662 S.E.2d 697
Although the trial court acknowledged Mr. Schmehl's contention that his lack of ultimate authority regarding the disbursement of corporate funds weighed against imposing personal tax liability, the trial court wholly discounted Mr. Schmehl's position, and apparently his credibility, based on a representation made by the State that Mr. Schmehl owned stock in the corporation. In light of the fact that Appellant's stock ownership in Filly's has recently been disestablished, the undue emphasis the trial court placed on this issue in rendering its opinion suggests that the ruling below is untenable:
The Court emphasizes that Petitioner contradicted
himself at the Tax Appeal Office's hearing by stating he did
own stock in Filly's and then a few minutes later denying he
owned stock. Therefore, the Court finds his self-serving
testimony that he was only a contract worker and was not in fact
an officer suspect. For the same reason the Court finds the Tax
Appeal Office's view that Petitioner cannot escape liability by
claiming that superiors had the final authority is rational.
Between the time of the trial court's ruling in this matter and this Court's decision in this case, Stephen P. Lee, Executive Director, Clerk of the Court of the West Virginia Office of Tax Appeals, executed an affidavit pertaining to the evidentiary hearing of this matter. That affidavit contains averments that Mr. Lee conducted an independent review of the audio recording of the transcript and that after listening to the recording at least ten times, he came to the following conclusion:
[I]t is perfectly clear that a clerical error by the transcriptionist is set forth in the written transcript as follows.
On page 16, line 291, of this hearing transcript, the Petitioner's
counsel, Mr. Caryl, is conducting a line of questions toward his
witness, the Petitioner Barry Schmehl. The existing written
transcript states here: Do you have any stock in the
corporation? My thorough review of the audio recording
discloses that the actual question clearly was: She have any
stock in the corporation? In context, this question appears to
be referring to an Angela Frailly, whom the witness just
identified as the vice-president of the corporation.
The significance of this evidentiary conclusion is that the trial court presumed, as its order clearly demonstrates, that when Mr. Schmehl answered yes as to Ms. Frailly's stock ownership, he was responding in reference to his ownership of corporate stock, rather than that of the corporation's vice president.
Relegating any discussion of this issue to a footnote, the majority cursorily acknowledges that [t]he transcript of the hearing in the instant case in which Mr. Schmehl testified suggests, on balance, that he did not own stock in Filly's. . . . and further recognizes that [t]he lower court referred to Mr. Schmehl's inconsistent recorded answers about stock ownership as a factor in upholding the Tax Commissioner. Rather than recognize the significance of this conclusion regarding Mr. Schmehl's lack of stock ownership and the effect the stock ownership issue clearly had on the trial court's decision, the majority chose to deem it immaterial to our ruling.
From the quoted portion of the trial court's order above, there is no question that the trial court chose to discount the arguments Mr. Schmehl raised on the issue of his lack of final authority to make corporate tax payment-related decisions. The court characterized Mr. Schmehl's testimony as self serving and offered the contradictory (See footnote 3) evidence on the issue of his ownership of stock in Filly's as the sole basis for its opinion that Mr. Schmehl was devoid of credibility. From the record before this Court, we have to presume that if the issue of Mr. Schmehl's lack of stock ownership had been known to the trial court, the issue of Mr. Schmehl's credibility, if not the ultimate decision itself, might have been altered.
The issue of whether Mr. Schmehl was merely a titular office holder (See footnote 4) and not one with actual managerial authority is significant. The law is clear that corporate title holding alone is not sufficient to impose personal tax liability for unpaid corporate taxes. See State ex. rel Haden v. Calco Awning & Window Corp., 153 W.Va. 524, 170 S.E.2d 362 (1969) (upholding W.Va. Code § 11-15-17 as constitutional as applied against corporate officers who in fact acted as officers of corporation, rejecting claim that election flaws negated imposition of personal tax liability); Admin. Dec. 06-026C, 06-027W, W.Va. Office of Tax Appeals (April 7, 2006) (ruling that [e]ffective on and after July 15, 1993, the consumers' sales and service tax legislative regulations follow the broad reach of W.Va. Code § 11-15-17  by basing corporate officer liability for unpaid corporate consumers' sales and service tax liability upon the corporate officer's status as a corporate officer, as long as that officer, during the assessment period(s), had any actual managerial authority on behalf of the corporation, that is, he or she was not merely an officer in name only). Consequently, the argument that Mr. Schmehl raised below as to his lack of decision-making authority as to the tax payments in issue was deserving of more scrutiny than that accorded by either the trial court or the majority.
On balance then, I can only reach the conclusion that the decision to impose personal tax liability against Mr. Schmehl _ an individual who held a corporate title but no stock and who did not continuously occupy the position of corporate bookkeeper as one that is arbitrary, capricious, and clearly unreasonable under the facts of this case. Accordingly, I must respectfully dissent from the result reached by the majority.