PRESENT: Kinser, C.J., Lemons, Millette, Mims, McClanahan, and Powell, JJ., and Koontz, S.J.
CITY OF RICHMOND OPINION BY v. Record No. 102409 JUSTICE LEROY F. MILLETTE, JR. March 2, 2012 SUNTRUST BANK
FROM THE CIRCUIT COURT OF THE CITY OF RICHMOND Beverly W. Snukals, Judge
The question presented by this appeal is whether a
municipal corporation has the authority to tax a non-exempt
entity for an exempt entity's ownership interest in property
owned by the two entities as tenants in common. We hold that
it does not.
I.
A.
SunTrust Bank and the Richmond Redevelopment and Housing
Authority (RRHA) own two properties – 901 and 1001 Semmes
Avenue – in the City of Richmond as tenants in common.
SunTrust holds undivided interests of 62% and 80.27%, and the
RRHA holds undivided interests of 38% and 19.73%. To define
their rights and obligations with respect to their ownership
interests, SunTrust (then Crestar Bank) and the RRHA executed
two operating agreements, one for each property. In pertinent
part, the operating agreements provide that SunTrust "shall
have the exclusive right to use and occupy the [properties]"
and that it "shall have sole and exclusive management and
1 control over, and shall make all decisions affecting, the
business, management, leasing, operation and disposition of the
[properties], as fully and completely as if [it] owned the
entire fee simple interest[s] in the [properties] and subject
only to the rights of [the RRHA]." The operating agreements
further provide that "[n]o rent or other charges shall be
payable by [SunTrust] or its Affiliates to the [RRHA] as a
result of their possession of the [properties]."
B.
Before 2009, the City taxed SunTrust only for its
ownership interests in the properties. (The RRHA was not taxed
for its ownership interests because property owned by a
political subdivision of the Commonwealth is exempt from
taxation under Code § 58.1-3606.) In 2009, however, the City
determined that SunTrust was liable not only for the taxes on
its ownership interests, but also for the taxes on the RRHA's
ownership interests. The City accordingly corrected the
assessments against SunTrust for the years 2006 through 2009 to
reflect that it was liable for taxes on both its ownership
interests and the RRHA's. 1
1 An assessment may only be corrected "within three years from the last day for which such assessment is made." Code §§ 58.1-3980(A), -3981(D).
2 C.
SunTrust filed an "Application for Correction of Erroneous
Assessment of Real Property Taxes," pursuant to Code § 58.1-
3984. On cross-motions for summary judgment, the circuit court
ruled that the City had no authority to tax SunTrust for the
RRHA's ownership interests in the properties and, consequently,
granted SunTrust partial summary judgment. The City, while
preserving its right to appeal the circuit court's ruling, then
reached an agreement with SunTrust on the amount to be
refunded; and the circuit court entered a final order in accord
with that agreement.
The City now appeals.
II.
Whether the City has the authority to tax SunTrust for the
RRHA's ownership interests in the properties is a question of
law, which we review de novo. Marble Techs., Inc. v. City of
Hampton, 279 Va. 409, 416, 690 S.E.2d 84, 87-88 (2010). The
factual findings made by the circuit court as to the nature of
the relationship between SunTrust and the RRHA, however, are
presumed to be correct, and will not be set aside unless they
are plainly wrong or without evidence to support them. County
of Mecklenburg v. Carter, 248 Va. 522, 526, 449 S.E.2d 810,
812-13 (1994).
3 B.
For a tax to be valid, it must be supported by express
legislative authority. Woodward v. City of Staunton, 161 Va.
671, 673, 171 S.E. 590, 591 (1933); see also Hampton Nissan
Ltd. P'ship v. City of Hampton, 251 Va. 100, 105, 466 S.E.2d
95, 98 (1996) ("[A] city can derive its taxing power only
through positive grants of authority from the General
Assembly."). As this Court has explained:
"Taxes are imposed by the State in the exercise of its sovereign power. This power is exerted through the legislature, and an executive officer who seeks to enforce a tax must always be able to put his finger upon the statute which confers such authority. Taxes can only be assessed, levied and collected in the manner prescribed by express statutory authority. Tax assessors have no power to make an assessment except in the manner prescribed by law, and if the statute prescribes a method of assessment which is invalid, the assessor has no power or authority to adopt a method of his own which would have been legal if it had been prescribed by the legislature."
