U.S. v. Hankins
| Decision Date | 12 January 1978 |
| Docket Number | Nos. 76-3467 and 77-1967,s. 76-3467 and 77-1967 |
| Parties | 78-1 USTC P 9184 UNITED STATES of America and Robert E. Grant, Special Agent, Internal Revenue Service, Plaintiffs-Appellees, v. A. Burton HANKINS, Individually and as Executor of the Estate of Bewel A. Hankins, et al., Defendants-Appellants, Robert Lewis Smith, Intervenor-Appellant. UNITED STATES of America and Robert E. Grant, Special Agent, Internal Revenue Service, Petitioners-Appellees, v. A. Burton HANKINS and Hugh C. Montgomery, Jr., Respondents-Appellants. |
| Court | U.S. Court of Appeals — Fifth Circuit |
Paul P. Lipton, Milwaukee, Wis., James S. Nippes, Jackson, Miss., for A. Burton Hankins.
Charles L. Brocato, Jackson, Miss., for Hugh C. Montgomery, Jr.
J. N. Raines, Michael A. Robinson, Memphis, Tenn., for Robert L. Smith.
H. M. Ray. U. S. Atty., William M. Dye, Jr., Thomas W. Dawson, Asst. U. S. Attys., Alfred E. Moreton, III, Oxford, Miss., Gilbert E. Andrews, Chief, App. Section, Myron C. Baum, Acting Asst. Atty. Gen., Robert E. Lindsay, M. Carr Ferguson, Asst. Attys. Gen., Charles E. Brookhart, William A. Whitledge, Attys., Tax Div., Dept. of Justice, Washington, D. C., for United States.
Appeals from the United States District Court for the Northern District of Mississippi.
Before COLEMAN, SIMPSON, and TJOFLAT, Circuit Judges.
This is a consolidated appeal. No. 76-3467 is taken from orders of the District Court for the Northern District of Mississippi enforcing several summonses directed by the Internal Revenue Service to A. Burton Hankins, Hugh Montgomery, and Robert Lewis Smith, 26 U.S.C., § 7602.
No. 77-1967 is from a subsequent order of the Court finding Hankins in contempt of its earlier enforcement order and Montgomery in contempt for refusing to answer questions in open court.
We affirm in part, reverse in part, and dismiss Montgomery's appeal in No. 77-1967 for lack of appellate jurisdiction.
In 1957, A. Burton Hankins and Bewel Hankins, brothers, formed a partnership for the operation of a planing mill and lumber business at Elliott, Grenada County, Mississippi. 1 The partnership continued until the death of Bewel on November 19, 1971.
Bewel was survived by the wife of his second marriage and by three sons of a former marriage, none of the three having attained the age of majority. The surviving widow, Mrs. Frances Hankins, initially contested Bewel's last will and testament. A certified public accountant, William Boswell, was retained to perform audits of the late husband's financial status, which included the Hankins Lumber Company. Thereafter, as authorized by state law, Mrs. Hankins renounced the will and elected to take as if by intestacy. Consequently, in January, 1972, Bewel Hankins' last will and testament was admitted to probate in solemn form by the Chancery Court of Grenada County. That Court, in compliance with state statutes, authorized Burton Hankins to continue the operations of the partnership.
In August, 1972, by appropriate instruments of conveyance, Mrs. Frances Hankins sold her interest in the lumber company to the surviving partner, Burton Hankins.
In October, 1972, the Chancery Court allowed Burton to purchase the interests of the sons, nevertheless requiring, as Bewel's will had requested, that upon the conversion of the partnership into a corporation, to be known as Hankins Lumber Company, Inc., the children would be sold stock equal to the value of their previously existing interest in the partnership. Burton thus became the majority stockholder in the new corporation, which was not activated until January 2, 1973. Having purchased from the widow and sons the entire interest of the deceased Bewel Hankins in 1972, with the corporation taking effect in 1973, Burton filed his 1972 income tax return as sole proprietor of the business for that year. In the hearings before the District Court the attorney for the Department of Justice and the Internal Revenue Agent referred to the 1972 operations as that of a sole proprietorship, but the Court made no findings as to whether the operations from November 19, 1971 to January 2, 1973, were that of a sole proprietorship or a partnership between Burton Hankins and the estate of his deceased brother.
