Hooven & Allison Co. v. Lindley

• Decision Date: 20 April 1983
• Docket Number: No. 82-559,82-559
• Citation: 447 N.E.2d 1295,4 OBR 410,4 Ohio St.3d 169
• Court: Ohio Supreme Court
• Parties: , 5 ITRD 1213, 4 O.B.R. 410 HOOVEN & ALLISON COMPANY, Appellant and Cross-Appellee v. LINDLEY, Tax Commr., Appellee and Cross-Appellant.

Page 169

4 Ohio St.3d 169

447 N.E.2d 1295, 5 ITRD 1213, 4 O.B.R. 410

HOOVEN & ALLISON COMPANY, Appellant and Cross-Appellee v. LINDLEY, Tax Commr., Appellee and Cross-Appellant.

No. 82-559.

Supreme Court of Ohio.

April 20, 1983.

Jones, Day, Reavis & Pogue, Michael A. Nims, Kenneth E. Updegraft, Jr., and Charles H. Moellenberg, Jr., Cleveland, for appellant and cross-appellee.

Anthony J. Celebrezze, Jr., Atty. Gen., and Richard C. Farrin, Asst. Atty. Gen., for appellee and cross-appellant.

PER CURIAM.

In the case at bar, this court must first decide whether the doctrine of collateral estoppel bars the commissioner from imposing an ad valorem property tax upon imported raw goods stored by Hooven in its warehouse.

In Montana v. United States (1979), 440 U.S. 147, 99 S.Ct. 970, 59 L.Ed.2d 210, the United States Supreme Court clearly set forth the operational features of the interrelated doctrines of res judicata and collateral estoppel. The court therein declared:

" * * * Under res judicata, a final judgment on the merits bars further claims by parties or their privies based on the same cause of action. * * * Under collateral estoppel, once an issue is actually and necessarily determined by a court of competent jurisdiction, that determination is conclusive in subsequent suits based on a different cause of action involving a party to the prior litigation. * * * " (Citations omitted.) Montana v. United States, supra, at 153, 99 S.Ct. at 973. See, also, Parklane Hosiery Co. v. Shore (1979), 439 U.S. 322, 326, fn. 5, 99 S.Ct. 645, 649 fn. 5, 58 L.Ed.2d 552; State ex rel. Westchester v. Bacon (1980), 61 Ohio St.2d 42, 44, 399 N.E.2d 81 .

As the instant cause does not involve returns for the same years at issue in Hooven I, it is arguable whether the more restrictive doctrine of res judicata is apposite here. The applicability of collateral estoppel to the case sub judice, however, is undeniable. Both parties to the prior action (the Hooven & Allison Company and the Tax Commissioner of Ohio) are parties to the present, and the ultimate issue decided in Hooven I is that now under consideration--whether an ad valorem personal property tax may constitutionally be assessed against imported raw materials stored in their original containers for future use.

The commissioner offers this court's decision in Beatrice Foods Co. v. Lindley (1982), 70 Ohio St.2d 29, 434 N.E.2d 727 , and Standard Oil Co. v. Zangerle (1943), 141 Ohio St. 505, 49 N.E.2d 406 , as precedent for precluding the application of collateral estoppel to the instant action. Both cases, however, are readily distinguishable. In Beatrice Foods, supra, the taxpayer improperly essayed to invoke collateral estoppel where the subject issue had not been previously resolved in an adversary proceeding and where the principle argued for had not, through unchallenged operation over a period of time, gained acceptance as law. Similarly, our ruling in Standard Oil, supra, is not germane to the instant action as the applicability of res judicata, not collateral estoppel, was at issue there. Moreover, in Standard Oil, the taxpayer sought to shield property found to be tax-exempt in a prior year because of its then use from assessment in a later year when the property was employed in a different manner.

Nonetheless, despite the inappositeness of Beatrice Foods and Standard Oil, it must be acknowledged that, at least in the context of tax determinations, the applicability of collateral estoppel is not untempered. As the United States Supreme Court observed, in Commissioner v. Sunnen (1948), 333 U.S. 591, at 599-600, 68 S.Ct. 715, at 720, 92 L.Ed. 898:

" * * * [C]ollateral estoppel is a doctrine capable of being applied so as to avoid an undue disparity in the impact of income tax liability. A taxpayer may secure a judicial determination of a particular tax matter, a matter which may recur without substantial variation for some years thereafter. But a subsequent modification of the significant facts or a change or development in the controlling legal principles may make that determination obsolete or erroneous, at least for future purposes. * * * [A] judicial declaration intervening between * * * two proceedings may so change the legal atmosphere as to render the rule of collateral estoppel inapplicable. * * * "

The commissioner argues that the United States Supreme Court's decision in Michelin Tire Corp. v. Wages, supra, 423 U.S. 276, 96 S.Ct. 535, 46 L.Ed.2d 495, so altered the "legal atmosphere" relative to the constitutionality of personal property taxation of imports as to eviscerate Hooven's collateral estoppel claims. We strongly disagree.

Although the Michelin court clearly felt no compunction in explicitly overruling Low v. Austin (1871), 80 U.S. 29, 20 L.Ed. 517, the commissioner asks us to hold that that same court experienced a sudden diffidence and only tacitly overruled Hooven I. We are thus requested, in effect, to infer an implicit or "constructive" overruling. This we cannot do. Though twice citing Hooven I in its Michelin decision, the United States Supreme Court made no effort to overrule the former. See Michelin Tire Corp. v. Wages, supra, 423 U.S. at 281, 301, fn. 13, 96 S.Ct. at 538, 548, fn. 13. The court's action--or inaction--must be accorded conclusive effect, at least in regard to its intent in reappraising its earlier ruling in Hooven I.

Moreover, that the Michelin court did not attempt to overrule Hooven I should be evident given the factual distinctiveness of the two cases. In Michelin, the court upheld the constitutionality of a state ad valorem property tax levied upon imported tires that had been mixed with domestically manufactured ones and stored for future sale and delivery to various franchised dealers, without regard to the tires' point of origin. ¹ Hooven I, however, involved the validity of a state personal property tax assessed against, not imported finished goods ready for sale, but imported raw materials stored in their original packages for later use in the manufacturing process. Indeed, the court, in Michelin, specifically reserved judgment on the taxability of imported tire tubes still in their original cartons and segregated from their domestic counterparts, the issue most analogous to that presented in the herein action. ² Thus, the commissioner's contention that the holding in Michelin controls the disposition of the case at bar must fail.

The United States Supreme Court's decision in Youngstown Sheet & Tube Co. v. Bowers and United States Plywood Corp. v. Algoma (1959), 358 U.S. 534, 79 S.Ct. 383, 3 L.Ed.2d 490, also attests to the continued vitality of Hooven I. In Hooven I, the court declined to consider whether the taxpayer's inventory of imported raw goods was so integral to its daily manufacturing process...