CERTIORARI TO THE UNITED STATES COURT OF CUSTOMS APPEALS.
Taft, Holmes, Van Devanter, McReynolds, Brandeis, Sutherland, Butler, Sanford, Stone
MR. CHIEF JUSTICE TAFT delivered the opinion of the Court.
This is a proceeding by certiorari to review the judgment of the Court of Customs Appeals in the classification for duty of nine importations of wool in the fleece, one of cloth and one of yarn. 12 C. Cust. App. 557. The certiorari was granted by this Court October 12, 1925, 269 U.S. 542, a certificate of importance by the Attorney General under § 195 of the Judicial Code, as amended August 22, 1914, c. 267, 38 Stat. 703, having been filed in the Court of Customs Appeals before the case was decided in that court.
A similar case between the same parties, involving the same questions and importations of similar merchandise, was decided adversely to the Government by the Court of Customs Appeals on November 17, 1923, Stone & Page 230} Downer Co. v. United States, 12 Court of Customs Appeals Reports 62; 45 Treasury Decisions 167, T. D. 40019. In that case, however, there was no certificate of importance filed by the Attorney General, and no application was made for a writ of certiorari.
The case as now presented to this Court involves two questions.
First, Is the judgment of the Court of Customs Appeals, in November, 1923, involving the same customs classification an estoppel by res judicata against the Government?
Second, If it does not so operate, was the Court of Customs Appeals right in holding that the importations of wool herein are entitled to come in as wool of the sheep under the Tariff Act of October 13, 1913 (c. 16, 38 Stat. 114), and not as clothing wool under paragraph 18 of the Emergency Tariff Act of May 27, 1921 (c. 14, 42 Stat. 9, 10)?
First Question. It is settled in this Court that the general rule by which a judgment estops the parties in future litigation between them, to question either a fact or a point of law necessary to the first judgment and adjudicated therein, applies to cases of taxation as well as to other subjects of litigation. This was decided in the case of New Orleans v. Citizens' Bank, 167 U.S. 371. That was a tax suit, and the issue was whether the judgment of a court of competent jurisdiction, in holding that the Citizens' Bank had exemption by contract from certain taxation, was res judicata and estopped the city from attempting to enforce subsequent taxes contrary to the same exemption. The Court, through Mr. Justice White, said (p. 396):
"The proposition that because a suit for a tax of one year is a different demand from the suit for a tax for another, therefore res judicata can not apply, whilst admitting in form the principle of the thing adjudged, in
reality substantially denies and destroys it. The estoppel resulting from the thing adjudged does not depend upon whether there is the same demand in both cases, but exists, even although there be different demands, when the question upon which the recovery of the second demand depends has under identical circumstances and conditions been previously concluded by a judgment between the parties or their privies."
This is not the rule in a number of the States. City of Newport v. Commonwealth, 106 Ky. 434; Louisville Bridge Co. v. City of Louisville, 81 Ky. 189; Bank v. Memphis, 101 Tenn. 154; State v. Bank, 95 Tenn. 221, 231; Georgia Railroad & Banking Co. v. Wright, 124 Ga. 596, 603; Michigan Southern, etc. R. R. v. People, 9 Mich. 448, 450; L. S. & M. S. R. R. v. People, 46 Mich. 193, 208; C. B. & Q. R. R. v. Cass County, 72 Neb. 489, 491; Adams v. Yazoo & Miss. R. R., 77 Miss. 194, 266; State v. American Sugar Refining Co., 108 La. 603. Judge Cooley in his work on Taxation, 8th ed., says, at pages 2648-9, that the state courts, differing from this Court, do not generally regard an adjudication as to taxes for one year as making the decision of the supporting points res judicata for the following years.
We have held that where, in a federal court, a judgment of a state court in a tax case is pleaded in a subsequent tax case arising in a federal court, the estoppel from the judgment of the state court will not be given greater effect than it would have in the state court, and that a judgment not operating as res judicata in suits for taxes for another year in the state court will not be an estoppel in a federal court for subsequent years. Phoenix Fire and Marine Insurance Co. v. Tennessee, 161 U.S. 174; Covington v. First National Bank of Covington, 198 U.S. 100.
