U.S. v. First Nat. City Bank

• Decision Date: 04 February 1977
• Docket Number: D,Nos. 114,115,s. 114
• Parties: 77-1 USTC P 9198 UNITED STATES of America, Petitioner-Appellee, v. FIRST NATIONAL CITY BANK, Respondent-Appellant, and Milton F. Meissner, Proposed Intervenor-Appellant. ockets 75-6007, 75-6008.
• Court: U.S. Court of Appeals — Second Circuit

Page 853

568 F.2d 853

77-1 USTC P 9198

UNITED STATES of America, Petitioner-Appellee, v. FIRST NATIONAL CITY BANK, Respondent-Appellant, and Milton F. Meissner, Proposed Intervenor-Appellant.

Nos. 114, 115, Dockets 75-6007, 75-6008.

United States Court of Appeals, Second Circuit.

Argued Dec. 17, 1975.

Decided Feb. 4, 1977.

Henry D. Harfield, New York City (Matthew C. Gruskin, and Shearman & Sterling, New York City, on the brief), for respondent-appellant First National City Bank.

R. Kenly Webster, Washington, D.C. (Neal J. Hurwitz, New York City, and Kennedy & Webster, Washington, D.C., on the brief), for proposed intervenor-appellant Milton F. Meissner.

William R. Bronner, Asst. U.S. Atty., New York City (Paul J. Curran, U.S. Atty., and Steven J. Glassman, Asst. U.S. Atty., New York City, on the brief), for petitioner-appellee United States of America.

Before HAYS, TIMBERS and GURFEIN, Circuit Judges.

TIMBERS, Circuit Judge:

This appeal presents questions important to the administration of the internal revenue laws. They arise from the use of summary judicial proceedings to enforce IRS levies upon the contents of a taxpayer's safe deposit box following a determination by the IRS that the collection of back taxes from the taxpayer is in jeopardy. The central issue is whether the taxpayer's constitutional rights require that as a pre -seizure remedy he be granted leave to intervene in the summary enforcement proceedings or whether the taxpayer's post -seizure remedies are adequate to protect his rights. We affirm the district court's denial of the taxpayer's motion for leave to intervene and its direction that the bank allow the IRS to enter the box and obtain possession of the contents.

I. PRIOR PROCEEDINGS

Milton F. Meissner and First National City Bank (Citibank) appeal from orders entered in the Southern District of New York, Lloyd F. MacMahon, District Judge, 388 F.Supp. 1044, (1) denying Meissner's motion for leave to intervene in pre-seizure summary proceedings to enforce levies on the contents of his safe deposit box; and (2) directing (a) that Citibank allow the IRS to enter the box for the purpose of obtaining possession of the non-exempt contents, and (b) that Citibank retain possession of the contents not removed by the IRS, subject to further order of the court. ¹

On April 9, 1974, the IRS made a jeopardy assessment against Meissner pursuant to § 6851(a). ² It did so because it believed Meissner ³ owed substantial back taxes for the years 1970 and 1971, the collection of which was in jeopardy. ⁴ The IRS immediately served upon Meissner a notice of assessment and a demand for payment pursuant to § 6861(a). It also served a notice of deficiency pursuant to § 6861(b); this entitled Meissner to litigate his liability before the Tax Court, which he has done.

On April 10, the IRS issued jeopardy levies pursuant to § 6331(a) upon the contents of two safe deposit boxes leased by Meissner, one from Citibank and the other from Chemical Bank New York Trust Co. (Chemical). ⁵ The two banks refused the IRS access to the boxes. On October 4, the United States Attorney commenced the instant proceedings against the banks for summary enforcement of the IRS levies pursuant to § 7402(a). On October 15, Meissner, who was not a party to the summary enforcement proceedings, moved for leave to intervene in those proceedings.

The district court denied Meissner's motion for leave to intervene and directed the banks to allow the IRS access to Meissner's safe deposit boxes. See note 1, supra. The court also granted the motions of Meissner and Citibank for stays pending appeal conditioned on Meissner's posting a $260,000 bond, the approximate amount of his back taxes.

Instead of posting the bond ordered by the district court, Meissner moved in our Court for a stay pending appeal without bond. Citibank also moved in our Court for a stay pending appeal. We denied both motions on April 15, 1975. On April 17, Mr. Justice Marshall likewise denied appellants' applications for stays.

Chemical thereafter turned over to the IRS the contents of its safe deposit box which Meissner leased; and the government filed with the court an inventory, dated April 22, of the contents of the Chemical box. Citibank, on the other hand, while allowing the IRS access to the contents of its safe deposit box leased by Meissner, refused to permit the IRS to remove the contents. On April 22, after a hearing, the district court ordered that the Citibank box be placed under the joint control of the government and the bank. The court also ruled that the government, in order to remove the contents of the box, would be required to serve a formal subpoena. The government did serve upon Citibank an administrative subpoena demanding that the bank turn over to the IRS the contents of the box. No further action has been taken to enforce that subpoena pending the outcome of the instant proceedings.

