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Pan American World Airways Inc. v. Duly Authorized Government of Virgin Islands

decided: April 21, 1972.

PAN AMERICAN WORLD AIRWAYS, INC., APPELLANT,
v.
THE DULY AUTHORIZED GOVERNMENT OF THE VIRGIN ISLANDS, AND THE COMMISSIONER OF FINANCE OF THE GOVERNMENT OF THE VIRGIN ISLANDS



Seitz, Chief Judge, and Aldisert and Gibbons, Circuit Judges.

Author: Gibbons

Opinion OF THE COURT

GIBBONS, Circuit Judge.

Pan American World Airways, Inc. (Pan American), the plaintiff in the District Court of the Virgin Islands, appeals from an order of that court, 315 F. Supp. 746, dismissing its complaint for declaratory and injunctive relief. The defendants are the duly authorized Government of the Virgin Islands and the Commissioner of Finance of the Government of the Virgin Islands. On August 15, 1967 Pan American filed a complaint seeking to have the court declare that the gross receipts tax imposed by 33 V.I.C. § 43(a), (b), as applied to an international air carrier, is unconstitutional, and to enjoin the defendants from application of that tax to it. Pan American is an air carrier whose business is entirely interstate and foreign. It contends that the 2% gross receipts tax is an unapportioned gross receipts tax and therefore an impermissible burden on such commerce in violation of the commerce clause and an impermissible extension of Virgin Islands taxing jurisdiction in violation of the fourteenth amendment and the due process clause of the Virgin Islands Organic Act. 48 U.S.C. § 1561. In September 1967 the Attorney General of the Virgin Islands filed an answer on behalf of both defendants in which he alleged:

"7. That the gross receipts tax of the Virgin Islands (33 V.I.C. § 43(a), (b)) is apportioned to the plaintiff's activities in the Virgin Islands.

8. That the plaintiff has failed to pay its gross receipts tax liability for the calendar year 1964 to the present, although demand for the same has been made."

On December 12, 1967 the parties filed a stipulation, approved by the court, that collection of the gross receipts tax and penalties the subject of the litigation be held in abeyance pending final determination of the action. Thereafter disposition of the action was postponed from time to time apparently while the parties tried to agree upon an apportionment formula which would satisfy both the Government of the Virgin Islands and Pan American. These efforts were not successful, and on April 8, 1970 the parties filed a stipulation of facts. After hearing argument the court filed an opinion in which it rejected Pan American's commerce clause and due process arguments. On October 5, 1970 it entered an order granting the defendant's motion to dismiss the complaint.

Although it framed its order as one granting the defendants' motion to dismiss the complaint it is clear that the court intended that order to be a determination on the merits rather than a dismissal on jurisdictional grounds. The opinion declares that 33 V.I.C. § 43 et seq. meets both commerce clause and due process standards for apportionment of a tax on gross receipts. In the district court the defendants appear to have conceded the jurisdiction of the court to entertain such an action for declaratory and injunctive relief.*fn1 The basis for the district court's jurisdiction is significant because of a contention advanced by the Government of the Virgin Islands on this appeal. That contention, not considered by the district court, is that the apportionment issue is not properly before us. The pleadings and the stipulation of facts establish that Pan American neither filed the required returns nor paid the tax demanded by the Commissioner of Finance for the years in question. The defendants urge that the only question properly before the court in such a case is whether the statutory scheme, which permits the Commissioner to make an arbitrary assessment against a delinquent taxpayer, meets due process requirements. That statutory scheme is set forth in 33 V.I.C. § 45 as follows:

"(a) Every person, partnership, firm, corporation, or other business association failing to file reports or pay the total amount of tax within the time required by this chapter is liable for penalty at the rate of five (5) percent per month or any fraction of a month, but not exceeding 25 percent in the aggregate; Provided, That if the gross receipts tax or excise tax report is not received within 30 days after the due date of such report, the Commissioner of Finance shall make an arbitrary determination of the tax due for the delinquent taxpayer, and after giving him due notice, proceed to collect the tax plus penalties as provided by this chapter. The report shall consist of an estimated amount of tax due and chargeable against the delinquent taxpayer.

(b) When the arbitrary determination of tax due is made, as provided in subsection (a) of this section, the taxpayer shall be billed for said amount and may be proceeded against in any way that any other delinquent taxpayer may be proceeded against including the levy and attachment and sale of property, whether real or personal; Provided, however, That the taxpayer may file a petition in the Municipal Court asking that such execution be stayed, pending determination of the actual amount due. The Court shall advance such petition and shall hear such relevant evidence as the taxpayer and tax administration authority may produce and shall, in the light of such evidence, arrive at the amount the taxpayer should have paid had he complied with the law. Whereupon, the taxpayer shall be required to pay such amount plus any accrued penalty and Court costs."

The Commissioner's determination has not been challenged in the municipal court. Although not articulated in these precise terms it is apparently the Government's present position that since Pan American did not challenge the assessment in the municipal court it is not now open to challenge if the procedure for such challenge met due process requirements.

The statute providing for an arbitrary assessment, notice, opportunity for a stay of execution and for a hearing in the municipal court on the amount due provides to the taxpayer a plain, speedy and efficient remedy. In such circumstances if the Virgin Islands were a state and the district court were an Article III court it could not enjoin, suspend or restrain the assessment, levy or collection of the tax. 28 U.S.C. § 1341. Cf. Georgia R.R. & Banking Co. v. Redwine, 342 U.S. 299, 72 S. Ct. 321, 96 L. Ed. 335 (1952). Under the judiciary subchapter of the Organic Act, however, the District Court of the Virgin Islands has both federal question jurisdiction and general original jurisdiction in all other causes in the Virgin Islands except in those cases where Congress has placed exclusive jurisdiction elsewhere. 48 U.S.C. § 1612. There is no indication that Congress intended that the district court, in the exercise of either its federal question jurisdiction or its original Virgin Islands jurisdiction should be subject to the strictures of 28 U.S.C. § 1341. Indeed no such notions of federalism as underlie limitations on the power of the federal district courts to enjoin certain state actions are applicable to the territories.

The general grant of legislative power, 48 U.S.C. § 1574, may not be construed as permitting the legislature to limit the jurisdiction of the district court. Nor does 48 U.S.C. § 1613, which permits the establishment of inferior courts by local law, permit the legislature, when it establishes such inferior courts, except in specified cases, to limit the concurrent jurisdiction of the district court.*fn2

Properly construed, however, 33 V.I.C. § 45 is not a limitation on the jurisdiction of the district court. Section 45(b) provides for judicial review of an arbitrary assessment of gross receipts taxes in the municipal court. The decision of that court is appealable to the district court, where the scope of judicial review is much narrower than if the district court were exercising original jurisdiction. 4 V.I.C. § 32. If the availability of a remedy under 33 V.I.C. § 45(b) were construed as prohibiting declaratory or injunctive relief in an original action in the district court, that section would conflict with 48 U.S.C. § 1612. We do not think the Virgin Islands legislature intended any such conflict. Section 45(b) applies only to review of arbitrary assessments in cases of delinquency. The gross receipts tax statute makes no provision for judicial review by nondelinquent taxpayers. In these cases judicial review of the Commissioner's computations is available in the district court under 48 U.S.C. § 1612. Section 45(b) does not say that such judicial review is not also available in the district court for delinquent taxpayers. The section only enacts an additional, alternative, and possibly ...


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