Department of Revenue v. Continental Illinois Bank & Trust Co.

• Decision Date: 20 March 1975
• Docket Number: No. 59027,59027
• Citation: 326 N.E.2d 453,27 Ill.App.3d 326
• Parties: DEPARTMENT OF REVENUE of the State of Illinois for the Use of the People of the State of Illinois, Plaintiff-Appellee, v. The CONTINENTAL ILLINOIS BANK AND TRUST COMPANY, a Banking Corporation, Defendant, and Julius W. Butler, Defendant-Appellant.
• Court: United States Appellate Court of Illinois

Page 453

326 N.E.2d 453

27 Ill.App.3d 326

DEPARTMENT OF REVENUE of the State of Illinois for the Use of the People of the State of Illinois, Plaintiff-Appellee, v. The CONTINENTAL ILLINOIS BANK AND TRUST COMPANY, a Banking Corporation, Defendant and Julius W. Butler, Defendant-Appellant.

No. 59027.

Appellate Court of Illinois, First District, Third Division.

March 20, 1975.

Wayne B. Giampietro, Chicago, Michael M. Ushijima, Des Plaines, for butler.

Mayer, Brown & Platt, Chicago, John D. Donlevy, Chicago, of counsel, for Continental.

William J. Scott, Atty. Gen., Jerrald B. Abrams, Asst. Atty. Gen., of counsel, for Dept. of Revenue.

McNAMARA, Justice:

This appeal is from an order of the circuit court of Cook County directing a bank to comply with an administrative subpoena duces tecum issued by the Illinois Department of Revenue commanding the bank to produce certain records relating to the financial affairs of one of its customers.

On August 22, 1972, the Illinois Department of Revenue (hereinafter 'the Department') issued a subpoena duces tecum commanding Continental Illinois Bank and Trust Company (hereinafter 'Continental') to appear at a hearing in the office of the Department at a specified date with certain books and records of Continental relating to the state income tax liability of Julius W. Butler for the years 1969--1971.

The records described in the subpoena were '(a)ll signature cards, ledger sheets, deposit tickets, credit memos, debit memos, transfer of fund advices, microfilms of checks charged or deposited; and any and all other records relative to the commercial and savings accounts of Julius W. Butler, and all records of the Hinsdale Golf Club Trust, known as Trust Number 31--57214--1, for the years of 1969, 1970, and 1971.' Upon being served with the subpoena, Continental notified Butler, who in turn informed Continental that its voluntary compliance with the subpoena would be at the risk of a lawsuit brought by him. Continental thereupon refused to voluntarily comply with the subpoena, and the Department filed suit on September 28, 1972, seeking judicial enforcement of its subpoena.

Butler and Continental were joined as defendants. Butler filed his answer and a motion to limit the use of information requested and later moved to dismiss the complaint on constitutional grounds. On January 26, 1973, the trial court granted Butler leave to withdraw his answer and motion to limit, and sustained his motion to strike the complaint. The court noted that conflicting pleadings had been filed by Butler and that it had read and considered suggestions filed by counsel. The court granted leave to the Department to file an amended complaint and defendants to file responses, and set a date for the hearing on the pleadings.

After the Department filed an amended complaint, Butler filed a motion to dismiss two paragraphs on the ground that they stated conclusions of law. On the date set for the hearing on the pleadings, the court granted Continental leave to file a late answer. Butler filed no answer and the record is silent regarding any request to file a late answer. Two weeks later the hearing was held, and the court granted Butler's motion to dismiss two paragraphs of the complaint and then ordered Constinental to comply with the subpoena duces tecum.

Butler alone prosecutes this appeal. He contends that the subpoena power vested in the Department pursuant to Section 916 of the Illinois Income Tax Act (Ill.Rev.Stat.1973, ch. 120, par. 9--916(a)) is unconstitutional on its face as a violation of due process. In this constitutional attack, Butler essentially maintains that the power is over-broad and open-ended, that it fatally neglects to require as a precondition to the subpoena's issuance the prior holding of an administrative hearing, that it exacts a prohibitive financial burden on the third party holder of the materials, that it violates the federal and state constitutional guarantees of privacy as to both the holder of the materials and the taxpayer, and that it illegally fails to provide the taxpayer with formal notice of the existence of an investigation. Butler further argues that the procedures employed by the trial court violated due process. It has been Continental's position throughout these proceedings that it will readily comply with the subpoena upon court order and final resolution of this dispute.

It seems clear to us that Butler has no standing to challenge the constitutionality of the subpoena power under the statute. It is uncontested that Continental is not only the holder of the requested materials but is also the owner of them. Yet Continental has not chosen to attack the breadth, reach, or financial responsibilities relative to this provision. Butler has not asserted any established legal privilege, such as attorney-client, any work product claim, or any proprietary interest in regard to the materials. Butler's sole interest in the papers is that they relate to his business relationship with the bank and presumably possess some significance for state income tax purposes. This interest is clearly insufficient to permit the taxpayer to attack the constitutionality of the provision in the manner urged by him. See Couch v. United States (1973), 409 U.S. 322, 93 S.Ct. 611, 34 L.Ed.2d 548; Donaldson v. United States (1971), 400 U.S. 517, 91 S.Ct. 534, 27 L.Ed.2d 580; United States v. Bank of Commerce (3rd Cir. 1969), 405 F.2d 931; Application of Cole (2nd Cir. 1965), 342 F.2d 5, cert. den. 1965, 381 U.S. 950, 85 S.Ct. 1803, 14 L.Ed.2d 723; United States v. Northwest Pennsylvania Bank & Tr. Co. (W.D.Pa.1973), 355 F.Supp. 607; Perkal v. Rayunec (N.D.Ill.1964), 237 F.Supp. 102.

There are several reasons for our refusal to entertain the taxpayer's claim of constitutional deprivation in respect to his failure to receive formal notice of the existence of a tax investigation. In the first place, the record fails to disclose that Butler raised this defense in the trial court. Further, he was made a party to the enforcement proceedings, which afforded him sufficient notice in this case. Finally, Butler has not shown how he could have been prejudiced by the lack of formal notice. These events, taken together,...