Virgo Corporation v. Paiewonsky
| Decision Date | 29 September 1967 |
| Docket Number | 16374.,No. 16116,16133,16116 |
| Citation | 384 F.2d 569 |
| Parties | VIRGO CORPORATION v. Ralph M. PAIEWONSKY, Governor, Morris F. deCastro, Director of the Budget and the Government of the Virgin Islands, Appellants. MASTER TIME COMPANY, Ltd. v. Percy DeJONGH, as Commissioner of the Department of Finance of the Government of the Virgin Islands, Appellant. VIRGO CORPORATION v. Ralph M. PAIEWONSKY, Governor, Morris F. deCastro, Secretary, Governor's Committee on the Virgin Islands Watch Industry, Member, Virgin Islands Industrial Incentive Board, and Director of the Budget, Albert Prendergast, Member, Governor's Committee on the Virgin Islands Watch Industry, Chairman, Virgin Islands Industrial Incentive Board, and Commissioner of Commerce; Percy deJongh, Commissioner of the Department of Finance; Ruben Wheatley, Member, Virgin Islands Industrial Incentive Board and Director of Tax Division of Department of Finance; Mahlen Lindquist, Member, Virgin Islands Industrial Incentive Board; Adolph Potter, Member, Virgin Islands Industrial Incentive Board; Joseph Alexander, Member, Virgin Islands Industrial Incentive Board; Percy Gardine, Member, Virgin Islands Industrial Incentive Board; the Government of the Virgin Islands, and Atlantic Time Products Corporation, Appellants. |
| Court | U.S. Court of Appeals — Third Circuit |
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Francisco Corneiro, Atty. Gen., Bruce MacGibbon, Asst. Atty. Gen., Charlotte Amalie, V. I., for Paiewonsky, de Jongh and others.
William Simon, Washington, D. C. (J. Coleman Bean, Howrey, Simon, Baker & Murchison, Washington, D. C., Russell B. Johnson, Christiansted, St. Croix, V. I. on the brief), for Virgo Corp.
Ronald H. Tonkin, Christiansted, St. Croix, V. I. (Young & Isherwood, Christiansted, St. Croix, V. I., on the brief) for Master Time Co.
Before STALEY, Chief Judge, and MARIS and FREEDMAN, Circuit Judges.
Argued February 3, 1967 at Christiansted.
These are appeals by the defendants from judgments entered against them in the District Court of the Virgin Islands. The appeals at our docket Nos. 16116, 16133 and 16374 involve the validity of the Watch Production Act of 1965, as originally enacted and as amended, 33 V.I.C. §§ 511-518, which, inter alia, imposed taxes on the production of watches in the Virgin Islands and also involve the validity of the Governor's action in allocating quotas to watch manufacturers under the Act. The appeal at our docket No. 16374 raises, also, the question whether the Governor acted arbitrarily in denying the plaintiff Virgo Corporation tax exemption and subsidy benefits under the Virgin Islands industrial incentive program, 33 V.I.C. § 4001 et seq.
Virgo Corporation, a Virgin Islands corporation engaged in the business of manufacturing and selling watches, filed a complaint in the district court, at Civil Docket No. 165-1965, Division of St. Croix, against the Government of the Virgin Islands, its Governor, and certain of its other officers, and Atlantic Time Products Corporation. The complaint set out two separate claims for relief. The first was for a determination that the Governor had acted arbitrarily in making an allocation to Atlantic Time Products Corporation, a newly established watch manufacturer, from the reserve quota of 300,000 units established under the Watch Production Act while denying Virgo an allocation of 45,000 additional watches from the reserve quota to relieve it from severe financial hardship. Virgo sought a judgment declaring that the Governor's allocation of 240,000 units to Atlantic Time was invalid and that Virgo was entitled to the allocation of the additional 45,000 units which it had requested. In the alternative, Virgo asked that the entire watch production program and the taxes imposed by the Watch Production Act of 1965 be declared invalid. Virgo's second claim for relief was for a judgment declaring it entitled to tax exemption and subsidy benefits under the Virgin Islands industrial incentive program, 33 V.I.C. § 4001 et seq. The district court, after hearing, filed its opinion holding the Watch Production Act of 1965 to be invalid on the ground that it imposed a new export duty in violation of section 36 of the Organic Act of 1936, 49 Stat. 1816-1817. In respect to count two of the complaint, the court concluded that the case should be remanded to the Virgin Islands Industrial Incentive Board with directions that recommendations which the Board deemed proper should be made to the Governor within 30 days, that the Governor should act thereon within a reasonable time thereafter; and that if no action was taken within the time prescribed, Virgo could seek an order compelling the defendants to grant tax exemption and subsidy benefits to it. 251 F.Supp. 279, 5 V.I. 342. The court entered an order pursuant to its opinion on March 16, 1966 from which the defendant appealed to this court at our docket No. 15894. That appeal was, however, dismissed by this court as premature since the Industrial Incentive Board had not yet acted and a final decision on all the claims for relief had accordingly not yet been rendered.
