Petition — Hankins v. United States

Supreme Court brief1979

Ask Donna

What actually matters in this document.

Text

Supreme Court, U. Se

rIiLs wv

HOY —b107 8

————

In The MIOWAEL R@DAK, JR., CLERK

Supreme Court of the United States

OCTOBER TERM, 1978

A. BURTON HANKINS,

Petitioner,

vs.

UNITED STATES OF AMERICA, et al.,

Respondents.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

Paut P. LIPTON

LIPTON & PETRIE, LTD.

625 North Milwaukee Street

Milwaukee, Wisconsin 53202

L. ARNOLD PYLE

WATKINS, PyYLe, LUDLAM, WINTER

& STENNIS

Post Office Box 427

Jackson, Mississippi 39201

JAMES S. NIPPES

DossETT, MAGRUDER AND MONTGOMERY

1800 Deposit Guaranty Plaza

Jackson, Mississippi 39201

Counsel for the Petitioner

E. L. MENDENHALL, INc., 926 Cherry Street, Kansas City, Mo. 64106, (816) 421-3030

TABLE OF CONTENTS

ge SRST iiaibiaosenees 1

IN SRS EI Sa esa CO 2

an ceesesesscccsccocecscceees 2

Constitutional Provision Involved .....0.......2......cc2ecce0c0000+s 3

LS LE 4

Cenc ccsecsorsccceccees 4

The Income Tax Investigation ..0.......00..0....cceeceeeeeee: 5

The Enforcement Proceeding .......................:00--00+ 6

pe ee 8

TD 9

Reasons for Granting the Wit ...0......2....0..0....cccecceeceeeeeeeeeees 11

SD 13

I. The Contempt Conviction -0..0......0.000..cccccceceeeeees 13

II. The Underlying Appeal ...0...................ccccsesseeceeees 20

ea esescasvccccccccecccccceres 26

Appendix:

A. Opinion of the United States Court of Appeals,

EE Al

B. Court of Appeals’ Supplemental Opinion ........ A21

C. Memorandum of Decision, United States Dis-

trict Court, N.D. Mississippi, W.D. .....00000000....... A4l

i A63

Table of Authorities

CASES

Andresen v. Maryland, 427 U.S. 463 (1976) ..........2..... 25-26

Bellis v. United States, 417 U.S. 85 (1974) ........ 12, 20, 22, 23

Cagle v. Scroggins, 410 F. 2d 741 (5th Cir. 1969) ........ 15

Couch v. United States, 409 U.S. 322 (1973) 0000... 12

Curcio v. United States, 354 U.S. 118 (1957) 00000... 11, 13, 25

Fisher v. United States, 425 U.S. 391 (1976) ..00000... 12, 20,

23, 24, 25

Garrity v. New Jersey, 385 U.S. 493 (1967) 0.000000... 14

Gass v. Robie, 25 A. 2d 487 (Me. Sup. Jud. Ct. 1942) .... 23

Hagen v. Porter, 156 F. 2d 362 (9th Cir. 1946) ........... 16

Helvering v. Mitchell, 303 U.S. 391 (1938)... 16

Holt v. United States, 218 U.S. 245 (1910) 20. 12

In re Reicher, 159 F. Supp. 161 (S.D. N.Y. 1958) ........ 16

Kelly v. Kelly, 411 S.W. 2d 953 (Tex. Civ. App. 1967) 23

Louisiana Education Association v. Richland Parish

School Board, 421 F. Supp. 973 (W.D. La. 1976)

McNeil v. Patuxent Institution Director, 407 U.S. 245

CIS UEE "= scdicishi wis syeditccsnepteiraaalabincdedlbmaseraemiccodarmeeeaccataatccte 11, 19

Maggio v. Zeitz, 333 U.S. 56 (1948) 000000... 11, 13, 17, 18, 19

Murphy v. Waterfront Commission, 378 U.S. 52 (1964)

Oriel v. Russell, 278 U.S. 358 (1929) 00. 17, 18

Robertshaw v. Hanway, 52 Miss. 713 (Miss. 1876) ........ 21

Sanderson v. Cooke, 175 N.E. 518 (N.Y. Ct. App. 1931)

Tomlinson v. Lefkowitz, 334 F. 2d 262 (5th Cir. 1964) 16

Traub v. United States, 232 F. 2d 43 (D.C. Cir. 1955) 11

United States v. Anderson, 567 F, 2d 839 (8th Cir. 1977) 15

United States v. Greenleaf, 546 F. 2d 123 (5th Cir. 1977) 22

Ill

United States v. Helina, 549 F. 2d 713 (9th Cir. 1977) ... 20

United States v. Patterson, 219 F. 2d 659 (2d Cir. 1955)

United States v. Plesons, 560 F. 2d 890 (8th Cir. 1977) 20

United States v. Rizzo, 539 F. 2d 458 (5th Cir. 1976) .... 15

United States v. Silvio, 333 F. Supp. 264 (W.D. Mo.

PIED: ‘sci duasnocananscenagebeincabiarsaioucdaumcecanmmisnmdsmnendticearsacnnnibeatin 16

United States v. Slutsky, 352 F. Supp. 1105 (S.D. N.Y.

ID Sinctecescsrren sta sesnstasetceoh toes ceactecei lias aie et iearestiaseveniactentons 22

Uphaus v. Wyman, 360 U.S. 72 (1959) 2... 19

CONSTITUTIONAL PROVISION

United States Constitution, Fifth Amendment ............ 3, 11,

12, 13, 14, 15, 20, 22, 23, 24, 25

TEXTS

60 Am. Jur. 2d Partnership §§265, 267, 296 (1972) ........ 23

33 C.J.S. Executors and Administrators §113 (1942) .... 21

68 C.J.S. Partnership $1 (1950) ................cccccecccssscsssseesses 23

68 C.J.S. Partnership §275 (1960) ...........r..ccccccersssssscecsee 21

In The

Supreme Court of the United States

OCTOBER TERM, 1978

A. BURTON HANKINS,

Petitioner,

vs.

UNITED STATES OF AMERICA, et al.,

Respondents.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

A. BURTON HANKINS, your petitioner, prays that

a writ of certiorari issue to review the judgment of the

United States Court of Appeals for the Fifth Circuit in

this case.

OPINIONS BELOW

The opinion of the Court of Appeals, officially reporiss A

at 565 F. 2d 1344, is printed in full as Appendix A” The

supplemental clarifying opinion of the Court of Appeals,

officially reported at 581 F. 2d 431, is printed in full as

’ 9 \ Appendix B.) The District Court’s Memorandum of De-

* <a cision, officially reported at 424 F. Supp. 606, is printed as

Appendix C. A copy of the District Court’s order, com-

mitting appellant to the custody of the Attorney General,

is printed as Appendix D.

)

—

The supplemental clarifying opinion of the Court of

Appeals denied appellant’s Petition for Rehearing En Banc

with respect to affirmance of the contempt conviction,

and denied appellant’s Petition for Rehearing in the under-

lying appeal.

JURISDICTION

The judgment and opinion of the Court of Appeals

for the Fifth Circuit were entered on January 12, 1978.

The supplemental clarifying opinion of the Court of Ap-

peals for the Fifth Circuit was entered on October 3,

1978. The jurisdiction of this Court is invoked under

28 U.S.C. §1254(1).

QUESTIONS PRESENTED

1. Was the target of a criminal tax investigation

denied due process of law and unlawfully subjected to

the trilemma of self-incrimination, perjury or contempt

where the District Court, despite the absence of any show-

ing that he was able to produce “missing records”, com-

mitted the taxpayer to indeterminate incarceration because

he relied upon his privilege against self-incrimination in

failing to explain non-production of some of the records

summoned by the Internal Revenue Service?

2. Alternatively, should the District Court have af-

forded the taxpayer a non-incriminatory opportunity to

explain failure to produce where the taxpayer had moved

to dismiss the contempt petition on the ground that he

did not have custody or control of any “missing” records

when the summonses were served?

3. Does the taxpayer’s privilege against self-incrim-

ination preclude the compulsory production, pursuant to

an Internal Revenue Service summons, of the records of

a business concededly operated by him as a sole pro-

prietorship in the year following the death of the taxpayer’s

former co-partner?

4. Where a two-brother partnership was terminated

and completely wound up after the death of one brother,,

and the surviving brother acquired by purchase unqualified

ownership and unrestricted possession of the partnership

assets prior to the issuance of an IRS summons calling for

production of records of the former partnership, are such

records protected against compulsory production by the

taxpayer’s privilege against self-incrimination?

5. Does the Fifth Amendment privilege protect the

taxpayer against the incriminating testimonial implications

involved in the attempted enforcement of various IRS

summonses calling for the production of former partner-

ship records, and records prepared by an accountant dur-

ing the pendency of a will contest involving the deceased

partner’s estate, where such records were not being held

in a custodial capacity and where the taxpayer denied that

he had possession of some of the documents at the time the

summonses were served?

CONSTITUTIONAL PROVISION INVOLVED

United States Constitution, Fifth Amendment

“No person ... shall be cornpelled in any criminal

case to be a witness against himself, nor be deprived

of life, liberty, or property, without due process of

STATEMENT OF THE CASE

The petitioner, A. Burton Hankins, is the principal

target of a criminal tax investigation by the Intelligence

Division of the Internal Revenue Service. Petitions to

enforce various summonses issued to Hankins by a special

agent in March, 1975, were filed in the District Court

for the Northern District of Mississippi on November 28,

1975. Hankins appealed from orders enforcing the sum-

monses, entered on August 10, 1976, but was denied a

stay pending appeal. 3

On April 29, 1977, following a hearing on the Govern-

ment’s petition to hold Hankins in contempt, the District

Court committed Hankins to the custody of the Attorney

General for failure to produce certain “missing” records

when he responded to the enforcement orders. The Court

of Appeals granted a stay pending appeal, but affirmed all

relevant orders in both appeals.

References to the appendix filed in the appeal of the

summons enforcement orders will be designated as “App.

| eee ”. (References to the appendix filed in the appeal

of the contempt conviction will be designated as “App.

Wy theccs a

The Underlying Facts

In 1957, the petitioner and his brother, Bewel Hankins,

formed a partnership, Hankins Lumber Company, for the

operation of a planing mill and lumber business. The

partnership continued until the death of Bewel on Novem-

ber 19, 1971. (App. I, 79-80, 278) For the balance of

1971 and for all of 1972, Hankins operated the lumber

business as a sole proprietorship, reporting the income

from its operations as his own on his personal joint income

tax returns. (App. I, 167, 446, 491; App. IT, 122)

Bewel’s will was admitted to probate and Burton was

appointed executor on January 21, 1972. (App. I, 85-86)

In August, 1972, Burton purchased a one-fourth interest

in the former partnership from Bewel’s widow, who had

elected to take her statutory share. On October 18, 1972,

the probate court granted Hankins’ request to purchase

from the estate the balance of his deceased brother’s in-

terest in the prior partnership. (App. I, 501-502)

A certificate of incorporation was issued for Hankins

Lumber Company, Inc. on October 17, 1972. However,

the corporation was not activated, no lumber business as-

sets were transferred to the corporation, and no stock cer-

tificates were issued, until January 2, 1973. (App. I, 80-

81)

During the pendency of an earlier will contest, an

attorney representing Bewel’s widow caused William S.

Boswell, a C.P.A., to audit the financial affairs of her

late husband, including the lumber company partnership.

(App. I, 242-252, 418-420) In late March or early April,

1974, the attorney was requested to deliver the Boswell

papers to Hankins. (App. I, 254)

On May 8, 1974, the estate was closed and Hankins

was released and discharged as executor. (App. I, 86-87,

520-522) On July 2, 1974, possession and “all right, title,

interest and ownership” in the Boswell files was obtained

by Hankins pursuant to a letter which contained the writ-

ten approval of Bewel’s widow. (App. I, 90, 420-421)

The Income Tax Investigation

In January, 1973, an informant formerly employed

by Hankins’ certified public accountant made serious alle-

gations to the Intelligence Division concerning the accuracy

of the lumber company’s 1971 records and income tax

returns. (App. I, 95, 180, 190, 192-193, 200, 223) Neverthe-

less, the investigation was assigned merely to a revenue

agent from the Audit Division. (App, I, 165) After find-

ing apparent discrepancies in the 1971 records, the revenue

agent requested access to the 1972 records. (App. I, 167-

168) However, Hankins’ attorney denied the revenue

agent’s request to inspect the 1972 records in reliance upon

his client’s Fifth Amendment rights. The investigation

thereafter was referred to the Intelligence Division. (App.

I, 171-172, 229)

On March 10, 1975, Special Agent Grant issued a sum-

mons to A. Burton Hankins calling for the production

of all records “pertaining to the Hankins Lumber Company

partnership for the years 1968, 1969, 1970, 1971 and 1972.”

(App. I, 475) On March 25, 1975, Special Agent Grant

issued a summons to Burton Hankins which called for

the production of “all reports, documents, correspondence,

workpapers, files and other data, related to an audit per-

formed by William S. Boswell, Certified Public Accountant,

of the records of the Hankins Lumber Company (a part-

nership at that time)”. (App. I, 483)

When Hankins appeared in response to the above sum-

monses, the special agent was informed that Hankins would

not produce any documents or answer any questions in

reliance upon his Fifth Amendment privilege. Grant

thereupon terminated the meeting without placing Hankins

under oath and without asking any questions. (App. I,

240-242)

The Enforcement Proceeding

Proceedings to enforce the foregoing and other IRS

summonses were brought about nine months after service

thereof. Hankins’ verified answer to the petition seeking

production of the former partnership records alleged that

he was unable to comply inasmuch as he did not have

possession or control “of much of the record material which

the Internal Revenue Service is attempting to summon.”

(App. I, 338) In his verified answer regarding a separate

summons for estate papers, Hankins categorically denied

the allegation that he had in his possession the documents

demanded therein. (App. I, 389) In affidavits accompany-

ing motions for summary judgment, Hankins admitted

possession only of “existing” records and such records “‘as

may be in my possession”. (App. I, 35; R. 357, 488, 493)

At the enforcement hearing, Hankins’ counsel asserted

that it was premature to determine whether or not all

of the records could be produced, and contended that this

issue should be reserved for a contempt hearing in the

event that the asserted legal defenses were overruled.

(App. I, 58) Counsel advised the court that his position

was supported by prior decisions. Neither Government

counsel nor the District Court took issue with this conten-

tion.

During the above colloquy, the Court inquired whether

Hankins had possession of all the summoned papers,

except certain workpapers in the possession of his accoun-

tant. To this, counsel responded: “Such records as are

in existence and were in existence at the time... the

summons was served.” (App. I, 59) The Government of-

fered no proof that any of the summoned records were

in existence or in the possession of Hankins at the time

the summonses were served. (App. I, 41-269) Hankins

was not called as a witness by the Government, nor did

he testify in his own behalf.

Before the transcript was available, the Government

submitted a proposed finding of fact that Hankins had

“acknowledged to the court that he had in his possession,

in whatever capacity, the summoned records.” The Dis-

trict Court adopted verbatim this totally unsupported find-

ing. (App. C, p. A53)

The District Court’s Orders

In the Memorandum of Decision entered July 15,

1976, the District Court ruled that Hankins’ privilege

against self-incrimination was not available to bar produc-

tion of the “partnership records.”’ The Memorandum fur-

ther directed that an order be entered requiring Hankins

“to produce the books and records of the Hankins Lumber

Company partnership.” (App. C, p. A62) Nothing was

said therein concerning the 1972 records. The District

Court also ruled that Hankins had sought and obtained

the Boswell papers in his capacity as Executor, and that

the papers were not privileged because they had been

obtained in a representative capacity. (App. C, pp. A60-61)

Hankins was ordered to produce the summoned docu-

ments for “examination and copying”, at a specified date.

