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Austin Liquor Mart, Inc. v. Dept. of Revenue

MARCH 27, 1974.

AUSTIN LIQUOR MART, INC., PLAINTIFF-APPELLEE,

v.

THE DEPARTMENT OF REVENUE, DEFENDANT-APPELLANT.



APPEAL from the Circuit Court of Cook County; the Hon. DANIEL A. COVELLI, Judge, presiding.

MR. JUSTICE DIERINGER DELIVERED THE OPINION OF THE COURT:

The defendant, Department of Revenue of the State of Illinois, brought this appeal from a decree of the Circuit Court of Cook County, heard on remand from the Supreme Court of Illinois (Austin Liquor Mart, Inc. v. Department of Revenue (1972), 51 Ill.2d 1), quashing subpoenas and enjoining the Department of Revenue from examining certain books and records. Upon remand the court held that he first was required to determine whether the taxpayer was being harassed:

"THE COURT: In the event that I find they are being harassed, you are not entitled to subpoena.

MR. BROMBERG (Assistant Attorney General): That is correct."

Accordingly, the court ordered evidence presented on that issue.

The issues for review are whether the supreme court, in remanding the cause for further proceedings, intended the circuit court to determine whether there was evidence of abuse of the court's process, and whether there is evidence to support the determination by the trial court that there was an abuse of the court's process resulting from the harassment of the plaintiff.

At the end of July, 1969, the plaintiff submitted its books and records to the Department for the 3-year period, August 1, 1966, to July 31, 1969, seeking a release from liability under the Retailers' Occupation Tax Act in order to sell one of a chain of retail liquor stores which it owned and operated in Cook County.

The Department kept the books and records until August 19, 1969, when it issued a notice of tax liability in the amount of $15,194.28, which the plaintiff paid on the following day.

The Supreme Court of Illinois reviewed that part of this case wherein the trial court had enjoined the Department of Revenue of the State of Illinois from examining the plaintiff taxpayer's books and records a second time, after the plaintiff had paid the assessment, as levied by the Department, in full. The case at that point did not contain any evidence or testimony regarding harassment or threats to the taxpayer because the trial court had not heard that question. In a four-to-three opinion, the supreme court remanded the cause to the circuit court, citing the case of United States v. Powell, 379 U.S. 48, 58, 13 L.Ed.2d 112, 120, 85 S.Ct. 248, 255, which case discusses harassment of a taxpayer and the abuse of judicial process.

In the instant case, the circuit court, after remand, heard testimony as to the arrest and treatment of the plaintiff corporation and its officers by the Revenue Department agents and made the following findings: (1) that the issuance of the first and second subpoenas duces tecum was an abuse of judicial process, violated the law of the State of Illinois, and did harass and discriminate against the plaintiff; (2) that the Department was not authorized by law to arrest any taxpayer without issuance of an arrest warrant upon proper affidavit by a court of competent jurisdiction; that the Department did so make an illegal arrest in this case and did undertake to assume power not delegated to it by the legislature; (3) that the legislature has delegated to the Department the right to file a complaint under oath in a court of competent jurisdiction and ask that a warrant for the arrest of a disobedient taxpayer be issued; that the Department did not follow this procedure and singled out the plaintiff herein and with 12 to 14 agents of the Department went to the taxpayer's place of business with an unverified complaint; that the Department did not properly and legally file an affidavit and complaint with the clerk of the Circuit Court of Cook County and did not appear with said complaint and affidavit before a judge of the Circuit Court of Cook County and ask that a warrant issue, and that the failure to conform to this basic rule is an abuse of judicial process; and (4) that the arrest, taking into custody, jailing and fingerprinting of the officers of the taxpayer corporation was an abuse of judicial process in that the Department has singled out, discriminated and harassed this plaintiff. Wherefore, the court ordered, adjudged and decreed:

"The plaintiff's motion to quash the subpoena duces tecum issued by the Department of Revenue on November 24, 1969 and a second subpoena duces tecum issued by the Department on December 2, 1969, directed to the plaintiff to produce all its books and records for the period January 1, 1967 to November 24, 1969, is sustained and the subpoenas duces tecum are hereby quashed, dismissed and held for naught and that the defendant Department of Revenue, the Director, and their agents, representatives and or successors are permanently enjoined and restrained from conducting any investigations or holding any hearings pertaining to the Retailers' Occupation Tax Act in any manner whatsoever including sales records and reports, journals, ledgers, invoices, bills of sale, Federal Income Tax * * * and all other business operations of plaintiff pertaining to said operation for the period August, 1966 to July 31, 1969 and the Department's motion filed December 1, 1972 to produce plaintiff's books and records for said period is denied in its entirety."

