United States v. Walter Secor, 476 F.2d 766, 2d Cir. (1973)
United States v. Walter Secor, 476 F.2d 766, 2d Cir. (1973)
2d 766
73-1 USTC P 9342
Upon this appeal from a judgment of contempt for failure to comply with two
orders of the United States District Court for the Southern District of New York
directing appellant, Walter Secor, to comply with a summons issued by the
Internal Revenue Service ("IRS") pursuant to 26 U.S.C. Sec. 7602,1 the sole
error claimed by Secor is that the summons directing him to appear at the IRS
offices and to turn over certain records violated his Fifth Amendment privilege
against self-incrimination. That issue, however, had been raised earlier in a
proceeding instituted in the district court pursuant to 26 U.S.C. Secs. 7402(b)
and 7604(a)2 to enforce compliance with the IRS summons and had been
adjudicated against Secor by a decision and order of the district court from
which no appeal had been taken within the time prescribed by law.
Accordingly, since Secor is barred by the doctrine of res judicata from raising
the issue, we affirm the judgment of the district court.
The history of the government's efforts to interrogate Secor and of the legal
On December 13, 1971, the district court, acting upon a petition of the IRS,
issued to Secor an Order to Show Cause why he should not be compelled to
comply with the IRS summons served upon him in June. On December 30,
1971, Secor appeared in court and furnished an affidavit of the same date
prepared by his counsel, which reiterated his refusal to testify in response to the
summons, stating that he was contesting IRS assessments against him for the
years 1964-1967, that a tax deficiency had been assessed against him for the
year 1968 after he had refused to answer questions with respect to earlier
orders, and that he had been convicted in 1966 for failure to register and pay the
federal wagering tax. The conviction was set aside pursuant to the subsequent
decision in Marchetti v. United States, 390 U.S. 39, 88 S.Ct. 697, 19 L. Ed.2d
889 (1968), which held unconstitutional the wagering tax as violative of the
Fifth Amendment. Secor's affidavit requested that he be permitted the right to
invoke his constitutional privilege against self-incrimination, that the order to
show cause be dismissed, and that the summons issued by the IRS be cancelled.
With the issue thus joined, Judge Pierce in a memorandum opinion entered on
February 10, 1972, denied Secor's application, stating "The Court is not aware
that anyone has suggested criminal prosecution of respondent based on any
alleged gambling activities. . . . If such a situation eventuates, respondent may
then urge that his constitutional claims be measured against the Marchetti
case." Secor was ordered by the court "to obey the mandate contained in the
Internal Revenue Service summons which had been served upon him."
Secor neither obeyed the court's order nor took an appeal therefrom. On June
27, 1972, the court, upon the written application of the United States Attorney,
a copy of which was served on Secor's attorney, issued a second order directing
Secor to comply with the IRS summons by appearing at the IRS offices, this
time on July 10, 1972, and by producing the documents and records referred to
in the summons. Again Secor neither obeyed the court's order nor took an
appeal.
7604(b)3 for an order holding Secor in contempt because of his failure to obey
the court's two earlier orders. An evidentiary hearing was held in which the
only witness called by Secor was Revenue Agent Faletty; Secor also offered a
limited amount of documentary evidence. Secor's position was that he was not
guilty of contempt because he had been justified in refusing to obey the
summons on the ground that interrogation pursuant to it would violate his Fifth
Amendment rights.
7
Upon this appeal Secor asks us to reverse the judgment of contempt on the
ground that interrogation of him pursuant to the IRS summons would violate
his Fifth Amendment rights. However, we must first determine whether we are
precluded from determination of that issue, interesting though it may be, by
Secor's failure to take a timely appeal from the district court's earlier orders
directing him to comply with the IRS summons. The government urges that
when his time to appeal from the February 10, 1972 order expired the district
court's decision in this proceeding became res judicata as to the sole issue
which he now seeks to raise and that that order cannot now be collaterally
attacked. We agree.
The final and appealable nature of a district court's order enforcing an IRS
summons in a proceeding instituted pursuant to 26 U.S.C. Secs. 7402(b) and
7604 (a) was firmly established by the Supreme Court in Reisman v. Caplin,
375 U.S. 440, 84 S.Ct. 508, 11 L.Ed.2d 459 (1964). There the Court, affirming
the denial of declaratory and injunctive relief sought by attorneys for the
taxpayers against an IRS summons issued under Sec. 7602, held that the
taxpayers' constitutional rights were fully protected for the reason that in order
to enforce the IRS summons the government would be required to institute an
adversary proceeding in the district court (as it did here) for an order enforcing
the summons, in which the taxpayer could assert and litigate his constitutional
rights and appeal as a matter of right from an adverse decision and enforcement
order.
