# Petition — Antilles Industries, Inc. v. Government of Virgin Islands

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition
- **Published:** January 1, 1976
- **Citation:** 429 U.S. 824

## Text

— —_

Supreme Court, U. &
FILED

MICHAEL RODAK, JR., CLERK |
IN THE FO Se Ce Te Re

Supreme Court of the United States

Octosper TERM, 1975

No. 75-1675

ANTILLES INpDUsTRIEs, INC.
Petitioner,
v.

GOVERNMENT OF THE ViRGIN IsLANDS; Metvin H.
Evans, Governor of the Virgin Islands ;‘STanLEyY
FarreLLy, Chairman of the Virgin Islands Indus-
trial Incentive Board; and Revsen B. WHEATLEY,
Commissioner of Finance,

Respondents.

PETITION FOR A WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

Rosert H. Ruskin, Esquire
THoMas ALKON, EsQuiRE
GEOFFREY W. BARNARD, EsQuire
JAMES W, DizHM, Esquire
IsHERWOOD, COLIANNI, ALKON
AND BARNARD
46 King Street
Christiansted, St. Croix

Attorneys for Petitioner

Pases or Braonw S. Apams Paurrina, inc., Wasutroron, D. C.

TABLE OF CONTENTS

Page
Opinions Below ........ceseeceeeeeeseeeeeesneeees 2
DetaMha oo ccccccccvcccstecessvcecevessccecess 2
Questions Presented ........cccscccccccceccscveces 2
Meatabes Tmvebved ..ccccccccvccccccccccevcsccccees 2
Statement of the Case ..........cceeeeeee paWencede 3
Reasons for Granting the Writ ............eeeeeeees 5

I. The Court of Appeals Ignored the Standard of
Federal Appellate Review for Decisions of the
Territorial Courts on Purely Local Territoria!
Matters Established in Waialua Agricultural
Co. v. Christian, 305 U.S. 91 (1988) .......... 5

Il. The Constitutional Principles Embodied in Sec-
tion 34 of the Judicia ct of 1789, the Policy
of Which Was, Extended to the Territories in
Waialua, Require That the Court of Appeals
Adhere to Territorial Substantive Law on Mat-

ters of Purely Local Concern ............005: )
Commies cc cccvccccccecescccsccceccceceweceseces 12
Appendices :
A. Opinion of the United States Court of Appeals
for the Third Circuit ...........ccceeeeeeeees la
B. Opinion of the District Court, Virgin Island
District GE GOMER 6 cs cbcvcesetess . ewesdes : 10a
C. Judgment of the United States Court of Appeals
ee Ge Ts COED 0 c'c dave caessacnnccehsuce 25a
D. Denial of Petition for yay 4 the United
States Court of Appeals for the Third Circuit .. 26a
EK. Industrial Incentive Act of 1957 (No. 224) ..... 27a
F. Restatement of Contracts, Ch. 7, §§ 150-151 .... 39a

G. Opinion of the Attorney General No. 1960-17 .. 40a

AUTHORITIES CITED

Cases: Page
Buscaglia, Treas. v, Tax Court, 66 P.R.R. 670 (1946).. 8
Clen v. Jorgenson, 265 F’. 120 (3d Cir. 1920) ........ 5, 6
Erie R.R. Co. v. Tompkins, 304 U.S. 64 (1938) ....7, 10,11
Hanna v. Plumer, 380 U.S. 460 (1965) ........00.0005
Mookini v. United States, 303 U.S. 201 ere 6
O'Donoghue v. United States, 289 U.S. 516 (1933) ... 7
People of the Virgin Islands v. Price, 181 Fed. 2d 394,

on a REE te ee RE ee ene 5
Picard v. East Tennessee, Virginia & Georgia Railroad
es SO I n'a is a sc ccannccaccecécc 11

ne I ee ie 4,11
Sancho v. Texas Co., 308 U.S. 463 ( Se 6.00000 decede 7
Swift v. Tyson, 16 Pet. 1 (1842) ............000005.. 10
Thompson v. Consolidated Gas Utilities Corp., 300 U.S.

|} EAPO Ie Geet riots 6
United States v. Malmin, 272 F. 785 (3d Cir.1921)... 5
Waialua Agricultural Co. vy. Christian, 305 U.S. 91

DEE etheetiud Ceeehdbcesceedhaee cal. 2, 5, 7, 9, 10, 12
Srarures:

EE 2a iach ac cues evckbatae ddundeidicas 2
Ea 2,7, 10, 11
Act March 3, 1917, Ch. 171, 39 Stat. 1182 ............ 5
Act June 22, 1936, Ch. 699, 49 Stat. 1807 ............ 6
Act June 25, 1948, Ch. 646, 62 Stat. SS aa 5
Act July 22, 1954, Ch. 558, 68 Stat. 497, 48 U.S.C. § 1541 6,9
Industrial Incentive Act of 1957 (Act No, 224) ....... 3,4
1 Virgin Islands Code § 4 .............0ccccc0c0-.e, 4,10
Restatement of Contracts, §§ 151, 160 (1932) as incor-
porated in 1 V.L.C. § 4, supra .................. 4

Orner Aurnonriry:

Opinion of Attorney General of the Virgin Islands, No.
1960-17 (April 28, 1960), 4 V.I. Op. Atty. Gen. 29 8

IN THE

Supreme Court of the United States

OctToBEeR TERM, 1975

No.

ANTILLES INpusTRIES, INC,
Petitioner,
v.

GOVERNMENT OF THE VirGIN ISLANDS; Metvin H.
Evans, Governor of the — Islands; STANLEY
FARRELLY, Chairman of the Virgin Islands Indus-
trial Incentive Board; and Revsen B. WHEATLEY,

: issioner of Finance,
Commissione Beidiedoate

PETITION FOR A WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

Antilles Industries, Inc., the petitioner, prays that
a Writ of Certiorari issue to review the judgment of
the United States Court of Appeals For The Third
Cireuit entered herein January 27, 1976.

OPINIONS BELOW

The Opinion of the Court of Appeals (App. A, pp.
la-9a) is unreported. The Opinion of the District Court
of the Virgin Islands (App. B, pp. 10a-24a) is reported
in 388 F. Supp. 315; 11 VI .... (1975).

JURISDICTION

The judgment of the Court of Appeals was entered
January 27, 1976 (App. C, p. 25a). <A timely Petition
for Rehearing was denied by order entered February
19, 1976 (App. D, p. 26a). The jurisdiction of this
Court is invoked pursuant to 28 U.S.C. § 1254(1).

QUESTIONS PRESENTED

1, Whether the Court of Appeals in reviewing a
decision of the territorial District Court of the Virgin
Islands on a matter of local concern may substitute
its judgment for that of the territorial court, thereby
ignoring the standard of Federal Appellate Review
established for decisions of territorial ecvurts in
Waialua Agricultural Co. vy. Christian, 305 U.S. 91
(1938).

2. Whether is is constitutionally pe-missable for the
Court of Appeals in reviewing a decision of the terri-
torial District Court of the Virgin Islands on a matter
of purely local concern . disregard territorial law and
impose a rule of law in« ‘ict therewith.

STATUTES !NVOLVED

28 U.S.C. § 1652 provides:

The laws of the several states, except where the
Constitution or treaties of the United States or
Acts of Congress otherwise require or provide,

3

shall be regarded as rules of decision in civil
actions in the courts of the United States, in cases
ae they apply. June 25, 1948 c. 676, 62 Stat.

Industrial Incentive Act of 1957 (Act No. 224) is
printed in its entirety in Appendix E, pp. 27a-38a.

1 Virgin Islands Code § 4 provides:

The rules of the common law, as expressed in the
restatements of the law aproved by the American
Law Institute, and to the extent not so expressed,
as generally understood and applied in the United
States, shall be the rules of decision in the courts
of the Virgin Islands in cases to which they apply,
in the absence of local laws to the contrary.

Restatement of Contracts, as incorporated in 1 Y.L.C.
§ 4, the relevant sections of which are printed in Ap-
pendix F, p. 39a.

STATEMENT OF THE CASE .

In an effort to encourage new business activity in
the territory, the Virgin Islands legislature enacted
the Industrial Incentive Act of 1957, Act 224, which
offered tax exemptions and subsidies to qualified enter-
prises .

Induced by the exemptions and subsidies offered in
Act 224, a group of investors established Delaware
Watch Co. of the V.I. to manufacture and assemble
watches, and having met the qualifications enumerated
in the Act, was granted a ‘‘Certificate for Tax or Fee
Exemptions and Subsidies’’ for a limited period of
ten years. Subsequently, Delaware assigned, for a
valuable consideration, all its assets including its Certi-
ficate of Tax Exemption to Antilles Industries, Inc.,
another Vigin Islands watch company.

4

For reasons unrelated to this petition, which reasons
were characterized by the territorial District Court as
arbitrary and without authority and which were not
considered by the Court of Appeals, the Virgin Islands
Tax Exemption Board refused to recognize the assign-
ment.

Following the denial of the transfer, Antilles filed an
action charging that the Government had breached its
contractual obligations under Act 224.

The territorial District Court, after recognizing that
certificates granted pursuant to Act 224 were contracts,
applied the substantive law of assignments as set forth
in the Restatement of Contracts which is the appli-
cable local territorial law pursuant to Title 1 Virgin
Islands Code §4. (App. F, p. 39a.)

The Restatement of Contracts (App. F, p. 39a)
provides that contractual rights are assignable, absent
a prohibition, unless it would vary materially the per-
formance under the contract. The court noted the
absence of any prohibition, and found as a fact that the
assignment would not vary materially performance
under the contract. Accordingly, the court held the
assignment to be effective.

The Court of Appeals in reviewing the territorial
District Court decision refused to apply the territorial
law, but chose a different rule of law in conflict with
that law; i.e., that such contracts are not assignable
in the absence of express permission. The Court of
Appeals borrowed this conflicting rule of law from this
Court’s decisions in Picard v. East Tennessee, Virginia
& Georgia Railroad Co., 130 U.S. 637 (1889), and
Rochester Railway Co. v. City of Rochester, 205 U.S.

5

236 (1907). Finding no express permission, the Court
of Appeals found the assignment invalid and reversed
the terr.torial court’s decision.

