ANALYSIS OF MARCH 2, 2017 SUPREME COURT OPINIONS
(Posted March 2, 2017) Virginia’s common law continues to grow as the justices today give us three new published opinions.
Today’s decision in Boasso America Corp. v. Chesapeake Zoning Administrator occupies much of the same turf as another recent case, Frace v. Johnson in 2015. The issue is who the necessary parties are when someone appeals an adverse decision of a board of zoning appeals. In Frace, the landowner followed the statutory script on how to style the petition for certiorari in circuit court. But he didn’t name the local governing board as a party, and that proved fatal.
The same thing happened here: Boasso got an adverse ruling from the local zoning administrator, and an appeal to the Chesapeake BZA resulted in a tie vote. Boasso timely (within 30 days) filed a cert petition in circuit court but didn’t name the city council as a party. That was the fatal error in Frace.
In fairness to Boasso’s lawyers, the ink was barely dry on the Frace decision, and they may not have been aware of it. (If they’d been regular readers of this website, they would have known. It pays to read your VANA!) When the zoning administrator moved to dismiss for lack of a necessary party, Boasso moved for leave to add the council. But the trial court ruled that it was too late to do that; the council had to be sued within 30 days, and that deadline was by then far in the rear-view mirror. The court dismissed the case.
The justices today affirm. Justice McCullough writes for a unanimous court and observes that the only difference between this procedural setup and that in Frace is that Boasso at least moved for leave to amend, something that Frace had declined to do. But the Supreme Court holds that the trial judge was right: once the 30 days pass, it’s too late to add a party whose presence is required by statute.
I’ll note an important distinction here that appears only in a footnote to today’s opinion. It’s still possible to add necessary parties after the 30 days; just not those parties the statute requires.
Today is the second time in just over a year that the court has decided an appeal involving conservation easements. Last February we saw Wetlands America Trust v. White Cloud Nine Ventures; today it’s Mount Aldie, LLC v. Land Trust of Virginia.
The land in issue is in Loudoun County, an area that I’ve been too quick to dismiss as just another part of the congested State of Northern Virginia. While most of Dulles airport is in that county, it also includes at its western edge a stretch of the Appalachian Trail, a route I’ve long regarded as sacred ground. Just south of the middle of that county is the small village of Aldie, and the origin of today’s dispute.
In 2008, the owner of the land delivered unto Land Trust a deed of gift, conveying a conservation easement over part of the land abutting the Little River. It forbade certain development activities within 100 feet of the river bank. Mount Aldie, LLC later acquired the land and sought to make some changes along the route of an old Indian footpath that traced the river’s edge.
After some work within the easement area – the complaint isn’t specific as to just what happened — Land Trust sued to enjoin the work. It also sought an award of damages to restore the land to its previous condition. Evaluating reciprocal motions for summary judgment, the trial judge agreed with Land Trust and awarded damages and costs – notably including expert-witness fees – against Mount Aldie.
The analysis of the case in today’s unanimous opinion is highly case-specific; Justice McClanahan analyzes the language of the easement and concludes that it’s not at all clear that Mount Aldie has violated the easement’s terms. The trial court’s fundamental mistake was in granting summary judgment at all; the court finds that the resolution of the case will turn on disputed facts, so it remands for trial on those contested allegations.
But both parties moved for summary judgment, you may be thinking. Isn’t that a concession that there are no material facts genuinely in dispute? No; summary judgment doesn’t work that way. Even if both parties contend that the facts are undisputed, the truth may be that they very much disagree on the facts, in which case the court has to deny both motions and proceed to trial.
I’ll add one note, again on some language that appears in a footnote. The easement contained a provision that in the event its terms were found to be ambiguous, those terms should be construed liberally. The justices today decline to do that, because they find no ambiguity in the easement. Liberal-construction provisions in contracts, or in caselaw, are fine as aids to courts in interpreting doubtful text. But neither rules of construction nor those of interpretation have any place where the language used is unambiguous. In that event, you simply apply the plain language used. There is no Step B.
