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U.S. v. International Building Co.

U.S.
May 4, 1953
345 U.S. 502 (1953)

Summary

holding that Tax Court decisions based on stipulations are res judicata for the years they govern

Summary of this case from U.S. v. Mathewson

Opinion

CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE EIGHTH CIRCUIT.

No. 508.

Argued April 8, 1953. Decided May 4, 1953.

In 1942 the Commissioner of Internal Revenue assessed deficiencies against respondent for the taxable years 1933, 1938 and 1939, determining that the proper basis for depreciation of respondent's leasehold was $385,000, not $860,000 as claimed by respondent. Respondent petitioned the Tax Court for review. Thereafter, pursuant to a stipulation filed by respondent and the Commissioner, and without a hearing, the Tax Court entered formal decisions that there were no deficiencies for the taxable years in question. In 1948 the Commissioner assessed deficiencies against respondent for the years 1943, 1944 and 1945, again challenging respondent's claimed basis for depreciation. Held: Upon this record, the decisions of the Tax Court for the years 1933, 1938 and 1939 were not res judicata of the fact that the basis for depreciation was $860,000. Pp. 503-506.

(a) In a subsequent action between the same parties on a different claim, a judgment is conclusive only as to the point or question actually litigated and determined in the original action, not as to what might have been litigated and determined. Pp. 504-505.

(b) The decisions entered by the Tax Court for the years 1933, 1938 and 1939 were only pro forma acceptance by the Tax Court of an agreement between the parties to settle their controversy for reasons undisclosed. P. 505.

199 F.2d 12, reversed.

In a suit by respondent to recover alleged overpayment of federal income taxes, the District Court held against respondent. 97 F. Supp. 595. The Court of Appeals reversed. 199 F.2d 12. This Court granted certiorari. 344 U.S. 927. Reversed, p. 506.

Philip Elman argued the cause for the United States. With him on the brief were Acting Solicitor General Stern, Assistant Attorney General Holland, Ellis N. Slack, Lee A. Jackson and Cecelia H. Goetz.

Malcolm I. Frank argued the cause for respondent. With him on the brief was Irl B. Rosenblum.


Respondent, a Missouri corporation, owns a lease-hold of a plot of ground together with an office building erected on it. In 1942 the Commissioner assessed deficiencies against respondent for the taxable years 1933, 1938, and 1939, determining that it had claimed an excessive value as its basis for depreciating the property. These deficiencies were predicated on a basis of $385,000 amortized over the life of the lease. Respondent, who claimed a base of $860,000 amortized over a shorter period, filed petitions for review with the Tax Court. Meanwhile respondent filed a petition under ch. X of the Bankruptcy Act which ended in a confirmed plan of reorganization. Although the Collector filed proof of claim for the deficiencies in those proceedings, he later withdrew the claim under a stipulation that the withdrawal was "without prejudice" and did not constitute a determination of or prejudice the rights of the United States to any taxes with respect to any year other than those involved in the claim. Shortly thereafter respondent and the Commissioner filed stipulations in the pending Tax Court proceedings stating that "there is no deficiency in Federal income tax due" from respondent for the taxable years in question, that the tax liability for each of the years was nil, and that the jeopardy assessment was abated. The Tax Court, pursuant to the stipulation, entered formal decisions that there were no deficiencies for the taxable years in question. The Tax Court, however, held no hearing; no stipulations of fact were entered into; no briefs were filed or argument had. The issue as to the correctness of the basis of depreciation used by respondent was, however, the basis of its appeal to the Tax Court. And so, when the Commissioner in 1948 assessed deficiencies for the years 1943, 1944, and 1945, challenging once more the correctness of the basis of depreciation, respondent paid the deficiencies and brought this suit to recover, alleging inter alia that the decisions of the Tax Court for the years 1933, 1938, and 1939 were res judicata of the fact that the basis for depreciation was $860,000. The District Court held against respondent. 97 F. Supp. 595. The Court of Appeals reversed. 199 F.2d 12. Because of a conflict between that decision and Trapp v. United States, 177 F.2d 1, decided by the Court of Appeals for the Tenth Circuit, we granted certiorari. 344 U.S. 927.

The stipulation for the year 1933, which is typical, reads as follows: "It is hereby stipulated that there is no deficiency in Federal income tax due from the petitioner for the taxable year 1933 and that the following statement shows the petitioner's Federal income tax liability for the taxable year 1933: "Tax liability ................................. None "Assessment (Jeopardy):

"January 23, 1942 (not paid) ................. $2,188.12 --------- "Assessment to be abated ........................ $2,188.12"

The governing principle is stated in Cromwell v. County of Sac, 94 U.S. 351, 352-353. A judgment is an absolute bar to a subsequent action on the same claim.

"But where the second action between the same parties is upon a different claim or demand, the judgment in the prior action operates as an estoppel only as to those matters in issue or points controverted, upon the determination of which the finding or verdict was rendered. In all cases, therefore, where it is sought to apply the estoppel of a judgment rendered upon one cause of action to matters arising in a suit upon a different cause of action, the inquiry must always be as to the point or question actually litigated and determined in the original action, not what might have been thus litigated and determined. Only upon such matters is the judgment conclusive in another action."