REASONS FOR GRANTING THE WRIT

THE COURT OF APPEALS IGNORED THE STANDARD OF
" FEDERAL APPELLATE REVIEW FOR DECISIONS OF THE
TERRITORIAL COURTS ON PURELY LOCAL TERRITORIAL
MATTERS ESTABLISHED IN WAIALUA AGRICULTURAL

CO. v. CHRISTIAN, 305 US 91 (1938).

The United States purchased the Danish West In-
dies in 1917. Pursuant to its plenary powers under
Article 4, Section 3, Clause 2 of the Constitution, Con-
gress enacted the Act of Congress of March 3, 1917,
Ch. 171, § 2, 39 Stat. 1132 (48 U.S.C. 1946 ed. § 1392),
which provided for needful Rules and Regulations re-
specting the Territory. The Act provided inter alia
for the continuance of the existing judicial system and
local laws in force and effect. This judicial system
consisted of three inferior courts, or ‘Lower Courts
and an “‘Ordinary”’ or “‘ District Court’’, which was a
local court established under Danish rule with juris-
diction over controversies of every kind. Appeals were
taken to the Danish Courts in Copenhagen.’

, ila | A

In the Act of 1917, the Third Circuit Court of p-
peals in Philadelphia replaced the Danish Court in
Copenhagen as the appellate court.’ It has been held

1Clen v. Jorgenson, 265 F. 120 (3 Cir. 1920); U.S. v. Malmin,
272 F. 785 (3d Cir. 1921).
i i the Third Circuit
*This appellate power of review granted to
Court of out was subject to a series of amendments poo
ing in the Act of June 25, 1948, ¢. 646, § 1, 62 Stat. 929, es ere-
in the Court of Appeals was granted jurisdiction ae aa
decisions of the District Court of the Virgin Islands. eople o
the Virgin Islands v. Price, 181 Fed. 2d 394, 397 (8rd Cir. 1950).

6

that in passing this Act, ‘“Congress intend[ed] ... to
preserve the local laws of the islands and to provide for
their enforcement through the local judicial tribunals
as then established’’.* Congress in 1936 pursuant to
fere!e 4, Section 3, Clause 2 of the Constitution, en-
acted the Organic Act of 1936, Act of June 22, 1936,
Ch. 699, 49 Stat. 1807, which inter alia granted the
territorial court known as the District Court of the
Virgin Islands appellate review over the judgments
and rulings of the inferior courts in the territory. In
1954 * Congress cloaked the District Court of the Vir-
gin Islands with the authority of a District Court of
the United States in federal matters* while retaining
the court’s original jurisdiction over territorial mat-
ters. However, this authority and nomenclature did
not change this Court from a territorial court to an
Article 3 District Court of the United States. Rey-
nolds v. United States, 98 U.S. 145, 154 (1878) ;
Mookini v. United States, 303 U.S. 201 (1938). It
remains a territorial legislative court created by Con-

* Clen v. Jorgenson, pp. 122-123, supra.
* Act of July 22, 1954, ch. 558, 68 Stat. 497, 48 USC 1541.

SIf the District Court of the Virgin Islands were to be con-
sidered strictly a Federal District Court for the purposes of the
case at bar, then the Court of Appeals for the Third Circuit was
nonetheless in error for failing to accord the appropriate defer-
ence and great weight to the decision of a lower federal court in
interpreting a statute dealing with a purely local matter.

When not instructed by some decision of a state court, we
are disposed, in exercising appellate jurisdiction, to accept
the construction given by the lower federal court to a statute
of the State, particularly when that court is composed as
in this instance, wholly of citizens of the State, familiar with
the history of the statute, the local conditions to which it
applies, and the character of the State’s laws. Thompson v.
Consolidated Gas Utilities Corp., 300 U.S. 55 (1937) pp. 74-75.

7

gress pursuant to Article 4, Section 3, Cl. 2 of the Con-
stitution. O’Donoghue v. United States, 289 U.S. 516

(1933).

Congress enacted the Judiciary Act of September 24,
1789, C. 20, 28 U.S.C. § 725, now 28 U.S.C. § 1652,
known as the Rules of Decision Act, requiring that state
law be followed in the federal courts in order to obtain
uniformity of decisions between the state courts and the
federal courts sitting in the states.

Erie v. Tompkins, 304 U.S. 64 (1938), furthered this
goal by declaring that state law, within the context of
the Rules of Decision Act, encompassed not only legis-
lative enactments, but also included decisional law of
state courts. This underlying policy of the Judiciary
Act as expressed in Erie v. Tompkins, supra, applies
with equal force to territorial law and decisions by ter-
ritorial courts, Waialua Agricultural Co. v. Christian,
305 U.S. 91 (1938), where the Court stated at p. 109

While the 34th section of the Judiciary Act is not
applicable to territories, the arguments of policy in
favor of having the state courts declare the law of
the state are applicable to the question of whether
or not territorial courts should declare the law of
the territories with the least possible interference.

In conformity with these considerations the Supreme
Court established in Waialua a narrow standard of re-
view for Courts of Appeals holding that the Courts of
Appeals were not to interfere with the decisions of the
territorial tribunals unless manifestly erroneous.

In Sancho v. Texas Co., 308 U.S. 463 (1940), this
Court repeated the admonition that careful and con-
sistent adherence to the legislative and judicial policy

8

of deference to the local laws and tribunals is founded
on sound policy. The Court stated at 471:

To reverse a judgment of a [loeal] tribunal on
such a local matter as the interpretation of an act
of the local Legislature it would not be sufficient
if we or the Circuit Court of Appeals merely dis-
agreed with that interpretation. Nor would it be
enough that the [local] tribunal chose what might
seem on appeal to be the less reasonable of two
possible interpretations. And such judgment of
reversal would not be sustained here even though
we felt that of several possible interpretations that
of the Circuit Court of Appeals was the most rea-
sonable one. For to justify reversal in such cases
the error must be clear or manifest; the inter pre-
tation must be inescapably wrong, the decision
must be patently erroneous. (Emphasis supplied. )

In holding the tax exemption certificate to be a con-
tract and to be validly transferable under the same
conditions as contracts generally, the territorial court
analyzed the substantive law and the legislative pur-
pose of the Act, and held that a determination uphold-
ing the validity of the transfer would better serve the
purpose of the Act, and would be consistent with the
prior opinion of the territorial Attorney General that
the Legislature did not intend to prohibit such assign-
ments.” This conclusion is also in accord with similar
decision of the territorial Supreme Court in neighbor-
ing Puerto Rico holding that similar certificates were
transferable under the Puerto Rico Act which was also
silent on the issue of assignment.’

4 V.I. Op. Atty. Gen. 29.
* Buscaglia, Treas. v. Tax Court, 66 P.R.R. 670 (1946).

The Court of Appeals ignored the territorial court’s
analysis and exercised its judgment to apply a rule
that transfers are prohibited absent permission.
Although the Court of Appeals may prefer this
rule * the conclusion of the territorial District Court
that the certificate was assignable was not manifestly
or patently erroneous, nor was it inescapably wrong.
Rather, it was not only a permissible interpretation of
the territorial law, it was absolutely correct and in sub-
stituting its judgment for that of the judgment of the
court vested with the authority to interpret territorial
law, the Court of Appeals for the Third Circuit ignored
the injunction of this Court in Waialua, supra, that
decisions of territorial courts in matters of territorial
concern should not be disturbed in the absence of mani-
fest error.

Il. THE CONSTITUTIONAL PRINCIPLES EMBODIED IN SECTION
34 OF THE JUDICIARY ACT OF 17°, THE POLICY OF WHICH
WAS EXTENDED TO THE TERRITORIES IN WAIALUA,
REQUIRE THAT THE COURT OF APPEALS ADHERE TO
TERRITORIAL SUBSTANTIVE LAW ON MATTERS OF
PURELY LOCAL CONCERN.

Congress, by Section 8 of the Revised Organic Act
of the Virgin Islands, approved July 22, 1954, 68 stat.
501; Title 48 U.S. Code § 1574, vested the legislative
power of the Virgin Islands in a local Legislature des-
ignated the ‘‘Legislature of the Virgin Islands.’”’ Sec-
tion 8 (e) authorized the Legislature to enact new laws
and amend, alter, modify or repeal any local law or

ordinance.

* The constitutionally impermissible nature of the effort by the
Court of Appeals to enforce its preference is discussed in Point
II, infra, together with the territorial rules of substantive law
applicable to the assignment.

10

On May 16, 1957, the Legislature of the Virgin
Islands enacted the Virgin Islands Code, which is the
official statement of the local laws and ordinances in
force in the Virgin Islands.

Title 1, § 4 of the Virgin Islands Code provides:

The rules of the common law, as expressed in the
restatements of the law approved by the American
Law Institute, and to the extent not so expressed,
as generally understood and applied in the United
States, shall be the rules of decision in the courts
of the Virgin Islands in cases to which they apply,
in the absence of loca! laws to the contrary.

As pointed out in Point I, supra, the 34th Section of
the Judiciary Act of September 24, 1789 ¢.20-28 U.S.C.
§ 725 now 28 U.S.C. § 1652, requires that federal courts,
when passing on state or territorial matters of a purely
local concern, must apply both the statutory and de-
cisional law of the state or territory.” In Erie, Jus-
tice Brandeis pointed out the constitutional basis for
this imperative, noting that no clause in the Constitu-
tion purports to confer a power upon the federal courts
to declare substantive rules of common law applicable
to a state.

The issue before the territorial court was the assign-
ability of a contract created by the territorial Legisla-
ture granting a tax exemption for a limited period.
The court pursuant to § 4 of Title 1 of the V.I. Code,
relied on the relevant provisions of the Restatement
of Contracts, together with the general law of assign-
ments, which provides that contractual rights are
assignable absent a prohibition in the contract unless
the assignment would vary materially the performance

* Swift v. Tyson, 16 Pet. 1 (1842); Erie R.R. Co. v. Tompkins,
304 U.S. 64 (1938); and Waialua Agricultural Co. vy. Christian,
305 U.S. 91 (1938).

ll

of the parties." Applying these tests, the court found
that the Legislature did not intend to prohibit transfers
and that the performance of Antilles would not vary
materially from that of Delaware.

The Court of Appeals in reversing the territorial
Court selected a rule in conflict with the territorial
law, i.e., that such contracts are not assignable in the
absence of express permission, and not only ignored
the territorial law but went so far as to hold that the
territorial court erred in applying local law.

