Hunsucker v. Phinney

• Decision Date: 29 August 1974
• Docket Number: No. 71-2580.,71-2580.
• Citation: Hunsucker v. Phinney, 497 F.2d 29 (5th Cir. 1974)
• Parties: Louis Sager HUNSUCKER, Jr., Plaintiff-Appellant, v. Robert L. PHINNEY, District Director of Internal Revenue, Defendant-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

497 F.2d 29 (1974)

Louis Sager HUNSUCKER, Jr., Plaintiff-Appellant, v. Robert L. PHINNEY, District Director of Internal Revenue, Defendant-Appellee.

No. 71-2580.

United States Court of Appeals, Fifth Circuit.

July 10, 1974.

Rehearing Denied August 29, 1974.

Douglass D. Hearne, Austin, Tex., for plaintiff-appellant.

Morris Silverstein, U. S. Dept. of Justice, Tax Div., Scott P. Crampton, Asst. Atty. Gen., Carlton D. Powell, Fred B. Ugast, Act. Asst. Atty. Gen., Meyer Rothwacks, Attys., Tax Div., Dept. of Justice, Washington, D. C., William S. Sessions, U. S. Atty., San Antonio, Tex., for defendant-appellee.

Before GODBOLD, DYER and GEE, Circuit Judges.

GODBOLD, Circuit Judge:

Appellant Hunsucker, against whom no civil or criminal proceeding was pending, sued seeking to prohibit the use against him in any action, civil or criminal, of documentary evidence that he claims had been illegally seized. More specifically he sought pursuant to the federal declaratory judgment statute, 28 U.S.C. §§ 2201-2202, a declaration that the material was illegally seized, and, pursuant to Rule 41(e), F. R.Crim.P.,¹ return of the seized property and an order prohibiting its use as evidence against him. His suit was dismissed with prejudice, and he appeals.

These are the relevant facts, as found by the District Court. On December 23, 1967, Hunsucker's apartment was searched by agents of the United States pursuant to a search warrant issued by a United States Commissioner. Bet slips, wager recap slips, names and addresses and other items were seized. Hunsucker was arrested on the same day and charged with violations of 26 U.S.C. §§ 4901, 7203, and 7262. Subsequently the criminal action was dismissed by the U.S. Attorney, and the seized materials were turned over to an agent of the Internal Revenue Service who, on the basis of these materials, recommended that an assessment of $36,167 be made against Hunsucker for delinquent excise taxes. At the time of trial no assessment had actually been made. Prior to trial in the District Court the seized materials were returned to Hunsucker, but the IRS made and retained copies of some items.

The District Court held that it had jurisdiction and dismissed the action with prejudice. The dismissal appears to be based on alternative conclusions that either (a) determination of whether or not the evidence was illegally seized was premature, or (b) that the search warrant was issued with an adequate showing of probable cause and was not invalidated by the subsequent decisions in Marchetti v. United States, 390 U.S. 39, 88 S.Ct. 697, 19 L.Ed.2d 889 (1968), and Grosso v. United States, 390 U.S. 62, 88 S.Ct. 709, 19 L.Ed.2d 906 (1968).

Hunsucker asserts that this is not a tax case but a controversy concerning search and seizure. That characterization is a necessary one because, as we discuss below, § 2201 does not confer power to enter declaratory judgments in tax cases, and the use of injunctions against assessment or collection of federal taxes is barred by 26 U.S.C. § 7421(a) (subject to certain narrow exceptions). Having attempted to remove himself from the tax field, Hunsucker seeks to obtain an early adjudication of the legality of the seizure by invoking a limited concept of supervisory and equitable powers of the court and a seldom used jurisdictional statute, 28 U.S.C. § 1356.

A. Equitable or supervisory jurisdiction

Hunsucker contends that cases entertaining pleas for suppression and return of unconstitutionally seized property prior to any indictment establish that the District Court had jurisdiction. We hold that even if the District Court had the power to adjudicate the issues tendered and to grant the relief requested, the exercise of that power is tempered by equitable considerations which justified the District Court's conclusion that Hunsucker's attempt to obtain relief was premature.