After the Government had an opportunity to inspect and

copy the records, the orders required Hankins to appear

before the special agent at a mutually agreeable date “for

the purpose of giving testimony relating to the specified

records and the tax liabilities under investigation”. (App.

I, 308-309, 342-343) On September 27, 1976, Hankins ap-

peared before the special agent and produced various rec-

ords for inspection and copying. (App. II, 60-64)

Following Hankins’ appearance, letters were addressed

to Hankins and his attorneys demanding production of

various “missing” records, particularly pages from the part-

nership books for the period ended November 21, 1971,

and the “Boswell audit report”. (App. II, 19-23) No de-

mand was made for the production of records of the lum-

ber business for any period subsequent to Bewel’s death.

Counsel for Hankins responded to both letters, stating

that Hankins did not have custody, possession, or control

of any of the documents specified as “missing” and suggest-

ing that further inquiry be made when Hankins appeared

for the purpose of “giving testimony’. (Supp. R. 19-21;

Dkt. No. 77-1967) Hankins was never directed to make the

suggested appearance, a procedure plainly required by the

District Court’s orders. (App. I, 309, 343, 372, 403)

The Contempt Proceeding

On March 16, 1977, the Government filed a petition

to hold Hankins in contempt for failing to produce the

documents described in the above mentioned correspon-

dence. (App. II, 1-3, 15-23) Petitioner moved to dismiss

the contempt petition on the ground that he was unable

to produce any of the “missing” records. (App. II, 28)

Responding to this motion, the Government conceded that

it could “offer no proof that Hankins is still in possession”

of any “missing” records. (Memorandum in Opposition,

p. 7; R. 55)

At the contempt hearing, the Government presented

no evidence regarding existence and possession of the sum-

moned records. Moreover, the District Court declined to

permit cross-examination of the special agent concerning

his knowledge as to possession and existence of the records

at the time the summonses were served. (App. II, 73-

76, 80-81, 82)

When the Government rested, the District Court was

advised that Hankins was prepared to testify under oath

that he did not have possession, custody or control of

the documents alleged to be “missing”, and that he was

unable to produce the same on the dates the summonses

were served. However, counsel requested a preliminary

ruling that Hankins would nct thereby waive his privilege

and be compelled to respond to cross-examination regard-

ing the whereabouts and disposition of nonproduced rec-

ords. (App. II, 86) The Court refused to so rule and

stated that Hankins would be directed to respond if he

exercised his privilege against self-incrimination upon

cross-examination. (App. II, 85-86)

Counsel for Hankins thereupon made an offer of proof

to the effect that Hankins would testify that he was unable

to produce any of the “missing” records, and that he did

not have possession, custody or control of the same when

the summonses were served. An alfidavit to this effect,

signed by Hankins, was attached to his Motion for Stay

Pending Appeal.

After Hankins rested without offering any testimony

or further evidence, the District Court stated: (App. II,

97)

“In view of the fact that he has refused to present

any evidence, I don’t see anything I can do but hold

him in contempt of court and order him committed

to the custody of the Attorney General”.

REASONS FOR GRANTING THE WRIT

1. The decision below violates the basic holdings of

this Court in Curcio v. United States, 354 U.S. 118 (1957),

and Murphy v. Waterfront Commission, 378 U.S. 52 (1964).

Moreover, the holding of the court below is in essential

conflict with the decisions of the Courts of Appeal for the

Second Circuit in United States v. Patterson, 219 F. 2d 659

(2d Cir. 1955), and the District of Columbia Circuit in

Traub v. United States, 232 F. 2d 43 (D.C. Cir. 1955).

2. The holding in Curcio v. United States, 354 US.

118 (1957), that the custodian of non-privileged records

may not be compelled to testify concerning their where-

abouts and disposition, will become meaningless if incar-

ceration may be used to compel incriminating testimony in

exchange for freedom. Clarification is needed to protect

the erosion of Fifth Amendment rights by use of the sub-

poena duces tecum to coerce testimony from the target of

a criminal investigation.

3. The coercive incarceration of the target of a crim-

inal tax investigation, without affording him a non-incrim-

inating opportunity to explain a failure to produce records,

violates the fundamental principle that the Fifth Amend-

ment should protect one suspected of crime from being

subjected to the ‘cruel trilemma of self-accusation, perjury

or contempt.” Murphy v. Waterfront Commission, 378 U.S.

52, 55 (1964).

4. The holdings below conflict with the mandate of

this Court in Maggio v. Zeitz, 333 U.S. 56 (1948), that coer-

cive imprisonment for contempt is improper in the absence

of convincing proof of ability to comply with a court’s

order. See also McNeil v. Patuxent Institution Director, 407

U.S. 245, 251 (1972).

5. The holding below fails to extend Fifth Amend-

ment protection to the records of a business concededly op-

erated as a sole-proprietorship by the surviving brother

in the year following the death of his co-partner. Thus,

the holding conflicts with the explicit recognition in Bellis

v. United States, 417 U.S. 85, 87-88 (1974), that such pro-

tection extends to “‘business records of the sole proprietor’.

6. The holding below fails to apply the ‘‘small family”

exception suggested by this Court in Bellis v. United States,

417 U.S. 85, 101 (1974), which should provide Fifth Amend-

ment protection to the records of a two-brother partnership.

The opinion also errs in failing to recognize that the former

character of the records is not controlling where the part-

nership had been dissolved and fully terminated and the

new owner was not holding the records in a representative

capacity.

7. In Fisher v. United States, 425 U.S. 391 (1976), this

Court left open the possibility that the privilege against

self-incrimination may protect records owned and possessed

by the person to whom a subpoena is issued, even though

such records were created and previously owned by another

person or entity. Here, unlike Fisher, the existence and

possession by the taxpayer of “third party’ documents

was not a foregone conclusion. On the contrary, the con-

text of the present case makes it abundantly clear that

the mere production of records of the former partnership,

as well as workpapers prepared by an accountant, would

involve incriminating testimonial admissions concerning

existence, possession, and completeness. (425 U.S. at 410-

411)

8. The issues raised in this case have wide im-

portance in the administration of the revenue laws and the

laws of other investigative agencies, and they are equally

important in determining the rights and obligations of per-

sons subpoenaed to produce records before congressional

committees and grand juries.

ARGUMENT

The issues in the appeal from the order committing

petitioner to jail for an indeterminate period are discussed

at the outset because of their paramount importance, Ar-

gument pertaining to the underlying appeal from orders

enforcing IRS summonses is set forth following discussion

of the contempt issue.

The Contempt Conviction

1. The holdings below violate the fundamental prin-

ciples that the Government should be required to

“ ‘shoulder the entire load’ ” in its contest with the individ-

ual and that the Fifth Amendment should protect one sus-

pected of crime from being subjected “to the cruel tri-

lemma of self-accusation, perjury or contempt.” Murphy v.

Waterfront Commission, 378 U.S. 52, 55 (1964). Here, the

District Court’s order subjects petitioner to the dilemma

denounced in Murphy and will oblige him to “choose his

own brand of hemlock.” Traub v. United States, 232 F. 2d

43, 48 (D.C. Cir. 1955). Unless clarification is forthcoming

from this Court, there is grave danger that administrative

and judicial subpoenas duces tecum will be used to coerce

incriminating testimony, thereby seriously curtailing the

protection afforded by the Fifth Amendment.

In Curcio v. United States, 354 U.S. 118, 128 (1957),

this Court declared that forcing the custodian of non-priv-

ileged records “to testify orally as to the whereabouts of

non-produced records requires him to disclose the contents

of his own mind. He might be compelled to convict him-

self out of his own mouth.” Anticipating the holding in

Curcio, the Court of Appeals for the Second Circuit pro-

claimed that a witness who fails to produce records can

not “legally be jailed for contempt for invoking his con-

stitutionally protected privilege not to be a witness against

himself.” United States v. Patterson, 219 F. 2d 659, 662

(2d Cir. 1955).

Petitioner submits that the holding of the court below

is in essential conflict with the holdings of the Courts of

Appeals for the Second Circuit and District of Columbia

Circuit in the previously cited Patterson and Traub cases,

as well as violating the basic holdings of this Court in

Curcio and Murphy.

The record shows that Hankins has been subjected to

incarceration for refusing to waive his privilege against

self-incrimination. He has been obliged to choose between

imprisonment for remaining silent and waiving a sacred

constitutional privilege. This surely necessitated a choice

“ “between the rock and the whirlpool’”, which this Court

refused to countenance under far less compelling circum-

stances in Garrity v. New Jersey, 385 U.S. 493, 498 (1967).

The compulsion proscribed by the Fifth Amendment is

fashioned to thwart the “use of physical or moral compul-

sion to extort communications” from a person. Holt v.

United States, 218 U.S. 245, 252-253 (1910). See also Couch

v. United States, 409 U.S. 322, 328 (1973), where the Court

noted that it is the “extortion of information from the

accused that offends our sense of justice.”

Hankins was never called as a witness by the Govern-

ment, in which case he could have denied that he was able

to produce any of the “missing records” and then have

asserted his Fifth Amendment privilege against self-in-

crimination upon further questioning. See Curcio v.

United States, 354 U.S. 118 (1957). Instead, the District

Court ruled that Hankins must take the stand voluntarily

and completely waive his Fifth Amendment privilege.

If Hankins must testify to avoid incarceration, we sub-

mit that due process requires that he be given a non-incrim-

inating opportunity to explain his inability to produce.

Recently, the Court of Appeals for the Eighth Circuit util-

ized this approach in reversing a civil contempt order.

United States v. Anderson, 567 F. 2d 839 (8th Cir. 1977).

In Anderson, the taxpayer contended that he was indigent

but refused, relying upon his privilege against self-incrim-

ination, to submit an affidavit containing financial infor-

mation. The Court of Appeals held that the taxpayer could

not be forced to “choose between his Sixth Amendment

right to counsel and his Fifth Amendment right against

self-incrimination.” (567 F. 2d at 840-841) The Court di-

rected that the taxpayer be permitted to make an in camera

disclosure which would then be sealed and not be used in

criminal prosecution. A similar procedure should be util-

ized in this case if the Court should conclude, contrary to

our basic contention, that Hankins did have an obligation

to explain failure to produce in order to avoid a contempt

commitment.

Stated simply, the District Court’s order requires

Hankins either to waive his privilege against self-incrim-

ination or go to jail for an indefinite term. This cruel sen-

tence has been imposed without the benefit of the due

process safeguards inherent in a criminal trial. To protect

the values encompassed by the Fifth Amendment, this

Court must preclude the extortion of information from the

target of a criminal investigation by use of the civil con-

tempt power.

2. In a civil contempt proceeding, the complaining

party must carry his burden of proof by “clear and con-

vincing” evidence. Cagle v. Scroggins, 410 F. 2d 741, 742

(5th Cir. 1969); United States v. Rizzo, 539 F. 2d 458, 465

(5th Cir. 1976). Here, the Goverment made no attempt to

meet its burden of proof in the contempt proceeding, but

was content to rest upon a sharply disputed finding of

possession in the prior enforcement proceeding.

The statement of facts in this Petition amply discloses

that the District Court’s finding in the enforcement pro-

ceeding regarding a presumed admission by Hankins of

possession was without foundation. It is abundantly clear

that Hankins denied any ability to produce all of the

summoned records. Moreover, without objection or com-

ment, Hankins’ counsel took the position at the outset

that the issue of “ability to comply” should be reserved

for a subsequent contempt proceeding in the event the

constitutional and other defenses were overruled. (App. J,

58) See Hagen v. Porter, 156 F. 2d 362, 366 (9th Cir.

1946); In re Reicher, 159 F. Supp. 161 (S.D. N.Y. 1958);

United States v. Silvio, 333 F. Supp. 264 (W.D. Mo. 1971).

Even if the disputed finding concerning possession

had been warranted, and petitioner submits that there

was no evidence to support the same, it would not have

sufficed to meet the Government’s burden of proof in

the subsequent contempt proceeding. Although a prepon-

derance of the evidence will suffice to support a finding

of fact in an enforcement proceeding, “clear and convinc-

ing” evidence is required in a contempt proceeding. Thus,

a finding regarding existence and possession in the enforce-

ment proceeding cannot be given conclusive effect, or even

shift the burden of proof, in the subsequent contempt

proceeding. Cf. Helvering v. Mitchell, 303 U.S. 391 (1938),

and Tomlinson v. Lefkowitz, 334 F. 2d 262, 264-265 (5th

Cir. 1964) (analogous difference between the burden of

proof in civil and criminal proceedings ).

The clarifying opinion discloses that the Court of Ap-

peals erroneously assumed that a bare showing of failure

to fully comply with an order enforcing an IRS summons

is sufficient to support a civil contempt sanction unless

the alleged contemnor presents evidence providing a com-

plete defense to the charge. In a civil contempt proceeding,

the “show cause” order “merely is a method of serving

notice on the party allegedly in noncompliance” and “does

not shift the burden of proof from the petitioner to the

respondent.” Louisiana Education Association v. Richland

Parish School Board, 421 F. Supp. 973, 976 (W.D. La.

1976).

The clarifying opinion also erroneously states that peti-

tioner, in the contempt proceeding, attempted to relitigate

the issue of possession. (App. B, pp. A34-35, n. 8) The sim-

ple truth is that the “ability to comply” issue was not liti-

gated in the enforcement proceeding. No useful purpose

would have been served by trying the issue inasmuch

as Hankins never denied that he could produce some of

the records. Thus, he could not have offered a “complete

defense” to enforcement of the summonses, and requiring

him to explain inability to produce specific documents

was potentially incriminating. Clearly, such proof should

not be required where the taxpayer is contesting produc-

tion of any and all records on constitutional and other

grounds.

Here, the Court of Appeals also mistakenly assumed

that the holdings in the bankruptcy cases are analogous

and that a summons enforcement order can not be chal-

lenged in a subsequent contempt proceeding for failure

to comply. (App. B, pp. A34-35, n. 8) Unlike summons en-

forcement proceedings, the burden of proof necessary to ob-

tain a turnover order in a bankruptcy case is precisely the

same as that necessary for a finding of civil contempt,

namely, clear and convincing evidence. See Oriel v. Rus-

sell, 278 U.S. 358, 363 (1929), and Maggio v. Zeitz, 333

U.S. 56, 64 (1948).

Moreover, the factual issue regarding possession had

been raised and tried in the prior proceedings and no

appeal had been taken from the turnover order in either

Oriel or Maggio, Unlike the bankruptcy cases, the posses-

sion issue was not litigated in the summons enforcement

proceedings involved herein, and the unsupported finding

of possession was under attack in the appeal from the

enforcement orders, (Opening Brief, pp. 5-6; Dkt, No, 76-

3467) For these reasons, and because of the difference

in the burden of proof, it was totally erroneous for the

Court of Appeals to conclude that petitioner was attempt.

ing to relitigate an issue foreclosed by the enforcement

proceeding, Moreover, the courts below erroneously held

that petitioner had the burden of establishing why he

could not comply with the orders,

3, Assuming arguendo that the District Court was

justified in holding Hankins in contempt for failing to

produce some or all of the “missing” records, the only

appropriate relief would have been the imposition of the

remedial, monetary sanction, The record simply does not

support the required premise that coercive imprisonment

is likely to result in the production of further records,

In response to petitioner's Motion to Dismiss the con-

tempt petition on the ground that he was unable to produce

any of the “missing” records, the Government conceded

that it could “offer no proof that Hankins [was] still

in possession” of any “missing’’ records, (Memorandum in

Opposition, p. 7; R, 55) On appeal, the Government merely

argued that incarceration would enable the District Court

to ascertain whether Hankins was responsible for the de-

struction of records, ( Brief for the Appellees, p, 47)

In McNeil v. Patuxent Institution Director, 407 U.S.

