Petitioners Brief — GM Leasing Corp. v. United States

, [ Supreme Court, U. g,

| FILED

! FEB 5 976

|

‘MMICHAEL RODAK, JR., CLERK

in the Supreme Court of the

United States

October Term, 1975

No. 75-235

G. M. LEASING CORP.,

Petitioners,

Ve

UNITED STATES, et al.

Respondents.

ON WRIT OF CERTIORARI TO TILE

UNITED STATES COURT OF APPEALS

FOR THE TENTH CIRCUIT

BRIEF FOR THE PETITIONERS

RICHARD J. LEEDY

744 East 300 South

Salt Lake City, Utah 84102

Attorneys for Petitioners

TABLE OF CONTENTS

Page

OPINION BELOW _..... shicariadeheiantantaldaipiaiitdmuiaiih ]

JURISDICTION _.... iisetpieatiteipepapianciapeiniacianeiiiedisien ae

QUESTION PRESENTED ............00.00.2.2....0022. 2

CONSTITUTIONAL PROVISIONS AND

STATUTES INVOLVED .............................. 2

SPUEASTEENEETTT ~ sictuessnncovtshicenstilincensthatininnmmesiianieniianiats 5

SUMMARY OF ARGUMENT ............................ 8

STE eisicicesricineicdnenitioniemneetneian 9

POINT LI. THE FOURTH AMENDMENT

TO THE CONSTITUTION OF THE

UNITED STATES PROHIBITS UNREA-

SONABLE SEIZURES CONDUCTED BY

AGENTS OF THE UNITED STATES

WITH A VIEW TOWARDS CIVIL OR

CRIMINAL PROCEEDINGS IN EN-

FOREMENT OF THE REVENUE

ARTO ED scccntnnscnsnevnintitnnansdiaenusiniisimiiniasaininaniaiaedeia 9

POINT IL. IN THE ABSENCE OF EXI-

GENT CIRCUMSTANCES THE FOURTH

AMENDMENT REQUIRES A WAR-

RANT PRIOR TO THE SEIZURE OF

PROPERTY ORK EVIDENCE BY IN-

TERNAL REVENUE SERVICE

FETED cutisictinstinimiinnnmmnmmnae ~&

POINT IIL. BECAUSE OF THE WRONG-

FUL SEIZURE ACTION OF THE RE-

SPONDENTS THE TRIAL COURT

FOUND LIABILITY FOR DAMAGES

AND AWARDED AFFIRMATIVE

DEE ccncsisscecessonsscessnnvenmentateasesmnmstsntssinnemetniaite 34

ICT cececteepiccevnecccsencsncvsnsenessnsmionennonsenemnenion 38

i

Page

CITATIONS

Cases

Alexander v. American United, Inc.,

en Or cremate 36

Allee v. Medrano,

ee si ailactiaissilaneinlll 37

Bevins v. Six Unknown Named Agents,

re ey Tae 34, 35, 37

Bob Jones University v. Simon,

BIS U.S. FOB (IOTSE) ....ccccccveccsscsccsccvcccccccsscscoscssecces 36

Boyd v. United States, 116 U.S. 616 (1886) .... 19, 20

Brown v. United States, 411 U.S. 223 (1978) ........ 24

Camara v. Municipal Court of San Francisco,

“(BS Ee 31, 32

Carroll v. United States,

OS ——————————————— 28

Chambers v. Maroney, 399 U.S. 42 (1970) ............ 27

Coolidge v. New Hampshire,

BOT ts BED CGE cncicetcccinsessessvecnsesnies 27, 28, 29, 32

Donaldson v. United States,

OL ae, | ee eee 17, 18

Dyke v. Taylor Implement and Mfg. Inc.,

ek EO 8 ee ee 20

Kfrian T. Suarez, 58 T.C. 792 (1972) ...............000000 21

Entick v. Carrington,

19 Howell State Trials 1029 (1765) .......... 14, 19, 32

Frank v. Maryland, 359 U.S. 360 (1959) ................ 32

Fuentes v. Shevin, 407 U.S. 67 (1972)... 22, 23

Go-Bart Importing Co. v. United States,

RE Sar TOU. CTIIIED ccccivinssscsncisddidinsnistnecsersbiassnencninasinile 26

118

Page

Gomez v. Layton, 394 F.2d 764 (D.C. Cir. 1968) .... 37

Gouled v. United States, 225 U.S. 298 (1921) ...... 26

Hale v. Henkel, 201 U.S. 43 (1906) 20000... 26

Hill v. Phillpot, 445 ¥.2d 144 (7th Cir. 1971) ........ 26

Husty v. United States, 282 U.S. 694 (1931) ........ 28

In re Jackson, 96 U.S. 727 (1878) ccc cccccccceeoeccoeee 19

Johnson v. United States, 333 U.S. 10 (1948) ........ 29

Jones v. United States, 362 U.S. 257 (1960) .......... 24

Katz v. United States, 389 U.S. 347 (1967) .. 18, 27, 29

Knoll Associates Inc. v. F.T.C.,

397 F.2d 570 (7th Cir. 1968) ooo 21

Kremen v. United States, 353 U.S. 346 (1957) ...... 26

Laing v United States, ........ s Te ve

44 L.W. 4035 (1976) 20000... 21, 22, 23, 28, 34, 36

Lankford v. Gelston, 364 ¥'.2d 197 (4th Cir. 1966) .. 37

Mancusi v. DeForte, 392 U.S. 364 (1968) 20000... 24

Mapp v. Ohio, 367 U.S. 643 (1961) eee 20

Mathis v. United States, 391 U.S. 1 (1968) .......... 21

Mitchell v. W. T. Grant Co.,

416 U.S. 600, 610-611 (1974) ooo 22

Murray v. Hoboken Land Co.,

18 Howard 272 (1855) ..............0c.c.-cscseceeees .... 18, 19

Nardone v. United States, 308 U.S. 338 (1939) .... 37

North Georgia Finishing, Inc. v. Di-Chem, Inc.

ae U.S........., 95 S.Ct. 719 (1975) .......... 21, 23, 33

Oklahoma Press Publishing Co. v. Walling,

B27 U.S. 186 (1946) ...........0..-cccccscceoscsecrees 24, 25, 26

Vv

Page

One 1958 Plymouth Sedan v. Pennsylvania,

Bee £6) |) 20

Pearson v. Ray, 386 U.S, 547 (1967) ...0.-.ceeeeeeeeees 35

Phillips v. Commissioner,

. oe ee 2 oe 22, 23, 28

Schneckloth v. Bustamonte,

ee Se. 8b. ) ee 27

Schwimmer v. United States,

SOO F.G0 BS (Gta Civ. BOGT) .........0..2-ccececcesscnsceceees 26

See v. City of Seattle, 387 U.S. 541 (1967) ............ 32

Silverthorne Lumber Co. v. United States,

Se TT, SD CID cccesnecvrccencesnsesncsincserees 24, 25, 37

Sniadach v. Family Finance Corp.,

da OB, ee ee 23, 34

Stanford v. Texas, 379 U.S. 476 (1965)... 26

Stanford Daily v. Zurcher,

353 F.Supp. 124 (N.D. Cal. 1972) ..................00 32

United States v. Weingarden,

O73 FD 454 (GEN Cie. 1OTB) ....n...nccccccesesescsccescsecses 17

United States v. White, 401 U.S. 745 (1971) ........ 18

Vale v. Louisiana, 399 U.S. 30 (1970) ooo. 28

Warden v. Hayden, 387 U.S. 294 (1967) 2... 28

Wong Sun v. United States,

OE RE eee eee ee 37

Wyman v. James, 400 U.S. 309 (1971)... ee 21

Statutory Material

United States Constitution:

