Bear Valley Mutual Water Company v. R. A. Riddell, District Director of Internal Revenue

Finally, while the courts should

not create antitrust remedies not sanc BEAR VALLEY MUTUAL WATER COM by Congress, they tioned neither should PANY, Plaintiff-Appellee, facilitate avoidance of the antitrust Sobel, laws. Antitrust Defenses to Con RIDDELL, R. A. District Director In Question Policy tract A Actions: Pri Revenue, Defendant-Appellant. ternal orities, (1971). 16 Antitrust Bull. 455 No. 72-1800. appears Packer to have stated a cause of Appeals, United States Court action in antitrust15 but will be unable Ninth Circuit. litigate except it as a counterclaim.16 20, March We see no reason facilitate the collec relieving tion of own claim while Gutor’s accountability Gutor anti normal violations, any. trust if holdWe

the antitrust counterclaim is maintaina

ble.17 Since the district court sum-

mary judgment on the antitrust counter- solely interpretation

claim on its of Kel- ly, summary all alternative open express remain and we opinion on them. part, part,

Affirmed in reversed in proceedings

and remanded for further opinion.

consistent with this Pursuant 9, ante,

to footnote enforcement of Gu- stayed

tor’s until further

order of the district court. alleges Dictaphone’s acquisi

15. Packer our antitrust laws. Timkin Roller Bear rights ing States, 593, tion of Ultravox eliminated Ultravox Co. competitor Dictaphone (1951). as a US; 971, United States S.Ct. Gra Cf. appears ham, Marcus, to state a at Hermann & Section 7 of tempting monopolize decreasing Clayton Mergers Involving Foreign and of Act and competition merger. Interests, horizontal Such Com Stan.L.Rev. may though ment, be tenable even mar Antitrust in Interna Considerations extremely Activity: Corporate ket shares involved are tional small. Technical Assist Stanley Agreements Foreign Acquisitions, FTC, See Works v. ance (2d 1972), Cir. cert. De denied 411 B.C.Ind. & Com.L.Rev. 453 partment Justice, (1973). S.Ct. 37 L.Ed.2d 155 Packer Memorandum Concern presented ing Foreign Commerce, has also 5 Trade a claim Antitrust & of concerted re deal, per Reg.Rep. 50,129 (1972) ; Baker, violation, Klor’s, fusal Anti se see If Broadway-Hale Economy, Inc., Stores, Inc. v. trust and the 5 Trade World 359 U.S. (1973). Reg.Rep. 50,161 (1959), 3 L.Ed.2d 741 If market, usually illegal division of the Although brought separate Packer ac- under Arnold, United States v. Schwinn & against Dictaphone US, tion it is not clear 388 U.S. 18 L.Ed. relief, that Packer will be able to full obtain (1967) Topco 2d 1249 and United States v. prevails, party. if it unless Gutor is also a Associates, Inc., 405 U.S. 92 arbitration, 31 L.Ed.2d But Even had Gutor waived cf. States, White Motor Co. v. United the antitrust counterclaim arbi would not be 9 L.Ed.2d trable. excellent discussion Cobb Conspiracies foreign Lewis, between American 47-50 companies markets, though to divide even they foreign may products, involve violate Belanger, Atty. (argued),

Ann E. Crampton, Atty. Gen., P. Scott Asst. Meyer Rothwacks, Dept, Justice, U. S. Washington, C., defendant-appel- D. lant. (argued), Michael Arkin B. Thomas McPeters, Hellyer, H. & Surr San

