Troy Company, Inc. v. Craig Griffith, State Tax Commissioner of WV

STATE OF WEST VIRGINIA
SUPREME COURT OF APPEALS
Troy Company, Inc., FILED
Petitioner Below, Petitioner May 17, 2013
RORY L. PERRY II, CLERK
SUPREME COURT OF APPEALS
vs) No. 12-0521 (Kanawha County 11-AA-93) OF WEST VIRGINIA
Craig Griffith, in his official capacity as
State Tax Commissioner of West Virginia,
Respondent Below, Respondent
MEMORANDUM DECISION
Petitioner Troy Company, Inc., by counsel Steven B. Wiley, appeals the Circuit Court of
Kanawha County’s “Order Granting Tax Commissioner’s Motion to Dismiss for Failure to File
Appeal Bond” entered on March 21, 2012. Respondent Craig Griffith, State Tax Commissioner,
by counsel L. Wayne Williams, argues in support of the order.
This Court has considered the parties= briefs and the record on appeal. The facts and legal
arguments are adequately presented, and the decisional process would not be significantly aided
by oral argument. Upon consideration of the standard of review, the briefs, and the record
presented, the Court finds no substantial question of law and no prejudicial error. For these
reasons, a memorandum decision is appropriate under Rule 21 of the Rules of Appellate
Procedure.
In May of 2009, the State Tax Commissioner issued sixteen penalties to petitioner for
engaging in the business of motor fuel distribution in West Virginia without the license required
by West Virginia Code § 11-14C-10(a)(8). Pursuant to West Virginia Code § 11-14C-38(a), the
penalty for the first offense was $5,000 and the penalty for each of the fifteen subsequent
offenses was $10,000, for a total of $155,000. Petitioner denied that it needed a license and filed
an appeal with the Office of Tax Appeals (“OTA”). The OTA administrative law judge upheld
the penalties.
Petitioner then filed a petition for appeal in circuit court. When a decision of the OTA is
appealed, West Virginia Code § 11-10A-19(e) requires the petitioning party to post an appeal
bond of not less than the total amount of the tax plus additions to tax, penalties, and interest.
However, the statute also provides a procedure for applying to the Tax Commissioner and then to
the circuit court for a waiver of the appeal bond requirement. Specifically, West Virginia Code §
11-10A-19(e) provides as follows:
If the appeal is of an assessment, except a jeopardy assessment for which security
in the amount thereof was previously filed with the Tax Commissioner, then
within ninety days after the petition for appeal is filed, or sooner if ordered by the
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circuit court, the petitioner shall file with the clerk of the circuit court a cash bond
or a corporate surety bond approved by the clerk. The surety must be qualified to
do business in this State. These bonds shall be conditioned upon the petitioner
performing the orders of the court. The penalty of this bond shall be not less than
the total amount of tax or revenue plus additions to tax, penalties and interest for
which the taxpayer was found liable in the administrative decision of the Office of
Tax Appeals. Notwithstanding the foregoing and in lieu of the bond, the Tax
Commissioner, upon application of the petitioner, may upon a sufficient
showing by the taxpayer, certify to the clerk of the circuit court that the
assets of the taxpayer are adequate to secure performance of the orders of
the court: Provided, That if the Tax Commissioner refuses to certify that the
assets of the taxpayer or other indemnification are adequate to secure
performance of the orders of the court, then the taxpayer may apply to the
circuit court for the certification. No bond may be required of the Tax
Commissioner.
(Emphasis added.) In lieu of posting a cash or corporate surety appeal bond, petitioner requested
that the Respondent Tax Commissioner certify that petitioner had sufficient assets to secure
performance without posting bond or, in the alternative, to certify to the circuit clerk that the
bond should be set at only $5,000. Respondent refused because petitioner had failed to provide
any financial information in support of its application and because petitioner’s certificate to
transact business in West Virginia had previously been revoked.1 Respondent filed a motion to
dismiss the appeal for failure to post an appeal bond.
Petitioner moved the circuit court to waive the bond, reduce the amount of the bond to
$5,000, or reduce it to something much less than $155,000. After a hearing, the circuit court
refused to waive the bond and found that a $5,000 bond would be inadequate. However, the
circuit court granted petitioner thirty days to provide sufficient financial information for a review
as to whether the bond could be lowered.
Thereafter, petitioner submitted a one-page “Financial Statement” along with a
certification signed by petitioner’s general manager. The statement included a very general
overview of the corporation’s assets and liabilities, without specific information or supporting
documentation. The circuit court held a second hearing on the motion for bond reduction.
Although a transcript of the hearing is not included in the record on appeal, petitioner apparently
argued that it has an ongoing cash flow, while respondent argued that the one-page balance sheet
shows that only about $5,000 would be available to pay this civil penalty. In its order, the circuit
court “could not conclude” that petitioner had assets adequate to secure performance. The court
found that the circumstances did not warrant a reduction or waiver of the bond. Accordingly, the
circuit court granted respondent’s pending motion to dismiss the appeal for failure to post an
appeal bond.
