Court Opinion

ID: 4472180
Source: CourtListenerOpinion
Date Created: 2020-01-13 23:19:11.664591+00
Date Added: 2024-06-11T15:03:22.522282
License: Public Domain

Opper, J., dissenting: In my view, disposition of the present proceeding conflicts not only with recognized principles of estoppel by judgment, Cromwell v. County of Sac, 94 U. S. 351, and their application in tax litigation, Tait v. Western Maryland Ry. Co., 289 U. S. 620; The Evergreens, 47 B. T. A. 815; affirmed in part (C. C. A., 2d Cir.), 141 Fed. (2d) 927; certiorari denied, 323 U. S. 720, but with the Supreme Court’s most recent pronouncement on the subject, Commissioner v. Sunnen, 333 U. S. 591.1 Nothing about the prior decision is shown to “have become obsolete or erroneous with time,” but it remains “substantially static, factually and legally” and seems to me binding as to the “right, question or fact” there decided. What we are now doing fails to distinguish between new evidence, which res judicata never yields to, and a new fact. There was no change in the latter between 1939 and 1940. If there were other owners of the business in 1939, an “issue” or “fact” which the prior decision established, there were such likewise in 1940. The issue here is not whether petitioner was a de facto or a de jure corporation in the year 1940, but whether, not being a corporation, it is nevertheless an association taxable as such. In the prior proceeding the opinion affirming the Tax Court (C. C. A., 9th Cir.), 149 Fed. (2d) 739, 741, decided under Treasury regulations reading “If the conduct of the affairs of a corporation continues after the expiration of its charter, or the termination of its existence, it becomes an association,” that petitioner “was an association and was properly taxed under the provision of the tax code referring to corporations.” (Emphasis added.) Thus the fact that the corporate charter had expired is not determinative of the present issue any more than it was of that already adjudicated. Now why did the Tax Court determine in the earlier proceeding that this was an association? It was because it rejected the contention there made, which is the same as that made here, “that it was not an association, but a sole proprietorship. The contention is predicated upon the theory that J. L. Norie, as the sole stockholder of the corporation, was the owner of petitioner’s business. The record fails to prove such a premise for the argument.” There is absolutely no evidence in this record that the conduct of petitioner’s business was different in the year 1940; that, for example, it became a partnership or joint venture. The mere fact that it changed the letterhead — how does not appear — or that it removed the name from the door, does not to any extent bear on its manner of doing business. Incidentally, this was not until the close of 1940. For all that appears, there was not even this change for 365 days of the year. The real issue is the same as that in the prior proceeding— petitioner’s classification as an “association” because it had “associates,” and was not a sole proprietorship. On this issue nothing is produced, certainly no evidence which was not or could not have been produced in the prior proceeding. The State Court proceeding relied on, if not collusive under the definition of the Freuler case,2 in fact demonstrates not any change subsequent to our prior decision, but the reverse. The State Court found “as a fact” that after Norie acquired all of the stock as far back as the year 1926, “at no time * * * did plaintiff [Norie] dispose of any of said stooh or create any interest therein in any other person * * (Emphasis added.) This is properly described as a fact. But it is diametrically contrary to the fact found in our prior decision. No authority, including the Blair case,3 has decided that the intervening determination of a fact, as opposed to a question of law, in other litigation eliminates the binding quality of a prior decision when the same factual issue arises in the same court. See The Evergreens, supra. It is further adjudged in the same decree that the corporation ceased to exist either de jare or de facto on September 7, 1929 — ten years before the year that was- in issue in the prior proceeding. But as the Court makes clear in its opinion on the appeal from this Court’s decision, petitioner would be taxable as an association under the express language of the regulation precisely because it had ceased to be a de facto or a de jure corporation. Finally, the decree finds that two other proceedings before other state courts, in which accountings were approved confirming the property in others, were both “in error.” Perhaps the prior decision of this Court was also “in error”; perhaps its affirmance on appeal was also “in error.” But even if that were so, it would be the kind of error which the rule of res judicata was designed to leave undisturbed, for it is that rule which “makes white, black; black, white; the crooked, straight; the straight crooked.” TukneR, Murdock, and Disney, JJ., agree with this dissent.   “Of course, where a question of fact essential to the judgment is actually litigated and determined in the first tax proceeding, the parties are bound by that determination in a subsequent proceeding even though the cause o} action is different. See The Evergreens v. Nunan, 141 Fed. (2d) 927.” (Emphasis added.)    Freuler v. Helvering, 291 U. S. 38.    Blair v. Commissioner, 300 U. S. 5.