I ee a isto 16

Fourth Amendment .... 6, 7, 8, 9, 10, 15, 16, 18, 19, 20,

21, 22, 23, 24, 25, 26, 27, 28, 31, 32, 33, 34, 35, 38

Fifth Amendment ..............................-. 6, 8, 19, 21, 26

y

: Page

United States Code, Title 26:

5. SS eee ae 27

DE acc en ee eee 35

2 __ PRR REUIEU aro VYurI NC ny Se ee AERO aa ROOTED 27

IF GE pa cairaneeteninsniectnscetn tated cent 2

§$ 6331(a) and (b) 2000.00... 3, 8, 10, 16, 17, 23, 28

eae ee COEDS a EO 23

| RIESE TR SUNS Dace ree SEEN SRC en 4, 23

ND eects ee 23

BF PD sccnccsabionisisseheassicheslacessceceaaasastemlaciensdecsch soe ones te ci Dec atc 31

| er eT ee ee) 36, 37

§ 7426 (A) (1) ccccccccccccccccecceccseccseccsececcsseceusesees 4, 34, 37

Oy UN inhi ital Be 31

United States Code, Title 28

IR eee ae eet ee ee ee 2

United States Code, Title 42

RFR ENE AESC OL Oe TD 35

Federal Rules of Appellate Procedure:

eR ei is SESE ARSENE a ae le et eee 1

Federal Rules of Criminal Procedure:

REESE Ee 37

Miscellaneous

Civil Versus Criminal: Taxpayers Rights Under The

}‘ourth and Fifth Amendments, 38 Brooklyn

L. Rev. 130, 149-155 I anata treat cea ne: 26

Landynski, Search and Seizure and the

SID TRIN, sotnsnciesnsssuveserapieninionenenmmninetin 13, 15, 16

University Southern California Law Center

Tax Institute, 1022-23 (1974) 0... cccccssseees 26

in the Supreme Court of the

United States

October Term, 1975

No. 75-235

G. M. LEASING CORP.,

Petitioners,

v.

UNITED STATES, et al.,

Respondents.

ON WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE TENTH CIRCUIT

BRIEF FOR THE PETITIONERS

OPINION BELOW

The Opinion of the Court of Appeals (App. to

Petition pg. A-1) is reported at 514 F.2d 935.

JURISDICTION

The judgment of the Court of Appeals for the

Tenth Circuit was entered on May 1, 1975. A timely

petition for rehearing was filed pursuant to Rule 40,

kederal Rules of Appellate Procedure, along with Sug-

gestion for Rehearing En Banc on May 13, 1975. The

2

petition for rehearing was denied on June 17, 1975.

Petition for Certiorari was filed on August 13, 1975

and granted December 15, 1975. The jurisdiction of

this Court rests on 28 U.S.C. 1254.

QUESTION PRESENTED

Whether tax agents of the United States acted

illegally in seizing automobiles and documents in vio-

lation of the petitioner G. M. Leasing Corporation's

Fourth Amendment rights under the Constitution of

the United States.

CONSTITUTIONAL PROVISIONS AND

STATUTES INVOLVED

The Fourth Amendment of the Constitution of

the United States provides:

The right of the people to be secure in their

persons. houses, papers, and effects, against un-

reasonable searches and seizures, shall not be

violated, and no Warrants shall issue, but upon

probable cause, supported by Oath or affirma-

tion, and particularly describing the place to be

searched, and the persons or things to be seized.

United States Code, Title 26 § 6321, 68A Stat.

779, Aug. 16, 1954, c. 736, provided as of the dates

involved in this case:

Lien for Taxes

If any person liable to pay any tax neglects or

refuses to pay the same after demand, the

amount (including any interest, additional

amount, addition to tax, or assessable penalty, to-

3

gether with any costs that may accrue in addition

thereto) shall be a lien in favor of the United

States upon all property and rights to property,

whether real or personal, belonging to such per-

son.

United States Code, Title 26 § 6331, 80 Stat. 1135,

Nov. 2, 1966, P.L. 89-719, Title § 104(a), 68A Stat.

783, Aug. 16, 1954, c. 736, provided as of the dates

involved in this case:

Levy and distraint

(a) Authority of Secretary or delegate —If

any person liable to pay any tax neglects or re-

fuses to pay the same within 10 days after notice

and demand, it shall be lawful for the Secretary

or his d legate to collect such tax (and such

further sum as shall be sufficient to cover the

expenses of the levy) by levy upon all property

and rights to property (except such property as

is exempt under Section 6334) belonging to such

person or on which there is a lien provided in

this chapter for the payment of such tax. Levy

may be made upon the accrued salary or wages

of any officer, employee, or elected official, of

the United States, the District of Columbia, or

any agency or instrumentality of the United

States or the District of Columbia, by serving

a notice of levy on the employer (as defined in

Section 3401(d)) of such officer, employee, or

elected official. If the Secretary or his delegate

makes a finding that the collection of such tax

is in jeopardy, notice and demand for immediate

payment of such tax may be made by the Sec-

retary or his delegate and upon failure or refusal

tu pay such tax, collection thereof by levy shall

be lawful without regard to the 10-day period

provided in this section.

4

(b) Seizure and sale of property—The term

‘levy’ as used in this title includes the power of

distraint and seizure by any means. A levy shall

extend only to property possessed and obliga-

tions existing at the time thereof. In any case in

which the Secretary or his delegate may levy

upon property or rights to property, he may

seize and sell such property or rights to property

(whether real or personal, tangible or intang-

ible).

United States Code, Title 26 $ 6861, 68A Stat.

834, Aug. 16, 1954, c. 736, provided as of the dates

involved in this case:

Jeopardy assessments of income, estate, and gift

taxes.

(a) Authority for Making. —If the Secretary

or his delegate believes that the assessment or

collection of a deficiency, as defined in Section

6211, will be jeopardized by delay, he shall, not-

withstanding the provisions of Section 6213(a),

immediately assess such deficiency (together

with all interest, additional amounts, and addi-

tions to the tax provided for by law), and notice

and demand shall be made by the Secretary or

his delegate for the payment thereof.

United States Code, Title 26 § 7426, P.L. 89-719,

Title 1 § 110(a), Nov. 2, 1966, 80 Stat. 1142, pro-

vided as of the dates involved in this case:

Civil actions by persons other than taxpayers.

(a) Actions permitted.—

(1) Wrongful levy—If a levy has been made

5

on property or property has been sold pursuant

to a levy, any person (other than the person

against whom is assessed the tax out of which

such levy arose) who claims an interest in or lien

on such property and that such property was

wrongfully levied upon may bring a civil action

against the United States in a district court of

the United States. Such action may be brought

without regard to whether such property has

been surrendered to or sold by the Secretary or

his delegate.

STATEMENT

On March 19, 1973, the Internal Revenue Service

made an assessment of income taxes, penalties, and in-

terest against George I. Norman, Jr. and his wife,

Frances M. Norman. Simultaneously, it was deter-

mined that the collection of taxes was in jeopardy. Mr.

Norman had been a fugitive from justice for several

weeks. Shortly thereafter, within two days, the In-

ternal Revenue Service ©vents made the determina-

tion that petitioner G. M. Leasing Corporation was an

alter ego, nominee, or transferee of George I. Norman,

Jr.; whereupon, all of the assets and books and records

of G. M. Leasing Corporation were seized without

notice of any kind to petitioner nor an opportunity to

be heard. Two automobiles which were titled in the

name of G. M. Leasing Corporation were seized by

the Internal Revenue Service and turned over to lien

creditors who sold said automobiles. (App. p. 33).

