Brent Cherne v. U.S. Internal Revenue Service

MEMORANDUM ** Brent T. Cherne and Sheryl L. Cherne appeal the district court’s judgment affirming the bankruptcy court’s decision on summary judgment. The bankruptcy court, overruling the Chernes’ objection to a proof of claim filed on behalf of the Internal Revenue Service (IRS) against the Chernes’ bankruptcy estate under 26 U.S.C. § 6672, granted summary judgment to the IRS and denied the Chernes’ motion for summary judgment. We have jurisdiction under 28 U.S.C. § 158(d). We review de novo both the district court’s judgment and the underlying bankruptcy court’s ruling on summary judgment, In re Raintree Healthcare Corp., 431 F.3d 685, 687 (9th Cir. 2005), and we affirm. Section 6672 -provides that a person with “status, duty, and authority” to remit a company’s collected trust-fund taxes to the IRS can be held personally liable for taxes due that he willfully fails to remit. See Davis v. United States, 961 F.2d 867, 873 (9th Cir. 1992). As a board member of Florence Hospital, the management company’s chief financial officer, and a significant shareholder in the hospital’s ownership group and its management company, Mr. Cherne possessed “the authority required to exercise significant control over” the hospital’s financial affairs. Purcell v. United States, 1 F.3d 932, 937 (9th Cir. 1993). Mr. Cherne participated in discussions concerning which of the hospital’s bills to pay (including, at one point, recommending that other expenses be prioritized over payroll taxes), and he had signature authority on the hospital’s accounts. We hold that Mr. Cherne’s failure to remit taxes due to the IRS thus constituted “a voluntary, conscious and intentional act to prefer other creditors over the United States.” Davis, 961 F.2d at 871 (quoting Klotz v. United States, 602 F.2d 920, 923 (9th Cir. 1979)). Further, we conclude that the encumbered funds exception to section 6672 does not apply. Florence Hospital was under no legal obligation “to use the funds for a purpose other than satisfying the preexisting employment tax liability,” as restrictions on assets imposed by a creditor do not qualify as legal obligations for purposes of this exception. Nakano v. United States, 742 F.3d 1208, 1212 (9th Cir. 2014). We also deny the Chernes’ motion to supplement the record in a separate Order. AFFIRMED. Footnotes [**] This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3.