Tait v. Western Maryland Railway Co.Tait v. Western Maryland Railway Co.
delivered the opinion of the Court.
Between the years 1902 and 1908 The Western Maryland Rail Road Company, a Maryland corporation, sold and issued at a discount, large amounts of its first mortgage Jbonds. . In foreclosure proceedings undеr a second mortgage its entire property was sold to a reorganization committee representing second mortgage bondholders, and a new company formed under the name Thе Western
In 19.17 The Western Maryland Railway Company was consolidated, pursuant to Maryland statutes, with some seven subsidiaries. The new corporation so formed, named Western Maryland Railwаy Company, recognized as its own obligations the outstanding first mortgage bonds issued by its two- predecessors. In computing this company's income tax for the years 1918 an.l 1919 the Commissioner of Internal Revenuе refused to allow as a deduction from gross income an amortized proportion of the discount on the sales of bonds by the first and second companies. The Board of Tax Appeals sustained the ruling. 1 The Circuit Court of Appeals for the Fourth Circuit reversed the decision of-the Board. 2
In returns for 1920, 1921 and 1922 the company neglected to take any deduction for amortization of the bond discount ir question. It made timely claim for refund for all three years, and, upon denial, brought a suit for the amount claimed against the petitioner, as collector; and also sued the United States fоr refund of the alleged overpayment for 1920. Deductions taken on the same ground for 1923, 1924 and 1925 were disallowed by the Commissioner, the resulting deficiencies in tax were paid under protest, claims for rеfund filed and disallowed, iand suit brought against the petitioner as collector. The (District Court consolidated the cases and tried them without a jury on an agreed stipulation. That court found that no facts were presented which had not been before the Board of Tax Appeals in the litigation over the 1918 and 1919 taxes, that the parties were concluded by the-
The petitioner seeks a reversal on the merits, asserting that a judgment in a suit concerning- income tax for a given year cannot estop either of the parties in a later action touching liability for taxes of another year. He urges further, that, if this position is not well taken, he is not concluded by the former judgment because neither the proofs nor the parties are the same as in the prior proceeding.
The scope of the estoppel of a judgment depends upon whether the question arises in a subsequent action between the same parties upon the same claim or demand or upon a different claim or demand. In the former case a judgment upon the merits is an absolute bar to the subsequent action. In the latter the inquiry is whether the point or question to be determined in the later action is the same as. that litigated and determined in the original action.
Cromwell
v.
County of Sac,
•As petitioner says, the scheme of the Revenue Acts is an imposition of tax for annual periods, and the еxaction for one year is distinct from that for any other. But it does not follow that Congress in adopting this system meant to deprive the government and the taxpayer of relief from redundant litigation of thе identical question of the statute’s application to the taxpayer’s status.
This court has repeatedly applied the doctrine of
res judicata
in actions concerning^ state taxes, holding the parties concluded in a suit for one year’s tax as to the right оr question adjudicated by a former judgment respecting the tax of an earlier year.
New Orleans
v.
Citizens’ Bank,
Wé are not persuaded that the operation of, the principle of the thing adjudged in-tax cases will, as petitioner insists, produce serious inequalities, or result in great сonfusion; but any adverse consequence in the administration of the law furnishes ho sufficient reason for the abandonment of a rule founded in sound policy, to the enforcement of which suitors are in justice-entitled.
Is the question or right here in issue the same as that adjudicated in the former action? The pertinent language of the Revenue Acts is identical;
5
the regulations issued by the Treasury remained unchanged,
6
and of course the facts with respect to the sale of the bonds and the successive ownership of the railroad property were the same at the time of both trials. The petitioner suggests, however, that significant facts were stipulated in the present case which were not made to aрpear in the former proceeding. He shows that in the earlier case the Conimissioner inadvertently stipulated that the fir-t company “ may be taken as identical ” with the second,
As we have seen, the demand.for refund of 1918-1919 taxes was against the Commissioner of Internal Revenue. The present suits are against the United States and the Collector. Are the parties the samе or in such privity that the claimed estoppel binds them? The petitioner concedes that the former judgment is, so far as identity of parties is concerned, conclusive in the suits in which the United States is nоw the defendant, since the Commissioner acted in the earlier suit in his official capacity and as representative of the Government. This leaves for consideration the question whether the Commissioner and the Collector are for purposes of application of the rule of estoppel, to be regarded as different parties.
These views render unnecessary any consideration of the merits of the controversy.
Judgment affirmed.
Notes
33 F. (2d) 695.
53 F. (2d) 211.
62 F. (2d) 933.
Revenue. Act of 1918, § 234 (a) (2), 40 Stat. 1057, 1077; Revenue Act of 1921, § 234 (a) (2), 42 Stat. 227, 254; Revenue Act of 1924, § 234 (a) (2), 43 Stat. 253, 283; Ü.S.C., Tit. 26, § 986.
Regulations 45 (1920 ed.), Art. 544 (a) (3); Art. 563. Regulations 62 and 65, Art. 545 (a) (3); Art. 563.