*2 Before HICKS, SIMONS, ALLEN, Judges. 16G Judge. though jurisdiction, co-ordinate SIMONS, Circuit acquired jurisdiction the latter first in- involves This review controversy, for af- a motion the calendar come taxes seasonably latter, firmance sole issue before 1926, inclusive. The *3 supported identity by proofs establishing respondent or the Board was whether not subject-matter of privity parties, and of gross disallowing deductions erred proper raising is a means of the defense of value the exhaustion on of income account judicata eases, of res therein. These how- taxpay- by the owned group of of ever, do precise problem not the reach respondent of the er. The determinations involved. Passing the as to wheth- taxpayer the seeks re- and approved, were er the to Appeals Board of Tax acts decision. view of the Board’s judicially extent as to its decisions the binding required by force doctrine of the at the outset We are met judicata, res have a we case where two con- respondent’s motion for an affirmance by the troversies, parties respect identical in and to judi principle the of res on of the decision subject-matter, contemporaneously of redetermination cata. The order pending Appeals. before the Tax Board of May Un 10,1932. entered present ease was made, When second decision was applicable, then section der the statute yet of view the first decision had not been (26 Act of 1926 USCA (a) of the Revenue foreclosed. all that appears, For taxpayer six (a), the months § cases could well have been consolidated and petition for review which to file its within acceptance as tried one. There was no of 9,1932. court, it did on November which the first final. start- decision as It is rather respond petition Meanwhile a review oper- ling doctrine that a later can decision year of for the ent’s determination taxes retroactively one, ate to bar an earlier hearing 1927 came before Board on statutory right that a to review can be de- Appeals, involving a claim for ex of Tax by deciding feated an inferior tribunal patents, same and was decid haustion of the twice, ease and same we have been cited to taxpayer July 11, adversely on authority sustaining no it. the second decision of To review necessary judicata for the (Baldwin Board it was Res is defined v. Iowa review in this court with petition Traveling Association, Men’s file his State U. by reason of 522, 1244) of that date in three months Ed. S. Ct. 75 L. (a) of the merely public to section 1001 Reve policy designed amendment a rule of incorporated in the prevent reopening questions nue Act of 1926 corre of which of sponding 1932, by competent of Revenue Act section have been court of decided (26 (a). 6, jurisdiction. policy USCA “Public § effective June dictates that petition decision of litigation; No to review second be an end of that those who and final filed, it became on an by have contested issue shall be bound contest; 11, 1932. result October and matters once tried be considered forever shall set- therefore, to us, We have parties.” present tled as between the question as whether deci rather novel not come within the rule situation does thus tribunal, an administrative inferior sion litigation interpreted. yet is not at an statutory right court reason our to this yet is as end. There matter forever set- review, our review of its earlier bars de parties, tled between no result of contest though the latter could have cisión parties accepted have which judicata at pleaded as res the first been abide. cannot which must We think hearing not then made. because set public policy that reasons of out of which Maryland Railway Tait v. Western tled require application arose doctrine 620, 53 77 L. 706, Co., U. S. The motion for here. affirmance of de- judicata ap doctrine of res cision denied. under the plies to eases courts tax pass then to a consideration of We the is- parties laws, that, where the are the petition. sues raised question identical, same and the fact corporation organized 1,1913. December tax different are involved will not $100,000.00 stock of was is- Its entire application. is also settled prevent Nachod, Railway to Carl P. who had been Supply Co., en- (Hart Steel Co. v. 244 sued signal in the manufacture and sale 1148), gaged 37 S. Ct. U. S. by him for use one court in a case invented elec- involving devices a decision His assets taken over subject- tric railroads. parties same same shop, embraced a machine interposed in another tools may be court matter patent applications, dies, tangible as- will. His 1916 to good 1925, showing the contracts, $18,712.22. The er had claimed no value value for its had a book sets stock, par determined