The record shows that on November 24, 1969, the Department issued a subpoena duces tecum directing the plaintiff to produce all of its books and records for the period January 1, 1967, to November 24, 1969. The plaintiff's attorney appeared and filed a motion to quash, alleging no prior notice, harassment and an improper subpoena. The motion was taken under advisement by the hearing officer, but prior to a decision, another subpoena duces tecum was issued seeking the production of the books and records for the same period. The plaintiff's attorney again made a motion to quash and it was again taken under advisement by the hearing officer.

Both motions to quash were denied on December 8, in a letter to the plaintiff's attorney, who then appeared before the hearing officer complaining about the implied threat of arrest contained in the letter by reference to section 452 of the Retailers' Occupation Tax Act (Ill. Rev. Stat. 1969, ch. 120, § 452), which is penal in character, and also complaining that the Department considered the subpoenas as first and second demands for the books and records.

In reply to his argument the hearing officer stated, "The last thing this Department is interested in is arresting these clients of yours."

Two days later, without any further communication with the taxpayer, its lawyer, or the officers of the corporation, Anthony and Benedict Fillichio were arrested by agents of the Department. Six agents led by John Johnson appeared at the store where the arrest was made and other agents appeared at various of the other stores in the chain. Only two witnesses testified in the instant trial, both agents of the defendant Department of Revenue, called by the plaintiff.

Mr. Johnson testified that for 14 years prior to his employment with the Department, he was warden of the Cook County Jail. His formal educational background included 2 years at Northwestern University in police administration and criminology. He has had some 32 years' experience working in the area of criminology, dealing with arrests and people who commit crimes. On December 12, 1969, he was employed by the Department as an investigator. On that date there were approximately 14 or 15 investigators in the Department's Chicago office. He further testified that on December 12, he arose at 5:30 A.M. for an early morning meeting at Dempster and Waukegan Avenues with three other investigators (Maloney, Kelleher and Beason) so as to get together to proceed to the taxpayer's premises in Glenview. They had received their orders on December 11 from John Gallagher in the Department's Chicago office. Other officers of the Department were assigned to the investigation of the taxpayer that day; Johnson estimated about 10 or 12, but he did not know how or where they were assigned.

They proceeded in two cars to the taxpayer's Glenview store and arrived about 7:30 A.M. The three other investigators waited in the car while Johnson entered the store next door to the taxpayer's offices and spoke to a clerk. He identified himself and asked if either the president or vice president of the taxpayer was there. Neither was in the store. He left the store and with another agent ten minutes later went next door to the taxpayer's offices where he had identified himself to Benedict Fillichio, taxpayer's vice president. Johnson testified he showed his credentials, stated he was there as an agent of the Department, and that if Benedict failed to produce the books and records, he was authorized to make an arrest. Benedict stated he had no such authority and would have to get Mr. Anthony Fillichio. Benedict then asked to make a telephone call.

Johnson further testified that he then had a telephone conversation with Anthony Fillichio, taxpayer's president, who wanted to know what it was all about. Johnson stated he was there to see the books and records. (Johnson later admitted that at the criminal proceeding he told Anthony Fillichio on the telephone that they were there to make an arrest if the books were not shown.) Anthony then stated he would come to the premises and arrived 10 to 15 minutes later, or about 11 A.M.

When he arrived, Johnson stated they were there to see the books and records. Anthony said that the books and records Johnson was after were not on the premises. Johnson then told him he would have to place both Anthony and Benedict under arrest, which he did. Johnson later stated that before making the arrests he called one Edward Meeci at the Department's office, who confirmed his prior directions to ...


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