Source: https://casetext.com/case/g-m-leasing-corp-v-united-states-3
Timestamp: 2019-11-21 12:02:04
Document Index: 362860452

Matched Legal Cases: ['§ 6321', '§ 2', '§ 6861', '§ 6861', '§ 6861', '§ 7701', '§ 301', '§ 301', '§ 6321', '§ 6321', '§ 6331', '§ 923', '§ 6331', '§ 6331']

G. M. Leasing Corp. v. United States, 429 U.S. 338 | Casetext
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G. M. Leasing Corp.v.United States
U.S.Jan 12, 1977
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holding that IRS agents did not violate the Fourth Amendment by seizing vehicles to satisfy a debt because the seizures occurred on public streets and therefore did not violate the debtor’s privacy rights.
Summary of this case from Cahoo v. SAS Analytics Inc.
holding that the government may "properly regard" an alter ego's assets as the delinquent taxpayer's assets for purposes of 26 U.S.C. § 6321
Summary of this case from Adam v. U.S.
holding that warrantless seizure of automobile pursuant to tax levy from public area did not involve invasion of privacy
Argued October 4, 1976 Decided January 12, 1977
1. This Court granted certiorari limited to the Fourth Amendment issue and thus accepts the Court of Appeals' determinations that the assessments and levies were valid and that petitioner was the taxpayer's alter ego. Petitioner does not challenge any other aspect of probable cause to believe that the items seized were properly subject to seizure, and therefore the only question before the Court is whether warrants were required. P. 351.
2. The warrantless automobile seizures, which occurred in public streets, parking lots, or other open areas, involved no invasion of privacy and were not unconstitutional. Murray's Lessee v. Hoboken Land Improv. Co., 18 How. 272. Pp. 351-352.
3. The warrantless entry into the privacy of petitioner's office violated the Fourth Amendment, since "except in certain carefully defined classes of cases, a search of private property without proper consent is `unreasonable' unless it has been authorized by a valid search warrant." Camara v. Municipal Court, 387 U.S. 523, 528-529. Pp. 352-359.
4. Of the various remedy issues raised by petitioner, only the issue of damages against the individual agents need be addressed under the limited grant of certiorari and in the present posture of the case. Petitioner has shown violation of its constitutional rights. Whether, as the Government contends, petitioner is not entitled to money damages if the agents acted in good faith should be considered by the courts below in the light of all the facts, including IRS procedures based upon Murray's Lessee, supra, the existence of proof of any injury to petitioner resulting from the entry and temporary seizure of books and records, and the immunity issue reserved in Bivens v. Six Unknown Fed. Narcotics Agents, 403 U.S. 388. Pp. 359-360.
We granted certiorari in this case, 423 U.S. 1031 (1975), limited to the Fourth Amendment issue arising in the context of seizures of property in partial satisfaction of income tax assessments.
In 1971 Norman was tried and convicted in the United States District Court for the District of Colorado on two counts of aiding and abetting a misapplication of funds from a federally insured bank, in violation of 18 U.S.C. § 2 and 656. He was sentenced to two concurrent two-year terms of imprisonment. On appeal, his conviction was affirmed. United States v. Cooper, 464 F.2d 648, 651-652 (CA10 1972). This Court denied certiorari. 409 U.S. 1107 (1973).
Norman and his wife, on November 15, 1971, filed a joint income tax Form 1040 for the calendar year 1970 on which, apart from their names, address, social security numbers, occupations, and dependents, they indicated only that their tax for that year, "[e]stimated," was $280,000. The sum of $289,800 was transmitted when the form was filed and was placed by the Internal Revenue Service in a suspense account for future credit. Apart from the naked figure of estimated tax, the return contained no information as to income or deductions. App. 94.
Upon Norman's becoming a fugitive, the Service activated its investigation. On March 19, it determined deficiencies in Norman's income tax liability for 1970 and 1971 in the amounts of $406,099.34 and $545,310.59, respectively. App. 95. These were based solely on information from third parties concerning the amount of stock sales Norman made through various brokerage houses. Id., at 30, 67. Because of Norman's failure to file appropriate returns and because of his fugitive status, collection of the taxes as so determined was regarded by the Service as in jeopardy; the deficiencies therefore, were assessed forthwith pursuant to the authority granted by § 6861(a) of the Internal Revenue Code of 1954, 26 U.S.C. § 6861 (a).
The notice which is required after jeopardy assessment by § 6861(b) of the Code enables the taxpayer to file a petition with the United States Tax Court for a redetermination of the deficiency. See Laing v. United States, 423 U.S. 161 (1976). A timely notice was sent to Norman, and a petition was filed on his behalf with the Tax Court. His case awaits trial there (Docket No. 6000-73).
