Casa Bella Luna, LLC v. The Gov't of the U.S. V.I.
| Decision Date | 08 February 2023 |
| Docket Number | CIVIL 2022-15 |
| Parties | CASA BELLA LUNA, LLC, Plaintiff, v. THE GOVERNMENT OF THE U.S. VIRGIN ISLANDS, and IRA MILLS in his position as the VIRGIN ISLANDS TAX ASSESSOR, Defendants. |
| Court | U.S. District Court — Virgin Islands |
REPORT AND RECOMMENDATION
Before the Court is the Government of the U.S. Virgin Islands and Ira Mills, Tax Assessor for the U.S. Virgin Islands' (collectively, “GVI” or “government”) motion to dismiss plaintiff Casa Bella Luna, LLC's (“CBL”) complaint based on a pending parallel proceeding and for lack of subject matter jurisdiction. [ECF 12]. Plaintiff filed a response, [ECF 13], and the time to reply has expired.
CBL has sued defendants for violation of its constitutional rights claiming that the government unlawfully changed property tax assessments for prior tax years and conducted a deficient appeals process. [ECF 1] at 1-2. CBL owns a property on St John (the “Property”) that is the subject of this dispute, and states that it “faithfully and promptly” paid the real property tax bills issued by the Virgin Islands Tax Assessor's Office (“TAO”) for the years 2016-2020. Id. ¶¶ 1, 15. On May 21, 2021, the TAO issued supplemental real property tax bills for the years 20172020, changing the assessments for the Property. Id. ¶¶ 20-26; see also [ECF 1-7].[1] According to a letter from the TAO, the supplemental bills issued because an internal review revealed a permit for a new construction on the Property that was never assessed by the TAO. [ECF 1-7] at 1. CBL contends these revised assessments were untimely and in violation of 33 V.I.C. § 2412, which requires that if a new assessment is made on a property, the Tax Assessor must mail notice to the taxpayer “no later than May 15th of the year the assessment is made.” [ECF 1] ¶ 27.
CBL paid the supplemental tax bills, stating it was “forced” to do so pursuant to 33 V.I.C. § 2451 in order to file an appeal to the Board of Tax Review (“BOTR” or “Board”). Id. at 2, ¶ 114.[2],[3] On July 14, 2021, CBL appealed the new assessments to the BOTR. Id. ¶ 37. CBL contends that although the Board is statutorily required to hold a hearing within 120 days of such a filing, the Board did not schedule a hearing until 210 days later. Id. ¶¶ 36, 39 (citing 33 V.I.C. § 2452). Prior to the hearing, CBL made multiple requests for a list of the BOTR members, but never received an answer. Id. at 2. Pursuant to 3 V.I.C. § 180(b), the “Board shall be composed of seven (7) members;” however, only four board members were present at CBL's hearing on February 2, 2022. Id. ¶ 40. CBL states it confirmed that “these are, and were, the only members of the BOTR, not merely the members present.” Id. n.16. CBL further states that upon information, the BOTR has not been properly constituted with the required seven members since at least 2020. Id. ¶ 67 n.20.
The BOTR's Property Tax Appeals Rules and Regulations provide that, following the presentation of evidence at a hearing, “[t]he Appellant or Appellant's representative shall be allowed to cross examine the Tax Assessor and the Tax Assessor's witnesses.” [ECF 1-10] at 11 (Rules and Regulations 2453-3(b)). According to CBL, a few weeks before its hearing, counsel for the BOTR sent an email stating “No witnesses are questioned by attorneys.” [ECF 1] ¶ 103.[4] CBL asserts it was not permitted to properly cross-examine the Tax Assessor during its appeal hearing. [ECF 1] ¶ 100. The Rules and Regulations also require that all hearings shall be recorded and subsequently transcribed. [ECF 1-10] at 14 (Rules and Regulations 2454-1(a)). Additionally, the Board must provide a full record of the proceeding upon any party's request. Id. (2454-1(c)). CBL requested a copy of the transcript and the full record, but the BOTR did not respond. [ECF 1] ¶¶ 46-47.
On February 10, 2022, the BOTR issued a determination letter as to the 2020 tax year only upholding the reassessment. Id. ¶ 48 (citing Ex. 11); see [ECF 1-7] at 3 (). CBL states that the TAO's position is that the tax year billing for 2017, 2018, and 2019 “could not be addressed,” and that the TAO has refused to address the 2021 billing. Id. ¶ 64.
