U.S. v. Sun First Nat. Bank of Orlando, 74--1453

Decision Date04 April 1975
Docket NumberNo. 74--1453,74--1453
Citation510 F.2d 1107
Parties75-1 USTC P 9356 UNITED STATES of America and Edward P. Cory, Revenue Agent, Internal Revenue Service, Petitioners-Appellees, v. SUN FIRST NATIONAL BANK OF ORLANDO and Clifford M. Hames, Respondents-Appellants.
CourtU.S. Court of Appeals — Fifth Circuit

J. Thomas Cardwell, Orlando, Fla., for respondents-appellants.

John L. Briggs, U.S. Atty., Harrison T. Slaughter, Jr., Asst. U.S. Atty., Orlando, Fla., Scott P. Crampton, Asst. Atty. Gen., Meyer Rothwacks, Chief, Appellate Sec., Dennis M. Donohue, John P. Burke, William A. Whitledge, Attys., Tax Div., Dept. of Justice, Washington, D.C., for petitioners-appellees.

Appeal from the United States District Court for the Middle District of Florida.

Before BELL, AINSWORTH and RONEY, Circuit Judges.

RONEY, Circuit Judge:

Sun First National Bank of Orlando and Clifford M. Hames, its Vice-President and Trust Officer, appeal from the district court's enforcement of a Section 7602 administrative summons of the Internal Revenue Service issued by Revenue Agent Edward P. Cory. We affirm.

The summons was issued in the matter of the tax liability of thirty-two named trusts handled by the bank's trust department and sought production of the following:

'As to each of the Trusts set forth on the attached list for which the bank has fiduciary responsibilities, the retained copy of Form 1041 (Fiduciary Income Tax Return) filed by the bank as trustee for the years 1970 and 1971; the trust declaration or instrument establishing or creating the trust; all records of income and disbursements of each trust; records in connection with the investment of trust funds; records of assets contributed to the trust; your Trust Committee minutes relevant to each trust; and the Employer Identification Number of each of the trusts.'

The two questions raised by Sun on appeal from the judgment enforcing this summons are: first, whether an IRS summons seeking production of a random sample of records of a bank's trust accounts is authorized under 26 U.S.C.A. § 7602 and second, whether an IRS summons seeking production of a random sample of records of a bank's trust accounts violates the Fourth Amendment. We limit our consideration of this case to these two attacks on the summons. The attacks fail because the facts as they appear in the record do not support the basic premise of arbitrariness implicit in the questions posed. Our affirmance of the enforcement, therefore, does not squarely confront the import of the questions.

Respondents' opposition to the summons is based on the factual situation in which it was issued. Early in 1973 the IRS undertook an audit of the consolidated income tax return for the First at Orlando Corporation, a bank holding company controlling thirty-seven banks with assets of over 1.7 billion dollars. As a part of this larger audit Revenue Agent Edward P. Cory directed the audit of Sun First National Bank of Orlando, the lead bank of the holding company. Sun was very cooperative, providing free access to the IRS for most of its records, including those records of its Trust Department which Sun considered relevant to the IRS review of First at Orlando's tax liability. The information provided which related to the Trust Department included data on its common trust fund, the minutes of the Trust Committee meetings, the tax identification numbers of certain accounts, records of the amount of income and expenses received by and incurred by Sun in managing the common trust fund, and other requested materials. It was only when Cory requested information concerning certain individual trusts that Sun balked at the IRS request.

Cory and his supervisor, prior to the beginning of the examination of Sun's records, had determined that in the Trust Department phase of the audit the IRS would examine the common trust fund and audit the interest equalization taxes reported by Sun, as fiduciary, in respect to the various trusts it managed. See Int.Rev.Code of 1954, §§ 4911--4920. From the information which the bank freely provided, Cory extracted the names of approximately 150 individual trusts. He then selected a random sample of these trusts for closer examination to evaluate Sun's performance of its duties to the IRS with respect to these trusts. The bank was requested to furnish Cory the bank's retained copy of the Form 1041 Fiduciary Income Tax Return of each of the thirty-two accounts. Sun offered, through its trust officer, Clifford M. Hames, to provide copies of the requested returns with the top portions, containing the names of the trusts, blanked out. This offer made Cory suspicious as to the accuracy of the fiduciary returns, and he decided, with the concurrence of his supervisor, to examine more closely these trusts and the data which the bank had to support its information returns. Accordingly, Cory served Hames with an IRS summons on May 14, 1973. The summons directed Hames to appear before Cory on May 29, 1973, to testify regarding the thirty-two trusts, and to bring with him, as to each trust for which Sun had fiduciary responsibilities the documents and records set forth.

After consulting with its legal counsel, Sun refused to obey the summons, asserting that the requested materials were not relevant to the ongoing audit of First at Orlando's consolidated return. Sun felt that its fiduciary relationship with the trusts impelled it to protect them and their beneficiaries from what it considered a 'fishing expedition' by the IRS. After the case was reviewed by the Department of Justice at the request of the IRS, the United States sought enforcement of the summons in federal district court. See Int.Rev.Code of 1954, § 7402(b).

The district court held a hearing on the motion for enforcement, at which only Agent Cory testified. The court found that there was underway a good faith audit of the tax liability of the trusts sufficient to justify enforcement of the summons, which sought information relevant to that investigation.

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