became choate prior to the attachment of the federal tax liens.

The State and the United States were both holders of general statutory liens in the Gilbert Associates case. But the question we have here did not arise there because that was a case involving personal property and insolvency of the taxpayer. We said in that case:

"Where the lien of the Town and that of the Federal Government are both general, and the taxpayer is insolvent, § 3466 [Revised Statutes] clearly awards priority to the United States." 345 U. S., at 366. Here the contest is between two groups of statutory liens, one specific and one general, attached to the same real estate, with no question of insolvency involved; therefore, "the first in time is the first in right."

The State finds the rule of "first in time, first in right" not applicable because of § 3672 of the Internal Revenue Code,10 which makes the lien of the United States invalid as to the prior recorded mortgages and the judgment in this case. It points out that the mortgagee could have paid the delinquent real-estate taxes and water rent, with the amount so paid becoming part of the mortgage debt covered by the mortgage lien," and suggests that the federal tax lien would therefore be invalid as to such amount by virtue of § 3672.12 From this and a belief that Congress did not intend, by giving mortgages and

10 "SEC. 3672. VALIDITY AGAINST MORTGAGEES, PLEDGEES, PURCHASERS, AND JUDGMENT CREDITORS.

"(a) INVALIDITY OF LIEN WITHOUT NOTICE.-Such lien shall not be valid as against any mortgagee, pledgee, purchaser, or judgment creditor until notice thereof has been filed by the collector. . . I. R. C., § 3672, as amended, 53 Stat. 882, 26 U. S. C. (1946 ed.) $3672.

"Conn. Gen. Stat., 1949, c. 361, § 7192.

12 We need not now pass upon the merits of this suggestion since the situation is not presented by the record in this case.

288037 0-54--11

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347 U.S.

judgments priority over federal tax liens, to supersede state laws making certain interests superior to mortgages and judgments, the Supreme Court of Errors concluded that by enacting § 3672 Congress "expressed the intention that federal liens should be subordinated to such mortgages and judgment liens as are described therein and, consequently, subordinated to such other incumbrances as have priority over those mortgages and judgment liens." 13

We do not agree. The United States is not interested in whether the State receives its taxes and water rents prior to mortgagees and judgment creditors. That is a matter of state law. But as to any funds in excess of the amount necessary to pay the mortgage and judgment creditors, Congress intended to assert the federal lien. There is nothing in the language of § 3672 to show that Congress intended antecedent federal tax liens to rank behind any but the specific categories of interests set out therein, and the legislative history lends support to this impression.".

Under the circumstances, we vacate the judgment of the Supreme Court of Errors of Connecticut and remand the case to that court to have determined the order of priority of the various liens asserted, in accordance with this opinion.

Judgment vacated.

13 139 Conn. 363, 373, 94 A. 2d 10, 15.

14 See United States v. Gilbert Associates, 345 U. S. 361, 364; United States v. Security Trust & Savings Bank, 340 U. S. 47, 51 (concurring opinion).

Syllabus.

PARTMAR CORPORATION ET AL. v. PARAMOUNT PICTURES THEATRES CORP. ET AL.

CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT.

No. 17. Argued October 13, 1953-Decided February 8, 1954.

Paramount leased a theatre and granted a franchise to Partmar to exhibit first-run films of Paramount pictures, both for terms of ten years. The lease provided that it was terminable at Paramount's option if the franchise agreement "be cancelled or terminated for any reason whatsoever." In an antitrust suit by the Government against Paramount and others, a Federal District Court held that such franchise agreements were the product of an illegal conspiracy and enjoined their enforcement. Paramount then notified Partmar that it was terminating the franchise agreement because of the injunction and that it was terminating the lease because of termination of the franchise agreement. Partmar refused to vacate the theatre, and Paramount sued in a Federal District Court to obtain possession and for a declaratory judgment that the lease had been properly terminated. Partmar answered, setting up various defenses, and filed counterclaims seeking treble damages resulting from a conspiracy respecting the franchise agreement in violation of the Sherman Act. Paramount's suit and the counterclaims were separated for trial. After this Court had overruled the District Court's finding that such franchise agreements violated the Sherman Act, the eviction suit was tried and the District Court found no substantial evidence of a conspiracy respecting the franchise agreement and entered judgment for Partmar; but it also dismissed Partmar's treble-damage counterclaims, with prejudice and without trial. Partmar took no appeal from the District Court's judgment in the eviction suit; but it appealed from the judgment dismissing the treble-damage counterclaims. Held: Collateral estoppel bars further litigation by the parties of the issue of conspiracy in violation of the Sherman Act, and the judgment dismissing the counterclaims with prejudice is sustained. Pp. 90-103.

