Daly v. United States

• Decision Date: 11 April 1968
• Docket Number: No. 18906.,18906.
• Parties: Jerome DALY, Appellant, v. UNITED STATES of America and Raymond H. Ehlers, Revenue Agent, Internal Revenue Service, Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

393 F.2d 873 (1968)

Jerome DALY, Appellant, v. UNITED STATES of America and Raymond H. Ehlers, Revenue Agent, Internal Revenue Service, Appellees.

No. 18906.

United States Court of Appeals Eighth Circuit.

April 11, 1968.

Jerome Daly, Savage, Minn., pro se.

John P. Burke, Atty., Dept. of Justice, Washington, D. C., for appellees, Mitchell Rogovin, Asst. Atty. Gen., Lee A. Jackson and Joseph M. Howard, Attys., Dept. of Justice, Washington, D. C., and Patrick J. Foley, U. S. Atty., and J. Earl Cudd, Asst. U. S. Atty., Minneapolis, Minn., on the brief.

Before MATTHES and LAY, Circuit Judges, and BECKER, Chief District Judge.

LAY, Circuit Judge.

Appellant appeals a judgment finding him in contempt arising out of his alleged refusal to comply with the District Court's order enforcing the Internal Revenue Service's administrative summons and their right to interrogate under Int. Rev. Code of 1954, § 7604(a).¹ Appellant alleges (1) that he was not served with proper process and therefore the District Court was without jurisdiction over his person; (2) that he was denied a proper hearing below; (3) that his objections to the interrogation should be sustained because of various constitutional claims, including his privilege not to incriminate himself.² We reverse and remand the case to the district court for a plenary hearing on appellant's objections.

The chronology of events reflects that on July 21, 1966, a revenue agent issued and served appellant a summons pursuant to §§ 7602 and 7603 of the Internal Revenue Code of 1954, requesting him to appear to give testimony and to produce various documents. Daly appeared, but he refused to be sworn to give testimony with respect to his income tax liabilities for 1965 for reasons hereafter discussed. On December 1, 1966, the United States Attorney filed a "Petition to Enforce Internal Revenue Summons" in the District Court of Minnesota along with a copy of the summons, the agent's affidavit and Daly's income tax return. The latter was an income tax return for the year 1965 with only Daly's name and occupation (lawyer and farmer) inscribed thereon. It was otherwise blank. Attached was Exhibit "A" which was a memo containing appellant's constitutional objection to the income tax, as well as his memorandum attacking the constitutionality of the Federal Reserve system.

On December 2, 1966, the District Court entered an order requiring Daly to appear before the court on the 28th of December, 1966, and to show cause why he should not be compelled to obey the Internal Revenue summons served on July 21, 1966. On December 6, 1966, Daly admitted service of the order but therein recited that he was appearing specially and that he objected to the jurisdiction of the court over his person. Thereafter, the court entered an order which singularly recites that Daly appear for examination on January 6, 1967, at St. Paul, Minnesota, pursuant to §§ 7602, 7603 and 7604(a). Daly did not appeal this order.

On January 6, 1967, Daly appeared at the appointed time and place, and again objected to the jurisdiction of the District Court and the order dated December 28, 1966, and then was duly sworn. He then stated:

"Now, in view of United States statutes 26, United States Code, Internal Revenue Code, Section 7202 and 7203 — well, Chapter 75 of 26 United States Code, 7201 through 7212, including but not limited to Section 1918(b) of Title 28, Section 7207 of Title 26, Section 6531 of Title — no, strike that.

"In the face of those criminal statutes, I am going to refuse to answer the question that you asked me, Mr. Ehlers, upon the grounds that it infringes upon my rights as secured by the Constitution of the United States; and more specifically the fourth, fifth and sixth amendments thereof."

Thereafter he repeated the same objection to a series of questions concerning his income tax records.

The revenue agent filed an affidavit on January 26, 1967, reciting the events of January 6, 1967. On March 20, 1967, the court entered an order to show cause why appellant should not be adjudged in contempt for refusal to comply with the order entered December 28, 1966. Appellant was ordered to appear on March 27, 1967, before the District Court. On that date the parties appeared and appellant was given twenty days in which to submit a brief. Appellant argues that no hearing was held.

On May 3, 1967, the District Court entered findings of fact and conclusions of law and adjudged appellant in contempt, directing that appellant be arrested and confined until such time that he complied with the court's order entered December 29, 1966.

Appellant challenges the jurisdiction of the court over his person on the grounds that he was not properly served with a summons under Rule 4(a) of the Federal Rules of Civil Procedure. Jurisdiction of the District Court was invoked by service upon the appellant by an order to show cause. Cf. Beatty v. United States ex rel. Halpin, 227 F.2d 350 (8 Cir. 1955); Wild v. United States, 362 F.2d 206 (9 Cir. 1966).