balance in consid- had a was issued $81,287.78, per share, $5 which intangibles, of excess this value was eration important. sufficiently represented patent rights were the most the value of the operat- petitioner’s an physical intangibles petitioner sustained assets In 1914 the ap- in 1915 of nothing other than ing loss of almost and that more Thereafter, during speculative the than a nominal proximately $1,000. value could be inclusive, operation assigned patents as of the critical earnings in total date. On the *4 of the business resulted basis the Board to the ex- respondent disallowing out of which dividends sustained the in the first in 1918 $174,000 paid, the deductions, of were claimed tent review follow- 1920 years to ed. and the remainder inclusive. haveWe to us familiar the Naehod, purpose In 1914 for the of ob- question as to the whether evidence before taining capital, working additional trans- legally the Board was sufficient to sustain Bell, pro- 245 of to a ferred shares his stock findings, fully this court discussed moter, in that connection. services Tracy in v. Commissioner of Internal Reve Augustus-Stewart syndicate Thereafter the 53 It nue, 575, and other eases. acquired 500 shares of the stock. reasoning clear from the of the memoran shares, $1,250 Bell his 245 obtain- opinion opinion dum that the evidence sub Naehod, the ed shares from and for petitioner completely the was dis mitted maining treasury agreed 240 shares of regarded. testimony, is true pay $6,000 to the indebtedness of upon though binding often helpful, is not $7,000 Signal Hall & to to the Switch Com- obliged to the extent that it is petitioner pany, with had a which the manu- contrary to it if to the of follow facturing contract to take over the Hall every in its members. Nevertheless Company’s dies, amounting tools and to question must remain whether fix the value $5,000 space, to furnish office about sales- arbitrary unsupport ed the. men, and executive officers for the evidence, represents ed or a substantial er, capital necessary and to furnish to judicial reasonably determination founded operate the business. Rapids upon before it. Grand evidence that the Equipment Commissioner, contends Corp. Store patents patent rights acquir- (C. 6) when . F.(2d) 915 C. A. While the Board reject on not principle may ed was of general less than as law ex upon $135,000. It relies of pert testimony evidence five ex- a conclusion ac and reach pert witnesses, who experi fixed their knowledge, value at sums cordance with its own ranging $100,000 $170,000. to judgment, it ence, also must itself have upon experi relies of knowledge subject-matter success business based upon Pittsburgh 3918 to ence it. Hotels Co. v. Com put upon and the value Revenue, them of 43 F.(2d) Naehod missioner Internal time of (C. 3). arbitrarily sale. Board in its memoran- 345 It cannot C. dis reciting opinion positive testimony dum facts all regard discarded the affirmative and particular evidence. Its reasons doing for so to case. applicable Nor qualification were the lack of rely wholly presumption upon can it witnesses of express opinion, a failure to show findings that their correctness that attáches upon were based knowledge valuations we said in the Commissioner. As they or Commissioner, existed could reasonably Pottery bo anticipated date, why at the basic see no reason failure to 45: “We did not show put proofs result of it not make its ease when retrospec- clear appraisals made in light distinctly tending tive ly value; to show this later earnings, inconsistency and their proofs and when so introduced other remained testimony by eontraiy proofs unchallenged case. No de indei>endent knowledge of the Board analysis, as to these duty it was the valua- structive upon. upon tions relied Based the sale commissioner decide issue in accord stock, upon Bell lack proof appearing then substantial ance with before consideration for the think, duty sale of the treasury him; was, we of: the Augustus-Stewart stock to the Company, view.” up- to take same Cf. Lunsford board 6);A. ical (C. Paint Commissioner, F.(2d) Co. v. of Internal v. Planters’ 3). 55 Revenue, (C. 66 F.(2d) Co.v. C. A. Operating F.(2d) 583, 585 Refusing give profits based principles to apply I£ we are to upon years. during case, instant the Board 1928, inclusive, at nevertheless the Board the rea required consideration there is cap importance tached to the fact that the disregarding the tes rejecting sons for ital stock return of the experts as to timony of the approximately organiza after four bas reasons wore patents, in far as those so tion, surplus profits showed or undivided inconsistency grounds other than earned, and no paid. Experience dividends sufficient, testimony. period one to aid was called put up say the value us, it seems prophecy, illu correcting uncertain but the ap that it speculative, or experience minating repu in the other was ap retrospective peared to result diated. Nor considera did the Board earnings light praisals made in period tion to the fact that the earlier years. ap subsequent petitioner in the praisal years, abnormal in that it included war fully exploited is yet notwithstanding that, a difficult Its val speculative. in a sense bound *5 development, survived proof. “A not, however, incapable of ue is acceptance achieved of its end commercial no There can be thing unique. is a widespread patented that was devices express the mar contemporaneous sales to a Moreover, assigning substantial. that