Kivela v. Department of Treasury, Docket No. 138738

• Decision Date: 06 July 1993
• Docket Number: Docket No. 138738
• Citation: 200 Mich.App. 545,505 N.W.2d 11
• Parties: Diane KIVELA, Petitioner-Appellant, v. DEPARTMENT OF TREASURY, Respondent-Appellee.
• Court: Court of Appeal of Michigan — District of US

Page 11

505 N.W.2d 11

200 Mich.App. 545

Diane KIVELA, Petitioner-Appellant, v. DEPARTMENT OF TREASURY, Respondent-Appellee.

Docket No. 138738.

Court of Appeals of Michigan.

Submitted Jan. 7, 1993, at Lansing.

Decided July 6, 1993, at 9:40 a.m.

Released for Publication Sept. 23, 1993.

Daniel J. Blank, Birmingham, for petitioner-appellant.

Frank J. Kelley, Atty. Gen., Thomas L. Casey, Sol. Gen., and E. David Brockman, Asst. Atty. Gen., for respondent-appellee.

Before MURPHY, P.J., and MICHAEL J. KELLY and WAHLS, JJ.

MURPHY, Presiding Judge.

Petitioner appeals from an order of the Michigan Tax Tribunal granting respondent's motion for summary disposition and denying petitioner's motion for summary disposition. We reverse and remand.

In July 1989, police officers searched petitioner's house pursuant to a search warrant. The officers seized four ounces of marijuana, as well as financial records detailing sales and purchases of marijuana. Following the search, petitioner was charged with possession of marijuana with intent to deliver. Petitioner successfully challenged the validity of the search warrant in the Detroit Recorder's Court, which ordered the seized evidence suppressed. The criminal charges against petitioner were subsequently dismissed.

The financial records seized from petitioner's house were turned over to respondent. Respondent and its agents had not participated in the preparation or execution of the search warrant. Respondent used the information contained in the financial records to determine that petitioner owed unpaid sales, use, income, and single business taxes, along with penalties and interest. Shortly before the criminal charges against petitioner were dismissed, respondent issued a jeopardy tax assessment against her, pursuant to M.C.L. § 205.26; M.S.A. § 7.657(26), in the amount of $26,079.

Petitioner challenged the tax assessment in the Tax Tribunal, contending that evidence seized during an illegal search cannot be used as the basis for a jeopardy tax assessment. Both parties moved for summary disposition pursuant to MCR 2.116(C)(10), and petitioner also moved for summary disposition pursuant to MCR 2.116(C)(6) and (8). The hearing officer found that the evidence could be considered and used as the basis for the tax assessment. The Tax Tribunal adopted the hearing officer's proposed order, granted summary disposition to respondent, and denied petitioner's motion for summary disposition.

Petitioner contends that the Tax Tribunal erred in granting respondent summary disposition and declining to grant her summary disposition. Petitioner argues that under Michigan law, as set forth in People v. Pringle, 96 Mich.App. 26, 33, 292 N.W.2d 153 (1980), modified 409 Mich. 945 (1980), evidence seized during an unconstitutional search and seizure may not be used as the basis for a jeopardy tax assessment. Respondent counters that Pringle was essentially overruled in Tirado v. Comm'r. of Internal Revenue, 689 F.2d 307 (C.A.2, 1982), cert. den., 460 U.S. 1014, 103 S.Ct. 1256, 75 L.Ed.2d 484 (1983), in which the Second Circuit Court of Appeals determined that the Internal Revenue Service could properly use evidence illegally seized by federal narcotics agents to establish tax liability.

Our review of decisions of the Tax Tribunal is limited to determining whether the factual findings of the tribunal are supported by competent evidence, and, where fraud is not alleged, whether the tribunal has made an error of law or adopted a wrong principle. Meadowlanes Ltd. Dividend Housing Ass'n v. Holland, 437 Mich. 473, 482-483, 473 N.W.2d 636 (1991). In this case, we are called upon to decide whether the Tax Tribunal erred as a matter of law in rejecting the precedent of Pringle and adopting the rationale of Tirado.

Pringle is factually similar to the case at bar. In Pringle, police officers arrested the defendants for delivery of marijuana and seized books and records detailing narcotics transactions. The officers turned the records over to the Michigan Department of Treasury, which in turn used the evidence as the factual basis for a jeopardy tax assessment against the defendants, seizing money that had been discovered during the defendants' arrests. The defendants successfully moved for suppression of the evidence and the circuit court subsequently granted their motion for return of the money. Id., at 28, 292 N.W.2d 153. This Court affirmed, determining that evidence obtained pursuant to an unconstitutional search and seizure cannot serve as the factual basis or the triggering event for a jeopardy tax assessment and the seizure of money. Id., at 33, 292 N.W.2d 153.

