Opinion
No. 546 C.D. 2013
01-03-2014
Borough of Versailles and Barbara Warhold, Business Privilege Tax Collector v. Ingram's Cleaning Service, T. Patrick Ingram and Cynthia Ingram, t/d/b/a Ingram's Cleaning Service, and T. Patrick Ingram and Cynthia Ingram, Individually, Appellants
BEFORE: HONORABLE DAN PELLEGRINI, President Judge HONORABLE MARY HANNAH LEAVITT, Judge HONORABLE ROCHELLE S. FRIEDMAN, Senior Judge
OPINION NOT REPORTED
MEMORANDUM OPINION BY JUDGE LEAVITT
Ingram's Cleaning Service, T. Patrick Ingram and Cynthia Ingram, t/d/b/a Ingram's Cleaning Service, and T. Patrick Ingram and Cynthia Ingram, individually (Taxpayers), appeal an order of the Allegheny County Court of Common Pleas (trial court) requiring them to produce tax returns for years 2000 through 2011. Taxpayers argue that the documents are protected by the privilege against self-incrimination. We affirm.
On September 21, 2011, the Borough of Versailles and Barbara Warhold, Business Privilege Tax Collector (collectively, Borough), filed a complaint alleging that Taxpayers have been operating a business since 2000 without filing an annual gross receipts return or paying the business privilege taxes owed under the Borough's Business Privilege Tax Ordinance (Tax Ordinance). Thereafter, on February 1, 2012, the Borough requested Taxpayers to produce their federal income tax returns for the years 2000 through 2011. When Taxpayers did not respond, the Borough filed a motion to compel discovery. Taxpayers opposed the motion and filed a motion for protective order, asserting that the documents were protected from discovery by their privilege against self-incrimination. After hearing oral argument on September 7, 2012, the trial court granted the motion to compel and ordered Taxpayers to produce the tax returns within 10 days.
BOROUGH OF VERSAILLES TAX ORDINANCE NO. 468, ENACTED DECEMBER 27, 1979. A copy of the Tax Ordinance is attached to the Borough's amended complaint. The Tax Ordinance imposes a tax at the rate of 6 mills per dollar of the gross annual receipts of each business in the Borough. TAX ORDINANCE, SECTION III. Borough businesses must file a return providing the information necessary to calculate the gross annual receipts. TAX ORDINANCE, SECTION IV. The Borough tax collector is authorized to enforce the Tax Ordinance. TAX ORDINANCE, SECTION VII.
When Taxpayers did not provide the tax returns, the Borough filed a motion for sanctions. After oral argument on the motion for sanctions, the trial court directed the parties to submit briefs on the specific issue of whether Taxpayers' tax returns were privileged by reason of the Fifth Amendment. After considering the parties' briefs, the trial court issued an opinion and order on December 18, 2012. First, the trial court explained that it had granted Taxpayers' request for reconsideration of the court's earlier order compelling Taxpayers' production of documents. Second, the trial court addressed the merits of the motion to compel and held that the tax returns were not protected information because the Tax Ordinance was a civil, not a criminal, statute. Further, by filing federal tax returns, Taxpayers had waived any privilege to keep the information on those tax returns confidential.
Taxpayers have appealed to this Court. On appeal, Taxpayers raise one issue, i.e, that the trial court's order to produce federal tax returns violates their right against self-incrimination.
Our standard of review is deferential where we consider whether the trial court committed an abuse of discretion in entering a discovery order. MarkWest Liberty Midstream & Resources, LLC v. Clean Air Counsel, 71 A.3d 337, 342 (Pa. Cmwlth. 2013). Where we are faced with a question of law, our scope of review is plenary. Id.
As an initial matter, we decide the threshold issues this Court directed the parties to address in their briefs: whether the trial court's order of September 7, 2012, could be reconsidered and whether the trial court's order of December 18, 2012, was an appealable order. Taxpayers did not address these threshold issues, but the Borough did.
The April 10, 2013, order states as follows:
Upon review of the transfer from the Superior Court of Pennsylvania, the parties shall address in their principal briefs on the merits the appealability of the December 18, 2012 order of the [trial court] granting [the Borough's] motion to compel discovery pursuant to Pa.R.A.P. 313 and shall further address the order's appealability where the trial court docket entries fail to show that [Taxpayers] filed a motion for reconsideration of the trial court's September 7, 2012 [order] (which first granted the [Borough's] motion to compel discovery) and that the trial court expressly granted reconsideration of the September 7, 2012 order.
Section 5505 of the Judicial Code allows a court to change an order, and it states:
Except as otherwise provided or prescribed by law, a court upon notice to the parties may modify or rescind any order within 30 days after its entry, notwithstanding the prior termination of any term of court, if no appeal from such order has been taken or allowed.42 Pa. C.S. §5505. Once the 30-day period has passed, the trial court lacks jurisdiction to act. However, Section 5505 applies only to final orders. Commonwealth v. Nicodemus, 636 A.2d 1118, 1120 (Pa. Super. 1993). An order resolving a discovery dispute is an interlocutory order, not a final order. Ben v. Schwartz, 556 Pa. 475, 479-80, 729 A.2d 547, 549-50 (1999). Accordingly, a trial court has the authority, even after the expiration of 30 days, to modify an interlocutory order. Buehl v. Horn, 728 A.2d 973, 977 (Pa. Cmwlth. 1999). The fact that an interlocutory order may in some cases be appealable, such as a collateral order, "does not transform the order into a final one" for purposes of Section 5505 of the Judicial Code. Commonwealth v. James, ___ Pa. ___, 69 A.3d 180, 185 (2013). We conclude, therefore, that the trial court had authority to reconsider its September 7, 2012, order even after 30 days had elapsed.
