Tracy Leigh Dev. Corp. v. Gov't of the Virgin Islands

• Decision Date: 25 June 1974
• Docket Number: No. 73-2081,73-2081
• Citation: 11 V.I. 244
• Parties: TRACY LEIGH DEVELOPMENT CORPORATION, Appellant v. GOVERNMENT OF THE VIRGIN ISLANDS, Appellee
• Court: U.S. Court of Appeals — Third Circuit

11 V.I. 244

TRACY LEIGH DEVELOPMENT CORPORATION, Appellant v. GOVERNMENT OF THE VIRGIN ISLANDS, Appellee

No. 73-2081

United States Court of Appeals Third Circuit

Argued April 25, 1974

Filed June 25, 1974

Suit by developer seeking application of business incentive statute to developer's construction of condominiums. Circuit Court, Adams, Circuit Judge, held that where statute granting subsidies and tax exemption to condominiums and certain other eligible business and industrial activities "including the construction or operation of the same" was amended and the amendment enumerated the activities as to which construction was exempted, court could not say that legislature did not intend to distinguish between private condominiums, which alone were left out of the constructionexemption clause, and other activities, all of which were included in the construction exemption clause, and would not find the omission to be a drafting oversight, and grant for construction of condominiums was ultra vires the statute and thus invalid and government properly refused to honor the grant.

CHARLES S. WAGGONER, II, ESQ., St. Thomas, V.I., for appellant

GORDON S. GILMAN, ESQ., Assistant Attorney General, St. Thomas, V.I., for appellee

Before ALDISERT, ADAMS and GARTH, Circuit Judges

OPINION OF THE COURT

ADAMS, Circuit Judge

Resolution of this case turns primarily on the willingness or power of this Court to correct an alleged "drafting oversight" by the Virgin Islands legislature in enacting a statute that conferred certain specified categories of tax relief.

The appellant, Tracy Leigh Development Corp. ("Tracy Leigh") contends vigorously that it is our province, and indeed our duty, to supply a term to the VirginIslands Code which, it is asserted, the draftsmen unintentionally omitted. Standing in sharp counterpoint to this contention are doctrines of judicial temperance, doctrines which take on a heightened significance when the elemental relationship of courts to legislatures is put in issue.

I.

The facts of the case have been stipulated by the parties. Tracy Leigh was incorporated under the laws of the Virgin Islands on February 24, 1967. On June 23, 1967, Tracy Leigh purchased about four acres of land on St. Thomas, for approximately $130,000.¹ On October 26, 1967, the corporation applied for a grant of "tax or fee exemptions and subsidies" under the Virgin Islands Industrial Incentive Act.² A public hearing on the application was held on December 14, 1967, and an executive committee of the Industrial Incentive Board approved the application on February 11, 1969.³ The grant was made effective from October 26, 1967, the date of the application, for a period of ten years. Subsequently, in 1970, the Government of the Virgin Islands refused to pay Tracy Leigh the subsidies provided for in the grant, declined to recognize any of the tax exemptions conferred by the grant, and filed a lien against Tracy Leigh for taxes owed.⁴ The Government's failure to comply with the terms of the grant reflected a recommendation by the Comptroller of the Virgin Islands to the Governor that "no subsidy payments be made under this grant" and "that any taxes or fees exempted underthis grant be billed and collected, and that the grant be voided."⁵

Under protest Tracy Leigh paid the asserted tax deficiency, and then brought this lawsuit in the district court. It sought a declaration of the validity of the exemption and subsidy grant, a payment of the subsidies, and a refund of the taxes it had paid under protest.

The Government, in defending the suit, asserted that the tax exemption and subsidy grant exceeded the terms of the authorizing statute. The district court declared the grant void as not supported by the terms of the statute, and Tracy Leigh has appealed.

II.

The Virgin Islands Industrial Incentive Act was enacted by the Islands' legislature "to promote the economic development of the Virgin Islands by the offering of certain incentives to the establishment or expansion of industries or businesses."⁶ The Incentive program was repealed in July of 1972.⁷ As of September 25, 1967, the Act provided in part as follows:

"A person, firm, or corporation engaged in or about to engage in an industrial or business activity in the Virgin Islands, which industrial or business activity in the judgment of the Governor of the Virgin Islands, will promote the public interest by economic development of the Virgin Islands, may apply for the [tax exemption and subsidy] if such person, firm, or corporation meets the following requirements:

. . . (3) undertakes to invest in an industry or business in the Virgin Islands. . . .

