WARREN, C. J., dissenting.

347 U.S.

I submit that on these facts the Court's two assumptions are unwarranted. The issue of conspiracy was not litigated; nor did petitioner have a fair opportunity to litigate the issue. Indeed, whether petitioner had an opportunity to do so is immaterial under the doctrine of collateral estoppel. If the counterclaims had been based on the same cause of action as the eviction suit, such an opportunity might have barred petitioner under the more sweeping doctrine of res judicata. But here, where the second suit is based on a different cause of action, a neglected opportunity in the first action to litigate an issue is without legal significance."

Under these circumstances, should the doctrine of collateral estoppel be invoked against petitioner to bar a trial on its counterclaims? I believe not. The doctrine presupposes, and the Constitution requires, that the party who is estopped had his day in court in a prior action and that he then had a fair hearing in which to prove his point but failed. Surely the doctrine was never intended to estop a party who in the prior action was denied such a hearing.

That, as I see it, is precisely the situation here. The eviction suit and counterclaims had been severed for trial purposes. During the trial of the eviction suit, Paramount was the only party with any reason or justification for proving that the franchise was part of a conspiracy. Because of Paramount's failure to present such proof, the court held the lease to be valid, but at the same time gave judgment against petitioner on its counterclaims because of the same shortcoming of Paramount's proof. This Court now affirms. The anomalous result is to penalize petitioner for refusing to help Paramount win the eviction suit.

See note 1, supra.

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WARREN, C. J., dissenting.

I believe that petitioner has been denied its day in court, and that the case should be reversed with instructions to the trial court to hear the counterclaims.8

8 There is yet an additional reason for not applying the doctrine of collateral estoppel here. Petitioner, as the successful party in the eviction suit, could not appeal the District Court's finding that there was no evidence of conspiracy. Lindheimer v. Illinois Bell Telephone Co., 292 U. S. 151, 176; New York Telephone Co. v. Maltbie, 291 U. S. 645. The adverse finding was not included in the Court's decree, as in Electrical Fittings Corp. v. Thomas & Betts Co., 307 U. S. 241. Because of this inability to appeal, the finding cannot bind petitioner in a subsequent action between the parties based upon a different cause of action. See Restatement, Judgments, § 69 (2); Scott, Collateral Estoppel by Judgment, 56 Harv. L. Rev. 1, 15–18.

The Court's opinion (footnote 6) concedes that inability to appeal precludes a subsequent application of collateral estoppel, but contends that petitioner could have appealed here because the trial court's finding in the eviction suit (as to the absence of proof of conspiracy) was material to the decree in the eviction suit. The Court's opinion cites no case, in this Court or any other, holding that a successful party can appeal findings which are not inserted as part of the decree. Indeed, the opinion overlooks the very holdings of this Court on which it relies for support. In both Lindheimer v. Illinois Bell Telephone Co., supra, and New York Telephone Co. v. Maltbie, supra, the findings which the public utility sought to appeal related to the value of its property for rate-making purposes; in each case, the trial court had held that the rates fixed by a state commission were confiscatory on the basis of those findings. Yet this Court held that the public utility, as the successful party, could not appeal those findings. Surely in this case the trial judge's finding as to conspiracy was no more "material" than the findings which this Court refused to review in Lindheimer and Maltbie.

KERN-LIMERICK, INC. ET AL. v. SCURLOCK, COMMISSIONER OF REVENUES FOR ARKANSAS.

APPEAL FROM THE SUPREME COURT OF ARKANSAS.

No. 115. Argued January 4, 1954. Decided February 8, 1954. The Arkansas Gross Receipts Tax Law of 1941, which levies on sellers an excise tax of 2% on the gross receipts from all sales in the State, held unconstitutional as applied to the transactions here involved, whereby private contractors procured in Arkansas two tractors for use in constructing a naval ammunition depot for the United States under a cost-plus-fixed-fee contract entered into with the Navy Department under §§ 2 (c) (10) and 4 (b) of the Armed Services Procurement Act of 1947 and providing that, in procuring articles required for accomplishment of the work, the contractor should act as purchasing agent for the Government, title to the articles purchased should pass directly from the vendor to the Government and the Government should be directly liable to the vendor for payment of the purchase price. Pp. 111-123.

(a) The Procurement Act authorized the purchase of this machinery by the Navy for the construction of an ammunition depot. P. 114.