Bernardino, Cal., plaintiff-appellee. KOELSCH, Before BROWNING KILKENNY, Judges. Circuit KOELSCH, Judge: Circuit government appeals from the granting motion to- amend judgment, 60(b)(6), the ef- Fed.R.Civ.P. fect which to increase government amount of taxes which beyond already must refund the amount pursuant refunded judgment.1 background present dispute is as follows: nonprofit a is “mutual” irri- gation company distributes water covering shareholders, free to its distributing capturing costs reported 1. The initial decision district court is and this court’s affirmance at reported F.Supp. (C.D.Cal.1968), at 283 operations, years prior and which because the water other business years, by periodic were loss be carried “shareholder assessments.” could over remaining liability eliminate the assessed deficiencies 1958 and 1960. 26 fiscal U.S.C. § government opposed ending 1958, 1959, and amendment of October 31 approximately collected precluded recovery alleg- |31,000 corporate income was its fail- in taxes carryovers right edly Taxpayer ure to filed for re- assert the loss due. claims denied, in in its claim for refund or the suit in fund suit was which were brought overpayments. the district court. recover agree govern the As we only partial in vic- The suit resulted position, ment’s do not reach the is tory taxpayer. The district the for sue, argued parties which the ex rejected court the conten- tensively, 60(b)(6) of Rule whether was taxpayer in tion realized income that the appropriately judg used to amend the shareholders, distributing to the water in ment The this case. failure of the agreed taxpayer its taxpayer carry the issue of loss raise expenses properly were deductible. precluded in overs for refund his claim However, held that the court shareholder refund on in that basis the district court assessments, had which —we are certain that district court nontaxable characterized as contribu- grant taxpayer by could not to the relief part payments in capital, tions to were judgment amendment of which it for and therefore distributed water grant appropriately could not original judgment. taxpayer. income to the adopted a formula The court district “No suit be maintained can proportion determining of the for sovereign illegally collected tax- [for taxpayer’s in- includable assessments strictly unless it is within terms es] come, income redetermined sovereign of the statute under which the years, disputed calculated each of the Mertens, has consented sued.” 10 to be judgment due, the tax entered Taxation, Law of Federal Income for the amounts over- favor grants 58A.02, at 6. 28 U.S.C. § paid. compu- of the As a result court’s original jurisdiction the district courts tations, taxpayer was entitled to a illegally to entertain for refund of suits paid amount refund of the entire However, collected taxes. U.S.C. § only partial refund for but to 7422(a) provides: 1958 and as court’s calcula- “(a) Filing No Prior to Suit Claim tions net taxable income revealed proceeding for Refund.—-No or suit years. those any shall be maintained court for April judgment entered The was internal revenue affirmed on June and was alleged erroneously to have been accepted the or- Thereafter the illegally or or assessed collected signed a dered satisfaction refund and . until for refund a claim or disputed years. duly credit filed has been with the However, on June Secretary delegate, according or his moved to order to amend provisions regard, of law in that refund taxes regulations Secretary and the judg- not refunded under the delegate pursu- or his established ment. court The district ance thereof.” government brought motion and the applicable appeal. Treasury Regulation, reverse. We 301.6402-2(b) provides: C.F.R. § relief for the additional basis sought “(b) by taxpayer set claim. existence Grounds forth operating (1) net losses in 1953 and 1955 No refund or credit will al- be expiration 1953 and whether loss existed stat- after lowed carryover. applicable 1955 which period limitation utory except filing a claim therefor persuaded. are We upon set or more one for refund aware when it filed expi- filed before the forth a claim theory that under of the law it had period. The claim of such ration operating years prior net losses in detail each forth must set completion the audit con- or upon a credit throughout litigation by ducted apprise and facts sufficient claimed judg- years after some three the exact basis the Commissioner not, taxpayer argues, ment as .” . . thereof . simply losses; “establish” the the audit taxpayer thought confirmed what long-established interpreta The fact be the case from outset. filing provisions is that the tion of these placed in that the losses were some Revenue of the Internal a claim with court did doubt because the accept not district jurisdictional prerequisite is a Service position on shareholder and, refund,2 absence to a for suit taxpayer not relieve assessments does government, by tax a waiver advancing responsibility all issues payer in its for re recover suit cannot bearing liability for on tax the dis- its set different than that fund on a puted years in claim for refund. its Taxpay for refund.3 forth in the claim taxpayer so, the Had done Service failed to include er’s claim for carryovers have the loss considered right carryover and from 1953 to a loss reviewing administratively claim, as among the and 1960 1955 to 1958 by 7422(a), might contemplated and § contesting liability, grounds the tax If on that basis have refunds. necessary facts nor it recite litigated not, and the issue was by support required claim as such a § suit, original judgment could 301.6402-2(b). This failure is fatal audit, using open held been until an any ground. subsequent on that formula, determined district court’s attempts Taxpayer taxpayer conse- to avoid the whether had losses 1953 noncompliance quence with available for its and the amounts § 1955 by 301.6402-2(b) 7422(a) carryover. Taxpayer’s con- to follow failure by tending prescribed procedure, the issues raised rather than an that 4 pertained consequence entire for refund to its nature inevitable necessity government’s history had be audit issues and costly taxpayer procedure,5 simply know over- decided before could 1957) ; aff’d, (9th Felt & Nem- United States v. Tarrant 283 250 F.2d Cir. 744 States, Corp. L.Ed. 