The remaining automobiles belonging to G. M. Leas-

ing Cerporation are still being stored by the Internal

Revenue Service.

6

On May 31, 1973, petitioner G. M. Leasing Corp-

oration, a Utah corporation, filed suit in the United

States District Court of Utah, against the United

States, Department of Treasury, Internal Revenue

Service and the named individual officers, agents and

employees of the United States Internal Revenue Serv-

ice. The petitioner G. M. Leasing Corporation alleged

that the individual named respondents as agents of the

Internal Revenue Service entered premises in Salt Lake

County, Utah, and illegally seized automobiles and

documents of the petitioner G. M. Leasing Corpora-

tion. It was alleged that the seizure was in viola-

tion of the Fourth and Fifth Amendments to the

Constitution of the United States. The petitioner G.

M. Leasing Corporation sought a return of all docu-

ments seized by agents of the United States, the return

of motor vehicles seized by the United States and a

suppression of evidence obtained as a result of such

seizure including destruction of all photostats of books,

records, and files of G. M. Leasing Corporation. Peti-

tioner also sought general and punitive damages against

the individual defendants as the result of their illegal

search and seizure and damages against United States

of America for allowing the alleged wrongful sale of

two motor vehicles.

An answer and counterclaim were filed by respond-

ents, admitting the seizure, but denying the property

seized was that of the petitioner G. M. Leasing Corp-

oration. Instead the respondents claimed that the prop-

erty belonged to George I. Norman, Jr. The answer

alleged the jeopardy assessment for income taxes, pen-

alties and interest made against George I: Norman, Jr.

-

The counterclaim alleged that the petitioner G. M.

Leasing Corporation was the alter ego, nominee, or

transferee of George I. Norman, Jr., and the Internal

Revenue Service sought foreclosure on the automobiles

seized.

During the pendency of the action assets were

seized from George I. Norman, III, the son of George

I. Norman, Jr. The Internal Revenue Service again

claimed that George I. Norman, III, was an alter ego,

nominee, or transferee of George I. Norman, Jr. The

motion was allowed and George I. Norman, III filed

his complaint in intervention alleging in essence the

same matters as G. M. Leasing Corporation and also

secking similar relief.

Trial was had in the United States District Court

for the District of Utah on May 10, 1974. The trial

court found that the individual Internal Revenue Serv-

ice agents had acted beyond the scope of their authority

and had violated the Fourth Amendment to the Fed-

eral Constitution in searching the offices of G. M. Leas-

ing Corporation and seizing its books and records. The

trial court awarded compensatory damages against the

individual agents in an amount to be thereafter deter-

mined. The trial court also found that one individual

agent had acted with malice and the court awarded

punitive damages against that agent. The court further

ordered that the books and records which had been

illegally seized be suppressed as evidence and that the

photocopies of those books and records that had been

made by the government should be destroyed. The

8

court found that G. M. Leasing Corporation and George

I. Norman, III, were not the alter egos, nominees, or

transferees of George I. Norman, Jr., and that their

assets should be returned to them and that damages

should be awarded against the United States of Amer-

ica for the value of two automobiles of G. M. Leasing

Corporation that had been sold. The Government's

counterclaim was dismissed with prejudice.

The Court of Appeals for the Tenth Circuit re-

versed the judgment of the District Court concluding

that the seizure was valid under the provision of 26

U.S.C. § 6331(a). The Court did not reverse the trial

court’s order to return the property that had been seized

from George I. Norman, III.

SUMMARY OF ARGUMENT

A corporation's records and automobiles are en-

titled to protection from unreasonable searches and

seizures. Whether the seizure of petitioner's property

was claimed for civil or criminal purposes the Fourth

Amendment and Fifth Amendment provide standards

by which the legality of the seizure is to be judged.

The Fourth Amendment implies a preference for a

warrant before private property can be searched or

seized. Only exigent circumstances justify a departure

from the warrant requirements and a determination

by a neutral and detached magistrate that a seizure is

justified.

Tax seizures are not immune from the requirements

of the Fourth and Fifth Amendments.and some deter-

9

mination of probable cause by an objective judgment

should either be a prerequisite to or afforded immedi-

ately after the seizure of a corporation's property and

records. Actions taken by government agents in viola-

tion of the Fourth Amendment give rise to a cause of

action against the respondents for damages and affirm-

ative injunctive relief. The conduct of the respondents

a the instant case indicates that they acted in disregard

of Fourth Amendment standards and without good

faith.

ARGUMENT

POINT I

THE FOURTH AMENDMENT TO THE

UNITED STATES CONSTITUTION PRO-

HIBITS UNREASONABLE SEIZURES

CONDUCTED BY AGENTS OF THE

UNITED STATES WITH A VIEW. TOoO-

WARDS CIVIL OR CRIMINAL PRO-

CKEEDINGS IN ENFORCEMENT OF THE

REVENUE LAWS.

The conduct of agents and employees of the In-

ternal Revenue Service in seizing automobiles and rec-

ords of G. M. Leasing Corporation was in violation of

the Fourth Amendment to the Constitution of the

United States because such conduct constituted an un-

reasonable seizure. G. M. Leasing Corporation in re-

sponse to the action of tax agents of the United States

brought suit against the United States for an alleged

wrongful tax levy and seizure of assets of G. M. Leas-

ing Corporation and sought return of property seized.

10

G. M. Leasing Corporation also sought damages against

the individual named defendants for violation of its

Fourth Amendment rights based on the search of its

office and seizure of its records. Subsequent interven-

tion was allowed by the trial court for George I. Nor-

man, III whose property was also seized. The United

States counterclaimed for foreclosure on the property

seized. The District Court for the District of Utah

entered judgment in favor of Petitioner G. M. Leas-

ing Corporation ordering the return of seized assets,

damages yet to be determined, the return of all books

and records seized, the destruction of photostats that

had been made of the records, and the prohibition of

their use by the respondents. The Court of Appeals

for the Tenth Circuit reversed the judgment in favor of

G. M. Leasing 514 F.2d 935. In reference to the seiz-

ure of the assets of G. M. Leasing Corporation the

Court of Appeals held that: “. . . [Respondents] con-

ducted a statutorily valid seizure.” 514 F.2d 941. The

Court concluded 26 U.S.C. $6331 (a) and (b) was suf-

ficient authority for the action of the respondents.

The facts pertinent to this inquiry disclose that G.

M. Leasing Corporation was, at the time of respondents’

seizure, a Utah corporation in good standing. (R. Vol.

I 13 lines 10-15; Exhibit No. 1) G. M. Leasing Corp-

oration was incorporated for the purpose of owning and

leasing various expensive motor vehicles. (App. 51).

G. M. Leasing Corporation had not actually begun

leasing autos, because none of the cars they owned

were in good enough shape. (App. 52). However, G.

M. Leasing had undertaken many of the prerequisites

for engaging in business. It had obtained lease forms.

ll

(App. 53). It had contacted prospective lessees, ( App.

53). It had initiated inquiries to obtain either a dealer-

ship or better purchase prices for the cars it acquired.

(App. 53-54). There was evidence and conflicting evi-

dence regarding other attributes of G. M. Leasing’s sep-

arate corporate existence. There was conflicting evi-

dence as to whether stock was issued. A stockholder

testified that he had been issued stock (R. Vol. I, page

52, line 5-12; page 53, lines 17-18). However, an of-

ficer and director testified that no stock had been issued.

(App. 43). While one officer and director testified that

there were no meetings of the Board of Directors:

(App. 43) ; another officer testified that meetings took

place on a daily basis although they were not formally

designated as directors meetings. (App. 53-54). The

trial court found that G. M. Leasing Corporation was

not an alter ego, nominee, or transferee of George I.

