Russell v. C. I. R.

• Decision Date: 02 June 1982
• Docket Number: No. 80-7730,80-7730
• Citation: 678 F.2d 782
• Parties: 82-2 USTC P 9429 Dolores J. RUSSELL, Petitioner-Appellant, v. COMMISSIONER OF INTERNAL REVENUE, Respondent-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 782

678 F.2d 782

82-2 USTC P 9429

Dolores J. RUSSELL, Petitioner-Appellant, v. COMMISSIONER OF INTERNAL REVENUE, Respondent-Appellee.

No. 80-7730.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Jan. 8, 1982.

Decided June 2, 1982.

Ferris F. Boothe, Portland, Or., for petitioner-appellant.

William P. Wang, Washington, D. C., for respondent-appellee.

Appeal from the United States Tax Court.

Before BROWNING, WALLACE and BOOCHEVER, Circuit Judges.

BOOCHEVER, Circuit Judge:

Appellant Russell seeks relief from the harsh effects of a misunderstanding about the procedural rules allocating jurisdiction between the Tax Court and the district courts. The trouble stems from Russell's failure to argue the merits of a refund claim in a Tax Court deficiency contest because she mistakenly believed that it could be pursued in a previously filed district court action. The district court case was reversed on appeal by this court due to lack of jurisdiction. Russell v. United States, 592 F.2d 1069 (9th Cir.), cert. denied, 444 U.S. 946, 100 S.Ct. 308, 62 L.Ed.2d 315 (1979). The Tax Court now refuses to allow her to pursue the issue there.

We affirm in part and reverse in part. The Tax Court properly denied leave to file a motion to vacate its earlier decision, but erred in ignoring Russell's motion for calendaring of her refund claim which it had never adjudicated.

PROCEDURAL HISTORY

This appeal arises from the pitfalls for the unwary created by the jurisdictional rules governing refund suits and tax deficiency contests in the district and tax courts. Russell has diligently pursued her refund claim through nine years of litigation but has not yet received a hearing on the merits in a court of competent jurisdiction.

Russell's litigation odyssey began in 1973, when she filed suit in district court seeking a refund for overpayment of her 1965 income taxes. Shortly thereafter, the Commissioner assessed a deficiency for Russell's 1965 tax year. Russell petitioned for redetermination of the deficiency assessment in the Tax Court, the only forum in which she could contest the deficiency before payment. In her petition she claimed that she was entitled to a refund. Because Russell's 1965 tax liability was at issue in the Tax Court, the district court held that it had lost jurisdiction and dismissed the refund suit.

In 1974, Russell won a decision in the Tax Court that there was no deficiency, on the ground that the Commissioner's deficiency notice was untimely. Although Russell had also moved the Tax Court to dismiss her refund claim without prejudice and the government had moved to dismiss it with prejudice, the Tax Court never ruled on the motions.

After the 1974 Tax Court decision, the district court reinstituted Russell's original refund action, reasoning that it had retained jurisdiction over the refund claim. The district court recognized the usual rule that it loses jurisdiction to the extent acquired by the Tax Court, but held that because the notice of deficiency was untimely, the Tax Court had acquired jurisdiction only to dismiss the deficiency and that jurisdiction over Russell's refund claim had remained in the district court. The district court found for Russell after a trial on the merits. We reversed on appeal, holding that the district court did not have jurisdiction over the refund action. Russell, 592 F.2d at 1071.

The present appeal stems from Russell's attempt to have the merits of her refund claim decided in the Tax Court. She sought to have the matter placed on the Tax Court calendar. In the alternative, she sought to vacate or revise the initial Tax Court decision to clarify that it had been only an interim decision on the timeliness of the deficiency assessment. The Tax Court denied the entire motion on the ground that this court's prior decision had held that the initial Tax Court decision was res judicata on the refund claim, and, further, that no grounds for vacating the initial Tax Court decision had been alleged. This ruling is now on appeal.

We affirm the denial of leave to move to vacate the initial Tax Court decision. We reverse and remand for reconsideration of the motion to calendar the refund claim. We hold that res judicata and our prior decision do not bar Russell from litigating the merits of her refund claim in the Tax Court. The initial Tax Court ruling was only a partial resolution of the issues involved in Russell's cause of action. Because the Tax Court never considered or dismissed Russell's refund claim, that claim is still pending before the Tax Court. Russell's request for calendaring of her refund claim should therefore have been granted.

I The Motion to Vacate

Russell first filed her motion for placement on the Tax Court calendar in January, 1980. The Tax Court clerk returned it, advising that only a "motion for leave to file a motion to vacate" and "motion to vacate" could be filed. The record shows that, in a series of letters and calls over the next four months, Russell's counsel repeatedly explained his client's position that she was not seeking to vacate the prior Tax Court decision, but rather to force the Tax Court to hear and rule on matters raised before the Tax Court in 1974 and which, because never ruled upon, were still pending before the Tax Court.

