791 F.2d 666 (9th Cir. 1985), 84-2155, United States v. 2.61 Acres of Land, More or Less, Situated in Mariposa County, State of Cal.

Docket Nº:84-2155.
Citation:791 F.2d 666
Party Name:UNITED STATES of America, Plaintiff-Appellee, v. 2.61 ACRES OF LAND, MORE OR LESS, SITUATED IN the COUNTY OF MARIPOSA, STATE OF CALIFORNIA; Wawona Village, a California corporation, et al., Defendant- Appellant.
Case Date:November 08, 1985
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit

Page 666

791 F.2d 666 (9th Cir. 1985)

UNITED STATES of America, Plaintiff-Appellee,




California corporation, et al.,

Defendant- Appellant.

No. 84-2155.

United States Court of Appeals, Ninth Circuit

November 8, 1985

Argued and Submitted May 14, 1985.

As Amended June 13, 1986.

Page 667

Donald B. Ayer, U.S. Atty., Andrew M. Wolfe, Asst. U.S. Atty., Sacramento, Cal., Maria A. Iizuka, Dept. of Justice, Washington, D.C., Martin W. Matzen, San Francisco, Cal., for plaintiff-appellee.

Joseph M. Gughemetti, San Mateo, Cal., for defendant-appellant.

Appeal from the United States District Court for the Eastern District of California.

Before POOLE and NELSON, Circuit Judges, and KELLEHER, [*] District Judge.


Appellant Wawona Village, a corporate landowner, appeals from a judgment entered by the district court which determined the amount of just compensation for the taking by eminent domain of certain real property it owned. Because we find the district court abused its discretion by denying appellant's request for a continuance of the trial to allow time for appellant to revive itself through payment of back taxes to the State Franchise Tax Board of California, we reverse and remand.

The United States filed a condemnation by declaration of taking 1 in 1977 against 2.61 acres of land in Mariposa County, California, owned by Wawona Village ("Wawona"), a California corporation. The government sought to acquire this land, located in Yosemite National Park, because the proposed development by Wawona was incompatible with public land use policies 2 and because a faulty sewage disposal system created serious environmental problems. The government deposited $82,000, the estimated fair market value of the land, in the Registry of the District Court on December 13, 1977. On January 18, 1980, the government increased the amount to $118,450 to reflect a subsequent government appraisal.

Prior to the scheduled jury trial of the just compensation issue, the government discovered that the State of California had

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suspended Wawona's corporate privileges because Wawona had failed to pay back taxes. 3 On March 12, 1984, the eve of trial, the government moved for an order to show cause why Wawona should not be barred from presenting evidence at trial. Immediately thereafter, Wawona moved for a short continuance in order to pay its delinquent tax assessments and to revive itself as a corporation. 4 The district court elected to "deny the corporation [the right] to appear in [the] lawsuit," determining that "under the law [the court] was lacking discretion to do anything [else]." Additionally, the Court reminded Wawona that the March 13 trial date had been set for Wawona's convenience.

Thereafter, a court trial commenced, with the district court affording the government a one day continuance to accommodate one of its witnesses. On March 14, the Court found the fair market value of the land to be $85,000, despite the earlier government estimate of $118,450. On March 23, Wawona, now conditionally revived, filed a motion for relief from the judgment of March 14th. The court denied Wawona's motion on May 7, even though the motion was not ripe because the district court had not yet signed the judgment. On May 29 the court entered judgment, from which Wawona filed a timely appeal.

"The capacity of a corporation to sue or be sued shall be determined by the law under which it was organized." F.R.Civ.P. 17(b). See Chicago Title and Trust Co. v. Forty-One Thirty-Six Wilcox Bldg. Corp., 302 U.S. 120, 125-26, 58 S.Ct. 125, 127-28, 82 L.Ed. 147 (1937). Wawona is a California corporation, which mandates the application of California law. The relevant California law, Cal.Rev. and Tax Code Sec. 23301, provides that the rights, powers and privileges of a corporation may be suspended for nonpayment of taxes. It is well-settled that a delinquent corporation may not bring suit and may not defend a legal action. Reed v. Norman, 48 Cal.2d 338, 343, 309 P.2d 809, 812 (1957). Nor may the delinquent corporation appeal an adverse ruling. Boyle v. Lakeview Creamery Co., 9 Cal.2d 16, 19, 68 P.2d 968, 970 (1937). However, once the corporate powers are reinstated, the corporation may defend an action. Traub Co. v. Coffee Break Service, Inc., 66 Cal.2d 368, 371, 57 Cal.Rptr. 846, 848, 425 P.2d 790, 792 (1967).

The government contends that the legislature enacted Sec. 23301 with a punitive intent. That is, once a corporation fails to pay its taxes, the entity should be forever barred from appearing in a lawsuit. The various penalties detailed in Cal.Rev. and Tax Code Sec. 25962.1, however, belie the government's contention. Moreover, the California Supreme Court has held that Sec. 23301 is intended merely to pressure delinquent corporations to pay their taxes. Boyle, 9 Cal.2d at 19, 68 P.2d 968. See also Peacock Hill Ass'n. v. Peacock Lagoon Constr. Co., 8 Cal.3d 369, 371, 105 Cal.Rptr. 29, 30, 503 P.2d 285, 286 (1972).

A corporation may move for a continuance in order to enable the corporation to

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revive itself pursuant to Cal.Rev. and Tax Code Sec. 23305. Schwartz v. Magyar House, Inc., 168 Cal.App.2d 182, 188, 335 P.2d 487, 490-91 (1959); Traub, 66 Cal.2d at 370 n. 3, 57 Cal.Rptr. 846, 425 P.2d 790; Reed, 48 Cal.2d at 344, 309 P.2d 809; A.E. Cook Company v. K S Racing Enterprises, 274 Cal.App.2d 499, 500, 79 Cal.Rptr. 123, 124 (1969) ("[e]ven at the time of the hearing, the court may grant a continuance in order to allow the delinquent corporation to secure a revivor."). Accord, Duncan v. Sunset Agricultural Minerals, 273 Cal.App.2d 489, 493, 78 Cal.Rptr. 339, 342 (1969). 5

In Schwartz, the appellate court found no abuse of discretion when the trial court granted the defendant...

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