245, 251 (1972), this Court appropriately noted that;

“Civil contempt is coercive in nature, and consequently

there is no justification for confining on a civil con-

tempt theory a person who lacks the present ability

to comply,”

As the basis for this pronouncement, MeNeil cited

Maggio v, Zeitz, 333 U.S, 56 (1948), In Maggio, this Court

ruled that issuance of a civil contempt order, not supported

by proof of present ability to perform, was a “flagrant

abuse of process,” (333 U.S, at 64)

The holding in Maggio forbids the use of coercive

civil contempt orders not founded on proof of present

ability to perform, Such orders are nothing more than

disguised findings of criminal contempt, without the due

process safeguards required in a criminal proceeding. (333

U.S, at 67-68) Most significantly, incarceration for civil

contempt does not provide the limited and definite term

of confinement obligatory in a criminal contempt proceed-

ing.

In MeNeil v, Patuxent Institution Director, 407 U.S.

245, 251 (1972), the Court was not obliged to consider

“what limitations the Due Process Clause places on the

contempt power” or the “precise contours of that power”,

Perhaps indeterminate confinement is appropriate where,

as in Uphaus v. Wyman, 360 U.S, 72, 81 (1959), the contem-

nor admits that he has the documents but refuses to pro-

duce them, In the absence of such an admission, or at

the very least “clear and convincing” proof of ability to

comply, incarceration for civil contempt constitutes a viola-

tion of the Due Process Clause,

II,

The Underlying Appeal

1, Petitioner's rights under the Fifth Amendment will

be violated if he is compelled to produce records of a

business concededly operated by him during 1972 as a

sole proprietor, This Court should reaffirm its firm dec-

laration in Bellis v, United States, 417 U.S, 85, 87-88 (1974),

that the privilege extends to the “business records of the

sole proprietor,” Two appellate courts, in post-Fisher deci-

sions, have explicitly stated that Fifth Amendment protec-

tion continues to exist with respect to such records, United

States v, Plesons, 560 F, 2d 890, 893 (8th Cir, 1977); United

States v, Helina, 549 F, 2d 713, 716-717 (9th Cir, 1977),

The Court of Appeals should have acepted the Gov-

ernment's concession in the trial court that the 1972 records

were those of a sole proprietor and rejected the conflicting

argument belatedly raised on appeal, During his opening

statement, trial counsel for the Government asked only for

the production of the former partnership records, stating

that this involved a “close question”. (App. I, 70) He

conceded in open court that the partnership became a “sole

proprietorship” by the “operation of law” upon the death

of Bewel Hankins, (App. I, 68) At both the enforcement

and contempt hearings, the revenue agent testified that

the business was operated as a “sole proprietorship” dur-

ing 1972, (App. I, 167; App. II, 122)

The Government did not request the District Court

to make any finding with respect to the 1972 records, Ac-

cordingly, the District Court held that the Fifth Amend-

ment was “not available to bar production of the partner-

ship records” and merely ruled that Hankins would be

directed ‘to produce the books and records of the Hankins

Lumber Company partnership,” (App. C, p, A62)

Confirming the concession made at the hearing, no

demand was made for production of the 1972 records fol-

lowing Hankins’ appearance in response to the Court's or-

der and Hankins was not charged in the contempt proceed:

ing with failure to produce the 1972 records, Moreover,

the Government determined that Hankins was the sole

owner of the lumber business in 1972 by using the begin-

ning and ending assets and liabilities of the lumber business

in determining a deficiency in Hankins’ income tax liability

for 1972, (App. I, 118, 123, 162)

On appeal, the Government conceded that the partner-

ship terminated at date of death and that the business

was not “being operated as a ‘partnership’ in 1972”, (Ap-

pellee’s Brief, pp. 49, 51) Nevertheless, the Court of Ap-

peals refused to recognize the existence of the sole pro-

prietorship and held that the business was being operated

as “a partnership between Burton Hankins and the estate

of his deceased brother,” (App. A, pp. A7, 12-13; App. B,

pp. A32-33)

The record clearly shows that Hankins continued the

operation, not in partnership with the estate, but as a sole

proprietor concerned with protecting and conserving the

value at death of the estate's equity in the assets of the

former partnership, As surviving partner, Hankins was

“entitled to the exclusive possession and control” of the

former partnership assets, subject only to the estate's equi-

table interest in the partnership surplus at the time of

Bewel’'s death. 68 C.J.S. Partnership §275 (1950); 33 CJS,

Executors and Administrators $113 (1942); Robertshaw v,

Hanway, 52 Miss, 713, 717 (Miss, 1876), Accordingly, peti-

tioner should be accorded the constitutional protection ap-

plicable to a sole proprietorship with respect to the 1972

records,

2. Petitioner has been unlawfully denied the right to

assert his privilege against self-incrimination to bar the

production of records of a partnership that formerly existed

between himself and his deceased brother. Petitioner sub-

mits that this Court should give substance to the sug-

gestion in Bellis v. United States, 417 U.S. 85, 101 (1974)

that the records of a “‘small family partnership” should be

given protection under the Fifth Amendment.

The Court of Appeals for the Fifth Circuit did not

address itself to this issue despite its recent acknowledge-

ment that the Bellis exception would apply under appropri-

ate circumstances. United States v. Greenleaf, 546 F. 2d

123, 128 (5th Cir. 1977). The incongruity apparent from

the recent opinions in the Fifth Circuit merely adds to

the present uncertainty regarding the privileged status

of the records of small family partnerships. Until this

question is resolved, litigation of the issue will continue to

burden the courts.

The two-brother partnership in the pending case was

precisely the same as the partnership entity in United

States v. Slutsky, 352 F. Supp. 1105 (S.D. N.Y. 1972).

In Bellis, the Court cited Slutsky, which involved a very

substantial business operation, as an example of a protected

“small family partnership”. (417 U.S. at 101).

Even if the records in question would not have been

privileged during the existence of the partnership, Fifth

Amendment protection attached when Hankins acquired

sole and unqualified ownership and possession thereof fol-

lowing the death of his brother and prior to the commence-

ment of the income tax investigation. This is implicit

from the indisputable consequence that the estate and

Bewel’s heirs gave up all right to inspect the records,

or to have a formal accounting, when they sold their

interests to petitioner during 1972. Sanderson v. Cooke,

175 N.E. 518, 521 (N.Y. Ct. App. 1931); Gass v. Robie, 25

A. 2d 487, 488 (Me. Sup. Jud. Ct. 1942); Kelly v. Kelly,

411 S.W. 2d 953, 955 (Tex. Civ. App. 1967); 60 Am. Jur. 2d

Partnership §§265, 267, 296 (1972).

In Bellis, the partnership was still in the process of

winding up its affairs when the subpoena was issued. Un-

like Bellis, Hankins did have a “direct ownership interest”

in the records, not merely a “derivative interest” subject

to rights of access and inspection by other partners. (417

U.S. at 97-98) Thus, Fifth Amendment protection is not

foreclosed by the holding in Bellis.

The decisions denying privilege to the records of a

dissolved corporation are not controlling. Unlike a corpo-

ration, which is a creature of the State, a partnership

is a mere contract, or the relationship arising out of a

contract, between two or more persons. 68 C.J.S. Partner-

ship $1 (1950). Although the State’s visitorial powers

of inspection are not affected by a dissolution of a corpora-

tion, the right of access to, and inspection of, partnership

records is conferred only upon the partners. Such rights

are terminated upon the unrestricted sale of their interests

in the partnership. Inasmuch as there was no basis for

a finding, as Bellis requires, that Hankins was holding

the records in a “representative capacity” when the sum-

mons was served, his claim of privilege should have been

upheld. (417 U.S. at 97-98)

Because Hankins was not holding the records in a

representative, custodial capacity or as a mere possessor,

nothing said in Fisher v. United States, 425 U.S. 391 (1976),

regarding the unavailability of the privilege to such indi-

viduals, is applicable to this case. Fisher teaches that

the compelled act of producing personally owned records

would constitute a testimonial, incriminating admission of

their existence and possession, as well as an implicit au-

thentication or attestation of their genuineness. (425 U.S.

at 411-412)

Unlike Fisher, the existence and possession of the rec-

ords demanded from Hankins was not a tacit assumption

or “foregone conclusion”. As owner of the records, Hankins

did not have a custodian’s obligation to retain or preserve

them for access by others. The incarceration order for

failure to produce certain “missing” records of the former

partnership clearly establishes the incriminating nature of

the act of production in response to a subpoena duces

tecum.

3. A further violation of petitioner’s Fifth Amend-

ment privilege resulted from the order compelling him

to produce the Boswell workpapers. Hankins had acquired

“personally all right, title, interest and ownership” therein

prior to any demand for the papers by the Government.

(App. I, 420-421) For the reasons set forth above, recogni-

tion of the Fifth Amendment privilege would not conflict

with this Court’s holding in Fisher v. United States, 425

U.S. 391 (1976).

The entire thrust of the Fisher opinion is directed

at the compulsory production of an accountant’s work-

papers in the mere possession of a taxpayer or his attorney.

The Court did not decide that the privilege is inapplicable

where the taxpayer had personally obtained exclusive own-

ership and control of such papers. Although the newly

enunciated rationale of Fisher indicates that the content

of voluntarily prepared papers is not controlling, the Court

recognizes that “the act of producing evidence in response

to a subpoena nevertheless has communicative aspects of

its own.” (425 U.S. at 410) In addition to the implicit

authentication of the records, the Court declared that com-

pliance with the subpoena “tacitly concedes the existence

of the papers demanded and their possession or control

by the taxpayer.” (425 U.S. at 410) It is this latter

incriminating, testimonial aspect that precludes compulsory

production of Hankins’ personally owned papers.

In Fisher, the implicit admission of existence and pos-

session did not rise to the level of incriminating testimony.

Unlike the instant case, the papers in Fisher belonged

to the accountant and the Government was not “relying

on the ‘truthtelling’ of the taxpayer to prove the existence

of or his access to the documents.” (425 U.S. at 411)

The rejection of the privilege was premised on the fact

that Fisher was a mere “possessor” or custodian of the

workpapers and the circumstance that the “existence and

possession or control of the subpoenaed documents” was

not genuinely in issue. (425 U.S. at 412) See Curcio

v. United States, 354 U.S. 118, 128 (1957), which denied

Fifth Amendment protection to the custodian of records

“because he does not own the records and has no legally

cognizable interest in them.”

Unlike Fisher, Hankins was not a custodian or mere

possessor of the accountant’s workpapers. As the sole

owner of the papers, Hankins had a right to do with

them whatever suited his convenience. Hence, there could

be no “foregone conclusion” with respect to the existence

and the possession of Hankins’ personally owned ‘“Bos-

well” papers.

The testimonial communication is particularly incrim-

inating where, as in the instant case, the existence and

possession of the records is disputed and partial compliance

results in a contempt proceeding wherein the summoned

party can extricate himself only by oral testimony. Peti-

tioner’s pending incarceration for contempt presents a clas-

sie illustration of the danger perceived by this Court, in

both Fisher and Andresen v. Maryland, 427 U.S. 463, 473-

474 (1976), that enforcement of a summons for the produc-

tion of documents may have incriminating, testimonial im-

plications.

CONCLUSION

For the foregoing reasons, a writ of certiorari should

issue to review the judgment and opinion of the Court

of Appeals for the Fifth Circuit.

PAuL P. Lipton

Lipton & PETRIE, LTp.

625 North Milwaukee Street

Milwaukee, Wisconsin 53202

L. ARNOLD PYLE

WATKINS, PYLE, LUDLAM, WINTER

& STENNIS

Post Office Box 427

Jackson, Mississippi 39201

JAMEs S. NIPPES

DosseTT, MAGRUDER AND MONTGOMERY

1800 Deposit Guaranty Plaza

Jackson, Mississippi 39201

Counsel for the Petitioner

APPENDIX

APPENDIX A

UNITED STATES of America and Robert E. Grant, Special

Agent, Internal Revenue Service, Plaintiffs-Appellees,

Vv.

A. Burton HANKINS, Individually and as Executor of the

Estate of Bewel A. Hankins, et al., Defendants-Appel-

lants,

Robert Lewis Smith,

Intervenor-Appellant.

UNITED STATES of America and Robert E. Grant, Special

Agent, Internal Revenue Service, Petitioners-Appel-

lees,

A. Burton HANKINS and Hugh C. Montgomery, Jr., Re-

spondents-Appellants.

Nos. 76-3467 and 77-1967.

United States Court of Appeals,

Fifth Circuit.

Jan. 12, 1978.

United States sought enforcement of Internal Revenue

Service summons. The United States District Court for

the Northern District of Mississippi, Orma R. Smith, J.,

granted enforcement, 424 F.Supp. 606, and also granted

enforcement of other summonses and held certain parties

in contempt. The Court of Appeals, Coleman, Circuit

Judge, held that. (1) surviving partner could not assert

Fifth Amendment privilege to IRS summons directed at

partnership tax records; (2) executor of deceased partner’s

estate could not assert Fifth Amendment privilege with

respect to estate papers; (3) business had not been oper-

ated as a sole proprietorship in the year following partner’s

death so that the surviving partner could not assert Fifth

Amendment privilege to the IRS summons for records for

those years; (4) accountant was required to provide sub-

poenaed records; (5) investigation of accountant was so

surrounded by a criminal aura as to preclude use of ad-

ministrative summons to obtain his testimony, and (6)

order which held one person in contempt but deferred sen-

tencing pending outcome of other appeals was not a final

appealable decision.

Affirmed in part, reversed in part, and dismissed in

part.

1. Witnesses (Key) 298

Since internal revenue subpoenas for partnership rec-

ords prior to the date of death of one of two partners would

not have infringed any Fifth Amendment privilege of

either partner had they been served during the lifetime of

both partners, subsequent acquisition of those papers by

the sole surviving partner did not change either the iden-

tity or character of the records from what they were at

the time that they were made so that they were not per-

sonal records as to which Fifth Amendment privilege could

be asserted by the surviving partner. U.S.C.A.Const.

Amend. 5; 26 U.S.C.A. (1.R.C.1954) § 7602.

2. Witnesses (Key) 298:

Since, after death of one of two partners, surviving

partner continued to operate the business by virtue of

court order in probate proceedings, and since purchase of

interest of three of the heirs was allowed in trust for de-

livery of stock in successor corporation, the books, records,

and papers for the operation during the year following the

death of one partner were not the private personal papers

of the surviving partner and were not the property of a

sole practitioner or sole proprietor so that the surviving

partner could not assert Fifth Amendment privilege in re-

sponse to IRS summons. 26 U.S.C.A. (I.R.C.1954) § 7602;

U.S.C.A.Const. Amend. 5.

3. Witnesses (Key) 298

Since audit was not made at the behest of surviving

partner but rather was made in opposition to his interest

at the behest of widow of deceased partner, partner could

not assert Fifth Amendment privilege in response to IRS

summons directed at the papers connected with the audit.

26 U.S.C.A. (I.R.C.1954) § 7602; U.S.C.A.Const. Amend. 5.

4. Witnesses (Key) 298

Papers incident to estate of deceased partner were not

personal and private papers of the executor of that estate,

who was also the surviving partner in the operation, so

that he could not assert Fifth Amendment privilege, either

as executor or as surviving partner, in response tc Internal

Revenue Service subpoenas directed to the papers. 26

U.S.C.A. (1.R.C.1954) § (602; U.S.C.A.Const. Amend. 5.

5. Witnesses (Key) 307

Person who is called to testify before internal revenue

agent must appear in response to the summons and may

claim Fifth Amendment privilege only as to specific ques-

tions propounded to him by the IRS. U.S.C.A.Const.

Amend. 5.

6. Internal Revenue (Key) 1458

If Internal Revenue Service wished testimony from

any person who was associated with the business and who

would not assert Fifth Amendment privilege, it should use

its own resources to subpoena such a person and it was

improper for court to direct president of the corporation to

produce a witness who would be familiar with the records,

books, and papers of the corporation and who would not

claim the Fifth Amendment privilege against self-incrimi-

nation. U.S.C.A.Const. Amend. 5.

