Present: All the Justices
JAMES LEONARD GIBSON
v. Record No. 072023 OPINION BY JUSTICE DONALD W. LEMONS
JUNE 6, 2008
COMMONWEALTH OF VIRGINIA
FROM THE COURT OF APPEALS OF VIRGINIA
In this appeal, we consider whether a conviction under
Code § 58.1-1815 requires proof of both a failure to
truthfully account for and a failure to pay withholding tax.
I. Facts and Proceedings Below
In 2000, James Leonard Gibson (“Gibson”) registered
Leonard Gibson Excavating, Inc. (“Gibson Excavating”) for
sales and withholding taxes with the Virginia Department of
Taxation. Gibson, the president of Gibson Excavating, was the
person listed as responsible for the sales and withholding
taxes. Although the required forms were filed, Gibson failed
to pay withholding taxes for the periods of October 16, 2001
through August 22, 2002 in the amount of $278.93, November 22,
2002 through May 7, 2003 in the amount of $35,314.94, and June
11, 2003 through November 24, 2003 in the amount of
$12,464.06. The underlying taxes for the period of October
16, 2001 through August 22, 2002 had been paid; however, the
remaining amount owed was for penalties and interest incurred.
Gibson testified that the company simply did not have money to
pay the obligations. However, there was also evidence that
Gibson paid himself a salary of $116,592.00 in 2002, yet
underpaid the tax obligations by over $22,000.00.
Gibson was charged with three misdemeanor counts of
failure to pay tax, in violation of Code § 58.1-1815, for the
three periods that withholding taxes were not paid. He was
convicted in the General District Court of the County of
Stafford and then appealed to the Circuit Court of the County
of Stafford. In an order entered August 24, 2004 in the
circuit court, the trial court found “the evidence would
support a finding of guilty” but “defer[red] final disposition
until August 15, 2005.” Deferral was further delayed and on
December 15, 2005, the trial court entered an order finding
Gibson guilty of the charges and continued the case for
sentencing. Gibson was sentenced to twelve months in jail for
each of the three convictions. The entirety of the twelve-
month sentence was suspended for two of the convictions and
all but 90 days was suspended on the third conviction.
Gibson appealed to the Court of Appeals of Virginia which
affirmed the trial court’s judgment and Gibson’s convictions.
Gibson v. Commonwealth, 50 Va. App. 285, 649 S.E.2d 214
2
(2007). Gibson appeals to this Court on four assignments of
error 1 :
1. The trial court erred by finding one guilty of a
violation of section 58.1-1815 of the Code of Virginia
when the person truthfully accounts for his tax
obligation, but is unable to pay the obligation and does
not take any steps to avoid the obligation.
2. The Court of Appeals erred by not addressing whether the
term “tax” in section 58.1-1815 includes penalties and
interest assessed by the taxing authority.
3. The trial court erred by finding that an individual who
fails to pay penalties and interest assessed by a taxing
authority, although the underlying tax had been paid, is
guilty of a violation of section 58.1-1815 of the Code of
Virginia.
4. The courts erred by not recognizing the courts [sic]
authority to defer findings of guilt absent a specific
legislative grant of authority.
II. Analysis
A. Deferral
The circuit court’s August 24, 2004 order stated “that
the evidence would support a finding of guilt” but “defers
final disposition until August 15, 2005 . . . to which time
this case is continued, and the bond is continued.” The order
continued the case but did not enter a final disposition.
Additionally, the record in this case does not reveal any
particular disposition that would be entered after deferral.
1
Gibson did not file transcripts of the proceedings
below; rather he proceeds on appeal with a written statement
of facts in lieu of a transcript pursuant to Rule 5:11(c).
3
Gibson’s argument that it was understood that the charges
would be dismissed at the end of the year is unsupported by
the record.
Gibson received the initial deferral of disposition for
one year; however, no request for further deferral appears on
the record. Although the December 15, 2005 order recites,
“counsel for the defendant noted his exceptions to the
ruling,” nothing appears in the order or in the written
statement of facts revealing what, if any, objections Gibson
made. After the December 15th order was entered “find[ing]
the defendant guilty,” no additional request for deferral was
made. Additionally, the final sentencing order does not
reveal that a request for additional deferral was made.
Finally, no objection was made to the sentencing order.
Gibson further alleges that he received a “double
sentence,” namely a deferred sentence and then an adjudication
of guilt with sentences of confinement in jail. Gibson
mischaracterizes what happened in the trial court. The
initial August 24, 2004 order did not impose a sentence. The
record does not reflect any understanding or agreement that
the charges would be dismissed at the end of the deferral
period.
Finally, Gibson argues that he is entitled to “the
suspended imposition of sentence initially ordered” on August
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24, 2004 pursuant to “the plethora of options available to a
trial court to dispense justice” under Code § 19.2-303.
However, Code § 19.2-303 is inapplicable to this case because
its terms only apply “[a]fter conviction.” Gibson was not
convicted on August 24, 2004; rather, he was convicted on
December 15, 2005.
