Rentex Corp. v. Messinger

570 F.2d 913

• Court: Court of Appeals for the Tenth Circuit
• Decided: February 21, 1978
• Docket: No. 76-1749
• Status: Published

Opinions

PER CURIAM.

The plaintiffs sought money damages, the return of personal property seized by the Internal Revenue Service, and to enjoin the use of the documents seized in any future criminal proceeding. The individual and the corporate plaintiffs assert a violation of Fourth Amendment rights.

The IRS was conducting an income tax investigation of plaintiff Rentex Corporation and also of plaintiff Larry Glist who was the “principal officer” of Rentex. The plaintiffs were in the business of selling lists of available residential rental property to persons looking for apartments or houses. The place of business of Mr. Glist was in Denver. The plaintiffs also sold franchises to persons wishing to engage in the same business. The office in Denver had four rooms including the private office of Mr. Glist. The business was a perfectly legitimate one, and no fraud or unfair dealing is asserted.

However, the IRS stated that it had information, apparently from former employees, that Mr. Glist kept a separate ledger at the Denver office as to payments received from franchisees. This was referred to as a “skim book,” and was apparently used to record transactions not reported or not fully reported to the IRS. In any event, the IRS decided to put one of its agents in an undercover capacity into the Denver office as an employee. Thus Agent Messinger obtained employment at the Rentex office as a “rental counselor.” He reported regularly to his superior in the IRS as to what he observed, heard, and read in the office. It is not necessary to describe this in detail as he had free access to the entire office. He read material on or in the desk and apparently elsewhere in the office. He asked questions of the other employees and of Mr. Glist as to how the business was conducted and how the franchises were handled. Mr. Messinger acted as an employee at Denver from October 18th until November 20th. He was then assigned to Boulder but “quit” on November 20th, and went to Denver to get his pay check. The next day he and Agent Kilpatrick filed affidavits with a magistrate and procured a search warrant for the Rentex office which was executed the same day. The agents thereby seized books and records.

As to the claim for damages, the record does not contain any evidencfe upon which a judgment for damages could be based. We thus agree with the conclusion reached on this point by the trial court. The personal property was returned to the plaintiffs, and the claim for return is moot.

The claim for injunctive relief to prevent the use of the material seized, or information derived from it at any criminal proceedings in the future must also fail. Such a matter cannot properly be litigated in a civil action under the circumstances here present. It was a premature claim and the matter had not yet reached the status of a justiciable controversy. There were, as we read the record, only possibilities. The claim could not be considered in the context of a particular indictment or information, and the impact of the search was thus speculative. The nature and scope of the criminal proceedings were not formed. If the criminal proceeding had proceeded to a point where the issue could be considered with reference to the particular charge, then the proper remedy would be a motion to suppress. This civil suit cannot be used in place of a motion to suppress nor to anticipate such a motion in advance of charges.

This opinion should not be taken in any way as an approval or disapproval of the use of undercover agents in legitimate businesses. Quite different considerations are there present which are not present in the drug cases, and we have not evaluated them.

AFFIRMED.