Hubner v. Tucker, 14704.

• Decision Date: 30 January 1957
• Docket Number: No. 14704.,14704.
• Citation: 245 F.2d 35
• Parties: Evelyn HUBNER, Appellant, v. Lloyd M. TUCKER, Special Agent, Internal Revenue Service, Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

245 F.2d 35 (1957)

Evelyn HUBNER, Appellant, v. Lloyd M. TUCKER, Special Agent, Internal Revenue Service, Appellee.

No. 14704.

United States Court of Appeals Ninth Circuit.

January 30, 1957.

COPYRIGHT MATERIAL OMITTED

Sloane & Fisher, Robert W. Conyers, San Diego, Cal., for appellant.

Laughlin E. Waters, U. S. Atty., Edward R. McHale, Asst. U. S. Atty., Chief, Tax Division, Robert H. Wyshak, Asst. U. S. Atty., Los Angeles, Cal. (Harry D. Steward, Howard R. Harris, Asst. U. S. Atty., San Diego, Cal., of counsel), for appellee.

Before MATHEWS and FEE, Circuit Judges, and FOLEY, District Judge.

JAMES ALGER FEE, Circuit Judge.

The previous opinion in the instant case is withdrawn upon the petition for rehearing because of the filing of opinions in Local 174, International Brotherhood of Teamsters v. United States, 9 Cir., 240 F.2d 387, and Boren v. Tucker, 9 Cir., 239 F.2d 767. We agree with the results and reasoning of both of these opinions. The present opinion is substituted to clarify our attitude, in the light of these decisions, with certain modifications and additions to meet the petition on rehearing and prevent misunderstanding. We reaffirm our former conclusions and therefore deny the petition for rehearing.

Appeal has here been taken from the judgment of the District Court adjudging that attachment against the person of Evelyn Hubner as and for contempt should be issued and said Evelyn Hubner remanded to the custody of the Marshal until she complies with an administrative subpoena issued by a Special Agent of the Internal Revenue Service and that the Special Agent who issued the subpoena "shall have the right at all reasonable times to examine said Books of Account, records and documents."¹

The cause arose upon a petition of the Special Agent of the Internal Revenue Service to enforce an administrative subpoena² issued in an investigation of the internal revenue tax liability of Clifford O. Boren and Delta M. Boren, and it was alleged in general that "said books, records, papers and data are material and relevant to said inquiry." The hearing was had before the trial judge upon affidavits. Based upon such proof, the court found that Evelyn Hubner had appeared in response to the subpoena, but had failed, neglected and refused to produce any records. It was also found that said Evelyn Hubner was executrix of the estate of her husband, Elmer J. Hubner, deceased.

The contentions of Evelyn Hubner are, first, that she was entitled to notice before her papers relating to her own tax liability were examined for a second time, second, that the examination of all papers in her possession in her own right and as executrix of the estate of her husband, for the purpose of discovering whether fraud had been committed by the Borens, was a violation of her right against unlawful search and seizure, absent a showing that the particular document was relevant to the inquiry and that the demand was not unreasonable as to her personally or as executrix, and, third, that she was not required to produce evidence against herself.

The vital point upon which our conclusions are based is that the order directing production was not limited to specific documents designated and described as in the possession of Mrs. Hubner, but, on the other hand, enforced a general warrant of search and seizure³ as a result of the failure to designate the documents and to define in which capacity, individually or as executrix, Mrs. Hubner held any particular document. She was thereby deprived of her right, as a third person not under investigation, to urge that some of the documents not relevant or material to the inquiry were in her personal possession, care or control, that the production thereof would tend to degrade or incriminate her, and that thus she was required to produce evidence against herself. Upon this point, the decision here is based. But other preliminary points must be discussed.

As to the first question, the learned trial judge was correct in holding that § 7605(b) did not apply here.⁴ It was held that the "taxpayer" referred to in that section is the one whose return is under investigation. The showing made by the Special Agent expressly disclaimed any intention of reexamining the papers in reference to any tax liability of Evelyn Hubner. But this very representation of the Internal Revenue Service places her in the category of third persons not connected with the investigation. Such persons have rights of their own.