Norman, Jr. (R. Vol. 2, page 87, findings 22- page 88

findings 32). The Court of Appeals reversed.

On March 19, 1973, agents of the Internal Rev-

enue Service made a jeopardy assessment of income

tax due and owing the United States for the years

1970 and 1971 from George I. Norman, Jr., and

Frances M. Norman. Neither of these persons are

parties to this action. Subsequently, on March 22, 1973,

respondents acting without a search warrant entered

the garage and building at 4751-53 Holladay Boulevard

in Salt Lake County, State of Utah. The premises

were the offices of G. M. Leasing Corporation and the

residence of George I. Norman, III as well as the

office of George 1. Norman, Jr. (App. 19, 32-33, 34

12

35). The agents entered the premises by engaging lock-

smiths to open the locks without the permission of peti-

tioner or any other person having an interest in the

premises. (App. 19-20). The group manager of the In-

ternal Revenue office in Salt Lake City, testified that it

was not a common practice to use a warrant or summons

under such circumstances (App. 19). A lock was re-

moved by the locksmiths in order for the respondents to

gain entrance (App. 20). The removal of the lock was

apparently done at the request of respondents Haacke

and White, agents of the Internal Revenue Service

(App. 20-21). Subsequent to entry on the premises by

some of the respondents, George I. Norman III arrived

(App. 24) and a determination was made bv the agents

that there may be a possible violation of constitutional

rights by seizing any property and the premises were

locked by restoring the original locks ( App. 24). Two

days later, respondents made a decision again to enter

the premises. They acted without notice of any kind to

G. M. Leasing Corporation, and upon the conclusion

that G. M. Leasing Corporation was an alter ego, nom-

inee, or transferee of George I. Norman, Jr. They then

searched the premises and seized books and records of

G. M. Leasing Corporation. ( App. 22-24). All assets of

G. M. Leasing Corporation including seven automobiles

and a bank account were seized as was certain stock,

later determined to be that of George I. Norman, III.

The seizure of the automobiles and records was made

with the aid of investigating officers of the Intelligence

Division of the Internal Revenue Service. While the

special agents were present, a commercial storage van

was used to haul away the Corporation's records (App.

13

28-29). The agents had been told by Internal Revenue

Service lawyers to seize property including books and

records but not to look at them and to seal them. They

were apparently opened and photocopied some time

later. (App. 27-30). Photostats of some of the records

were apparently turned over to the FBI for their in-

vestigative purposes. (Supplemental Memorandum of

Appellants Tenth Circuit p. 2). At the time of the sec-

ond seizure, agents of the I.R.S. told intervenor he

would have to move and find a new home. (App. 34-

35). Intervenor moved to his family’s residence and

the next day Ih~ agents raided that premises also.

(App. 35). While there, agents threatened to throw

George I. Norman, III in jail, seize his family’s house

and even if he didn’t allow them to make an inventory

of the home and premises they were going to do it any-

way. (App. 35).

Based on the above, the trial court found that the

respondents “did intentionally commit forced entry,

search and seizure knowing full well that they were

violating the rights of G. M. Leasing Corporation and

Intervenor...° (R. Vol. 2, 86 para. 8).

It is submitted that the actions of the respondents

were in violation of the Fourth Amendment of the Con-

stitution of the United States. The broad powers of

search and seizure known at common law were often

used in enforcement of the revenue laws. However,

revenue enforcement was not free from some restriction.

In Landynski, Search and Seizure and the Supreme

Court, p. 25, it is observed:

14

It was through efforts to control abusive en-

forcement of tax laws that limits were first

placed on search and seizure. At the urging of

the new king, William of Orange, one tax was

abolished by Parliament specifically on the

ground that the searches required in its enforce-

ment constituted ‘a badge of slavery upon the

whole people exposing every man’s house to be

pr en into and searched by persons unknown

to him.’ In 1733 a tobacco and wine tax pro-

posed by Walpole failed of parliamentary en-

actment because of its search provisions, though

under its terms only warehouses would have

been subject to search on a genera] warrant; a

special warrant would have been required for

the search of dwellings. And in 1763 William

Pitt proclaimed against the cider tax and its en-

forcement provisions. In the words which have

rung out through the centuries, he cried: “The

poorest man may in his cottage bid defiance to

all the force of the Crown. It may be frail—its

roof may shake—the wind may blow through it

—the storm may enter—the rain may enter—but

the King of England cannot enter: all his force

dares not cross the threshold of that ruined tene-

ment.’

The general warrants and writs of assistance in preva-

lent use by the English Crown were well known to the

founders of the American Constitution. The case of

Entick v. Carrington, 19 Howell State Trials 1029

(1765) where papers of a publisher were seized, and

a private action for their return was upheld where the

seizure was excessive, was apparently well known to

colonial leaders. Writs of assistance to collect various

customs and taxes were frequently used in the American

colonies. In Massachusetts. the governor of the colony

would often issue writs of assistance in aid of customs

15

officers. The objections to the practice were substan-

tial which led the governor to advise officers to apply

for writs in the Superior Court. Landynski, supra, p.

32. Also, in Massachusetts, the Declaration of Rights

adopted in 1780 expressly prohibited unreasonable

searches and the substance of its provisions adopted in

other colonies. Landynski, supra, p. 38.

With reference to the Fourth Amendment and its

relation to the history of use of general warrants it has

been observed:

In recognition of this national criticism, Presi-

dent Washington in his first inaugural address

urged modification in the Constitution to safe-

guard ‘the characteristic rights of freemen’ but

refused to make ‘particular recommendations.’

James Madison, a leading light in the Conven-

tion, as in the struggle for ratification, commit-

ted his great prestige to the fight for a bill of

rights and assumed the role of sponsor in push-

ing the amendments through Congress. He spec-

ifically adverted to the need for search safe-

guards in the light of the necessary and proper

clause: ‘The General Government has a right

to pass all laws which shall be necessary to col-

lect its revenue: the means for enforcing the col-

lection are within the discretion of the Legisla-

ture: may not general warrants be considered

necessary for this purpose .. ./ Madison’s solu-

tion to the problem was a clause to read as fol-

lows: ‘The rights of the people to be secure in

their persons, their houses, their papers, and

their other property, from all unreasonable

searches and seizures, shall not be violated by

warrants issued without probable cause, sup-

ported by oath or affirmation, or not particularly

16

describing the places to be searched, or the per-

sons or things to be seized.’

Madison’s draft proposal for a bill of rights

was referred to committee, where the search pro-

vision was altered to read: “The right of the

people to be secured in their persons, houses,

papers, and effects, shall not be violated by war-

rants issuing without probable cause, supported

by oath or affirmation, and not particularly de-

scribing the place to be searched and the per-

sons or things to be seized.’ Landynski, supra,

p. 41.

It is submitted that the history of the Fourth Amend-

ment supports a conclusion that it was intended to re-

strict seizures made in aid of revenue laws. Indeed, un-

less the “necessary and proper” clause Article I, Sec-

tion VIII, C1. 18 Constitution of United States grant-

ing general Congressional power was restricted by the

Fourth Amendment, general unlimited government

power to intrude into the privacy of individual citizens

would be sanctioned.

The government and the Tenth Circuit Court of

Appeals relied on 26 U.S.C. 6331(a) and (b) for the

authority of the respondents to act in the fashion they

acted in this case. The government has contended and

the Court of Appeals accepted the position that the

statutory process set out by Congress is sufficient to

meet the Fourth Amendment standards.

Even assuming the Internal Revenue Service

agents were intending to levy and ngt search, it is sub-

17

mitted that the executive authority to levy under Sec-

tion 6331 does not contemplate the seizure of records

not available to satisfy the tax assessment. Section 6331

(b) provides: “A levy shall extend only to property

possessed and obligations existing at the time thereof.”