Next, we consider whether the trial court's order of December 18, 2012, is appealable as a collateral order. A collateral order is identified as follows:
(a) General rule. An appeal may be taken as of right from a collateral order of an administrative agency or lower court.Pa. R.A.P. 313. The note following Pa. R.A.P. 313 explains that "[i]f an order falls under Rule 313, an immediate appeal may be taken as of right simply by filing a notice of appeal. The procedures set forth in Rules 341(c) [for final orders] and 1311 [for interlocutory appeals by permission] do not apply under Rule 313." Pa. R.A.P. 313, note.
(b) Definition. A collateral order is an order separable from and collateral to the main cause of action where the right involved is too important to be denied review and the question presented is such that if review is postponed until final judgment in the case, the claim will be irreparably lost.
In Berkeyheiser v. A-Plus Investigations, Inc., 936 A.2d 1117, 1123-24 (Pa. Super. 2007), the Superior Court explained that "Pennsylvania courts have held that discovery orders involving potentially confidential and privileged materials are immediately appealable as collateral to the principal action." Taxpayers claim that a constitutional privilege is implicated regarding the production of their federal tax returns. This is sufficient to allow an appeal of the trial court's order of December 18, 2012.
We turn, then, to the merits of Taxpayers' constitutional claim. Both the Pennsylvania and the United States Constitutions create a privilege against self-incrimination. Article 1, Section 9 of the Pennsylvania Constitution states that "[i]n all criminal prosecutions the accused ... cannot be compelled to give evidence against himself." The Fifth Amendment to the United States Constitution provides that "[n]o person ... shall be compelled in any criminal case to be a witness against himself." In Commonwealth v. Swinehart, 541 Pa. 500, 512, 664 A.2d 957, 962 (1995), our Supreme Court held that the two constitutional provisions offer nearly identical protection. The only distinction is that the Pennsylvania Constitution provides more protection where the citizen's reputation is at stake; however, the reputation of Taxpayers is not an interest implicated in this appeal.
Taxpayers claim that the business is a sole proprietorship. Thus, the tax records the Borough is seeking belong to individuals, not agents of a business or a corporate entity. In the pleadings, Taxpayers identify T. Patrick Ingram as the sole proprietor of the business. --------
Taxpayers argue that because violations of the Tax Ordinance can be punished by fines, it is a quasi-criminal statute for purposes of the Fifth Amendment. In support, Taxpayers cite to City of Philadelphia v. Kenny, 369 A.2d 1343 (Pa. Cmwlth. 1977), in which this Court held that enforcement of a municipal Tax Ordinance is procedurally civil, but can have criminal consequences if the Tax Ordinance authorizes fines and imprisonment for violations. Although the Borough is not attempting to fine Taxpayers, the Fifth Amendment privilege "does not turn upon the type of proceeding in which its protection is invoked ... [and] can be asserted in any proceeding in which the witness reasonably believes that the information sought, or discoverable as a result of his testimony, could be used in a subsequent state or federal criminal proceeding." Commonwealth v. Brown, 26 A.3d 485, 494 (Pa. Super. 2011) (emphasis added).
The Tax Ordinance authorizes the imposition of a fine of $300 for failure to file a tax return and imprisonment of up to 30 days upon failure to pay the fine. TAX ORDINANCE, Section IX. Taxpayers argue that these sanctions make the Tax Ordinance a criminal statute for purposes of their Fifth Amendment privilege. However, it has not yet been determined that they are required to file the return or pay a business privilege tax to the Borough. In any case, we need not resolve this issue because Taxpayers have waived their right to assert that the information on their federal tax returns is privileged.
The trial court held that the federal tax returns were not privileged based upon the holding of the United States Supreme Court in Garner v. United States, 424 U.S. 648 (1976). In that case, the taxpayer revealed himself to be a gambler on his federal income tax return, and that admission was used against him when he was charged with a federal gambling conspiracy offense. Garner argued that using his tax return against him violated his privilege against self-incrimination. The Supreme Court disagreed. The Fifth Amendment guarantees citizens the right to remain silent. However, to claim the privilege, one cannot volunteer information and later claim it is privileged. The taxpayer chose to disclose the information on his tax return, and this act waived the privilege. In the case of a custodial interrogation, there must be an intelligent waiver of the privilege against self-incrimination. However, a custodial interrogation is not analogous to completing a tax return, which can be done at leisure and with legal assistance. Simply, the disclosure of information on a tax return is not subject to the psychological pressures of a police interrogation.
In Garner, the taxpayer argued that the information on his tax return was "compelled" because it was required by law. Rejecting this argument, the Supreme Court held that where the income tax return questions were neutral on their face, and not designed to elicit incriminating statements, the mere fact that the law requires the filing of a return does not create a "compulsion." Because the taxpayer made disclosures, instead of claiming the privilege on his tax return, his disclosures were not compelled statements. Accordingly, the taxpayer was not able to assert the privilege when the information in the tax return was used against him in a criminal prosecution.
Taxpayers do not and cannot distinguish Garner. As such, we hold that the trial court did not err in holding that Taxpayers have waived their right to assert that information on their federal tax returns are privileged by reason of the Fifth Amendment.
Accordingly, the order of the trial court to compel discovery is affirmed.
/s/_________
MARY HANNAH LEAVITT, Judge ORDER
AND NOW, this 3rd day of January, 2014, the order of the Court of Common Pleas of Allegheny County, dated December 18, 2012, in the above-captioned matter is hereby AFFIRMED.
/s/_________
MARY HANNAH LEAVITT, Judge