(a) A prior judgment between parties operates as an estoppel in a suit on a cause of action different from that forming the basis for the original suit only as to those matters in issue or points

Opinion of the Court.

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controverted, upon the determination of which the finding or verdict was rendered. P. 91.

(b) The District Court did not err in dismissing Partmar's counterclaims with prejudice and without a separate trial as to their merits, and such dismissal did not deprive Partmar of due process of law. Pp. 100-103.

(c) The power remained in the trial court until entry of its final judgment to set aside, for appropriate reasons, the former order for the separate trial of the counterclairas. P. 100.

(d) A separate trial on the counterclaims would have been an improper procedure, as the judgment entered in Paramount's suit was a final disposition of the determinative issue on the counterclaims-whether or not the terms of the lease were the product of an illegal conspiracy. Pp. 100-101.

(e) Partmar was not prejudiced by the failure of the District Court to consider either the judgment or the decree in the Government's antitrust suit as evidence of the conspiracy alleged in the counterclaims. Pp. 102-103.

200 F. 2d 561, affirmed.

In a suit by respondents to declare a lease properly terminated and to regain possession of a theatre, the District Court decided that issue in favor of petitioners but dismissed petitioners' counterclaims for treble damages under the antitrust laws. 97 F. Supp. 552. The Court of Appeals affirmed. 200 F. 2d 561: This Court granted certiorari. 345 U. S. 963. Affirmed, p. 103.

Russell Hardy argued the cause for petitioners. With him on the brief were Henry Schaefer, Jr. and James Wallace Kemp.

Jackson W. Chance argued the cause for respondents. With him on the brief was Rodney K. Potter.

MR. JUSTICE REED delivered the opinion of the Court.

This case presents a matter of federal practice involving inconsistent positions by litigants in court proceedings. We have often held that under the doctrine of res judicata a judgment entered in an action conclusively

89

Opinion of the Court.

settles that action as to all matters that were or might have been litigated or adjudged therein.' But a prior judgment between the parties has been held to operate as an estoppel in a suit on a cause of action different from that forming the basis for the original suit "only as to those matters in issue or points controverted, upon the determination of which the finding or verdict was rendered." This latter aspect of res judicata is the doctrine of collateral estoppel by judgment, established as a procedure for carrying out the public policy of avoiding repetitious litigation.

Petitioners entered counterclaims in a suit against them by respondent. These counterclaims were dismissed by the trial court upon determination of the original suit for petitioners and against respondents. The cause of action stated in petitioners' counterclaims is based upon a controverted personal right that had not been adjudged and therefore res judicata is no bar to the claimed right of recovery. Respondent, however, in its original suit had raised an issue, determinative of its cause of action, which had been therein successfully controverted by petitioners to final judgment on the merits. Collateral estoppel stands as a bar to further litigation by the parties of this issue, and this issue was held by the trial court to be determinative of petitioners' counterclaims. Petitioners' argument that the dismissal denied a hearing of issues that might have been but were not determined by the judgment on the merits of the original action

1 Cromwell v. County of Sac, 94 U. S. 351, 352; Fayerweather v. Ritch, 195 U. S. 276, 300, 308; Gunter v. Atlantic Coast Line R. Co., 200 U. S. 273, 290; Stoll v. Gottlieb, 305 U. S. 165.

2 Cromwell v. County of Sac, supra, at 353; United States v. Moser, 266 U. S. 236, 241; Treinies v. Sunshine Mining Co., 308 U. S. 66, 74; Commissioner v. Sunnen, 333 U. S. 591, 597–601. Cf. Federal Trade Commission v. Cement Institute, 333 U. S. 683, 706, where the rule is recognized but its application denied because the issues differed.