1025 188 F.2d U.S. 75 ours v. United (1931) ; (3rd 1951). States, F.2d Clement v. United 472 750 Cir. (1st 1973) ; v. 776 Cir. United States grounds taxpay- refund stated (9th Freedman, 1971) ; 444 F.2d 1387 Cir. refund, which it er’s claim for on also relied States, Thompson v. United 308 F.2d (a) court, were in its that suit district 1962) ; Corp. (9th v. 634 Nemours Cir. expenses properly disallowed business States, (3rd F.2d United 188 Cir. 749 deductible, (b) that shareholder assessments (c) capital, were nontaxable contributions taxpayer that did not receive constructive States, v. Real Estate Title Co. 309 United distributing water, (d) that irihome 371, 84 L.Ed. 542 subject to an unrelated not Alexander, Tucker v. business tax. income v. 72 Austin United (10th ; complains States, 1972) Bel Cir. (5th States, v. audit on basis of 452 F.2d Cir. refusal United 695 conduct 1971) ; States, deci- decision until that v. 444 F.2d the district court’s Stoller United thereby delay- (5th 1971) ; Riddell, upheld court, Ladd sion was 1391 309 Cir. v. 1962) (9th Scharpf ing ; that had loss the determination F.2d 54 Cir. carryover. States, (D.Or.1956), F.Supp. we While United showing States, having Young sight. Far the clear re- United by Angelus Milling, supra, Barry-Weh- quired (8th 1953); we Cir. F.2d 686 Commissioner, record, nor find no indication has miller Machine Co. v. us, taxpayer pointed out to that T.C. on the focused attention Service carry- merits of claim loss Finally, contends taxpayer’s motion to until after overs has its that waived judgment.7 then as- amend The Service right rely on variance.6 We find ground for de- serted the variance as a in this has waiver case. Court insisting refund, thereby nying the order made clear that to establish regula- right compliance with compliance that the Service has waived is no that tion. There evidence regulation’s requirement —that carryovers Service considered loss all for refund be set out originally denying refund, the claim for claim refund— litigated. See and the issue was not showing “The should be unmistakable Alexander, Tucker that has in fact Commissioner dispense fit his formal seen requirements and to examine mer- not This is a situation such as enough States, its of the claim. It found in Brown v. 1970), way sup- where in some roundabout the facts government, by interject that the held ing porting may the claim have reached from a defense at trial different attention him. The Commissioner’s disallowing claim, relied in the that on the mer- should have been focused on object taxpay right to to the waived its dispute. particular evi- its of the ground response, which advanced a er’s the Com- dence should be clear that recovery out different from that set specific the missioner understood refund, claim for but which was the though made even claim that was position. on the new based departure form in there was a government’s position been the has Here Milling Angelus Co. submission.” litiga throughout entire the consistent Commissioner, 297- 325 U.S. tion, not con has been and any surprises which would fronted with regulation.8 compliance the excuse with figures and 7. not understand note that formula While do equally taxpayer, rely refusal is claim for refund on that way formally informally irrelevant it affected the either or amended because dispositive issue, taxpayer’s ground, fail- to include we note the omitted carryover ground nothing passing record ure that there is to include loss support conclusion, claim refund. such a which would require have occurred that the amendment regula- Recognizing purpose 6. that of the rejection of the before tion is to inform the Commissioner November, v. Gar 1964. See States thereby expe- and basis 58 butt Oil claim,, dite research into merits a United States v. Wells L.Ed. may Court has held that the Commissioner Fargo Bank, compliance regula- either with the insist on compliance inspect tion or waive Having so, that it comes within merits of the claim. done contends Brown, rely may rationale because issues Commissioner not thereafter on “injected” by government case were the variance to defend thereby permit- Milling assessing deficiency, Angelus meritorious claim. tax Co. respond Commissioner, ting basis for an extension of v. Alex- available. Such Tucker Brown, 7422(a) ander, holding § L.Ed. would render meaningless, (b) we decline 301.6402-2 adopt it. taxpay- can that be said The most that is “waiver” contention er’s CORPORA COMPUTER PROPERTY litigated en- affected issues TION, Plaintiff-Appellee, history, that tax tire history, was aware DISTRIBUTING CORPORA COLUMBIA knowledge the tax law Service’s TION, Defendant-Appellant. necessarily it to awareness lead an. No. 73-1599. carry- availability possible of loss' Appeals, United States Court gov- dispute. overs to Fourth Circuit. after-acquired awareness ernment’s Argued Nov. insuffi- is for relief omitted basis com- Decided March an intent to waive indicate cient reg- requirement pliance regula- very point of the ulation. orderly adminis- promote tion is to taxpayers to focus by requiring

tration dispositive at the issues on the attention process beginning of administra- requiring the review, than rather tive legal gradually out the sort Service presented de- it. We for claims basis purpose of the to undermine cline finding

regulation a waiver The Service of this case. circumstances compliance with insist entitled to insisted, and regulation. It has so refund should

the additional granted.

been De- entered amended 16, 1971,is reversed.

cember Judge

KILKENNY, Circuit Senior

(dissenting): not chal does Since

lenge validity nor the amount court, in the lower awarded litigation first instance

vited the fully all times aware was at oper net appellee’s

nature prior years, hold ating I losses position rely on for is in no that it the au and would affirm

malities thority Alexander, of Tucker States, 427 (1927), Brown United (CA 9 57,

F.2d my opinion, court, The lower amending the its discretion in abuse provisions of Rule under

60(b)(6), FRCivP.

Case Details

Case Name: Bear Valley Mutual Water Company v. R. A. Riddell, District Director of Internal Revenue

Court Name: Court of Appeals for the Ninth Circuit

Date Published: Mar 20, 1974

Citation: 493 F.2d 948

Docket Number: 72-1800

Court Abbreviation: 9th Cir.