Davis v. City of Phila.

• Decision Date: 04 May 2016
• Docket Number: No. 15–2937.,15–2937.
• Parties: Michael E. DAVIS ; Global Sales Call Center LLC v. CITY OF PHILADELPHIA Michael E. Davis, Appellant.
• Court: U.S. Court of Appeals — Third Circuit

821 F.3d 484

Michael E. DAVIS ; Global Sales Call Center LLC

v.CITY OF PHILADELPHIA

Michael E. Davis, Appellant.

No. 15–2937.

United States Court of Appeals, Third Circuit.

L.A.R. 34.1a March 4, 2016.

Filed: May 4, 2016.

Submitted Under Third Circuit

Earl D. Raynor, Jr., Philadelphia, PA, Counsel for Appellant.

Michael A. Siddons, Media, PA, Counsel for Appellee.

Before McKEE, Chief Judge, SMITH, and HARDIMAN, Circuit Judges.

OPINION OF THE COURT

HARDIMAN

, Circuit Judge.

Federal law confers various protections on United States servicemembers called to active duty. Among these are limits on the interest and penalties that may be charged to a servicemember for overdue property taxes. Michael Davis, who served his country in both Iraq and Afghanistan, appeals the District Court's order dismissing his lawsuit challenging delinquent property tax interest and penalties that the City of Philadelphia assessed against his company while he was on active duty. The question presented by this appeal is whether the protections afforded to Davis as a servicemember extend to his company's property.

I

Davis and his wife purchased a two-story, three-bedroom rental property at 5624 Willows Avenue in Philadelphia on July 15, 1997. A longtime member of the United States Army Reserve, Davis was called to active duty in December 2004. A few months after he was called up, Davis and his wife transferred the property to Global Sales Call Center LLC, a Pennsylvania company that is solely owned and managed by Davis.¹ Davis served six months of active duty in Iraq in 2005 and three years in Afghanistan between 2008 and 2011.

In December 2009, Davis and Global asked the Philadelphia Department of Revenue to reduce Global's property tax debt in accordance with the Servicemembers Civil Relief Act (SCRA), 50 U.S.C. § 3901 et seq.,

which limits any interest imposed on a servicemember's delinquent property taxes during his period of active duty to a rate of six percent and forbids any additional penalties.² 50 U.S.C. §§ 3991(d), 3937(a)(1). The Department denied this request on the grounds that the SCRA does not apply to a business owned by a servicemember, telling Davis that he should instead file an abatement petition with the Philadelphia Tax Review Board. Davis did so in January 2010, rehashing his SCRA argument and requesting a recalculation of the interest and penalties assessed against Global based on its overdue property taxes. The Review Board denied the petition after a March 2011 hearing.

Two years later the City of Philadelphia initiated foreclosure proceedings on Global's property because of its failure to pay the delinquent property taxes and associated interest and penalties, and the Philadelphia Court of Common Pleas entered judgment in the City's favor. In a subsequent hearing upon a petition to open the judgment, Davis again requested an abatement of Global's debt, reasserting that the interest and penalties assessed by the City violated the SCRA and neglecting to inform the Court that the Review Board had already considered and rejected this argument. After learning of the Review Board's decision, the Court of Common Pleas ruled in the City's favor and signed the foreclosure petition.

Davis and Global then turned to federal court, suing under 42 U.S.C. § 1983

, which “provides a recovery mechanism for the deprivation of a federal right by a person acting under color of state law.” Hynson By & Through Hynson v. City of Chester Legal Dep't, 864 F.2d 1026, 1029 (3d Cir.1988)

. The City moved to dismiss, arguing that it had applied the SCRA to Davis's personal liabilities (those arising during the brief period between Davis's transition to active duty and his transfer of the Willows Avenue property to Global) and that both Davis and Global lack standing.

The District Court granted the City's motion. The Court reasoned that the SCRA extends only to servicemembers and that a corporation is not a “servicemember” under the statute. Davis v. City of Philadelphia, 2015 WL 4461770, at *3 (E.D.Pa. July 21, 2015)

. Accordingly, it concluded that Global was without statutory standing to seek relief under the SCRA. Id. The Court also dismissed Davis's suit, holding that—because he was not personally liable for Global's tax debt—he “has not been denied relief under the SCRA.” Id.

