Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-91-01002/USCOURTS-ca10-91-01002-0/pdf.json

Nature of Suit Code: 871
Nature of Suit: IRS 3rd Party Suits 26 USC 7609 (U.S. plaintiff)
Cause of Action: 

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,, 

FILED..,, 

U •......a States Court (?f Apl:'cab 

UNITED STATES COURT OF APPEALS 

FOR THE TENTH CIRCUIT 

m""' Tenth Circult 

SEP 2 5 1991 

PRESTON L. STEINERT; MARYE. STEINERT, ) 

) 

Petitioners-Appellants, ) 

) 

v. ) 

) 

UNITED STATES GOVERNMENT and ) 

PENNY THOMPSON, Revenue Agent; ) 

DOUGLAS R. JOHNSON, Group Manager; ) 

INTERNAL REVENUE SERVICE; CENTENNIAL ) 

NATIONAL BANK; BANK OF DOUGLAS COUNTY; ) 

CAPITAL FEDERAL SAVINGS AND LOAN; ) 

FIRST INTERSTATE BANK; ARAPAHOE BANK ) 

AND TRUST, ) 

) 

Respondents-Appellees. ) 

ORDER AND JUDGMENT* 

ROBERT L. HOECKER 

Clerk 

No. 91-1002 

(D.C. No. 90-C-12QS) 

(D. Colo.) 

Before ANDERSON, BARRETT, and TACHA, Circuit Judges. 

After examining the briefs and appellate record, this panel 

has determined unanimously that oral argument would not materially 

assist the determination of this appeal. See Fed. R. App. P. 

34(a); 10th Cir. R. 34.1.9. 

submitted without oral argument. 

* 

The case is therefore ordered 

This order and judgment has no precedential value and shall 

not be cited, or used by any court within the Tenth Circuit, 

except for purposes of establishing the doctrines of the law of 

the case, res judicata, or collateral estoppel. 10th Cir. R. 

36.3. 

Appellate Case: 91-1002 Document: 010110090672 Date Filed: 09/25/1991 Page: 1 
Petitioners, Preston L. and Mary E. Steinert, appeal from an 

order of the district court which denied their petition to quash 

and granted the United States' petition for summary enforcement of 

summonses issued against the respondent banks. 

Petitioners argued below that the summonses should be quashed 

because proper authority had not been delegated to the Internal 

Revenue Service (IRS) in order to authorize issuance of the 

summonses. On appeal, petitioners argue· that the district court 

converted the respondent banks' motions to dismiss to motions for 

summary judgment without notice thereby denying them the 

opportunity for discovery. Petitioners also argue they were 

denied their seventh amendment right to a jury trial, were 

erroneously denied witness fees and mileage, and the government 

was on a "fishing expedition." We affirm. 

In order to obtain enforcement of a summons, the summons must 

be issued before a referral for criminal prosecution is made to 

the Justice Department. United States v. LaSalle Nat'l Bank, 437 

U.S. 298, 318 (1978). The Commissioner of Internal Revenue "must 

show that the investigation will be conducted pursuant to a 

legitimate purpose, that the inquiry may be relevant to the 

purpose, that the information sought is not already within the 

commissioner's possession, and that the administrative steps 

required by the Code have been followed." United States v. 

Powell, 379 U.S. 48, 57-58 (1964). "Material is relevant for 

purposes of summons enforcement if it '"might throw light on the 

correctness of taxpayer's returns."'" United States v. 

Southwestern Bank & Trust Co., 693 F.2d 994, 996 (10th Cir. 

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Appellate Case: 91-1002 Document: 010110090672 Date Filed: 09/25/1991 Page: 2 
• 

1982)(quoting United States v. City Nat'l Bank & Trust Co., 642 

F.2d 388, 389 (10th Cir. 198l)(which quoted United States v. 

Davey, 543 F.2d 996, 1000 (2d Cir. 1976))). 

The burden then shifts to the taxpayer. The taxpayer must 

establish that enforcement of the summons would amount to an abuse 

of the court's process. United States v. Balanced Fin. 

Management, Inc., 769 F.2d 1440, 1444 (10th Cir. 1985). He must 

prove lack of good faith in that the government has abandoned its 

pursuit of any possible civil penalties. Id. More than just 

producing evidence calling into question the government's prima 

facie case, the taxpayer must fully bear the burden of proof by 

factually opposing the government's allegations by means of 

affidavits. Id. 

