cir. 1999); 
United States v. Evangelista, 122 F.3d 112, 121 (2d Cir. 
1997).  In order to comply with statutory obligations, a 
responsible party must account for and pay over a tax, and 
this requirement is not satisfied unless both obligations have 
been met.  The “plain language of the disputed passage in [26 
U.S.C.] § 7202 creates a dual obligation – to ‘truthfully 
account for and pay over’ trust fund taxes – that is satisfied 
only by fulfilling both separate requirements. Accordingly, 
the command of the statute is violated by one ‘who willfully 
fails’ either to ‘account for’ or to ‘pay over’ the necessary 
 
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funds.”  Evangelista, 122 F.3d at 121. See also Gilbert, 266 
F.3d at 1183-84; Thayer, 201 F.3d at 220-21. 
Gibson’s interpretation of the statute would allow a 
person to collect the taxes and use them for his own benefit 
without penalty under Code § 58.1-1815.  Such a result cannot 
be the intent of the General Assembly in enacting this Code 
provision particularly in light of federal case law to the 
contrary interpreting identical language.  We hold the Court 
of Appeals did not err in affirming Gibson’s convictions. 
Affirmed.