The present appeals are from the district court's orders denying Meissner's motion for leave to intervene and directing Citibank to turn over to the IRS the contents of its safe deposit box leased by Meissner.

The essential questions presented are (1) whether summary proceedings to enforce IRS levies are authorized by § 7402(a); (2) whether Meissner is barred by § 7421(a) (the Anti-Injunction Act) from raising his claims in the pre-seizure summary proceedings; and (3) whether Meissner is entitled to intervene in the pre-seizure summary proceedings to protect his constitutional rights.

II. SUMMARY ENFORCEMENT PROCEEDINGS PURSUANT TO SECTION 7402(a)

Appellants claim that the district court lacked jurisdiction to enforce the IRS levies by summary proceedings. They argue that § 7402(a), ⁶ relied on by the district court, authorizes only "writs and orders" ancillary to plenary civil actions. We disagree.

The language of this statute is broad and clear. In addition to authorizing writs and orders ancillary to civil actions, it gives the district courts jurisdiction to issue "such other orders and processes, and to render such judgments and decrees as may be necessary or appropriate for the enforcement of the internal revenue laws." We decline to construe such a broad statutory mandate so restrictively as to add nothing to the power conferred by the All Writs Act, 28 U.S.C. § 1651 (1970). ⁷ We hold, as the Third Circuit did in United States v. Mellon Bank, N.A., 521 F.2d 708, 710-11 (3 Cir. 1975) (related case), ⁸ that § 7402(a) authorized the summary enforcement proceedings in the district court.

III. ANTI-INJUNCTION ACT SECTION 7421(a)

Before turning to Meissner's constitutional claims, we must determine whether he is barred by the Anti-Injunction Act ⁹ from raising those claims in the instant proceedings. We hold that he is not.

Section 7421(a) has no application to counterclaims or defenses interposed by a taxpayer in an action brought by the government. By its terms, this statute applies only to a "suit for the purpose of restraining the assessment or collection of any tax," meaning of course a suit by a taxpayer. It would seem fundamental that when Congress confers jurisdiction upon the district courts to entertain a government action to collect taxes, it may not bar a taxpayer from asserting in such action counterclaims or defenses which affect his rights with respect to the taxes sought to be collected.

In Commissioner v. Shapiro, 424 U.S. 614 (1976), which was a post -seizure injunction action by the taxpayer, the Court held that the Anti-Injunction Act did not bar such an action and that the taxpayer would be entitled to injunctive relief if (1) he could show a likelihood of irreparable injury, and (2) the government could not establish a factual basis for its assessment. ¹⁰ 424 U.S. at 627-32. While the Court's holding was based on its interpretation of the statute, it strongly suggested that a narrower construction of the jurisdiction of the courts under the statute would involve "serious constitutional problems." Id. at 629.

In view of our holding below, under Section IV of this opinion, that Meissner is not entitled to a pre -seizure hearing, it is not necessary for us to decide what effect Shapiro (which was a post -seizure action) would have on the instant proceedings.

It is sufficient in the instant case to hold, as the Third Circuit did in United States v. Mellon Bank, N.A., supra, that the Anti-Injunction Act does not bar Meissner from raising his constitutional claims in the instant proceedings. See note 8, supra.

IV. CONSTITUTIONAL CLAIMS

Turning directly to the constitutional claims which Meissner sought to raise by his motion for leave to intervene in the summary enforcement proceedings, and viewing the record in the light most favorable to Meissner, it appears that the following are the claims he sought to raise: (1) due process claim under the Fifth Amendment; (2) search and seizure claim under the Fourth Amendment; and (3) self-incrimination claim under the Fifth Amendment. ¹¹

(1) Due Process Claim

In order to focus on the precise due process claim raised, it is important to bear in mind what is not involved. The issue here is not whether the taxpayer has a right to a hearing after his property has been seized. Rather, the issue is whether he is entitled to litigate his claims before the government has obtained possession of the contents of his safe deposit box. Meissner has not commenced an action of his own. Instead, he has sought by intervening to oppose every step of the government's pre-seizure enforcement proceedings.

In Commissioner v. Shapiro a post-seizure injunction action the Court stated that due process required "some kind of predeprivation or prompt post- deprivation hearing." 424 U.S. at 629 (emphasis added). The Court again noted:

"We have often noted that, in resolving a claimed violation of procedural due process, a careful weighing of the respective interests is required, Goss v. Lopez, 419 U.S. 565,...