10 the Secretary or his delegate wishes to enforce the summons, he must proceed
"If
under Sec. 7402(b), which grants the District Courts of the United States jurisdiction
'by appropriate process to compel such attendance, testimony, or production of
"Furthermore, we hold that in any of these procedures either before the district
judge or United States Commissioner, the witness may challenge the summons
on any appropriate ground. This would include, as the circuits have held, the
defenses that the material is sought for the improper purpose of obtaining
evidence for use in a criminal prosecution, Boren v. Tucker, 239 F.2d 767, 772773, as well as that it is protected by the attorney-client privilege, Sale v.
United States [8 Cir.] 228 F.2d 682. . . . Finally, we hold that such orders are
appealable. See O'Connor v. O'Connell, 253 F.2d 365 (C.A. 1st Cir.); In re
Albert Lindley Lee Memorial Hospital, [209 F.2d 122 (C.A. 2d Cir.)]; Falsone
v. United States, [205 F.2d 734 (C.A. 5th Cir.)]; Bouschor v. United States, 316
F.2d 451 (C.A. 8th Cir.); Martin v. Chandis Securities Co., 128 F.2d 731 (C.A.
9th Cir.); D. I. Operating Co. v. United States, 321 F.2d 586 (C.A. 9th Cir.).
Contra, Application of Davis, 303 F.2d 601 (C.A. 7th Cir.). It follows that with
a stay order a witness would suffer no injury while testing the summons."
Reisman v. Caplin, 375 U.S. at 445-446, 449, 84 S.Ct. at 512-513.
15
Accord, Daly v. United States, 393 F.2d 873, 876 (8th Cir. 1968) ("The order of
the trial court in enforcing the summons of the revenue agent became an
appealable order upon its proper entry. . . . [t]he order entered was similar to a
final judgment in any other case"); see McGarry's Inc. v. Rose, 344 F.2d 416
(1st Cir. 1965); Tillotson v. Boughner, 327 F.2d 982 (7th Cir. 1963).
16
Since the district court's February 10, 1972, decision and enforcement order
represented a final adjudication of Secor's Fifth Amendment defense, he cannot
now turn back the hands of the clock and retry an issue that was litigated on the
merits in an adversary proceeding where due process requirements were fully
observed. To permit such a collateral attack would be to make a mockery of the
well settled doctrine of res judicata. See Oriel v. Russell, 278 U.S. 358, 49 S.Ct.
173, 73 L.Ed. 419 (1929); Baldwin v. Iowa State Traveling Men's Association,
283 U.S. 522, 51 S.Ct. 517, 75 L.Ed. 1244 (1931); Durfee v. Duke, 375 U.S.
106, 83 S.Ct. 509, 9 L.Ed.2d 496 (1963); Daly v. United States, 393 F.2d 873
(8th Cir. 1968). The situation here is in all legally significant respects the same
as that before the Supreme Court in Oriel, supra, where it held, in a contempt
proceeding for violation of a bankruptcy court turnover order, that the bankrupt
was precluded from relitigating defenses raised and tried in the earlier turn-over
proceeding itself, resulting in a final order from which no appeal had been
taken.
17 would be a disservice to the law if we were to depart from the longstanding rule
"It
that a contempt proceeding does 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. The 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 turnover as in other
proceedings, only after legal grounds are shown and only when it appears that
obedience is within the power of the party being coerced by the order. But when it
has become final, disobedience cannot be justified by re-trying the issues as to
whether the order should have issued in the first place." Maggio v. Zeitz, 333 U.S.
56, 69, 68 S.Ct. 401, 408, 92 L.Ed. 476 (1948). See also 9 J. Moore, Federal Practice
p 110.13 at 168-69 (2d ed. 1972).
18
These principles apply with equal force here, where we are not confronted with
any contention that Secor was denied due process in the enforcement
proceeding or that he was barred from raising his Fifth Amendment claims on a
question-by-question basis before the IRS. The latter procedure might have
represented at least an effort to furnish non-incriminatory information to the
IRS and have permitted the court to rule on specific questions claimed to be
incriminatory. But Secor simply refused on Fifth Amendment grounds to
submit to any interrogation.
19
Since Secor is thus barred by res judicata from raising again the issue of
whether he properly invoked his privilege against self-incrimination, we need
not consider on the merits his claim that enforcement of the IRS summons
would violate the Fifth Amendment.4
20
Although Secor does not raise the issue, we note that there was ample evidence
in the record to support the district court's finding of contempt. His conduct in
refusing to comply with the district court's February 10, 1972 enforcement
order was not free of contumacy. Upon the entry of that order he faced the
choice of complying or taking an appeal. Instead of following either course, he
deliberately defied the order. Four months later, when the court entered its
second enforcement order in the hope that Secor might comply, he adhered to
his course of disobedience. The order holding him in contempt was fully
justified and is affirmed.