7. Internal Revenue (Key) 1459

Since no recommendation for prosecution of accoun-

tant had been made by the Internal Revenue Service and

since there was no evidence of bad faith on the part of

the IRS in the issuance of the summons, the summons

was proper and enforceable insofar as it sought records

and work papers relative to tax returns prepared for

others. 26 U.S.C.A. (I.R.C.1954) § 7602.

8. Internal Revenue (Key) 1458

Since accountant could have no civil liability as a con-

sequence of investigation into corporate and estate tax

returns but could only have criminal liability, and since

Miranda warnings had been given to the accountant by

internal revenue agent prior to any questioning, accoun-

tant could not be required to answer subpoena ad testifi-

cundum from the Internal Revenue Service since the in-

vestigation as to the accountant had such a dominant crim-

inal aura as to preclude use of an administrative summons,

even though the Internal Revenue Service had made no

recommendation for criminal prosecution of the accoun-

tant. U.S.C.A.Const. Amend. 5.

9. Internal Revenue (Key) 1460

In the absence of any evidence presented by witness

concerning his lack of possession of records which had

been summoned by the Internal Revenue Service, witness

was properly held in contempt for failing to respond to

IRS subpoena which had been enforced by the district

court. 26 U.S.C.A. (1.R.C.1954) § 7602.

10. Witnesses (Key) 21

Where witness had been held in contempt for failing

to testify but where sentence had been deferred pending

outcome of appeal in related matter, there was no final

decision of the district court from which appeal could be

taken, 28 U.S.C.A. § 1291.

Paul P. Lipton, Milwaukee, Wis., James S. Nippes,

Jackson, Miss., for A. Burton Hankins.

Charles L. Brocato, Jackson, Miss., for Hugh C. Mont-

gomery, 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. Lind-

say, M. Carr Ferguson, Asst. Attys. Gen., Charles E. Brook-

hart, 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.

COLEMAN, Circuit Judge.

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 Mont-

gomery’s appeal in No, 77-1967 for lack of appellate juris-

diction.

In 1957, A. Burton Hankins and Bewel Hankins, broth-

ers, formed a partnership for the operation of a planing

mill and lumber business at Elliott, Grenada County, Mis-

sissippi.' 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 Bos-

well, was retained to perform audits of the late husband’s

financial status, which included the Hankins Lumber Com-

pany. 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,

1. The record does not reveal whether he partnership agree-

ment was oral or written, It is undisputed that each brother

owned a 50°% interest in the partnership,

in compliance with state statutes, authorized Burton Hank-

ins to continue the operations of the partnership.

In August, 1972, by appropriate instruments of convey-

ance, 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 requir-

ing, 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 ma-

jority 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 adjust-

ments. 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 inform-

ing 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:

“All records in your possession pertaining to the

Hankins Lumber Company partnership for the years

1968, 1969, 1970, 1971, and 1972, and other records

including, but not limited to the following:

“1, General Journal and General Ledger.

“2. Accounts Receivable Subsidiary Ledger.

“3. Accounts Payable and Accounts Receivable

Ledger Sheets.

“4, Bank statements, canceled checks, check

stubs, and original deposit tickets, if available, or dupli-

cate deposit tickets for all bank accounts open during

1968 through 1972.

“5, All accountant’s work papers pertaining to

the preparation of the U. S. Partnership Return of

Income (Form 1065) for the Hankins Lumber Com-

pany for the period beginning January 1, 1968, and

ending November 20, 1971.

“6. Copy of formal partnership agreement.”

Another summons of the same date required Hankins

to appear and produce

“All records pertaining to the preparation of the

estate tax return and the settlement of the estate

of Bewel A. Hankins, a former partner in the Hankins

Lumber Company, including, but not limited to, a

list of the partnership trade accounts receivable and

accounts payable, as well as inter-company accounts

receivable and payable.”

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

Al0

to produce the desired documents and to testify after the

government had an opportunity to examine them. Han-

kins 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 ca-

pacity, 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 part-

nership 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

2. The right of people to be secure in their papers and effects

against unreasonable searches and seizures is a guarantee of the

Fourth Amendment.

GO EE a

All

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

iuudividual’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:

“A subpoena served on a taxpayer requiring him

to produce an accountant’s work papers in his pos-

session without doubt involves substantial compulsion.

But it does not compel oral testimony; nor would

it ordinarily compel the taxpayer to restate, repeat,

or affirm the truth of the contents of the documents

sought. Therefore, the Fifth Amendment would not

be violated by the fact alone that the papers on their

face might incriminate the taxpayer, for the privilege

protects a person only against being incriminated by

his own testimonial communications (citations omit-

ted). The accountant’s work papers are not the tax-

payer’s. They were not prepared by the taxpayer,

and they contain no testimonial declarations by him.

The Court concluded that “however incriminating the

contents of the accountant’s workpapers might be, the

act of producing them . . . would not itself involve testi-

monial self-incrimination”. Id., at 411, 96 S.Ct. at 1580.

At the end of all this, however, the Court said, 425

US. at 414, 96 S.Ct. at 1582:

Al2

“Whether the Fifth Amendment would shield the

taxpayer from producing his own tax records in his

possession is a question not involved here; for the

papers demanded here are not his ‘private papers’,

see Boyd v. United States, 116 U.S., at 634-63

S.Ct. 524.” | ta

During the course of the Fisher opinion, 425 U.S. at

408, 96 S.Ct. at 1579, the Court took occasion to say:

“Furthermore, despite Boyd, neither a partnership

nor the individual partners are shielded from com-

pelled production of partnership records on self-in-

crimination grounds, Bellis v. United States, 417 U.S

85, 94 S.Ct. 2179, 40 L.Ed.2d 678 (1974).” |

[1] From this most recent decision of the Supreme

Court we are convinced that subpoenas for the Hankins

Lumber Company partnership records from January 1

1968 to November 19, 1971, the date of Bewel Hankins’

death, would not have infringed any Fifth Amendment

privileges of either partner had the subpoenas been served

during the lifetime of the partners. Neither do we believe

that the subsequent acquisition of those papers by Burton

Hankins, as his own, changes either the identity or charac-

ter of the books, papers, and records from what they

undoubtedly were at the time they were made, United

States v. Bellis, supra, 417 U.S. at 96, 94 S.Ct. 2179. Foot-

note 3. |

[2] Some doubt is cast upon the status of the 1972

papers because the Revenue Agent and the Attorney for

the Department of Justice uniformly referred to the 1972

operations as a sole proprietorship. The District Court

made no specific finding on this point, but the trial record

shows that in 1972 Burton Hankins continued to operate

the business by virtue of a court order, which necessarily

Al3

included the interests of the heirs, devisees, and legatees

of the deceased partner. Moreover, when Burton Hankins

bought the interests of the three sons, with court approval,

in October, 1972, the purchase was allowed in trust for

the delivery of the prescribed amount of stock in the

successor corporation. We must accordingly hold that the

1972 books, records, and papers for the operation were

not the private personal papers of, Burton Hankins, Fisher

v. United States, swpra, nor were they the property of

a sole practitioner or sole proprietor, Bellis v. United States,

supra, 417 U.S. at 87, 88, 94 S.Ct. 2179.

[3] Certainly there can be no doubt that Mr. Han-

kins may be required to produce the papers connected

with the Boswell audit. The audit was not made at his

behest; indeed it was made in opposition to his interests.

While Hankins may be the “owner” and now in possession

it contains nothing that could be charged to him as his

own testimony.

[4] We are equally unable to see how any of the

papers incident to the estate of Bewel Hankins may be

denominated as “personal and private”. Even though the

estate is now closed, the Executor was never acting in

either a personal or a private capacity. He was an officer

of the Court which appointed him, under whose direction

and control he served. He was answerable as a fiduciary,

charged with duties which transcended his personal wishes

or personal views. Again, the books, papers, and records

did not lose either their nature or their identity when

the estate was closed. Additionally, as to the estate, Han-

kins was acting in a representative capacity, Bellis, supra.

The judgment of the District Court enforcing the sum-

monses directed to Burton Hankins for the production

of books, papers, and records must, in all respects, be

affirmed.

Al4

[5] The requirement that Mr. Hankins testify before

the Internal Revenue Agent is, of course, subject to the

rule prevailing in this Circuit that he must appear in

response to the summons, thereafter the Internal Revenue

Service must propound specific questions, and the witness

may then claim the privilege as*to each question, United

States v. Malnik, 5 Cir., 1974, 489 F.2d 682; United States

v. Roundtree, 5 Cir., 1970, 420 F.2d 845.

[6] This brings us to the final issue, involving the

order of the trial court that Mr. Hankins, as President

of the corporation, produce as a witness before the special

agent some employee of the firm who is familiar with

the books, records, and papers of the corporation for 1973,

and who will not claim the Fifth Amendment privilege

against self-incrimination. At first blush this struck us

as a most unusual order. The government in its brief

cites no tax case in which such an order has been entered.

It relies on United States v. Kordel, 397 US. i, 7, 8

S.Ct. 763, 25 L.Ed.2d 1 ( 1970), a Food and Drug case

in which no officer of the corporation claimed the privi-

lege, no showing was made that no officer of the corpora-

tion could have answered the questions without incriminat-

ing himself personally, and, more to the point, no court

had entered such an order as we have here. The govern-

ment has made no showing of its inability to ascertain

who kept the books, records, and papers for the corporation

in this comparatively small operation in a small city in

the year 1973. If the Internal Revenue Service wishes

such testimony it should use its own resources to subpoena

any person likely to have the requisite information and

let them claim the privilege if they so desire. Moreover,

we do not know how Hankins could compel the attendance

of a witness, nor do we see how the Constitution would

allow him to speak for the strictly personal right of any

ote ea Ee

a ee eee

Al5

individual to claim the privileges of the Fifth Amendment.

We accordingly reverse this portion of the District Court

order, especially since the record shows that Accountant

Smith was employed by Hankins in 1973, apparently was

in charge cf its accounting facilities for that year, and

the government frankly conceded on oral argument that

Mr. Smith is a prime target for criminal prosecution in

connection with this very case.

The Summons for Robert Smith, C.P.A.

The summons issued to Robert Smith called for testi-

mony and all records and workpapers relative to the estate

tax return and 1973 corporate tax return. Smith contends

that the tax investigation assumed a predominantly crimi-

nal aspect, and that enforcement of the summons was

therefore an abuse of the Court’s process.

Smith has complied with the Court’s order to produce

the 1973 corporate records. That portion of the case is

therefore moot, United States v. Carpenter, 5 Cir., 1970,

425 F.2d 264; Baldridge v. United States, 5 Cir., 1969,

406 F.2d 526.

The government did not pursue the estate papers at

the enforcement hearing, and the District Court’s order

made no mention of the estate papers. That omission

was not cross appealed by the government. Consequently,

the only issue remaining for our consideration is the claim

that the investigation, as to Robert Smith, acquired such

a dominant criminal aura as to preclude the use of an

administrative summons.

The Internal Revenue Service has made no recommen-

dation for criminal prosecution of appellant Smith. How-

ever, the government counsel unequivocally informed the

Al6

Court during oral argument that Smith probably would

be prosecuted should evidence of criminal conduct on his

part be uncovered.

[7] Since no recommendation for prosecution had

been made, and there is in the record no evidence of

bad faith on the part of the Internal Revenue Service

in the issuance of the summons, we hold that the use

of the summons was proper and enforceable as to the

records, Donaldson v. United States, 400 U.S. 517, 91 S.Ct.

534, 27 L.Ed.2d 580 (1971).

[8] Our inquiry does not end here, however, for

we must still consider the ad testificundum portion of

the summons.

Of key significance to this issue is the fact that Smith

could have no civil liability as a consequence of this inves-

tigation, only criminal liability. The Miranda warnings

given to Smith by the agent prior to any questioning

was a clear signal of his potential criminal liability.

Nevertheless, the government argues that Smith can

be compelled to appear, take the witness stand, and either

answer the questions the government asks, or plead his

Fifth Amendment protection on a question-by-question

basis. In the particular circumstances of Smith’s situation,

we disagree. Were Smith the target of an investigation

for robbing a bank, he would unquestionably have the

right to stand on his silence. There is no significant differ-

ence between Smith as a suspected participant in a tax

fraud and Smith as a suspected bank robber.

We hold that Smith cannot be compelled to take the

stand by a § 7602 Internal Revenue Service summons.

The order that he must do so is reversed.

Al7

No. 77-1967

Hankins’ Appeal from Contempt

On the date ordered by the Court after the enforce-

ment hearing, Hankins produced various books and records.

The government discovered that the Boswell audit report

itself was not produced and that numerous pages were

missing from the company books. Upon petition by the

government, the Court issued an order to show cause why

Hankins should not be held in contempt of the Court’s

enforcement order. The ensuing hearing resulted in a

conviction for contempt. Hankins was ordered into the

custody of the Attorney General until such time as he

produced the missing papers. Confinement has been

stayed pending our determination of this appeal.

[9] Hankins argues that the District Court erred

in holding him in contempt because he had informed the

Court at the enforcement hearing, through his attorney,

that he did not have all the records summoned by the

government. Our inspection of the record reveals this

contention to be totally devoid of merit.* No evidence

on inability to produce was presented by Hankins during

the enforcement hearing in response to the government’s

evidence that the books and records were in his hands.

At the contempt hearing the government relied on the

finding of fact, of which the Court took judicial notice,

3. Finding of Fact by the District Court:

Each of the respondents in these four cases, with the

exceptions of Attorneys Hugh C. Montgomery and Tommy

M. McWilliams, acknowledged to the Court that he had in his

possession, in whatever capacity, the summoned records. Re-

spondent Montgomery denied that he had in his possession

at the time of the issuance of the summons to him the records

demanded by that summons (the Boswell audit papers). The

government accepted that representation and deemed the

duces tecum provision of the summons to Montgomery com-

plied with.

Als

and the testimony of Special Agent Grant that apparently

various pages of the produced records had been systemati-

cally removed. In an effort to rebut this evidence, Han-

kins attempted to testify under the condition that he not

be exposed to croys-examination. When the Court properly

refused to agree to this condition, Hankins rested without

offering evidence.

The government has carried its burden to obtain en-

forcement of its summonses by showing that they were

administratively regular and that the information sought

was relevant, material, and not in the hands of the Com-

missioner, United States v. Powell, 379 U.S. 48, 85 S.Ct.

248, 13 L.Ed.2d 112 (1964). No evidence has been pre-

sented by Hankins, at either the enforcement hearing or

the contempt hearing that he was unable to produce the

records, He relies on United States v. Silvio, 333 F.Supp.

264 (W.D.Mo., 1971) for the proposition that the govern-

ment must prove that the records are in existence and

in the possession of the respondent before any defense

of non-possession need be raised. What appellant over-

looks is that the respondents in Silvio appeared before

the Internal Revenue Agent as ordered by the District

Court and testified under oath that they kad no further

documents. In response to a subsequent show cause order

respondents submitted an affidavit stating again that all

the records in their possession had been produced. In

the face of these representations, the Court required the

government to show existence and possession of the papers

sought. Here, however, Hankins has made no showing

whatsoever that he does not possess the records named

in the summonses.

We have no alternative but to affirm the order of

contempt as to Hankins.

Alg

No. 77-1967

The Summons to Attorney Montgomery

and His Subsequent Conviction

of Contempt

On March 14, 1975, Hugh C. Montgomery, Jr., a tax

attorney, formerly for seventeen years an employee of

the Internal Revenue Service, was served with a subpoena

to appear and produce the Boswell audit papers. Mont-

gomery appeared and stated that he did not have them.

The government accepts this response. He declined to

answer as to whether he had ever had the papers, claim-

ing both the attorney-client privilege and Hankins’ Fifth

Amendment privilege.

