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

493 F.2d 948 74-1 USTC P 9323 BEAR VALLEY MUTUAL WATER COMPANY, Plaintiff-Appellee, v. R. A. RIDDELL, District Director of Internal Revenue, Defendant-Appellant. No. 72-1800. United States Court of Appeals, Ninth Circuit. March 20, 1974. Ann E. Belanger, Atty. (argued), Scott P. Crampton, Asst. Atty. Gen., Meyer Rothwacks, U.S. Dept. of Justice, Washington, D.C., for defendant-appellant. Michael B. Arkin (argued), Thomas H. McPeters, of Surr & Hellyer, San Bernardino, Cal., for plaintiff-Appellee. Before KOELSCH, BROWNING and KILKENNY, Circuit Judges. KOELSCH, Circuit Judge: 1 The government appeals from the granting of taxpayer's motion to amend judgment, Fed.R.Civ.P. 60(b)(6), the effect of which was to increase the amount of taxes which the government must refund beyond the amount already refunded pursuant to the original judgment. 1 2 The background of the present dispute is as follows: 3 Taxpayer is a nonprofit 'mutual' irrigation company which distributes water free to its shareholders, covering the costs of capturing and distributing the water by other business operations, and by periodic 'shareholder assessments.' The government assessed deficiencies against taxpayer…

The government appeals from the granting of taxpayer’s motion to- amend judgment, Fed.R.Civ.P. 60(b)(6), the effect of which was to increase the amount of taxes which the government must refund beyond the amount already refunded pursuant to the original judgment. 1

The background of the present dispute is as follows :

Taxpayer is a nonprofit “mutual” irrigation company which distributes water free to its shareholders, covering the costs of capturing and distributing the *950 water by other business operations, and by periodic “shareholder assessments.” The government assessed deficiencies against taxpayer for the fiscal years ending October 31 of 1958, 1959, and 1960, and collected approximately |31,000 in corporate income taxes allegedly due. Taxpayer filed claims for refund which were denied, and suit was brought to recover the overpayments.

The suit resulted in only a partial victory for the taxpayer. The district court rejected the government’s contention that the taxpayer realized income in distributing water to the shareholders, and agreed with the taxpayer that its expenses were properly deductible. However, the court held that shareholder assessments, which the taxpayer…

(dissenting):

Since the government does not challenge the validity nor the amount of the refund awarded by the lower court, invited the litigation in the first instance and was at all times fully aware of the nature of appellee’s claims for net operating losses in prior years, I would hold that it is in no position to rely on formalities and would affirm on the authority of Tucker v. Alexander, 275 U.S. 228, 231 , 48 S.Ct. 45 , 72 L.Ed. 253 (1927), and Brown v. United States, 427 F.2d 57, 62 (CA 9 1970).

The lower court, in my opinion, did not abuse its discretion in amending the judgment under the provisions of Rule 60(b)(6), FRCivP.