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Excavation Construction Inc. v. Quinn

UNITED STATES COURT OF APPEALS, THIRD CIRCUIT


decided: March 17, 1982.

EXCAVATION CONSTRUCTION, INC. NO. ONE CONTRACTING CORP.
v.
LEROY A. QUINN, COMMISSIONER OF FINANCE OF THE GOVERNMENT OF THE VIRGIN ISLANDS, APPELLANT

ON APPEAL FROM THE DISTRICT COURT OF THE VIRGIN ISLANDS, DIVISION OF ST. THOMAS AND ST. JOHN (D.C. Civil No. 80-389)

Before Hunter, Van Dusen and Sloviter, Circuit Judges.

Author: Sloviter

Opinion OF THE COURT

This is an appeal by the Commissioner of Finance (Commissioner), now Director of the Virgin Islands Bureau of Internal Revenue, from a preliminary injunction entered by the District Court of the Virgin Islands, which stayed the execution of an assessment of Virgin Islands excise taxes. The Commissioner contends that the district court lacked jurisdiction to enjoin the collection of the taxes. The district court considered and rejected that contention. We affirm.

I.

Appellees, Excavation Construction, Inc. and No. One Contracting Corp. (taxpayers), are a joint venture licensed to do business in the Virgin Islands. In October 1980, taxpayers received a letter from the Virgin Islands Department of Finance informing them that it had been determined that they were liable for an excise tax deficiency for the year 1978 in the amount of $137,417, plus a penalty in the amount of $34,354. The excise tax assessment was based on equipment which had been brought into the Virgin Islands by taxpayers in connection with construction work being done by them at the Harry S. Truman Airport. The letter requested that taxpayers either agree to the finding of a deficiency or file a protest with the Department of Finance within thirty days. Instead, taxpayers initiated this action in the District Court of the Virgin Islands, seeking an order staying the execution of the deficiency assessment. As authority for such an action, taxpayers relied upon 33 V.I.C. § 45. Section 45(a) provides that the Commissioner may make an "arbitrary determination" of the gross receipts or excise tax due by a delinquent taxpayer; section 45(b) provides that a taxpayer against whom an arbitrary determination of excise or gross receipts taxes is made "may file a petition in the Municipal (now Territorial) Court asking that such execution be stayed, pending determination of the actual amount due."*fn1

Taxpayers sought a determination that they were not liable for any excise tax on the grounds, as alleged in their petition for stay of execution, that the items upon which the assessment was based had been brought into the Virgin Islands for the sole purpose of the airport construction work in which taxpayers were engaged, that they were "present in the Virgin Islands only temporarily, and will be removed after having served their purpose in construction," that they were "owned or leased and possessed by (taxpayers) at all times material" and "were not brought into the Virgin Islands for disposition in the course of trade or business or for sale," and that "no invoice existed for such items and ... the items were not consumed by their use in the Virgin Islands." The district court denied the Commissioner's motion to dismiss for lack of subject matter jurisdiction, rejecting the contention that jurisdiction was precluded by 33 V.I.C. § 1691(a), which provides, in relevant part:

No action for the purpose of restraining the assessment or collection of any internal revenues tax shall be maintained in any court.

Thereafter, the district court granted taxpayer's motion for a temporary stay of execution, ordering that the Commissioner be "enjoined from issuing any writ of execution or notice of levy ... for the purposes of collecting excise taxes allegedly owed by petitioner for the year 1978 ... until final disposition of this matter on the merits by judgment or other final order." We have jurisdiction of the Commissioner's appeal from this interlocutory order pursuant to 28 U.S.C. § 1292(a)(1).

II.

Appellant's primary contention is that 33 V.I.C. § 1691(a) by its plain language precludes the district court from entertaining any "action for the purpose of restraining the assessment or collection of any internal revenues tax." The prohibition of section 1691(a), however, is not as absolute as its sweeping language suggests. As noted above, 33 V.I.C. § 45(b) provides that a taxpayer against whom an arbitrary determination of a gross receipts or excise tax deficiency has been made "may file a petition in the Municipal Court asking that such execution be stayed, pending determination of the actual amount due." Section 1691(a) was enacted in 1957; the Act containing section 45(b) was enacted in 1959, and provided that "any ... provisions of law which may be in conflict with this Act are hereby repealed." Internal Revenue Act of the Virgin Islands, No. 473, § 3, 1959 V.I.Sess.Laws, at 83. To the extent that section 45(b) may be inconsistent with section 1691(a), section 45(b) would be the operative provision.

Appellant contends that although 33 V.I.C. § 45(b) confers jurisdiction on the territorial court (the successor to the municipal court) to stay the execution of an excise tax deficiency assessment, such jurisdiction does not lie in the district court. We cannot accept appellant's argument that would give the territorial court broader jurisdiction than the district court in this type of action. Under section 22 of the Revised Organic Act, the District Court of the Virgin Islands, in addition to its federal question jurisdiction, "shall have general original jurisdiction in all other causes in the Virgin Islands, exclusive jurisdiction over which is not conferred by this Act upon the inferior courts of the Virgin Islands." 48 U.S.C. § 1612. This action does not fall within one of the categories of cases which the Revised Organic Act places within the exclusive jurisdiction of the territorial court.*fn2 The Virgin Islands Legislature cannot expand the exclusive jurisdiction of the territorial court beyond the limits set by the Revised Organic Act, or restrict the concurrent jurisdiction of the district court. Pan American World Airways, Inc. v. Duly Authorized Government of the Virgin Islands, 459 F.2d 387, 391, 8 V.I. 558, 565 (3d Cir. 1972). Therefore, the Virgin Islands Legislature could not, consistent with the Revised Organic Act, create an exclusive cause of action in the territorial court by its enactment of 33 V.I.C. § 45(b).*fn3 As we stated in Pan American, "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." 459 F.2d at 391-92, 8 V.I. at 566.*fn4 See Luetta Samuel v. Virgin Islands Telephone Corp., 12 V.I. 64 (D.V.I.1975). Because a petition to stay the execution of an arbitrary determination of excise tax deficiency can be brought in territorial court,*fn5 it follows that such a petition can be brought in the district court.

We find it significant that the Virgin Islands Legislature has not chosen to maintain a blanket prohibition against maintenance of suits which would retard the collection of taxes. In the limited circumstances in which section 45 applies, the legislature has approved petitions for stay of execution, to be granted in the discretion of the court, pending a determination of the actual amount due. Since it has authorized persons against whom an arbitrary determination of excise taxes has been made to file a petition for stay of execution in territorial court and the district court has concurrent jurisdiction over such actions, the district court had subject matter jurisdiction over this case. The order of the district court will be affirmed.


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