It would appear that only assets real, personal, tangible

or intangible capable of satisfying the lien for taxes are

the proper subject of levy. It is submitted the extensive

seizure of records in this case was outside the statute.

The Government's contention that it was merely seiz-

ing the records because the records may have concealed

assets seems specious in view of Intelligence Agents’

participation in the seizure and the copying of records

and the subsequent transmission of some of them to the

I‘ederal Bureau of Investigation.

The proceedings in this case appear to have had

some direction towards criminal investigation and poss-

ible prosecution since the seizure was conducted in part

by agents of the Intelligence Division of the Internal

Revenue Service and records taken in the seizure found

their way into the hands of the FBI. As the trial court

found, it is submitted that the conduct of the agents in

this case cannot be said to be exclusively and in “good

faith” directed towards a civil distress process. cf. Don-

aldson v. United States, 400 U.S. 517 (1971) requir-

ing “good faith” on the part of Internal Revenue agents

in the use of a civil summons. Also, United States v.

W eingarden, 473 F.2d 454 (6th Cir. 1973).

It is submitted that especially where there is rea-

sonable evidence to suggest that criminal investigation

18

was an allied purpose to the seizure of property of

records that the Fourth Amendment should be applic-

able. The “sole purpose” test alluded to in Donaldson

v. United States, supra is unworkable and inapplicable

in the seizure area. It must be concluded that a seiz-

ure made in violation of a constitutionally reasonable

expectation of privacy whether for tax purposes or

otherwise is contrary to the Fourth Amendment. Katz

v. United States 389 U.S. 347 (1967); United States

v. White, 401 U.S. 745 (1971).

Even assuming that the seizure in the present case

was solely a civil levy and seizure, it is submitted that

Fourth Amendment safeguards apply. In addition the

previously stated history surrounding the adoption of

the Fourth Amendment, a synthesis of this Court's opin-

ions would also reveal that the Fourth Amendment

applies in purely civil proceedings as well as criminal

proceedings.

In Murray v. Hoboken Land Company, 18 How.

272 (1855), this Court considered the question of

whether a distress levy against a revenue collector

issued by an executive official of the United States was

a violation of the Fourth Amendment. The Court gave

scant attention to the issue merely observing that the

amendment had “no reference to civil proceedings for

the recovery of debts of which a search warrant is not

made part.” p. 285. In light of the history of the Fourth

Amendment, already discussed, it is questionable

whether that conclusion was warranted. One of the

concerns of the countrys founders was the use of

general warrants and writs of .assistance in aid

19

of tax and customs collections. The conclusion in Mur-

ray fails to consider the history of the adoption of the

Fourth Amendment. Furthermore, the Murray case

has been substantially eroded by later decisions of this

Court interpreting and applying the Fourth Amend-

ment. In Boyd v. United States, 116 U.S. 616 (1886),

the government sought to confiscate glass brought into

the United States in violation of the custom laws. The

case was, in effect, a revenue case. The prosecution did

not seek a criminal penalty but only a civil confisca-

tion and the forfeiture of the glass to the United States.

The Court in combining the application of the Fourth

and Fifth Amendments held that the defendants could

not be compelled to produce an invoice of the trans-

action which would have supplied the needed govern-

ment evidence to sustain the forfeiture. The Court

ruled:

It is our opinion, therefore, that a compulsory

ppeantion of a man’s private papers to estab-

ish a criminal charge against him or to forfeit

his property is within the scope of the Fourth

Amendment to the Constitution, in all cases in

which a search and seizure would be; .. . (116

U.S. at 622).

The Court relied heavily on Entick v. Carrington,

supra, which had recognized a civil cause of action for

illegal seizure of private papers.

In In re Jackson, 96 U.S. 727 (1878), a habeas

corpus action, the Court in a dictum statement said that

the Fourth Amendment prohibited postal authorities

from opening sealed letters in the mails except when

20

authorized by warrant. The case is significant in that

the Court acknowledged the power of Congress to regu-

late and control the mails, but ruled that such power

must be limited by the right of the citizenry to be free

from unreasonable searches and seizures of private

papers. Subsequent cases of this Court have applied the

scope of the Fourth Amendment in such a way that it

cannot be said to be restricted to criminal cases.

In One 1958 Plymouth Sedan v. Pennsylvania, 380

U.S. 693 (1965), the unanimous court held the exclu-

sionary rule enunciated by Mapp v. Ohio, 367 U.S.

643 (1961) applied to a forfeiture proceedings. The

Court cited to Boyd v. United States, supra, noting

that it was not a criminal case. The Court observed

that in the particular forfeiture proceeding, the owner

of the automobile had an interest in not losing his prop-

erty and that the Fourth Amendment provided a pro-

tection for his property interest. The Court stated:

It would be anomalous indeed, under these cir-

cumstances, to hold that in the criminal pro-

ceeding the illegally seized evidence is exclud-

able, while in the forfeiture proceeding, requir-

ing the determination that the criminal law has

been violated, the same evidence would be ad-

missible.

Thereafter, in Dyke v. Taylor Implement and Mfg. Inc.,

391 U.S. 216 (1968), the Court applied the Fourth

Amendment to a contempt proceeding associated with

a labor dispute.

Courts of Appeal have applied the exclusionary

21

rule to non-criminal administrative hearings. Knoll As-

sociates Inc. v. F.T.C. 397 F.2d 570 (7th Cir. 1968)

and the Tax Court has held the Fourth Amendment

applicable in a civil tax proceeding. Efrian T. Suarez,

58 T.C. 792 (1972). Similarly, in applying the Fifth

Amendment, this Court has noted that civil tax pro-.

ceedings often have corollary criminal ramifications.

Mathis v. United States, 391 U.S. 1, (1968) required

Miranda warnings be given to a defendant who was

serving a sentence in a Florida jail where a routine tax

investigation was being conducted of a claim for tax

refunds by the defendants.

Although in Wyman v. James, 400 U.S. 309

(1971) this Court upheld welfare inspections con-

ducted without a warrant to determine compliance with

a state AFDC program, the Court noted that prior

written notice was given of the home visit, forcible entry

was not made, the welfare recipient had the right to

refuse the visit, and that if the search were to become

intrusive it could violate the Fourth Amendment. The

procedures approved in Wyman were not observed in

the Internal Revenue Service's seizure of petitioner's

offices, assets and records. The Wyman case presents

a situation wholly different than that presented in the

instant case.

In Mr. Justice Brennan's concurring opinion in

the recent case of Laing v. United States, 44 LW. 4035

at 4043, held that constitutional safeguards should apply

in IRS seizures. That question was expressly reserved

by the majority in Laing, supra at 4042, note 26 al-

though the Court did cite to North Georgia Finishing,

22

Inc. v. Di-Chem, Inc., 419 U.S. 601, 607 (1975);

Mitchell v. W. T. Grant, Co., 416 U.S. 600, 610-611

(1974) ;and Fuentes v. Shevin, 407 U.S. 67, 72 (1972).

In the respondents’ reply brief to the petition for

certiorari it was contended that Phillips v. Commission-

er, 283 U.S. 589 (1931) was sufficient precedent to

support the actions of the revenue agents in the instant

case. The dissenting opinion in the Laing case also re-

lied on Phillips. The Phillips case did not consider the

application of the Fourth Amendment to a levy and

distraint procedure similar to that employed in this case.