The constitutional basis for the injunction discussed
in Hrie by Justice Brandeis compels that the rule of
law which the Court of Appeals seeks to impose on the
territorial Court must fall, no matter how persuasive,
reasonable, or ‘‘better’’ that rule may be. As Chief
Justice Warren explained in Hanna v. Plumer, 380
U.S. 460 (1965) at p. 471-472:

We are reminded by the Erie opinion that neither
Congress nor the federal courts can, under the
guise of formulating rules of decision for federal
courts, fashion rules which are not supported by
a grant of federal authority contained in Article
1 or some other section of. the Constitution; in
such areas state law must govern because there
can be no other law.

Accordingly, the Court of Appeals incorrectly and
impermissably borrowed language from this Court’s
decisions in Picard v. East Tennessee, Virginia &
Georgia Railroad Co., 130 U.S. 637 (1889) and Roches-
ter Railway Co. v. City of Rochester, 205 U.S. 236
(1907) to formulate a rule of law in conflict with the
territorial law, thus violating the constitutional
command of Section 34 of the Judiciary Act of 1789,

% App. F, p. 39a.

12

CONCLUSION

For the foregoing reasons Antilles Industries, Inc.
respectfully prays that a writ of certiorari issue to
review the judgment of the Court of Appeals below
upon plenary briefing and argument. Alternatively,
Antilles Industries, Ine. respectfully prays that this
Court summarily vacate the judgment below and rein-
state the judgment of the District Court of the Virgin
Islands pursuant to Waialua Agricultural Co. v. Chris-
tian, supra,

Respectfully submitted,

Rosert H, Ruskin, Esquire
THoMas ALKON, Esquire
GEorrrREY W. Barnarp, Esquire
JAMES W. Dieu, Esquire

IsHERWOOD, COLIANNI, ALKON
AND BARNARD
46 King Street
Christiansted, St. Croix

Attorneys for Petitioner

APPENDIX

la

APPENDIX A
UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT

No. 75-1176
No. 75-1458
AntiiLes Iypustrimes, Ino., Appellee
v.

GoveRNMENT OF THe Vrrotn Istanps; Mervin H. Evans,
Governor of the Virgin Islands; Srawuzy Farre.ry,
Chairman of the Virgin Islands Industrial Incentive
Board, and Reveew B. Wueariey, Commissioner of
Finance, Appellants

Appea From tue District Court or rae Virarn Isuanps
Drviston or Sarnt Crorx

(D.C. Civil No, 423-1970)
Argued December 1, 1975
Before: Avpisert, Weis and Gartn, Circuit Judges.

Verne A. Hodge, Esquire
Attorney General of the Virgin Islands

Donald M. Bouton, Esquire
Assistant Attorney General of the V.I.
P.O. Box 280
St. Thomas, Virgin Islands
Attorneys for Appellants

Robert H. Ruskin, Dsquire
Thomas Alkon, Esquire
Geoffrey W. Barnard, Esquire
Isherwood, Colianni,
Alkon & Barnard
46 King Street
Christiansted, St, Croix
Virgin Islands
Attorneys for Appellee

2a

Opinion of the Court
(Filed January 27, 1976)
Wears, Circuit Judge.

_The payment of taxes is one of the expected responsi-
bilities of citizenship. In order to preserve a resigned, if
not a cheerful, acceptance of that burden, policy dictates
that any waiver of the obligation by statute be not extended
beyond that expressly allowed, Accordingly, in this ap-
peal, we construe the terms of tax exemption legislation to
say no more than the wording requires, Since the enact-
ment did not speak to a right of assignment, we find none
existed and vacate the district court judgment which held
otherwise.

In an effort to encourage new business activity in the
territory, the Virgin Islands Legislature enacted the In-
dustrial Incentive Act of 1957, Act 224, which offered tax
exemptions and subsidiaries to qualified enterprises. The
Delaware Watch Company was granted such an exemption
on December 7, 1961, effective as of December 16, 1960 and
valid for a period of ten years thereafter. As a result,
the company was not required to pay excise or gross re-
ceipts taxes and it received non-taxable subsidies equal to
75% of the income taxes and 100% of the import duties
which it paid into the Treasury of the Virgin Islands.
Shortly afterward, Delaware encountered financial diffi-
culties. In June, 1962, it informed the Governor that it
was ceasing business, but hoped to resume operations at
some time in the future. Although the company continued
to file annual reports, it did not resume its manufacturing
activities.

Plaintiff Antilles Industries, Inc., a wholly-owned sub-
sidiary of General Time, Ine., began to manufacture
watches on St. Croix in 1961. On November 6, 1963 it
applied for a tax exemption but a decision on its request,
as well as on those of eleven other watchmaking com-

3a

panies,’ was deferred. Fearing that an influx of time-
pieces to the United States would imperil import policies
favorable to Island industry, the Governor applied a
‘*freeze’’ on further exemptions for watchmaking concerns.

Antilles then arranged to secure an assignment of
Delaware’s exemption. On March 26, 1965, pursuant to the
Act of 1961, 33 V.I.C. § 4106,? Antilles petitioned the Tax
Incentive Board for a transfer of Delaware’s certificate.
On April 6, 1965, Delaware executed a ‘‘general assign-
ment and bill of sale’’ which purported to sell all of its
‘*business and preperties (other than its cash)’’ to Antilles
for a consideration of $28,700.00. Nothing in the record
suggests whether Delaware had anything to transfer other

than its certificate.’

’ Before that time, a total of 5 exemptions, including Delaware’s,
had been issued.

*The Act of November 3, 1961, No. 798, became effective on
January 1, 1962. It repealed Act 224, but provided that no tax
exemptions granted under that statute would be affected. How-
ever, there was to be no enlargement or expansion of the pre-exist-
ing exemptions.

A continuing source of confusion throughout these proceedings
was the failure of both Antilles and the Government to recognize
that the Delaware exemption had been issued under the terms of
the 1957 legislation, Act 224. The provision codified at 33 V.L.C.
§ 4106, which allowed transfer of an exemption by the Tax In-
centive Board, was part of the 1961 Act and did not appear
in the 1957 enactment. Consequently, the provision for transfer
did not apply to the Delaware certificate. See Vitex Manufactur-
ing Co. v. Government of Virgin Islands, 351 F.2d 313, 316 n.4
(3d Cir. 1965).

* The balance sheet of Delaware as of December, 1962 showed
a merchandise inventory of $545.00. The only other assets listed
were $364.00 cash in bank, loans receivable of $14,800.00, and an
industry subsidy receivable of $1,878.24. A profit and loss state-
ment for the same year included as other income the sale of fixed
assets, $15,850.00. On the record in this case it is difficult to escape
the conclusion that in fact nothing other than the exemption cer-
tificate was sold to Antilles in 1965.

i oe

4a

On August 5, 1965, Antilles withdrew its request for
transfer of the Delaware certificate, but on September 27,
1968, resubmitted its petition.‘ On May 7, 1969, the Board
held a hearing to determine if the Delaware certificate
should be revoked. The record does not reveal whether
such an order was in fact issued. On July 22, 1970, the
Board wrote to the Governor stating that there was ‘‘no
outstanding or active business [of Delaware] on which to
predicate a transfer notwithstanding the eligibility of the
applicant [Antilles].’’ The Governor agreed with the
Board and denied Antilles’ application.

Plaintiff then filed suit in the district court. Follow-
ing the submission of an agreed statement of facts, the
district court decided that (1) the exemptions were assign-
able; (2) Antilles was the lawful assignee of Delaware’s
exemption as of April 6, 1965; and (3) it was entitled to a
refund of taxes paid thereafter. In a subsequent pro-
ceeding, the court entered a judgment fixing the amount of
the refunds at $2,232,286.38 plus interest and awarding
counsel fees.

The issue on appeal is simply whether an exemption
granted under the 1957 Act is assignable. The district
court, recognizing that the statute was silent on that point,

held that such exemptions were transferable. It reasoned

that since under the Act an exemption was ‘‘in the nature
of a contract,’’ traditional contract principles permitting

*In a letter requesting resubmission, Antilles stated that one
of the considerations for the withdrawal of its petition in August,
1965 was the decision of the district court. of the Virgin Islands in
Virgo Corporation v. Paiewonsky, 251 F. Supp. 279 (D. V.I. 1966).
Had the holding in that ease remained in effect, Antilles would
have been entitled to the exemption in its own right (under its
1963 request). The judgment in Virgo, however, was reversed by
this court in the following year, 384 F.2d 569 (3d Cir. 1967).

Since the opinion of the district court in the Virgo case was
dated March 14, 1966, it appears likely that the filing of the suit
rather than that decision, furnished the impetus for Antilles’ ac-
tion in August, 1965.

5a

assignment should govern. We disagree with that analysis
because it did not utilize the proper standards for inter-
preting tax exemption legislation.

‘In the interpretation of statutes, the function of the
court is easily stated. It is to construe the language so as
to give effect to the intent of [the legislature].’’ United
States v. American Trucking Ass’ns, 310 U.S. 534, 542
(1940) (footnote omitted). On several occasions, we have
stated the basic rule of construction which is to be applied
in claims of tax exemption. In King Christian Enter-
prises, Inc. v. Government of the Virgin Islands, 345 F.2d

633 (3d Cir. 1965), Judge Maris wrote:

“It is a well settled rule that statutory exemptions
from taxation, being a matter of grace, are to be strictly
and narrowly construed.’’ (citations omitted) 345

F.2d at 637.

In Tracey Leigh Development Corp. v. Government of the
Virgin Islands, 501 F.2d 439, 443 (3d Cir. 1974), Judge
Adams repeated that language with approval, and added:

‘*This rule, when compounded with the precept that
‘to supply [statutory] omissions transcends the ju-
dicial function,’ makes the present case—a case in-
volving a tax exemption—a particularly inappropriate
occasion for judicial tampering with the clear lan-
guage of a statute.’’ (footnote omitted).°

Viewed in the light of the correct rule of construction,
therefore, the absence of any reference to assignability

5 Our opinion in Vitex Manufacturing Co. v. Government of the
Virgin Islands, supra, is distinguishable. While there the lan-
guage in the exemption legislation was construed against the
drafter in accordance with the contractual rule, the statute con-
tained verbie,+ which is pertinent. Here, there is a total lack
of any wording in the statute on the crucial issue and, hence, no

language to construc.

