U.S. v. Hankins
| Decision Date | 03 October 1978 |
| Docket Number | Nos. 76-3467,77-1967,s. 76-3467 |
| Citation | 581 F.2d 431 |
| Parties | 78-2 USTC P 9736, 3 Fed. R. Evid. Serv. 1434 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 Burton Hankins.
Charles L. Brocato, Jackson, Miss., for Hugh C. Montgomery, Jr.
J. N. Raines, Michael Robinson, Memphis, Tenn., L. Arnold Pyle, John G. Gourlay, Jr., Jackson, Miss., for Robert L. Smith.
H. M. Ray, U. S. Atty., Thomas W. Dawson, William M. Dye, Jr., Asst. U. S. Attys., Gilbert E. Andrews, Acting Chief, Appellate Section, Myron C. Baum, Acting Asst. Atty. Gen., Robert E. Lindsay, Charles E. Brookhart, William A. Whitledge, Alfred E. Moreton, III, M. Carr Ferguson, Attys., Tax Div., Dept. of Justice, Washington, D. C., for the U. S.
Appeals from the United States District Court for the Northern District of Mississippi.
ON PETITIONS FOR REHEARING AND PETITIONS FOR REHEARING EN BANC
(Opinion January 12, 1978, 5 Cir., 1978, 565 F.2d 1344).
Before COLEMAN, SIMPSON and TJOFLAT, Circuit Judges.
No member of this panel nor Judge in regular active service on the Court has requested that the Court be polled on rehearing en banc (Fed.R.App.P. 35; Local Fifth Circuit Rule 12). Therefore, the various Petitions for Rehearing En Banc are denied.
The panel which originally heard and decided these appeals has nevertheless thoroughly re-examined the issues and finds that it must adhere to the previously rendered opinion, United States v. Hankins, 5 Cir. 1978, 565 F.2d 1344.
We consider it not out of order, however, to state additional reasons supporting the results announced in that opinion. 1 We also grant the government's request for clarification as to one aspect of the case affecting Mr. Montgomery.
In our prior opinion, we held that partnership records have no Fifth Amendment immunity to subpoenas in Internal Revenue investigations of tax liability. This clearly covered the partnership records in existence prior to the death of Mr. Bewel Hankins on November 19, 1971.
For the reasons stated in the opinion, we also held that the same rule applied to the Hankins' records for 1972.
As we noted before, 565 F.2d at 1349, much of the confusion surrounding the 1972 records was caused by "the Revenue Agent and the Attorney for the Department of Justice uniformly (referring) to the 1972 operations as a sole proprietorship". We are entirely convinced that the operations in 1972 were not, and could not have been, the activities of a sole proprietorship. This may affect the individual tax liability of A. Burton Hankins for that year, but that issue is not involved in the case at this point.
Mr. A. Burton Hankins' arguments for rehearing may be grouped into two categories: (1) that the government never sought the 1972 records, and (2) that, in any case, those records are nevertheless the records of a sole proprietorship (private papers) which he cannot be forced to produce.
As for the first point, we think it best to begin at the beginning. The summons in question, served on Burton Hankins on March 10, 1975, sought production of "(a)ll records in your possession pertaining to the Hankins Lumber Company partnership for the years 1968, 1969, 1970, 1971, and 1972 . . . (emphasis added)." Hankins appeared in response to the summons, but refused to turn over the summonsed documents. The United States filed a petition to enforce the summons, the District Court held a consolidated hearing on March 1, 1976, and issued its Memorandum of Decision on July 15, 1976. It was found as a matter of fact that the two brothers had operated a jointly owned partnership "(f)rom approximately 1957 until November 19, 1971 . . . ." The District Judge also drew the legal conclusion Consequently, we move to the second point.
