O'CONNOR v. O'CONNELL, 5267.

• Decision Date: 20 March 1958
• Docket Number: No. 5267.,5267.
• Citation: 253 F.2d 365
• Parties: Cameron O'CONNOR, Alias, Respondent, Appellant, v. John A. O'CONNELL, District Director of Providence District, Internal Revenue Service, Petitioner, Appellee.
• Court: U.S. Court of Appeals — First Circuit

253 F.2d 365 (1958)

Cameron O'CONNOR, Alias, Respondent, Appellant, v. John A. O'CONNELL, District Director of Providence District, Internal Revenue Service, Petitioner, Appellee.

No. 5267.

United States Court of Appeals First Circuit.

March 20, 1958.

Christopher Del Sesto, Providence, R. I., Jacob S. Temkin, Providence, R. I., on the brief, for appellant.

Joseph Mainelli, U. S. Atty., Providence, R. I., Arnold Williamson, Jr., and Samuel S. Tanzi, Asst. U. S. Attys., Providence, R. I., on the brief, for appellee.

Before MAGRUDER, Chief Judge, and WOODBURY and HARTIGAN, Circuit Judges.

WOODBURY, Circuit Judge.

This is an appeal from a district court order directing compliance with a summons issued by a Special Agent of the Internal Revenue Service directing the appellant to appear at a specified time and place to testify as to his and his wife's tax liabilities for the calendar years 1943 to 1947, inclusive. A motion by the appellee to dismiss the appeal for lack of jurisdiction lays first claim upon our attention.

The assertion is that the order of the District Court is not appealable for the reason that it is neither a "final decision" within the meaning of § 1291 of Title 28 U.S.C., nor any one of the interlocutory orders, decrees or judgments made appealable by § 1292 of the same Title. We do not agree for we consider the District Court's order to be a "final decision" and hence appealable under § 1291. In Ellis v. Interstate Commerce Commission, 1915, 237 U.S. 434, 442, 35 S.Ct. 645, 59 L.Ed. 1036, the Court, relying upon Interstate Commerce Commission v. Baird, 1904, 194 U.S. 25, 24 S.Ct. 563, 48 L.Ed. 860, and distinguishing Alexander v. United States, 1906, 201 U.S. 117, 26 S.Ct. 356, 50 L.Ed. 686, said that there was "no doubt" that an appeal lay from a district court order entered on a petition of the Interstate Commerce Commission under § 12 of the act, 49 U.S.C.A. § 12, to regulate commerce for enforcement of a summons issued by it directing the appellant to answer certain questions propounded and to produce certain papers called for by the Commission. In explanation of its holding the Court said 237 U.S. 434, 35 S.Ct. 646: "The order is not like one made to a witness before an examiner or on the stand in the course of a proceeding inter alios in court." Instead, the Court pointed out: "It is the end of a proceeding begun against the witness."

In the later case of Cobbledick v. United States, 1940, 309 U.S. 323, 60 S.Ct. 540, 84 L.Ed. 783, upon which the appellee relies, the Court was not confronted with the problem in the Ellis case or with the problem which confronts us here. The question in Cobbledick was whether a district court order denying a motion to quash a subpoena duces tecum requiring the person named therein to appear with papers and testify before a grand jury was a "final decision" and hence appealable to a court of appeals. The Circuit Court of Appeals for the Ninth Circuit, Palmuth v. U. S., 107 F.2d 975, had held that the order was not a final decision and the Supreme Court affirmed. But in doing so the Court was careful to distinguish, not to overrule, the Ellis case and to perpetuate, indeed to elaborate upon, the distinction between it and the Alexander case. After discussing the Ellis case and the distinction therein drawn with Alexander, the Court in Cobbledick, 309 U.S. at page 330, 60 S.Ct. at page 543 said that it found "a sufficient justification for treating these controversies i. e. those with respect to subpoenas issued in aid of administrative proceedings differently from those arising out of court proceedings unrelated to any administrative agency." It said:

"The doctrine of finality is a phase of the distribution of authority within the judicial hierarchy. But a proceeding like that under § 12 of the Interstate Commerce Act may be deemed self-contained, so far as the judiciary is concerned — as much so as an independent suit in equity in which appeal will lie from an injunction without the necessity of waiting for disobedience. After the court has ordered a recusant witness to testify before the Commission, there remains nothing for it to do. Not only is this true with respect to the particular witness whose testimony is sought; there is not, as in the case of a grand jury or trial, any further judicial inquiry which would be halted were the offending witness permitted to appeal. The proceeding before the district court is not ancillary to any judicial proceeding. So far as the court is concerned, it is complete in itself."