The Special Agent is proceeding under a general statute which has application to this individual only under limited circumstances. There is no attempt here to deny the paramount power of the government to collect taxes. But Evelyn Hubner, in her personal capacity or as executrix, was not ostensibly the subject of the investigation. By definition, the attempt was to examine into the tax liability of Clifford O. and Delta M. Boren.⁵ The executive agency itself is strictly limited by the statute and by the constitutional guaranties in such a situation. Furthermore, the agency is not the arm of a court, as is a grand jury.⁶ To enforce process of the Special Agent, resort must be had to an independent judicial proceeding which is characterized as a case or controversy. The executive agency would not have authority over Evelyn Hubner unless it could be established that she had custody of particular papers and that some of these were material or relevant to the tax liability of the Borens. A blanket order of production of all papers therefore had no proper foundation because she had no opportunity to claim her constitutional rights as to such papers en masse.

Far from denying a third party the right to raise the question of materiality or relevancy, we hold that, as to a stranger to the controversy whose tax liability was not apparently in question, the Special Agent had no right to examine any paper unless it was proven to have therein an entry relating to the tax liability of the Borens. The statute granting the authority to require production expressly so provides. No order to produce was properly found which was supported by adequate proof to that effect. If it be objected that these technical requirements make enforcement of the demands of an administrative subpoena a game, it may be countered that the constitutional guaranty requires that adequate protection be given to a third party against a general search and seizure. The very statute under which the Special Agent claims to act expressly provides for this protection.

This situation is further complicated by the failure of the Special Agent to allege in the subpoena and prove, if challenged, whether Evelyn Hubner held a particular paper as an individual or as executrix of the estate of Elmer J. Hubner, deceased. The challenge here is not to the admitted power paramount of the United States to collect the revenue, but to require the Special Agent to establish jurisdiction over Evelyn Hubner or Evelyn Hubner as executrix of the estate of Elmer J. Hubner, deceased, by showing that one or the other was a "person having possession, custody, or care of books of account containing entries relating to the business of the person liable for tax."⁷ Although Mrs. Hubner admitted possession of papers belonging to the former partnership and former corporation, she was never required to produce a particular document as to which she might assert her personal rights.

Appellant is an individual and a part of the general public. The papers which she held personally were of interest to her and she had a right to privacy therein. Likewise, she was the executrix of the estate of her husband and some documents may have been held by her as an adjunct of the state probate court. It would seem that, before there should be any examination of such papers, the consent of the state court should have been asked by her for her protection, since, unquestionably, the interests of the estate of the deceased, Elmer J. Hubner, were involved. It may well be that, as to papers which she held as executrix, she was in a less favorable position to refuse to produce than those which she herself owned or held.

On the other hand, it may be that, by demise of the corporation and dissolution of the partnership, Evelyn Hubner became the owner and entitled to the possession of all of these documents. In such circumstances, she would be an utter stranger to the proceedings. She would then have the right of privacy and could raise the question of constitutional protection as to each document. The Bureau of Internal Revenue would have no right to investigate the personal liability of Evelyn Hubner, either civilly or criminally, under guise of an investigation of the Borens. Be that as it may, the blanket demand of the subpoena and the blanket direction of the order to produce, since no distinctions were made as to custody, care or possession or materiality or relevancy as to particular documents, vitiated the effect of each. Her constitutional right of privacy she never had an opportunity to assert as to designated documents.

The original subpoena in the case called for her to produce:

"Books of account of the partnership known as the Hubner Building Company and the corporation known as the Hubner Building Company relating to transactions had by that partnership and corporation with the above-named Clifford O. Boren and Delta M. Boren for the years above stated, together with paid checks, invoices, correspondence, and any and all miscellaneous records, data, and memoranda relating to transactions between the Hubner Building Company and the above-named taxpayers."

It is objected that the papers demanded were those of a corporation which had no right to resist. It is unnecessary to pass upon this question, although there is grave doubt of the validity of the proposition in these circumstances. Here the corporation had been dissolved and the ownership and custody of its papers were in an...