At the enforcement hearing, the District Court, in

part, ordered as follows:

“ORDERED, ADJUDGED and DECREED that

Hugh C. Montgomery, Jr. comply with the summons

issued to him on March 14, 1975, by appearing before

Special Agent Robert E. Grant, or any other proper

officer of the Internal Revenue Service, at a time

and place to be agreed upon inutually by Hugh C.

Montgomery, Jr., and Special Agent Grant, for the

purpose of giving testimony relating to the federal

tax liabilities of A. Burton Hankins for the years 1969

through and including 1973....”

[10] On December 9, 1976, Montgomery appeared

and declined to answer questions, again claiming the attor-

ney-client relationship and other grounds. He was cited

for contempt of the enforcement order. At the hearing

he testified that Mr. Hankins had employed him “to advise

and consult with him about an examination of certain

income tax returns of his that were under examination

A20

at the time”, Upon advice of counsel, he refused to answer

as to what books and records he had examined. For failure

to answer after being directed to do so by the Court

he was held in contempt but sentence was deferred pend-

ing the outcome of the appeal in No. 76-3467.

Mr. Montgomery’s appeal from the contempt finding

must be dismissed for lack of a final decision of the Dis-

trict Court, 28 U.S.C., § 1291; S. E. C. v. Naftalin, 8 Cir.,

1972, 460 F.2d 471, 475.

The other errors assigned by the respective appellants

have been duly considered and found to be without merit.

The results in both appeals are:

The enforcement of the summonses directed to Burton

Hankins and his subsequent conviction of contempt for

failure to obey the enforcement order are affirmed.

The direction that Smith shall give testimony before

the Internal Revenue Service is reversed.

Montgomery’s appeal from the finding of contempt

in the presence of the Court is dismissed.

A2l

APPENDIX B

UNITED STATES of America and Robert E. Grant, Special

Agent, Internal Revenue Service, Plaintiffs-Appellees,

Vv.

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,

Vv.

A. Burton HANKINS and Hugh C.

Montgomery, Jr.,

Respondents-Appellants.

Nos. 76-3467, 77-1967.

United States Court of Appeals,

Fifth Circuit.

Oct. 3, 1978.

The United States sought enforcement of Internal Rev-

enue Service summons. The United States District Court

for the Northern District of Mississippi, Orma R. Smith,

J., granted enforcement, 424 F.Supp. 606, and subsequently

held certain parties in contempt, and appeals were taken.

The Court of Appeals, 565 F.2d 1344, affirmed in part, re-

versed in part, and dismissed in part, and thereafter certain

parties petitioned for rehearing. The Court of Appeals,

Coleman, Circuit Judge, held that: (1) under Mississippi

law, surviving partner, vis-a-vis heirs and legatees of de-

A22

ceased partner, stood in the same shoes as an administrator,

with status of trustee, and could not thereafter legally pro-

ceed in the operation of the business as a sole proprietor;

(2) the books, records, and papers of the business for

period during which surviving partner fulfilled his obliga-

tions under Mississippi law to wind up the business and

account for all interim profits to the estate of the decedent

were not the personal papers of the surviving partner and

with respect thereto he could not assert Fifth Amendment

privilege; (3) with fact of noncompliance with enforcement

order clearly and convincingly established, surviving part-

ner’s failure to testify, presumably resting on Fifth Amend-

ment right not to testify, meant that he had failed to show

cause why he should not be held in contempt of an outstand-

ing order, but (4) order that attorney testify relative to

surviving partner’s tax liability could not validly expand

the scope of the summons as issued and served.

Opinion clarified; petitions for rehearing denied.

1. Witnesses (Key) 306

Neither Government's “confession” nor surviving part-

ner’s tax return for period in question nor testimony of

IRS agents were determinative of legal issue of whether

business was partnership or proprietorship during period

following death of one of two partners, for purposes of en-

forceability of IRS summons as against assertion of Fifth

Amendment privilege. U.S.C.A.Const. Amend. 5.

2. Internal Revenue (Key) 1460

In proceeding for enforcement of IRS summons, record

established that the Government had at all times sought

“partnership” records for particular year at issue.

3. Partnership (Key) 251

Under Mississippi law in effect prior to enactment of

the Uniform Partnership Act, surviving partner, vis-a-vis

the heirs and legatees of deceased partner, stood in the

same shoes as an administrator, with status of trustee, and

could not thereafter legally proceed as a sole proprietor,

but operated business in a fidcuiary capacity. Code Miss.

1942, §§ 553-560.

4. Partnership (Key) 243, 255(1)

Under Mississippi law, when partner dies, in the ab-

sence of a prior agreement providing for the continuation

of partnership after death, the partnership is dissolved, but

dissolution does not mean the partnership thereby in-

stantaneously disappears; for various purposes, it continues

to live until it is lawfully sold or its affairs have been

lawfully wound up, and the surviving partner does not

become the sole proprietor of the partnership or its assets.

5. Partnership (Key) 251, 255(4)

Surviving partner, as executor of the estate of his de-

ceased partner, owed deceased partner’s legatees the fidu-

ciary duties of a trustee, and for the purpose of accounting

for any profits realized by virtue of his continued employ-

ment of the partnership assets, the partnership was still

alive under Mississippi law, and its books and records were

not the private property of the surviving partner.

6. Witnesses (Key) 306

Where partnership continued in existence by operation

of law following death of one of two partners until sur-

viving partner fulfilled his obligations under Mississippi

law to wind up the business and account for all interim

A24

profits to the estate of the decedent, the books, records and

papers o: the business during that period were not the

personal papers of the surviving partner, with result that

he could not assert his Fifth Amendment privilege in re-

sponse to IRS summons. U.S.C.A.Const. Amend. 5.

7. Internal Revenue (Key) 1460

Where fact of noncompliance with district court’s pre-

vious order enforcing IRS summons was clearly and con-

vincingly established, failure of person summoned to tes-

tify at contempt hearing, presumably resting on his Fifth

Amendment right not to testify, meant that he failed to

show cause why he should not be held in contempt of an

outstanding order. U.S.C.A.Const. Amend. 5.

8. Internal Revenue (Key) 1460

District court’s order in IRS summons enforcement pro-

ceeding was final and appealable. 28 U.S.C.A. § 1291.

9. Internal Revenue (Key) 1456, 1460

Statutory subsection with respect to enforcement of

IRS summons, providing that “the District Court of the

United States for the district in which such person resides

or may be found” shall have jurisdiction for enforcement

is in the nature of a venue provision which can be waived,

and preceding subsection is the general jurisdictiona! stat-

ute. 26 U.S.C.A. (I.R.C.1954), § 7402(a, b); 28 U.S.C.A.

§ 1345.

10. Witnesses (Key) 184(2)

State law does not determine its scope of attorney-

client privilege in federal court; rather, federal common law

determines the scope of the privilege.

A25

1l. Internal Revenue (Key) 1460

Order in IRS summons enforcement proceeding did

not prevent attorney from properly raising attorney-client

privilege in subsequent proceedings. Federal Rules of Evi-

dence, rule 501, 28 U.S.C.A.

12. Internal Revenue (Key) 1460

Order enforcing IRS summons could not validly ex-

pand the scope of the summons as issued and served.

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.

COLEMAN, Circuit Judge.

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 Re-

hearing 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

A26

opinion.' We also grant the government’s request for

clarification as to one aspect of the case affecting Mr.

Montgomery.

I. The Hankins Appeal, No. 76-3467

In our prior opinion, we held that partnership records

have no Fifth Amendment immunity to subpoenas in Inter-

nal 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.

1. We consider Hankins’ petition for rehearing to embrace

the period of time from November 19, 1971, when his brother and

partner, Bewel Hankins, died, to January 2, 1973, when the new

corporation, Hankins Lumber Company, Inc., was formed. It is

Hankins’ contention that the business was operated as a sole

proprietorship during that time, and that the records of that sole

proprietorship are his personal records, which, according to Hank-

ins, are protected by the Fifth Amendment. He has not requested

a rehearing on our affirmance of the District Court’s orders en-

forcing the summonses seeking the papers related to the estate

taxes of Bewel Hankins, the Boswell audit papers, and the part-

nership records dated prior to November 19, 1971. In connection

with this. petition, we have reexamined those noldings and are

convinced that they are correct. We therefore consider only the

records of the lumber business from Novernber 19, 1971, to Jan-

uary 2, 1973, but we shall refer to them as “the 1972 records.”

A27

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 pronii-

etorship (private pepers) which he cannot be forced to

produce.

[1, 2] 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). Han-

kins 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 that the partnership had termi-

nated on the death of Bewel Hankins.* On August 10,

1976, the District Judge ordered Hankins to produce, inter

alia, “fa]ll records in your possession pertaining to the

Hankins Lumber Company partnership for the years 1968,

1969, 1970, 1971, and 1972 ... .” It therefore seems

2. These findings track the stipulation of the parties that the

partnership terminated at the death of one of the partners. (R. 79).

Hankins also makes much of the government’s “concession” of this

point, as well as the fact that the government introduced Hankins’

tax returns for the period in question into evidence. Those returns

indicate that he operated the lumber business as a “‘sole proprietor-

ship.” We think that neither the “concession”, nor the tax returns,

nor the testimony of the IRS agents are determinative of the legal

issue involved, namely, was this business a partnership or a pro-

prietorship during the period between Bewel’s death and the in-

corporation?

A28

clear to us that the government has at all times sought

the “partnership” records.

Consequently, we move to the second point.

The Hankins partnership existed by virtue of Missis-

sippi 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.* The partnership, therefore, was gov-

erned by the common law, except where modified or sup-

plemented by statute. In 1971, the only relevant statutes

which we have been able to uncover were found in Miss.

Code Ann. §§ 553-560 (1942). 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

3. The Mississippi Uniform Partnership Act became effective

April 1, 1977, and is now codified at Miss. Code Ann. §§ 79-12-1

through 79-12-85 (1977 Supp.). That Act provides that dissolu-

tion is caused by the death of one of the partners, unless the part-

nership agreement provides to the contrary. Miss. Code Ann.

§ 79-12-61(4) (1977 Supp.). However, it also provides that

“{o]n dissolution, the partnership is not terminated, but continues

until the winding up of partnership affairs is completed.” Miss.

Code Ann. § 79-12-59 (1977 Supp.) Upon the death of a partner,

the partnership may be continued with the consent of the de-

ceased’s representative, who then assumes the status of a creditor

entitled to his share of the partnership with interest or a pro-

portionate share of the profits. Miss. Code Ann. § 79-12-83 (1977

Supp.). We cite these provisions, not because they are dispositive

(since they are not), but because they do provide some insight

into the law of the State of Mississippi in 1971.

4. These statutes were carried forward in the 1972 Code in

§§ 91-7-119 through 91-7-133. These sections were subsequently

repealed when the Legislature enacted the Mississippi Uniform

Partnership Act. 1976 Miss. Laws ch. 407, § 44.

A29

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 part-

nership estate and not merely that of the interest of the

deceased partner, Gurley v. Gurley, 77 Miss. 413, 26 So.

962 (1900).°

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 applicable if the surviving

partner declines to account. See id. at §§ 559-560.

Section 557, however, provides:

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.

[3] Since the status of an administrator is defined

by statute to be that of a trustee, and since interested

5. This bond was not posted until the appraisal had been

completed. Hankins, in his petition to the Chancery Court, as-

serted that liquidation of the business would result in ‘tremendous

financial loss to the Estate” and thet the book value might not

represent the true value of the part'ership assets. (R. 422). He

therefore requested permission to continue the business.

A30

parties, namely the heirs of the deceased partner, have

the same remedies against the survivor as against an ad-

ministrator, again as provided by statute, it follows a forti-

ori 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 obliga-

tions 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 unequivo-

cally stated, “At law, upon the death of one of the partners

the surviving partner is invested with the title and posses-

sion 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 requiremeii] may be soon removed

by a speedy execution of the trust”. 26 So. at 963.°

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:

“upon a dissolution of a firm, by the death of

one of its members, the credits and personal effects

vest, by operation of law, in the survivors, and under

judgment against them the effects of the sirm may

6. This was apparently one of the first cases to authorita-

tively construe the statute which was the direct predecessor to

Miss. Code Ann. § 91-7-123 (1972). No later case has repudiated

that language.

= NSS

A31

be sold. The real estate, however, preserves its dis-

tinct qualities and descends to the heir of the decedent,

who holds in common with the survivor in trust for

the purposes of the partnership, first for the creditors,

and, second for the members of the firm and their

representatives, according to their several interests.”

52 Miss. at 716.

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 contin-

ued 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 pri-

marily 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 of a full exposition on the law

governing the dissolution of partnerships. We quote it

in full because of its clarity and its important relevance

to this case:

By the death of Beazley the partnership was dis-

solved. The legal title to the property survived to

Mayson only for the purpose of enabling him to pay

the copartnership debts. As to the beneficial interest

in the property, Mason and Beazley’s representatives

were tenants in common. It was the right of the

representative of the deceased partner to call for an

A32

account at any time, and Mayson’s duty to give it

when demanded. Till the account was given, or the

business closed by a sale of the property, a court

of equity will, for certain purposes, regard the partner-

ship as still in existence, and will require the survivor

to account for whatever profits he may have made

by the use of the property or the employment of

the joint capital. Or, to state the proposition in a

few words, if the survivor has made profits he must

account for them upon the terms regulating the co-

partnership; if he has made nothing by continuing

the business, he is accountable only as a tenant in

common, 27 Miss. at 112.

[4, 5] It is true, of course, that when a partner

dies, in the absence of a prior agreement providing for

the continuation of the partnership after death, the partner-

ship is dissolved because the surviving partner cannot

continue doing business with, for, or on behalf of a dead

man. But dissolution does not mean that the partnership

thereby instantaneously disappears. For various purposes,

it continues to live until it is lawfully sold or its affairs

have been lawfully wound up. The surviving partner

does not become the sole proprietor of the partnership

or its assets. Burton Hankins, as the executor of

his brother’s estate, owed Bewel’s legatees the fiduciary

duties of a trustee. For the purpose of accounting for

any profits realized by virtue of his continued employment

of the partnership assets, the partnership was still alive.

Its books and records were not, and could not have been,

the private property of Burton Hankins.’

7. Since Mayson’s Adm’r states the common law of Missis-

sippi one might conclude that present § 79-12-59 of the Miss.

Code is a codification of that common law rule. See note 3, supra.

This result under Mississippi law means that the partnership con-

tinued for federal income tax purposes. See Treas.Reg. §1.708-

1(b) (1) (i) (a) (1978).

A33

[6] When did the partnership terminate? Frances

Hankins, Bewel Hankins’ widow, on August 11, 1972, exe-

cuted a quitclaim deed conveying her one-fourth interest

in the partnership to Burton Hankins and the Chancery

Court approved that sale the next day. On October 18,

1972, the Chancery Court granted a petition by Burton

Hankins to purchase the remaining portion of the estate’s

interest in the partnership. A bill of sale and warranty

deed, conveying to Burton the estate’s interest in the part-

nership property and real estate, were executed on Novem-

ber 3, 1972, and December 14, 1972. However, there were

special circumstances present here which extended the

life of the partnership. In the proceedings before the

Chancery Court there was testimony that it was the tes-

tator’s wish that the children stay in the business, (R.

433), and the court so found. (R. 502). In its decree

authorizing Burton Hankins to purchase the remaining

interest of the estate in the partnership assets, the Chan-

cery Court permitted the purchase “with the understanding

that the guardian of the minor children of Bewel A. Han-

kins, deceased, will have the right to purchase stock for the

children in an amount equal to the value of their interest

in said former partnership assets, which said stock will

be placed in a trust fund and administered by the Trustee,

which trust is to be set up at the appropriate time.” (R.

503). In its later order releasing Burton Hankins from

his duties as executor, the Chancery Court “further decreed

that the equitable interest of the three sons in the business

formerly operated as a partnership known as Hankins Lum-

ber Company, and which has now been incorporated as

Hankins Lumber Company, Inc., should be converted to

shares of stock in said corporation... .” Plainly, the

court of equity regarded the partnership as continuing

in existence until the business was incorporated. See May-

son’s Adm’r v. Beazley’s Adm’r, supra.

