State Of Washington v. Paul Timothy Chase
75050-0
| Wash. Ct. App. | Dec 26, 2017Background
- Paul Chase incorporated Red Leaf Construction, a closely held corporation, and served as its president, secretary, treasurer, and chairman; his wife was vice-president.
- A former customer referred Red Leaf to the Department of Revenue (Department) for suspected sales tax fraud; Red Leaf filed no sales tax returns for 2008–2010.
- The Department issued administrative summonses to banks for Red Leaf's bank records (not Chase's personal accounts); Banner Bank complied and records showed Red Leaf collected but did not remit sales tax.
- The Attorney General charged Chase with first-degree theft; Chase moved to suppress Red Leaf's bank records under article I, section 7 of the Washington Constitution.
- Trial court suppressed only Chase's social security number on signature cards but denied suppression of the remainder of the corporate bank records, concluding they were not Chase's "private affairs" and that he lacked standing.
- The Court of Appeals granted discretionary review and affirmed, holding a shareholder/officer of a closely held corporation has no personal article I, section 7 privacy interest in corporate bank records and therefore no standing to challenge their seizure.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a shareholder/officer has a personal privacy interest under WA Const. art. I, § 7 in a closely held corporation's bank records | Chase: He has a personal privacy interest in Red Leaf's financial information and article I, § 7 was violated when the Department obtained those records | State: Corporate records are distinct from personal records; Miles controlling only when personal accounts were sought | Court: No. A shareholder/officer has no personal article I, § 7 interest in the corporation's bank records; those records are corporate, not personal private affairs |
| Whether Miles controls this case | Chase: Miles supports suppression because privacy in bank records exists | State: Miles differs because it involved intrusion into personal accounts and broader subpoenas | Court: Distinguishes Miles; here only corporate records were subpoenaed, not personal accounts |
| Whether historical practice supports a privacy interest in corporate financial records | Chase: Corporate records can reveal sensitive details akin to personal records | State: Tax and corporate financial records have long been subject to Department audit and not treated as personal private affairs | Court: Historical practice weighs against a personal privacy interest; taxpayers have long been subject to Department audits under RCW authority |
| Standing to challenge Department summons for corporate records | Chase: He can challenge because he is sole shareholder/officer and asserts personal privacy | State: He lacks a legitimate expectation of privacy in corporate records and thus lacks standing | Court: Chase lacks standing because he has no personal privacy interest in corporate records |
Key Cases Cited
- State v. Miles, 160 Wn.2d 236 (superseding discussion on bank-record privacy where both personal and business accounts were sought)
- State v. Reeder, 184 Wn.2d 805 (discusses article I, § 7 private affairs/authority of law framework and broader state privacy protections)
- State v. McKinney, 148 Wn.2d 20 (historical analysis of whether certain public records constitute "private affairs")
- State v. Garvin, 166 Wn.2d 242 (standards of review for suppression issues)
- In re Personal Restraint of Maxfield, 133 Wn.2d 332 (quoted on concept of privacy interests citizens should hold safe from government trespass)
- Grayson v. Nordic Construction Co., 92 Wn.2d 548 (corporation as a legal entity distinct from shareholders)