On or about March 21, two days after the jeopardy assessments, revenue officers, without a warrant, seized several automobiles. Among them were a 1972 Stutz, a Rolls Royce Phantom V, a 1930 Rolls Royce Phantom I, two 1971 Stutzes, and a Jaguar. Three were taken at two different locations in Salt Lake City; two at the Century Plaza parking lot in Los Angeles, Cal.; and one near Norman's residence in Salt Lake City. Id., at 121, 129; Tr. of Oral Arg. 13-14. None of the cars was on property in which petitioner had an interest. All were registered in petitioner's name. App. 75-76. The officers left a Chevrolet and a station wagon for the personal use of Mrs. Norman and her family. Id., at 58.
Applegate entered the cottage. He observed that its outward appearance was such that it could be a residence. He noticed a kitchen. He instructed the officers not to proceed with the seizure of any property there until the status of the cottage could be confirmed. Id., at 81, 23-24. The officers then left the cottage without taking anything, and its lock was replaced. Id., at 82.
The Internal Revenue Service Manual, ¶ 5341.1, instructs that if an occupant of a private residence denies a revenue officer permission to enter, the officer should not attempt entry by force.
Information then came to Applegate, primarily from a Mr. Redd who was a contractor for Norman, that the cottage was a place of business and not a residence. Id., at 79. In addition, there was activity at the cottage that night; the lights were on and boxes were being moved. The next morning the Stutz was not in the garage. Id., at 83. Sometime during the next two days, a decision was made to seize the cottage, its furnishings and any other assets there. On March 23, agents, acting without a warrant, and with the assistance of locksmiths and the equipment of a private van and storage firm, entered the cottage and removed its remaining contents, including furnishings and books and records. An inventory was made of the property so seized. The agents hoped to examine the books and records to see if they contained stock certificates or information concerning the location of other assets. The Regional Counsel, however, instructed them to pack the books and records, seal the boxes, and remove them to a safe storage place. Id., at 83-88.
Title to the cottage was in the name of Real Estate, Inc., a corporation the Service determined to be the alter ego of Mrs. Norman. Id., at 97. That corporation is not a party to the present suit and the relief petitioner requests does not include the return of the cottage.
Shortly thereafter, the Service returned to the cottage the originals of the records and documents that had been seized. In the meantime, however, they had been photocopied. By a second amendment to petitioner's complaint, id., at 124, punitive damages, among other relief, were requested.
At the ensuing trial before the court without a jury there was testimony that Norman himself originally held title to some of the automobiles registered in petitioner's name, id., at 37; that petitioner had no employees and did not lease any cars, id., at 37, 39; that petitioner's only assets were luxury or vintage model automobiles; that the cars had not been transferred to it until at or near the end of 1972; and that petitioner never issued any stock, held any director's meetings, or engaged in any business. Id., at 43-45.
The District Court entered judgment for petitioner and for the intervenor. It found that the premises in question were the offices of petitioner and the residence of the intervenor; that the revenue-officer defendants had no search warrant; that they forcibly entered the premises on March 23 and again on March 25; that they made the entry, search, and seizure "knowing full well that they were violating the rights" of petitioner, the intervenor, "and others"; that Agent Clayton committed the entry "maliciously"; that the defendants returned the books and records that had been seized but photocopied them and retained the photocopies; that the defendants levied upon and seized all the assets of petitioner, including seven automobiles and a bank account; that they disposed of two of the automobiles and stored the others in Salt Lake City; that the assessments of taxes, penalties, and interest against Norman and his wife for 1970 and 1971 were erroneous; that Norman and his wife had no liability for federal income tax, penalties, or interest for those years; that petitioner had "engaged in substantial business activity in preparation for its business purpose of leasing automobiles"; that it was not controlled solely by Norman or his wife; that it was not an alter ego of Norman or his wife; and that it was not their nominee. The court concluded that the revenue-officer defendants committed an illegal search and seizure of petitioner's offices and the intervenor's residence, in violation of the Fourth Amendment; that the photocopies of the seized books and records in the possession of the Service should be destroyed because any use of them would be illegal; that petitioner and the intervenor were entitled to general and punitive damages in amounts to be determined; that the Government's counterclaim should be dismissed with prejudice; that the Service should return all the seized assets of petitioner and of the intervenor; and that judgment should be awarded against the United States in favor of petitioner for the value of the two automobiles that had been sold. Id., at 136-142. Judgment, including injunctive relief for the return of the automobiles and the books and records, and for the destruction of the photocopies, was entered accordingly. Id., at 142-144.
