Source: https://m.openjurist.org/316/f2d/451
Timestamp: 2020-04-10 20:17:41
Document Index: 475477540

Matched Legal Cases: ['§ 1291', '§ 7604', '§ 7604', '§ 14', '§ 9', '§ 7604', '§ 595', '§ 2292', '§ 7605', '§ 7605', '§ 7605', '§ 7605', '§ 7605', '§ 7605', '§ 7605']

316 F. 2d 451 - Bouschor v. United States
316 F2d 451 Bouschor v. United States
316 F.2d 451
Royal G. BOUSCHOR, Appellant,
2. The finality of the district court's order. We are also met at the outset with the government's claim that the order from which the appeal is taken "is probably interlocutory and non-appealable" under 28 U.S.C. § 1291. Because this suggestion goes to jurisdiction, it must be disposed of first.
The government's argument here is that we are concerned with "a contempt proceeding ab initio" ; that this is indicated by the language of § 7604(b) of the 1954 Code which authorizes application to a district judge "for an attachment * * * as for a contempt"; that punishment is authorized by the statute for "contempt of the summons itself, rather than contempt of any subsequent court order" ; that this differentiation is justified by the legislative history, particularly as it has to do with the enactment of § 7604(b)'s original predecessor which was part of § 14 of the Revenue Act of June 30, 1864, 13 Stat. 226, and with the amendment of that section by § 9 of the Act of July 13, 1866, 14 Stat. 101, and as that history is disclosed in 65 Congressional Globe, 2440-41 and 2660-61, and in 66 Congressional Globe 2997; that if the enforcement of an Internal Revenue summons under § 7604(b) is no more than a step in a single contempt proceeding, the only final and appealable order is the one which imposes punishment; that an order which merely compels compliance is interlocutory and not appealable; and that a rule of non-appealability is consistent with the need for speed in the assessment and collection of federal taxes.
Whether the order is final and hence appealable depends, it seems, on whether it corresponds with the type of order held appealable in Ellis v. I.C.C., 1915, 237 U.S. 434, 35 S.Ct. 645, 59 L.Ed. 1036, or with that kind held not to be final in Alexander v. United States, 1906, 201 U.S. 117, 26 S.Ct. 356, 50 L.Ed. 686, and Cobbledick v. United States, 1940, 309 U.S. 323, 60 S.Ct. 540, 84 L.Ed. 783.
This question of appealability has been presented to this court at least twice in the past although the formal opinions do not disclose that the legislative history was urged here in support of the government's position. Over thirty years ago, in Brownson v. United States, 8 Cir., 1929, 32 F.2d 844, the court itself raised the question of jurisdiction. The district court had ordered a Western Union superintendent to appear before a revenue agent and produce records showing a taxpayer's receipt of telegraphed funds. This court said, p. 846 of 32 F.2d, "That such an order is appealable we think is established", and cited Ellis and other cases in support of that statement. In Sale v. United States, 8 Cir., 1956, 228 F.2d 682, cert. denied 350 U.S. 1006, 76 S.Ct. 650, 100 L.Ed. 868, the district court had ordered an attorney to appear before a revenue agent and produce work papers prepared by an accountant for taxpayer-clients of the lawyer. We said, p. 683 of 228 F.2d, "It would seem that the order appealed from is a final order and that an appeal lies".
All other courts of appeals which have touched upon the question appear, with one exception, to be in accord. O'Connor v. O'Connell, 1 Cir., 1958, 253 F.2d 365-367; Lash v. Nighosian, 1 Cir., 1959, 273 F.2d 185, 186, cert. denied 362 U.S. 904, 80 S.Ct. 610, 4 L.Ed.2d 554; In re Albert Lindley Lee Memorial Hosp., 2 Cir., 1953, 209 F.2d 122, 123, cert. denied 347 U.S. 960, 74 S.Ct. 709, 98 L.Ed. 1104; Application of Colton, 2 Cir., 1961, 291 F.2d 487, 490-491; United States v. McDonald, 2 Cir., 1963, 313 F.2d 832, 834; United States v. Silverstein, 2 Cir., 1963, 314 F.2d 789; Falsone v. United States, 5 Cir., 1953, 205 F.2d 734, 737, cert. denied 346 U.S. 864, 74 S.Ct. 103, 98 L.Ed. 375. See Martin v. Chandis Securities Co., 9 Cir., 1942, 128 F.2d 731, 734, where, however, the appeal was from an order denying rather than directing compliance. See also, where appealability seems to have been assumed sub silentio, First National Bank of Mobile, Ala. v. United States, 1925, 267 U.S. 576, 45 S.Ct. 231, 69 L.Ed. 796, affirming 5 Cir., 295 F. 142; Wall v. Mitchell, 4 Cir., 1961, 287 F.2d 31; Eberhart v. Broadrock Development Corp., 6 Cir., 1961, 296 F.2d 685, cert. denied 369 U.S. 871, 82 S.Ct. 1139, 8 L.Ed.2d 275; In re Fahey, 6 Cir., 1961, 300 F.2d 383. Compare Chapman v. Goodman, 9 Cir., 1955, 219 F.2d 802, where the district court had reserved jurisdiction.