The question here differs from that presented in ordinary tax suits, and involves the effect of an adjudication
of a peculiar character. Prior to the passage of the McKinley Tariff Administrative Act, approved June 10, 1890 (c. 407, 26 Stat. 131, 136, § 12), litigation over the collection of duties and the classification of importations under tariff acts was carried on by suits against the collectors who imposed the duties and was in the form of an action against the collecting official as an individual. After the judgment was obtained, the collecting officer was relieved from personal obligation and the judgment was paid from the Treasury of the United States. See U.S. Rev. Stat., §§ 3009-3014. In 1890, new machinery was introduced by which a board of nine general appraisers was created which, sitting in divisions of three, constituted in a sense administrative courts of appeals to pass on questions of classification and the imposition of duties; and appeals were allowed from it to the proper circuit court of the United States, whence, upon an allowance of an appeal by the circuit court, the cases came to this Court. By the Act of 1891, creating circuit courts of appeals (26 Stat. 826, c. 517, § 6), these cases went by appeal to those courts, and then by certiorari to this Court. By the Tariff Act of August 5, 1909 (36 Stat. 11, 105, § 29), another change was made by which appeals from the decisions of the Board of General Appraisers were allowed to a new court created by the act, called the Court of Customs Appeals, and by that act the whole question of classification and refunding of duties was taken out of the jurisdiction of the regular federal judiciary. The classification by the Court of Customs Appeals was made final, and no appeal was granted to this Court. This independent plan for the settlement of tariff questions, and the complete finality of the decisions of the Court of Customs Appeals in that field of litigation, lasted until August, 1914, when, by the Act of August 22 of that year (c. 267, 38 Stat. 703), a limited review by writ of certiorari was given to this Court of judgments of the
Court of Customs Appeals, in cases in which the construction of the Constitution, or any part thereof, or any treaty made pursuant thereto, was drawn in question, and in any other case when the Attorney General of the United States should, before the decision of the Court of Customs Appeals was rendered, file with the court a certificate that the case was of such importance as to render expedient its review by this Court. For five years, however, the Board of General Appraisers and the Court of Customs Appeals between them exercised complete jurisdiction in the construction of tariff acts and the determination of the amount due as duties from every importation coming into the country. By the Act of 1909 (36 Stat. 105) the court was given power "to establish all rules and regulations for the conduct of the business of the Court and as might be needful for the uniformity of decisions within its jurisdiction as conferred by law." It was by the law to exercise exclusive appellate jurisdiction in all cases as to the construction of the law and the facts respecting the classification of merchandise and the rate of duty imposed thereon under such classification, and the fees and charges connected therewith, and all appealable questions as to the jurisdiction of the Board of General Appraisers, and all appealable questions as to the laws and regulations governing the collection of the customs revenues; and the judgment or decrees of said Court of Customs Appeals were made final in all such cases. (p. 106). It was thus for five years put in a position where it must not only make its own rules, but it must determine, as a practical matter, what should be the conclusive effect of its own judgments in the determination of questions of fact and statutory construction and classification, in subsequent cases brought before it by the same parties and presenting similar issues. In the exercise of this jurisdiction, it established the practice that the finding of fact and the construction of the statute and classification
thereunder, as against an importer, was not res judicata in respect of a subsequent importation involving the same issue of fact and the same question of law.
In Beuttell & Sons v. United States, 8 U.S. Court of Customs Appeals Reports, 409, the question was whether machine-made Wilton rugs were dutiable under par. 300 of the Tariff Act of 1913, or under par. 294 by virtue of par. 303 of that act. In delivering the opinion of the court, Judge Barber, who has been a member of the court since its organization, in 1909, used this language:
"At the outset it should be noted that the precise issue here has been before and decided by this court in Beuttell & Sons v. United States (7 Ct. Cust. Appls., 356; T. D. 36905). The Government, being of opinion that such issue, which was there decided adversely to its contention, ought again to be here considered, and following a recognized practice in customs litigation, has made up a new record, which for practical purposes results as a retrial of the former case."
It is clear that this has been the practice since the beginning of the court. See Stone & Downer Co. v. United States, 4 U.S. Court of Customs Appeals, 47. In United States v. Hearst Company, 49 Treasury Decisions, 854, T. D. 41584, the court said:
"Precisely the same kind of merchandise was under consideration in Hearst & Company v. United States, 12 Court of Customs Appeals, 81; T. D. 40021. The record of the evidence in that case is incorporated in this and it is agreed that this case is, in effect, a retrial of the issues involved in that upon additional testimony introduced on behalf of the government, none having been offered by it in the earlier case."
