Appeal from the Order of the United States Tax Court; William Drennan, Judge.
Cummings and Pell, Circuit Judges, and Prentice H. Marshall, District Judge.*fn*
This is an appeal from a decision of the Tax Court holding taxpayer-appellants, Raymond and Helen Ryan, in contempt of court for refusing to answer seven interrogatories propounded by appellee, Commissioner of Internal Revenue. The issue is whether the Tax Court properly rejected the Ryans' claims of Fifth Amendment privilege, and of marital privilege. Additionally, we must decide whether the Tax Court properly rejected the Ryans' contention that they need not answer because the interrogatories were the product of illegal governmental surveillance upon the Ryans, and deferred consideration of the Ryans' underlying claims of illegal governmental conduct until the hearing of the Ryans' motion to suppress. We hold that the court below ruled correctly and affirm its decision in all respects.
Before discussing the complex procedural history of this case and of the issues raised, it is appropriate to commend Judge Drennan of the Tax Court for his diligent efforts in administering this litigation. In a proceeding punctuated by stalls and appeals, he has exercised extraordinary patience in pressing for a trial over the course of this litigation, now in its eighth year.
A detailed recitation of the early course of the Tax Court proceedings would serve no purpose here. That history has been recounted in the opinion of the Tax Court and in a previous, premature appeal of this case, Ryan v. C.I.R., 517 F.2d 13 (7th Cir. 1975). The following statement is sufficient.
In September, 1969, the Ryans filed a petition in the Tax Court for a redetermination of deficiencies in income taxes assessed by the Commissioner for the taxable years 1958 through 1962, 1964 and 1965. In order to obtain information about allegedly questionable dealings between the Ryans and a Swiss bank in a form admissible in Tax Court, the Commissioner spent several years attempting to take depositions of Swiss bank officials pursuant to an agreement between the United States and Switzerland, the Double Taxation Convention of 1951.
In 1972, while the Commissioner's efforts were proceeding, the Ryans filed a "Motion to Suppress and to Enjoin all Proceedings Based upon Evidence Illegally Obtained and Illegally Derived from Grand Jury Investigations of Petitioners" (motion to suppress). In this motion the Ryans alleged that federal agents had obtained damaging information by abusing grand jury process and by illegal searches and seizures of their papers. The Ryans then served subpoenas on several Internal Revenue Service (IRS) agents and other federal officials seeking information about any illegal electronic surveillance of the Ryans. The Commissioner moved to quash the subpoenas, and this motion was called for a hearing at the same time as the Ryans' motion to suppress. At a hearing on November 16, 1972, Judge Drennan tried to determine what facts, if proved, would justify suppression of evidence at trial. He sought to define the issues on any subsequent evidentiary hearing on the motion to suppress with sufficient clarity so that the evidentiary hearing would be manageable. Without making a final determination regarding the legal grounds for suppression, Judge Drennan limited the evidence at the suppression hearing to three topics: a meeting of the Commissioner's agents with Ryan Oil Company representatives in 1965, electronic surveillance of the Ryans, and illegal use of grand jury subpoenas by the Commissioner. Insofar as the motion sought to enjoin proceedings, it was denied on the grounds that the court lacked the power to enter such an order. Late in 1973, the Ryans moved to suspend the hearing on their motion to suppress until trial, apparently under the assumption that the trial would be held early in 1974. This motion was granted.
But on January 1, 1974, the new Rules of Practice and Procedure of the United States Tax Court (Tax Court Rules) became effective and set the stage for the instant appeal. These rules provide for discovery methods, including interrogatories to parties, similar to those of the Federal Rules of Civil Procedure. Without abandoning his attempt to secure information from the Swiss banking officials, the Commissioner served seven interrogatories upon the Ryans seeking information as to any relationships or transactions between the Ryans and the Commercial Credit Bank of Zurich, Switzerland, or with one Carl W. Hirschmann between 1958 and 1965.*fn1
The Ryans objected to the interrogatories, resting on their constitutional privilege against self-incrimination. Rejecting the claim of privilege, the Tax Court granted the Commissioner's motion to compel answers. The Ryans appealed that order to this court. The appeal was dismissed for lack of jurisdiction because the order was not a final judgment. This court suggested that the proper avenue for appellate review of the order would be for the Ryans to risk a contempt citation. Ryan v. C.I.R., 517 F.2d 13 (7th Cir. 1975).