The Supreme Court has stated that an action under § 7604(a) is clearly an adversary proceeding where a hearing is based upon issues formed by the filing of a proper complaint and answer. United States v. Powell, 379 U.S. 48, 58, 85 S.Ct. 248, 13 L.Ed.2d 112 (1964); Reisman v. Caplin, 375 U.S. 440, 446, 84 S.Ct. 508, 11 L.Ed.2d 459 (1964). As pointed out in Powell, in the absence of specific procedures set forth under § 7604(a) as under § 7604(b), the Federal Rules of Civil Procedure are generally applicable. See also United States v. McKay, 372 F.2d 174 (5 Cir. 1967); Wild v. United States, supra; Kennedy v. Rubin, 254 F. Supp. 190 (N.D.Ill.1966) allowing pretrial discovery practice under § 7604 (a). See also 7 Moore's Federal Practice, ¶ 81.016, p. 4413, discussing the Committee's notes of 1946 to Amended Subdivision (a) (3) of Rule 81. Except when expressly authorized by statute summary procedures are to be substituted for plenary actions only in narrowly defined special situations. See New Hampshire Fire Ins. Co. v. Scanlon, 362 U.S. 404, 406-408, 80 S.Ct. 843, 4 L.Ed.2d 826 (1960); Application of Howard, 325 F.2d 917 (3 Cir. 1963); 2 Moore's Federal Practice ¶ 3.04 at p. 714.

In the instant case, although the order to show cause did not specify the normal 20 days for appellant's response (Fed.R.Civ.P. 12(a)), nevertheless, it was served 22 days before the hearing ordered. No argument has been made at any time that appellant has been prejudiced, only that he was technically not given a proper summons. Although, it would seem advisable in future cases for the government to comply with Fed.R. Civ.P. 3 and 4, under the circumstances it seems reasonable to say appellant received sufficient notice to be within the confines of "appropriate process" and that the District Court's jurisdiction was properly invoked. Cf. In re Wolrich, 84 F.Supp. 481 (S.D.N.Y.1949); Long Beach Federal Savings and Loan Assoc. v. Federal Home Loan Bank Board, 189 F.Supp. 539, 596 (S.D.Cal.1960); Federal Maritime Commission v. Transoceanic Terminal Corp., 252 F.Supp. 743, 746 (N.D.Ill.1966); Walling v. Moore Milling Co., 62 F.Supp. 378, 381-382 (W.D.Va.1945).³

However, we need not decide that precise question here. Appellant raised his special appearance before the trial court at the time of the original hearing on his enforcement order. The court overruled all of his objections including his jurisdictional claim and entered an order requiring his appearance to answer the agent's questions. Appellant discussed the question of appeal at that time with the court. His actions demonstrate that he chose to appear at the time set for the interrogation and he did not appeal. The order of the trial court in enforcing the summons of the revenue agent became an appealable order upon its proper entry. See Reisman v. Caplin, supra. The order entered was similar to a final judgment in any other case. Appellant's defenses, including the jurisdictional question, which went to the validity of the overall enforcement order were fully tried in this original hearing before Judge Lord. In the contempt proceeding, from which this appeal is filed, appellant attempts to collaterally attack the original enforcement order. He cannot do this. His jurisdictional claim has been adjudicated and the doctrine of res judicata applies. Baldwin v. Iowa State Traveling Men's Assoc., 283 U.S. 522, 51 S.Ct. 517, 75 L.Ed. 1244 (1923); Durfee v. Duke, 375 U.S. 106, 84 S.Ct. 242, 11 L.Ed.2d 186 (1963); see also Restatement, Judgments § 9 (1942). And although the contempt proceedings required the court to review the specific objections raised to the questions asked by the revenue agent, it was then too late to reach back and rely upon the jurisdictional claim he had abandoned. The door was closed. As Mr. Justice Jackson has stated: "* * * when the order has become final, disobedience cannot be justified by re-trying the issues as to whether the order should have issued in the first place." Maggio v. Zeitz, 333 U.S. 56, at 69, 68 S.Ct. 401, at 408, 92 L.Ed. 476 (1948).

We turn now to appellant's claim that he was denied a proper hearing.

In Shillitani v. United States, 384 U.S. 364, 370-371, 86 S.Ct. 1531, 1536, 16 L.Ed.2d 622 (1966), Mr. Justice Clark, in discussing civil contempt proceedings, states:

"The conditional nature of the imprisonment * * * justifies holding civil contempt proceedings absent the safeguards of indictment and jury * * * provided that the usual due process requirements are met." (Emphasis ours.

Due process under these circumstances demands a plenary hearing. However, the problem we face is that it is extremely doubtful whether appellant did not actually waive his right to such a hearing.⁴ However, it is also clear the government has not elected, nor would it be possible for it to do so, to proceed summarily with attachment against the appellant under § 7604(b). See Reisman v. Caplin, supra, 375 U.S....