Provision for just such rehearings was made in the rules of procedure and practice adopted by the Board of General Appraisers (35 Treasury Decisions, 113, Rule 22) as follows:
"Where a question of the classification of imported merchandise is under consideration for decision by any one of the boards and the decision has been previously made involving the classification of goods of substantially the same character, the record and testimony taken in the latter case may, within the discretion of the board, be admitted as evidence in the pending case on motion of either the Government or the importer or on the board's own order: Provided, That either party may have any one or more of the witnesses who testified in such case summoned for re-examination or cross-examination as the case may be. The rule shall, furthermore, apply to the printed records which may have been acted on by the courts in the case of appeals taken from the decisions of the board."
There would seem to be an analogy between the proper respect of this Court for the conclusion of the Court of Customs Appeals upon the question of the estoppel of its own decisions, when it was an independent court not subject to review by this Court, and our respect for judgments of the state courts, in limiting the application of the estoppel of their decisions in tax cases, and unless some controlling reason exists why we should overrule the established practice in this matter of the Court of Customs Appeals, now that the power of review of some of its judgments has been given us, we should follow it.
We think that, not only was it within the power of the Court of Customs Appeals to establish the practice, but that it was wise to do so. The effect of adjudicated controversies arising over classification of importations may well be distinguished from the irrevocable effect of ordinary tax litigation tried in the regular courts. There of course should be an end of litigation as well in customs matters as in other tax cases; but circumstances justify limiting the finality of the conclusion in customs controversies to the identical importation. The business of importing is carried on by large houses between whom and
the Government there are innumerable transactions, as here for instance in the enormous importations of wool, and there are constant differences as to proper classifications of similar importations. The evidence which may be presented in one case may be much varied in the next. The importance of a classification and its far-reaching effect may not have been fully understood or clearly known when the first litigation was carried through. One large importing house may secure a judgment in its favor from the Customs Court on a question of fact as to the merchandise of a particular importation, or a question of construction in the classifying statute. If that house can rely upon a conclusion in early litigation as one which is to remain final as to it, and not to be reheard in any way, while a similar importation made by another importing house may be tried and heard and a different conclusion reached, a most embarrassing situation is presented. The importing house which has, by the principle of the thing adjudged, obtained a favorable decision permanently binding on the Government will be able to import the goods at a much better rate than that enjoyed by other importing houses, its competitors. Such a result would lead to inequality in the administration of the customs law, to discrimination and to great injustice and confusion. In the same way, if the first decision were against a large importing house, and its competitors instituted subsequent litigation on the same issues, with new evidence or without it, and succeeded in securing a different conclusion, the first litigant, bound by the judgment against it in favor of the Government, must permanently do business in importations of the same merchandise at great and inequitable disadvantage with its competitors.
These were doubtless the reasons which actuated the Court of Customs Appeals when the question was first presented to it to hold that the general principle of res judicata should have only limited application to its judgments.
These are the reasons, too, why the principle laid down by this Court in the decision already referred to, in New Orleans v. Citizens' Bank, 167 U.S. 371, should not apply or control. There, the thing adjudged was the existence of an immunity of the property of a bank from taxation, due to a contractual obligation of the state or city government to the bank, -- a personal relation which might without embarrassment and with much more safety be permanently fixed for one tax payer than a question of fact or law affecting discriminatingly one of a whole class of importers and giving the exceptional operation in its favor of a general tariff on articles of merchandise largely imported. The fact that objection to the practice has never been made before, in the history of this Court or in the history of the Court of Customs Appeals in eighteen years of its life, is strong evidence not only of the wisdom of the practice but of general acquiescence in its validity. The plea of res judicata can not be sustained in this case.
Second question. Paragraph 18 of the Emergency Tariff Act of May 27, 1921, c. 14, 42 Stat. 9, 10, under which the wool was classified for duty herein, is as follows:
"Wool, commonly known as clothing wool, including hair of the camel, angora goat, and alpaca, but not such wools as are commonly known as carpet wools: Unwashed, 15 cents per pound; washed, 30 ...