The Seventh Circuit holds otherwise. That court first announced its position in Jarecki v. Whetstone, 1951, 192 F.2d 121, 124, citing Alexander and Cobbledick, both supra. The First Circuit in O'Connor v. O'Connell, supra, p. 367 of 253 F.2d, rejected Jarecki as authority because the court had reached its conclusion "without any notice of the Ellis case". However, the Seventh Circuit has reaffirmed its position in Application of Davis, 1962, 303 F.2d 601, stating that, in United States v. Vivian, 1955, 217 F.2d 882, cert. denied 350 U.S. 953, 76 S.Ct. 340, 100 L.Ed. 830, it had pointed out that the rationale of Jarecki was grounded on the nature of the specific statutory provision involved. We note that certiorari has been granted in the Davis case, sub nom. Davis v. Soja, 371 U.S. 810, 83 S.Ct. 45, 9 L.Ed.2d 53, so further assistance on this point may soon be forthcoming.
The government urges the Seventh Circuit cases upon us and suggests that we reconsider the reasoning in Brownson v. United States, supra. At this late date and with the last Seventh Circuit case now pending in the Supreme Court, we are disinclined to do this. We reaffirm the conclusions this court reached in both Brownson and Sale and hold that the district court's order here is a final one and is appealable.
3. The attorney-client privilege. Bouschor's first point on the merits is that the work papers in question were privileged communications between him and his client O'Brien and that the attorney-client privilege is applicable to prevent their review by the Service.
We think the point is not well taken. We note that, concededly, (a) the work papers were prepared by the accountants and not by the taxpayer; (b) they were in existence prior to Bouschor's appearance in the case as attorney for the taxpayer; and (c) they had already been reviewed by agents Kaufer and Falconer. Under these circumstances we feel it is unnecessary to decide whether, in connection with an Internal Revenue Service investigation, the privilege is one to be determined under federal law, as the government suggests, citing Falsone v. United States, supra, 5 Cir., 205 F.2d 734, 741-742, and In re Albert Lindley Lee Memorial Hosp., supra, 2 Cir., 209 F.2d 122, 123, to which we may add Colton v. United States, 2 Cir., 1962, 306 F.2d 633, 636, cert. denied 371 U.S. 951, 83 S.Ct. 505, 9 L.Ed.2d 499, or under Minnesota law, Minnesota Statutes Annotated § 595.02,2 as Bouschor urges, citing Baird v. Koerner, 9 Cir., 1960, 279 F.2d 623, 632, a case with which the Second Circuit, in Colton v. United States, supra, says flatly, "we do not agree", for we conclude that the result must be the same under either standard. Compare United States v. Summe, E. D. Ky., 1962, 208 F.Supp. 925, 926-927.
a. Clearly if the work papers were the property of the accountants in the sense that they were owned by them and not by the taxpayer or Bouschor, no claim of privilege could prevail. This court specifically so held in Sale v. United States, supra, p. 686 of 228 F.2d, where an attorney having possession of an accountant's work papers was asserting the privilege. In accord are In re Fahey, supra, 6 Cir., 300 F.2d 383, 385, affirming D.C., 192 F.Supp. 492, 495, and United States v. Boccuto, D.N.J., 1959, 175 F. Supp. 886, appeal dismissed, 3 Cir., 274 F.2d 860. The district court made no finding as to ownership of these papers and on this record we are not fully assured as to their ownership after the delivery by the accountants to Bouschor. When Bouschor wrote the accountants for the papers he asked only "if you would send me all of the papers". Both Stillman and Oase in their affidavits say merely that they have "relinquished their right(s) to the return or possession of" them, and we have already noted that the government concedes that rightful indefinite possession of the papers was in Bouschor. But these statements, singly or in the aggregate, do not specifically deny the accountants' ownership. They are directed rather to possession. Is a trier of fact to imply from them that ownership remains in the accountants or that they have abandoned any property interest in them, or that title in some way has leaped to O'Brien or to Bouschor? Because one claiming the privilege has the burden of establishing it, United States v. Kovel, 2 Cir., 1961, 296 F.2d 918, 923; Brown v. St. Paul City Ry., 1954, 241 Minn. 15, 34-35, 62 N.W. 2d 688, 701; State v. Anderson, 1956, 247 Minn. 469, 477, 78 N.W.2d 320, 326; Mattson v. Cuyuna Ore Co., D. Minn., 1959, 178 F.Supp. 653, 654, we have no hesitancy in concluding that this burden has not adequately been sustained here Compare United States v. Boccuto, supra, pp. 888 and 890 of 175 F.Supp., where an accountant's affidavit stated that he had turned work papers over to counsel "with no intention of retention or any title or belief that I can get them back", and the court held there was no clear demonstration that the work papers were the property of the taxpayers "despite the affidavit filed herein". We need not decide what the situation would be if the work papers were clearly shown to be the property of the taxpayer or of Bouschor. See Application of House, N.D.Cal., 1956, 144 F.Supp. 95.
