Mary Pat Martin v. Ryan S. Lafountain, Commissioner of Revenue for the City of Roanoke ( 2023 )

COURT OF APPEALS OF VIRGINIA
PUBLISHED
Present: Judges Beales, Ortiz and Causey
Argued at Richmond, Virginia
MARY PAT MARTIN
OPINION BY
v. Record No. 0971-22-3 JUDGE DORIS HENDERSON CAUSEY
DECEMBER 12, 2023
RYAN S. LAFOUNTAIN, COMMISSIONER
OF REVENUE FOR THE CITY OF ROANOKE
FROM THE CIRCUIT COURT OF THE CITY OF ROANOKE
David B. Carson, Judge
Arthur P. Strickland (Strickland, Diviney, Segura & Byrd, on briefs),
for appellant.
Timothy R. Spencer, City Attorney (Douglas P. Barber, Jr., Assistant
City Attorney, on brief), for appellee.
Mary Pat Martin appeals the circuit court’s decision to dismiss her claim against the
Commissioner of Revenue for the City of Roanoke (the “Commissioner”). Martin petitioned for
declaratory relief to contest the Commissioner’s “arbitrary refusal” to impose business taxes on the
owner and the lessee of a neighboring property. The circuit court denied the requested relief,
finding that Martin failed to establish local taxpayer standing. She appealed to this Court, and for
the following reasons, we affirm.
BACKGROUND1
In June 2020, CapGrow Holdings JV Sub V LLC (“CapGrow”), a venture capital firm
based in Chicago, purchased a residential property in the Oak Hill neighborhood of Roanoke,
Virginia. CapGrow subsequently leased the residence to Pinnacle Treatment Centers
(“Pinnacle”). Pinnacle opened and operated a for-profit halfway house in the residence.
Residents of the Oak Hill neighborhood unsuccessfully challenged the establishment of the
halfway house on the grounds that it operated in breach of a local zoning ordinance.2 Martin, the
taxpaying owner and resident of a nearby property, subsequently filed a petition in circuit court
against the Commissioner. She asked the circuit court for a declaratory judgment under Code
§ 8.01-184, stating that the business run by CapGrow and Pinnacle is subject to a yet unenforced
business tax that should be applied retroactively.
The Commissioner filed a demurrer in response to the petition, arguing that Martin failed
to allege facts sufficient to establish local taxpayer standing. The circuit court heard arguments
from both parties and in a “purely advisory capacity,” acknowledged the appearance of “an
ongoing enterprise for which gross receipts tax should be paid.” But the court sustained the
demurrer and dismissed Martin’s petition with prejudice. This appeal follows.
1
“We apply well-established principles to guide our review of a circuit court’s judgment
sustaining a demurrer.” Dunn, McCormack & MacPherson v. Connolly, 281 Va. 553, 557
(2011). “A demurrer tests the legal sufficiency of facts alleged in pleadings, not the strength of
proof. Accordingly, we accept as true all properly pled facts and all inferences fairly drawn from
those facts. Because the decision whether to grant a demurrer involves issues of law, we review
the circuit court’s judgment de novo.” Id. (quoting Abi–Najm v. Concord Condominium, LLC,
280 Va. 350, 356-57 (2010)).
2
Martin was not a party to that action, which was dismissed on appeal based on the
petitioners’ failure to join the Roanoke City Council, a necessary party, as a defendant. See
Marsh v. Roanoke City, 301 Va. 152 (2022).
-2-
ANALYSIS
A. Standard of Review
“A trial court’s decision sustaining a demurrer presents a question of law which we
review de novo.” Harris v. Kreutzer, 271 Va. 188, 196 (2006). “A demurrer admits the truth of
all facts alleged in a motion for judgment but does not admit the correctness of the pleader’s
conclusions of law.” Chesapeake Bay Found., Inc. v. Commonwealth ex rel. Virginia State
Water Control Bd., 46 Va. App. 104, 110 (2005). “A demurrer tests the legal sufficiency of facts
alleged in pleadings, not the strength of proof.” Glazebrook v. Bd. of Supervisors of
Spotsylvania Cnty., 266 Va. 550, 554 (2003). “To survive a challenge by demurrer, a pleading
must be made with ‘sufficient definiteness to enable the court to find the existence of a legal
basis for its judgment.’” Eagle Harbor, L.L.C. v. Isle of Wight Cnty., 271 Va. 603, 611 (2006)
(quoting Moore v. Jefferson Hospital, Inc., 208 Va. 438, 440 (1967)). Here, the circuit court
sustained the demurrer. Accordingly, in reviewing the circuit court’s conclusion on standing,
“[w]e accept as true all facts properly pleaded in the [petition for appeal] and all reasonable and
fair inferences that may be drawn from those facts.” Glazebrook, 266 Va. at 554.