Observing this distinction, we follow the Ellis case and hold that the order of the District Court from which this appeal is taken is a "final decision" and hence appealable to this court under Title 28 U.S.C. § 1291.¹ In accord see particularly Capital Co. v. Fox, 2 Cir., 1936, 85 F.2d 97, 99, 106 A.L.R. 376, certiorari denied 1936, 298 U.S. 672, 56 S.Ct. 937, 80 L.Ed. 1394; Falsone v. United States, 5 Cir., 1953, 205 F.2d 734, 737, certiorari denied 1953, 346 U.S. 864, 74 S.Ct. 103, 98 L.Ed. 375. And, sub silentio, First National Bank of Mobile, Ala. v. United States, 1925, 267 U.S. 576, 45 S.Ct. 231, 69 L.Ed. 796, and, in this circuit, McDonough v. Lambert, 1 Cir., 1938, 94 F. 2d 838; and Pacific Mills v. Kenefick, 1 Cir., 1938, 99 F.2d 188.

We have discussed the question of our jurisdiction at some length only because of the appellee's heavy reliance upon Jarecki v. Whetstone, 7 Cir., 1951, 192 F.2d 121, which holds that an order of the kind under consideration is not final and hence not appealable.² The Jarecki case undoubtedly supports the appellee's contention. But we reject it as authority, for in it the court relied upon the Alexander and Cobbledick cases without any notice of the Ellis case and the distinction drawn therein and emphasized in Cobbledick between an order enforcing a subpoena issued in the course of a judicial proceeding and an order enforcing a subpoena issued in aid of an administrative proceeding.

Having determined that the order appealed from is within our jurisdiction, we turn to the merits.

A Special Agent of the Internal Revenue Service, as the delegate of the Secretary of the Treasury, on February 7, 1957, issued a summons pursuant to § 7602 of the Internal Revenue Code of 1954, 26 U.S.C.A. § 7602, directing the appellant to present himself at the office of the Intelligence Division of the Internal Revenue Service in Providence, Rhode Island, at 9:30 a. m. on February 18, 1957, to testify with respect to his and his wife's tax liabilities for the calendar years 1943 to 1954, inclusive. By agreement the date of appearance was advanced to February 15, and on that day the appellant accompanied by counsel appeared in response to the summons. He was not put under oath but he was asked about and freely discussed matters pertaining to his and his wife's taxes for the years 1951 to 1954. As a result a basis for the settlement of claimed deficiencies for those years was agreed upon. He was informed that no deficiencies were claimed for the years 1948 to 1950, and then the years 1943 to 1947 came up for discussion. At this juncture appellant's counsel pointed out that there was no claim that the appellant had failed to file returns for any of those years and that no waivers for any of the years, except 1944, had ever been requested, and that the last of five waivers granted by the appellant for that year had long since expired. He therefore asserted that in the absence of fraud³ the statute of limitations prevented the assessment or collection of tax deficiencies for the years 1943 to 1947 and that he would advise his client not to discuss those years until some reasonable ground for the possible belief that the appellant had fraudulently understated his taxable income for those years had been shown. Counsel said: "We want to make it perfectly clear, however, that if and when there is any evidence submitted that would show, or tend to show, fraud for those years, Mr. O'Connor is willing to testify as to those years."

The Revenue Agents in attendance at the hearing admitted that the appellant had filed returns for the years in question and that the years were "closed" except for fraud. But, although they conceded that the appellant's return for 1943 had been destroyed in accordance with established administrative practice, they asserted that calculations based on the tax paid by the appellant for 1943, and his returns for later years, indicated a substantial untaxed increase in his net worth during the years in question. Appellant's counsel replied that proof of a deficiency alone was not proof of fraud and further that calculations based only on the amount of tax paid could not possibly show the amount of gross income reported or the nature and amount of the deductions claimed. And he reasserted his position that discussion with respect to the years 1943 to 1947 "will depend upon whether or not you can show us any evidence of fraud. The minute you show us any evidence of fraud, Mr. O'Connor would discuss those years freely and without reservation." The Agents maintained that they did not need to make any such showing as a prerequisite to discussion of those years and the interview came to an amicable end.

Soon thereafter the appellee filed a petition in the court below for an order directing the appellant to comply with the subpoena insofar as the so-called "closed" years of 1943 through 1947, closed that is except for fraud, were concerned. The appellant moved to dismiss the petition and to quash the subpoena and the matter came on for hearing. At the hearing appellant's counsel maintained the same position he had taken at the interview and the appellee took the position that the testimony of the agent that from his investigation he honestly suspected that the taxpayer-appellant had filed false and fraudulent returns for the years in question was all that had to be shown to support an order of the...