State, Dept. of Revenue v. Moore

Decision Date14 October 1986
Docket NumberNo. S,S
Citation722 S.W.2d 367
PartiesSTATE of Tennessee, DEPARTMENT OF REVENUE, Donald W. Jackson, Commissioner, Petitioner-Appellant, v. James H. MOORE, Whitwell Branch Manager of First Bank of Marion County, and First Bank of Marion County, Respondents-Appellees, and Buck Layne, Jr., Intervenor-Appellee. /C 86-16-I
CourtTennessee Supreme Court

W.J. Michael Cody, Atty. Gen. and Reporter, Daryl J. Brand, Asst. Atty. Gen., Paul E. Terry, Dept. of Revenue, Nashville, for appellant.

Graham Swafford, Jasper, for First Bank.

Ray H. Moseley, Chattanooga, for intervenor.


DROWOTA, Justice.

On direct appeal from the Chancery Court of Marion County, this case arises out of a petition to enforce an investigative summons issued by the Department of Revenue, the Petitioner. The summons was issued by Petitioner to the Respondent, First Bank of Marion County, in the course of an investigation of the potential tax liability of one of Respondent's customers. Intervenor, Buck Layne, Jr., is the customer who is the subject of an ongoing Department of Revenue investigation. Several significant issues are presented by this case.

I. The Facts

The facts are simple and undisputed. The Commissioner of Revenue (the Commissioner) is currently conducting an investigation into the possible tax liability of Buck Layne, Jr. The investigation concerns unassessed coal severance taxes, sales taxes, and business taxes. Information presently held by the Department of Revenue Special Investigations Unit indicates that funds from potentially taxable transactions may have been deposited in the First Bank of Marion County (First Bank). On July 10, 1985, Special Agent C.K. Johnson issued an investigative summons, 1 which was left at the First Bank addressed to James H. Moore, branch manager. The summons directed him to appear in Chattanooga on July 22, 1985, and to produce the records described in the summons, which requested the following information:

"Any and all bank statements, deposit slips, cancelled checks, signature cards, notes, certificates of deposit, savings accounts, and all other bank records maintained on the following accounts: Buck Layne, Buck Layne, Jr., Buck Layne Leasing, B & J Coal Mining and Leasing Co., M & W Coal Co., or any other accounts controlled by Buck Layne, Jr."

Appearing on July 22 as summoned, Mr. Moore and the First Bank's attorney refused to produce the records on the grounds that they were protected by state and federal law and that production of the records could expose First Bank to a suit by the customer, Mr. Layne. Also present at this meeting on July 22 was Mr. Layne's attorney, Mr. Moseley. The Commissioner subsequently filed a Petition for Contempt on August 15, 1985, in Chancery Court to enforce the summons. First Bank's Answer to the Petition alleged, among other defenses, that the summons was unconstitutional as well as improper and over-broad, and that the records were protected under state and federal statutes. Mr. Layne filed an Intervening Petition on August 30, 1985, moving to quash the summons because no basis existed for the investigation, which was allegedly being used to harass Mr. Layne.

A hearing was held on September 3, 1985. Mr. Moore and Special Agent J.T. Durham testified. Mr. Moore testified that he and First Bank would comply willingly with any court order, but that he had sought guidance from the court on advice of the bank's attorney, who was of the opinion that the summons was too broad and violated certain statutes. The testimony of Special Agent Durham generally concerned the nature of his duties and of investigative methods generally, as well as the basis of the investigation into Mr. Layne's potential tax liability. Agent Durham stated that he had seen documents indicating that proceeds from potentially taxable transactions had been deposited in First Bank, but he claimed that statutorily imposed confidentiality, which protects such information during an investigation, prevented him from detailing the evidence. Counsel for the Department of Revenue stated at this point:

"MR. TERRY: Again, [the investigation] was predicated on severance tax recommendation. However, during the course of the investigation, again, we're getting into what did he have uncovered, and to me that is confidential information which is not to be disclosed until the information is compiled, whether he will be indicted or whether he will be charged with the tax liability. At that time avenues are open to Mr. Moseley to determine what information we have compiled."

When Mr. Layne's attorney again pressed to obtain more information concerning the basis of the investigation and whether the investigation was criminal in nature, the Department of Revenue attorney responded:

"MR. TERRY: Your Honor, that information will be available to Mr. Moseley should there be some criminal prosecution against his client, and at that time he has the Grand Jury and the discovery process available to him. All we're asking that we be not impeded in the investigation. This investigation is not conclusive in any manner."

