California State Board of Equalization v. Sierra Summit Inc/Dissent Blackmun

Justice BLACKMUN, with whom Justice BRENNAN and Justice MARSHALL join, dissenting.

The Court today, overturning a 32-year-old Court of Appeals decision, settles a Circuit conflict of ancient vintage and doubtful urgency in a case where the question decided is not properly presented. Although the majority may well be correct that Califor ia State Board of Equalization v. Goggin, 245 F.2d 44 (CA9) (Goggin II), cert. denied, 353 U.S. 961, 77 S.Ct. 863, 1 L.Ed.2d 910 (1957), is not good law, I respectfully dissent from the majority's resolution of an issue that is res judicata in this litigation.

The history of this case, notably missing from the majority opinion, has its genesis in 1980, when China Peak Resort, Ltd., filed for Chapter 11 bankruptcy relief. After a variety of proceedings, the receiver, Robert T. Ford, entered into negotiations with Snow Summit Ski Corporation and respondent Sierra Summit, Inc., its wholly owned subsidiary, for the sale of China Peak's assets. See In re China Peak Resort, 847 F.2d 570, 571 (CA9 1988). The sale was consummated with the approval of the Bankruptcy Court, and China Peak dismissed its bankruptcy petition. After the sale, petitioner Board attempted to assess the debtor's principals and Mr. Ford for taxes on the sale of China Peak's assets to Snow Summit. The bankruptcy trustee moved to reopen the bankruptcy case and filed an adversary proceeding on his own behalf and on behalf of the debtor, seeking to bar the tax assessment. After full briefing, the Bankruptcy Court found that the sale amounted to a liquidation of the China Peak estate and that, therefore, a tax on the sale was prohibited by Goggin II. In re China Peak, Advisory Proceeding No. 183-0344 (Bkrtcy.Ct. ED Cal.1983), App. to Pet. for Cert. A-27. The Bankruptcy Court's judgment prohibited the Board from assessing or enforcing any tax against the trustee, China Peak, its principals, or other parties "by reason of the sale of the assets of China Peak Resort, Ltd. to Snow Summit." Id., at A-28. Petitioner did not appeal this 1983 judgment, and it became final when the time for appeal expired later that year.

The instant case arose when petitioner attempted to assess a use tax against Sierra Summit for revenues collected from the rental of ski equipment obtained in the China Peak sale. Sierra Summit claimed that the 1983 order precluded the assessment of these taxes and sought enforcement of the injunction. The Court of Appeals ultimately granted Sierra Summit relief, remanding the case to the Bankruptcy Court with instructions to issue a contempt citation against petitioner. 847 F.2d, at 572-573.

Petitioner now argues to this Court, and the majority agrees, that Goggin II-the legal basis for the order from which the contempt arises-was wrongly decided. In my view, petitioner's challenge to the wisdom of Goggin II comes far too late. Petitioner had ample opportunity to challenge the continuing validity of Goggin II in the litigation resulting in the 1983 order, but failed to appeal the adverse judgment. That final judgment, and the legal precedents underlying it, are not now subject to collateral attack in these contempt proceedings. This Court in Federated Department Stores, Inc. v. Moitie, 452 U.S. 394, 101 S.Ct. 2424, 69 L.Ed.2d 103 (1981), wrote: "A final judgment on the merits of an action precludes the     parties or their privies from relitigating issues that were      or could have been raised in that action. . . .  Nor are the      res judicata consequences of a final, unappealed judgment on      the merits altered by the fact that the judgment may have      been wrong or rested on a legal principle subsequently      overruled in another case." Id., at 398, 101 S.Ct., at 2428.

In Maggio v. Zeitz, 333 U.S. 56, 68 S.Ct. 401, 92 L.Ed. 476 (1948), the Court applied these principles in a situation strikingly similar to the case at hand. There, in an appeal from a contempt order, the losing party attempted to challenge the merits of the judgment that he violated. The Court refused to hear the challenge because, "when completed and terminated in a final order, [the decision] becomes res judicata and not subject to collateral attack in the contempt proceedings." Id., at 68, 68 S.Ct., at 407. The Court elaborated:

"It would be a di service to the law if we were to depart     from the long-standing rule that a contempt proceeding does      not open to reconsideration the legal or factual basis of the      order alleged to have been disobeyed and thus become a      retrial of the original controversy. . . .  [W]hen [an order]      has become final, disobedience cannot be justified by      re-trying the issues as to whether the order should have been      issued in the first place." Id., at 69, 68 S.Ct., at 408.

None of the cases cited by the majority as authorizing its race to the merits persuades me to set aside these time-honored principles of appellate review. See ante, at 846-847, n. 3. Neither Canton v. Harris, 489 U.S. 378, 109 S.Ct. 1197, 103 L.Ed.2d 412 (1989), nor Oklahoma City v. Tuttle, 471 U.S. 808, 105 S.Ct. 2427, 85 L.Ed.2d 791 (1985), concerned the doctrine of res judicata. Donovan v. City of Dallas, 377 U.S. 408, 84 S.Ct. 1579, 12 L.Ed.2d 409 (1964), did involve review both of a contempt citation and of the order underlying the contempt. In contrast to this case, however, the Court in Donovan did not reach the merits of a final underlying order as part of its review of a contempt citation. Rather, the Court simultaneously granted Donovan's petition for certiorari seeking review of the underlying State Supreme Court injunction and his separate petition seeking review of the subsequent contempt conviction. Id., at 411, 84 S.Ct., at 1581. Far from revisiting the merits of an unappealed judgment, the Court in Donovan reviewed the underlying judgment itself in the ordinary course of business.

Accordingly, in my view, the only issue properly before the Court is the application of the 1983 order to the facts underlying the issuance of the contempt citation. Although of obvious importance to the parties, this wholly case-specific inquiry does not merit this Court's attention, and I would dismiss the writ of certiorari as having been improvidently granted.