Global did not appeal, but Davis did.³

II

This appeal is our first opportunity to interpret the Servicemembers Civil Relief Act. This straightforward statute provides that any interest imposed on a servicemember's late property taxes during a period of active duty may not exceed six percent. 50 U.S.C. §§ 3991(a)

, (d), 3937(a), and 3911(2)(A)(i), (3). The law also bars any additional charges or interest under the guise of a “penalty.” 50 U.S.C. § 3991(d). These property tax interest rate and penalty protections extend only to “property ... owned individually by a servicemember or jointly by a servicemember and a dependent or dependents.” 50 U.S.C. § 3991(e) (emphasis added). The SCRA defines a “servicemember” as “a member of the uniformed services.” 50 U.S.C. § 3911(1).

Although the parties view this case purely in terms of standing, we see it somewhat differently. As we shall explain, Global lacks standing, but Davis does have standing to sue.

Standing is a sine qua non in any case. See Warth v. Seldin, 422 U.S. 490, 498, 95 S.Ct. 2197, 45 L.Ed.2d 343 (1975)

. There are three types of standing: (1) constitutional standing owing to the “irreducible constitutional minimum” of the existence of an Article III “case or controversy,” Lujan v. Defs. of Wildlife, 504 U.S. 555, 560, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992) ; (2) prudential standing consistent with “judicially self-imposed limits on the exercise of federal jurisdiction,” United States v. Windsor, ––– U.S. ––––, 133 S.Ct. 2675, 2685, 186 L.Ed.2d 808 (2013) ; and (3) statutory standing, which is at issue in this case. Whereas “[c]onstitutional and prudential standing are about, respectively, the constitutional power of a federal court to resolve a dispute and the wisdom of so doing,” statutory standing is simply a matter of statutory interpretation. Graden v. Conexant Sys. Inc., 496 F.3d 291, 295 (3d Cir.2007). We inquire “whether Congress has accorded this injured plaintiff the right to sue the defendant to redress his injury.” Id.

Applying these principles, the District Court correctly held that Global is not a “servicemember” under the SCRA, as it is not a “member of the uniformed services.” 50 U.S.C. § 3911(1)

. Although federal law treats corporations as “people” in many respects, it does not deem them soldiers. Moreover, the SCRA limits the class of persons who may petition a court for relief under the Act to those with “servicemember” status. 50 U.S.C. § 4021(a). Thus, the plain language of the SCRA precludes Global's standing.

Unlike Global, Davis is a servicemember. As such, he is precisely the sort of plaintiff that the SCRA protects. Contrary to the City's arguments and the District Court's implicit holding, his complaint is not defeated for lack of statutory standing.

Unfortunately for Davis, he has not—and cannot—state a claim for relief under the SCRA. “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009)

(internal quotation marks omitted). To state a claim for relief, Davis was required to plead facts sufficient to prove the following elements of a SCRA claim: (1) an interest at a rate above six percent (2) assessed against a servicemember while on active duty (3) based on delinquent property taxes relating to “property ... owned individually by a servicemember or jointly by a servicemember and a dependent or dependents.” 50 U.S.C. § 3991(e) (emphasis added). Davis cannot satisfy the second or third elements because it is undisputed that Global owns the property in question and that Global alone is liable for the tax debt.⁴ Under Pennsylvania law, Global has its own legal identity, so Davis may not invoke the SCRA on Global's behalf. Nor may Davis appeal to equity to pierce Global's corporate veil based purely on the unremarkable fact that Global has no corporate shareholders or personnel beyond Davis and absent any evidence that the entity was nothing but a sham, as it is well established that “[m]ere stock ownership by a small number of shareholders does not blur the distinction between individual and corporate entities.” In re Deed of Trust of Rose Hill Cemetery Ass'n, 527 Pa. 211, 590 A.2d 1, 4 (1991) ; see also

Sams v. Redevelopment Auth. of City of New Kensington, 431 Pa. 240, 244 A.2d 779, 781 (1968) (“[O]ne cannot choose to accept the benefits incident to a corporate enterprise and at the same time brush...