Present: All the Justices
SHELOR MOTOR COMPANY, INC.,
D/B/A HOMER COX FORD, ET AL.
v. Record No. 001073 OPINION BY JUSTICE BARBARA MILANO KEENAN
April 20, 2001
NANCY W. MILLER, COMMISSIONER OF
THE REVENUE FOR MONTGOMERY COUNTY
FROM THE CIRCUIT COURT OF MONTGOMERY COUNTY
Ray W. Grubbs, Judge
This is an appeal from a decree entered in a declaratory
judgment suit. We consider whether the chancellor erred in
holding that certain merchants' capital that was removed
temporarily from a county before the "tax day" of January 1 is
subject to taxation by that county under Code § 58.1-3511(A).
The petitioners, Shelor Motor Company, Inc., d/b/a Homer
Cox Ford, Shelor Chevrolet Corporation, and Shelor Toyota, Inc.,
d/b/a Shelor Chrysler Dodge (collectively, Shelor), are
corporations organized and operated under the laws of the
Commonwealth. These corporations maintain their principal
places of business in the Town of Christiansburg in Montgomery
County (the County). Shelor is engaged in the retail sale of
automobiles in several local jurisdictions, including the
County, and a portion of its inventory typically is located in
the County.
Shelor's automobile inventory is "merchants' capital,"
which is defined in Code § 58.1-3510(A), in relevant part, as
"[i]nventory of stock on hand." Shelor's inventory located in
the County is subject to the County's merchants' capital tax
under Code § 58.1-3511(A), which provides, in relevant part:
The situs for the assessment and taxation of tangible
personal property, merchants' capital and machinery and
tools shall in all cases be the county, district, town or
city in which such property may be physically located on
the tax day. However, the situs for purposes of assessment
of motor vehicles, travel trailers, boats and airplanes as
personal property shall be the county, district, town or
city where the vehicle is normally garaged, docked or
parked. . . .
Under Code § 58.1-3515, "tax day" in the County for purposes of
applying the merchants' capital tax is January 1 of each year.
In December 1998, Shelor moved its automobile inventory
from the County to its other business locations outside the
County and offered those vehicles for sale in these locations.
On "tax day," January 1, 1999, none of Shelor's automobile
inventory was located in the County. During January 1999,
Shelor moved the relocated inventory that had not been sold back
to Shelor's places of business in the County. The County has
not yet assessed merchants' capital tax on Shelor's automobile
inventory for the 1999 tax year.
In March 1999, Shelor filed bills of complaint for
declaratory judgment against Nancy W. Miller, Commissioner of
the Revenue for Montgomery County (the Commissioner). 1 Shelor
1
Shelor Motor Company, Inc., d/b/a Homer Cox Ford, Shelor
Chevrolet Corporation, and Shelor Toyota, Inc., d/b/a Shelor
2
asked the chancellor to declare that Shelor's merchants' capital
located outside the County on January 1, 1999 is not subject to
the County's merchants' capital tax for that year. Shelor also
asked the chancellor to declare that the situs for assessment
and taxation (taxation situs) of merchants' capital under Code
§ 58.1-3511 is the locality where the property is "physically
located on the tax day," regardless of where the property is
kept during the remainder of the tax year.
The Commissioner filed demurrers asserting, among other
things, that Shelor had "fail[ed] to state a claim upon which
relief can be granted" because Shelor had removed its automobile
inventory from the County "with the intent to circumvent the tax
laws." The Commissioner thus contended that Shelor’s entire
automobile inventory was still subject to the County's
merchants’ capital tax.
The chancellor sustained the Commissioner's demurrers and
entered a final decree dismissing the cases with prejudice. He
explained his decision in a letter opinion, which was
incorporated by reference into the final decree.
The chancellor's decision was based in part on his
interpretation of Newport News v. Commonwealth, 165 Va. 635, 183
S.E. 514 (1936), and Hogan v. County of Norfolk, 198 Va. 733, 96
Chrysler Dodge each filed separate but identical bills of
complaint. The three suits were consolidated for trial.