In addition, First Bank argued at this hearing that the Financial Records Privacy Act, T.C.A. Secs. 45-10-101, et seq., not only applied in this case to protect the records, but that this statute required the Commissioner to bear the reasonable expenses of producing the records in response to the summons. Mr. Moore testified that the records involved are voluminous and that the search for them was time consuming.

The Chancellor's Order of October 18, 1985, applying the Financial Records Privacy Act to the Department of Revenue and ordering that the Commissioner pay the reasonable expenses of production of the records, restricted the summons to only those bank accounts and records on which Buck Layne, Jr., has signatory authority or on which his name appears. None of the other records sought by the summons were to be produced under this order. The Chancellor then dismissed the Petition for Contempt, but enjoined Buck Layne, Jr., from doing anything to impede the investigation.

The Commissioner appealed to this Court under T.C.A. Sec. 16-4-108. He challenges the Chancellor's decision to enforce the summons only as limited, the order that the State bear the costs of producing the records under summons pursuant to the Financial Records Privacy Act as well as the costs of the proceeding below, and argues that the Chancellor incorrectly dismissed the Petition for Contempt.

II. The Law
A. Application of Article VI, Sec. 12, Tennessee Constitution

The constitutionality of the summons issued under these tax statutes has been specifically challenged by Respondents under Art. VI, Sec. 12, of the Tennessee Constitution, which provides in relevant part that "[a]ll writs and other process shall run in the name of the State of Tennessee and bear test and be signed by the respective clerks." Respondents contend that the signature of the Special Agent on this summons is constitutionally insufficient, invalidating the process issued.

This provision of the Constitution does not, however, control the authority of the Legislature to authorize nonjudicial process. In White v. State, 50 Tenn. 338 (1871), the Court recognized the power of the Legislature to authorize nonjudicial process in aid of the administration of the government. In that case, the Court upheld the constitutionality of a statute that authorized a judge to issue summons to call the venire for jury service. The Court distinguished this type of process from judicial process, by which a court obtains jurisdiction, stating that "[o]riginal process, in the sense of the Constitution, is the means of compelling a defendant to appear in court after suing out the original writ in civil, and after indictment in criminal cases." Id., at 340. The White Court further observed that:

"The only object of requiring process to be signed by the clerk is, to give it the stamp of judicial authority. The Legislature would certainly have no power to vary the mode of attesting process in its technical sense, as required by the Constitution; but all precepts from courts of justice, other than such process as is contemplated in the Constitution, [are] under the legislative control."

Id. See also State ex rel. Shriver v. Leech, 612 S.W.2d 454 (Tenn.1981).

Art. VI, Sec. 12, which is in the context of that article of the Constitution defining the Judicial Department, does not, therefore, require that an investigative summons be signed by a clerk of an issuing court. This conclusion is consistent with the rationale of cases that have construed this provision of the Tennessee Constitution. See, e.g., Webb v. Carter, 129 Tenn. 182, 165 S.W. 426 (1913); Harper v. Turner, 101 Tenn. 686, 50 S.W. 755 (1899); McLendon v. State, 92 Tenn. 520, 22 S.W. 200 (1893); Wiley v. Bennett, 68 Tenn. 582 (1877); Lyle v. Longley, 65 Tenn. 286 (1873); State v. Scott, 32 Tenn. 332 (1852); Mayor and Aldermen of the City of Nashville v. Pearl, 30 Tenn. 249 (1850); Reynolds v. Lowthrop, 7 Tenn.Civ.App. 12 (1916). These cases deal with the sufficiency of process issued by courts to obtain jurisdiction and involve the issues of the name in which a writ must run and whether the process was duly attested by the clerk of the issuing court. Particularly instructive for this case is State v. Scott, supra. There a statute authorized a district attorney general to issue a writ of scire facias in certain cases; the Court found that the Legislature did not intend to permit the district attorney to initiate judicial process on his own authority, but rather it intended

"that he should collect the facts, and file his official information before the court, as a foundation for the writ, and then that the same, like any other process, should run in the name of the state, with the signature of the clerk. It surely could not have been intended that a proceeding...

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  • McNiel v. Cooper
    • United States
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    ...that "civil investigative authority will not permit the government to expand its criminal discovery powers." State Dept. of Revenue v. Moore, 722 S.W.2d 367, 373 (Tenn. 1986). 12. Meanwhile, Tenn.Code Ann. § 63-1-117 had been revised again. Act of April 15, 2004, ch. 575, 2004 Tenn. Pub. Ac......
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