Opinion ID: 779773
Heading Depth: 1
Heading Rank: 5

Heading: value of hondo stock

Text: 47 At its core, this issue centers around whether Vestal is bound by the Estate's stipulation during the tax court proceedings that the market value of Hondo stock in 1980 was $2,000.00 per share. See Estate Davenport, 184 F.3d at 1179 n. 2; Estate Davenport, 1997 Tax Ct. Memo LEXIS 468, at  n. 7. As discussed above, the value of Hondo stock at the time of the transfer is important to Botefuhr's, Davenport's, and Vestal's case, because, generally speaking, a donee's liability for a donor's gift tax is capped by the value of the gift received. When determining Vestal's tax liability, the district court used the $2,000.00 per share figure. See Estate of Davenport, 159 F.Supp.2d at 1335-36 (Based on the parties' stipulation and the Tax Court's ruling in previous litigation, this Court adopts the value of the stock gifted by Birnie Davenport at $2,000.00 per share.). 48 On appeal, Vestal advances various arguments for why she is not bound by this figure. In particular, she contends that the stipulation was limited to the tax court proceeding only and does not preclude litigation of that issue in this case. We agree. 49 As an initial matter, we note some confusion over whether the district court invoked the doctrine of claim preclusion or issue preclusion when concluding that the stock should be valued at $2,000.00 per share. Ultimately, however, we conclude that this matter must be evaluated as an assertion of issue preclusion, rather than claim preclusion. Claim preclusion is inapplicable to the situation here presented. 50 Issue preclusion is designed to prevent needless relitigation and bring about some finality to litigation. Under the doctrine, [w]hen an issue of ultimate fact has once been determined by a valid and final judgment, that issue cannot again be litigated between the same parties in any future lawsuit. Ashe v. Swenson, 397 U.S. 436, 443, 90 S.Ct. 1189, 25 L.Ed.2d 469 (1970). Four elements must be demonstrated in order to trigger issue preclusion: (1) the issue previously decided is identical with the one presented in the action in question, (2) the prior action has been fully adjudicated on the merits, (3) the party against whom the doctrine is invoked was a party, or in privity with a party, to the prior adjudication, and (4) the party against whom the doctrine is raised had a full and fair opportunity to litigate the issue in the prior action. Dodge v. Cotter Corp., 203 F.3d 1190, 1197 (10th Cir.2000); see also Orjias v. Stevenson, 31 F.3d 995, 1010 (10th Cir.1994) (identifying elements for issue preclusion). 51 The critical issue is whether the prior stipulation in the estate proceeding on the value of Hondo stock constitutes an adjudication on the merits. In the issue preclusion context, the underlying issue must have been adjudicated on the merits. See Jones v. United States, 466 F.2d 131, 133 (10th Cir.1972) (explaining that issue preclusion is only applicable when an issue identical to that presented in the second suit has been raised and fully adjudicated under identical and inseparable relevant facts). Generally speaking, when a particular fact is established not by judicial resolution but by stipulation of the parties, that fact has not been `actually litigated' and thus is not a proper candidate for issue preclusion. Otherson v. Dep't of Justice, 711 F.2d 267, 274 (D.C.Cir.1983); see also Kane v. Town of Harpswell, 254 F.3d 325, 329 (1st Cir. 2001). This is particularly so when the stipulation does not manifest an intent to be bound in a subsequent action. Red Lake Band v. United States, 221 Ct.Cl. 325, 607 F.2d 930, 934 (1979). As the Restatement (Second) of Judgments states: 52 A judgment is not conclusive in a subsequent action as to issues which might have been but were not litigated and determined in the prior action. 53 .... 54 An issue is not actually litigated if the defendant might have interposed it as an affirmative defense but failed to do so; nor is it actually litigated if it is raised by a material allegation of a party's pleading but is admitted (explicitly or by virtue of a failure to deny) in a responsive pleading; nor it is actually litigated if it is raised in an allegation by one party and is admitted by the other before evidence on the issue is adduced at trial; nor is it actually litigated if it is the subject of a stipulation between the parties. A stipulation may, however, be binding in a subsequent action between the parties if the parties have manifested an intention to that effect. 55 Restatement (Second) of Judgments § 27 cmt. e at 256-57 (1982) (emphasis added); see 18A Charles Alan Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice & Procedure § 4443, at 252-53 (2d ed. 2002) (Stipulation of individual issues is treated much as a consent judgment. A stipulation or admission may be binding in later stages of a continuing proceeding. But issue preclusion ordinarily does not attach unless it is clearly shown that the parties intended that the issue be foreclosed in other litigation.) (footnotes omitted); see also id. at § 4442 at 236 (explaining that procedural default might warrant claim preclusion but does not normally warrant issue preclusion); id. at § 4443 at 251 (explaining that consent judgments will justify claim preclusion but not issue preclusion). The Supreme Court has also recognized that stipulations in one tax proceeding generally do not amount to an adjudication on the merits for issue preclusion purposes. See United States v. Int'l Bldg. Co., 345 U.S. 502, 506, 73 S.Ct. 807, 97 L.Ed. 1182 (1953). 56 Applying these principles to this case, it is clear that the parties never adjudicated the value of Hondo stock. The tax court's decision, for example, noted, For purposes of this case, if we find that Birnie Davenport did transfer the stock in question, the parties have stipulated the fair market value of such stock was $2,000 per share at the time of the transfer. Estate of Davenport, 1997 WL 491571, 1997 Tax Ct. Memo LEXIS 468, at  n. 7. Likewise, in the prior appeal to this court, we observed, The parties stipulated that the fair market values of Hondo stock in the third quarter of 1980 was $2,000 per share. 184 F.3d at 1179 n. 2. Such stipulations do not manifest an intent to be bound in subsequent litigation against a donee. Red Lake Band, 607 F.2d at 935, and, therefore, we reverse the district court's application to the contrary. 57 In summary, we hold that the district court erred in holding that the parties were precluded from relitigating the value of Hondo stock. 15