that the partnership had terminated on the death of Bewel Hankins. 2 On August 10, 1976, the District Judge ordered Hankins to produce, Inter alia, "(a)ll records in your possession pertaining to the Hankins Lumber Company partnership for the years 1968, 1969, 1970, 1971, and 1972 . . . ." It therefore seems clear to us that the government has at all times sought the "partnership" records
The Hankins partnership existed by virtue of Mississippi law, so it is to that law that we turn for a rule of decision. At the time of the death of Bewel Hankins, Mississippi had not yet enacted its version of the Uniform Partnership Act. 3 The partnership, therefore, was governed by the common law, except where modified or supplemented by statute. In 1971, the only relevant statutes which we have been able to uncover were found in Miss. Code Ann. §§ 553-560 (1942). 4 These sections regulated the executor or administrator of a deceased partner's estate and prescribed what actions he shall take for the benefit of heirs, devisees or legatees. With the approval of the chancellor, the executor or administrator might sell the decedent's interest in the partnership estate. Id. at § 553. He shall also conduct an inventory of the partnership accounts. Id. at § 554. Once the appraisal is completed, he may take control of such an amount of the partnership assets as will equal the decedent's interest, or he may allow those assets to be managed by the surviving partner, who must then post a bond. Id. at §§ 554-555. This bond should be an amount equal to the value of the partnership estate and not merely that of the interest of the deceased partner, Gurley v. Gurley, 77 Miss. 413, 26 So. 962 (1900). 5
In the event that the surviving partner declines to act, the executor or administrator shall post bond, take possession of the assets, and liquidate. Miss. Code Ann. §§ 558-559 (1942). Furthermore, the surviving partner is under a duty to exhibit all partnership property to the appraiser. If the executor must administer the estate, the surviving partner is under a further duty to turn over "books and papers and all necessary documents". Id. at § 560. Although the Code does refer in two places to the "trust" obligations of the executor or administrator, those two sections are only Section 557, however, provides:
applicable if the surviving partner declines to account. See id. at §§ 559-560.
The court shall have the same authority to cite such surviving partner to account, and to adjudicate upon his accounts as in the case of an administrator; and the parties interested shall have the like remedies on such bond for any misconduct or neglect of the survivor as may be had against administrators.
Since the status of an administrator is defined by statute to be that of a trustee, and since interested parties, namely the heirs of the deceased partner, have the same remedies against the survivor as against an administrator, again as provided by statute, it follows A fortiori that vis-a-vis heirs and legatees the surviving partner stands in the same shoes as an administrator, namely that of a trustee and he cannot thereafter legally proceed as a sole proprietor.
A surviving partner, who accepts his statutory obligations and proceeds to satisfy the claims of the heirs of his deceased partner, operates the business in a fiduciary capacity. In Gurley v. Gurley, supra, the Court unequivocally stated, "At law, upon the death of one of the partners the surviving partner is invested with the title and possession of the partnership property, But in equity (emphasis added) he is a trustee for all parties concerned . . . ." 26 So. at 962. The Court left no doubt about the status of the surviving partner by saying that any "hardship (caused by the bond requirement) may be soon removed by a speedy execution of the trust". 26 So. at 963. 6
Statutory law made Burton Hankins a trustee, and so did the common law of Mississippi. In Robertshaw v. Hanway, 52 Miss. 713 (1876), a case decided prior to the first enactment of partnership statutes in 1892, the Court was confronted with a claim against a dissolved partnership. In the course of its opinion, the Supreme Court stated:
We look next to the case of Mayson's Administrator v. Beazley's Administrator, 27 Miss. 106 (1854) which in the 124 years since it was handed down has never been undercut by any subsequent statute or Mississippi Supreme Court decision. Mayson and Beazley formed a partnership for the purchase and operation of a sawmill (a type of activity quite similar to that which we have in the instant case). After a year or so, Beazley died and Mayson continued to operate the business, allegedly realizing large profits for which he failed to account to Beazley's administrator. The latter then sued and won a large judgment in the lower court, whereupon Mayson appealed, complaining primarily about the exclusion of certain of his evidence. The Court held that Beazley's administrator could recover a share of the profits earned After Beazley's death and that Mayson was entitled to prove his legitimate expenses. The Court also delivered itself...
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