from invention derives value of an ket ** * merely nominal value to quality. novelty patentable ground that stock value was the determined appraisal that it make best The law will sufficiently represented by the whatever aids can, summoning-toits service * * * petitioner’s physical and other intan assets At times the command. it can completely gibles, the Board overlooked may supplied be that only available evidence enterprise entirely up fact in an that built testimony experts as to the state of patented public recognition devices improvement,' art, the character designated good product, whether vri.ll efficiency probable increase same, patent value, essentially is still Refining Co. saving expense.” Sinclair tools, dies, and that like for the Co., 289 U. Jenkins Petroleum Process patented may manufacture of devices well from be without substantial value divorced the only ignored L. R. The Board not 88 A. patents. Of a similar situation profits petition made the substantial Pottery Company Case, supra, during period er its business was con said: “There no this court these was doubt that wholly the manufacture and sale of fined registered and this trade-mark devices, rejected patented but this very repu high existed a gain as an to be considered element product tation for the had been established. hypothetical situation submitted to the enterprise substantially The had become experts. think this was erroneous. We in the Sinclair As self-supporting; and happen this does not Company Refining said was kind of manufacture until after supra: "But a different situation Case, place in product has a the market. gone by if have before the reputation good That kind of and success is Experience offered. evidence is is then will. The decision of the board assumes prophecy. to correct uncertain available good there could have been no will may a of wisdom that book courts Here not [patent prof if there been no had net value] neglect. rule We find’no of law many clearly wrong; its. This is prise an enter clasp upon pages, a and forbids sets us been, by good will, has sustained within.” We made similar to look obser through non-profit period. and carried Miller in H. H. Industries Co.v. Com vation to,us intangibles is thus clear these had
missioner, F.(2d) 412, at 414: “We know * * * a real and substantial value. authority to effect of no deter upon large later success scale was doubt- intangible mining property having built, great degree, upon less founda- market fixed and determinable value in no intangibles; tion of these it had little other obliged at a the Board is later date base.” subsequent close its mind cir demonstrating value, and cumstances none held sale of shares Bell’s See, also, Augustus-Stewart syndicate American to the has been cited.” Chem- in 1914 fully petition- years was disclosed fixing the value sale representative could have The Commissioner er’s returns. per $5 approximately Bell stock the re- made his own valuation. Whether evidence there But share. good does showed an item for will turns a distress the Bell that the sale tho value appear, may well be that out, had broken war sale. may have been attributable to the manu- improvident an er was saddled sufficiently in the values return- reflected was desirous contract, Bell facturing intangibles. But, if this for other so he responsibility relieving himself so, are of no is not stock returns contracts. war busy himself might probative inquiry in an as to the value force the circum- under market, and no There was patents. As said in the Rookwood market could there stances Pottery Company Case, supra: “The facts uncontradieted. stood evidence This stock. appearing they do, negligi- it becomes of analysis of which evidence Nor not, importance ble had directors $50,000 put destroy the valuation could carry intangibles continued to as an receiv- upon the consideration asset on the books. That fact is no more Augustus- treasury ed for important than it if here would-be the cor- spent syndicate That syndicate. Stewart poration intangibles for tho cash Com- canceling Hall Switch $11,600 in cutting instead in stock. The out of this its tools acquiring pany contract class of assets from stock ac- necessary all agreed to advance It had dies. count was accord with the best and most $50,000 in the first and did advance capital, prudent practice of the time.” years. provided and contributed necessary space office appears us, after a full con and of officers of its executive the services record, public reception sideration of the immaterial that organization. its sales given the substantial invest manufacturing contract with profitable exploit ment made to them Nachod and *6 companies after- one of its constituent petitioner, put upon the value them both contract. The the Hall ward substituted petition and Nachod at the paid out its syndicate the risks and took organization, er’s the substantial considera great ultimately petitioner’s money, and the Augustus-Stewart syndicate tion it of what value success demonstrated in obligations both cash and assumed for syndicate