Woodward, 161 Va. at 673, 171 S.E. at 591 (quoting Commonwealth
v. P. Lorillard Co., Inc., 129 Va. 74, 82, 105 S.E. 683, 685
(1921)).
C.
The City advances three arguments for why it has the
authority to tax SunTrust for the RRHA's ownership interests in
the properties. 2 We address these arguments in turn and
2 The City makes a fourth argument, based on an expansive reading of Code § 58.1-3200, in its reply brief. At oral
4 conclude that they are either without merit or procedurally
barred.
1.
The City first contends that it has the authority to tax
SunTrust for the RRHA's ownership interests because, pursuant
to the operating agreements, SunTrust has the exclusive right to
use and possess the properties as if it were the fee simple
owner. In making this argument, the City cites no statutory
authority; instead, it relies on City of Norfolk v. Perry Co.,
108 Va. 28, 61 S.E. 867 (1908). There, we upheld a tax imposed
by a municipal corporation upon two perpetual leaseholders for
property owned by the municipal corporation, explaining that
the leaseholders were "the substantial and real owners of the
property" because they "ha[d] the right of possession, use and
occupation forever." Id. at 30, 61 S.E. at 868. In so ruling,
we observed that, "as a general rule, in the absence of a
covenant the landlord under an ordinary lease is responsible
for taxes on the property leased by him; but this general rule
can have no application to the case of a perpetual
leaseholder." Id.
We reject the City's argument based on Perry. That case
is simply inapposite here because SunTrust is not a perpetual
argument, however, the City's counsel correctly conceded that the argument runs contrary to well-established rules of statutory construction. We therefore do not address it.
5 leaseholder; indeed, it is not a leaseholder at all. The RRHA,
as the circuit court found, did not lease the properties to
SunTrust. Rather, the RRHA and SunTrust own the properties as
tenants in common — a fact that the City conceded below and
concedes on the first page of its opening brief. As a tenant
in common, SunTrust has the right to use and possess the
properties without any agreement with the RRHA. Graham v.
Pierce, 60 Va. (19 Gratt.) 28, 38 (1869) ("[E]very tenant in
common has a right to possess, use and enjoy the common
Free access — add to your briefcase to read the full text and ask questions with AI
PRESENT: Kinser, C.J., Lemons, Millette, Mims, McClanahan, and Powell, JJ., and Koontz, S.J.
CITY OF RICHMOND OPINION BY v. Record No. 102409 JUSTICE LEROY F. MILLETTE, JR. March 2, 2012 SUNTRUST BANK
FROM THE CIRCUIT COURT OF THE CITY OF RICHMOND Beverly W. Snukals, Judge
The question presented by this appeal is whether a
municipal corporation has the authority to tax a non-exempt
entity for an exempt entity's ownership interest in property
owned by the two entities as tenants in common. We hold that
it does not.
I.
A.
SunTrust Bank and the Richmond Redevelopment and Housing
Authority (RRHA) own two properties – 901 and 1001 Semmes
Avenue – in the City of Richmond as tenants in common.
SunTrust holds undivided interests of 62% and 80.27%, and the
RRHA holds undivided interests of 38% and 19.73%. To define
their rights and obligations with respect to their ownership
interests, SunTrust (then Crestar Bank) and the RRHA executed
two operating agreements, one for each property. In pertinent
part, the operating agreements provide that SunTrust "shall
have the exclusive right to use and occupy the [properties]"
and that it "shall have sole and exclusive management and
1 control over, and shall make all decisions affecting, the
business, management, leasing, operation and disposition of the
[properties], as fully and completely as if [it] owned the
entire fee simple interest[s] in the [properties] and subject
only to the rights of [the RRHA]." The operating agreements
further provide that "[n]o rent or other charges shall be
payable by [SunTrust] or its Affiliates to the [RRHA] as a
result of their possession of the [properties]."