Gibson’s fourth assignment of error is based upon a
faulty premise concerning what actually transpired in the
trial court. On the only occasion that Gibson requested a
deferral of disposition to a later date, it was granted by the
trial court. The record reveals no additional requests or
motions for deferral. Consequently, the trial court never
denied such a request or motion. Accordingly, the issue
presented in Gibson’s fourth assignment of error, namely that
the trial court “erred by not recognizing the courts [sic]
authority to defer findings of guilt absent a specific
legislative grant of authority” is not properly before us
because the record reflects no ruling of the trial court to
that effect. We note that although the Court of Appeals
addresses this issue in its opinion, the question was not
properly before the Court of Appeals for the same reason. 2
2
See also Moreau v. Fuller, 276 Va. ___, ___ n.5, ___
S.E.2d ___, ___ n.5 (2008) (this day decided) (overruling
Gibson v. Commonwealth, 50 Va. App. 285, 649 S.E.2d 214 (2007)
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B. Tax Issues
1. Definition of “Tax”
Gibson’s second and third assignments of error are based
upon arguments that were not made in the trial court.
Gibson’s argument that the term “tax” as used in Code § 58.1-
1815 does not include penalties and interest was not preserved
in the statement of facts or in the circuit court’s orders and
no transcript was filed. There is no indication in the record
that Gibson made these arguments to the circuit court.
Therefore, Gibson waived these arguments pursuant to Rule
5:25. “The purpose of Rule 5:25 is to afford the trial court
the ability to address an issue. If that opportunity is not
presented to the trial court, there is no ruling by the trial
court on the issue, and thus no basis for review or action by
this Court on appeal.” Riverside Hospital v. Johnson, 272 Va.
518, 526, 636 S.E.2d 416, 420 (2006).
2. Effect of Bankruptcy
Gibson Excavating filed for bankruptcy protection under
Chapter 11 of the United States Bankruptcy Code. 11 U.S.C.
§ 1101 et seq. The proceeding was converted to a Chapter 7
proceeding and it “was during this liquidation process that
the withholding tax assessments for the final charge were
to the extent that it is inconsistent with the holding of that
case).
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accumulated.” Gibson argues that he “clearly had no authority
or control, and consequently ‘willfulness’ for the failure for
withholding taxes to be paid when a corporation was in the
control of a bankruptcy trustee.”
This argument is made for the first time before this
Court. The argument was not made at the trial court nor was
it made in the Court of Appeals. Accordingly, we will not
consider the argument made for the first time before this
Court. Rule 5:25.
3. Scope of Code § 58.1-1815
Code § 58.1-1815 provides, in pertinent part, “Any . . .
person required to collect, account for and pay over any
sales, use or withholding tax, who willfully fails to collect
or truthfully account for and pay over such tax . . . shall
. . . be guilty of a Class 1 misdemeanor.”
Under well-established principles, an issue of
statutory interpretation is a pure question of law
which we review de novo. When the language of a
statute is unambiguous, we are bound by the plain
meaning of that language. Furthermore, we must
give effect to the legislature's intention as
expressed by the language used unless a literal
interpretation of the language would result in a
manifest absurdity. If a statute is subject to
more than one interpretation, we must apply the
interpretation that will carry out the legislative
intent behind the statute.
Conyers v. Martial Arts World of Richmond, Inc., 273 Va. 96,
104, 639 S.E.2d 174, 178 (2007) (citations omitted).
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Gibson argues that to violate the statute one would have
to fail to collect or truthfully account for and fail to pay
over the tax. We have not previously addressed the elements
of the crime proscribed in Code § 58.1-1815. However, a
federal statute is worded in much the same way: “any person
required under this title to collect, account for, and pay
over any tax imposed by this title who willfully fails to
collect or truthfully account for and pay over such tax shall
. . . be guilty of a felony.” 26 U.S.C § 7202 (2000). The
United States Courts of Appeals for the Second Circuit, the
Third Circuit, and the Ninth Circuit have interpreted the
language of 26 U.S.C. § 7202 in the conjunctive. United
States v. Gilbert, 266 F.3d 1180, 1183-84 (9th Cir. 2001);
United States v. Thayer, 201 F.3d 214, 220-21 (3rd Cir. 1999);
United States v. Evangelista, 122 F.3d 112, 121 (2d Cir.
1997). In order to comply with statutory obligations, a
responsible party must account for and pay over a tax, and
this requirement is not satisfied unless both obligations have
been met. The “plain language of the disputed passage in [26
U.S.C.] § 7202 creates a dual obligation – to ‘truthfully
account for and pay over’ trust fund taxes – that is satisfied
only by fulfilling both separate requirements. Accordingly,
the command of the statute is violated by one ‘who willfully
fails’ either to ‘account for’ or to ‘pay over’ the necessary
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funds.” Evangelista, 122 F.3d at 121. See also Gilbert, 266
F.3d at 1183-84; Thayer, 201 F.3d at 220-21.
Gibson’s interpretation of the statute would allow a
person to collect the taxes and use them for his own benefit
without penalty under Code § 58.1-1815. Such a result cannot
be the intent of the General Assembly in enacting this Code
provision particularly in light of federal case law to the
contrary interpreting identical language. We hold the Court
of Appeals did not err in affirming Gibson’s convictions.
Affirmed.
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