Opinion
Civil Action No. 42736
12-11-2008
STEVE GIORDANO, JR. et. al. Complainants v. THE TOWN OF LEESBURG, VIRGINIA Respondent
MEMORANDUM OPINION
This is an action for declaratory and injunctive relief challenging the water and sewer rates charged by the Town of Leesburg to out-of-town customers, and that applied a 100% surcharge to out-of-town customers effective January 1, 2006. Complainants, out-of-town customers, complain that the rates are unfair, unreasonable, unlawful, and lacking in uniformity. In addition to declaratory and injunctive relief, the complainants seek a refund for excessive rates charged and paid. A trial has been set for a hearing on the merits of the complaint to commence later this month.
Currently before the Court is the motion of the Town for partial summary judgment as to the claim for a monetary judgment in satisfaction of a refund for excessive rates charged and paid. Both the complainants and the respondent have briefed the issue, as well as presented oral argument. Upon conclusion of argument on the motion, the Court took the matter under advisement and informed the parties that it would decide the matter in writing.
In support of their motion for partial summary judgment, the Town relies upon the voluntary payment doctrine in arguing that the claim for a refund should be dismissed.
The complainants seek to have the Court determine that the water and sewer rates charged by the Town violate state law in that they are unfair, unreasonable, impracticable, and non-uniform. Va. Code Ann. §§15.2-2119, 15.2-2143. As previously noted, in their prayer for relief, they seek, among other things, a refund or monetary damages for those payments found to be excessive. While no statute provides for such relief, they seek recovery based on the common law.
While no cases in Virginia directly address the issue of whether, absent action by the legislature, petitioners may recover a refund under the circumstances claimed, the Court agrees with the Town, that guidance may be found in the principles established in cases where a tax refund is sought for taxes later determined to be illegally assessed and collected. That is, if the payments are voluntarily made, then the person paying the tax may not recover.
In ruling on the motion for partial summary judgment, the Court is mindful of its obligation not to short-circuit the litigation process. Summary judgment may only be entered as to the issue of petitioners' entitlement to a refund if there are no material facts genuinely in dispute upon the issue. Va. Sup. Ct. R. 3:19.
The Town's argument is based upon certain requests for admissions. It notes that the answers suggest that the complainants are current in their payment of the challenged water and sewer charges, but that such payments were neither paid under protest or under duress. To the contrary, complainants suggest that the payments were coerced under protest and that they are entitled to an evidentiary hearing on the matter.
The instant action was filed on October 2, 2006. It has been agreed upon that a two-year statute of limitations applies in this case.
Petitioners have admitted having paid all charges for water and sewer, although challenging the excessive amounts of such fees. While they admit not having noted their objection in writing to the fees when paid, the petitioners contend such payments were coerced in that they had no other potable water source or sewer service available to them. It is uncontroverted that the claim for damages mirrors that for a refund.
Central to the instant motion is a consideration of the voluntary payment doctrine to the instant complaint. Complainants concede that they are seeking a common law right to recover for overpayments, as the legislature has afforded no statutory right to recovery a refund for water and sewer charges that are judicially determined to be illegal. The application of the voluntary payment doctrine would interpose a bar to such recovery at common law.
Of the voluntary payment doctrine, one commentator has observed,
[t]he voluntary payment doctrine, as applied to taxation, generally provides that a voluntary payment of a tax, even an illegal tax, is not recoverable, in the absence of statutory authority providing for recovery. The policy, based on the sovereign immunity of the taxing authority, is to avoid the financial uncertainty that would be caused by taxpayer demands for refunds following the discovery that the taxing authority collected and spent monies under the illegal tax. Under the doctrine, tax payments are presumed to have been made voluntarily, therefore it is incumbent upon the taxpayer to establish either that the doctrine should not apply, or that his or her payment was made involuntarily.The doctrine has been applied to fees related to the provision of water and sewer. Id., at § 33.
David J. Marchitelli, Annotation, Voluntary Payment Doctrine as Bar to Recovery of Payment of Generally Unlawful Tax, 1 A.L.R.6th 229 (2008).
The voluntary payment doctrine remains a viable defense to damage claims arising in the Commonwealth from the payment of taxes and fees later determined to be illegal. Phoebus v. Manhattan Club, 105 Va. 144 (1906); Charlottesville v. Marks' Shows, 179 Va. 321 (1941); Crestwood Constr. v. Fairfax County, 212 Va. 6 (1971).
All such payments are presumed to be voluntary "until the contrary is made to appear". Phoebus, at 149. Either the payment must be made under protest or otherwise have paid as a result of mistake, duress, coercion, or compulsion. See, Marchitelli, at § 4. The circumstances under which payment was made are relevant to whether a refund may be recovered upon judicial review. Thus, the Supreme Court of Virginia has observed,
[w]here a party pays an illegal demand with full knowledge of the facts which render such demand illegal, without an immediate and urgent necessity therefore, or unless to release his person or property from detention, or to prevent an immediate seizure of his person or his property, such payment must be deemed voluntary, and cannot be recovered back. And the fact that the party at the time of making the payment, files a written protest, does not make the payment involuntary.Whether a payment was coerced is dependent upon the totality of the circumstances under which each of the individual payments was made.
Commonwealth v. Conner, 162 Va. 406, 411 (1934) (authorities omitted).
Petitioners challenge the fairness and reasonableness of the rates charged by the Town for water and sewer service, not the right of the Town to make such charges in the first instance. Thus, it is a portion of the fees paid that would form the basis of a refund. Should the Court find that the fees were unfair, unreasonable, unlawful, impracticable, and non-uniform, then the petitioners would need to demonstrate that the excessive amounts paid, and for which they seek a refund, were paid in a way so as to avoid the voluntary payment doctrine.
An analysis of the claimed refunds would include, among other things: the discrete nature of each claim, notice, sanctions for no-payment, forms of protest, and nature of other coercive influences exercised by the Town resulting in more than mere economic inconvenience. In this connection, the Court agrees with the Town that merely voicing concerns in private or in a public forum does not support a claim for payment under protest. Something far more is required. While the discovery responses raise significant issues respecting the viability of petitioners' claims for a refund, the Court cannot conclude on the extant record that the damage claim is barred as a matter of law.
Counsel for both the petitioners and the Town have argued the applicability of the case of Prince George Sewerage v. Bexley Ltd. Partnership, 247 Va. 372 (1994). While the case involves a challenge to the amount charged for water and sewer services to customers, the Court does not find it particularly controlling in the case sub judice. It is to be noted that the party furnishing the services in that case was a non-public service corporation and that the fee calculations were determined by a complicated contractual formula. No such contract exists in this case.
Accordingly, the motion for partial summary judgment is denied with leave for the Town to renew that motion at a later time, should they be so advised. Counsel for the petitioners may draw an order consistent with this opinion, to which counsel for the Town may note their exception.
Entered this 11th day of December, 2008
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Thomas D. Horne, Judge