profited also That received. stock, company survival of the arrange- destroy the value does not years development through in an abnor ment to the period, ultimately very mal and its marked wholly upon success based consideration devices made un Finally, there was positive cap der the are and substantial given by the Board to 1925, evidence real value. This evidence returns for the ital stock bymet required controverting evi state These inclusive. dence, opinion destroyed by and is not in corpo our shown tho ment of asset values as analysis. failing We think the Board books, claimed rate and as arbitrarily regard to it acted capital with purposes for tho of! stock determina legally out evidence sufficient sustain The returns showed valuation for tion. circumstances, findings. Under these patents cairicd on the books question (Rookwood Pottery of law is one 1917, value 1918 of 1916 and but a book Case), and in its conclusion the successively during subse Co. Board reduced years $35,298.00 erred. quent to a book however, returns, claimed no val 1925. The having findings Board made no The during any patents ue for 1916 1,1913, as of December value for us spe capital stock tax to 1925. But the say what value was that date. like tax cial excise tax not measured Company Industries v. Miller Commission average es, the fair the cor er, supra. It follows that its order of re- capital poration’s stock, pur and the method aside, is set determination the cause re ascertaining such value is left to the sued proceed manded, instruction to con discretion of sound the formity herewith. Commissioner, subject obligation every take relevant fact. into Judge ALLEN, (dissenting). Ray Copper Co. v. United Consolidated in the view that 373, 526, 69 L. I concur tho doctrine of 268 U. 45 Ct. States, S. judicata apply does not to an res order of 1003. The book value of the Appeals. agree., Tax I cannot depreciation regular through successive 170 the Board this
however, the conclusion that evidence was contradicted arbitrarily acted and without historical stated facts. evidence, sufficient order should under oath capital and that its in its tax return had disal- per be set aside. The its stock was $2.50 sold in 1914 at pat- depreciation lowed the share. claimed es- ents because the evidence submitted Moreover, the sworn tablish their insufficient. valuation was turns of the to the value of the approved action Commissioner’s patents presented sup- substantial evidence for lack of evidence show error. porting the decision of the Board. While up returns set substantial book question presented fact, was one of value, their fair claimed namely, the value in these sworn returns for acquired by pe- rights when the- 1925, 1916 exception year 1, on December 1913. The conclu- titioner 1918, was not declared. In men- 1918 the fair val- sion of the Board falls within the class ue Pottery was stated to in Rookwood Co. v. Commis- be “None.” tioned sioner, F.(2d) 43, page (C. 45 45 A. C. Pottery The decision in v. Rookwood 6). spite-of negative form de- In Commissioner, supra, does not contradict finding cision had the character of a any this view. In that ease no tax return of prima fact. correct and should facie kind was evidence, introduced in nor was supported by be sustained if 26 evidence. weight of such sworn 1218; Colony USCA Old Trust Co. v. § my statements is, considered. There Commissioner, 279 U. S. 49 S. Ct. judgment, a material difference between not 918; Phillips Commissioner, v. charging proved an asset to ex- books 1289; 283 U. S. 51 L. Ed. 75 ist, Case, as in the and the mak- Commissioner, Avery F.(2d) v. 22 55 ing of required by a sworn statement law (C. 5); A. L. R. 1277 A. Henderson Iron js C. the fair value of as claimed Blair, Supply taking Works & Co. v. Commis- “None.” The Board did not err App. F.(2d) 538; sioner, stock tax returns into consider- Commissioner, ation, Conklin-Zonne-Loomis Co. v. order should be affirmed. F.(2d) (C. 8);A. C. Northwestern Commissioner, Motor Car Co. (C. 7); Westlake Public Market *7 presented supporting Evidence was petitioner’s claim, but if there was substan- support tial evidence to conclusion Board, it is immaterial so far TRAVELERS’ PROTEC- ANDERSON v. concerned whether there court is is other evi- TIVE ASS’N OF AMERICA. which, believed, support if would dence No. 7537. contrary
require conclusion. Appeals, my opinion In there was substantial evi- Circuit Court of Fifth Circuit. support Board’s dence conclusion. Dec. expert testimony pe- Certain behalf of given titioner was upon December 1913. One wit- $170,000. ness testified worth had or previously All of the witnesses had a close connection with the knowledge Lack factual as to the condi- tion of the business 1, 1913, hypothetical assumption and of accurate give little, the Board to any, led if weight opinion testimony. to this It was contrary it if not bound to follow to the best Tracy of the Board. v. Commis- sioner, 53 In view as to the condition of of the record the busi- to December prior ness and for the immediately following date,