A substantial body of precedent establishes that federal district courts have power to order the suppression or return of unlawfully seized property even though no indictment has been returned and thus no criminal prosecution is yet in existence.² Though firmly established, this jurisdiction is an exceptional one. Judge Friendly has observed that one may search the jurisdictional statutes, 28 U.S.C. §§ 1331-1358, in vain for a grant of such power in cases where the jurisdictional amount required by § 1331(a) is not satisfied, Grant v. United States, 282 F.2d 165, 168 (CA2, 1960), and Judge Wyzanski has referred to the power as "the anomalous jurisdiction," Lord v. Kelley, 223 F.Supp. 684 (D.Mass.1963), appeal dismissed, 334 F.2d 742 (CA1, 1964), cert. denied, 379 U.S. 961, 85 S.Ct. 650, 13 L. Ed.2d 556 (1965). The theory articulated by most of the cases is that jurisdiction to order suppression or return prior to indictment exists not by virtue of any statute but rather derives from the inherent authority of the court over those who are its officers.³

Whether the anomalous jurisdiction extends to cases, such as this one, where the likely future proceeding is at least nominally civil in nature rather than criminal is uncertain. The theoretical basis of the jurisdiction in the court's power over its officers would seem unaffected. We have encountered only one case, however, in which it appears that the anomalous jurisdiction was exercised where the only likely future proceeding was a civil one, and in that case it was simply exercised without discussion. United States v. Blank, 261 F.Supp. 180 (N.D.Ohio 1966). Some cases suggest in passing that exercise of the jurisdiction is limited to cases of threatened criminal indictment. Thus in Lord v. Kelley, 223 F.Supp. 684, 689 (D.Mass. 1963), Judge Wyzanski stated,

Often—perhaps usually—it will be more prudent for a trial court to await the return of an indictment before granting any relief. For in many cases the trial court may not be persuaded that the substantial risk facing the aggrieved person is a criminal prosecution, as distinguished from an administrative or civil proceeding.

See also Fifth Avenue Peace Parade Committee v. Hoover, 327 F.Supp. 238, 242 (S.D.N.Y.1971). Certainly where a criminal indictment is threatened one reason for early adjudication of the admissibility of evidence exists which is not present where only a civil proceeding is threatened: the criminal indictment itself carries a danger of stigmatization which may not be removed by a determination in the criminal trial that the evidence on which the indictment was based is inadmissible. See In re Fried, 161 F.2d 453, 458 (CA2, 1947) (opinion of Frank, J.). Hunsucker argues that even if a threatened criminal prosecution is usually necessary, the threat of an assessment for unpaid gambling taxes sufficiently resembles a threat of criminal indictment to bring this action within the cases dealing with pre-indictment suppression or return where a criminal indictment is threatened. We do not determine in this case whether exercise of the anomalous jurisdiction is limited to instances where criminal prosecution is threatened nor do we determine whether the threat of a gambling tax assessment is a surrogate for threatened prosecution. Rather, we have assumed that for one reason or the other the cases dealing with pre-indictment suppression or return are applicable here.

The documents which are the immediate subject of the present dispute are apparently in the hands of agents of the Internal Revenue Service, and the question arises whether these persons are subject to the court's power over its officers. A number of older cases suggest not,⁴ but more recent cases indicate that the court's supervisory power is adequate to reach IRS agents as well as those who are traditionally regarded as officers of the court.⁵ We pretermit the question and assume for purposes of this case that the District Court had supervisory power over the IRS agents in possession of the documents.

But even if the District Court's power over its officers provides a theoretical basis for jurisdiction in this case, it does not automatically follow that this unique power should be exercised wherever it exists. Rather such jurisdiction should be exercised with "caution and restraint,"⁶ and "subject to equitable principles."⁷ The applicability of equitable principles is the same whether the present action is viewed as one brought under Rule 41(e), F.R.Crim. P., or as one premised on the equity jurisdiction of the District Court. In either event the theoretical basis of jurisdiction to order pre-indictment return or suppression is grounded in the court's supervisory power over its officers. As the Court of Appeals for the District of Columbia Circuit has observed, Rule 41 "is a crystallization of a principle of equity jurisdiction. That equity jurisdiction persists as to situations not specifically covered by the Rule. Alternatively the same result can be reached by a broad reading of the Rule." Smith v. Katzenbach, 122 U.S.App.D.C. 113,351 F.2d 810, 814 (1965)⁸.

Having concluded that exercise of the anomalous jurisdiction which Hunsucker seeks to invoke is governed by equitable principles, we must inquire whether those principles warrant jurisdiction in this case. The government argues and the District Court concluded that Hunsucker had an adequate remedy at law in that he could wait until an assessment was made, pay the tax for one wager and file a claim, and if necessary a suit, for refund.⁹ Hunsucker's counter-argument, that he would be required to incriminate himself in order to prevail in the refund suit, is the same argument which a majority of this Court en banc found "unpersuasive" in Lucia v. United States, 474 F.2d 565 (CA5, 1973). There was no showing that irreparable injury would result from waiting to vindicate his rights until a refund suit could be brought. The District Judge specifically found that, "The plaintiff has not presented any evidence to show that he would be irreparably injured...