On March 14, 2022, CBL filed its complaint in this Court, asserting jurisdiction based on 28 U.S.C. §§ 1331, 1367, and 2201. [ECF 1] ¶ 4. The complaint further asserts that the Fifth and Fourteenth Amendments to the U.S. Constitution are extended to the Virgin Islands through the Revised Organic Act of 1954, Section 3. Id.[5] The complaint alleges defendants' actions circumvented due process by: (1) failing to give CBL timely notice of the reassessments, denying it a proper opportunity to be heard; (2) failing to have a properly constituted BOTR, depriving CBL of a proper opportunity to appeal the tax assessments and its right to an unbiased tribunal; and (3) failing to conduct a proper hearing by depriving CBL of its right to cross examine adverse witnesses, and failing to prepare a record and provide a copy of the transcript to plaintiff. Id. ¶¶ 79-80, 83-85, 92-93, 100-01, 104-05. The complaint further alleges defendants' actions violated CBL's right to equal protection by treating other U.S. Virgin Islands taxpayers differently. Id. ¶¶ 119-20; see also ¶¶ 53-63 (). Finally, CBL alleges that the TAO is estopped from issuing supplemental bills based on CBL's justifiable and reasonable reliance on the original bills, and the TAO's acceptance of payment for those bills. Id. ¶¶ 113-15. Plaintiff requests that the Court enter judgment against defendants, order defendants to refund CBL the taxes paid in excess of the original bills, and order defendants to continue to bill CBL at the assessed amount shown in the original bills for tax year 2019. Id. at 18. Additionally, CBL requests injunctive relief enjoining the GVI “from issuing or collecting any property tax bills, and/or changing any assessments on any real property until the government . . . is operating a property tax system, and BOTR/appeal system, that comports with the Virgin Islands Code, procedural and substantive due process, and the equal protection clause.” Id. ¶¶ 87, 95, 107, 117, 123.
On March 15, 2022, CBL filed a petition for review in the Superior Court of the Virgin Islands. [ECF 12-1].[6],[7] CBL states that it did so “to preserve the petition rights as set forth in 33 V.I.C. § 2453,” which permits a taxpayer to challenge a decision of the BOTR by filing a petition for review in the Superior Court. [ECF 1] ¶ 52. CBL contends, however, that the Superior Court action “will not, and cannot, address the relief” it seeks in District Court. Id.
On June 9, 2022, the government moved to dismiss based on a pending parallel action in the Superior Court of the U.S. Virgin Islands, or, alternatively, lack of subject matter jurisdiction. [ECF 12] at 1-2. Defendants first contend that interests of wise judicial administration warrant abstention pursuant to Colorado River Water Conservation Dist. v. United States, 424 U.S. 800 (1976). Id. at 3-4, 8-12. Defendants argue that dismissal is further warranted under Virgin Islands Rule of Civil Procedure 12(b)(1) because the complaint alleges only generalized procedural and substantive due process violations and fails to assert a federal law or statute or substantial federal question that would confer jurisdiction in this Court. Id. at 4-5, 12-13, 15, 18. In addition, defendants contend that “[g]iven the lack of original jurisdiction premised on federal law or statute, CBL has not articulated a credible basis for the District Court's supplemental jurisdiction over issues arising out of territorial law.” Id. at 14. Finally, defendants maintain that plaintiff's claim for declaratory relief does not automatically satisfy the factual predicate necessary to confer federal question jurisdiction. Id. at 14. And, if declaratory relief is appropriate in this case, that determination should be made by the Superior Court. Id. at 15.
Plaintiff opposes the motion, first arguing that denial is warranted based on procedural deficiencies. [ECF 13] at 2. Specifically, CBL contends that the government's motion fails to comply with Local Rule of Civil Procedure 7.1(c)(1), and fails to assert any Federal Rule of Civil Procedure as a basis for relief. Id. at 2-5. Moreover, even if the Court construes the motion under Federal Rule 12(b), it is unclear whether defendants move pursuant to Rule 12(b)(1), or Rule 12(b)(6). Id. at 3, 5. Plaintiff thereby urges the Court to deny or strike defendants' motion “for failure to properly place its request for relief before this Court.” Id. at 5. CBL further argues that this Court has subject matter jurisdiction over its procedural due process claims as claims arising under the Constitution, and original jurisdiction over its equal protection claim. Id. at 6. Lastly, plaintiff maintains that pending state actions are no bar to federal court jurisdiction, and that no exceptional circumstances exist here such that this Court should defer to the Superior Court action. Id. at 6-12. Indeed, CBL argues that there are no parallel proceedings here at all; thus, abstention is not required. Id. at 7.
On October 27, 2022, the District Court referred defendants' motion to the undersigned for a Report and Recommendation. [ECF 14].
“Federal courts are courts of limited jurisdiction . . . [and] it is to be presumed that a cause lies outside this limited jurisdiction ....” Kokkonen v. Guardian Life Ins Co. of Am., 511 U.S. 375, 377 (1994). A court's...
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