A3s4

Thus, the books, records and papers of the lumber

business from November 19, 1971, to January 2, 1973, were

not the personal papers of Burton Hankins, but the papers

of a partnership which continued in existence by operation

of law until the surviving partner fulfillec his obligations

under Mississippi law to wind up the business and account

for all interim profits to the estate of the decedent. For

this additional reason, we adhere to our earlier decision

affirming the District Court’s order that the summons to

Mr. A. Burton Hankins be enforced. Bellis v. United States,

417 U.S. 85, 94 S.Ct. 2179, 40 L.Ed.2d 678 (1974); United

States v. Greenleaf, 5 Cir. 1977, 546 F.2d 123.

II. Hankins’ Appeal in No. 77-1967

[7] In No, 77-1967, Hankins also petitions for rehear-

ing. His argument is as follows: he did not have the

records on the date of the contempt hearing, he cannot

be cross-examined as to the reasons for the disappearance

of the records, and he cannot be confined indefinitely

when he lacks the ability to comply with the order of

the District Court. He did not testify at the contempt

hearing, nor did he present any evidence of inability to

comply." Among the citations in his brief, Hankins relies

8. When the court refused to allow Hankins to testif

the condition that he not be subject to cross-examination, pn ce

tendered an “offer of proof” to the effect that Hankins would

have testified that he did not have the missing records at that

time, nor when he appeared before the IRS agent in response to

the summons, nor when the summonses were served. In view of

our conclusion on the contempt citation, what was said by the

Supreme Court in Maggio v. Zeitz, 333 U.S. 56, 69, 68 S.Ct. 401

408, 92 L.Ed. 476 (1948), is especially relevan. to Hankins’ at-

tempt to relitigate the District Court's earlier finding that Hankins

had the records when the court ordered the summons enforced:

It would be a disservice to the law if we were to d

from the long-standing rule that a contempt preceeding dees

(Continued on following page)

A35

primarily on Curcio v. United States, 354 U.S, 118, 77

S.Ct. 1145, 1 L.Ed.2d 1225 (1957); Maggio v. Zeitz, 333

U.S. 56, 68 S.Ct. 401, 92 L.Ed. 476 (1948); United States

v. Rizzo, 5 Cir. 1976, 539 F.2d 458; and Cagle v. Scroggins,

5 Cir. 1969, 410 F.2d 741. None of these cases aids Han-

kins.

In Maggio, the Court reversed a court of appeals deci-

sion affirming a coercive sanction when the latter court

was absolutely convinced that Maggio could not comply

with the order. The critical difference between Maggio

and the present case is that Maggio himself had testified

and had subjected himself to cross-examination. In Cagle

and Rizzo, both individuals testified that they were unable

to produce the records demanded and both were subject

to cross-examination. In Curcio, the Court reversed a

criminal contempt conviction of an individual for invoking

his Fifth Amendment privilege and refusing to testify as

to the whereabouts of corporate records which he had

not produced in response to a subpoena duces tecum, but

Curcio did not involve a refusal to testify in a contempt

proceeding. The difference between Curcio and this case

is that in the contempt proceeding here, the court ordered

Hankins to appear and show cause why he could not be

held in contempt for disobeying a prior order. With the

Footnote continued—

not open to reconsideration the legal or factual basis of the

order alleged to have been disobeyed and thus become a retrial

of the original controversy. he procedure to enforce a

court’s order commanding or forbidding an act should not be

so inconclusive as to foster experimentation with disobedience.

Every precaution should be taken that orders issue, in turn-

over as in other meg pene only after legal grounds are

shown and only when it appears that obedience is within the

wer of the party being coerced by the order. But when

t has become final, disobedience cannot be justified by re-try-

ing the issues as to whether the order should have issued in

the first place.

A36

fact of non-compliance with the court’s previous order

clearly and convincingly established, Hankins’ failure to

testify, presumably resting on his Fifth Amendment right

not to testify, means that he has failed to show cause

why he should not be held in contempt of an outstanding

order.”

III. Montgomery’s Case

Subsequent to the publication of our opinion in these

two cases consolidated on appeal, the government filed

a motion for clarification of the Court's decision with re-

spect to appellant Montgomery in No. 76-3467. Mont-

gomery filed a petition for rehearing.

[8] Both the government and appellant Montgomery

point out that our opinion did not specifically address

Montgomery's appeal from the lower court’s order in the

summons enforcement proceeding.’ Although our opin-

ion did state that “(t]he other errors assigned by the

respective appellants have been duly considered and found

to be without merit,” 565 F.2d at 1352, we now believe

that a clarification is not out of order.

9. Of course, should Hankins produce the records or become

willing to testify, criminal contempt proceedings might then be

appropriate. See United States v. Rizzo, 5 Cir. 1976, 539 F.2d

458; 18 U.S.C. § 401; Fed.R.Crim.P. 42.

10. This order was a “final” order for purposes of 28 U.S.C.

H 1291 and therefore appealable. Reisman v. Caplin, 375 U.S. 440,

4 S.Ct. 508, 11 L.Ed.2d 459 (1964); United States v. Malnik, 5

Cir, 1974, 489 F.2d 682; United States v. Roundtree, 5 Cir. 1970, 420

F.2d 845. Our earlier holding that Montgomery’s — in No,

77-1967 must be dismissed due to the lack of a final order im-

plicitly declined to convert the appeal into a petition for mandamus

or an interlocutory anpes under 28 U.S.C. § 1292(b). That

— has not been challenged by the parties, and we adhere

to it.

A37

[9-11] The most basic argument" is that Mr. Mont-

gomery should not be compelled to give general oral testi-

mony concerning communications privileged by virtue of

the attorney-client relationship. Montgomery apparently

argues that the District Court improperly ordered him

to testify generally and precluded Montgomery from rais-

ing any proper claims of attorney-client privilege. He

bases his argument on the sentence in the District Court’s

Memorandum of Decision which states that “orders will

be issued requiring each individual respondent to appear

before Special Agent Grant or his authorized representa-

tive to be sworn and to give testimony or to claim a

personal privilege as to particular questions.” 424 F.Supp.

at 613 (emphasis in original). It seems clear to us that

the District Judge had no intention of ignoring the rule

that the attorney-client privilege may be asserted either

by the client or by the attorney on behalf of the client,

in the absence of waiver or some other recognized excep-

11. Montgomery also contests the jurisdiction of the District

Court to pone vo the. summons and cites the appropriate statute,

26 U.S.C. § 7402(b), which grants jurisdiction to “the district

court of the United States for the district in which such person

resides or may be found... .” Montgomery characterizes this

statute as a grant of subject matter wre but we think this

assertion incorrect. It seems that 26 U.S.C. § 7402(a) is the gen-

eral jurisdictional statute, and that statute fically states that

the remedies which it provides are not exclusive. 28 U.S.C. § 1345

also provides jurisdiction here. We therefore conclude that the

language upon which Montgomery relies is in the nature of a venue

provision. It is elementary that venue can be waived if not

timely raised, see generally C. Wright, A. Miller & E. Cooper, 15

Federal Practice and Procedure § 3829 (1976), and the lower

court properly found that Montgomery had so waived his chal-

oak See United States v. Hankins, 424 F.Supp. 606, 612-13

(N.D.Miss. 1976). Any objections to the service of process or

urisdiction over the person of Montgomery were also waived.

Mee Fed.R.Civ.P. 12(b) (1).

12. We use the word Bs genom because many of his

factual arguments relate to what actually occurred at the hear-

ings. In No. 76-3467, however, we are concerned only with the

validity of the summons enforcement order.

A38

tion to the assertion of the privilege. See generally Fisher

v. United States, 425 U.S. 391, 403-405, 96 S.Ct. 1569, 48

L.Ed.2d 39 (1976); Fed.R.Evid. 501;'° 8 J. Wigmore, Evi-

dence § 2324 (McNaughton rev. ed. 1961) (“That the

attorney himself is prohibited [from disclosing his client’s

confidences], whether he is willing or not, is of course

the fundamental assumption of the modern theory.”) In-

deed, the District Court’s opinion clearly indicates that

he understood this rule, for he stated that Montgomery

could neither claim a blanket attorney-client privilege nor

assert another person’s personal privilege against self-in-

crimination. Neither the Memorandum of Decision nor

the subsequent order prevents Montgomery from properly

raising the attorney-client privilege in subsequent proceed-

ings. Furthermore, the record indicates that the govern-

ment never sought to compel Montgomery to divulge any

information in violation of the privilege. (R. 303). What

we said in our original opinion relative to Hankins is

therefore equally applicable to Montgomery:

The requirement that Mr. [Montgomery] testify

before the Internal Revenue Agent is, of course, sub-

ject to the rule prevailing in this Circuit that he must

appear in response to the summons, thereafter the

Internal Revenue Service must propound specific ques-

tions, and the witness miy then claim the privilege

13. Contrary to the assumption of counsel for appellant

Montgomery in the court below, (R. 60-61), state law does not

determine the scope of the attorney-client privilege. This is a

case in which federal law supplies the rule of decision, and the

federal common law therefore determines the scope of the priv-

ilege. See Conference Rep. No. 93-1597, 93rd Cong., 2d Sess. 7-8,

reprinted in [1974] U.S.Code Cong. & Admin.News pp. 7100-7101.

For a similar holding by this Circuit prior to enactment of the

Federal Rules of Evidence, see Garner v. Wolfinbarger, 5 Cir.

1970, 430 F.2d 1093, cert. denied, 401 U.S. 974, 91 S.Ct. 1191, 28

L.Ed.2d 323 (1971).

A39

as to each question, United States v. Malnik, 5 Cir.

1974, 489 F.2d 682; United States v. Roundtree, 5 Cir.

1970, 420 F.2d 845.

United States v. Hankins, supra, 565 F.2d at 1349-50.

[12] The final point which Montgomery raised in

his appeal was an argument that the District Court’s order

expanded the scope of the summons. The investigation

concerned Hankins’ tax years 1969 through 1973, but the

summons to Montgomery sought testimony only for the

years 1969 through 1972. Nevertheless, the District Court

ordered Montgomery to testify relative to Hankins’ tax

liability for 1973. Upon re-examination, we conclude that

the order could not validly expand the scope of the sum-

mons as issued and served and that the order should be

modified so that it will clearly indicate that Montgomery

is required to testify regarding only the years 1969 through

1972, but not in violation of the attorney-client privilege,

as the summons indicated. Although it is the rule in

this Circuit that a District Court has some discretion to

modify a summons in order to remove ambiguities or to

cure the summons of overbreadth, United States v. Malnik,

5 Cir. 1974, 489 F.2d 682, 686 n.4,’* the District Court

does not have power to modify the summons in order

to expand its scope. If the IRS needs the testimony of

Montgomery relative to Hankins’ tax liability for 1973,

during which year Hankins’ business was incorporated and

for which the IRS already has the corporate records, it

may consider the issuance of another summons to Mont-

gomery and make the proper showing under United States

v. Powell, 379 U.S. 48, 85 S.Ct. 248, 13 L.Ed.2d 112 (1964).

14. United States vy. Solomon, 5 Cir. 1971, 437 F.2d 110, is

not to the contrary. That case simply affirmed a district court’s

refusal to enforce a summons on grounds of ambiguity, and there

was no showing of abuse of discretion.

A40

CONCLUSION

With the above clarification as to Mr. Montgomery’s

testimony for the year 1973, all petitions for rehearing

are

DENIED.

A4l

APPENDIX C

UNITED STATES of America et al., Petitioners,

A. Burton HANKINS et al., Respondents,

Robert Lewis SMITH, Intervenor.

UNITED STATES of America et al., Petitioners,

Vv.

HANKINS LUMBER CO. et al., Respondents,

Vv.

Robert Lewis SMITH, Intervenor.

UNITED STATES of America et al., Petitioners,

HANKINS LUMBER CO., INC., et al., Respondents.

UNITED STATES of America et al., Petitioners,

A. Burton HANKINS et al., Respondents.

Nos. WC 75-107-S—WC 75-110-S.

United States District Court,

N. D. Mississippi, W. D.

July 15, 1976.

The Government sought to enforce summonses as is-

sued by the Internal Revenue Service, and the District

Court, Orma R. Smith, J., held that with respect to testi-

monial provisions of the summonses, none of the respon-

A42

dents were entitled to invoke, in a blanket manner, his

Fifth Amendment privilege against self-incrimination or

his attorney-client privilege as a bar to giving of all testi-

mony, nor could any respondent properly invoke another

person’s personal privilege against self-incrimination as

a bar to giving his own testimony. Even if no waiver

of privilege occurred and even if the client desired an

attorney-client privilege to be asserted, an estate settlement

agreement and details of audit could under no circurn-

stances be deemed privileged where they had been shared

with an adversary of the client and in no way could be con-

strued as “confidential communications.” Records of the

estate created and maintained by an individual in his repre-

sentative capacity as executor could not enjoy protection

of his personal privilege against self-incrimination, and

such records were not entitled to protection of such in-

dividual’s Fifth Amendment privilege.

Order issued for production.

1, Internal Revenue (Key) 1451

Special agent was delegate of Secretary of Treasury

and was authorized to issue summonses requiring parties’

appearance and testimony and production of various books

and records. 26 U.S.C.A. (I.R.C.1954) §§ 7402(b), 7602,

7604 (a).

2. Internal Revenue (Key) 1451

Individual was to be found in district at time of trial

when he appeared in person, and court had in personam

jurisdiction over him under internal revenue statutes pro-

viding for jurisdicticn and venue for judicial enforcement

of summons in United States district court for district

in which such person resides and is found. 26 U.S.C.A.

(I.R.C.1954) §§ 7402(b), 7604(a).

A43

3. Courts (Key) 37(3)

Individual upon whom Internal Revenue Service sum-

mons was served and who appeared in person was estopped

from contesting jurisdiction of court by virtue of waiver

of any timely objection. 26 U.S.C.A. (LR.C.1954) §§ 7402

(b), 7604(a).

4. Internal Revenue (Key) 1451

Witnesses (Key) 306, 307

With respect to testimonial provisions of summonses

issued by Internal Revenue Service, none of respondents

were entitled to invoke, in blanket manner, his Fifth

Amendment privilege against self-incrimination or his at-

torney-client privilege as bar to giving of all testimony,

nor could any respondent properly invoke another person’s

personal privilege aginst self-incrimination as bar to giving

his own testimony. 26 U.S.C.A. (I.R.C.1954) §§ 7402(b),

7604(a); U.S.C.A. Const. Amend. 5.

5. Witnesses (Key) 306

Corporation had no Fifth Amendment privilege against

self-incrimination and would be required to produce knowl-

edgeable witnesses who would not be incriminated by their

testimony. 26 U.S.C.A. (1.R.C.1954) §§ 7402(b), 7604(a);

U.S.C.A.Const. Amend. 5.

6. Witnesses (Key) 222

With respect to invocation of attorney-client privilege

on behalf of client as bar to testimony or production of

estate settlement agreement, burden of proving both ex-

istence and extent of privilege is squarely upon party

claiming it.

A44

7. Witnesses (Key) 205

Even if no waiver of privilege occurred and even

if client desired attorney-client privilege to be asserted,

estate settlement agreement and details of audit could

under no circumstances be deemed privileged where they

had been shared with an adversary of client and in no

way could be construed as “confidential communications.”

8. Internal Revenue (Key) 1459

Where individual was employee or officer of corpora-

tion at time of preparation of federal corporate income

tax return, work papers generated by preparation of return

were not personal books or records of individual held

in personal or private capacity but rather were corporate

records enjoying no privileged status and were in con-

structive possession of corporation and its president, and

corporation, its president and employee would be required

to appear before special agent of Internal Revenue Service

or authorized representative to produce such work papers.

