United States District Court, Northern District of Illinois, E.D
November 24, 1964
M. JAY PERKAL, SPECIAL AGENT, INTERNAL REVENUE SERVICE,
ARTHUR T. RAYUNEC, AUDITOR OF LASALLE NATIONAL BANK, CHICAGO, ILLINOIS.
The opinion of the court was delivered by: Marovitz, District Judge.
Petition to enforce Internal Revenue Summons.
Intervenor's motion to dismiss petition, and to quash summons.
This action has been brought pursuant to the provisions of
Sections 7402(b) and 7604 of the Internal Revenue Code of 1954
(Secs. 7402(b), 7604, Title 26 U.S.C.) to obtain an order
directing the respondent auditor of the LaSalle National Bank to
comply with the requirements of an Internal Revenue Summons, and
produce certain records which are needed to complete a federal
tax investigation. The taxpayer, Robert E. Gartland, has moved
for leave to intervene pursuant to Rule 24(a)(2) of the Federal
Rules of Civil Procedure, to dismiss said petition, and to quash
In support of his motions, the taxpayer argues that he is the
real party in interest and that the LaSalle National Bank was
merely acting as his agent to carry on his banking affairs.
Therefore, the taxpayer contends, if compliance with the summons
is ordered, he will be denied his constitutional privileges
against self-incrimination and unreasonable search and seizure.
This argument must fail. Through the enactment of Sections 6201
and 7602, Title 26, U.S.C. Congress has authorized the Secretary
of the Treasury to determine whether income tax returns correctly
include the true taxable income of the taxpayer. In furtherance
of this objective, Congress has armed the Internal Revenue
Service with the power to examine all relevant and material
records, Sec. 7602(1), and to issue an administrative summons,
Sec. 7602(2) to require their production. The primary question
before the Court today is whether a taxpayer may assert a
privilege to block an inspection of third party records when the
summons has been issued to said third party. It would seem to be
settled law that the taxpayer has no standing to object to their
In Zimmermann v. Wilson (3rd Cir., 1939) 105 F.2d 583, at pp.
585, 586, the Court stated:
"Since our former decision the Circuit Court of
Appeals for the Second Circuit in McMann v.
Securities and Exchange Comm., supra [2 Cir.,
87 F.2d 377], has held, on an application involving a similar
situation, that immunity under the Fourth Amendment
is a personal right, not evocable by the customer who
cannot object to the production of papers belonging
to his broker. No protection was afforded him by the
relationship, which was not confidential, such as
that of client, penitent, patient or spouse. * * *
"Following the McMann case Judge Patterson * * *
held that an executrix could not object to the
issuance of a summons to a bank for the production of
papers belonging to the bank relating to the income
liability of the decedent, where the statute had run:
In re Upham's Income Tax, D.C., 18 F. Supp. 737. * * *
"Our present view that a third party (the taxpayer)
is not entitled to invoke the protection of the
Fourth Amendment brings our decision in line with the
overwhelming weight of authority."
And further, in DeMasters v. Arend (9th Cir., 1963)
313 F.2d 79, 85, the Court stated at footnote 11:
"Fourth Amendment rights do not depend upon nice
distinctions of property law * * *, but the taxpayers
had no interest in the bank's records of the kind the
Fourth Amendment was intended to protect. Their
interest was no different nor greater than that which
they would have in denying appellants access to
documentary evidence belonging to, in the possession
of, and to be produced by, any third person, which
might contain information damaging to the taxpayers."
See also Application of Magnus (2d Cir., 1962) 299 F.2d 335;
Foster v. United States (2d Cir., 1959) 265 F.2d 183
, 187, 188.
It would therefore appear that the case law clearly states that
a taxpayer is without standing to defeat compliance with a
Section 7602(2) summons directed to a third party asking for
production of that party's own records.
Reisman v. Caplin, 375 U.S. 440, 84 S.Ct. 508, 11 L.Ed.2d 459
(1964) on which the taxpayer relies, does not support his
position. Although the Court stated there by way of dicta that
parties affected by a disclosure may appear and assert their
claims, there is no reference made to the situation at bar in
which the taxpayer seeks to quash a summons directed to an
independent bank for production of its own records. Indeed
the case relied on by the Supreme Court for the statement cited
by the taxpayer, In re Albert Lindley Lee Hospital, (2d Cir.,
1953) 209 F.2d 122, was decided by the Second Circuit six years
before the Foster case, supra, and nine years before the Magnus
In light of this Court's holding, we do not reach taxpayer's
objections as to privilege, probable cause, vagueness, and
oppressiveness. These are objections properly made by the bank
itself, and not by the taxpayer. Inasmuch as the respondent
auditor of the LaSalle National Bank stands ready, without
objection to turn over the records, he shall be ordered to comply
with the summons.
Accordingly, the motions of Robert E. Gartland, applicant for
intervention, are denied. Pursuant to authority granted this
Court by Sections 7402(b) and 7604, Title 26, U.S.C. the
petition to direct respondent to produce those records requested
by the summons is granted.
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