"The refusal to pay authorized appellants to collect the tax by levy, and this included the power of `seizure by any means.' Thus appellants were acting pursuant to statute and did not commit an illegal search. The trial court's order returning the assets and suppressing the documents is improper." (Footnote omitted.) Id., at 941.
A. Section 6331(a) of the 1954 Code authorizes the Secretary or his delegate to collect taxes "by levy upon all property and rights to property" belonging to a person who "neglects or refuses to pay" any tax "or on which there is a lien . . . for the payment of such tax." Section 6331(b), and § 7701(a) (21) as well, define "levy" as including "the power of distraint and seizure by any means." Both real estate and personal property, tangible and intangible, are subject to levy. Levy upon tangible property normally is effected by service of forms of levy or notice of levy and physical seizure of the property. Where that is not feasible, the property is posted or tagged. Because intangible property is not susceptible of physical seizure, posting, or tagging, levy upon it is effected by serving the appropriate form upon the party holding the property or rights to property. See Treas. Reg. § 301.6331-1(a)(1), 26 C.F.R. § 301.6331-1 (a)(1) (1976). See also Phelps v. United States, 421 U.S. 330, 335-337 (1975). And the Court has recognized that compulsion on the part of the Service occasionally is required in the enforcement of the revenue laws. See United States v. Bisceglia, 420 U.S. 141, 145 (1975). Indeed, one may readily acknowledge that the existence of the levy power is an essential part of our self-assessment tax system and that it enhances voluntary compliance in the collection of taxes that this Court has described as "the life-blood of government, and their prompt and certain availability an imperious need." Bull v. United States, 295 U.S. 247, 259 (1935).
"The term `levy' as used in this title includes the power of distraint and seizure by any means. A levy shall extend only to property possessed Page 350 and obligations existing at the time thereof. In any case in which the Secretary or his delegate may levy upon property or rights to property, he may seize and sell such property or rights to property (whether real or personal, tangible or intangible)."
Under § 6321 of the Code, the assessments against Norman were a lien in favor of the United States upon all property belonging to Norman. If petitioner was Norman's alter ego, it had no countervailing effect for purposes of his federal income tax. Griffiths v. Commissioner, 308 U.S. 355 (1939); Higgins v. Smith, 308 U.S. 473, 476 (1940). It would then follow that the Service could properly regard petitioner's assets as Norman's property subject to the lien under § 6321, and the Service would be empowered, under § 6331, to levy upon assets held in petitioner's name in satisfaction of Norman's income tax liability. See United States v. Plastic Electro-Finishing Corp., 313 F. Supp. 330, 333-334 (EDNY 1970), aff'd, 71-1 USTC ¶ 9421 (CA2 1971).
B. Our grant of certiorari was limited to the Fourth Amendment issue, and we declined to review petitioner's and Norman's son's claims that the assessments and levies should have been voided and that petitioner was not Norman's alter ego. Pet. for Cert. 2, 3. We therefore approach this case accepting the Court of Appeals' determinations that the assessments and levies were valid and that petitioner was Norman's alter ego. Those facts necessarily establish probable cause to believe that assets held by petitioner were properly subject to seizure in satisfaction of the assessments. Petitioner does not claim that there was no probable cause to believe that the automobiles were held by petitioner, nor does it claim that there was no probable cause to believe that its offices would contain other seizable goods. There being probable cause for the search and seizures, the only questions before the Court are whether warrants were required to make "reasonable" either the seizures of the cars or the entry into and seizure of goods in the cottage.
C. The seizures of the automobiles in this case took place on public streets, parking lots, or other open places, and did not involve any invasion of privacy. In Murray's Lessee v. Hoboken Land Improv. Co., 18 How. 272 (1856), this Court held that a judicial warrant is not required for the seizure of a debtor's land in satisfaction of a claim of the United States. The seizure in Murray's Lessee was made through a transfer of title which did not involve an invasion of privacy. The warrantless seizures of the automobiles in this case are governed by the same principles and therefore were not unconstitutional. See also Hester v. United States, 265 U.S. 57 (1924) (liquor seized in open field).