6a

takes on particular significance in assertaining the intent
of the legislature. In the context of tax exemptions,
silence implies not permission, but denial of authoriza-
tion. We do not find in the Act a legislative intention to
include a right of transfer. Historically in the Virgin
Islands, such permission has been articulated. For ex-
ample, the predecessor legislation, Bill 293 (1954) of the

Municipal Council of St. Thomas and St. John, provided
at § 3(e):

**In the event of sale, transfer or assignment of any
tax exempt or subsidized business or industry here-
under, the exemption or subsidy granted shall not be
extended beyond the period originally authorized.”

By implication then, exemptions granted under that Act
could be assigned—at least in connection with the transfer
of the business to which it had been granted.

Act 798, 33 V.LC. § 4106, the 1961 statute which suc-
ceeded Act 224, contained a provision for limited trans-
ferability after approval by a governmental board.

Thus, both before and after Act 294 transferability was
expressed in statutory terms. The legislature has demon-
strated that, when it choose to permit transferability, it
knew how to do so. In these circumstances there is no
principle of logic commanding the conclusion that, by
absolute silence on the subject of transferability, the legis-
lature meant to include it. Indeed the contrary conclusion
1s compelling, to-wit, that the legislature did not wish to
provide transferability of Act 224 exemptions. See Vitex
v. Government of the Virgin islands, supra.

It may be argued that the Act of 1961, in allowing a
qualified right of transfer, was meant to narrow a much
wider privilege implied in the 1957 legislation. But it is
far more consistent to adopt the contrary view and to re-

7a

gard the 1961 provisions as a step toward liberalizing the
negative feature of the earlier enactment.

Antilles contends that, since the statute refers to an
exemption as being ‘‘in the nature of a contract’’ and gen-
erally contracts are assignable, therefore an exemption is
transferable. We do not accept the proposition that a tax
exemption is an ordinary contract, and, examined in con-
text, the statutory language is not to the contrary.

The Act was intended to entice new business to the
Islands with the promise of a favorable tax treatment. To
assure prospective entrepreneurs that there would be no
change in the rules of the game after the initial invest-
ments, the legislature provided that:

‘“*(e) In order that the encouragement tendered by
this Act in the form of subsidies for the promotion of
the business and industrial development of the Islands
may be an incentive, having a real and unmistakably
sure basis, the Government of the Virgin Islands
hereby declares that it considers all orders granting
subsidies and tax exemptions made available under
the provisions of this Act as being in the nature of a
contract or agreement between the Government of the
Virgin Islands and the persons or corporations re-
ceiving the benefit of the subsidies or tax exemptions,
and that it will not adopt any legislation which may
impair or limit such subsidies or tax exemptions
granted hereunder or which may defeat the purpose
of this Act.’’ Act 224.

The statute thus establishes an arrangement which would
not allow impairment of benefits once conferred to be
diminished by legislative after-thought—a desirable pro-
tection for a prospective investor. But it does not follow
that he is free to pass on to others what has been granted
to him.

OD Comer ———

Per ee mee «

ee Ce SA

8a

The personal nature of a tax exemption has been dis-
cussed by the Supreme Court in terms still appropriate
today although the opinions were handed down many years
ago. In Picard v. East Tennessee, Virginia & Georgia
Railroad Co., 130 U.S. 637, 641 (1889), the Court said:

‘Yielding to the doctrine that immunity from taxa-
tion may be granted, that point being already ad-
judged, it must be considered as a personal privilege
not extending beyond the immediate grantee, unless
otherwise so declared in express terms. The same
considerations which call for clear and unambiguous
language to justify the conclusion that immunity from
taxation has been granted in any instance must re-
quire similar distinctness of expression before the im-
munity will be extended to others than the original
grantee.’’

Rochester Railway Co. v. City of Rochester, 205 U.S. 236,
247 (1907), further explained :

‘‘This court has frequently had occasion to decide
whether an immunity from the exercise of governmen-
tal power which has been granted by contract to one,
has by legislative authority been vested in or trans-
ferred to another, and in the decisions certain general
principles, which control the determination of the case
at bar, have been established. Although the obliga-

tions of such a contract are protected by the Federal

Constitution from impairment by the State, the con-
tract itself is not property which, as such, can be trans-
ferred by the owner to another, because, being per-
sonal to him with whom it was made, it is incapable of
assignment. The person with whom the contract is
made by the State may continue to enjoy its benefits
unmolested as long as he chooses, but there his rights
end, and he cannot by any form of conveyance trans-

Rates |

9a

mit the contract or its benefits, to a successor.”’ (cita-
tion omitted)

Later, the Court recited this language with approval in
Morris Canal and Banking Co. v. Baird, 239 U.S. 126, 131
(1915). See also 173 A.L.R. § 118 (1948).

In substance then, the Supreme Court cases establish
that a tax exemption is personal to the entity to which it
was granted, and unless the legislation so provides, the
privilege may not be assigned to another.* That being so,
the district court erred in applying the usual principles
of contract law favoring assignability.

Because we have found no right of assignability under
Act 224, we need not address the question of irregularities
during the administrative proceedings concerning the
transfer. The 1961 Act did not affect the exemptions
granted under the 1957 legislation. Consequently, Antilles’
petition for transfer and the Government’s actions there-
after were nullities.

The judgment of the district court will be vacated, and
we will enter judgment for the defendants.

A True Copy:
Teste:

Clerk of the United States Court of Appeals
for the Third Circuit.

* The district court in indicating that ‘‘ [t}he general law of as-
signments’’ required ‘‘that in the absence of language prohibiting
assignments, claims against the Government are freely assignable’’
relied upon Webster v. Luther, 163 U.S. 331, 341 (1896). That
case involved the pre-entry assignment of lands granted to a Civil
War veteran’s widow under a special homestead act. The unique
nature of a tax exemption distinguishes the case at bar and we
find the district court’s reliance on Webster was misplaced.

10a
APPENDIX B

DISTRICT COURT, VIRGIN ISLANDS,
D, ST, CROIX,

Civ. No. 70-423.
AntiLues [npustries, Inc., Plaintiff,
v.
CGioVERNMENT OF THE VirGtn IsLaNpDs ET AL., Defendants.
Jan, 21, 1975.

Isherwood & Colianni, Christiansted, St. Croix, V. L.,
Thomas Alkon, Christiansted, St. Croix, V. L, of counsel,
for plaintiff.

Donald M. Bouton, Asst. Atty. Gen., Saint Thomas, V. L.,
for defendants.

Memorandum Opinion and Judgment
Warren H. Youna, District Judge.
I
Backerounp Facts

Antilles Industries, Inc, (herein ‘‘ Antilles’’) brings this
action against the Government of the Virgin Islands (here-
in ‘*Government’’) for the breach of a contract originally
entered into between the latter and Delaware Watch Com-
pany (herein ‘‘Delaware’’), On December 7, 1961, pursu-
ant to the provisions of Act No. 224, the Government
granted Delaware a ‘‘Certificate for Tax or Fee Exemp-
tions and Subsidies’’, which was to be effective for a period
of ten years commencing on December 16, 1960. Delaware
engaged in the manufacture and assembly of watch move-
ments until August, 1962, when it halted production due to
financial difficulties. Remaining dormant throughout the
ensuing period of time, Delaware, warranting that its tax
certificate was in good standing, sold all of its assets to
Antilles on April 6, 1965, by execution of a Bill of Sale

lla

which purported to include inter alia Delaware’s claim to
tax exemptions and subsidy benefits.

Prior to the acquisition, Antilles, also actively engaged
in the watch business, wrote to the Attorney General of the
Virgin Islands, noting its intention to purchase Delaware’s
watch production business and requesting verification as to
its eligibility to succeed to the unexpired portion of Dela-
ware’s certificate. Qn February 15, 1965, the Acting At-
torney General responded by suggesting that the proposed
assignment fell within Section 4106 of Act 798, but added
that approval thereof by the Board was necessary.

On March 26, 1965, Antilles submitted an application to
the Board for the transfer of the Delaware certificate. The
Board failed to act on the application for transfer for five
months, at which time Antilles withdrew its application,
but reserved the right to reapply. This right of reapplica-
tion was acknowledged by the Board in a letter dated
August 10 of the same year.

During the pendency of its application for transfer,
Antilles submitted an independent application for a Cer-
tifieate of Tax Exemption and Subsidies in its own right.
The withdrawal of the application for transfer, then,
amounted to a strategic assessment by Antilles that the
pendency of both applications might jeopardize action on
its application for an independent grant. On September
27, 1968, after its application for an independent grant was
denied by the Governor, Antilles reapplied for approval
of the transfer of Delaware’s certificate.

Seven months later, the Government published a notice
for Delaware to appear and show cause why its certificate
should not be revoked for failure to engage in the business
for which the tax benefits were granted. On May 7, 1969,
Antilles appeared by counsel and with witnesses prepared
to prove its entitlement to the benefits of Delaware’s cer-
tifieate by virtue of the aforementioned assignment. The

12a

Board, however, refused to hear testimony, asserting that
the issue noticed was the revocation of Delaware’s certifi-
cate rather than the validity of the transfer thereof. Ad-
ditionally, the Board determined that Antilles lacked stand-
ing to present evidence on the issue of revocation. On No-
vember 4, 1969, the Board met in Executive Session with-
out having scheduled a subsequent hearing and agreed to
recommend that the application for transfer of Delaware’s
certificate to Antilles be denied. Almost one year later on
October 27, 1970, Governor Evans notified Antilles that its
application for transfer was denied, at which time the in-
stant action was commenced,

II
TransrenaAsiuity or Act No, 224 Certiricates

Act No, 224, under which Delaware was granted its cer-
tifieate, was replaced on January 1, 1962, by Act No. 798.
Throughout their correspondence and continuing up to the
commencement of this action by Antilles, both Antilles and
the Government assumed incorrectly that Section 4106 of
Act No. 798! governed the transferability of Delaware’s
Tax Exemption Certificate. This assumption, however,

1 Section 4106 reads:

A certificate of tax exemption and/or subsidy benefits
granted under the provisions of this subtitle may be trans-
ferred, for the unexpired portion of the term of the certificate,
to another person, firm, or corporation who, or which, succeeds
the beneficiary in carrying on, or in operating, the tax exempt
business, upon determination by the Board that such person,
firm, or corporation is otherwise qualified to receive such bene-
fits and provided the industrial or business activity with re-
spect to which the certificate was granted, is continued by
said person, firm or corporation. Thereafter, the transferor
of the certificate shall lose all tax exemption and subsidy
benefits under this subtitle and shall be subject to the opera-
tion of the tax laws of the Virgin Islands.—Added Nov. 3,
1961, No. 798, § 2, Sess.L.1961, p. 260; March 26, 1963, No.
990, § 1, Sess.L.1963, p. 217.

