United States for an accounting and a refund of an
unspecified amount. The United States filed an answer and counterclaim
for a trust fund liability balance of $39,464.11. The United States moves
for summary judgment, and Mr. Pinto filed a cross-motion for summary
judgment. I grant the government's motion and deny Mr. Pinto's motion.
Both the government and Mr. Pinto move for summary judgment, which is
proper only when the record "show[s] that there is no genuine issue as to
any material fact and that the moving party is entitled to a judgment as
a matter of law." Fed.R.Civ.P. 56(c) In determining whether a genuine
issue of material fact exist, I must construe all facts in the light most
favorable to the non-moving party and draw all reasonable and justifiable
inferences in its favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
255 (1986). On cross-motions for summary judgment, I give separate
consideration to the evidence of each party and the inferences to be
drawn from it. See Hendricks-Robinson v. Excel Corp., 154 F.3d 685, 692
(7th Cir. 1998).
However, I dispose of Mr. Pinto's motion without reaching its merits.
Local General Rule 56.1(a) requires any party moving for summary judgment
to submit "a statement of material facts as to which the moving party
contends there is no genuine issue and that entitle the moving party to a
judgment as a matter of law." The statement of material facts "shall
consist of short numbered paragraphs, including within each paragraph
specific references to the affidavits, parts of the record, and other
supporting materials relied upon to support the facts set forth in that
paragraph. Failure to submit such a statement constitutes grounds for
denial of the motion." Id. Failure to comply with the local rules is not
merely a "harmless technicality," but can be a "fatal" mistake. See
Waldridge v. American Hoechst Corp., 24 F.3d 918, 924 (7th Cir. 1994).
The Seventh Circuit has repeatedly upheld the strict application of Local
Rule 56.1. See Servin v. GATX Logistics, Inc., 187 F.R.D. 561, 562-63
(N.D. Ill. 1999) (Gettleman, J.) (citing cases).
Although Mr. Pinto includes a statement of facts in his motion that
consists of numbered paragraphs, and he attaches evidence to it, he does
not provide any citations to the record in the statement of facts. The
Rule 56.1(a) statement is a "roadmap" to these facts, without which I
"should not have to proceed further, regardless of how readily [I] might
be able to distill the relevant information from the record on [my] own."
Waldridge, 24 F.3d at 923. Mr. Pinto's statement of facts does not comply
with Rule 56.1, so his motion is denied. See Servin, 187 F.R.D. at 563;
see also Prudential Ins. Co. of America v. Tomaszek, No. 90 C 6892, 1992
WL 26734, at *2 (N.D. Ill. Feb. 7, 1992) (Shadur, J.) (noting that
predecessor to Rule 56.1(a) "expressly permits the denial of a summary
judgment motion for non-compliance with its terms").
Employers are required to withhold federal taxes from employee wages in
trust for the United States government. 26 U.S.C. § 3102 (a),
3402(a). These taxes are commonly referred to as "trust fund taxes." See
United States v. Energy resources Co., Inc., 495 (U.S. 545, 546-47
(1990). If an employer fails to pay trust fund taxes, § 6672 of the
Internal Revenue Code, known as the "responsible person penalty
provision," see Buffalow v. United States, 109 F.3d 570, 573 (9th Cir.
1997), allows the government to collect a sum equal to the amount owed
"directly from the officers or
employees of the employer who are
responsible for collecting the tax." >Energy Resources, 495 U.S. at 547;