Notice was given to stockholders of the delinquent tax-

payer corporation against whom collection was sought

before any seizure was undertaken and a more formal

procedure ensued. The seizure, if any, was not com-

parable to that of the instant case. The court simply

indicated that the summary distraint process employed

in that case was adequate compliance with Fifth

Amendment due process of law. The court stated in

that case the mere postponement of judicial inquiry

was not a violation of due process of law under the pro-

cedures Congress had established. In Note 5, page 595

of 283 U.S., the court refers to the “ancient English

practice of summary seizure of property of a Crown

debtor. . .” However, it did not give consideration to

the history of the Fourth Amendment which would

suggest that the summary seizure of property from an

area where there was a reasonable expectation of pri-

vacy without a probable cause determination or hearing

was not to be sanctioned. Additionally, recent cases

from this court have substantially undermined the broad

pronouncements in Phillips v,. Commissioner, supra,

23

Fuentes v Shevin, supra; Sniadach v. Family Fin-

ance Corp., 395 U.S. 337 (1969) ; North Georgia Fin-

ishing, Inc. v. Di-Chem, Inc., supra. In Fuentes v.

Shevin, supra, this Court acknowledged the Phillips

decision but emphasized that its application approved

in situations where it was “essential that governmental

needs be immediately satisfied.” 407 U.S. at 92. In

North Georgia Finishing, Inc., this Court held uncon- —

stitutional a Georgia process similar to the tax seizure

process at 26 U.S.C. § 6331 when applied against a

corporate bank account. In Laing v. United States,

supra, this Court in a deficiency case under 26 U.S.C.

’ 6851 ruled that failure to comply with 26 U.S.C.

‘ 6861(a) and (b) rendered the assessment and subse-

quent seizure of taxpayer's property under 26 U.S.C.

§ 6331(a) defective and allowed taxpayer injunctive

relief. The Court noted the construction given to the

Internal Revenue Code provisions rendered unneces-

sary the consideration of the continued viability of

Phillips v. Commissioner, supra. 44 LW 4042 n. 26.

While there are some distinctions between the IRS

seizures in the Phillips case and in the present case,

which would allow the court to decide in petitioner's

favor without rejecting the rationale of Phillips but re-

stricting it to its particular facts, the Court may wish to

reexamine the holding of Phillips in light of its more

recent decisions which are cited herein. Consequently

it is submitted that the Fourth Amendment is applic-

able to a seizure proceeding of the nature found in this

case whether the proceeding be denominated civil or

criminal.

24

There is also no question that a corporation such as

G. M. Leasing Corporation has the right to assert pro-

tections of the Fourth Amendment from having its

corporate papers and properties seized contrary to law.

Silverthorne Lumber Co. v. United States, 251 U.S.

358 (1920); Oklahoma Press Publishing Co. v. Wall-

ing, 327 U.S. 186 (1946): Irrespective of the govern-

ment’s alter-ego contentions, G. M. Leasing Corpor-

ation as registered owner and possessor had sufficient

interest in the automobiles and records seized to give it

standing to challenge the seizure, Jones v. United

States, 362 U.S. 257 (1960); Brown v. United States,

411 U.S. 223 (1973); Mancusi v. DeForte, 392 U.S.

364 (1968).

In Silverthorne v. United States, supra, this Court

acknowledged the Fourth Amendment protects a corp-

oration from compulsory production of corporate books

and papers and that when items have been obtained as

a result of a previous unconstitutional search that they

may not thereafter be used by the government for its

benefit. In the Silverthorne case, a United States Mar-

shal went to the office of the company and made a

clean sweep of all books, papers and documents. Photo-

graphs and copies were thereafter made of the docu-

ments seized and then subpoenas issued to produce the

originals. This Court speaking through Mr. Justice

Holmes observed:

The proposition could not be presented more

nakedly. It is that although of course its seizure

was an outrage which the Government now re-

grets, it may study the papers before it returns

them, copy them, and then may use the knowl-

25

edge that it has gained to call upon the owners

in a more regular form to produce them; that

the protection of the Constitution covers the

physical possession but not any advantages that

the Government can gain over the object of its

pursuit by doing the forbidden act.”

... In our opinion such is not the law. It re-

duces the Fourth Amendment to a form of

words. 232 U.S. 393. The essence of a pro-

vision forbidding the acquisition of evidence in

a certain way is that not merely evidence so ac-

uired shall not be used before the Court but

that it shall not be used at all.

In this case, the action of the revenue agents in mak-

ing such a broad and sweeping seizure of property that

was claimed to be the corporate property of G. M.

Leasing Corporation when the agents in fact were in-

terested in property of George I. Norman, Jr. and his

wife as much as that of G. M. Leasing Corporation

amounts to a similar subterfuge. Substantial amounts

of books and documents were seized and carried away

in a moving van, scrutinized, copied, and disseminated

to other government agencies. The actions of the gov-

ernment agents in the instant case are not dissimilar to

those disapproved in the Silverthorne Lumber case.

In Oklahoma Press Publishing Co. v. Walling,

supra, Justice Rutledge speaking for the Court stated

that the Fourth Amendment:

.. . guards against abuse only by way of too

much indefiniteness or breadth in the things re-

quired to be ‘particularly described,’ if also the

inquiry is one the demanding agency is author-

26

ized by law to make and the materials specified

are relevant. The gist of the protection is in the

requirement, expressed in terms, that the dis-

closure sought shall not be unreasonable. 327

U.S. at 208.

A subpoena couched in terms as broad as the seizure

in the instant case would be beyond the scope of Fourth

Amendment allowances. Hale v. Henkel, 201 U.S. 43

(1906); Oklahoma Press Publishing Co. v. Walling,

327 U.S. 186 (1946). Schwimmer v. United States, 232

F.2d 35 (9th Cir. 1957); 26 Univ. So. Calif. Law

Center Tax Institute, 1022-23 (1974); Civil Versus

Criminal Taxpayers Rights Under the Fourth and Fifth

Amendments, 38 Brooklyn L. Rev. 130, 149-155 (1971).

And a search warrant could not have justified the extent

of the seizure of property and records without greater

particularity. Stanford v. Texas, 379 U.S. 476 (1965) ;

Hill v. Phillpot, 445 F.2d 144 (7th Cir. 1971), (evid-

ence excluded obtained by in broad search warrant in

tax investigation.) Indeed, it was conceded that the

jeopardy assessment on which the seizure was attempted

to be justified was itself in error. The scope of the

seizure was similar to those condemned in Kremen v.

United States, 353 U.S. 346 (1957) and Go-Bart Im-

porting Co. v. United States, 282 U.S. 344 (1931).

In Gouled v. United States, 225 U.S. 298 (1921)

this Court disapproved the use of subterfuge to gain

access to private papers to violate the Fourth Amend-

ment. As pointed out before, the evidence in the instant

case supports a conclusion that government agents at-

tempted by subterfuge to rely upon an otherwise in-

applicable process to gain access to property and rec-

27

ords for purposes of criminal investigation as well as

just satisfying the revenue laws and that the seizures

were conducted without a prior determination of prob-

able cause, were made without a warrant and not under

exigent circumstances, and were without any reasonable

limits.

POINT II

IN THE ABSENCE OF EXIGENT CIR-

CUMSTANCES THE FOURTH AMEND-

MENT REQUIRES A WARRANT PRIOR

TO THE SEIZURE OF PROPERTY OR

EVIDENCE BY INTERNAL REVENUE

SERVICE AGENTS.

This Court has on many occasions indicated that a

search not predicated on a search warrant is per sc

unreasonable. Schneckloth v. Bustamonte, 412 U.S.

218 (1973); Coolidge v. New Hampshire, 403 U.S.

443 (1971) ; Chambers v. Maroney, 399 U.S. 42 (1970).