26 US.C.A. (1.R.C.1954) §§ 7402 (b), 7604(a).

9. Witnesses (Key) 298

Records of estate created and maintained by individual

in his representative capacity as executor could not enjoy

protection of his personal privilege against self-incrimina-

tion, and such records, required to be created and main-

tained by probate laws of Mississippi, were not entitled

to protection of such individual’s Fifth Amendment priv-

ilege. 26 U.S.C.A. (I.R.C.1954) §§ 7402(b), 7604(a);

U.S.C.A.Const. Amend. 5.

10, Witnesses (Key) 298

Termination of decedent’s estate was immaterial to

question of privilege against self-incrimination as claimed

A45

for executor’s records; it was nature of records and not

status of possessor or owner which controlled. 26 U.S.C.A.

(I.R.C.1954) §$ 7402(b), 7604(a); U.S.C.A.Const. Amend. 5.

11. Internal Revenue (Key) 1454

Where events suggested that taxpayer in acquiring

audit papers was embarked upon course of action designed

to obtain potential evidence against him before it fell into

hands of Internal Revenue Service, such third-party evi-

dence obtained in such manner and for such purpose could

not be shielded from government inspection. 26 U.S.C.A.

(I.R.C.1954) §§ 7402(b), 7604(a); U.S.C.A.Const. Amend 5.

12. Witnesses (Key) 306

Partnership which was not “small family partnership”

but was large, many-faceted commercial venture of long

duration, with numerous employees, substantial assets and

impressive gross receipts and interrelationship with two

substantial closely held corporations was not entitled to

assert personal privilege of former partner against self-

incrimination to bar production of partnership records for

inspection by Internal Revenue Service. 26 U.S.C.A.

(1.R.C.1954) §§$ 7402(b), 7604(a); U.S.C.A.Const. Amend. 5.

13. Witnesses (Key) 298

Partnership records do not lose characteristic as such,

as bearing upon privilege against self-incrimination with

respect to production in response to internal revenue sum-

mons, because of termination of partnership. 26 U.S.C.A.

(I.R.C.1954) $$ 7402(b), 7604(a); U.'S.C.A.Const. Amend. 5.

H. M. Ray, U. S. Atty., William M. Dye, Jr., Asst.

U.S. Atty., Oxford, Miss., for petitioners.

A46

Hugh C. Montgomery, Jr., Dossett, Magruder & Mont-

gomery, Jackson, Miss., J. N. Raines, Memphis, Tenn.,

Tommy M. McWilliams, Townsend, McWilliams & Holla-

day, Drew, Miss., Paul P. Lipton, Lipton & Petrie, Mil-

waukee, Wis., for respondents.

MEMORANDUM OF DECISION

ORMA R. SMITH, District Judge.

These related matters came on for a consolidated hear-

ing before the court on March 1, 1976, pursuant to the

court’s orders to show cause; the parties were present

by counsel; evidence was presented and the parties were

heard. Due consideration having been had, the court en-

ters the following findings of fact and conclusions of law.

A. Findings of Facts.

1. The petitioner Robert E. Grant is a special agent

of the Intelligence Division of the Internal Revenue Ser-

vice, United States Treasury Department, with post of

duty in Jackson, Mississippi.

2. In his capacity as a special agent Grant was as-

signed to conduct an investigation of the federal income

tax returns and liabilities of A. Burton Hankins of Gre-

nada, Mississippi, for the years 1971, 1972, and 1973. The

investigation also included the 1973 federal income tax

return and liability of Hankins Lumber Company, Inc.,

Grenada, Mississippi, a Mississippi corporation of which

A. Burton Hankins is the president and majority share-

holder.

3. Special Agent Grant’s investigation is a joint inves-

tigation being conducted in coordination with the Audit

Division of the Internal Revenue Service. The Audit Divi-

sion representative assigned to the investigation is Revenue

Agent John Ervin.

A47

4. The investigation is directed toward the 1971, 1972

and 1973 tax years of A. Burton Hankins and 1973 for

the corporation. However, because of the complicated fi-

nancial history of the taxpayers, the agents also need to

determine Hankins’ correct tax liabilities for the years

1969 and 1970.

5. From approximately 1957 until November 19, 1971,

A. Burton Hankins and his brother, Bewel A. Hankins,

operated a jointly owned partnership, the Hankins Lumber

Company, which engaged in the planer mill and lumber

business in Grenada County, Mississippi. In 1971, the

partnership had 98 employees, assets of about $1 million,

gross receipts of more than $3 million, and a payroll of

almost one-half million dollars. The company purchased

an average of more than 30 tracts of timber a year and

during 1971, produced around 27 million feet of lumber.

6. In connection with their lumber operation, the

Hankins brothers were also joint owners of two Mississippi

corporations, Hankins Lumber Sales, Inc., which was incor-

porated on February 21, 1964, and Logging Industries,

Inc., which was incorporated in April, 1966. As of April

26, 1972, the net assets of these corporations were appraised

at $202,358.69, for Hankins Lumber Sales, Inc., and $52,-

698.32, for Logging Industries, Inc.

7. The partnership maintained various business

ledgers, journals and books of account. These records,

which are the subject of Civil Action No. WC 75-108-S,

are in the possession of A. Burton Hankins to whom the

summons at issue there is directed.

8. On November 19, 1971, Bewel A. Hankins died

at the age of 43. His last will and testament, which

named his brother A. Burton Hankins as executor of the

estate, was contested on November 23, 1971, by his widow,

A48

Frances Hankins. In re Estate of Bewel A. Hankins, No.

12,200 (Grenada Cty., Miss.Ch.Ct. May 8, 1971). Mrs. Han-

kins was represented in that matter by the respondent,

Attorney Tommy M. McWilliams of Drew, Mississippi.

9, On January 11, 1972, Mrs. Hankins petitioned the

Grenada County Chancery Court for appointment as tem-

porary administratrix of the Estate of Bewel A. Hankins.

On January 21, 1972, the Chancery Court ordered the

will admitted to probate and appointed A. Burton Hankins

Executor of the Estate of Bewel A. Hankins.

10. On February 11, 1972, Frances Hankins renounced

the will and elected to receive a one-fourth share of the

net estate.

11, On August 11, 1972, Mrs. Hankins filed a petition

to terminate her interest in the Estate of Bewel A. Han-

kins which reflected the sale of her one-fourth interest

in Hankins Lumber Company to A. Burton Hankins, the

surviving partner. On August 12, 1972, the Chancery Court

granted this petition.

12. On October 18, 1972, the Chancery Court granted

a petition by A. Burton Hankins to purchase the remaining

portion of the Estate’s interest in the Hankins Lumber

Company partnership.

13. In his capacity as Executor of the Estate of Bewel

A. Hankins, A. Burton Hankins created or caused to be

created and maintained various books, records, and papers

pertaining to the administration, probate and settlement

of the Estate. These records include the papers relating

to preparation and filing of the Federal and Mississippi

estate tax returns, appraisal of the assets of the state,

payment of creditors, settlement of the will contest, and

closing out the Estate. These records, which are the sub-

ject of Civil Action No. WC 75-110-S, are in the possession

A49

of Robert Lewis Smith and A. Burton Hankins, to whom

the summonses at issue therein are directed.

14, During pendency of the will contest, Attorney

McWilliams, on behalf of Frances Hankins, caused an audit

of the partnership books and records to be performed

by Certified Public Accountant William S. Boswell, Drew,

Mississippi. This audit resulted in the creation of reports,

schedules, memoranda, correspondence, and other writings

by Certified Public Accountant Boswell. In connection

with the will litigation, Attorney McWilliams and his law

firm also prepared or caused to be prepared certain docu-

ments, reports, correspondence, files, etc.

15. Although the will litigation between Mrs. Han-

kins and A. Burton Hankins, Executor and surviving part-

ner, was concluded by agreement in about August, 1972,

Certified Public Accountant Boswell continued to retain

his audit papers until about June 26, 1974, and the papers

of the widow’s lawyers (McWilliams and his law firm)

were retained by them until July 2, 1974.

16. On October 27, 1972, the Hankins Lumber Com-

pany was incorporated as a Mississippi corporation with

A. Burton Hankins as president and majority shareholder.

This implemented a decision which had been made prior

to September 15, 1972.

17. The respondent, Robert Lewis Smith, is a Certi-

fied Public Accountant in Grenada, Mississippi. He pre-

pared and signed the 1971 Hankins Lumber Company fed-

eral partnership return as well as the 1971 and 1972 per-

sonal federal income tax returns of A. Burton and Juanita

Hankins. He also prepared and signed the federal estate

tax return for the Estate of Bewel A. Hankins and the

1973 federal corporate income tax return for Hankins Lum-

ber Company, Inc.

A50

18. The evidence reflects that prior to October, 1973,

Smith was in the private practice of accountancy with

an office in Grenada, Mississippi. However, on or about

October 1, 1973, Smith sold his accounting practice and

moved his books, records, and workpapers and the corpo-

rate books and records of Hankins Lumber Company, Inc.,

to an office in the offices of Hankins Lumber Co., Inc.,

in Ellivtt, Mississippi.

19. In performing the various accounting services de-

scribed above, Smith created and retained various account-

ing workpapers, books, and records. These workpapers

and records, which are the subject of Civil Action Nos.

WC 75-109-S and WC 75-110-S, are in the possession of

Robert Lewis Smith, to whom one of the summonses at

issue therein was directed.

20. In November of 1973, Revenue Agent Ervin began

an audit of the 1971 partnership of Hankins Lumber Com-

pany and the individual returns of the two partners which

would reflect the distribution of the partnership income

from that year. In addition he undertook an audit of

the returns of three closely held Hankins corporations

with fiscal years ending March 31, 1972. Revenue Agent

Ervin conducted the audits with the assistance of CPA

Smith, who represented Hankins and the companies. In

January, 1974, Revenue Agent Ervin advised CPA Smith

that he needed to examine the subsequent year records

(1972) of the lumber company. Smith advised Revenue

Agent Ervin that Attorney Hugh Montgomery had the

1972 records in Jackson, Mississippi, and was making an

analysis of them which would be helpful to Ervin and

facilitate his audit. Ervin was able to work around this

delay by conducting the audits of the closely held corpora-

tions. However, by May, 1974, he had completed the col-

lateral audits and continued to request the 1972 lumber

company records.

A51

21. In late March or early April of 1974, the taxpayer,

A. Burton Hankins, requested Attorney Tommy M. McWil-

liams to turn over to the taxpayer all books, records,

and papers relating to the Boswell audit of the partnership

and the will contest. This was ostensibly in furtherance

of the settlement of the Estate reached in 1972.

22. On May 7, 1974, A. Burton Hankins petitioned

the Chancery Court for approval of the final accounting

of the Estate of Bewel A. Hankins and for his discharge

as Executor of the Estate. ,

23. On May 8, 1974, the Chancellor of the Grenada

County Chancery Court entered an order approving the

final accounting and disbursements of assets and ordering

the Estate of Bewel A. Hankins closed and the Executor,

A. Burton Hankins, released and discharged.

24. On June 13, 1974, Revenue Agent Ervin met with

Attorney Montgomery and advised him that although

there were discrepancies in the partnership return in ex-

* cess of $100,000 for 1971, he could not complete the 1971

audit without inspecting the 1972 records. Montgomery

appeared to acquiesce in the 1971 discrepancies but insisted

on closing the audit for that year before producing the

1972 lumber company records. Revenue Agent Ervin was

unwilling to close 1971 without an inspection of the 1972

records. At that point Attorney Montgomery advised Rev-

enue Agent Ervin that he would have to consult with

his client, A. Burton Hankins, about producing the 1972

records.

25. On June 26, 1974, Attorney McWilliams sent a

letter to CPA Boswell acknowledging delivery from Mr.

Boswell to McWilliams’ law firm of all reports, schedules,

memoranda, correspondence, and other writings relating

to the will contest. On that same date Mr. McWilliams

A52

drafted a letter to Mr. Burton Hankins agreeing to the

turnover of all Boswell papers as well as all McWilliams’

documents, reports, correspondence, files, etc. The actual

turnover, according to Attorney McWilliams, took place

on July 2, 1974, when Attorney McWilliams physically

delivered these records to A. Burton Hankins.

26. Revenue Agent Ervin, in the meantime, had had

an appointment with Attorney Montgomery on July 3,

1974, to learn if the taxpayer was going to produce the

1972 records. This appointment had to be cancelled and

Revenue Agent Ervin was then contacted by Attorney

Montgomery on July 8, 1974, and advised that the 1972

records would not be produced because they might tend

to incriminate A. Burton Hankins.

27. Based upon the discrepancies previously described,

certain informant information items, and Attorney Mont-

gomery’s representation that production of the 1972 records

would be refused because they might tend to incriminate

the taxpayer, Revenue Agent Ervin determined the likeli-

hood of tax fraud, and on July 21, 1974, referred the matter

to the Intelligence Division where the present joint investi-

gation was initiated.

28. Thereafter, in furtherance of the investigation

Special Agent Grant determined that it would be necessary

to inspect (A) the partnership records of Hankins Lumber

Company; (B) the records of the Estate of Bewel A. Han-

kins; (C) the corporate records of Hankins Lumber Com-

pany, Inc.; and (D) the Boswell audit papers of the Han-

kins Brothers partnership. To that end he issued seven

summonses to the various parties to these transactions

requiring their appearance, testimony, and production of

the various books and records.

A53

29. Each of the summoned parties appeared as re-

quired by the summonses, but declined on varying grounds

to testify or, with one exception, to produce the summoned

documents. Special Agent Grant did not pursue the mat-

ter by asking specific questions. The exception was the

production of all required corporate books and records of

Hankins Lumber Company, Inc., except for the accounting

workpapers used to prepare the 1973 corporate return.

30. Each of the respondents in these four cases, with

the exceptions of Attorneys Hugh C. Montgomery and

Tommy M. McWilliams, acknowledged to the court that

he had in his possession, in whatever capacity, the sum-

moned records. Respondent Montgomery denied that he

had in his possession at the time of the issuance of the

summons to him the records demanded by that summons

(the Boswell audit papers). The government accepted

that representation and deemed the duces tecum provision

of the summons to Montgomery complied with.

31. The government’s own proof demonstrated that

_ Attorney McWilliams had turned over all his records re-

lating to the will contest (including the Boswell audit

papers) to A. Burton Hankins in furtherance of the estate

settlement agreement. The only item still in McWilliams’

possession is the original settlement agreement between

Frances Hankins and A. Burton Hankins. McWilliams was

unwilling to produce that document because his client had

requested him not to (on grounds not otherwise specified).

32. Special Agent Grant testified that Mrs. Frances

Hankins had cooperated with the Internal Revenue Service

completely in the investigation and had not refused to

give information or invoked any privilege.

33. Each of the individual respondents has knowledge

and information pertaining to the tax liabilities under in-

A54

vestigation. In addition, Hankins Lumber Company, Inc.,

has employees with knowledge and information pertaining

to the tax liabilities under investigation.

34. The government presented the testimony of

Leonard Parnell, a former employee of Certified Public

Accountant Smith, Special Agent Grant, Revenue Agent

Ervin, and Attorney Tommy M. McWilliams and offered

into evidence 18 exhibits, all of which were received. In

addition the government proposed several stipulations of

fact which were agreed to by respondents in open court.

35. The respondents (other than Attorney McWilliams

who was called as a government witness) did not testify

and presented no witnesses. The only evidence presented

by the respondents consisted of six documents relating to

the administration and settlement of the Estate of Bewel

A. Hankins and a letter from the District Director of

Internal Revenue accepting the estate tax return of the

Estate of Bewel A. Hankins as filed.

36. No recommendation for criminal prosecution has

been made by the Internal Revenue Service to the United

States Department of Justice in this investigation.

B. Conclusions of Law.

1. The court has jurisdiction over these actions and

the parties pursuant to Int.Rev.Code of 1954, §§ 7402(b),

7604 (a).