b. In any event, in order for the privilege to be invoked, the communication must have been one between attorney and client and it must have been made in confidence. These are two among several essentials described in 8 Wigmore, Evidence, § 2292 (McNaughton Rev. 1961). More specifically,
"[I]f an unprivileged document exists before there exists an attorney-client relationship the mere delivery of the document to an attorney does not create a privilege * * *
"One of the essentials of a privileged communication is that it be confidential." Brown v. St. Paul City Ry., supra, pp. 33-34 of 241 Minn., p. 700 of 62 N.W.2d;
Grant v. United States, 1913, 227 U.S. 74, 79, 33 S.Ct. 190, 57 L.Ed. 423. The work papers here were prepared by the accountants in their analytical work. They were preexisting and they had already been reviewed by agents. These two essential elements were therefore absent. Application of House, supra, pp. 97-98 of 144 F.Supp. The delivery of the papers to the attorney does not create the privilege when it did not theretofore exist. Falsone v. United States, supra, p. 739 of 205 F.2d; In re Colton, S.D. N.Y., 1961, 201 F.Supp. 13, 17, affirmed sub nom. Colton v. United States, supra, 306 F.2d 633, 639.
4. The Fourth Amendment and § 7605 (b). Bouschor's argument is that he is O'Brien's agent; that the Service had many opportunities to review the work papers; that agents Kaufer and Falconer in fact had examined those papers or most of them; that the government failed to sustain its burden under § 7605(b) of the 1954 Code, 26 U.S.C.A. § 7605(b)3 of proving the necessity of a further examination; that the notice required by this statute was not given O'Brien; and that an unnecessary examination is an unreasonable search within the proscription of the Fourth Amendment.
We think the short answer, so far as § 7605(b) is concerned, is that Bouschor is not the person protected by the statute and that the work papers are not its subject. The section relates to a taxpayer and to a taxpayer's books of account. It does not refer to a third person other than the taxpayer or to work papers prepared by accountants. The restrictions imposed by § 7605(b) therefore have no application to Bouschor and the papers the special agent desires to examine. In Hubner v. Tucker, 9 Cir., 1957, 245 F.2d 35, 38-39, the court said:
"As to the first question, the learned trial judge was correct in holding that § 7605(b) did not apply here. It was held that the `taxpayer' referred to in that section is the one whose return is under investigation." (footnote omitted)
In Application of Magnus, 2 Cir., 1962, 299 F.2d 335, 336, cert. denied 370 U.S. 918, 82 S.Ct. 1556, 8 L.Ed.2d 499, the statute was under consideration and it was said:
"The examination which IRS seeks is of third parties and not a further examination of the taxpayer. The inspection desired is of corporate books and accounting firm papers and not of the taxpayer's books. Under these circumstances, the taxpayers have no standing to quash the summonses which call neither for their further appearance or examination nor for further production of their books."
Compare In re Magnus, Mabee & Reynard, Inc., 2 Cir., 1962, 311 F.2d 12, 17, cert. denied 83 S.Ct. 1289. We do not regard the comments in the earlier Ninth Circuit cases of Martin v. Chandis Securities Co., supra, pp. 735-736 of 128 F.2d, and Local 174, etc. v. United States, 1956, 240 F.2d 387, 390-391, and in First Nat. Bank of Mobile v. United States, 5 Cir., 1947, 160 F.2d 532, 534-535, as opposing authority. In any event, the Second Circuit's observation, p. 337 of 299 F.2d, in Application of Magnus, supra, is pertinent:
"We have reviewed the many cases cited by both parties. Because of the special circumstances of each case, they are not particularly helpful. Where the statute is clear, it is frequently unwise to try to construe it in accordance with language, used in opinions in other cases, which applies most pertinently only to the facts of those cases."