B. Standing
The pivotal issue before this Court is whether Martin has standing as a local taxpayer to
challenge the Commissioner’s decision not to impose certain taxes against CapGrow and
Pinnacle. Martin contends that she has standing to challenge the Commissioner’s lack of
enforcement of taxes against Pinnacle and CapGrow pursuant to Roanoke City Code § 19.1-3(7)
and Virginia Code § 58.1-3703(7) because she is a local taxpayer. The Commissioner argues she
does not. We agree with the Commissioner.
The Declaratory Judgment Act, Code §§ 8.01-184 to -184.1, authorizes circuit courts to
issue “binding adjudications of right” when presented with “cases of actual controversy.” To
-3-
demonstrate an “actual controversy,” the plaintiff must have standing, which in the context of the
Declaratory Judgment Act, requires that the plaintiff establish “a ‘justiciable interest’ in the
subject matter of the proceeding, either in its own right or in a representative capacity.” W.S.
Carnes, Inc. v. Bd. of Supervisors of Chesterfield Cnty., 252 Va. 377, 383 (1996). This entails a
showing that the “[plaintiff’s] rights will be affected by the outcome of the case.” Deerfield v.
City of Hampton, 283 Va. 759, 764 (2012) (alteration in original). In other words, there must be
an “‘antagonistic assertion and denial of right’—whether that right be derived from statutes,
common law, or constitutional law.” Lafferty v. Sch. Bd. of Fairfax Cnty., 293 Va. 354, 362
(2017).
Ordinarily, payment of taxes does not confer a general right to challenge any government
action alleged to be unlawful. Id. It is well established, however, that “local taxpayers possess
the common law right ‘to challenge the legality of expenditures by local governments.’” Id. at
363 (quoting Goldman v. Landsidle, 262 Va. 364, 372 (2001)). This is so because of “‘the
peculiar relationship of the taxpayer to the local government that makes the taxpayer’s interest in
the application of municipal revenues direct and immediate,’ giving local taxpayers a personal
stake in the outcome of the controversy.” Id. (quoting Goldman, 262 Va. at 372). Local
taxpayer standing, however, “does not open the door to challenge any local government action,”
id. at 364, and a plaintiff’s complaint “must do more than identify a policy that the plaintiff
disagrees with,” McClary v. Jenkins, 299 Va. 216, 223 (2020) (citing Lafferty, 293 Va. at
364-65). A challenge to government expenditures, moreover, cannot rely on wholly speculative
inferences about actual costs or expenditures of a challenged measure or on merely nominal costs
of implementation that do not implicate the special relationship between local taxpayers and
local revenue expenditures. Lafferty, 293 Va. at 364-65).
-4-
Here, Martin does not challenge the legality of an expenditure by a local government, but
simply the failure to impose a tax by a local government on a third party. A decision to refrain
from taxing an entity is not an expenditure. Martin has cited no authority establishing a
taxpayer’s right to challenge the non-imposition or non-collection of a tax, and we decline to
recognize such a right today. In addition, even if we were to treat such inaction as the potential
equivalent of an expenditure, Martin’s complaint also lacks express allegations of costs or
expenditures connected to the Commissioner’s determination about the property at issue. She
alleges that she, “along with all city taxpayers, is directly affected pecuniarily by the
Commissioner of Revenue’s failure to collect business taxes and transient taxes from CapGrow
and Pinnacle,” reasoning that “if substantial business and transient occupancy taxes are not
collected, then there is less money for the City to spend and either expenditures will have to
decrease or taxes increase to meet the City’s expenses.” Without more, the effects she imagines
are “wholly speculative.” “[V]ague, speculative, and conclusory allegations of a connection
between the expenditure of local funds and the policy or action the taxpayer seeks to prohibit do
not meet the requirements to establish local taxpayer standing.” See McClary, 299 Va. at 224.
Martin has not alleged sufficiently definite facts that provide a justiciable interest to
survive demurrer. She has not alleged a specific statutory right to relief, nor has she alleged an
injury that is specific to her. Additionally, the allegations in the complaint are mere policy
disagreements with the Commissioner’s decision regarding whether the taxes apply in Martin’s
bare position as a taxpayer, lacking any connection to local government expenditure. Thus, we
hold that she may not claim local taxpayer standing.
-5-
CONCLUSION
For these reasons, we hold that the circuit court did not err in sustaining the
Commissioner’s demurrer and dismissing Martin’s claim with prejudice.
Affirmed.
-6-