Opinion ID: 1837305
Heading Depth: 1
Heading Rank: 6

Heading: 1990-96 penalties and interest

Text: In its 1997 modified judgment, the district court found that Misle incurred tax liability as a consequence of payments made by HJA directly to his creditors under the agreement, and upon the failure of the payment of those taxes, interest and penalties were assessed against [Misle]. Direct evidence with regard to this matter shows that [Misle] was unable to pay the taxes because of the failure of the defendants to provide the income to him as contemplated in the [covenant not to compete]. (Emphasis supplied.) We do not know what direct evidence the court was referring to because the record from the 1996 trial has not been provided to us in this appeal. We do know, of course, that the record before the district court at that time did not include the final adjudication by the Tax Court with respect to penalties and interest owed by Misle. That adjudication, made in October 2000, conclusively establishes that the penalties and interest assessed for the years 1990 through 1996, inclusive, did not result from Misle's failure to pay taxes on income which he reported, but, rather, from his failure to report income because of a mistaken or misguided belief that it was not subject to taxation. The record does not reflect any tax penalties or interest other than those which are the subject of the Tax Court adjudication and related state assessments. Misle assigns and argues that the district court erred in sustaining objections to affidavits of his lawyer and accountant offered in opposition to HJA's motion for summary judgment. Each affiant sought to characterize certain provisions of the agreement and stated that delays by HJA in making payments to Misle prevented him from paying his taxes, resulting in penalties and interest. Counsel for HJA objected to the affidavits on grounds that they had not been served prior to the date of the hearing, see Neb.Rev.Stat. § 25-1332 (Cum.Supp.2002), and that the affidavits constituted legal conclusions and hearsay. We conclude that the district court did not err in sustaining this objection. However, we further note that even if the affidavits had been received, they would not have created a genuine issue of material fact with respect to the basis upon which penalties and interest were assessed. This is so because the opinion of the Tax Court conclusively establishes that such assessment was not due to Misle's failure or inability to pay taxes on reported income, but, rather, his failure to report as income payments made under the agreement during each of the years in question and his complete failure to file a 1995 tax return.