Unpublished Disposition, 886 F.2d 1319 (9th Cir. 1979)

MEMORANDUM^* 

Gerald G. Burke appeals the district court's denial of his motion for judgment notwithstanding the verdict or for a new trial following a $21,769.38 jury verdict against him. At no time during his trial did Burke move for a directed verdict or make a motion which could be construed as a continuing objection to the sufficiency of the evidence. We agree with the reasoning of the district court and affirm.

Whether the district court properly denied Burke's motion for judgment notwithstanding the verdict in the absence of a motion for a directed verdict is a question of law subject to de novo review.

It is well settled under Rule 50(b)¹  that a party who fails to move for a directed verdict is precluded from seeking judgment notwithstanding the verdict. Farley Transportation Co. v. Santa Fe Trail Transportation Co., 786 F.2d 1342, 1347 (9th Cir. 1985). Under these circumstances, the district court was required to deny Burke's motion for judgment notwithstanding the verdict. Moreover, absent a motion for directed verdict, "a party cannot question the sufficiency of the evidence either before the district court through a motion for judgment notwithstanding the verdict or on appeal." Id. at 1345 (quoting Myers v. Norfolk Livestock Market, Inc., 696 F.2d 555, 558 (8th Cir. 1982)). Because Burke cannot challenge the sufficiency of the evidence on appeal, appellate review is limited to the standard applicable to a motion for new trial.

The district court's denial of the motion for new trial is reversible only if the record contains no evidence in support of the verdict because Burke failed to move for a directed verdict. Farley Transportation, 786 F.2d at 1347. The issue therefore becomes whether the jury had any evidence before it that would support a finding of liability under section 6672(a) of the I.R.S. code (26 U.S.C.). Section 6672 sets forth two elements to liability. First, the taxpayer must be a "responsible person," i.e., a person required to collect, account for, and pay over the payroll taxes. Maggy v. United States, 560 F.2d 1372, 1374 (9th Cir. 1977), cert. denied, 439 U.S. 821 (1978). Second, the responsible person must "willfully" refuse to pay the taxes. Id.

Liability as a responsible person is not limited to those individuals who physically prepare tax returns, pay wages, or withhold taxes. Rather, liability is imposed upon those persons actually responsible for the employer's failure to withhold and pay over the tax. Pacific National Insurance Co. v. United States, 422 F.2d 26, 31 (9th Cir.), cert. denied, 398 U.S. 937 (1970).

Burke argues that the December 27, 1979 agreement that designated Combs as the successor in interest to the San Diego contract makes Combs the only person responsible for withholding and paying the tax. In his testimony, Burke claimed that he served only as a consultant on payroll matters. However, the government offered evidence showing that Burke signed all the payroll checks for the employees working on the San Diego contract and also signed all the checks for payment of creditors' claims. In addition, Burke signed checks made payable to himself to repay loans he had advanced to Urban Laboratories.

Evidence that Burke signed checks to pay major creditors, including himself, belies his argument that Combs controlled the expenditure of funds on the San Diego contract. Certainly, the jury could choose not to believe Burke's testimony that Combs bore sole responsibility for the payroll in light of the evidence summarized above. Furthermore, Combs also testified that he disassociated himself from the San Diego contract after Burke became involved again. The jury could also choose to accept Combs' story and reject Burke's.

Burke also argues that his failure to pay the taxes cannot be willful because it was unintentional. However, willfulness in this context does not translate into intent to defraud. In Teel v. United States, 529 F.2d 903 (9th Cir. 1976), the court held that for nonpayment to be willful there must be either knowledge of nonpayment or reckless disregard of whether payments were being made. Id. at 905.

Evidence at trial showed that only Burke could issue checks on his own signature on the account from which all the disbursements for the San Diego contract were made. Combs could issue a check only when Burke cosigned it. Burke thus knew that Combs had not issued any checks to the government in satisfaction of the taxes owed. Furthermore, Burke admitted in his own testimony that he knew in May 1980 that Combs had failed to pay the withholding taxes due for the second quarter of 1980. In light of Burke's knowledge that Combs was not authorized to issue checks and that Burke, himself, had issued all checks since May 1980, the jury could properly conclude that Burke's conduct amounted to reckless disregard or obvious risk that the withholding taxes would not be paid.

Burke's excuse that his conduct was not willful because he lacked sufficient funds is not persuasive. The record establishes that Burke used funds to pay other creditors, including himself, when the third quarter taxes were due.² 

Burke raises several equitable defenses which he claims excuse his failure to pay the third quarter taxes. He argues that the statute of limitations and the equitable defense of laches bar the government's action and that the government is estopped from collecting the assessment. Because Burke failed to raise the arguments regarding the statute of limitations, equitable estoppel, and laches in the district court, he may not rely on them here. Rule 8(c), Federal Rules of Civil Procedure; see United State v. DeTar, 832 F.2d 1110, 1114 (9th Cir. 1987).

AFFIRMED.