Court Opinion

ID: 9488619
Source: CourtListenerOpinion
Date Created: 2023-08-05 12:50:25.981406+00
Date Added: 2024-06-11T17:52:59.502633
License: Public Domain

DAVID A. NELSON, Circuit Judge,
concurring.
I agree that the decision of the district court should be affirmed, but only because the government failed adequately to present in the district court the argument it has presented here.
In simple terms, the government’s argument is this. The Michigan Building Contract Fund Act, adopted in the depths of the Great Depression, antedates both the Social Security Act and federal income tax withholding. Under current conditions, withhold*146ing taxes are simply part of a laborer’s pay. In paying withholding taxes over to the federal government, a contractor is thus paying its employees — something the Michigan Act was obviously not designed to prohibit.
“The design of the Act is to prevent contractors from juggling funds between unrelated projects. By imposing a trust as to monies paid the contractor, the statute insures that funds for a particular project will be used for that project alone.” People v. Miller, 78 Mich.App. 336, 259 N.W.2d 877, 881 (1977). To the extent that a contractor might satisfy a withholding tax obligation arising out of activities on one project with funds received by the contractor in connection with another project, the contractor would be misapplying “encumbered” funds. But funds received by the contractor in connection with a particular project are not “encumbered” in such a way as to prevent the contractor from applying the funds against a withholding tax obligation related to the same project — and this is true even when the obligation is overdue. “The primary duty of the trustee is to insure that trust funds are spent on the particular project for which trust funds were deposited.” Weathervane Window, Inc. v. White Lake Construction Co., 192 Mich.App. 316, 480 N.W.2d 337, 341 (1991).
The burden of demonstrating that funds are encumbered rests on the taxpayer. See Collins v. United States, 848 F.2d 740, 742 (6th Cir.1988); Honey v. United States, 963 F.2d 1083, 1087 (8th Cir.), cert. denied, — U.S. -, 113 S.Ct. 676, 121 L.Ed.2d 598 (1992). An affidavit executed by Daniel Huizinga establishes that the funds which the government contends should have been applied against withholding tax liability were used to pay other “Builder’s Trust Fund Expenses,” but the affidavit does not show that any of these expenses pertained to a project for which the contractor did not have an unsatisfied withholding tax obligation at least as great as the expense in question. Neither is such proof to be found elsewhere in the record.
In the district court the government obliquely suggested that withholding taxes could be paid out of a Michigan Builder’s Trust. The government did not, however, argue that the taxpayers had failed to demonstrate that the expenses in question were incurred on projects other than projects to which the delinquent taxes pertained. If the government had suggested this critical failure in proof to the district court, I do not believe that it would have been proper to grant summary judgment to the taxpayers on the encumbrance issue. But because the argument was not presented to the district court, it should not be entertained here.
“It is well-settled that, absent exceptional circumstances, a court of appeals will not consider an argument by an appellant that was not presented to or considered by the trial court.” Estate of Quirk v. Commissioner, 928 F.2d 751, 757-58 (6th Cir.1991). There do not appear to be any exceptional circumstances militating in favor of a departure from this principle here. Accordingly, I concur in the affirmance of the summary judgment.