In the meantime, the United States Attorney for the District of Columbia obtained an order in the United States District Court for the District of Columbia granting the Ryans use immunity in exchange for their testimony, pursuant to 18 U.S.C. §§ 6002 and 6003. This order directed the Ryans "to give testimony or provide other information and to produce documents which they refuse to give or to provide on the basis of their privilege against self-incrimination as to all matters about which they may be interrogated before the United States Tax Court." App. 23a-24a. The Ryans appealed the order granting immunity to the Court of Appeals for the District of Columbia Circuit. That appeal was dismissed for lack of jurisdiction on the grounds that the order granting immunity was not a final, appealable order. In re Ryan, 176 U.S. App. D.C. 87, 538 F.2d 435 (1976). That court also noted that the proper method to litigate the validity of the immunity order would be through contempt proceedings, which would be subject to appellate review.
On remand, the Ryans persisted in their refusal to answer the interrogatories, asserting for the first time that the marital privilege justified their refusal to answer the interrogatories. The Tax Court set a hearing on August 18, 1976 to rule on the Ryans' claim of marital privilege and to determine what, if any, sanctions should be imposed against the Ryans. On the day of the hearing, the Ryans filed an 87 page brief entitled "Request that No Sanctions be Imposed upon Them and for Other Relief." This brief resuscitated the Fourth Amendment claims previously asserted in their motion to suppress, which they had previously urged be deferred until trial. This time, however, the Ryans asserted that the alleged illegal government conduct justified not only the exclusion of the tainted evidence at trial, but also justified their refusal to answer interrogatories.
Following a hearing, the Tax Court entered an order holding the Ryans in contempt of court for their refusal to obey the earlier order that they answer the interrogatories. The Court imposed a fine upon Raymond Ryan. In its memorandum opinion, the Tax Court rejected the Ryans' Fifth Amendment claims because the Ryans had not established a reasonable apprehension that they would be prosecuted for any crime connected to the information sought in the interrogatories. Specifically, the Tax Court noted that the questions were innocuous, that no criminal prosecutions were then pending against the Ryans, and that the statute of limitations had run for any prosecutions for the years referred to in the interrogatories. Without passing on the validity of the immunity order, the Court said that the order supported its independent conclusion that the Ryans had nothing to fear from answering the interrogatories. Next, the Tax Court rejected the Ryans' claim of marital privilege because the privilege against adverse spousal testimony is only applicable in criminal proceedings. Finally, without ruling on the merits of the Ryans' claim of illegal governmental conduct, the Court held that these contentions, which were referred to as Fourth Amendment claims, were premature and should be raised in the Ryans' motion to suppress, scheduled for hearing at the time of trial. It is from the contempt order that the Ryans appeal.
After oral argument was held in this case, Raymond Ryan died and the Commissioner filed a suggestion of death of a party pursuant to F.R.A.P. 43(a). At our request, the parties have filed memoranda which take the position that the action is not moot but continues in full force with respect to appellant Helen Ryan and to the Estate of Raymond Ryan, since the civil contempt sanctions remain effective against them. The Tax Court has entered an order substituting the Estate of Raymond Ryan for Raymond Ryan. We agree with the parties and hold that the controversy is not altogether moot. See Wetzel v. Ohio, 371 U.S. 62, 83 S. Ct. 111, 9 L. Ed. 2d 26 (1962) (Douglas, J., concurring). The Tax Court, however, also deemed it appropriate to impose a criminal sanction upon Raymond Ryan alone and fined him $1,000 as punishment for his wilful disobedience of its orders. It may be that Mr. Ryan's death moots the imposition of this particular sanction. Death of a criminal defendant while his appeal is pending moots the prosecution and requires the appellate court to dismiss the appeal, vacate the judgment, and remand to the district court with instructions to dismiss the indictment. United States v. Moehlenkamp, 557 F.2d 126 (7th Cir. 1977). Nevertheless, ...