B.
Before 2009, the City taxed SunTrust only for its
ownership interests in the properties. (The RRHA was not taxed
for its ownership interests because property owned by a
political subdivision of the Commonwealth is exempt from
taxation under Code § 58.1-3606.) In 2009, however, the City
determined that SunTrust was liable not only for the taxes on
its ownership interests, but also for the taxes on the RRHA's
ownership interests. The City accordingly corrected the
assessments against SunTrust for the years 2006 through 2009 to
reflect that it was liable for taxes on both its ownership
interests and the RRHA's. 1
1 An assessment may only be corrected "within three years from the last day for which such assessment is made." Code §§ 58.1-3980(A), -3981(D).
2 C.
SunTrust filed an "Application for Correction of Erroneous
Assessment of Real Property Taxes," pursuant to Code § 58.1-
3984. On cross-motions for summary judgment, the circuit court
ruled that the City had no authority to tax SunTrust for the
RRHA's ownership interests in the properties and, consequently,
granted SunTrust partial summary judgment. The City, while
preserving its right to appeal the circuit court's ruling, then
reached an agreement with SunTrust on the amount to be
refunded; and the circuit court entered a final order in accord
with that agreement.
The City now appeals.
II.
Whether the City has the authority to tax SunTrust for the
RRHA's ownership interests in the properties is a question of
law, which we review de novo. Marble Techs., Inc. v. City of
Hampton, 279 Va. 409, 416, 690 S.E.2d 84, 87-88 (2010). The
factual findings made by the circuit court as to the nature of
the relationship between SunTrust and the RRHA, however, are
presumed to be correct, and will not be set aside unless they
are plainly wrong or without evidence to support them. County
of Mecklenburg v. Carter, 248 Va. 522, 526, 449 S.E.2d 810,
812-13 (1994).
3 B.
For a tax to be valid, it must be supported by express
legislative authority. Woodward v. City of Staunton, 161 Va.
671, 673, 171 S.E. 590, 591 (1933); see also Hampton Nissan
Ltd. P'ship v. City of Hampton, 251 Va. 100, 105, 466 S.E.2d
95, 98 (1996) ("[A] city can derive its taxing power only
through positive grants of authority from the General
Assembly."). As this Court has explained:
"Taxes are imposed by the State in the exercise of its sovereign power. This power is exerted through the legislature, and an executive officer who seeks to enforce a tax must always be able to put his finger upon the statute which confers such authority. Taxes can only be assessed, levied and collected in the manner prescribed by express statutory authority. Tax assessors have no power to make an assessment except in the manner prescribed by law, and if the statute prescribes a method of assessment which is invalid, the assessor has no power or authority to adopt a method of his own which would have been legal if it had been prescribed by the legislature."
Woodward, 161 Va. at 673, 171 S.E. at 591 (quoting Commonwealth
v. P. Lorillard Co., Inc., 129 Va. 74, 82, 105 S.E. 683, 685
(1921)).
C.
The City advances three arguments for why it has the
authority to tax SunTrust for the RRHA's ownership interests in
the properties. 2 We address these arguments in turn and
2 The City makes a fourth argument, based on an expansive reading of Code § 58.1-3200, in its reply brief. At oral
4 conclude that they are either without merit or procedurally
barred.
1.
The City first contends that it has the authority to tax
SunTrust for the RRHA's ownership interests because, pursuant
to the operating agreements, SunTrust has the exclusive right to
use and possess the properties as if it were the fee simple
owner. In making this argument, the City cites no statutory
authority; instead, it relies on City of Norfolk v. Perry Co.,
108 Va. 28, 61 S.E. 867 (1908). There, we upheld a tax imposed
by a municipal corporation upon two perpetual leaseholders for
property owned by the municipal corporation, explaining that
the leaseholders were "the substantial and real owners of the
property" because they "ha[d] the right of possession, use and
occupation forever." Id. at 30, 61 S.E. at 868. In so ruling,
we observed that, "as a general rule, in the absence of a
covenant the landlord under an ordinary lease is responsible
for taxes on the property leased by him; but this general rule
can have no application to the case of a perpetual
leaseholder." Id.