If additional support were needed for this result, it is found in the Court's decisions sustaining the right of the Government to collect taxes by summary administrative proceedings. Thus, in Bull v. United States, 295 U.S. 247, 260 (1935), it was stated that a tax assessment "is given the force of a judgment, and if the amount assessed is not paid when due, administrative officials may seize the debtor's property to satisfy the debt." See also Cheatham v. United States, 92 U.S. 85, 87-90 (1876); State Railroad Tax Cases, 92 U.S. 575, 612-615 (1876); Graham v. Du Pont, 262 U.S. 234, 255 (1923). The rationale underlying these decisions, of course, is that the very existence of government depends upon the prompt collection of the revenues. In Phillips v. Commissioner, 283 U.S. 589, 596-597 (1931), the Court rejected a constitutional challenge to the statutory system under which taxes may be collected summarily without a pre-seizure judicial hearing. It was held that as long as there was an adequate opportunity for a post-seizure determination of the taxpayer's rights, the statute met the requirements of due process. See Commissioner v. Shapiro, 424 U.S. 614, 630-633 (1976); Fuentes v. Shevin, 407 U.S. 67, 91-92 (1972). These cases, of course, center upon the Due Process Clause rather than the Fourth Amendment, but the constitutional analysis is similar and yields a like result. It is to be noted that the Court in Phillips, 283 U.S., at 596, cited Murray's Lessee with approval as a case which sustained proceedings "more summary in character" and "involving less directly the obligation of the taxpayer."
"[O]ne governing principle, justified by history and by current experience, has consistently been followed: except in certain carefully defined classes of cases, a search of private property without proper consent is `unreasonable' unless it has been authorized by a valid search warrant." Camara v. Municipal Court, 387 U.S. 523, 528-529 (1967).
The Court, of course, has recognized that a business, by its special nature and voluntary existence, may open itself to intrusions that would not be permissible in a purely private context. Thus, in United States v. Biswell, 406 U.S. 311 (1972), a warrantless search of a locked storeroom during business hours, pursuant to the inspection procedure authorized by the Gun Control Act of 1968, 18 U.S.C. § 923 (g), was upheld:
Indeed, one of the primary evils intended to be eliminated by the Fourth Amendment was the massive intrusion on privacy undertaken in the collection of taxes pursuant to general warrants and writs of assistance. As Madison argued, urging the adoption of a Bill of Rights to restrain the Federal Government:
The respondents also rely upon certain dicta in Boyd v. United States, 116 U.S. 616 (1886) (subpoena of private papers impermissible). But see Fisher v. United States, 425 U.S. 391, 408-411 (1976), and Andresen v. Maryland, 427 U.S. 463, 471-472 (1976). We do not find in Boyd any direct holding that the warrant protections of the Fourth Amendment do not apply to invasions of privacy in furtherance of tax collection. Insofar as language in Boyd might be read so to state, we decline to follow those dicta into rejection of the basic governing principle that has shaped Fourth Amendment law.
"The search for and seizure of stolen or forfeited goods, or goods liable to duties and concealed to avoid the payment thereof, are totally different Page 356 things from a search for and seizure of a man's private books and papers for the purpose of obtaining information therein contained, or of using them as evidence against him." 116 U.S., at 623.
Finally, the respondents argue that warrantless searches are justified by congressional enactment, as were the searches in Biswell and Colonnade. The statute, § 6331(b) of the Code, 26 U.S.C. § 6331 (b), authorizes "distraint and seizure by any means." See n. 15, supra. Read narrowly, it authorizes the use of every means to deprive the taxpayer of use, enjoyment, or title to property ( e. g., transferring title, asportation, immobilization). It does not refer to warrantless intrusions into privacy. The respondents, however, would have us read the statute to authorize such warrantless intrusions. They assert that a statute of that kind is permissible in light of the considerations discussed in Camara and See. Examination of the statute shows that quite the opposite is true.
The intrusion into petitioner's office is therefore governed by the normal Fourth Amendment rule that "except in certain carefully defined classes of cases, a search of private property without proper consent is `unreasonable' unless it has been authorized by a valid search warrant." Camara v. Municipal Court, 387 U.S., at 528-529.
As an alternative to their argument that a new exception to the warrant requirement should be recognized, the respondents assert that the facts of this case bring it within the "exigent circumstances" exception to the warrant requirement. The agents' own actions, however, in their delay for two days following their first entry, and for more than one day following the observation of materials being moved from the office, before they made the entry during which they seized the records, are sufficient to support the District Court's implicit finding that there were no exigent circumstances in this case.
The alter ego issue, as has been noted, was denied review. The books and records were returned, and the photocopies concededly have been destroyed; that claim, thus, is moot. We have decided the issue of the legality of the seizure of the automobiles adversely to petitioner. The suppression issue, as to the books and records, obviously is premature and may be considered if and when proceedings arise in which the Government seeks to use the documents or information obtained from them. See Meister v. United States, 397 F.2d 268, 269 (CA3 1968); Hill v. United States, 346 F.2d 175 (CA9), cert. denied, 382 U.S. 956 (1965). And the irreparable injury required to support a motion to suppress, under Fed. Rule Crim. Proc. 41(e), on equitable grounds in advance of any proceedings, has not been demonstrated. Hunsucker v. Phinney, 497 F.2d 29, 34 (CA5 1974), cert. denied, 420 U.S. 927 (1975).