Superior's Brand Meats, Inc. v. Lindley

• Decision Date: 30 April 1980
• Docket Number: No. 79-796,79-796
• Citation: 403 N.E.2d 996,62 Ohio St.2d 133,16 O.O.3d 150
• Parties: , 16 O.O.3d 150 SUPERIOR'S BRAND MEATS, INC., Appellant, v. LINDLEY, Tax Commr., Appellee.
• Court: Ohio Supreme Court

Page 133

62 Ohio St.2d 133

403 N.E.2d 996, 16 O.O.3d 150

SUPERIOR'S BRAND MEATS, INC., Appellant, v. LINDLEY, Tax Commr., Appellee.

No. 79-796.

Supreme Court of Ohio.

April 30, 1980.

Syllabus by the Court

Ordinarily, where an administrative proceeding is of a judicial nature and where the parties have had an ample opportunity to litigate the issues involved in the proceeding, the doctrine of collateral estoppel may be used to bar litigation of issues in a second administrative proceeding.

Superior's Brand Meats (Superior) was issued a sales and use tax assessment on April 9, 1973, based on a purchase audit for the period between January 1, 1969, and December 31, 1971. A portion of the assessment was for the components of a cold storage building called a Bally Box. The building is refrigerated and houses a conveyor system.

Superior filed a petition for reassessment, pursuant to R.C. 5739.13, and after a hearing, the Tax Commissioner issued an order assessing Superior $50,123.86 in sales and use taxes and penalties.

Superior filed a notice of appeal with the Board of Tax Appeals pursuant to R.C. 5717.02. The appeal was docketed as Superior's Brand Meats v. Kosydar and was assigned case No. C-149. A hearing was held on August 29, 1974. Superior, inter alia, contended that the components of the Bally Box were exempted from the definition of "sale" in R.C. 5739.01(B) because they were tangible personal property which was incorporated into a structure or improvement on and becoming a part of real property pursuant to a construction contract.

The Board of Tax Appeals issued its decision on June 5, 1975, affirming the Tax Commissioner's final assessment. The board held that the components of the Bally Box did not qualify for the exemption from the definition of sale because Superior had failed to present any evidence establishing the existence of a construction contract.

Superior did not appeal the decision in case No. C-149 and in January, 1976, Superior paid the assessment. In July, 1977, though, Superior filed an application for a refund pursuant to R.C. 5739.07. This application asserted that the components of the Bally Box were exempt because the box and its components constitute real property. The application for a refund included amounts paid for some parts of the conveyer system which were not included in the earlier petition for reassessment.

The Tax Commissioner denied the application for a refund on March 8, 1978. Superior appealed the ruling to the Board of Tax Appeals. At the hearing before the board, on October 19, 1978, the commissioner raised the defense of collateral estoppel for the first time. The commissioner argued that the disposition of case No. C-149 resolved issues between the parties which were determinative in the appeal of the refund decision. Based on an apparent understanding of the parties, the board heard evidence and reserved a ruling on the collateral estoppel issue until briefs were submitted.

On May 22, 1979, the board affirmed the decision of the Tax Commissioner, holding that the issues litigated in case No. C-149 were dispositive of the appeal before it under the doctrine of collateral estoppel. The board also held that the appeal of the tax assessment on the conveyor system had not been properly perfected in Superior's notice of appeal and as a consequence had been waived.

The cause is now before this court as a matter of right.

Miller & Noga and Ronald B. Noga, Columbus, for appellant.

William J. Brown, Atty. Gen., and John C. Duffy, Jr., Asst. Atty. Gen., for appellee.

CELEBREZZE, Chief Justice.

The basis of the Board of Tax Appeal's decision in the case at bar is the doctrine of collateral estoppel. This issue was not raised in the disposition of appellant's application for a refund until the October, 1978, hearing before the Board of Tax Appeals. Appellant argues that the Tax Commissioner, by failing to utilize the doctrine in denying the application for a refund, waived its use before the board. Appellant analogizes the Tax Commissioner's failure to impose the doctrine to the failure of a party in a civil action to assert the doctrine in the pleadings.

Sales and use tax assessment cases do not become adversarial until the taxpayer appeals the Tax Commissioner's final order to the Board of Tax Appeals. The taxpayer appeals by filing a notice of appeal, and the record and order are then transmitted to the board. The commissioner's determination is rendered before he is aware an appeal has been made. The taxpayer files nothing else before the hearing is held. The Civil Rules cannot be directly applied in such cases.

It is clear from the transcript that ample notice of the use of the doctrine of collateral estoppel was given the taxpayer as well as a full opportunity to argue the issue before the board. The doctrine of collateral estoppel was not waived.

This court must decide whether the doctrine of collateral estoppel can be applied to decisions rendered by administrative bodies. This is a question this court has not faced squarely in the past.

The doctrine of collateral estoppel is an important element of our legal system. It provides a necessary degree of finality to decisions rendered by our courts. Finality is a desirable objective in administrative proceedings as well.

We recognize the need for flexibility in applying the doctrine of collateral estoppel to the administrative decision-making process; however, because of the need for finality, we hold that ordinarily where an administrative proceeding is of a judicial nature and where the parties have had an adequate opportunity to litigate the issues involved in the proceeding, the doctrine of collateral estoppel may be used to bar litigation of issues in a second administrative proceeding. In so ruling we join numerous courts including the United States Supreme Court. United States v. Utah...