Katz v. United States, 389 U.S. 347 (1967). Since

the Fourth Amendment expressly refers to seizures as

well as searches it can be assumed that a seizure not

based on a warrant is per se unreasonable unless there

are exigent circumstances that dissipate the need for a

warrant. Adequate alternative process that affords an

equivalent protection may also suffice to dispense with

a warrant in special situations not present in this case.

Cf. 26 U.S.C. § 6213; 26 U.S.C. § 2401.1 In the in-

1 Petitioner will not attempt to assess the constitutionality of

alternative processes that Congress may i.ave provided in tax

deficiency cases since such alternatives were not employed in

this instance.

28

stant case the government agents purported to rely upon

the provisions of 26 U.S.C. § 6331 (a) and (b) to sup-

port their action. It is submitted that these provisions

cannot justify the action that respondents took against

petitioner in this case.

In some instances it may be that in tax seizure

matters that circumstances are so compelling that im-

mediate action is necessary to prevent the destruction

or removal of property, and in such cases careful articu-

lation of facts justifying action and excusing the Fourth

Amendment warrant requirements may sustain a seiz-

ure. Warden v. Hayden, 387 U.S. 294 (1967); Car-

roll v. United States, 267 U.S. 132 (1925); Husty v.

United States, 282 U.S. 694 (1931).

No exigent circumstances have been established in

the instant case.

It has been noted by this Court the levy and dis-

traint provisions under the Internal Revenue laws dis-

pensing with notice and opportunity to be heard be-

fore seizure arises out of necessity in enforcement of

the tax laws, Phillips v. Commissioner, supra; Laing v.

United States, supra. Petitioner claims that blanket

provisions cannot control all cases and that each case

must be judged on its own facts as to whether or not

exigent circumstances exist so that seizure without

notice for determination of probable cause may occur.

Petitioner contends that absent a showing of exigent

circumstances making necessary the immediate seizure

of property that a seizure warrant must be obtained.

Coolidge v. New Hampshire, supra; Vale v. Louisiana,

399 U.S. 30 (1970).

29

This Court has held it a prerequisite to the search

or seizure of property that a warrant issue upon the

judgment of a neutral and detached magistrate finding

probable cause for the seizure or search and specifying

with particularity the items to be seized. Coolidge v.

New Hampshire, supra. In the instant case, there was

no control, as a practical matter, on the judgment of

the agents as to whether or not to seize or what assets

were to be seized. The vehicles seized in the instant

case were claimed by petitioner and intervenor to be

the property of G. M. Leasing Corporation. The re-

spondents seized the vehicles contending they were the

property of George I. Norman, Jr. and his wife. The

determination as to whether there was probable cause

for such a belief and thus to seize the vehicles should

have been made, by a magistrate rather than the judg-

ment of government agents engaged in the competitive

enforcement of the tax and criminal laws of the United

States. Katz v. United States, supra; Johnson v. United

States, 333 U.S. 10 (1948).

The facts of the instant case show a radical depart-

ure from the notion of a neutral detached magistrate’s

decision. The first step leading to the seizure was an

assessment. In the instant case, uo “thirty day letter’

or notice of any kind was given to taxpayer prior to the

assessment (although George I. Norman, Jr. was a

fugitive, his wife who was also assessed, was present and

Mr. Norman had left behind him not only his assets but

also a power of attorney ).

This first step, the assessment, was prepared by de-

fendant Phillip Clayton. (App. 25). Clayton, an In-

30

ternal Revenue agent had audited Norman for four

previous years. (App. 26). There was question as to

the manner in which Mr. Clayton had handled the prev-

ious years audits and there was also evidence of Clay-

ton’s malice or at least disparagement of Norman in his

prior audits. (R. Vol. I, pages 36-38).

The assessment Mr. Clayton prepared was admit-

tedly erroneous. Among other things, he failed to give

Norman credit for a $290,000 payment which he knew

Norman had paid; ( App. 26-27), he prepared penalties

and interest as if no payment had been made; he in-

cluded items in income which he admitted on the wit-

ness stand were not income: (App. 27), he gave no

credit for expenses but admitted that he knew that Nor-

man had extraordinarily high business expenses. (App.

26). The Government attorney at the trial stipulated

that the assessment was erroneous. From that initial

basis, the erroneous assessment, the seizure originated.

Thereafter, the Internal Revenue Service, not a

neutral detached magistrate, determined that the col-

lection of taxes for both Mr. and Mrs. Norman was in

jeopardy. Again, Phillip Clayton recommended the de-

cision. (App. 26).

The final step for seizure was the determination

that petitioner G. M. Leasing Corporation was the alter

ego, nominee or transferee of George I. Norman, Jr.

Again, no independent detached determination.

Phillip Clayton himself participated in the seizure

raid along with the 13 other agents seven of which were

intelligence officers, (App. 27). Phillip Clayton, a

31

Revenue officer, had never previously participated in

a seizure nor was such activity part of his job descrip-

tion (App. 28). Clayton testified that his sole purpose

for participating was to seize books and records. (App.

29). The evidence was replete and the trial court found

that agent Clayton acted with malice. (R. Vol. II,

page 86, para. 10). Respondent Clayton initiated the

entire process that resulted in seizure of petitioner's

property. The facts of this case demonstrate the need

for a neutral detached determination prior to seizure.

Equally as important is that there be some specific-

ity particularizing the things to be seized. The Fourth

Amendment requirement of particularity was clearly

violated in this case. The seizure in this case included

boxes full of records and numerous motor vehicles with-

out there being any prior probable cause determination

that the items were properly subject to seizure in aid

of the distraint process of the revenue laws or probable

cause to seize the items for purposes of criminal investi-

gation. Congress has expressly provided for a warrant

process in tax matters. 26 U.S.C. § 7302; 26 U.S.C.

§ 7608. Consequently, the emergency distraint laws

absent a warrant, as employed in this case, can only be

harmonious with the Fourth Amendment where they

are interpreted as applying under exigent circumstances

and not sanctioning what, in effect, is a writ of assist-

ance or general warrant.

This Court has previously required the application

of the warrant process and some form of probable cause

standard in less intrusive situations. Camara v. Muni-

cipal Court of San Francisco, 387 U.S. 523 (1967) ;

32

See v. City of Seattle, 387 U.S. 541 (1967). The

Camara case recognized that “prompt inspection even

without warrant” may occur in instances “that the law

has traditionally upheld in emergency situations.” 387

U.S. 539. The facts of the instant case show no emerg-

ency situation that would justify dispensing with a war-

rant. The assessment was made by the government on

March 19, 1973, weeks after Norman became a fugitive.

Not until days later did government agents move

to the premises where the records and vehicles were

seized. At that time, respondents had arranged to have

various agents present and to employ private locksmiths

to remove locks. They left the premises on March 21,

1973, replacing the locks but returned on the 23rd day

of March, 1973, without a warrant to continue the seiz-

ure and arranged for a van to remove items seized. The

taxpayer had not been present for a period of weeks.

The books and papers were seized but not examined

and photocopied for some period of time after their

seizure. C.f. Coolidge v. New Hampshire, supra. Under

these circumstances, there was ample time to obtain a

warrant for the seizure or search of items properly

sought. The right of the government to seize property

and records in enforcement of the tax laws must be

balanced against the Fourth Amendment privacy in-

terests which a citizen, corporate or individual, has a

constitutional right to expect. To allow such seizure

is to substantially reduce the efficacy of the Fourth

Amendment as well as to reverse the common law tra-

ditions that restricted the seizure of private papers.

Entick v. Carrington, supra; Cf. Stanford Daily v.

