Fairmont Aluminum Co. v. Commissioner of Int. Rev.
Decision Date | 18 May 1955 |
Docket Number | No. 6946.,6946. |
Citation | 222 F.2d 622 |
Parties | FAIRMONT ALUMINUM COMPANY, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent. |
Court | U.S. Court of Appeals — Fourth Circuit |
Earl Q. Kullman, New York City (Kirlin, Campbell & Keating, New York City, on brief), for petitioner.
Melva M. Graney, Sp. Asst. to the Atty. Gen. (H. Brian Holland, Asst. Atty. Gen., and Ellis N. Slack, Sp. Asst. to the Atty. Gen., on brief), for respondent.
Before PARKER, Chief Judge, and SOPER and DOBIE, Circuit Judges.
This is an appeal from the Tax Court of the United States involving a deficiency in excess profits taxes for the year 1945. 22 T.C. 1377. The question in the case is based upon the contention of taxpayer that its equity invested capital was not less than $1,500,000 instead of $550,000, the amount allowed. Precisely the same question was raised by taxpayer before the Tax Court with respect to the computation of its excess profits taxes for the year 1944, and was decided adversely to its contention both by the Tax Court and by this court. Fairmont Aluminum Co. v. Commissioner, 4 Cir., 180 F.2d 832, 834. The court below held taxpayer concluded by the decision in the prior litigation on the principle of collateral estoppel. Taxpayer argues that the principle of collateral estoppel has no application (1) because it contends that the prior decision was not one on the merits, (2) because it says that there has been a change of "legal atmosphere" and (3) because it says the Tax Court is not a court at all but an administrative agency. We think that there is no merit in any of these contentions.
There can be no question but that the prior decision was a decision on the merits. In 1926 taxpayer had acquired property formerly belonging to the West Virginia Metal Products Corporation. That property had been sold under foreclosure proceedings and purchased by a committee of bondholders, who transferred it to taxpayer for notes in the aggregate sum of $550,000 and 3,000 of the 60,000 shares of common stock. Taxpayer contended that the property so acquired was worth $1,500,000 but offered nothing in support of the contention except a 1923 balance sheet. With respect to that matter this court said:
We considered also the contention of taxpayer that its claim should be allowed on the ground that it came into being as a tax free reorganization under the holding in Palm Springs Holding Corporation v. Commissioner, 315 U.S. 185, 62 S.Ct. 544, 86 L.Ed. 785 and held that it had not established its claim on this basis, saying:
In the prior case taxpayer relied upon a stipulation of facts, notwithstanding a warning by government counsel that it was insufficient to establish either of the contentions made by taxpayer. When the Tax Court decided that case against taxpayer on the ground that there had been a failure of proof, taxpayer asked to reopen the case for the taking of additional testimony, but this was denied. A subsequent motion for a new trial was likewise denied. On appeal this court had before it all the proceedings had in the Tax Court including these motions and affirmed the judgment there rendered. There can be no question but that the judgment so rendered was a judgment on the merits and was binding upon the taxpayer, on the principle of collateral estoppel on the issues raised as to its equity invested capital. A judgment on the merits is one which is based on legal rights as distinguished from mere matters of practice, procedure, jurisdiction or form. Swift v. McPherson, 232 U.S. 51, 34 S.Ct. 239, 58 L.Ed. 499; Clegg v. United States, 10 Cir., 112 F.2d 886; 30 Am. Jur. p. 944; 49 C.J.S., Judgments, § 8, p. 33; 27 Words and Phrases, Merits, pp. 146-147. Certainly a judgment on an agreed statement of facts is a judgment on the merits, just as is a judgment on the pleadings. See 27 Words and Phrases, Merits, p. 146 and cases there cited. And it does not become anything other than a judgment on the merits because a party fails to include in the agreed statement facts necessary to support his contentions. When taxpayer has invoked the judgment of the court with respect to his claim, he is bound by an adverse judgment, whether this has resulted from the fact that the law is against him, from failure to produce sufficient proof or from failure to include sufficient facts in a stipulation.
It is well settled that, although a judgment rendered with respect to taxes for one year is not res judicata in a suit for taxes for another year, a decision as to a matter put in issue and decided in the former suit is binding on the principle of estoppel by judgment or collateral estoppel with respect to the same matter arising in the subsequent litigation, provided that, in the meantime, there has been no change in the fact situation or in the law applicable thereto. Commissioner of Internal Revenue v. Sunnen, 333 U.S. 591, 598, 601, 68 S.Ct. 715, 719, 92 L.Ed. 898. As said by the Supreme Court in the case cited:
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