(B) at least $75,000 in the establishment of a business engaged in the ownership of housing projects . . . , factories, indus-trial plants, or commercial warehouses, industrial parks, condo-minium(s) . . . , including the actual construction of such housing projects, factories, industrial plants or commercial warehouses, industrial parks when such construction is engaged in by the owner." (Emphasis added.)⁸

It is conceded by the parties that Tracy Leigh was engaged in the "construction" of condominiums. Indeed, the tax exemption and subsidy form reflects that the award to Tracy Leigh was predicated on the corporation's intended "construction and sale to first buyer of condominium units."⁹ The Government, in seeking to justify the voiding of the grant, points out what is plain: that in authorizing grants to those engaged solely in "construction," the legislature did not include condominiums among the facilities for which construction grants could be given. Tracy Leigh, the Government urges, was thus not entitled to any grant for the construction of condominiums and, since condominium construction was the precise and express basis for Tracy Leigh's tax exemption and subsidy, the grant was void ab initio.

[1] Tracy Leigh's central contention is that the failure of the legislature to include condominium construction among those activities for which exemptions and subsidies might validly be granted, was an "obvious drafting oversight." In support of this contention we are pointed to an earlier version of the authorizing statute, enacted a few months prior to the amendment of September 25, 1967.¹⁰ The earlier statute, after listing condominiums among the facilities for which "ownership" grants could be given,further authorized grants for "construction or operation of the same."¹¹ This terminology, beyond doubt, meant that exemptions and subsidies could validly issue under the earlier version of the Act for the construction of condominiums.

However, in the September 25th amendment the legislature did not use the phrase "the same". Instead, the legislature undertook a specific enumeration of all those types of facilities for which construction grants were authorized. This enumeration tracked the listing of valid ownership grants, with the single exception of condominiums. Tracy Leigh maintains that, when read against the earlier enactment, the omission from the September 25th amendment of an authorization of grants for construction of condominiums was clearly an unintended omission—an "oversight"—by the legislature. We are asked to rectify that oversight by supplying the missing term, and so uphold the validity of Tracy Leigh's grant.

[2, 3] This we decline to do. We take it as a tenet of our jurisprudence that "[a] judge must not rewrite a statute, neither to enlarge nor to contract it."¹² At base, this adage is expressive of the fundamental separation between the judiciary and the legislature in our system. Where a statute is on its face clear, strict, literal interpretation renders a federal court functus officio. Departure from the plain import of statutory terms is justified only where terminological ambiguity is apparent,¹³ where inherent contradiction exists,¹⁴ or, perhaps, where the legislative history conclusively establishes that an oversight in draftsmanshiphas clearly occurred.¹⁵ None of these situations obtains here. Despite Tracy Leigh's assertion that the legislature fully intended to authorize grants for the construction of condominiums, not a single fragment of legislative history —except perhaps the above-mentioned predecessor of the applicable statutory section—has been brought to our attention indicating that the legislature intended to authorize grants for the construction of condominiums.

Indeed, we hesitate to adopt Tracy Leigh's characterization of the omission from the statute of condominium construction grants, as "obvious". For reasons that may have been perfectly rational, the legislature may have intended precisely what Tracy maintains was unintended. Under the Incentive Act, "condominium" was a statutory term of art. It meant "the ownership of single units in a multi-unit building with common elements."¹⁶ Inasmuch as the legislature promulgated an express definition of "condominium", we think it somewhat unlikely that the lawmakers would simply neglect to include that term in the grant authorization section of the same Act. At any rate, the reason for the omission of the term "condominium" in the grant section of the Act is considerably less clear than Tracy Leigh would have us conclude.

[4, 5] Additional considerations militate against judicial insertion of an allegedly "missing" word into this section of the Act. As Judge Maris has pointed out:

"It is a well settled rule that statutory exemptions from taxation, being a matter of grace, are to be strictly and narrowly construed."¹⁷This rule, when compounded with the precept that "to supply [statutory] omissions transcends the judicial function,"¹⁸ makes the present case—a case involving a tax exemption—a particularly inappropriate occasion for judicial tampering with the clear language of a statute. Thus, we conclude that the grant to Tracy Leigh was ultra vires the statutory authorization, and therefore invalid.

[6] Tracy Leigh mounts a second argument against the district...