13a

ignored Section 4115 of the same act, which reads in perti-
nent part:

‘*Nothing in this Act shall be construed to affect in
any manner any tax exemption or subsidies heretofore
granted under laws existing prior to the effective date
hereof’’.

See also Vitex Mfg. Co., Ltd., v. Government of the Virgin
Islands, 5 V.I. 429, 434-35 n. 4 (3d Cir. 1965).

Unlike Act No. 798, its predecessor is devoid of any pro-
vision regarding the transferability of certificates, thereby
raising difficult questions of statutory interpretation and
legislative intent. Any meaningful interpretation of either
statute, however, must begin with the important maxim
that once a certificate granting subsidies has been issued
by the Governor, a binding contract between the territory
and the taxpayer arises. See Act No. 224, § 1(e), V.I. Sess.
Laws (1957); Act No. 798 T. 33 V.LC. § 4001(b) (1962) ;
Virgo Corp. v. Paiewonsky, 6 V.I. 256, 286-87 (3rd Cir.
1967) ; Vitex Mfg. Co., Ltd. v. Government of the Virgin Is-
lands, 5 V.I. 429, 435 (3rd Cir. 1964); Pentheny, Ltd. v.
Government of the Virgin Islands, 5 V.I. 575, 585 (3rd
Cir. 1964). Relying heavily on the contractual nature of
Delaware’s grant, Antilles proposes that the tax exemption

certificate, like any contract right, should be fully assign-
able.

In its brief, the Government has raised two objectives to
Delaware’s attempted assignment of the benefits received
under its certificate—

(1) the respectable authority in this jurisdiction which
has deemed tax exemptions under the Industrial Inventive
Act to be matters of legislative grace and thus to be strictly
construed against the taxpayer [see Tracy Leigh Develop-
ment Corp. v. Government of the Virgin Islands, 501 F.2d
439, 443 (3d Cir. 1974); King Christian Enterprises, Ine.

———

- —_

l4a

yv. Government of the Virgin Islands, 345 F'.2d 633, 637 (3d
Cir. 1965) ] ;

(2) the prohibition, found in Section 160(3)(a) of the
Restatement of Contracts, against assigning contracts in
which performance by the assignee would vary materially
from that of the assignor.

A.

In response to the Government’s first assertion, I find
the doctrine of strictissimus juris inapplicable to the in-
stant case? Preliminarily, it is helpful to put the rule in
its proper perspective. Far from compelling immediate
surrender to its dictates whenever an ambiguity arises, the
rule of strict construction should be employed as an ele-
ment of decision only when the court has exhausted its
experience by attempting other tests of meaning. It is,
therefore, not a substitute for all other rules, Citizens’
Bank v. Parker, 192 U.S. 73, 85-86, 24 S.Ct. 181, 48 L.Ed.
346 (1904).

Unlike the Tracy Leigh and King Christian cases in
which the Third Cireuit employed the rule, this Court is
not presented with solely a problem of statutory construe-
tion but rather is aided by both substantive law and legis-
lative purpose. The general law of assignments, for exam-
ple, states that in the absence of language prohibiting as-
signment, claims against the Government are freely assign-
able. Webster v. Luther, 163 U.S. 331, 341, 16 S.Ct. 963,
41 L.Ed. 179 (1896). In People ex rel. Stone v. Nudelman,
376 Il. 535, 34 N.E.2d 851 (Ill. 1941), the Supreme Court
of Illinois confronted the rule requiring strict construction

2The precedential impact of these authorities is somewhat neu-
tralized by the decisions which have held that because the Govern-
ment has declared the grants to be in the nature of a contract,
any ambiguity in the statute must be construed against its drafts-
man, the Government. See Vitex Mfg. Co., Ltd. v. Government of
the Virgin Islands, supra, at 435; Tumex Corp. v. Government
of the Virgin Islands, Civ. No. 160/70, at 4 (D.V.1. 1970).

15a

of a tax refunding statute in the context of an assignment
of a credit memorandum. The credit memorandum, issued
by the Department of Finance for the erroneous payment
of a retailers’ occupation tax, was transferred by the
grantee-company to an assignee for the benefit of creditors.
Noting that the refunding statute on which the issuance of
the credit memorandum was based was silent on the issue
of transferability, the Court declined to apply the doctrine
of strict construction, in favor of the rule upholding the
free assignability of claims against the Government. Id.
at 853. The foregoing decision is entirely consistent with
the weight of authority which provides that in the absence
of an express statutory prohibition against assignment,
the assignability of a claim for tax refund should be sus-
tained. See Crawford County Trust & Savings Bank v.
Crawford County, 66 F.2d 971, 972-73 (8th Cir. 1933); 51
Am. Jur, (Taxation) § 1182, at 1015; Annot., 134 A.L.R.
1202.

An additional, even more com elling, reason for not in-
voking the technical rule of construction is that to do so
would vitiate the important policies underlying Act No.
224. For, the rule is not to be applied where the real in-
tent of the statute can be gathered from the Act itself.
See State v. Taylor, 80 So.2d 618, 621 (Ala. 1955); Chi-
cago Home v. Carr, 300 Ill. 478, 183 N.E. 344 (IIL 1921).
As expressed in the Preamble and Declaration of Policy
of Act No, 224, the purpose of the statute is to promote the
local economy and to provide steady employment to the
people of the Virgin Islands by aiding and encouraging
new and existing business enterprises. It is difficult to
conceive in what way the economy of the Islands would be
harmed by permitting a marginally successful or defunct
enterprise like Delaware to transfer its tax exemptions and
subsidies to Antilles, a profitable business which would not
only preserve the jobs created by its predecessor company
but also maintain a high level of investment and capital
input. Cf. Tumex v. Government of the Virgin Islands,

l6a

Civ. No. 160/60, at 3 (D.V.I. 1970). To irretrievably tie
up a valuable tax exemption certificate in a corporation
that has ceased operating with almost eight years remain-
ing on its grant can only be termed counterproductive from
an economic standpoint.

Responding to an inquiry made by the Tax Exemption
Board regarding the transferability of tax exemption cer-
tificates issued pursuant to Act No. 224, the Attorney Gen-
eral of the Virgin Islands suggested that the Legislature
did not intend to prohibit assignment. Analyzing the poli-
cies of the Act from the standpoint of a potential investor,
he noted that:

‘*rijf ... an investor could look forward to the loss
of the special rights upon the sale of the business, he
would be far less willing to invest his money here.
So, likewise, would be a future investor by way of a
purchaser of an existing business. Upon purchase, he
would lose the benefits of the original owner.”

4 V.LOp. Atty. Gen. 29, Op. No. 1960-17 (Apr. 28, 1960).

In a recent appeal from this Court, the Third Circuit
emphasized the importance of the reasonable expectations
of applicants under the Industrial Incentive Act seeking
to establish new businesses in these Islands. Noting that
the Legislature deemed the tax exemption grant to be a
contract to assure companies that their rights thereunder
were vested and thus did not rest on gossamer nations of
legislative whim, the Court held that:

‘*to deny taxpayers who were induced to establish new
businesses in the Virgin Islands the benefits they rea-
sonably anticipated receiving would do immeasurable
harm to the economy of the territory and render un-
certain indeed its prospects of attracting any addi-
tional investment’’.

HMW Indus., Inc. v. Wheatley, 504 F.2d 146 at 155 (3d
Cir. 1974), citing this Court’s opinion in 368 F.Supp. 915,

17a

919-20 (D.V.I. 1973) ; see also Vitex Mfg. Co., Ltd. v. Gov-
ernment of the Virgin Islands, supra 5 V.1. at 434-35 n. 4.

Given the unequivocal declaration of the Legislature that
the arrangement between Delaware and the Government
was contractual, plus the lack of statutory prohibition
against assignment, Delaware could reasonably expect that
the validity of any subsequent transfer of its grant would
be governed by the law of contracts. Despite its dormancy,
Delaware maintained its status as a Virgin Islands corpo-
ration and continued to pay franchise taxes and file annual
reports. It then entered into an arms length transaction
with Antilles to transfer the certificate, and both parties
gave notice to the Government of the proposed transfer.
The feregoing action by Delaware was entirely consistent
with its reasonable expectation that its tax certificate was
a valuable and transferable asset. In addition, the letter
dated February 15, 1965, in which the Acting Attorney
General advised Antilles that the proposed assignment ap-
peared to be statutorily sanctioned, added further fuel to
Delaware’s expectations.

B.

I now turn to the Government’s claim that Restatement
of Contracts, Section 160(3)(a) prohibits the transfer of
Delaware’s grant. Section 160(a)(3) provides in pertinent
part:

‘Performance . . . by a person delegated has the
same legal effect as performance . . . by the person
named in the contract, unless . . . performance by the
person delegated varies or would vary materially from
performance by the person named in the contract as
the one to perform... ’’.

The validity of an assignment, then, depends on whether it
makes a substantial difference to the Government whether
its performance is to be rendered by Delaware or Antilles.
See Simpson, Contracts § 127, at 267 (1954).

18a

The Government argues that in return for the generous
subsidies and exemptions afforded by the Act, the taxpayer
must respond with corresponding duties; that is, the tax-
payer’s industry or business must promote the public in-
terest by furthering the economic development of the terri-
tory. Since the extent to which one enterprise’s activities
benefit the economy, the argument continues, will normally
differ substantially from that of another business, the con-
tract is personal and thus non-assignable. For the reasons
stated herein, I must disagree with the foregoing analysis.

A thorough reading of Act No. 224 convinces me that the
considerations involved in the Government’s granting or
denying exemptions and subsidies under the statute are
fundamentally objective in nature.

This view is buttressed by a comparison of Act No. 224
with its successor, Act No. 798. Outlining the criteria re-
quired of applicants under 798, Section 4041 of Title 33 of
the V.I. Code reads:

‘*A person, firm, or corporation, engaged in or about
to engage in an industrial or business activity in the
Virgin Islands, which industrial or business activity,
in the judgment of the Governor of the Virgin Islands
will promote the public interest by economic develop-
ment of the Virgin Islands, may apply for the same
...?’. (Emphasis added.)