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S.E.2d 744 (1957). Citing Newport News, the chancellor
concluded that the term "physically located," as used in Code
§ 58.1-3511(A), refers to property that has acquired a degree of
permanency within the taxing jurisdiction. Quoting the Hogan
decision, the chancellor stated that property "physically
located" in a jurisdiction, within the meaning of Code § 58.1-
3511(A), is property that is "being used in such a way as to be
fairly regarded as part of the property of the [c]ounty." 198
Va. at 735, 96 S.E.2d at 746. The chancellor concluded that
Shelor's pleadings established only a temporary removal of the
vehicles and, thus, failed to establish that the vehicles were
"physically located" outside the County, as that term is used in
Code § 58.1-3511(A). 2
On appeal, Shelor argues that the plain language of Code
§ 58.1-3511(A) allows the County to tax only merchants' capital
that is "physically located [in the County] on the tax day,"
2
In addition to addressing the merits of Shelor's bills of
complaint in her demurrers, the Commissioner also asserted that
the chancellor should decline to exercise his jurisdiction
because declaratory relief "is not a proper vehicle to determine
the validity of tax assessments.” In his letter opinion, the
chancellor preliminarily stated that he was sustaining the
demurrers and declining to exercise jurisdiction for this other
reason. However, since the chancellor ultimately did rule on
the merits of Shelor’s bills of complaint, the chancellor in
fact exercised his declaratory judgment jurisdiction and, thus,
effectively reconsidered and overruled his preliminary ruling
that he was declining to exercise that jurisdiction. Therefore,
we do not further address the chancellor's preliminary ruling in
this case.
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January 1. Shelor asserts that the chancellor's interpretation
effectively deletes the phrase "on the tax day" from the first
sentence of the statute, which applies to all merchants'
capital.
Shelor also contends that the chancellor incorrectly relied
on this Court's decisions in Newport News and Hogan. First,
Shelor asserts that both cases are inapplicable because they
addressed the taxation situs of mobile personal property, not
automobiles held as merchants' capital. Second, Shelor notes
that the Hogan and Newport News cases were decided under
predecessor statutes to Code § 58.1-3511(A), which did not
contain the second sentence of the present Code § 58.11-3511(A)
that treats mobile personal property differently from merchants'
capital.
In response, the Commissioner argues that the chancellor
correctly relied on Newport News and Hogan in construing Code
§ 58.1-3511(A). The Commissioner asserts that although these
cases involved the taxation situs of personal property rather
than of merchants' capital, these decisions still control the
present issue because the phrase "physically located" in the
predecessor statutes to Code § 58.1-3511(A) applied to both
merchants' capital and personal property.
The Commissioner contends that the addition of the second
sentence in Code § 58.1-3511(A) governing the assessment of
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taxes on certain types of mobile personal property should not
affect the Court's construction of the term "physically located"
in the first sentence. The Commissioner asserts that the second
sentence was added only to address the difficulty of
ascertaining a tax situs for mobile personal property such as
automobiles and not to alter the meaning of the first sentence
of the statute. We are not persuaded by the Commissioner's
arguments.
Initially, we observe that the function of a demurrer is to
test whether a bill of complaint states a cause of action on
which relief can be granted. Grossmann v. Saunders, 237 Va.
113, 119, 376 S.E.2d 66, 69 (1989); Penick v. Dekker, 228 Va.
161, 166, 319 S.E.2d 760, 763 (1984). In the present case, the
chancellor decided the merits of the issue pleaded, effectively
treating the demurrer as if the Commissioner had made a motion
for summary judgment. However, since Shelor made no objection
to the Commissioner's use of a demurrer to test the merits of
the suit, or to the chancellor's action ruling on the merits of
the issue pleaded on demurrer, we review the chancellor's
holding as if he had entered summary judgment for the
Commissioner. See Johnson v. Campbell, 258 Va. 453, 456, 521
S.E.2d 764, 766 (1999); Carmel v. City of Hampton, 241 Va. 457,
458, 403 S.E.2d 335, 336 (1991).
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The statute at issue, Code § 58.1-3511(A), is part of a
comprehensive scheme that authorizes local governments to
assess, levy, and collect a tax on certain categories of
property, including merchants' capital. Fundamental principles
govern our consideration of this taxation statute. Taxes can be
imposed only in the manner prescribed by express statutory
authority. Hampton Nissan v. City of Hampton, 251 Va. 100, 104,
466 S.E.2d 95, 97 (1996); Commonwealth v. P. Lorillard Co., 129
Va. 74, 82, 105 S.E. 683, 685 (1921). Taxing statutes must be
construed strongly in the taxpayer's favor, and will not be
extended by implication beyond the clear import of the statutory
language. Hampton Nissan, 251 Va. at 104, 466 S.E.2d at 97;
City of Winchester v. American Woodmark, 250 Va. 451, 456, 464
S.E.2d 148, 152 (1995); Commonwealth v. Gen. Elec. Co., 236 Va.
