Boren v. Tucker

• Decision Date: 08 January 1957
• Docket Number: No. 15010.,15010.
• Citation: 239 F.2d 767
• Parties: Clifford O. BOREN, Delta M. Boren and Clifford O. Boren Contracting Co., Inc., Appellants, v. Lloyd M. TUCKER, Special Agent, Internal Revenue Service, Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

239 F.2d 767 (1956)

Clifford O. BOREN, Delta M. Boren and Clifford O. Boren Contracting Co., Inc., Appellants, v. Lloyd M. TUCKER, Special Agent, Internal Revenue Service, Appellee.

No. 15010.

United States Court of Appeals Ninth Circuit.

December 3, 1956.

Rehearing Denied January 8, 1957.

John A. Brant, San Diego, Cal., for appellants.

Charles K. Rice, Asst. Atty. Gen., Lee A. Jackson, Attorney, Dept. of Justice, Washington, D. C., Laughlin E. Waters, U. S. Atty., Edward R. McHale, Asst. U. S. Atty., Chief, Tax Division, Thomas J. Sullivan, Attorney, Int. Rev. Service, Los Angeles, Cal., for appellee.

Before LEMMON, BARNES and HAMLEY, Circuit Judges.

BARNES, Circuit Judge.

Appeal is here taken from the judgment of the District Court adjudging the appellants Clifford O. Boren, as President, and Delta M. Boren, as Vice-President, of Clifford O. Boren Contracting Company, Inc., and the corporation, itself, and each of them, in civil contempt, and committing the two individuals to the custody of the United States Marshal until they comply with the orders of court requiring them "to produce for examination, copying, photostating or photographing" certain documents; to-wit: General Journal, Cash Journal, General Ledger, Payroll Records and Payroll Checks bearing the endorsement of any of the following named persons:

Clifford O. Boren Delta M. Boren Marjorie H. Bell Betty K. McCarthy

and the Clifford O. Boren Contracting Company, Inc., for the period from July 1, 1951 to December 31st, 1951.

The cause arose upon a petition of a Special Agent of the Internal Revenue Service seeking to enforce an administrative subpoena, 26 U.S.C.A. § 7604,¹ issued in an investigation of the internal revenue tax liability of Clifford O. Boren and Delta M. Boren for the years 1950 and 1951.²

When the appellants refused to comply with the subpoena, the instant petition was filed, and three orders were issued, (two by Judge Harry C. Westover on September 19th, 1955, addressed to the individual defendants as officers of the corporation, and one by Judge Leon R. Yankwich on September 30, 1955, addressed to Clifford O. Boren, as President of the then respondent corporation) ordering appellants to show cause why they should not be punished for contempt. They refused to produce the documents, and a hearing was had on December 5th, 1955, before Judge Wm. C. Mathes. His order was the basis for the subsequent contempt found by the court.

To the petition, the respondents below (appellants here) filed an answer, generally denying the material allegations, and setting up nine separate defenses.³ Appellants also filed a motion to vacate the order to show cause.

Two proceedings were had in the lower court on December 5th, 1955. The court's minutes show that the first was the hearing of the motion of appellants to vacate the order to show cause, and the second, the hearing of the order to show cause itself. The first motion was granted in part, (that part relating to an immediate attachment of the person) and the balance denied.

On the hearing of the order to show cause, both parties introduced evidence, written and oral, pursuant to stipulations. Tr. 104 The second and ninth defenses were stricken on motion of petitioner. The remaining separate defenses were not sustained. The petition was granted, in part; i. e.,

"to the extent that respondents are ordered to appear and give testimony in response thereto and produce the documents set forth in the summonses, Exhibits A, B and C, to the petition." Tr. 46

Findings of Fact and Conclusions of Law, and the order requiring production were prepared, signed, and filed. Tr. 48

The appellants thereafter, having appeared with the records on the return day, December 8th, 1955, but having refused to comply with the court's order to produce, were held in contempt on December 13th, 1955. Appellants then filed a cash deposit in lieu of a supersedeas bond, and Notice of Appeal, and obtained a supersedeas order, staying execution and impounding the documents specified in the summonses with the Clerk of the Court, where they now are.

