U.S. v. Horton, 78-2740

• Decision Date: 24 September 1980
• Docket Number: No. 78-2740,78-2740
• Citation: 629 F.2d 577
• Parties: 80-2 USTC P 9704 UNITED STATES of America and Lawnie Mayhew, Plaintiffs-Appellees, v. Jack HORTON and Schonert Construction, Inc., Defendants-Appellants.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 577

629 F.2d 577

80-2 USTC P 9704

UNITED STATES of America and Lawnie Mayhew, Plaintiffs-Appellees, v. Jack HORTON and Schonert Construction, Inc., Defendants-Appellants.

No. 78-2740.

United States Court of Appeals,

Ninth Circuit.

Argued and Submitted June 30, 1980.

Decided Sept. 24, 1980.

Ronald K. Van Wert, Irvine, Cal., for defendants-appellants.

Gilbert E. Andrews, Washington, D. C., on brief; George L. Hastings, Dept. of Justice, Washington, D. C., for plaintiffs-appellees.

Appeal from the United States District Court for the Central District of California.

Before MARKEY, ^* Chief Judge, and WALLACE and HUG, Circuit Judges.

WALLACE, Circuit Judge:

Schonert Construction, Inc. (Schonert) and Horton appeal from a district court order enforcing a summons of the Internal Revenue Service (IRS). United States v. Horton, 452 F.Supp. 472 (C.D.Cal.1978). They contend that the summons fails to meet the requirements set forth in United States v. Powell, 379 U.S. 48, 85 S.Ct. 248, 13 L.Ed.2d 112 (1964), that it violates various constitutional provisions, and that some of the requested materials should have been suppressed because of allegedly illegal actions by the IRS. We affirm.

Schonert is in the framing construction business in Orange County, California, and Horton was president of Schonert at all times relevant to our inquiry. In 1977 the IRS conducted an investigation of Schonert's tax liability for 1974-1977. Revenue agent Smith conducted the initial examination of Schonert's records and determined that adjustments were required because of allegedly unsubstantiated deductions. In addition, the matter was referred to special agent Mayhew for investigation of suspected fraud.

Agent Mayhew issued the challenged summons in August 1977 and petitioned for enforcement in March 1978. In a declaration attached to the enforcement petition, agent Mayhew asserted that the information was not in his possession and that it was necessary to examine the summoned records to ascertain Schonert's tax liability. In September 1977, agent Mayhew contacted an attorney of a Schonert shareholder and obtained copies of at least some of the records referred to in the summons. The attorney had obtained these records from Schonert's accountants, who, as third-party recordkeepers, had received a separate summons and a notice from Schonert not to comply.

In United States v. Powell, supra, 379 U.S. 48, 85 S.Ct. 248, 13 L.Ed.2d 112, the Supreme Court held that an IRS summons is entitled to an enforcement order if the investigation has a legitimate purpose, the inquiry may be relevant to such purpose, the materials sought are not already within the possession of the IRS, and the administrative steps required by the Code have been fulfilled. Id. at 57-58, 85 S.Ct. at 254, 255. Schonert and Horton contend that this investigation had an improper purpose, that the IRS already possessed the material, and that statutory procedures were not followed. We find that the first and third of these contentions are completely answered by our recent decision in United States v. Popkin, 623 F.2d 108 (9th Cir. 1980).

The only question requiring elaboration beyond our decision in Popkin is whether the information at issue was already in the possession of the IRS. The record before us is less than clear. We are unenlightened as to whether the records received through Schonert's accountants are still in the possession of the IRS. Schonert and Horton do not claim that they are, nor that such possession, if it exists, militates against the position asserted in the Mayhew affidavit.

In addition, Mayhew's affidavit is not as clear as it could have been as to the issue of possession of the records. The affidavit contains the following statements:

6. The books, papers, records, or other data sought by the summons are not in my possession, nor have the...