3 The Act requires only (1) that a business seeking exemptions
and subsidies thereunder have ‘‘an actual and demonstrable cap-
ital investment of at least Ten Thousand ($10,000.00) Dollars’’,
(2) that the product in which the business deals not have been
manufactured, processed, created or produced within the Virgin
Islands prior to January 1, 1947, (3) that ‘‘[n]ot less than seventy-
five (75%) per cent of all persons employed in any new industry
.. . be legal residents of the Virgin Islands’’, and finally (4) that
to be eligible a person has to be a registered voter and domiciled in
the Virgin Islands, while a corporation has to be organized under
the laws of the Virgin Islands.

19a

The provision, which essentially grants to the Governor au-
thority to weigh subjective factors in determining whether
a business should be granted exemptions [see Virgo Corp.
v. Paiewonsky, supra, at 288-89], is important for purposes
of the instant case only insofar as it is absent from its
predecessor statute. By adding subjective factors to the
1961 amendments, which the Legislature could have in-
cluded in the 1957 Act, it is strong evidence that the Legis-
lature intended no such interpretation of the prior law.
Vitex Mfg. Co., Ltd. v. Government of the Virgin Islands,
supra, 5 V.I1. at 436.

In the Vitex decision, the Third Circuit expressed
““strong disapproval’’ of a Board meeting in which ‘‘the
Governor’s views on the role of Vitex in the economy of
the Islands and the mainland’’ was discussed in the con-
text of a certificate issued under Act No. 224. The Court
urged that

“the statute from which [the Board] derives its au-
thority to act prescribes the standards to be applied
by it in the conduct of its functions, which may not be
disregarded merely because the Governor believes that
other considerations should enter into its deliberations
and recommendations.”

Id. 5 V.I. at 436-37. Cf. 3 V.L.Op.Atty.Gen. 94, Op. No.

1954-57 (Nov. 24, 1957); 2 V.I.Op.Atty.Gen. 128, Op. No.
1951-16 (Feb. 23, 1951).

In light of the objective nature of the criteria under Act
No. 224, the Board’s revocatory powers, as set forth in
Section 9(a)(3) of the statute, ensure that performance by
Antilles will not, and indeed cannot, vary materially from
performance by Delaware. For, any failure to comply with
either the stated provisions of the Act or the rules and
regulations issued in accordance therewith would subject
the assignee to the loss of the certificate. Consequently,

20a

the Restatement of Contracts does not prohibit the trans-
ferability of grants issued pursuant to the 1957 Act.*

Consistent with the general law of assignments which I
have held applicable to the case before me, I find that the
transfer of the certificate became effective immediately
upon final acquisition by Antilles of all of Delaware’s as-
sets on April 6, 1965. Also in accordance with contractural
principles cf assignment, said transfer was valid without
Board approval, thereby rendering unnecessary Antilles’
applications for transfer on March 26, 1965 and Septem-
ber 27, 1968. On the date of effective transfer, Aatilles
became subject to revocatory powers of the Board; and
although the record fails to disclose whether Antilles com-
plied with the provisions of the Act from that date, I find
that the onus was on the Government, via its powers of
revocation, to initiate sanctions for failure to comply there-
with. Inasmuch as the Board did not initiate revocation
proceedings until April 28, 1969—more than four years
after the transfer—the Government clearly neglected its
above stated duty. Furthermore, since Antilles was not
required under Act No. 224 to apply for the transfer, it
cannot be faulted for either the subsequent withdrawal of
its application or the three-year lapse prior to the renewal
thereof.

III

ADMINISTRATIVE IRREGULARITIES

From the foregoing, it is clear that the Board’s determi-
nation that Antilles lacked standing to respond to the order
to show cause why Delaware’s certificate should not be re-
voked was erroneous. As a consequence, the Government

* Some courts have recognized that even personal service ecatracts
traditionally the quintessential example of non-assignability under
the common law, are assignable when no change in the employee’s
rights and duties are entailed. See, e.g., Haldor, Inc. v. Beebe, 72
Cal.2d 357, 164 P.2d 568, 572 (Cal. App. 1945).

2la

violated the clear procedural mandate of Section 14 of the
1957 Act, which provides that ‘‘[n]o tax or fee exemption
or subsidy granted herein shall be revoked, modified, or
rescinded, without notice and hearing... ”’

I now turn to plaintiff Antilles’ allegation that the
Board’s action in denying its application for transfer was
‘“‘arbitrary’’ as having no statutory basis therefor. See
Act No. 224, § -(b). Administrative action is deemed arbi-
trary.

‘if it is taken without any authority of law or upon a
misconstrvction of the statutory authority under which
it purports to be taken...’ (citations omitted).

In re Hooper’s Estate, 3 Cir., 359 F.2d 569 at 575 n.7. See
also United States v. Carmack, 329 U.S. 230, 243-44 n. 14,
67 S.Ct. 252, 91 L.Ed. 209 (1946); 2 Am.Jur.2d (Admin.
Law) §§ 620, 651.

Although the letter dated October 27, 1970, from Gov-
ernor Evans to Antilles, in which the latter was formally
notified of the rejection of its application for transfer,
fails to state any reason therefor, a prior letter from the
Executive Director of the Board to Lt. Governor Maas is
somewhat more informative:

‘‘This is to advise that the Industrial Incentive
Board at Executive Session after careful considera-
tion of the subject application found applicant (An-
tilles Industries, Inc.) ineligible to be the recipient of
the requested transfer, and that there is no active or
outstanding business operation and grant on which to
predicate a transfer notwithstanding, eligibility of ap-
plicant.’’

5 The Third Circuit has recognized that the exercise of the right
of judicial review of administrative determinations is rendered
practically impossible, or at least more difficult, when the agency’s
decision is not accompanied by express findings. See Morton v.
Delta Mining, Inc., 495 F.2d 38, 42 (3d Cir. 1974).

22a

Letter from G. Beretta, Dir. of Indus. Incentive Bd., to
D. Maas, Government Secretary of Virgin Islands (July
22, 1970) (emphasis added). The minutes of the Board’s
closed executive meeting of November 4, 1969 further indi-
cate that although other potential justifications for the
denial of the transfer were discussed,® the Board’s deci-
sion ultimately crystallized around the lack of a viable cer-
tificate to be transferred. Exec. Sess., V.I. Indus. Incen-
tive Bd., Record at 19 (Nov. 4, 1969). Since it is uncon-
troverted that Delaware’s certificate was never formally
revoked, the Board is necessarily suggesting, albeit indi-
rectly, that Delaware’s dormancy constituted a revocation
of its certificate as a matter of law. See Record, supra
at 4-5. This argument was explicitly rejected by Judge
Christian in Trumex Corp. v. Government of the Virgin
Islands, Civ. No. 160/70 (D.V.I. 1970). Tumex, a proc-
essor of tungsten ore who was granted a tax exemption
certification in 1964, closed operations and sold its plant
in earlv 1966 due to financial difficulties. In upholding
Tume: ~ laim for a refund of income and excise taxes paid
for the , ear 1966, the Court found no authority either in
language of the statute or in the legislative intent to sup-
port the Government’s assertion that Tumex, by terminat-
ing its operations, had violated the statutory conditions of
its grant and thereby forfeited any rights or benefits due
to it under the Act.

Section 9(a)(3) of Act No. 224 provides for revocation
of a tax or fee exemption for ‘‘failure of a person, firm or
corporation to which such exemption or subsidy was
granted to comply with the provisions of this Act and the
rules and regulations issued in accordance therewith’’.

®From the record, the Board appears to have considered two
other reasons for denying Antilles’ application for a transfer—(1)
that Antilles did not in fact ‘‘need’’ the tax exemptions and sub-
sidy benefits [see Record, supra, at 17]: and (2) the Governor
had made a philosophical decision to limit the number of watch
companies receiving said benefits [sce Record, supra, at 6, 15].

23a

No provision within Act No. 224 has been cited by the
Government which would lend support, either directly or
indirectly, to the Board’s theory of automatic revocation
by inactivity. Inasmuch as the Industrial Incentive Board
of the Virgin Islands is an administrative agency and thus
‘*a tribunal of limited jurisdiction’’ [Pentheny, Ltd. v.
Government of the Virgin Islands, supra at 582], its au-
thority to act is narrowly circumscribed by the statute
reposing power init. Id. See also Vitex Mfg. Co. v. Gov-
ernment of the Virgin Islands, supra at 435. It follows
that the Board’s action was without authority of law and,
therefore, arbitrary.

JUDGMENT

In accordance with the foregoing Memorandum Opinion
and the reasons set forth therein, it is hereby

Ordered, adjudged and decreed:

(1) That Antilles Industries, Inc. be deemed the lawful
assignee of Delaware Watch Company’s ‘‘Certificate for
Tax or Fee Exemptions and Subsidies’’ granted to Dela-
ware by defendant Government of the Virgin Islands on

December 7, 1961.

(2) That said assignment be deemed effective on April 6,
1965, and that the benefits arising thereunder inure to plain-
tiff Antilles until December 16, 1970, the date of expiration
of the certificate.

(3) That, following the submission by plaintiff Antilles
to this Court of adequate documentary proof of payment
thereof, defendant Government of the Virgin Islands re-
fund to Antilles the following taxes accruing between the
dates April 6, 1965 and December 16, 1970:

(a) one hundred percent (100%) of all excise taxes paid
by Antilles but which should have been exempted;

24a

(b) one hundred percent (100%) of all gross receipts
taxes paid by Antilles but which should have been ex-
empted ;

(c) ninety percent (90%) of all import duties;

(4) That, upon submission of adequate documentary
proof of Antilles’ income tax liabilities for the period in
question, defendant shall grant to Antilles a subsidy equal
to seventy-five per centum (75%) of such liabilities actu-
ally paid or which shall be paid by Antilles and shall, if
shareholders of Antilles qualify, grant the statutory sub-
sidy to those qualifying shareholders in accordance with
the provisions of Act No. 224, if any dividend income was
received by said shareholders.

25a

APPENDIX C
UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT

Nos. 75-1176 and 75-1458
AntiLtes Inpustaigs, Ino.
vs.

GoVERNMENT OF THE VincIN IsLanps, et al.,
Appellants

(D.C. Civil Action No. 423-1970)

ON APPEAL FROM THE DISTRICT COURT OF THE VIRGIN ISLANDS
DIVISION OF ST. CROIX, CHRISTIANSTED JURISDICTION

Present: Aupisert, Weis and Garru, Circuit Judges.