54, 64, 372 S.E.2d 599, 605 (1988); P. Lorillard, 129 Va. at 81-
82, 105 S.E. at 685.
Under basic rules of statutory construction, we examine
Code § 58.1-3511(A) in its entirety, rather than by isolating
particular words or phrases. Cummings v. Fulghum, 261 Va. 73,
77, 540 S.E.2d 494, 496 (2001); Earley v. Landsidle, 257 Va.
365, 369, 514 S.E.2d 153, 155 (1999); Ragan v. Woodcroft Vill.
Apartments, 255 Va. 322, 325, 497 S.E.2d 740, 742 (1998). When
the language of a statute is plain and unambiguous, we are bound
by the plain meaning of that language. Cummings, 261 Va. at 77,
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540 S.E.2d at 496; Earley, 257 Va. at 370, 514 S.E.2d at 155;
Ragan, 255 Va. at 326, 497 S.E.2d at 742. We must determine the
intent of the General Assembly from the words contained in the
statute, unless a literal construction of the statute would
yield an absurd result. Cummings, 261 Va. at 77, 540 S.E.2d at
496; Earley, 257 Va. at 369, 514 S.E.2d at 155; Ragan, 255 Va.
at 325-26, 497 S.E.2d at 742.
The language of Code § 58.1-3511(A) is plain and
unambiguous, and provides a single directive for determining the
taxation situs of merchants' capital of any type. Under the
statutory language, this taxation situs "shall in all cases be
the county, district, town or city in which such property may be
physically located on the tax day." Code § 58.1-3511(A). This
language does not provide for a determination of where the
merchants' capital is "ordinarily" or "normally" kept, but
requires that the situs be determined by the physical location
of the merchants' capital on one particular day of each year.
The second sentence of Code § 58.1-3511(A), which applies
only to the taxation situs of certain types of mobile personal
property, provides a distinct contrast to the statutory
provisions that govern the taxation situs for merchants'
capital. The taxation situs for those types of mobile personal
property is where the vehicle is "normally garaged, docked or
parked. . . ." The Commissioner's argument effectively asks us
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to add qualifying language such as "normally" or "ordinarily" to
the first sentence of the statute. However, we are not
permitted to add language to a statute. When the legislature
has used words of a plain and definite meaning, courts cannot
accord those words a meaning that amounts to holding that the
legislature did not mean what it actually expressed. Jan Paul
Fruiterman, M.D. and Assocs. v. Waziri, 259 Va. 540, 544, 525
S.E.2d 552, 554 (2000); Haislip v. Southern Heritage Ins. Co.,
254 Va. 265, 268, 492 S.E.2d 135, 137 (1997); Davis v. Tazewell
Place Assocs., 254 Va. 257, 260-61, 492 S.E.2d 162, 164 (1997).
We also observe that when the General Assembly uses two
different terms in the same act, those terms are presumed to
mean two different things. Greenberg v. Commonwealth, 255 Va.
594, 601, 499 S.E.2d 266, 270 (1998); City of Hopewell v. County
of Prince George, 239 Va. 287, 294, 389 S.E.2d 685, 689 (1990);
Klarfeld v. Salsbury, 233 Va. 277, 284-85, 355 S.E.2d 319, 323
(1987). Applying this principle, we presume that the General
Assembly meant two different things in using the term
"physically located on the tax day" in the first sentence of
Code § 58.1-3511(A), while using the term "normally garaged,
parked or docked" in the second sentence of the statute. Thus,
the inclusion of merchants' capital in the first sentence of
Code § 58.1-3511(A) mandates the use of the situs test of
"physically located on the tax day," without any qualification
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or limitation regarding the length of time that the property has
been situated in a given locality.
We disagree with the Commissioner's argument that our
decisions in Hogan and Newport News require a different result.