And see Tait v. Western Md. R. Co., 289 U.S. 620, 623; Mercoid Corp. v. Mid-Continent Co., 320 U.S. 661, 671; Commissioner v. Sunnen, 333 U.S. 591, 597-598. Estoppel by judgment, or collateral estoppel as it is often called, is applicable in the federal income tax field. Tait v. Western Md. R. Co., supra, at 624; Commissioner v. Sunnen, supra, at 598.

We conclude that the decisions entered by the Tax Court for the years 1933, 1938, and 1939 were only a pro forma acceptance by the Tax Court of an agreement between the parties to settle their controversy for reasons undisclosed. There is no showing either in the record or by extrinsic evidence (see Russell v. Place, 94 U.S. 606, 608) that the issues raised by the pleadings were submitted to the Tax Court for determination or determined by that court. They may or may not have been agreed upon by the parties. Perhaps, as the Court of Appeals inferred, the parties did agree on the basis for depreciation. Perhaps the settlement was made for a different reason, for some exigency arising out of the bankruptcy proceeding. As the case reaches us, we are unable to tell whether the agreement of the parties was based on the merits or on some collateral consideration. Certainly the judgments entered are res judicata of the tax claims for the years 1933, 1938 and 1939, whether or not the basis of the agreements on which they rest reached the merits. But unless we can say that they were an adjudication of the merits, the doctrine of estoppel by judgment would serve an unjust cause: it would become a device by which a decision not shown to be on the merits would forever foreclose inquiry into the merits. Estoppel by judgment includes matters in a second proceeding which were actually presented and determined in an earlier suit. See Commissioner v. Sunnen, supra, at 598. A judgment entered with the consent of the parties may involve a determination of questions of fact and law by the court. But unless a showing is made that that was the case, the judgment has no greater dignity, so far as collateral estoppel is concerned, than any judgment entered only as a compromise of the parties.

Reversed.


Summaries of

U.S. v. International Building Co.

U.S.
May 4, 1953
345 U.S. 502 (1953)

holding that Tax Court decisions based on stipulations are res judicata for the years they govern

Summary of this case from U.S. v. Mathewson

holding that there is no collateral estoppel from a stipulated decision

Summary of this case from Hommel v. Comm'r

finding no res judicata effect concerning tax deficiencies in previous years where deficiencies were entered into in prior tax litigation by stipulation

Summary of this case from New York v. Shinnecock Indian Nation

recognizing res judicata effect of stipulated Tax Court decisions

Summary of this case from Golden v. Commissioner

In International Building, deficiencies were assessed against the corporate taxpayer for the years 1933, 1938, and 1939, because of a determination that taxpayer had used an improper basis of depreciation for certain property.

Summary of this case from Gray v. C.I.R

In United States v. International Building Co., 345 U.S. 502, 73 S.Ct. 807, 97 L.Ed. 1182 (1953), the Court held that tax judgments based on consent agreements between taxpayers and the government do not collaterally estop litigation on the same issue for later tax years.

Summary of this case from Anderson, Clayton Co. v. United States

In United States v. International Bldg. Co., 1953, 345 U.S. 502, 73 S.Ct. 807, 97 L.Ed. 1182, the Supreme Court held that a judgment by confession could not be used as the basis for collateral estoppel even as to matters which were "necessarily determined" by a prior judgment.

Summary of this case from United States v. Eastport Steamship Corp.

explaining that settlement agreements do not indicate "whether the agreement of the parties was based on the merits or on some collateral consideration"

Summary of this case from Charbonneau v. Chartis Prop. Cas. Co.

stating that, where the language of judgment does not reveal whether it was based on the merits or a collateral consideration, it "has no greater dignity, so far as collateral estoppel is concerned, than any judgment entered only as a compromise of the parties"

Summary of this case from U.S. v. Rocky Mountain Holdings, Inc.

In International Building, the Plaintiff points out that the Tax Court had very little involvement with the substance of the case and that the earlier decision of the Tax Court was only a "pro forma" acceptance by that court of an agreement between the parties.

Summary of this case from Chicago and Illinois Midland Ry. Co. v. Marsh

In International Building, the Supreme Court held that prior decisions of the Tax Court were not res judicata of the fact that the proper basis for depreciation of the respondent's leasehold was $860,000.

Summary of this case from Chicago and Illinois Midland Ry. Co. v. Marsh

In United States v. Int'l Bldg. Co., 345 U.S. 502 (1953), the Supreme Court held that the Government was not collaterally estopped from rearguing a position it had conceded in a previous year, even if the concession was the basis of a court decision.

Summary of this case from Barrett v. Comm'r

opining that "[t]here are many reasons why a party may choose not to raise an issue, or contest an assertion, in a particular action."

Summary of this case from In re Olson

In International Building, the Court stated that a consent judgment (in that case a stipulation-based tax court judgment) was "an absolute bar to a subsequent action on the same claim," but also stated that "where the second action... is upon a different claim or demand, the judgment in the prior action operates as an estoppel only as to those matters in issue or points controverted."

Summary of this case from Willerton v. Bassham

In United States v. International Building Co., 345 U.S. 502 (73 S Ct 807, 97 L ed 1182), it was held, however, that judgments of that court on specific tax claims are res judicata of those claims.

Summary of this case from In re Bizanes Estate
Case details for

U.S. v. International Building Co.

Case Details

Full title:UNITED STATES v . INTERNATIONAL BUILDING CO

Court:U.S.

Date published: May 4, 1953

Citations

345 U.S. 502 (1953)
73 S. Ct. 807

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