Court Opinion

ID: 9592298
Source: CourtListenerOpinion
Date Created: 2023-08-22 00:12:46.153324+00
Date Added: 2024-06-11T09:17:59.665718
License: Public Domain

Senior Appellate Judge Harold R. Banke,
concurring specially.
I fully concur with the majority but write separately to emphasize several points.
To conclude their litigation, the parties executed a 12-page settlement agreement on May 31, 1988. Within this contract, they signed mutual releases and agreed to the transfer of all of Lostocco’s stock ownership in PLI to D’Eramo. Their settlement contract also included an Article 3 which bore the title: “Reimbursements/Assumptions/Indemnities.” This section providing for reimbursements, assumptions, and indemnities contains ¶ 3.02 which states, “Second Parties [D’Eramo and others] (except Ruby) shall pay and hereby agree to indemnify First Parties [including Lostocco] and each of them, from and against any liability for federal taxes arising out of PLI and its operations.” (Emphasis supplied.)
As I read the plain and unambiguous language of ¶ 3.02, D’Eramo and the others agreed not only to indemnify Lostocco against any federal tax liability but also to reimburse or to “pay . . . any liability for federal taxes.” It is undisputed that the liability at issue arose out of the operation of PLI and its apparent underpayment of federal taxes for the tax periods ending 12/31/86 and 3/31/87. PLI incurred this tax liability notwithstanding a tax refund check for more than $18,000 from the IRS made payable to PLI in mid-1987 for PLI’s overpayment of taxes. In his deposition, D’Eramo confirmed that in 1987, PLI did, in fact, receive a refund check of $18,000 from the IRS.
It is also undisputed that after entering into the settlement agreement in May 1988, D’Eramo did not pay the taxes incurred during the operation of PLI in 1986 and 1987, notwithstanding the fact that D’Eramo controlled the operation of PLI after the settlement agreement and despite Lostocco’s repeated letters requesting that he do so. As the unpaid assessments and statutory additions continued to remain unpaid by PLI, interest continued to accrue. Ultimately, due to PLI’s complete failure to pay the outstanding balance, the IRS decided to proceed against Lostocco whom PLI had designated as its corporate president on Form 433-B, “Collection Information State*278ment for Businesses,” completed on 12/8/87 for IRS use.
About ten months after the parties entered into their settlement agreement, the IRS addressed the following notice dated March 27, 1989 to Lostocco:
Our efforts to collect Federal taxes described in the enclosed Form 2751 have not resulted in the full payment of the corporate tax liability. We therefore propose to assess a penalty against you as a person required to collect, account for, and pay over withheld taxes for the above corporation [Performance Leasing, Inc.].
(Emphasis supplied.) The enclosed IRS Form 2751 (a proposed assessment for $18,917.53) stated that it was a “Report of Corporation’s Unpaid Tax Liability.” When the Notice of IRS Levy dated 10/ 18/90 remained unsatisfied by PLI, the IRS proceeded in February 1991 to levy not against PLI or D’Eramo but against Lostocco’s bank accounts.
Without question, the evidence established that D’Eramo breached the terms of the settlement by not paying the amount due to the IRS as set forth on Form 2751, the “Report of Corporation’s [PLI’s] Unpaid Tax Liability.” (Emphasis supplied.) To embrace the strained contract construction employed by D’Eramo, we must overlook the express contract terms by which D’Eramo agreed “to pay . . . any liability for federal taxes.” Although the parties could have drafted their contract terms differently and specified that D’Eramo would not be obligated to pay any interest or penalties relating to the liability for federal taxes, they did not elect to do so. Under the guise of construing the contract, we cannot alter its plain and unambiguous terms.
I am also concerned that the dissent ignores the fact that the IRS elected to proceed against Lostocco personally only after PLI, the corporation being operated by D’Eramo after the settlement agreement was entered, failed to pay the tax liability owed by PLI and sought by the IRS. I cannot imagine how public policy would be furthered by permitting D’Eramo to evade the plain terms of a contract to which he freely assented. Nor can I see how the public interest would be advanced by precluding indemnification or contribution for liability incurred under 26 USC § 6672. Congress implicitly rejected the position of the dissent by amending 26 USC § 6672 in 1996 to add subsection (d) which ensures a statutory right to contribution where more than one person incurs liability under § 6672.
I am authorized to state that Presiding Judge Blackburn joins in this special concurrence.