(b) Under the Procurement Act, the Navy Department has power to negotiate contracts which provide for private purchasing agents for supplies and materials. Pp. 114-116.

(c) The restrictions in §7 (b) on delegations of authority are not applicable to actions under § 2 (c) (10). Pp. 115–116.

(d) Under the contract here involved, the United States was the real purchaser; the naming of the Government as purchaser was not merely colorable and did not leave the contractor the real purchaser. Alabama v. King & Boozer, 314 U. S. 1, distinguished. Pp. 116-122.

(e) The drafting of the contract by the Navy Department to conserve Government funds, if that was the purpose, does not change the character of the transaction. Pp. 122-123. 221 Ark. 439, 254 S. W. 2d 454, reversed.

The Supreme Court of Arkansas held the Arkansas Gross Receipts Tax Law of 1941, Ark. Stat., 1947, § 84-1901 et seq., applicable to the sale of certain ma

110

Opinion of the Court.

chinery in Arkansas for use in the construction of a naval ammunition depot for the United States. 221 Ark. 439, 254 S. W. 2d 454. On appeal to this Court, reversed, p. 123.

Assistant Attorney General Holland argued the cause for appellants. On the brief were Acting Solicitor General Stern, Mr. Holland, Ellis N. Slack and Lee A. Jackson for the United States, and A. F. House and William Nash for Kern-Limerick, Inc., appellants.

O. T. Ward argued the cause and filed a brief for appellee.

MR. JUSTICE REED delivered the opinion of the Court.

This appeal brings here the legality of the application of the Arkansas Gross Receipts Tax Law of 1941, Ark. Stat., 1947, § 84-1901 et seq., to a transaction by which certain private contractors engaged in a joint venture, abbreviated WHMS, procured in Arkansas two diesel tractors costing $17,146, for use in the construction there for the United States of a naval ammunition depot estimated to cost over thirty million dollars. The tractors were procured from Kern-Limerick, Inc., a local dealer. The circumstances of the transaction would concededly make Kern-Limerick liable for the tax if the real purchaser were not the United States.

The applicable sections of the Gross Receipts Tax Law levy an "excise tax of two [2%] per centum upon the gross proceeds or gross receipts derived from all sales to any person." $84-1903. This is a sales tax, not a use tax. It is to be paid to the Tax Commissioner by the seller, § 84-1908. He is the taxpayer, § 84-1902 (e), and "shall collect the tax levied hereby from the purchaser."

1 Cook v. Southeast Arkansas Transportation Co., 211 Ark. 831, 202 S. W. 2d 772.

Opinion of the Court.

347 U.S.

§ 84-1908. Gross receipts derived from sales to the United States Government are exempt. § 84-1904.

The construction contract had, so far as pertinent here, the provisions as to "Materials-Purchases" which are set out in the margin. It was entered into by the Department of the Navy "under authority of Sections 2 (c) (10) and 4 (b)" of the Armed Services Procurement

2 Materials-Purchases. Article 8-(a) "Except where provision is otherwise made by the Officer-in-Charge, all materials, articles, supplies, and equipment required for the accomplishment of the work under this contract shall be furnished by the Contractor. The Contractor shall act as the purchasing agent of the Government in effecting such procurement and the Government shall be directly liable to the vendors for the purchase price. The exercise of this agency is subject to the obtaining of approval in the instances and in the manner required by subparagraph (c) of this article. The Contractor shall negotiate and administer all such purchases and shall advance all payments therefor unless the Officer-in-Charge shall otherwise direct.

"(b) Title to all such materials, articles, supplies and equipment, the cost of which is reimbursable to the Contractor hereunder, shall pass directly from the vendor to the Government without vesting in the Contractor, and such title (except as to property to which the Government has obtained title at an earlier date) shall vest in the Government at the time payment is made therefor by the Government or by the Contractor or upon delivery thereof to the Government or the Contractor, whichever of said events shall first occur. This provision for passage of title shall not relieve the Contractor of any of its duties or obligations under this contract or constitute any waiver of the Government's right to absolute fulfillment of all of the terms hereof.

"(c) No purchase in excess of $500 shall be made hereunder without the prior written approval of the Officer-in-Charge, except that the Officer-in-Charge may, in his discretion, either reduce the limitation on the amount of any purchase which may be made without such prior approval or authorize the Contractor to make purchases in amounts not in excess of $2500 for any one purchase without obtaining such prior approval."

These provisions were also applicable to subcontractors.