Opinion ID: 1317361
Heading Depth: 1
Heading Rank: 2

Heading: corporate officer liability

Text: Our initial inquiry is whether the evidence contained in the record is insufficient as a matter of law to establish the tax liability of the appellant. If it is insufficient as a matter of law, the appellant is entitled to have this litigation brought to an end in her favor. The appellant contends the evidence she submitted and testimony she gave at the 1992 hearing demonstrates that she was not an officer, specifically the Secretary, of Sunlite Seafoods. Instead, she states she was a secretary only in the sense of being a personal typist and secretary for Mr. Patterson. In support of her position, the appellant submitted into evidence the corporation's articles of incorporation as amended in November, 1980, that identify Mr. Patterson as President but that do not have anyone listed as the corporation's Secretary. Moreover, the appellant said she held no stock in the corporation nor received any income from the corporation. The appellant also testified that she attended the 1986 hearing before the Tax Commissioner under duress. She stated she was in a severely physically and an emotionally abusive relationship with Mr. Patterson over a period of years and lied when she said she was an officer of the corporation at the 1986 hearing in order to protect Mr. Patterson. On the other hand, counsel for the Department of Tax and Revenue submitted evidence in support of the Tax Commissioner's position that the appellant was in fact an officer of the corporation. For instance, five letters addressed to the Department of Tax and Revenue, dated between February, 1983, and October, 1983, were signed by the appellant as Secretary of the corporation. The hearing examiner found the appellant admitted at the hearing that the signature on those letter was authentic and she did not indicate the letters were signed under duress. In addition, all the consumers sales and service tax returns submitted into evidence during the time period in question were signed by the appellant as the taxpayer or preparer[.] The hearing examiner also found the appellant admitted at the hearing in this case that, during the assessment periods, she operated the business virtually without any assistance from Mr. Patterson, including writing checks on the corporate bank account for corporate obligations and investing her personal funds in the business. There is clear authority that if an individual is deemed to be an officer of a corporation, such individual may be held personally liable for the consumers sales and service tax of such corporation. W.Va.Code, 11-15-17 (1978), explicitly provides that an officer of a corporation shall be personally liable for any consumers sales and service tax along with any additions, penalties, and interest thereon owed by the corporation. [2] See also 8 W.Va.C.S.R. § 110-15-4a.1 (1993). [3] Those individuals who shall be considered officers for liability purposes are more precisely set forth in 8 W.Va.C.S.R. § 110-15-4a.5 (1993), which states, in relevant part: The officers of a corporation or association that are personally liable for consumers sales tax include any president, vice-president, secretary, or treasurer.... A person such as an incorporator, shareholder, member or employee of a corporation or association is not considered to be an officer subject to personal liability. (Emphasis added). In State ex rel. Haden v. Calco Awning and Window Corp., 153 W.Va. 524, 170 S.E.2d 362 (1969), we determined that W.Va. Code, 11-15-17, was constitutional on its face. [4] In addition to challenging the constitutionality of the statute and arguing they were not liable for the debts of the corporation, the defendants in that case argued they were not officers of the corporation because they were not elected at a duly held board of directors' meeting. In response, we held that [i]t is not a defense to individual liability for one who acts as an officer to assert that he was not properly elected as an officer[.] 153 W.Va. at 527, 170 S.E.2d at 364. Moreover, in Calco Awning, we quoted the following cogent language from 19 Am. Jur.2d Corporations § 1356, which states: `   one who assumes the character of a corporate officer cannot escape liability on the plea that his election to office was illegal. Persons ostensibly acting as officers of a corporation are ordinarily presumed to be rightfully in office; individuals elected and serving as officers may incur the statutory liability for the corporate debts of the company even though irregularities occurred in their election, if in all other respects the evidence brings them within the category of legal default.' 153 W.Va. at 527, 170 S.E.2d at 364-65. (Emphasis added; additional citation omitted). Thus, the test to determine whether an individual may be held statutorily liable for unpaid corporate tax is whether the person has acted as a corporate officer. It does not depend upon whether the person went through the rituals of being duly elected. In this regard, the hearing examiner in the December 23, 1992, order specifically found that the 1980 articles of incorporation submitted by the appellant shed little light on who the corporate officers  including de facto officers  were during the relevant period of time (April, 1983 through December, 1985). In addition to holding individuals who act as corporate officers as personally liable for consumers sales and service tax, W.Va.Code, 11-10-5j (1986), requires that any person who is responsible for collecting and withholding any tax on behalf of the State holds such moneys in trust for the State. W.Va. Code, 11-10-5j, provides, in relevant part: Whenever any person is required by this article (or any article of this chapter administered by this article) to collect or withhold any tax from any person and to pay it over to the tax commissioner, the amount of tax so collected or withheld shall be deemed to be moneys held in trust for the state of West Virginia. (Emphasis added). A person is defined in this article to include any individual or any officer, employee or member of any corporation who has a duty or responsibility to perform an act under article 10 or any other article in chapter 11 which impose taxes administered by the tax commissioner, unless the intention to give a more limited or broader meaning is disclosed by the context of this article or any of the other articles of this chapter which impose taxes administered by the tax commissioner. W.Va.Code, 11-10-4(b). [5] We find that the evidence of the Tax Commissioner is sufficient to justify further proceedings in this case. The need for such a further hearing shall be discussed more fully in Section III, infra. In so doing, we leave to the circuit court's discretion whether the contentions of the appellant, along with any additional evidence she may submit at a hearing, are sufficient to meet her burden of proof and overcome the presumption that she acted as an officer and is liable for payment of the taxes.