There are some interesting subplots in Verizon Online v. Horbal. Not in the opinion; Justice McClanahan has composed what I view as unassailable reasoning in support of the court’s conclusion, and no one on the court dissents.
I refer instead to the turf war over which government gets to tax what. In an anti-tax environment where legislators fear backlash over any increase, one way for the state to raise revenue without raising taxes is to shift some taxation from localities to the Treasurer of Virginia. From the voter’s perspective, it’s not a tax increase; you’re paying the same amount, just to a different payee. Of course, if you’re on the localities’ end of that transaction, you might view the move a little differently: the state has just purloined “your” source of tax revenue without making up for it elsewhere.
Here’s the factual setup for this appeal: If you get cable television, you’re familiar with the converter boxes that unscramble a signal and deliver a viewable picture to you. If you hypothetically owned one, you might have to pay some sort of property taxes on it; but unless you’re very, very unusual, you don’t own it. That’s because the cable companies have figured out that they can make tons more money by renting them to you than they could by selling them at a fair-market price. Hence those contraptions belong to the company; you can’t buy one at any price.
Verizon, in connection with its FiOS service, has plenty of those boxes installed in residences across the Commonwealth. The Chesterfield County Commissioner of the Revenue decided that they were tangible business personal property, and slapped the locality’s tax on them. Verizon paid for a while and then filed an application in late 2010, seeking a refund and a declaration that they aren’t taxable, at least not by the county. The company pointed to a 1984 statute that says that cable converters are intangible personal property, taxable only by the state.
The first person to review a challenge like this is, coincidentally, the Commissioner of the Revenue himself. As you might imagine, the Commissioner ruled in his own favor, finding that the boxes were “machinery,” as described in the tax act. Verizon appealed, pursuant to the process set out in the tax statutes, to Virginia’s Tax Commissioner. That Commissioner reversed, holding that the boxes were only taxable by the state. He ordered the county to refund three years’ worth of payments.
The County Commissioner then took the next appellate step, petitioning the circuit court for judicial review of the Tax Commissioner’s ruling. The court granted summary judgment to Verizon, agreeing with the Tax Commissioner’s reasoning. But the court handed a partial victory to Verizon, ruling that the original application for relief came too late for tax years 2008 and 2009.
The Supreme Court agreed to hear the case, granting petitions filed by each side. Today the justices agree with the circuit court and the Tax Commissioner that the boxes are intangible personal property, based on the 1984 change in the law. That act removed a provision that had made converter boxes taxed locally, and substituted a limited exemption that, the court finds, doesn’t include the boxes. That statutory change shifted the tax revenue from localities to the state level.
But the court has an unpleasant surprise for the county, and a word of warning to lawyers who handle this kind of appeal. When Verizon appealed to the state Tax Commissioner, the county Commissioner raised his defenses, but he didn’t list untimeliness among them. When the Tax Commissioner ruled against him and he went on to circuit, he did raise that defense to the refund claim, and the circuit court obviously latched onto that, cutting off Verizon’s relief at one year. But the justices find that the failure to assert that defense before the Tax Commissioner operated as a waiver of the issue, so the circuit court didn’t have the ability to apply it.
In this holding, the Supreme Court notes that in reviewing rulings like this, the circuit court operates as an appellate court. And in that context, appellate waiver rules apply: since the county Commissioner didn’t assert the untimeliness defense to the state Tax Commissioner, the circuit court couldn’t consider it. That means that Verizon is entitled, under today’s ruling, to a refund for all three tax years.
This is nothing more than an application of Rule 5:25 to intervening steps in the admin-law process. You can’t withhold an issue from a given level of decisionmaker and then ask a reviewing agency (the state Tax Commissioner or a court) to rule in your favor on that ground. The justices cite two decisions from the Court of Appeals – one from 1995 and one from 2008 – that hold that if you don’t submit a given argument to an agency for decision, you can’t raise it for the first time during circuit court review.