In this matter we might well have followed the example of the Fifth Circuit earlier this year, in Globe Construction Co. v. Humphrey, 229 F.2d 148, and by per curiam decision point out (a) that the Government felt the allegations in the affidavit of the officer who issued the subpoena were sufficient to support its issuance; (b) that the lower court made an order enforcing it; and (c) that we agree with both the officer and the lower court; that

"we think: that the insistence of the appellant to the contrary proceeds from a misconception of the nature of the subpoena power at issue here and of the conditions requisite to its exercise."

The action of the District Judge in ordering the subpoena enforced, the same per curiam decision holds, "was right. His order is affirmed."

Or we might have followed the 1954 per curiam decision of the Sixth Circuit, Peoples Deposit Bank & Trust Co. v. United States, 212 F.2d 86, at page 87. There the court concluded the special agent was not required to disclose in detail the facts relative to his investigation and his conclusion.

"that there was strong suspicion of a false or fraudulent tax return by a taxpayer for a certain year or years prior to the statutory limitation * * * nor was the District Court obliged to require proof of facts showing reasonable grounds to believe that the tax returns of taxpayer and others were false or fraudulent."

There "Judgment was affirmed, * * * for the reasons stated in the opinion below."

But we are certain such a disposition of this matter would not satisfy counsel for appellants herein.

The questions presented on this appeal, according to appellants' earnest contentions, are seven in number. Respondent reduces the issues involved to three. Because we believe the order of the lower court should be affirmed, we will follow the appellants' description of the points involved, and discuss each of them. They are:

1. Should appellants\' second defense to the petition have been stricken, i. e., is it a proper separate defense to allege that because of one examination by the Government, a reexamination was unnecessary and unreasonable?

2. Were the provisions of § 7605 (b), I.R.C.1954 26 U.S.C.A. § 7605(b), (particularly the requirement of written notice to taxpayer before a re-examination) followed?

3. Does an "examination" include the right to photostat taxpayer\'s records?

4. Does the law authorizing an examination for the "correctness" of a taxpayer\'s return permit the Government to seek evidence for his criminal prosecution?

5. Has the Government sustained the burden of proof that the books and records sought are material and relevant?

6. Was there a sufficient showing of investigation of fraud to avoid the bar of the statute of limitations?

7. Did the order to show cause state a claim upon which appellants could be held in civil contempt?

The able trial court carefully went into the unusual factual situation existing in this case, and carefully made findings, including separate findings as to each valid separate defense. Not the least of these peculiar circumstances brought to his attention was the existence of serious charges made against a Government employee once assigned to the investigation of appellants' taxes; the employee's resignation from Government service; and the ascertainment, by the Government, for the first time in March, 1955, of the possibility of the existence of fraudulent payroll records; that is to say, some indication that an alleged employee of the corporation during a part of 1951 was not such an employee, and did not receive the wages shown on the corporate records as having been paid her. Employee's affidavit, dated March 15, 1955; Tr. 132; Findings, IX and X. To take up appellants' points of alleged error in order:

I. On the showing before the District Court at the time of the hearing, the judge found that Special Agent Tucker's examination of tax liability of Clifford O. and Delta M. Boren commenced in November 1953, and "never terminated, and is still continuing." Findings, XXIII. Technically then, there is no question before this court of any "re-examination" made by the Government of the taxpayer's records, unless there is no sufficient support for the court's Findings of Fact on this issue. It is our opinion that the court's findings are amply supported by the record. But were we confronted with the question as to whether a re-examination of the subpoenaed records was proper in this case, we would not hesitate to hold, under the facts presently developed, that the Government would be entitled to a re-examination, provided always, that the Government's representatives complied with the law in requesting and obtaining such re-examination. Martin v. Chandis Securities Co., 9 Cir., 1942, 128 F.2d 731.

The burden was on the Government, had it desired a re-examination, to show that its request was in accordance with the law. It was therefore unnecessary for appellants here (respondents below) to plead as a special defense that the Government must proceed in accordance with statutory law.

The purported second and separate defense was properly stricken, and there was no error in appellants' first specification.

II. Because of the court's specific and precise findings that the examination had never terminated, there was no "re-examination". Appellants' second specification of error therefor becomes immaterial.

III. The right to photostat. We think it obvious that when the factual question involved in a trial is whether the person named as payee on a payroll check or checks, actually endorsed it or them, or whether someone else signed or forged his name, that a photostatic copy of the purported signature must be obtained, blown up, and pored over by handwriting experts before any safe conclusion can be arrived at. Copies of a check are not sufficient. Copies are...