On May 8, 1974, the Chancery administration of the Estate of Bewel Hankins was concluded and Burton, as Executor, was given his final discharge.
In January, 1973, an informant, Leonard E. Parnell, an employee of Hankins' certified public accountant, wrote the Internal Revenue Service, alleging that he had seen alterations to the 1971 Hankins records raising a potential for tax fraud. The matter was referred for investigation to the Audit Division. A revenue agent contacted Burton Hankins, who referred him to his accountant, Lewis Smith, for the audit of the 1971 books. During that examination the agent uncovered apparent discrepancies, so he then requested the records for 1972. Smith informed the agent that the 1972 records were held by Mr. Hankins' attorney, Hugh Montgomery. In June, 1974, the revenue agent met with Attorney Montgomery and discussed the 1971 adjustments. Mr. Montgomery, on behalf of Hankins, offered to make good the 1971 discrepancies but the agent refused to close out 1971 before seeing the 1972 books. This brought on an impasse and the interview was terminated. The case was then turned over to the Intelligence Division and assigned to a special agent, with Montgomery informing the Internal Revenue Service that Burton Hankins, relying on his Fifth Amendment rights, declined to produce the 1972 records.
A heavy downpour of Internal Revenue summonses soon ensued.
One summons, dated March 10, 1975, to A. Burton Hankins, Hankins Lumber Company, Grenada, Mississippi 38926, required him to appear and produce the following:
Additionally, a summons directed Hankins to produce the books, records, and working papers of the corporation for 1973 and to testify thereasto. The duces tecum portion of this summons has been satisfied and is no longer an issue. The testimonial aspect of the summons will be treated infra.
In response to the summonses, Hankins appeared, with counsel, and would state only that he had not produced and would not produce the records.
As no doubt expected, petitions were filed to enforce the summonses. At the hearing, the trial judge found that the government had made the requisite showings of relevancy, materiality and proper purpose. The record supports these findings. The Court ordered Mr. Hankins to produce the desired documents and to testify after the government had an opportunity to examine them. Hankins Lumber Company, Inc., was directed to appoint an individual who was conversant with the books and records, who would not claim the Fifth Amendment privilege, to appear and testify as to those books and records.
Hankins claims on appeal that by virtue of his status as a partner and later purchaser of the entire interest of the deceased partner he owns all the partnership papers in his personal capacity and not in a representative capacity, that because the Bewel Hankins estate is closed he likewise owns such of those papers as are now in his possession, and that by transfers appearing of record he also owns the papers produced by the Boswell audit; therefore, the Fifth Amendment privilege protects the papers from involuntary disclosure:
"(No person) shall be compelled in any criminal case to be a witness against himself", Amendment V. 2
We address ourselves first to the matter of the partnership papers.
In Boyd v. United States, 116 U.S. 616, 6 S.Ct. 524, 29 L.Ed. 746 (1886), the Supreme Court held that any forcible and compulsory extortion of a man's private papers to be used as evidence to convict him of crime violates the Fifth Amendment privilege.
More recently, however, the Supreme Court has adopted the view that the compulsion must be exerted upon the person claiming the privilege, not someone else, and that the compulsion must result in that person being made a witness against himself, Fisher v. United States, 425 U.S. 391, 397, 96 S.Ct. 1569, 48 L.Ed.2d 39 (1976), and cases cited. Compulsion for production against the individual's accountant or his attorney in the absence of the attorney-client relationship falls without the protection, Couch v. United States, 409 U.S. 322, 93 S.Ct. 611, 34 L.Ed.2d 548 (1973); Fisher v. United States, supra.
Even more specifically, the Court held that "the Fifth Amendment protects against 'compelled self-incrimination, not (the disclosure of) private information' " (citations omitted). Id., 425 U.S. at 401, 96 S.Ct. at 1576.
The Court went on to hold, 425 U.S. at 409, 96 S.Ct. at 1580:
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