People v. Paasche

• Decision Date: 05 December 1994
• Docket Number: Docket No. 147721
• Citation: 525 N.W.2d 914,207 Mich.App. 698
• Parties: PEOPLE of the State of Michigan, Plaintiff-Appellee, v. Joann Gerler PAASCHE, Defendant-Appellant.
• Court: Court of Appeal of Michigan — District of US

Page 914

525 N.W.2d 914

207 Mich.App. 698

PEOPLE of the State of Michigan, Plaintiff-Appellee, v. Joann Gerler PAASCHE, Defendant-Appellant.

Docket No. 147721.

Court of Appeals of Michigan.

Submitted April 20, 1994, at Detroit.

Decided Dec. 5, 1994, at 9:25 a.m.

Released for Publication Jan. 24, 1995.

Frank J. Kelley, Atty. Gen., Thomas L. Casey, Sol. Gen., and E. David Brockman and Paul L. Bricker, Asst. Attys. Gen., for the People.

John A. Lydick, Detroit, for defendant.

Before NEFF, P.J., and WHITE and STACEY, ^* JJ.

NEFF, Presiding Judge.

Defendant appeals as of right her conviction of failing to file a Michigan income tax return for 1988 with intent to evade taxes. M.C.L. § 205.27(1)(a); M.S.A. § 7.657(27)(1)(a). We reverse.

I

Defendant and her husband, William Paasche, were allegedly in the business of subdividing land. Although they earned substantial income from 1985 to 1988, they failed to file Michigan tax returns for those years. They also failed to file federal tax returns, and as a result, the Internal Revenue Service began an investigation. In response to the federal investigation, the Paasches hired attorney Richard Daguanno, who in turn hired certified public accountant Barry Allen, who had performed tax accounting services for the Paasches before being hired by Daguanno.

In May 1990, agents of the Michigan Department of Treasury executed a search warrant at the Paasches' residence. During the course of this search, William Paasche indicated to the agents that he kept some of his files at Allen's office. Accordingly, a search warrant was obtained for Allen's office, and additional files were seized.

Following a joint trial, both Paasches were convicted of tax evasion for the tax year 1988. ¹

II

At trial, defendants were limited to a total of five peremptory challenges. Defendants claimed that each was entitled to five challenges. We agree.

A

Both M.C.L. § 768.12; M.S.A. § 28.1035 and MCR 6.412(E)(1) provide that each defendant tried for an offense not punishable by death or life imprisonment is entitled to five peremptory challenges. There is no question that defendants statutorily were entitled to five peremptory challenges each, and that this statutory right was violated when they were allowed only five challenges for both of them.

The prosecution argues that this error does not require reversal because defendant failed to show prejudice, and because defendant waived this issue by using only four of the five peremptory challenges. We disagree.

B

In People v. Miller, 411 Mich. 321, 326, 307 N.W.2d 335 (1981), our Supreme Court noted:

[G]iven the fundamental nature of the right to trial by an impartial jury, and the inherent difficulty of evaluating such claims, a requirement that a defendant demonstrate prejudice would impose an often impossible burden. A defendant is entitled to have the jury selected as provided by the rule. [Citations omitted.]

In People v. Juarez, 158 Mich.App. 66, 71-72, 404 N.W.2d 222 (1987), this Court noted that although there is no constitutional right to peremptory challenges, the failure to "honor the statutory right of peremptory challenge is error requiring reversal and of serious import."

Accordingly, because the trial court failed to follow the proper procedure and allow defendant five peremptory challenges, we conclude that the trial court's error requires reversal, even if defendant failed to prove prejudice. See also Leslie v. Allen-Bradley Co., Inc., 203 Mich.App. 490, 493-494, 513 N.W.2d 179 (1994).

C

We next address whether this issue was waived because only four of the allotted five peremptory challenges were used.

Defendants were represented by separate counsel below and did not share a total identity of interests with respect to their defenses. Three of the peremptory challenges were exercised by counsel for Mr. Paasche. The fourth was exercised by Mr. Paasche's attorney also, but after consulting with Mrs. Paasche's attorney and by saying "we thank and excuse [juror's name]." Because the two defendants were limited to a total of five challenges and we are not privy to any decision they might have reached concerning how they would share or divide them, we simply have no way of knowing whether defendant exercised any, some, or all of the four challenges that were used. Thus, it would be mere speculation to conclude that defendant waived this issue by failing to use all of her peremptory challenges.

