Opinion ID: 677125
Heading Depth: 3
Heading Rank: 1

Heading: Schiff

Text: 14 Regarding Schiff, the court found that [a]s the landlord to whom the corporation owed substantial past due rent, Schiff was in a position to and did wield significant influence over the management decisions of the corporation. See Findings of Fact and Conclusions of Law at 4. The court also stated that Schiff was aware that the employment taxes for the first and second quarters were accruing, yet during that period he directed that a portion of the rent be paid to himself instead of directing that the delinquent taxes be paid to the Internal Revenue Service. Id. Deciding that Schiff met the definition of a responsible person, the court held that 15 [a]s the landlord of the corporation, and as a person who was interested in acquiring an interest in the corporation, Schiff was in reality one of the corporation's most important creditors. He had a vital interest in the continued viability of the business. At the same time he had the economic power to destroy the corporation. The context and dynamics of the relationship between Schiff and the corporation--more particularly between Schiff and the corporation's principal owner, Mariscal--clearly reflect that Schiff exerted enormous influence and control over the financial affairs of the corporation. As part of a plan to bring in a new management team Schiff required Mariscal to hire Jones. Schiff frequently demanded and received cash payments from the casino cage in partial satisfaction of rent past due to him. He infused cash into the business as loans to help it pay other high priority creditors. 16 Id. at 7. The court also found that Schiff participated in controlling the decision-making process regarding the allocation of funds among creditors. Id. 17 We find that on the basis of the record before us these findings, deeming Schiff a responsible person, are clearly erroneous because they are not supported by the evidence. 18 The record does not show that Schiff exercised significant influence over the management decisions of the corporation, nor does it indicate that Schiff helped control the decision-making process regarding the allocation of funds among creditors. 19 Schiff was never a shareholder, director, officer, or employee of the Nevada Palace and did not have signatory power on operational or payroll accounts. The fact that Schiff was an aggressive landlord who demanded and received cash payments to satisfy rent past due to him in no way suggests that Schiff had the authority to pay the payroll taxes. See Purcell, 1 F.3d at 937 (the duty to ensure that withheld employment taxes are paid over flows from the authority that enables one to do so). Further, although Schiff spent time in the hotel and casino and engaged in financial discussions with Mariscal and other management personnel, making Schiff aware of the Nevada Palace's liabilities, including the unpaid payroll taxes, he did not have the requisite status, duty, and authority to pay the taxes. See Alsheskie, 31 F.3d at 839 (upholding district court's finding that defendant was not a responsible person because he did not have discretionary authority to pay the Corporation's withholding taxes); Davis, 961 F.2d at 873 (responsibility is a matter of status, duty, and authority, not knowledge ) (emphasis added). 20 The record is void of any specific evidence that Schiff had or exercised any control over which creditors were paid. In fact, Schiff loaned money to Mariscal on the condition that Mariscal pay the payroll taxes, evidencing that Schiff had no authority to pay the taxes directly. Schiff even endorsed checks made out to Schiff for rent For Deposit to the Grand Opening Motor Inn Payroll Account. 21 Schiff did not have authority to hire or fire employees. While Schiff did bring in Jones, Mariscal and Jones signed the consulting agreement under which Jones reported to Mariscal. In addition, Mariscal fired Jones in late April 1980. 22 Therefore, the court's finding that Schiff was a responsible person because he exercised enormous influence over the corporation's financial affairs and the payment of creditors is clearly erroneous, and we reverse the district court's holding that Schiff is liable for the payroll taxes for the first and second quarters of 1980. 2