[1] 2. Special Agent Grant is a delegate to the Sec-

retary of the Treasury authorized to issue the summonses

involved in these actions. Int.Rev.Code of 1954, § 7602;

Treas.Reg. § 301.7602-1; 26 C.F.R. § 301.7602-1 (1975).

3. The government has demonstrated by a prepon-

derance of credible evidence that the joint investigation

A55

of Special Agent Grant and Revenue Agent Ervin is being

conducted for a legitimate purpose: The determination

of the correct tax liabilities of A. Burton Hankins and

Hankins Lumber Co., Inc., and the correctness of their

federal income tax returns; that the summoned records

and testimony may be relevant to the liabilities and

returns under investigation; and that the information sought

is not already in the government’s possession. United

States v. Powell, 379 U.S. 48, 85 S.Ct. 248, 13 L.Ed.2d 112

(1964).

4. With one exception the government has also dem-

onstrated that in each instance the administrative steps

required by the Internal Revenue Code have been followed.

United States v. Powell, supra.

(2, 3] 5. The exception pertains to the summons

issued on March 14, 1975, to Hugh C. Montgomery. The

summons issued to Mr. Montgomery was issued and served

in Jackson, Mississippi, in the Southern Judicial District

of Mississippi and required Mr. Montgomery’s appearance

in that same district. Under 26 U.S.C. §§ 7402(b), 7604(a)

jurisdiction and venue for judicial enforcement of such a

summons is in “the United States district court for the

district in which such person resides or is found... .”

(Emphasis added) (Id. at § 7402(b)). As reflected in

the government’s opposition to respondent Montgomery’s

post-trial attack on the jurisdiction of this court, Mr.

Montgomery was permitted by Special Agent Grant, as a

personal accommodation to Mr. Montgomery, to respond

to the summons at the office of the Internal Revenue

Service, Room 315, Federal Building, 200 Washington

Street, Greenwood, Mississippi, within the Northern Dis-

trict of Mississippi and the jurisdiction of this court. It

was, therefore, within this district and the jurisdiction of

this court that Mr. Montgomery was to be found when

A56

he failed to comply with the summons addressed to him.

Moreover, since this summons was part and parcel of an

investigation involving six other related summonses, all

issued, returnable, and enforceable in the Northern District

of Mississippi, it was consolidated with the other sum-

monses by the government for enforcement in this district.

The respondent failed to raise this issue until the case

had been consolidated and tried by this court and he was

certainly to be found in this district at the time of trial

when he appeared in person. Therefore the court had and

has in personam jurisdiction over Mr. Montgomery pursu-

ant to 26 U.S.C. §§ 7402(b) and 7604(a). Furthermore,

the respondent is estopped from contesting the jurisdiction

of this court at this time, by virtue of his waiver of any

timely objection.

6. None of the respondents has sustained his burden

of showing that the summonses here were issued in bad

faith or for an improper purpose. The government has

demonstrated and the court finds that each of the sum-

monses was issued in good faith and for a proper purpose.

Donaldson v. United States, 400 U.S. 517, 91 S.Ct. 534, 27

L.Ed.2d 580 (1971); United States v. Powell, supra.

[4,5] 7. With respect to the testimonial provisions

of the summonses at issue, none of the respondents is en-

titled to invoke, in a blanket manner, his Fifth Amendment

privilege against self-incrimination or his attorney-client

privilege as a bar to the giving of all testimony. United

States v. Sullivan, 274 U.S. 259, 47 S.Ct. 607, 71 L.Ed. 1037

(1927); United States v. Ellsworth, 460 F.2d 1246 (9th

Cir. 1972); United States v. Roundtree, 420 F.2d 845 (5th

Cir. 1969). See also United States v. Sigelbauwm, 27 Am.

Fed.Tax R.2d 71-762 (S.D.Fla.1970), aff'd per curiam, 435

F.2d 1313 (5th Cir. 1971). Nor may any respondent prop-

erly invoke another persons’ personal privilege against self-

A57

incrimination as a bar to the giving of his own testimony.

Schulze v. Rayunec, 350 F.2d 666 (7th Cir.), cert. denied,

382 U.S. 919, 86 S.Ct. 293, 15 L.Ed.2d 234 (1965); Geurkink

v. United States, 354 F.2d 629 (7th Cir. 1965); Genecov

v. Federal Pettroleum Board, 146 F.2d 596 (5th Cir. 1944)

cert. denied, 324 U.S. 865, 65 S.Ct. 913, 89 L.Ed. 1420

(1945); United States v. Conte, 300 F.Supp. 73 (D.Del.

1969); United States v. Learner, 298 F.Supp. 1104 (S.D.

111.1969); United States v. Zakutansky, 278 F.Supp. 682

(N.D.Ind.), aff'd, 401 F.2d 68 (7th Cir. 1968); In re Fahey,

192 F.Supp. 492 (W.D.Ky.), aff'd, 300 F.2d 383 (6th Cir.

1961). Consequently, orders will be issued requiring each

individual respondent to appear before Special Agent Grant

or his authorized representative to be sworn and to give

testimony or to claim a personal privilege as to particular

questions. An order will also issue requiring the respon-

dent, Hankins Lumber Company, Inc., to designate officers,

agents, or employees with knowledge of the required in-

formation to appear before Special Agent Grant or his

authorized representative to be sworn and to give the re-

quired testimony. United States v. Kordel, 397 U.S. 1, 90

S.Ct. 763, 25 L.Ed.2d 1 (1970). The corporation has, of

course, no Fifth Amendment privilege against self-incrim-

ination and will be required to produce knowledgeable

witnesses who will not be incriminated by their testimony.

Id.

[6, 7} 8. With respect to respondent McWilliams’

invocation of attorney-client privilege on behalf of his

client, Frances Hankins, as a bar to his testimony or pro-

duction of the estate settlement agreement, the burden of

proving both the existence and the extent of the attorney-

client privilege is squarely upon the party claiming it.

Bouschor v. United States, 316 F.2d 451 (8th Cir. 1963);

Colton v. United States, 306 F.2d 633 (2nd Cir. 1962), cert.

A58

denied, 371 U.S. 951, 83 S.Ct. 505, 9 L.Ed.2d 499 (1963);

United States v. Kovel, 296 F.2d 918, 923 (2d Cir. 1961);

Mattson v. Cuyuna Ore Co., 178 F.Supp. 653, 654 (D.Minn.

1959). Not only did McWilliams fail to demonstrate the

existence of any privileged communications between him-

self and his client, he failed even to demonstrate that the

client, to whom any such privilege belongs, desired its

invocation. Indeed, the government’s proof was to the

contrary. Finally, even assuming the existence of a priv-

ileged relationship, assuming confidential communications

between lawyer and client for the purpose of litigation or

legal advice, assuming that no waiver of privilege had oc-

curred, and assuming the client desired the privilege to

be asserted, it is clear that the estate settlement agreement

and the retails of the Boswell audit could under no cir-

cumstances be deemed privileged since they were shared

with an adversary of the client and in no way could be

construed as ‘‘confidential communications.” United States

v. Hodgson, 492 F.2d 1175 (10th Cir. 1974); United States

v. Finley, 434 F.2d 596 (5th Cir. 1970); In re Semel, 411

F.2d 195 (3d Cir.), cert. denied, 369 U.S. 905, 90 S.Ct.

220, 24 L.Ed.2d 181 (1969); United States v. Bartone, 400

F.2d 459, 461 (6th Cir. 1968), cert. denied, 393 U.S. 1027,

89 S.Ct. 631, 21 L.Ed.2d 571 (1969); United States v.

Harrington, 388 F.2d 520 (2d Cir. 1968); NLRB v. Harvey,

349 F.2d 900 (4th Cir. 1965); United States v. McDonald,

313 F.2d 832 (2d Cir. 1963); Colton v. United States, 306

F.2d 633 (2d Cir. 1962), cert. denied, 371 U.S. 951, 83

S.Ct. 505, 9 L.Ed.2d 499 (1963); McFee v. United States,

206 F.2d 872 (9th Cir. 1953); Pollock v. United States,

202 F.2d 281 (5th Cir. 1953); United States v. Long, 328

F.Supp. 233 (E.D.Mo.1971); United States v. Mellen, 28

Am.Fed.Tax R.2d 71-5392 (N.D.Ga.1971); United States v.

Dickinson, 308 F.Supp. 900 (D.Ariz.1969); United States

v. Berger, 16 Am.Fed.Tax R.2d 5224 (S.D.Fla.1965); In re

A59

Wasserman, 198 F.Supp. 564 (D.D.C.1961). See also United

States v. Kovel, 296 F.2d 918, 922 (2d Cir. 1961); Falsone

v. United States, 205 F.2d 734 (5th Cir.), cert. denied, 346

U.S. 864, 74 S.Ct. 103, 98 L.Ed. 375 (1953). Accordingly,

an order will be issued requiring Mr. McWilliams to appear

before Special Agent Grant or his authorized representa-

tive to be sworn to testify and to produce for inspection

and copying the estate settlement agreement.

[8] 9. With respect to the accounting workpapers

generated by respondent Smith’s preparation of the 1973

Hankins Lumber Company, Inc., federal corporate income

tax return, the only evidence before the court is that Mr.

Smith was an employee or officer of the corporation at

the time of its preparation. Such workpapers are there-

fore not the personal books or records of Mr. Smith held

in a personal or private capacity. United States v. Shlom,

420 F.2d 263 (2d Cir. 1969). They are rather corporate

records which enjoy no privileged status and which are

in the constructive possession of the corporation and its

president, A. Burton Hankins, and in the actual possession

of Mr. Smith in his representative capacity as an employee

of the corporation. Accordingly, an order will be issued

requiring the corporation, its president, A. Burton Hankins,

and its employee, Robert Lewis Smith, to appear before

Special Agent Grant or his authorized representative to

produce the 1973 corporate federal income tax return work-

papers.

[9,10] 10. With respect to the records of the Estate

of Bewel A. Hankins, it is clear that they were created

and maintained in A. Burton Hankins’ representative capac-

ity as Executor of the Estate and cannot enjuy the protec-

tion of his personal privilege against self-inerimination.

United States v. Egenberg, 443 F.2d 512 (3d Cir. 1971).

See also Bellis v. United States, 417 U.S. 85, 94 S.Ct. 2179,

A60

40 L.Ed.2d 678 (1974); Grant v. United States, 227 US. 74,

33 S.Ct. 190, 57 L.Ed. 423 (1913); Wheeler v. United States,

226 U.S. 478, 33 S.Ct. 158, 57 L.Ed. 309 (1913); United

States v. Cobb, 36 Am.Fed.Tax R.2d 75-5062 (6th Cir.

1975). Moreover, as records required to be created and

maintained by the probate laws of Mississippi, they would

not be entitled to the protection of Hankins’ Fifth Amend-

ment privilege. Shapiro v. United States, 335 U.S. 1, 68

S.Ct. 1375, 92 L.Ed. 1787 (1948); United States v. San Juan,

37 Am.Fed.Tax R.2d 76-810 (D.C.Vt.1975). The fact of

the termination of the estate is immaterial since it is the

nature of the records and not the status of the possessor

or owner which controls. Shapiro v. United States, supra;

United States v. San Juan, supra. Accordingly, an order

will be issued requiring A. Burton Hankins to appear be-

fore Special Agent Grant or his authorized representative

to produce all records of the Estate of Bewel A. Hankins.

[11]. 11. With respect to the Boswell audit papers

acquired by A. Burton Hankins from Attorney Tommy

M. McWilliams, ostensibly in furtherance of the estate set-

tlement agreement, the chronology of events described in

the findings of fact above suggest that the taxpayer was

embarked upon a course of action designed to obtain poten-

tial evidence against him before it fell into the hands of

the Internal Revenue Service. Such third-party evidence

obtained in such manner and for such purpose cannot be

shielded from government inspection. Fisher v. United

States, 425 U.S. 391, 96 S.Ct. 1569, 48 L.Ed.2d 39 (1976).

The government’s proof reflects that at the time of the

settlement agreement in 1972 and at the time A. Burton

Hankins sought possession of these records (and Mr.

McWilliams agreed to their turnover) in March or April

of 1974, Mr. Hankins was still the Executor of the Estate

of Bewel A. Hankins. Respondent Hankins offered abso-

A61

lutely no evidence showing that he sought and obtained

these records in any other capacity than as Executor of

the Estate and the court concludes that they are records

of the Estate acquired by Mr. Hankins in his representative

capacity. For this reason they cannot be withheld on the

basis of Mr. Hankins’ personal privilege against self-incrim-

ination. Accordingly, an order will be issued requiring

A. Burton Hankins to appear before Special Agent Grant

or his authorized representative to produce all books, rec-

ords, and papers delivered to him by attorney Tommy M.

McWilliams in connection with the settlement of the will

contest.

[12, 13] 12. With respect to the books and records

of the Hankins Lumber Company partnership, the evi-

dence shows that the company was a large, many-faceted

commercial venture of long duration, with numerous em-

ployees, substantial assets, and impressive gross receipts.

Its interrelationship in the lumber business with two sub-

stantial closely held corporations (each owned jointly by

the same partners) reflects the structured and organized

nature of the business. The incorporation of the successor

corporation within months of the termination of the part-

nership by the death of Bewel A. Hankins emphasizes the

continuity and organized nature of the business. Based

upon the foregoing the court concludes that the Hankins

Lumber Company was not the “small family partnership”

envisioned by the dictum in the Supreme Court’s decision

in Bellis v. United States, 417 U.S. 85 at 101, 94 S.Ct. 2179

(1974), which the court said might have dictated a dif-

ferent result, i. e., permitted invocation of a former part-

ner’s privilege against self-incrimination to bar compelled

production of the records of the former partnership.

Accord, United States v. Cobb, 36 Am.Fed.Tax R.2d 75-5062

(6th Cir. 1975) (two and three member law partnerships) ;

A62

United States v. Mahady & Mahady, 512 F.2d 521 (3d Cir.

1974) (four brother law partnership). The partnership

records do not, of course, lose that characteristic because

of the termination of the partnership. Bellis v. United

States, supra; Grant v. United States, 227 U.S. 74, 33 S.Ct.

190, 57 L.Ed. 423 (1913); Wheeler v. United States, 226

U.S. 478 (1913). Thus, A. Burton Hankins’ personal priv-

ilege against self-incrimination is not available to bar

production of the partnership records. Accordingly, an

order will be issued requiring A. Burton Hankins to appear

before Special Agent Grant or his authorized representative

to produce the books and records of the Hankins Lumber

Company partnership.

Petitioners’ attorneys may submit to the court for

entry within 10 days appropriate orders to give effect to

the decision of the court contained herein.

A63

APPENDIX D

ORDER

This cause coming on for a hearing on this date pur-

suant to this court’s order to A. Burton Hankins to show

cause why he should not be held in contempt for failing

to comply with this court’s previous orders of August 10,

1976;

The court, having heard testimony in open court, argu-

ment of counsel, and being further fully advised in the

premises;

The court finds as follows:

(1) That, upon the pleadings and the testimony and

the evidence presented, the United States has established a

prima facia case of contempt of this court by respondent

A. Burton Hankins;

(2) That respondent A. Burton Hankins has failed

to show cause why he should not be held in contempt of

this court’s orders of August 10, 1976;

IT IS THEREFORE ORDERED AND ADJUDGED

that respondent A. Burton Hankins is hereby committed

to the custody of the Attorney General of the United

States, or his authorized representative, until such time

as he purge himself of his contempt or until further order

of this court;

IT IS FURTHER ORDERED AND ADJUDGED, pro-

vided an appeal is taken from the above order, that the

commitment of respondent A. Burton Hankins is stayed

until Noon on Wednesday, June 1, 1977, unless the Fifth

A64

Circuit Court of Appeals or higher authority grants a stay

of execution of this order of commitment.

This 29th day of April, 1977.

/s/ Orma R. Smith

United States District Judge

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.