Even if we could conclude that defendant exercised the four peremptory challenges, we still would not find waiver of this issue. In People v. Russell, 182 Mich.App. 314, 451 N.W.2d 625 (1990) (Sawyer, J. dissenting), rev'd 434 Mich. 922, 456 N.W.2d 83 (1990) (for the reasons stated in the dissent of Sawyer, J.), Judge Sawyer concluded that a defendant who used only thirteen of a possible twenty peremptory challenges waived the defective jury selection procedure. However, Judge Sawyer held that if the defendant had used all but one of the challenges, a different result might follow, noting that commonly accepted trial tactics call for using all but one peremptory challenge. Id., 182 Mich.App. at 325, n. 5, 451 N.W.2d 625.

We also recognize this commonly followed trial strategy, and conclude that if defendant's trial counsel used all but one of her peremptory challenges, that fact would operate to preclude waiver of this issue on appeal.

D

Finally, it is not fatal to defendant's appeal that no record of defense counsel's objections to the limited number of peremptory challenges exists. Both parties agree that defense counsel objected to the number of peremptory challenges in chambers before jury selection began. This factual backdrop allows us to conclude that defendant is not using this issue as an appellate parachute.

The trial court's error requires reversal. Because our decision may result in retrial, we will discuss the issues that may arise during a new trial.

III

Defendant challenges the searches of her home and of her accountant's office on a number of grounds. Only one merits review.

Defendant argues that all evidence obtained from the search of accountant Allen's office should have been suppressed. According to defendant, the search and seizure violated the attorney-client and accountant-client privileges because the crime-fraud exception to those privileges, relied on by the trial court to admit the evidence, does not apply. We conclude that the record is insufficient to sustain either defendant's or the prosecution's position. ²

A

First, we note that the attorney-client privilege arises with regard to the search of Allen's office because, when executing the search warrant for that office, treasury agents seized attorney files as well as Allen's files. Although the agents eventually returned all but one of the files, a file dealing exclusively with the Paasches' tax returns, we find that the other files were also seized. Further, Allen had been retained under a Kovel ³ agreement, so that all communications by the Paasches to their accountant, made after that retention, fall within the attorney-client privilege as well. See Lindsay v. Lipson, 367 Mich. 1, 5-8, 116 N.W.2d 60 (1962); In re Petition of Delaware, 91 Mich.App. 399, 406-407, 283 N.W.2d 754 (1979).

B

The crime-fraud exception to the attorney-client privilege is predicated on the recognition that where the attorney-client relationship advances the criminal enterprise or fraud, the reasons supporting the privilege fail. As the Supreme Court in United States v. Zolin, 491 U.S. 554, 562-563, 109 S.Ct. 2619, 2626, 105 L.Ed.2d 469 (1989), stated:

"[S]ince the privilege has the effect of withholding relevant information from the factfinder, it applies only where necessary to achieve its purpose." The attorney-client privilege must necessarily protect the confidences of wrongdoers, but the reasons for the protection--the centrality of open client and attorney communication to the proper functioning of our adversary system of justice--"ceas[es] to operate at a certain point, namely, where the desired advice refers not to prior wrongdoing, but to future wrongdoing." [Citations omitted. Emphasis in original.]

We agree with the Supreme Court's reasoning and determine that where advice from an attorney refers to future, not past, wrongdoing, the crime-fraud exception applies to the otherwise privileged communication.

C

We do not limit our review, however, to the attorney-client privilege. The file admitted at trial was prepared by Allen and could have contained information acquired by him before he was retained by attorney Daguanno on behalf of the Paasches. In that instance, the attorney-client privilege would not apply. Kovel, supra. However, the accountant-client privilege might apply.

The purpose behind the accountant-client privilege, M.C.L. § 339.713; M.S.A. § 18.425(713), is to protect from disclosure the substance of the information conveyed by the client to the accountant. People v. Safiedine, 163 Mich.App. 25, 31, 414 N.W.2d 143 (1987). Although the purpose behind the accountant-client privilege is not the same as the purpose behind the attorney-client privilege, the effect of the two privileges is the same: otherwise relevant information is withheld from the factfinder. Thus, as with the attorney-client privilege, the purpose behind the accountant-client privilege must cease to operate when the advice sought by the client refers to ongoing or future wrongdoing.

D

It is unclear here exactly how the trial court applied the crime-fraud exception at the suppression hearing. Although the issue was argued by trial counsel, the court failed to make a specific ruling with regard to that issue, and trial counsel did not ask for a ruling. The court, however, later ruled that the exception applied to Allen's and Daguanno's trial testimony because this case involved the perpetration of a fraud. To the extent the court used this reasoning for admitting the file in...