Those decisions addressed the taxation situs for certain mobile
personal property, not the taxation situs for merchants'
capital. Moreover, those decisions were rendered under
predecessor statutes to Code § 58.1-3511(A), which did not
include the second sentence of the present statute. The second
sentence of the present statute sets forth a new and separate
test for determining the taxation situs for the types of mobile
personal property we considered in Hogan and Newport News. In
light of the addition of the second sentence, we conclude that
the General Assembly intended in the present statute to provide
a different test to determine the taxation situs for merchants'
capital than for the types of mobile personal property we
considered in Hogan and Newport News.
For these reasons, we will reverse the chancellor's decree
and enter final judgment for Shelor declaring that the taxation
situs for merchants' capital is the county, district, town, or
city in which such property may be physically located on the
"tax day," January 1. 3
3
Based on our holding, we do not consider Shelor's remaining
assignments of error.
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Reversed and final judgment.
JUSTICE KINSER, dissenting.
I believe that the judgment of the circuit court should be
affirmed but for reasons unrelated to the merits of the issue
addressed by the majority.
One of the grounds asserted by Nancy W. Miller,
Commissioner of the Revenue for Montgomery County, in support of
her demurrer to the bills of complaint was that the declaratory
judgment statute, Code § 8.01-184, is not the “appropriate
vehicle to determine the validity of tax assessments.” Instead,
Miller contended that the procedures established in Code
§§ 58.1-3980 through -3993 should be followed when an aggrieved
taxpayer seeks to correct an erroneous or invalid tax
assessment. In its letter opinion, the circuit court agreed and
sustained the demurrer on that ground. Despite that finding,
the court then addressed the merits of the question concerning
the tax situs of merchants’ capital under Code § 58.1-3511(A).
Code § 8.01-184 authorizes circuit courts to issue
declaratory judgments in cases of actual controversy. However,
we have said on more than one occasion that the authority “to
make a declaratory judgment is a discretionary one and must be
exercised with care and caution.” Liberty Mut. Ins. Co. v.
Bishop, 211 Va. 414, 421, 177 S.E.2d 519, 524 (1970); accord
USAA Cas. Ins. Co. v. Randolph, 255 Va. 342, 346, 497 S.E.2d
11
744, 746 (1998); Haughton v. Lankford, 189 Va. 183, 192, 52
S.E.2d 111, 114 (1949). Furthermore, the power to enter a
declaratory judgment should not be exercised “when some other
mode of proceeding is provided.” Randolph, 255 Va. at 346, 497
S.E.2d at 746; accord Bishop, 211 Va. at 421, 177 S.E.2d at 524.
In Haughton, this Court also cautioned against the exercise
of jurisdiction in declaratory judgment proceedings that involve
questions of tax liability. We did so because such questions
affect the orderly administration of the Commonwealth’s fiscal
affairs, which should not be unduly interfered with by the
courts. Haughton, 189 Va. at 198, 52 S.E.2d at 117. The same
caution should be exercised in this case because of Montgomery
County’s administration of its fiscal affairs.
As the circuit court noted in its letter opinion, the
taxpayers in this case can apply to the circuit court, pursuant
to Code § 58.1-3984, for correction of any erroneous assessment
of local taxes. Thus, another “mode of proceeding” is
available. Randolph, 255 Va. at 346, 497 S.E.2d at 746.
Additionally, entry of declaratory relief now, before Montgomery
County has assessed any tax on the merchants’ capital at issue,
could affect the administration of the County’s fiscal affairs.
For these reasons, I cannot say that the circuit court abused
its discretion in declining to exercise its jurisdiction under
Code § 8.01-184. See Reisen v. Aetna Life & Cas. Co., 225 Va.
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327, 334, 302 S.E.2d 529, 532 (1983)(abuse of discretion
standard used to review trial court’s decision regarding whether
to exercise power to issue declaratory judgments). Having
decided that it would not exercise its declaratory judgment
jurisdiction, the circuit court then erred by addressing the
merits of the bills of complaint. Once a court exercises its
discretion to decline jurisdiction under Code § 8.01-184,
nothing further remains before the court for adjudication.
Thus, I conclude that the remainder of the circuit court’s
letter opinion was merely advisory.
Accordingly, I would affirm the judgment of the circuit
court sustaining the demurrer on the basis that declaratory
relief is not the appropriate mechanism to determine the tax
situs of the merchants’ capital at issue, vacate the remaining
portions of its judgment, and dismiss the declaratory judgment
actions.
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