Union Pacific Railroad Company v. United States

• Decision Date: 19 January 1968
• Docket Number: No. 310-62.,310-62.
• Parties: UNION PACIFIC RAILROAD COMPANY v. The UNITED STATES.
• Court: U.S. Claims Court

182 Ct. Cl. 103, 389 F.2d 437 (1968)

UNION PACIFIC RAILROAD COMPANY v. The UNITED STATES.

No. 310-62.

United States Court of Claims.

January 19, 1968.

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COPYRIGHT MATERIAL OMITTED

Robert J. Casey, New York City, attorney of record, for plaintiff. John A. Craig, Thomas E. Tyre and Clark, Carr & Ellis, New York City, of counsel.

Theodore D. Peyser, Jr., Washington, D. C., with whom was Asst. Atty. Gen., Mitchell Rogovin, for defendant. Philip R. Miller, Washington, D. C., of counsel.

Before COWEN, Chief Judge and LARAMORE, DURFEE, DAVIS, COLLINS, SKELTON, and NICHOLS, Judges.

ON DEFENDANT'S AND PLAINTIFF'S MOTIONS FOR SUMMARY JUDGMENT

LARAMORE, Judge.

This is a suit for refund of Federal income and excess profits taxes and interest collected from the Union Pacific Railroad Company (hereinafter referred to as Union) for the calendar year 1942. On June 15, 1943, taxpayer filed its final corporation income and declared value excess profits (DVEP) tax returns and a final corporation excess profits tax return for the tax year 1942.

Successive claims for refund were filed on October 4, 1946 (1946 claim), April 25, 1949 (1949 claim), April 10, 1950 (1950 claim), and September 11, 1953 (1953 claim). An audit by the Internal Revenue Service had begun in 1945. On July 16, 1946, Union received a substantial refund of DVEP and excess profits taxes. After the audit was completed, it received a refund of income and additional DVEP taxes and a credit for excess profits taxes on September 19, 1960.

Consent agreements extended the period for assessment of 1942 taxes until June 30, 1961. The Commissioner of Internal Revenue (hereinafter referred to as Commissioner) disallowed the 1949 and 1950 claims by a statutory notice dated September 26, 1960, and the 1953 claim by a notice of September 28, 1960. Union's post-audit, timely claim for refund of income and excess profits taxes and assessed interest, in a total amount of $13,409,961.46, was filed on December 28, 1961 (1961 claim) and disallowed on August 14, 1962. Suit for that amount was timely commenced. To date no action has been taken on the 1946 claim.

Union's petition, filed September 14, 1962, enumerates 27 distinct items as grounds for relief, 26 of which are the precise items presented in its 1961 refund claim. Four years later, after an additional audit, defendant filed its first and second amended answers, contesting all of the taxpayer's grounds for relief and raising 10 new affirmative defenses, including lack of jurisdiction over Count XXVII.¹ Plaintiff's motion to strike these defenses was denied by the trial commissioner and his order of September 29, 1966 permitted Union to amend its petition and raise affirmative issues as offsets to defendant's additional defenses. Union, by that amendment, raised seven additional grounds for refund (Counts XXVIII-XXXIV).²

The government has moved for partial summary judgment asserting that neither these additional counts (except Count XXXI) nor Count XXVII of the original petition, were included in any timely claim for refund and that, therefore, they are both barred by the applicable statute of limitations.³ Taxpayer has moved for partial summary judgment on the government's affirmative defenses, and contends that the court does not have jurisdiction because the period within which additional taxes might have been assessed expired on June 20, 1961 and, therefore, these additional defenses are barred.

I

In opposition to defendant's motion, Union argues that the government is circumventing Court of Claims Rules 55(a) (1) and (3) (a trial commissioner's order, if not appealed, becomes the order of the court) by requesting this untimely review of the trial commissioner's 1966 order. Union states that defendant cannot now raise the dispositive motion for partial summary judgment pursuant to Rule 64, because the defendant did not appeal the 1966 procedural order granting plaintiff permission to amend its petition. The amendment had been allowed as a motion pursuant to Court of Claims Rule 22(a) (leave to amend within the discretion of the court). We cannot agree.

A procedural motion which requests leave to amend a petition out-of-time (Rules 54(a) (3) and 22), when granted by the trial commissioner, is subject to review by the court if requested within seven days after notice of the order is served (Rule 55(a) (3)). Absent that request, the order is deemed the order of the court. Dispositive motions (including a motion for partial summary judgment based upon lack of jurisdiction), however, are specifically excepted from the scope of Rules 54(a) and 55(a) and included in Rules 54(b) and 55(b). Clearly, Union's procedural motion to amend its petition cannot negate defendant's indisputable right to move, at any time, for summary judgment if it becomes evident that a claim is barred by the statute of limitations. See 6 Moore's Federal Practice (2d Ed. 1965), ¶ 56.14; and 3 Barron and Holtzoff, Federal Practice and Procedure, § 1245, and the cases cited therein.