The Fourth Amendment argument, we feel, must fall with that relating to the attorney-client privilege. Of course, a lawyer may assert a constitutional privilege on behalf of his client in a proceeding of this kind when the client is a party, Brody v. United States, 1 Cir., 1957, 243 F.2d 378, 387, cert. denied 354 U.S. 923, 77 S.Ct. 1384, 1 L.Ed. 2d 1438, or when the production of the papers demanded would violate the attorney-client privilege, Schwimmer v. United States, 8 Cir., 1956, 232 F.2d 855, 863-866, cert. denied 352 U.S. 833, 77 S.Ct. 48, 1 L.Ed.2d 52; Colton v. United States, supra, p. 639 of 306 F.2d. But here O'Brien is not a party and had not intervened or appeared and we have held that the privilege does not exist. The search claimed to be unreasonable does not have to do with O'Brien. It has to do with Bouschor, who is himself represented by counsel, and with the work papers which had been turned over to him. There is no claim that the search is unreasonable as to Bouschor. He claims immunity only in a representative capacity. And we are not confronted here with a claim of too much indefiniteness or breadth, which has been characterized as the abuse to which the Fourth Amendment is directed. See Oklahoma Press Pub. Co. v. Walling, 1946, 327 U.S. 186, 208, 66 S.Ct. 494, 90 L.Ed. 614.
5. The Fifth Amendment. Bouschor claims the right to assert on behalf of O'Brien the Amendment's protection against self-incrimination. He cites Application of House, supra, N.D. Cal., 1956, 144 F.Supp. 95. That case does indeed involve facts similar to those here. It is authority against Bouschor's position on the attorney-client issue and on the Fourth Amendment issue but it is favorable to him with respect to the Fifth Amendment. Directly opposing the House case is United States v. Boccuto, supra, D.N.J., 1959, 175 F.Supp. 886. There the court observed that House was on "all fours", that the taxpayers were not parties, and that it "must disagree with the conclusions" reached in House.
On this point we agree with Boccuto and disagree with House. We realize that the Fifth Amendment's provision against self-incrimination "must be accorded liberal construction in favor of the right it was intended to secure". Hoffman v. United States, 1951, 341 U.S. 479, 486, 71 S.Ct. 814, 818, 95 L.Ed. 1118; Counselman v. Hitchcock, 1892, 142 U.S. 547, 562, 12 S.Ct. 195, 35 L.Ed. 1110. But the guarantee against self-incrimination has long been characterized as a personal privilege of the witness. "It was never intended to permit him to plead the fact that some third person might be incriminated by his testimony, even though he were the agent of such person". Hale v. Henkel, 1906, 201 U.S. 43, 69-70, 26 S.Ct. 370, 377, 50 L.Ed. 652; McAlister v. Henkel, 1906, 201 U.S. 90, 91, 26 S.Ct. 385, 50 L.Ed. 671; United States v. White, 1944, 322 U.S. 694, 704, 64 S.Ct. 1248, 88 L.Ed. 1542; In re Fahey, supra, p. 385 of 300 F.2d. This, it seems to us, is determinative of the Fifth Amendment argument.
We note also, for what it may be worth, that Bouschor knew that the appearance of a Special Agent indicated that O'Brien's returns were being investigated for fraud, that it was Bouschor who, as he pleaded, "directed said client to cause to be turned over to him all work papers" and that in consequence thereof the papers were delivered. This, although proper and necessary or at least desirable for Bouschor's representation of his client, cannot in itself serve to thwart investigation by the Internal Revenue Service. Compare Schwimmer v. United States, 8 Cir., 1956, 232 F.2d 866, 868, cert. denied 352 U.S. 833, 77 S.Ct. 48, 1 L.Ed.2d 52.
We therefore conclude that, although its reasoning in certain respects is concededly inapplicable on the agreed facts, the district court's denial of Bouschor's petition for an order discharging the earlier ex parte order and quashing the subpoena was correct.
"Every person liable for any tax imposed by this title, or for the collection thereof, shall keep such records, render such statements, make such returns, and comply with such rules and regulations as the Secretary or his delegate may from time to time prescribe. * * *"
595.02. "Every person of sufficient understanding, including a party, may testify in any action or proceeding, civil or criminal, in court or before any person who has authority to receive evidence, except as follows: * * *
"(2) An attorney cannot, without the consent of his client, be examined as to any communication made by the client to him or his advice given thereon in the course of professional duty; nor can any employee of such attorney be examined as to such communication or advice, without the client's consent; * * *."
§ 7605(b). "No taxpayer shall be subject to unnecessary examination or investigations, and only one inspection of a taxpayer's books of account shall be made for each taxable year unless the taxpayer requests otherwise or unless the Secretary or his delegate, after investigation, notifies the taxpayer in writing that an additional inspection is necessary."