While the government did not clearly state that no referral 

to the Justice Department had been made, petitioners have not 

alleged any such referral nor have they alleged that the 

government has abandoned its pursuit of civil remedies. In order 

to meet its requirements under Powell, the government stated that 

petitioners' tax liabilities were being investigated and that the 

summoned information would be used to identify any financial 

transactions, assets, and liabilities not previously acknowledged 

by petitioners. The government stated that the summoned 

information was not already in the possession of the IRS and that 

all administrative steps had been followed. The government has 

met the Powell requirements. Because we hold that the government 

met the Powell requirements, we necessarily hold that the 

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Appellate Case: 91-1002 Document: 010110090672 Date Filed: 09/25/1991 Page: 3 
• 

government was not on a "fishing expedition." See Southwestern 

Bank & Trust, -693 F.2d at 995-96. 

In their petition to quash, petitioners alleged that the 

inspecting revenue agent "refused to present any type of proof of 

delegated authority to conduct investigation," and "refused to 

discuss the reason behind such an extensive audit." R. 1 at 2. 

Petitioners also alleged their filed tax returns were complete. 

These unsupported allegations are insufficient to meet 

petitioners' burden of proof. See Balanced Fin. Management, Inc., 

769 F.2d at 1444. Further, we have previously rejected 

petitioners' argument that authority to issue summonses has been 

improperly delegated to the IRS. See United States v. Finer, 709 

F.2d 1350, 1350-51 (10th Cir. 1983). 

Petitioners argue that the district court converted the 

respondent banks' motions to dismiss to summary judgment motions 

without notice to them. Even had such a conversion occurred, no 

reversible error is present because petitioners filed their own 

sworn affidavits in response. See Nichols v. United States, 796 

F.2d 361, 364 (10th Cir. 1986). Any conversion by the district 

court without notice was not error. 

Petitioners further argue that by converting the motions to 

dismiss to motions for summary judgment, petitioners were denied 

discovery. "'[D]iscovery is available in summons enforcement 

proceedings only in extraordinary situations.'" Balanced Fin. 

Management, Inc., 769 F.2d at 1445 (quoting United States v. 

Southern Tanks, Inc., 619 F.2d 54, 56 (10th Cir. 1980)). The 

defenses petitioners assert here do not require discovery. Id. 

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Appellate Case: 91-1002 Document: 010110090672 Date Filed: 09/25/1991 Page: 4 
Petitioners argue that they were denied their right to jury 

trial as guaranteed by the seventh amendment. The Supreme Court 

has consistently interpreted the seventh amendment to refer to 

"'suits in which legal rights were to be ascertained and 

determined, in contradistinction to those where equitable rights 

alone were recognized, and equitable remedies were administered.'" 

Granfinanciera, S.A. v. Nordberg, 492 U.S. 33, 41 (1989)(quoting 

Parsons v. Bedford, Breedlove & Robeson, 28 U.S. 433, 447 

(1830))(ernphasis added in Granfinanciera). Here, petitioners, in 

seeking to have the summonses quashed, are seeking equitable 

relief. Further, the government's petition for enforcement of the 

summons is also equitable in nature. Cf. Kennedy v. Rubin, 254 

F. Supp. 190, 194 (N.D. Ill. 1966) ( "[A] suit to compel compliance 

with an administrative subpoena is, by nature of the relief 

sought, a mandatory injunction proceeding, equitable in character, 

and traditionally triable by a Court alone, without the aid of a 

jury."). See Anaya v. United States, 815 F.2d 1373 (10th Cir. 

1987); Balanced Fin. Management, Inc., 769 F.2d at 1440. 1 

Petitioners argue they are entitled to witness fees and 

travel expenses. Payment of witness fees and travel expenses to 

persons summoned to appear before the IRS is authorized. See 26 

u.s.c. § 7610(e). Payment of witness fees and travel expenses is 

1 Even if this were an action historically entitled to a jury 

trial, "[i]t has long been settled that the Seventh Amendment 

right to trial by jury does not apply in actions against the 

Federal Government." Lehman v. Nakshian, 453 U.S. 156, 160 

(1981). A "plaintiff in an action against the United States has a 

right to trial by jury only where Congress has affirmatively and 

unambiguously granted that right by statute." Id. at 168. No 

such right was created here. 

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Appellate Case: 91-1002 Document: 010110090672 Date Filed: 09/25/1991 Page: 5 
not required, however, prior to compliance with a summons. United 

States v. Money, 744 F.2d 779, 780 (11th Cir. 1984). Petitioners 

state they have appeared before a revenue agent, however, they 

have not yet complied with the summonses. 

Petitioners' remaining arguments are likewise without merit. 

The judgment of the United States District Court for the 

District of Colorado is AFFIRMED. 

Entered for the Court 

Stephen H. Anderson 

Circuit Judge 

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Appellate Case: 91-1002 Document: 010110090672 Date Filed: 09/25/1991 Page: 6