Judgment
This cause came on to be heard on the record from the

District Court of the Virgin Islands, Division of St. Croix,
Christiansted Jurisdiction and was argued by counsel.

On consideration whereof, it is now here ordered and
adjudged by this Court that the judgment of the said
District Court, filed January 21, 1975, as amended April
10, 1975, as amended April 28, 1975, be, and the same is
hereby vacated and judgment is entered for the defendants.

ATTEST :
/s/ Tuomas F. Quinn
CLERK
January 27, 1976

Certified as a true copy and issued in lieu
of a formal mandate on February 27, 1976.

Test: /s/ Tuomas F, Quinn

Clerk, United States Court of Appeals
for the Third Circuit

26a

APPENDIX D
UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT

Nos. 75-1176 and 75-1458

AntTILtEs Inpustries, Inc.,
Appellee

Vv.

GOVERNMENT OF THE VirciIn IsLaAnps; Metvin H. Evans
Governor of the Virgin Islands; Sranuey FARRELLY,
Chairman of the Virgin Islands Industrial Incentive

Board, et al.,
Appellants

Sur Petition for Rehearing

Present: Serrrz, Chief Judge, Van Dusen, ALDISERT,
Apams, Grspons, Ros—enn, Hunter, Weis and

Gartu, Circuit Judges.

The petition for rehearing filed by
Appellee

in the above entitled case having been submitted to the
judges who participated in the decision of this court and
to all the other available circuit judges of the circuit in
regular active service, and no judge who concurred in the
decisior having asked for rehearing, and a majority of the
circuit judges of the circuit in regular active service not
having voted for rehearing by the court in bane, the
petition for rehearing is denied.

By the Court,

/s/ Illegible
Judge

Dated: February 19, 1976

27a

APPENDIX E

Virain Isiuanvs Session Laws
(BILL 479)

No. 224
(Approved July 5, 1957)

To Encourage the Establishment of New Business and In-
dustries—to Attract Investment Capital in order to further
the Economic Development of the Islands—to promote
Tourism and the Building of additional Hotels, Guest
Houses and Housing Projects—through the Granting of
Special Subsidies and for other Purposes.

Wuenrras is is deemed of great benefit to the people of the
Virgin Islands, as well as to the economy of the Virgin
Islands, to establish as many self-sustaining enterprises in
the Virgin Islands as is practical—to attract additional
investment capital—to promote tourism—to promote the
building of hotels, guest houses, and housing projects—
to the end that the economic life of the Virgin Islands may
be as diverse and stable as possible, and the people of the
Virgin Islands trained and employed in investments in
finance, in modern techniques of production, mechanical
skills, services and trades; and

Wuereas it is deemed to be in the public interest to ex-
tend such inducements and render such aid as will encour-
age persons, firms and corporations to establish and de-
velop new business enterprises; to make additional in-
vestment capital available to new and existing business; to
promote tourism and the building of hotels, guest houses
and housing projects.

Be it enacted by the Legislature of the Virgin Islands:

DecLaRATION OF PoLicy

Section 1. (a) In order to provide steady employment to
the people of the Virgin Islands and provide training in

28a

modern techniques of finance, investments, production, me-
chanical skills, services and trades, it is hereby declared
to be of great benefit to the people of the Virgin Islands
to have established in the Virgin Islands self-sustaining
business enterprises; to have investment capital made
available to new and existing business; to develop tourism
to the fullest extent possible and to have hotels, guest
houses and housing projects available for the many thou-
sands of persons wishing to reside and to spend their
vacations and holidays in the Virgin Islands.

(b) It is hereby declared to be of great benefit to the
economy of the Virgin Islands to have such enterprises as
are described in Section 1(a), established in that thereby
greater numbers of Virgin Islanders will be trained, de-
veloped and employed.

(c) Through the establishment of such enterprises as
declared in Section 1(a), the economy of the Virgin Is-
lands will rest on a broader base.

(d) To achieve this objective, exemptions from pay-
ment of certain taxes or fees and the granting of special
subsidies shall be allowed to new business enterprises and
to such other persons and corporations as hereinafter pro-
vided, and

(e) In order that the encouragement tendered by this
Act in the form of subsidies for the promotion of the busi-
ness and industrial development of the Islands may be an
incentive, having a real and unmistakably sure basis, the
Government of the Virgin Islands hereby declares that
it considers all orders granting subsidies and tax exemp-
tions made available under the provisions of this Act as
being in the nature of a contract or agreement between the
Government of the Virgin Islands and the persons or cor-
porations receiving the benefit of the subsidies or tax ex-
emptions, and that it will not adopt any legislation which
may impair or limit such subsidies or tax exemptions

29a

granted hereunder or which may defeat the purpose of
this Act.

DeFINITION oF New BusIneEsses

Section 2. For the purpose of this Act, a person, firm or
corporation shall be deemed to be engaged in a new indus-
try if duly qualified to do any business in the Virgin Islands
involving the manufacture, processing, creation or produc-
tion of any articles or commodities, or the application
thereof to a known unique process, which were not being
manufactured, processed, created or produced within the
said Islands prior to January 1, 1947, and in which indus-
try at the time of granting tax exemption there is an actual
and demonstrable capital investment of at least Ten Thou-
sand ($10,000.00) Dollars. For the purpose of this Act,
an article or commodity shall be deemed as being manu-
factured, processed, created, or produced within the islands
prior to January 1, 1947, if it was being manufactured,
processed, created or produced by an enterprise having at
said time an actual and demonstrable capital investment
of at least Ten Thousand ($10,000.00) Dollars. Provided
that such article continues at the time of application to be

manufactured, processed, created, or produced in the
Virgin Islands.

EXEMPTIONS AND SussIpies

Section 3. New Businesses: From and after the date of
approval of this enactment, all persons, firms, or corpora-
tions shall, upon application thereof, as hereinafter pro-
vided, be granted exemption from the payment of taxes or
fees and shall be eligible for industrial subsidies as speci-
fied in Section 6 of this Act, upon satisfactory proof that
such person, firm or corporation is engaged in a new indus-
try as hereinbefore defined, the said exemption and sub-
sidies to last for a period of ten (10) years from the date
of the order granting such exemption or subsidy; Provided,
That application for tax or fee exemption and the granting

30a

of subsidies under this Act shall be made not later than
December 31, 1960; and Provided, further, That in the case
of any enterprise engaged in the manufacture, creation,
or production of more than one article or commodity, the
exemption from payment of taxes or fees or granting of
industrial subsidies shall be restricted and limited only to
the portion of such enterprise as is not in competition with
existing enterprises within the meaning and spirit of this
Act.
Horets & Guest Houses

Section 4. Each person, firm or corporation operating
hotels and guest houses located in the Virgin Islands shall
be eligible for tax or fee exemptions and the subsidies pro-
vided for in Section 6 of this Act; and for the purposes of
this provision a hotel shall be considered any establish-
ment for the accommodation of the public, including hous-
ing and feeding of paying guests and any cottage resort
affording the above accommodations in which at the time
of application for tax or fee exemption or for subsidy there
is an actual and demonstrable capital investment of at least
One Hundred Thousand ($100,000.00) Dollars, provided
that application for tax or fee exemption and the granting
of subsidies hereunder shall be filed not later than Decem-
ber 31, 1960. And, as an added incentive, each person, firm
or corporation now operating a hotel and receiving sub-
sidies or tax exemption under this Act or any previous tax
exemption law shall, for each additional One Hundred
Thousand ($100,000.00) Dollars invested by him or it in
building additional accommodations and facilities to his or
its hotel, receive tax exemptions and subsidies as provided
for in section 6 of this Act, for an additional three (3)
years, but in no event for more than a total of six (6) addi-
tional years.

APARTMENTS—Hovsine ProJects

Section 5. Each person, firm or corporation engaged in
the business of constructing or operating apartment houses,

3la

housing projects, industrial or commercial buildings, within
the Virgin Islands, shall be eligible for the tax or fee ex-
emptions and the subsidies provided for in section 6 of this
Act; Provided there is a demonstrable capital investment
of at least One Hundred Thousand ($100,000.00) Dollars;
provided further that application for such subsidies and
exemptions shall be made not later than December 31, 1960;
and it is further provided, that no subsidies or exemptions
shall be granted to any person for the construction of any
home or dwelling to be occupied by himself or his family.

Extent or Sussinies & Exemptions GRANTED

Section 6(a). Each person, firm or corporation qualify-
ing for tax exemptions or subsidies under sections 3, 4 and
5 of this Act shall be exempt from the payment of the fol-
lowing taxes and fees:

1. All property taxes.

2. All trade taxes or excise taxes on building materials,
furnishings, and equipment necessary for the con-
struction of any new business or industry.

3. All annual or specific fees, except liquor l'cense fees
and automobile license fees.

4. All gross receipts taxes, except that this exemption
shall not apply to businesses operated by concession
or rental agreement on the premises of persons, firms
or corporations, including hotels, eligible for tax or
fee exemption or industrial subsidy, for which busi-
nesses separate licenses are required or which, as
determined by the Tax Exemption Board, are not
ordinarily related to, or do not constitute an essen-
tial part of, the operation of the exempt or sub-
sidized new businesses or industry, and which busi-
nesses are not otherwise eligible for exemption or
subsidies as a distinct enterprise.

32a

(b) Each person, firm or corporation qualifying under
Sections 3, 4 and 5 of this Act shall also be entitled to re-
ceive a non-taxable subsidy in an amount equal to Seventy
Five (75%) Per Cent of the Income Tax paid into the
Treasury of the Virgin Islands and one hundred (100%)
per cent of the import duties and other taxes on raw ma-
terial brought into the Islands for processing, actually paid
into the Treasury of the Virgin Islands by any such per-
sons, firms, or corporations. This subsidy shall be granted
over a period of ten (10) years, beginning with the estab-
lishment of the new business or enterprise.

(c) A non-taxable subsidy shall also be allowed for a
period of ten (10 )years as hereinabove set forth to all
stockholders or partners of corporations and firms qualify-
ing under Sections 3, 4, 5 and 7 of this Act in an amount
equal to Fifty (50%) Per Cent of the Income Tax actually
paid iuto the Treasury of the Government of the Virgin
Islands on income derived by any such stockholders or
partners from the operation of the business or industry
covered under this law; provided, that said stockholders
or partners are bona fide residents of the Virgin Islands.