26 U.S.C. § 6672 (a)
Richard Pinto was the president and 100 percent owner of Pinto
Brothers. Pinto Brothers tailed to pay trust fund taxes for, inter alia,
the second quarter of 1991 and all four quarters of 1994. When Pinto
Brothers went out of business, it assigned its assets for the benefit of
its creditors. Eight days before the scheduled sale of assets in June
1994, Mr. Pinto formed a new business, Pinto Construction, of which he is
a 60 percent owner and his wife, Doris Pinto, is a 40 percent owner. The
government, says that the assets of Pinto Brothers were assigned to Pinto
Construction, based on a statement of intent to assign the assets to
Mrs. Pinto in an IRS report. Mr. Pinto denies that Pinto Construction is
the assignee of Pinto Brothers (though he provides no evidence to support
the denial),*fn1 but any dispute is immaterial for reason I explain
On August 6, 1995, Mr. Pinto was assessed personal liability in the
amount of $214,702.77*fn2 for the trust fund tax penalties of Pinto
Brothers from the third and fourth quarters of 1993 as a "responsible
person" under § 6672. Beginning in August 1994, Pinto Construction
made monthly payments of $5,000 toward the trust fund tax liability of
Pinto Brothers. Each check from Pinto Construction bore the following
We hereby tender payment of $5,000.00 and specifically
demand that such funds be applied to the trust fund
tax liability of Pinto Bros. Construction, Inc., FEIN
Def. Ex. 5. None of the $5,000 payments was designated for a particular
quarter of trust fund tax liability. Pinto Construction made a total of
thirty-seven monthly payments of $5,000.*fn3 The IRS allocated these
payments among all four quarters of tax liability for 1993. Mr. Pinto's
civil penalty account, for his personal liability, received
cross-reference credit for the twenty-nine monthly payments made after
his assessment on April 6, 1995. A total of $124,500 of the monthly
payments were originally allocated to the third and fourth quarters of
1993. Def. Ex. 5, ¶ 14.
Mr. Pinto also made payments personally, both voluntarily and in
response to a levy, against his civil liability in the amount of
$143,238.66. Def. Ex. 5, ¶ 10. The government does not say whether
Mr. Pinto specifically designated any of his individual payments, but all
of them were allocated to the trust fetid tax liability for the fourth
quarter of 1993, and Mr. Pinto does not object to this allocation.
As a result of the individual payments by Mr. Pinto and the
cross-referenced payments by Pinto Construction, the balance of Mr.
Pinto's individual civil liability was
reduced to zero. Id. ¶ 15.
Mr. Pinto claims that he has overpaid his personal civil liability and
seeks a refund. the government admits that, when the IRS assessed the
$214,702.77 penalty on Mr. Pinto on April 6, 1995, it failed to account
for $32,000 of payments toward the liability for the third and fourth
quarters of 1993 made by Pinto Construction before the individual
assessment. Thus the government says that the assessment of personal
liability on April 6, 1995, ought to have been for $182,102.71.*fn4 The
total payments by Mr. Pinto (his individual payments and the
cross-referenced payments as originally allocated) amount to $267,738.66
— $53,035.89 more than the original assessment of $214,702.77 and
$85,035.95 more than the corrected assessment of $182,702.71.
Pinto Construction stopped making the $5,000 monthly payments after
Mr. Pinto's individual civil liability was reduced to zero. The
government claims that it is entitled now to reallocate the undesignated
monthly payments to Pinto Brothers' trust fund liability to the first two
quarters of 1993, for which Mr. Pinto was not assessed a civil penalty,
to maximize the collectibility of the trust fund tax liability. By the
government's calculations, then, if the $124,500 originally allocated to
the third and fourth quarters of 1993 is reallocated to the first and
second quarters of 1993, The total payments against Mr. Pinto's
individual civil liability are $143,238.66, leaving a $39,464.05*fn5
shortfall in Mr. Pinto's civil liability for the third and fourth
quarters of 1993.
Section 6672 expresses a congressional intent to allow collection of
trust fund taxes, and the IRS has a judicially sanctioned policy of
maximizing collection. See United States v. Schroeder, 900 F.2d 1144,
1146 n. 1 (7th Cir. 1990). When a taxpayer submits a voluntary payment,
he stay designate the particular liability to which the payment should be
applied, Davis v. United States, 961 F.2d 857, 878 (9th Cir. 1992), but
when a taxpayer does not designate the particular liability, the may
allocate the payment as it sees fit, id.; Schroeder, 900 F.2d at 1149;
Sotir v. United states, 978 F.2d 29, 30 (1st Cir. 1992).
In Davis, the plaintiff was the president. and major shareholder of a
company that owed both trust fund taxes and non-trust fund taxes. The
company began to pay the delinquent taxes on an installment basis, but
did not designate to which quarter of liability the payments should
apply. 961 F.2d at 870. Davis was assessed an individual civil penalty for
the trust fund taxes, but prior to the assessment, the IRS discovered
that the company lacked any assets to satisfy the non-trust fund
liability. Id. The IRS reallocated funds that were originally applied to
the trust fund taxes to cover the company's non-trust fund liability.
Id. The effect of the reallocation was to increase the amount of the
trust fund civil, penalty assessed against Davis from $3,000 to nearly
$19,000. Id. at 871.