# Petition — Hankins v. United States

> Briefs, arguments, decisions, and more.

URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385005_2064%3A1

## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition
- **Published:** January 1, 1979
- **Citation:** 440 U.S. 909

## 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

ll

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

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
ae

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)

5

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

6

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

7

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,

8

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.

9

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

10

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”.

11

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).

12

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.

13

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.

I,

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

14

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.

15

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

16

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

17

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).

18

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)

19

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,

20

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)

21

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,

22

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,

23

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-

24

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

25

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-

26

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

Al

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,

v.

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

A2

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

A3

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.

A4

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.

A5

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.

A6

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,

AT

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

A8

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-

_

A9

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

a

— 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,
v.
A. Burton HANKINS et al., Respondents,
v.
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,
v.
HANKINS LUMBER CO., INC., et al., Respondents.

UNITED STATES of America et al., Petitioners,
v.
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.

[Text truncated at 120,000 characters. The full text is on the page linked above.]

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385005_2064%3A1. Public record. Not legal advice.