Zurcher, 353 F.Supp. 124 (N.D. Cal. 1972). In Frank

33

v. Maryland, 359 U.S. 360 (1959) a case the ultimate

holding of which has been effectively undermined by

Camara v. Municipal Court of San Francisco, supra,

Justice Frankfurter noted the following with reference

to the history of the k'ourth Amendment:

[T]wo protections emerge from the broad con-

stitutional proscription of official invasion. The

first of these is the right to be secure from in-

trusion into personal privacy, the right to shut

the door on officials of the state unless their

entry is under proper authority of law. The sec-

ond, and intimately related protection is self-

protection; the right to resist unauthorized entry

which has as its design the securing of informa-

tion to fortify the coercive power of the state

against the individual, information which may

be used to effect a further deprivation of life or

liberty or property .. . . [History makes plain,

that it was on the issue of the right to be secure

from searches for evidence to be used in crim-

inal prosecutions or for forfeitures that the great

battle for fundamental liberty was fought. 359

U.S. 365 (Emphasis supplied ).

The observation of Justice Frankfurter on the Fourth

Amendment application to forfeiture is still valid.

Even if exigent circumstances existed in the instant

case which would dispense with the requirement of ob-

taining a warrant and determination of probable cause

by a neutral and detached magistrate, due process would

demand that some sort of a hearing be given before the

Internal Revenue Service would be allowed to retain

the property seized. See e.g., and North Georgia Fin-

ishing, Inc. v. Di-Chem, Inc. 419 U.S. 601 (1975) ;

34

Sniadach v. Family Finance Corp., 395 U.S. 337

(1969). Such was the gist of Mr. Justice Brennan's

concurring opinion in the recent Laing v. United States,

44 LW 4035, 4043. Although 26 U.S. 7426, would

allow an alleged alter ego such as G. M. Leasing Corp-

oration to file suite in District Court for return of seized

property such is not expeditious or adequate enough to

satisfy due process standards.

As constitutional safeguards apply to IRS seizures,

the provisions of the Fourth Amendment requiring

the issuance of a warrant based upon an independent,

neutral, and detached determination of probable

cause should be a prerequisite. If, because of exigent

circumstances of the particular case, the requirements

of a warrant should be dispensed with, then due

process demands that immediately subsequent to the

seizure a hearing be afforded to determine the right

of taxpayers and persons in positions similar to G. M.

Leasing Corporation.

POINT III

BECAUSE OF THE WRONGFUL SEIZ-

CRE ACTION OF THE RESPONDENTS

THE TRIAL COURT PROPERLY FOUND

LIABILITY FOR DAMAGES AND

AWARDED AFFIRMATIVE RELIEF.

The action against the individual defendants was

predicated in part by this Court’s decision in Bevin v.

Six Unknown Named Agents, 403 U.S. 388 (1971)

where this Court held that even though Congress had

not provided a tort remedy for violation of Fourth

35

Amendment rights that a complaint alleging a Fourth

Amendment violation by federal agents acting under

color of their authority would give rights to a federal

cause of action for damages. This action is not to be

confused with petitioner's claim for wrongful levy under

26 U.S.C. § 2426. The latter cause of action is against

the United States for return of seized assets not be-

longing to the delinquent taxpayer. The former cause

of action is against the individual agents who partici-

pated in the search of petitioner's office and intervenor's

residence and seizure of books and records. The trial

court found that petitioner should have recovery against

the respondents for damages for their respective viola-

tions. The amount is yet to be determined. It is sub-

mitted that an analysis of the evidence shows a blatant

insensitivity to the constitutional rights of G. M. Leas-

ing Corporation and to the obvious damage of G. M.

Leasing Corporation. On remand of Bevins (2nd Cir.

Court of Appeals 456 F.2d 1439) the Court ruled that

a defense of good faith would be available to the de-

fendants in that case who may have violated Fourth

Amendment rights of a person. The court applied a

standard similar to that applied by this Court in Pear-

son v. Ray, 386 U.S. 547 (1967) in interpreting 42

U.S.C. § 1983. In the instant action, the respondents

did not specifically plead good faith in their answer

or counterclaim. (R. Vol. 2 p. 65), but relied more on

sovereign immunity and the legality of their actions.

The trial court, however, found in favor of the petition-

er. The evidence amply justifies that finding. The re-

spondents did not make an effort to obtain a search

warrant or to proceed by subpoena even though ade-

36

quate time to obtain such a warrant existed. The assess-

ments were admittedly and knowingly erroneous.

Agents arranged to forcefully remove the locks at peti-

tioner’s office and entered to seize items. They returned

a second time again without a warrant, and proceeded

to seize the property and records of the petitioner in

an indiscriminate fashion. The records were later photo-

stated and some transmitted to the F BI. When George

I. Norman, III, the intervenor in the action below,

protested that the property was that of G. M. Leasing

Corporation, he was threatened with imprisonment and

that his mother's home and his family’s property would

be seized. The search was conducted not by agents

concerned with revenue alone, but also by agents of

the Intelligence Division thus clearly indicating an in-

tent to seize evidence for criminal investigation. The

agents were aware on March 21, 1973, that there were

constitutional problems associated with their actions,

but later decided to disregard their own intuition.

Under these circumstances, the Court’s determination

that judgment should be awarded in favor of petitioner

and against respondents is reasonably supported by the

evidence.

Additionally, the trial court was within its prerog-

ative of awarding petitioner affirmative relief. Such

relief is not barred by 26 U.S.C. § 7421(a). The relief

is properly in aid of the vindication of petitioner's

Fourth Amendment rights and therefore, not subject

to the above statutory restraint that might otherwise be

applicable. Laing v. United States, supra. Compare

Bob Jones University v. Simon, 416 U.S. 725 (1974)

and Alexander v. American United, Inc., 416 U.S. 752

37

(1974). Also so much of the relief as seeks return of

the seized property from the United States is expressly

exempted from 26 U.S.C. § 7421(a) and sanctioned by

26 U.S.C. § 7426(a).

This Court has recognized that the government

may not benefit by using evidence obtained, Silver-

thorne Lumber v. United States, supra, nor evidence

derived from illegal activity. Wong Sun v. United

States, 371 U.S. 471 (1963) ; Nardone v. United States,

308 U.S. 338 (1939). It is indeed more difficult in the

event of a criminal prosecution for a defendant to de-

termine whether evidence illegally obtained resulted in

additional evidence being obtained. This is especially

so in the case of matters involving records and the com-

plexities of a possible tax prosecution. In the event of

criminal prosecution of G. M. Leasing Corporation, it

might be very difficult to ascertain if the government

derived any benefit from its illegal actions in conducting

the instant seizures. Affirmative injunctive relief grant-

ing the return of evidence and prohibiting its use would

seem to be in harmony with other actions of this Court

and decisions of the Courts of Appeals granting affirm-

ative relief against police misconduct. Allee v. Med-

rano, 416 U.S. 802 (1973); Lankford v. Gelston, 364

F.2d 197 (4th Cir. 1966) ; Gomez v. Layton, 394 F. 2d

764 (D.C. Cir. 1968). Injunctive relief is equally neces-

sary and harmonious with this Court's holding in Bevins

v. Six Unknown Named Agents, supra, as damages

were in that particular situation. Plaintiff also relied

on Rule 41(e) of the Federal Rules of Criminal Pro-

cedure in seeking return of the property illegally seized.

38

The property illegally seized should be returned, dam-

ages allowed, yet to be proved against the individual

respondents, and the government precluded from ex-

ploiting the evidence seized. The government should

not thereafter be allowed to proceed to seize the prop-

erty again without meeting Fourth Amendment

standards.

CONCLUSION

For the reasons stated, it is respectfully submitted

that the judgment of the Court of Appeals should be

reversed.

Respectfully submitted,

RICHARD J. LEEDY

744 East 300 South

Salt Lake City, Utah 84102

Attorney for Petitioner