The federal exclusionary rule has been applied differently, however. In United States v. Janis, 428 U.S. 433, 96 S.Ct. 3021, 49 L.Ed.2d 1046 (1976), the United States Supreme Court held that evidence seized by state police officers in violation of the Fourth Amendment could be used in a civil suit brought by the Internal Revenue Service to determine the suspect's tax liability. The Supreme Court stated that the exclusionary rule is not a personal constitutional right of the aggrieved party, but rather is a judicially created rule designed to safeguard Fourth Amendment rights through deterrence of future unlawful police conduct. Id., at 446, 96 S.Ct. at 3028. The Supreme Court declined to extend the rule to exclude unconstitutionally obtained evidence in situations where it believed the deterrent effect of the rule would not be served. The Supreme Court stated that where, as in that case, the agents of one sovereign execute an unconstitutional search, the suppression of the seized evidence in a civil proceeding by another sovereign would not significantly deter unconstitutional behavior. Id., at 453-458, 96 S.Ct. at 3031-34. The Supreme Court reasoned that to so extend the exclusionary rule would hamper the enforcement of valid laws by preventing the admission of relevant and reliable evidence. Id., at 447, 96 S.Ct. at 3028. The Supreme Court also stated that the current sanction of excluding the evidence in a criminal proceeding is sufficient and that any additional sanction provided by extending the rule would not significantly increase the deterrence. Id., at 453-454, 96 S.Ct. at 3031-32. The Supreme Court did not decide whether the exclusionary rule would apply where the police officers who committed the illegal search were agents of the same sovereign seeking to impose tax liability upon the suspect. Id., at 456, 96 S.Ct. at 3033.

In Tirado, the Second Circuit Court of Appeals extended the rule of Janis to intrasovereign situations and held that the evidence seized by federal agents during a search that was later found to be unconstitutional could still be used by the IRS to determine the suspect's tax liability for narcotics-related income. The court determined that the key inquiry was whether the original unconstitutional search was somehow motivated by the challenged use of the evidence. Tirado, supra, 310-311. The court discussed that the exclusionary rule applied only to those circumstances where the deterrent effect would be "substantial and efficient." Id., at 310. The court explained that the need for the evidence should be balanced against the deterrent effect, and that to make this determination, the court must examine the motives of the searching officers. The closer the evidence is to the officers' "zone of primary interest" in seizing the evidence, the stronger the inference that the officers had that use in mind when they seized the evidence. Id., at 310-311. The court further reasoned that the exclusionary rule would apply if there were a close relationship between the search and the secondary proceeding. Any indication of an explicit understanding between the two law enforcement bodies would be decisive to invoke the exclusionary rule. Id., at 312. Thus, Tirado does not rule out the application of the federal exclusionary rule in all civil cases, but instead calls for an analysis of the facts of each case.

The Michigan Constitution is construed to provide no greater protection against unreasonable searches and seizures than does the Fourth Amendment, absent a compelling reason to apply a different interpretation. Const. 1963, art. 1, § 11; People v. Collins, 438 Mich. 8, 11, 25-31, 475 N.W.2d 684 (1991); People v. Cooke, 194 Mich.App. 534, 537, 487 N.W.2d 497 (1992). It does not necessarily follow, however, that Michigan's exclusionary rule must be applied in the same manner as the federal exclusionary rule, nor is Michigan required to follow the interpretation offered by the Second Circuit Court of Appeals. Our Supreme Court has acknowledged that Michigan's exclusionary rule differs from and provides greater protection than that established by the United States Supreme Court. In re Jenkins, 437 Mich. 15, 28, 465 N.W.2d 317 (1991). ¹

Michigan courts have applied Michigan's exclusionary rule in civil proceedings under certain circumstances. Id.; see, e.g., Lebel v. Swincicki, 354 Mich. 427, 437-438, 93 N.W.2d 281 (1958); Pringle, supra; Gilbert v. Leach, 62 Mich.App. 722, 725, 233 N.W.2d 840 (1975), aff'd sub nom., McNitt v. Citco Drilling Co., 397 Mich. 384...