By the Watch Production Act of August 30, 1965,1 the Legislature sought to discourage through taxation the production of watches2 destined for ultimate shipment to the United States in amounts in excess of one-ninth of the annual consumption of watches in the United States. For the six months period from October 1, 1965 to March 31, 1966, the Governor of the Virgin Islands was authorized by the Act to assign to watch manufacturers in the Virgin Islands production quotas totaling 1,800,000 units. A tax of $2.50 per watch was imposed on all watches produced in the Virgin Islands upon which tax a credit of $2.47 was to be allowed in the case of all watches manufactured within the quota allocated and watches not destined for the United States. The Governor was authorized to allocate 1,500,000 of the total quota of 1,800,000 units to Virgin Islands manufacturers in accordance with a formula set out in the Act. The remaining 300,000 units were to be reserved to relieve severe financial hardship, and to permit allocation to new manufacturers. The Watch Production Act of 1965 was amended by the Act of March 22, 1966.3 Under the Act, as amended, the tax of $2.50 per watch was imposed upon all watches produced in the Virgin Islands in excess of the quotas to be allocated by the Governor for manufacture by Virgin Islands manufacturers, which were to aggregate one-ninth of the total annual consumption of watches within the customs area of the United States. Watches manufactured within these quotas were to be taxed at 3 cents per watch only.
After the passage of the Act of 1966 Virgo brought a second suit in the district court against the Government of the Virgin Islands, its Governor, and the Director of the Budget, at Civil Docket No. 37-1966, Division of St. Croix, for a judgment declaring the amended Act invalid in that it violated section 36 of the Organic Act of 1936 and section 28(d) of the Revised Organic Act of 1954. The district court held that the statute, as amended, continued the export duty in violation of section 36 of the Organic Act of 1936. 254 F.Supp. 405, 5 V.I. 359. Judgment was entered accordingly in favor of Virgo on June 3, 1966 and an appeal by the defendants at our docket No. 16116 followed.
In compliance with the district court's order of March 16, 1966, the Virgin Islands Industrial Incentive Board held a hearing and recommended to the Governor that partial tax exemption be granted to Virgo. This recommendation the Governor disapproved, however, and he denied Virgo's application for benefits under the industrial incentive program. Virgo then moved in the district court for an order to compel the defendants to grant it the benefits it had applied for. The district court held that it was the legislative intent that tax exemption and subsidies be made available to Virgo if it complied with the requirements of the statute and that after such compliance no discretionary power remained in the Governor to deny it benefits under the program. 259 F.Supp. 26, 5 V.I. 417. Accordingly, on November 7, 1966 the court entered an order directing the Governor to issue a certificate granting Virgo the same tax exemptions and subsidy benefits which had been granted to four other watch companies. The defendants thereupon took an appeal at our docket No. 16374 from the orders of March 16, 1966 and November 7, 1966.
Master Time Company, Ltd., a Virgin Islands corporation engaged in the manufacture and sale of watches, brought suit against the Commissioner of the Department of Finance of the Government of the Virgin Islands, at Civil Docket No. 142-1965, Division of St. Croix, for a judgment declaring the Watch Production Act invalid as imposing a prohibited export duty upon goods coming into the United States. On the basis of its conclusions in the actions brought by Virgo, the district court entered judgment in this action in favor of Master Time. 255 F.Supp. 927, 5 V.I. 388. The defendant then took the appeal at our docket No. 16133.
The three appeals now before us, insofar as they relate to the Watch Production Act, raise similar questions. They were consolidated for argument and will be considered together in this opinion. The issues which they raise are (1) whether the Watch Production Act, as originally enacted or as amended, is invalid as imposing an export tax on watches shipped to the United States in excess of the production quotas established under the Act or is otherwise invalid, or (2) if the district court erred in holding the Act invalid, whether the allocation made by the Governor from the reserve quota to Atlantic Time Products Corporation resulted from such non-statutory considerations and improper...
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