As an alternative to its 1966 motion to strike defendant's additional defenses, which was denied, plaintiff requested permission to assert the grounds now challenged by the government, notwithstanding the fact that they may not have been the subject of a timely refund claim. The question of a timely-filed claim, however, was not decided by the trial commissioner's exercise of his discretionary power to permit an untimely amendment to the petition. We find the defendant's motion for partial summary judgment on Counts XXVII through XXX and XXXII through XXXIV procedurally correct.

II

Union's basic position in opposition to the merits of defendant's motion is that its original and amended claims for refund, in conjunction with the extensive and detailed Internal Revenue Service Agent's audit investigation and the knowledge thereby acquired by the Service, are an adequate foundation for raising Counts XXVII-XXXIV in this suit. Because the agent was aware of, and considered the facts underlying these counts, it argues that the Commissioner knew, or should have known, that taxpayer claimed a refund on these items.

Defendant's motion is based on its conclusion that the timely-filed claims for refund fail to state the grounds upon which plaintiff now seeks to recover. The taxpayer did not apprise the Commissioner of the grounds now asserted, either in a formal or an informal claim for refund, and, therefore, defendant reasons, taxpayer is barred from recovery.

It is an undisputed general rule that a ground for refund neither specifically raised by, nor comprised within the general language of, a timely formal or informal application for refund to the Internal Revenue Service cannot be considered by a court in which a suit for refund is subsequently initiated. United States v. Felt & Tarrant Mfg. Co., 283 U.S. 269, 51 S.Ct. 376, 75 L.Ed. 1025 (1931); Real Estate-Land Title & Trust Co. v. United States, 309 U.S. 13, 17-18, 60 S.Ct. 371, 84 L.Ed. 542 (1940); International Curtis Marine Turbine Co. v. United States, 56 F.2d 708, 74 Ct.Cl. 132 (1932); Midvale Co. v. United States, 138 F.Supp. 269, 133 Ct.Cl. 881 (1956); Williamson v. United States, 292 F.2d 524, 155 Ct.Cl. 279 (1961). The rule that a taxpayer cannot present one ground for refund in its claim and a different ground in its petition is designed both to prevent surprise and to give adequate notice to the Service of the nature of the claim and the specific facts upon which it is predicated, thereby permitting an administrative investigation and determination. United States v. Memphis Cotton Oil Co., 288 U.S. 62, 53 S.Ct. 278, 77 L.Ed. 619 (1933). In addition, the Commissioner is provided with an opportunity to correct any errors, and if disagreement remains, to limit the scope of any ensuing litigation to those issues which have been examined and which he is willing to defend. Carmack v. Scofield, 201 F.2d 360, 362 (5th Cir. 1953); Thompson v. United States, 332 F.2d 657, 660 (5th Cir. 1964); Tucker v. Alexander, 15 F.2d 356 (8th Cir. 1926), reversed on other grounds, 275 U.S. 228, 48 S.Ct. 45, 72 L.Ed. 253 (1927).

If the claim for refund states only general grounds for relief, an item raised in litigation but not specifically adverted to in the claim might be permitted if it is found that the taxpayer adequately alerted the Service to the fact that the item is a ground for refund, or that the Commissioner considered that unspecified ground in reaching his decision on the items for which a refund was requested. United States v. Kales, 314 U.S. 186, 62 S.Ct. 214, 86 L.Ed. 132 (1941); Bonwit Teller & Co. v. United States, 283 U.S. 258, 51 S.Ct. 395, 75 L. Ed. 1018 (1931); Cumberland Portland Cement Co. v. United States, 104 F.Supp. 1010, 122 Ct.Cl. 580 (1952); Stuart v. United States, 130 F.Supp. 386, 131 Ct. Cl. 174 (1955).

We have permitted a technically imperfect claim to be remedied by an amendment after the limitations period has expired if the Commissioner was neither misled nor deceived by the absence of a formal claim. Several of the decisions relied upon by taxpayer in support of its statement that formalistic or technical requirements are not applied to refund claims involved the sufficiency of a claim for refund based on a net operating loss deduction and the carryback or carryforward to, or from, another year. An amendment after the statutory period, or recovery on an item not specified in a claim, has been permitted if the Service had notice of the ground involved. See National Forge & Ordnance Co. v. United States, 151 F.Supp. 937, 139 Ct.Cl. 204, 222 (1957); Continental Foundry & Machine Co. v. United States, 159 F.Supp. 608, 141 Ct.Cl. 604 (1958); United States Pipe & Foundry Co. v. United States, 155 F.Supp. 231, 140 Ct.Cl. 132 (1957); Landers, Frary & Clark v. United States, 149 F.Supp. 202, 137 Ct.Cl. 870 (1957); Harlan v. United States, 312 F.2d 402, 160...