The affirmance of the denial of the motion to vacate and the motion for leave to file an untimely motion to vacate needs little discussion. The Tax Court has the power to vacate a final decision where there is fraud upon the court. Toscano v. Commissioner, 441 F.2d 930, 933 (9th Cir. 1971). Fraud upon the court does not include a taxpayer's misinterpretation of Tax Court procedure. Feistman v. Commissioner, 587 F.2d 941, 943 (9th Cir. 1978). Accordingly, the Tax Court did not abuse its discretion in denying Russell leave to file the untimely motion to vacate.

II The Motion for Calendaring

A. Our Prior Decision

Our prior decision turned on whether Russell's refund claim could be raised in the district court after the Tax Court found the Commissioner's deficiency notice untimely. We held that under I.R.C. § 7422(e), institution of the deficiency contest transferred jurisdiction over all issues relating to Russell's 1965 tax liability to the Tax Court. Russell, 592 F.2d at 1071. I.R.C. § 7422(e) provides that, when a taxpayer seeks redetermination of a deficiency, the district court loses jurisdiction over a previously filed refund suit "to the extent" that jurisdiction is acquired in the Tax Court. Thus, in our prior decision, it was necessary for us to determine the extent to which the Tax Court acquired jurisdiction. We held that, because all issues relating to tax liability for a particular year are a single cause of action, Commissioner v. Sunnen, 333 U.S. 591, 597-98, 68 S.Ct. 715, 719, 92 L.Ed. 898 (1948), the Tax Court acquired jurisdiction over all the issues relating to Russell's 1965 tax liability. Therefore, under § 7422(e), the district court lost jurisdiction over the refund claim. Russell, 592 F.2d at 1071. Although the issue was not briefed, we stated that the 1974 Tax Court decision in Russell's favor on the deficiency notice was res judicata against her on the refund claim. This was unnecessary to our decision. The district court's loss of jurisdiction is determined at the time of filing the petition in the Tax Court. It is not dependent on whether the Tax Court has actually determined the issues. See Finley v. United States, 612 F.2d 166, 170 (5th Cir. 1980) (mandatory ousting of district court jurisdiction measured from time of filing in Tax Court); United States v. Wolf, 238 F.2d 447, 449-50 (9th Cir. 1956); Holzer v. United States, 250 F.Supp. 875 (E.D.Wis.), aff'd 367 F.2d 822 (7th Cir. 1966) (per curiam). ¹ Thus, our res judicata discussion was unnecessary for the holding, and is properly characterized as dicta. ²

B. Doctrine of Law of the Case

The effect of our prior decision is governed by the doctrine of law of the case. The "law of the case" rule ordinarily precludes a court from reexamining an issue previously decided by the same court in the same case. See generally, 1B Moore's Federal Practice (2d ed.), 0.404(1), at 404-09. The doctrine does not limit our power to reexamine an earlier decision; rather, it is a voluntary limitation. See Lathan v. Brinegar, 506 F.2d 677, 691 (9th Cir. 1974) (en banc); United States v. Fullard-Leo, 156 F.2d 756, 757 (9th Cir. 1946).

The law of the case doctrine is not to be applied woodenly. United States v. Imperial Irrigation District, 559 F.2d 509, 520 (9th Cir. 1977), modified on other grounds, 595 F.2d 524, reversed in part, vacated in part, both on other grounds, sub nom. Bryant v. Yellen, 447 U.S. 352, 100 S.Ct. 2232, 65 L.Ed.2d 184 (1980). Because the res judicata discussion in our prior Russell decision was dicta, it is not part of the law of the case. See 5 Am.Jur.2d, Appeal and Error, § 753, at 197; In Re Norton's Estate, 177 Or. 342, 162 P.2d 379, 380 (1945). In the prior appeal, we merely set forth the law on res judicata and did not examine whether the Tax Court's decision was in fact a final decision.

Another factor in determining whether reconsideration is warranted is whether the appellant seems to be "shopping" for a more favorable panel. Imperial Irrigation, 559 F.2d at 521. We cannot attribute such a motive to Russell. This appeal arises not from any attempt to relitigate the previously decided issue of the district court's jurisdiction, but, rather, from Russell's attempt to pursue her refund claim in the Tax Court after we advised her that it was the proper forum.

C. Res Judicata

In the 1974 Tax Court proceeding, the Government admitted that its deficiency notice was untimely and, after an extremely brief hearing, the Tax Court entered a one-sentence decision in favor of Russell. Russell had also moved the Tax Court for dismissal of her refund claim without prejudice, and the Government had sought...