Edwin A. And Pauline Teel v. United States

Teel, Granberg and Blakesley were the sole shareholders and officers of Food Giant Management Corporation, Inc. which managed Food Giant No. 1, Inc., Food Giant No. 3, Inc., and Food Giant-Riverton, Inc., which were retail grocery stores located in the state of Washington. The stores encountered financial difficulties and in October, 1966, the state of Washington distrained the inventories to recover unpaid state taxes. On October 17, 1966, Granberg entered into “keeper power” agreements with the state whereby he regained control of the store inventories while assuming personal liability for the state taxes. The agreements apparently limited the right of the company to make expenditures with regard to the three stores. The continued operation of the stores proved unsuccessful, and on November 23, 1966, a receiver was appointed pursuant to a petition in a state suit pending against the stores.

This suit arises over the income and social security taxes withheld from the stores’ employees for the quarter ending September 30, 1966, and for the portion of the following quarter prior to the appointment of the receiver. The Commissioner of Internal Revenue filed a claim with…