Petitioner now appeals the dismissal order to this Court. “‘Appellate review of a circuit
court’s order granting a motion to dismiss an appeal . . . is de novo.’ Syl. Pt. 1, in part, Lipscomb
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Petitioner is a corporation based in Seattle, Washington.
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v. Tucker County Com’n, 197 W.Va. 84, 475 S.E.2d 84 (1996).” Syl. Pt. 2, Solution One Mortg.,
LLC v. Helton, 216 W.Va. 740, 613 S.E.2d 601 (2005). Furthermore, “‘[w]here the issue on an
appeal from the circuit court is clearly a question of law or involving an interpretation of a
statute, we apply a de novo standard of review.’ Syl. Pt. 1, Chrystal R.M. v. Charlie A.L., 194
W.Va. 138, 459 S.E.2d 415 (1995).” Syl. Pt. 1, Solution One Mortg., LLC. This appeal is limited
to the appeal bond issue. The propriety of the civil penalty and its amount are not before us.
First, petitioner argues that the circuit court erred by refusing to waive or reduce the
bond. We reject petitioner’s argument. We have recognized that the failure to post an appeal
bond as required by law is a jurisdictional bar to an appeal. See, Frantz v. Palmer, 211 W.Va.
188, 194, 564 S.E.2d 398, 404 (2001); Syl., Gaines v. Hawkins, 153 W.Va. 471, 170 S.E.2d 676(1969); Syl. Pt. 1, Hudgins v. Crowder & Freeman, Inc., 156 W.Va. 111, 191 S.E.2d 443 (1972).
To avoid posting this appeal bond in the full amount of the civil penalty, West Virginia Code §
11-10A-19(e) allowed petitioner to demonstrate that it possessed adequate assets to secure
performance. Petitioner failed to make that showing. Petitioner submitted only a one-page
financial statement that was very rudimentary, lacked any supporting documentation, and did not
indicate by whom it was prepared or whether it complied with generally-accepted accounting
principles. Even accepting this financial statement on its face, the statement did not show that
petitioner had sufficient assets to pay the civil penalty if petitioner did not prevail on appeal.
Moreover, the record on appeal does not indicate whether petitioner attempted to obtain a bond
from a corporate surety.
Second, petitioner argues that the appeal bond requirement of West Virginia Code § 11­
10A-19(e) does not even apply in this case. This statute begins with the language,“[i]f the appeal
is of an assessment[.]” Id. Petitioner argues that this case involves civil penalties for allegedly
distributing fuel without a license, not an assessment of unpaid taxes. We find no merit to
petitioner’s argument. These civil penalties were issued pursuant to West Virginia Code § 11­
14C-38, and subsection (b) of this statute expressly states that “[c]ivil penalties prescribed under
this section shall be assessed, collected and paid in the same manner as the motor fuel tax.” The
Legislature clearly intended for civil penalties to be treated in the same manner as unpaid taxes.
Third, petitioner argues that the imposition of any bond violates its rights to equal
protection, due process, and access to the courts. Petitioner contends that although the penalties
herein are labeled as “civil penalties,” they are more akin to criminal penalties that retroactively
punish a business for its conduct—as opposed to civil penalties that are intended to deter future
conduct. Petitioner asserts that bond requirements cannot be used to prevent a criminal defendant
from appealing. We find this argument to be unavailing. The Legislature expressly identified
these penalties as “civil penalties” in West Virginia Code § 11-14C-38. Moreover, the obvious
purpose of these penalties is to deter persons or entities from engaging in a motor fuel business
activity without a license.
Finally, petitioner argues that the appeal bond should be no higher than $5,000, the
penalty for a single violation. Petitioner argues that the Tax Department was aware that
petitioner had a contract to distribute fuel to a customer in West Virginia, and was aware that a
third-party was making the deliveries on petitioner’s behalf, thus respondent should have taken
action after the first alleged violation. Upon our review of the appellate record, we find
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insufficient evidence to support petitioner’s allegation that the Department knew, but essentially
ignored, petitioner’s conduct as it was occurring. The only evidence in the appellate record on
this issue is a self-serving affidavit signed by petitioner’s general manager after the appeal was
filed in circuit court. Because the OTA record is not included in the appellate record, we cannot
determine whether this issue was addressed in the evidentiary hearing.
For the foregoing reasons, we affirm.
Affirmed.
ISSUED: May 17, 2013
CONCURRED IN BY:
Chief Justice Brent D. Benjamin
Justice Robin Jean Davis
Justice Margaret L. Workman
Justice Menis E. Ketchum
Justice Allen H. Loughry II
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