We reject the City's argument based on Perry. That case
is simply inapposite here because SunTrust is not a perpetual
argument, however, the City's counsel correctly conceded that the argument runs contrary to well-established rules of statutory construction. We therefore do not address it.
5 leaseholder; indeed, it is not a leaseholder at all. The RRHA,
as the circuit court found, did not lease the properties to
SunTrust. Rather, the RRHA and SunTrust own the properties as
tenants in common — a fact that the City conceded below and
concedes on the first page of its opening brief. As a tenant
in common, SunTrust has the right to use and possess the
properties without any agreement with the RRHA. Graham v.
Pierce, 60 Va. (19 Gratt.) 28, 38 (1869) ("[E]very tenant in
common has a right to possess, use and enjoy the common
property without being accountable to his co-tenants for rents
or profits, except under the statute [now Code § 8.01-31] for
so much as he may receive beyond his just share or
proportion.").
2.
Next, the City argues that it has the authority to tax
SunTrust for the RRHA's ownership interests, since SunTrust
does not use the properties for a "public purpose." As support
for this contention, the City points to Article XIII, Section
183(a) of the 1902 Constitution of Virginia, which exempted
from taxation "property lawfully owned by counties, cities,
towns, or school districts, used wholly and exclusively for
county, city, town or public school purposes."
We conclude that the City's "public purpose" argument is
incorrect for two reasons. First, neither the current
6 Constitution nor Code requires that property owned by a
subdivision of the Commonwealth be used for a "public purpose"
in order to be exempt from taxation. See Va. Const. art. X,
§ 6(a)(1); Code § 58.1-3606. Second, even if there were still a
"public purpose" requirement, that would only mean that the
RRHA — not SunTrust — could be taxed by the City. In each of
the "public purpose" cases cited by the City, a tax was imposed
on a municipal corporation, not on a private business. See
City of Norfolk v. Bd. of Supervisors, 168 Va. 606, 611, 192
S.E. 588, 589 (1937) (municipal-owned waterworks taxed by
county); Commonwealth v. City of Richmond, 116 Va. 69, 70-71,
81 S.E. 69, 70 (1914) (municipal-owned waterworks taxed by the
Commonwealth).
3.
Lastly, the City contends that it has the authority to tax
SunTrust for the RRHA's ownership interests in the properties
under Code § 58.1-3203, which states in relevant part: "All
leasehold interests in real property which is exempt from
assessment for taxation from the owner shall be assessed for
local taxation to the lessee." According to the City, "[t]he
practical effect of the [operating] [a]greements was to create
a leasehold interest by SunTrust in the [RRHA's] undivided
ownership interest in the [p]roperties."
7 We find this contention procedurally barred. In granting
SunTrust's motion for partial summary judgment, the circuit
court held that the operating agreements are not leases and
that SunTrust and the RRHA are tenants in common. The City did
not assign error to these rulings; thus, they will not be
reviewed on appeal. Rule 5:17(c); State of Maine v. Adams, 277
Va. 230, 241-42, 672 S.E.2d 862, 868 (2009) ("A party who asks
this Court to consider whether a circuit court's holding was
erroneous is required to assign error to the challenged holding
so that it may be identified properly for our consideration.").
III.
The City has failed to "put [its] finger upon the statute
which confers" upon it the authority to tax SunTrust for the
RRHA's ownership interests in the properties. Woodward, 161
Va. at 673, 171 S.E. at 591 (internal quotation marks and
citation omitted). We therefore hold that it has no such
authority and will, accordingly, affirm the circuit court's
judgment.
Affirmed.