(d) The period of ten (10) years referred to in this sec-
tion shall be deemed to operate retroactively to include
new businesses, industries and enterprises heretofore
granted exemptions or subsidies in accordance with Bill
No. 293, the Tax Exemption Ordinance of the Municipality
of Saint Thomas and Saint John, approved January 25,
1954, as amended, or Bill No. 39, the Tax Exemption Ordi-
nance of the Municipality of Saint Croix, approved Janu-
ary 7, 1952, as amended, or any other enactments ante-
cedent of either; Provided, however, that nothing herein
contained shall be construed to extend the period of any
such tax-exemption or subsidy heretofore granted beyond
the original period of such exemption or subsidy.

33a

SEcuRITIES

Section 7(a). Each bona fide resident of the Virgin
Islands and each firm or corporation organized and doing
business in the Virgin Islands shall, for a period of ten
(10) years from the enactment of this law, be entitled to a
non-taxable subsidy each year in an amount equal to Fifty
(50%) per cent of the Income Tax paid on that portion of
his or its income, including interest, dividends and all other
earnings, derived from the purchase, transfer, assignment
or sale of stock, bonds and all other kinds of securities or
debentures of whatever character, purchased or sold each
year through an investment company located and author-
ized under the laws of the Virgin Islands to engage in such
a business; Provided, that no more than One Hundred
Thousand ($100,000.00) Dollars shall be paid as such sub-
sidy to any one taxpayer in any one year; and, provided
further, that the Commissioner of Finance shall, within a
reasonable period of time after the tax on said income is
paid, pay a first installment of not more than Fifty (50%)
per cent of said subsidy which may be due to the taxpayer;
the remaining installment of fifty (50%) per cent of the
subsidy due to the said taxpayer shall be paid by the Com-
missioner of Finance within one (1) year after the first
installment is paid, upon proper certification and proof
furnished to him by the taxpayer that an amount equal to
fifty (50%) per cent of the subsidy to which the taxpayer
is entitled in said taxable year, has been invested in busi-
ness veniures or projects located in the Virgin Islands
whose objectives may further and enhance the economic
development of the islands, such as: (a) bonds or other
securities issued by the Government of the Virgin Islands;
(b) stocks, bonds and mortgages and other securities on
property and businesses located in the Virgin Islands; (c)
the construction, operation, purchase or financing of land,
hotels, apartments, homes, offices, industrial and all other
types of buildings and structures in the Virgin Islands;
and (d) the purchase, operation, establishment or financ-

34a

ing of any existing or new businesses or projects which
would further the economic development of the islands.

Sa.es or SECURITIES

(b) No firm, company, or corporation shall, without first
securing a license or authorization to engage in said busi-
ness from the Government Secretary of the Virgin Islands,
engage in an investment brokerage business for the pur-
pose of buying and selling stocks, bonds, and other securi-
ties or debentures to and for others. No such license shall
issue, unless the firm, company, or corporation deposits in
a Reserve Account with a bank, designated by the Govern-
ment Secretary, Fifty Thousand ($50,000.00) Dollars in
cash or in interest-bearing United States Government Obli-

gations.

(c) All persons, firms and corporations entitled to non-
taxable subsidies pursuant to this Section shall annually,
within 60 days after payment of his or its Income Tax,
make application for said subsidies upon such forms and
pursuant to such rules and regulations as the Commissioner
of Finance shall prescribe.

PayMENT oF SussIpIEsS—REPORT

Section 8. The Commissioner of Finance shall compute
and determine annually the specific amount of the subsidy
to which each person, firm or corporation granted a subsidy
hereunder is entitled, and he is hereby authorized to make
payment of said subsidy in each case to [sic] person, firm
or corporation entitled to receive same from funds avail-
able in the special fund in the Treasury of the Virgin
Islands, and the Legislature of the Virgin Islands shall
appropriate sufficient funds in each annual budget to carry
out the provisions of this Act.

35a

Tax Exemption Boarp—Duties & Powers

Section 9(a). The provisions of this Act shall be admin-
istered by the Board of Tax Review heretofore created,
which shall, for the purposes of this Act, constitute the
Tax Exemption Board. Members of the Board shall be
entitled to travel allowance and such other compensation
as the legislature may provide.

All persons, firms or corporations entitled to tax benefits
pursuant to Sections 3, 4 and 5 of this Act shall, within 60
days after payment of such taxes, make applications for
tax or fee exemptions and for the granting of subsidies
under this Act to the said Board. In the performance of
its duties here under the said Board shall exercise the
following powers and authority.

1. Conduct preliminary hearings, after due notice
to all interested parties, with respect to applications
for tax or fee exemption and for the granting of sub-
sidies hereunder. At such hearings the Board shall
determine whether the proposed applicant is qualified
under the provisions of this Act. On the basis of its
findings, and not later than sixty (60) days after
receipt of application, the Board shall recommend to
the Governor that the application be approved or dis-
approved, and in the event approval is reconuiuended
that a temporary certificate of tax or fee exemption, or
qualification for subsidy be issued to the applicant
conditioned upon actual compliance with the provi-
sions of the law within a stated period.

2. Upon application of any person granted a tem-
porary certificate in accordance with the preceding
paragraph, or upon the expiration of any time limit
set in such a certificate, as the case may be, the Board
shall recommend to the Governor the final approval or
disapproval of applications made hereunder; provided
that if the Governor shall fail to either approve or

36a

disapprove the applications within thirty (30) days
after receipt of the Board’s recommendation the same
shall at the end of such period be deemed approved.

3. Recommend to the Governor, after notice and
hearing, the revocation of any tax or fce exemption or
denial of any subsidy for the unexpired portion of the
period for which granted in the event of the failure
of a person, firm or corporation to which such exemp-
tion or subsidy was granted to comply with the pro-
visions of this Act and the rules and regulations issued
in accordance therewith.

4. Hold hearings and investigations, subpoena wit-
nesses, records and books and inspect tax-exempt
properties and facilities upon due notice and promul-
gate such rules and regulations as may be necessary
to implement the operation of the program.

(b) Decisions of the Board, as to questions of fact, shall
be deemed final in any proceedings in any court except in
such cases as it shall be conclusively shown that any such
decision was arrived at by arbitrary or fraudulent means.

(c) The said Tax Exemption Board hereby created shall
operate as an agency within the Department of Tourism
and Trade or its successor, and it shall be authorized to
employ such personnel from time to time as may be re-
quired to effectively administer and enforce the provisions
of this Act.

(d) The Board shall prescribe the procedure for all
applications for tax exemption and subsidies, and shall
give public notice in all local newspapers published and of
general circulation in the islands of all applications. Any
person, firm or corporation interested in the approval or
disapproval of an application may file a written statement
with the Board prior to the hearing on such application.

37a

GENERAL Provisions

Section 10, Upon the recommendations of the Board
tax or fee exemptions and subsidies as herein provided
for shall be granted in the name of the Government of the
Virgin Islands by the Governor of the Virgin Islands.

Section 11. Not less than seventy-five (75%) per cent of
all persons employed in any new industry, subject to this
law, shall be legal residents of the Virgin Islands. Pro-
vided, that the Board shall have the right to grant tempor-
ary permits to any new industry applying for or receiving
benefits under this law to employ a greater percentage of
non-residents of the Virgin Islands, when it is conclusively
proven to the Board that residents with the necessary
ability to perform the services required are not available
within the Virgin Islands and the industry is or will be
greatly handicapped as a result thereof; provided further
that the Board shall revoke or modify the permit when-
ever it appears that the necessary services have become
available within the Virgin Islands.

Section 12. Any person to be eligitle to receive a non-
taxable subsidy, pursuant to Section 7 of this Act, must be
a registered voter and have his domicile in the Virgin
Islands. Corporations to be eligible to receive the benefits
of the provisions of this Act must be organized and estab-
lished under the laws of the Virgin Islands,

Section 13. Trade or excise taxes or import duties or
income tax payments made by persons qualifying under
this Act shall be covered into a Special Account in the
Treasury of the Virgin Islands to be designated as the
‘Tax Exemption Fund’. The proper officers are hereby
authorized, without further legislation, to make refunds of
such taxes authorized under this Act from moneys in such
special account.

Section 14. No tax or fee exemption or subsidy granted
hereunder shall be revoked, modified, or rescinded without

38a

notice and hearing and under such rules as may be promul-
gated by the Tax Exemption Board from time to time.

Section 15. If any provision of this Act or the applica-
tion thereof to any person or circumstance is held invalid,
the remainder of the Act and the application of such pro-
visions to other persons or circumstances shall not be

affected thereby.

Section 16. (a) The following laws and ordinances are
hereby repealed: (1) Municipal Council of Saint Thomas
and Saint John, approved September 11, 1945 (Bill No.
99); November 11, 1948 (Bill No. 291); June 25, 1949
(Bill) No. 8); August 17, 1951 (Bill No. 67); July 7, 1953
(Bill No. 198); January 25, 1954 (Bill No. 293); February
16, 1954 (Bill No. 334); April 1, 1954 (Bill No. 349) ;

(2) Municipal Council of Saint Croix, approved June
25, 1949 (Bill No. 35); January 7, 1952 (Bill No. 39);
December 30, 1952 (Bill No. 98); January 4, 1954 (Bill
No. 96); September 24, 1954 (Bill No. 169) ;

(3) Act of the Legislature of the Virgin Islands, ap-
proved May 29, 1956 (Act No. 90).

(b) There is also hereby repealed all other laws, ordi-
nances or parts thereof as may be in conflict with any of the

provisions of this Act.
Approved July 5, 1957.

39a

APPENDIX F

Restatement of Contracts
Ch. 7 §§ 150-151

§ 151. Waar Ricuts Can Bz Errectivety Assicnep.

A right j i i
Z ght may be the subject of effective assignment un-

(a) the substitution of a right of the assignee for the
right of the assignor would vary materially the duty
of the obligor, or increase materially the burden or
risk imposed upon him by his contract, or impair
materially his chance of obtaining return perfor-
mance, or

(b) the assignment is forbidden b
y statute or by th
policy of the common law, or ge:

(c) the assignment is prohibited by th i
ue by the contract creating

§ 160. DeLecation or Perrormanog or a Duty

or A ConpDlITION.

(3) Performance or offer of
performance by a person
delegated has the same legal effect as performance a offer

- ~<a: by the person named in the contract, un-

(a) performance by the person delegated varies or would
vary materially from performance by the person
named in the contract as the one to perform, and

there has been no such assent to the del i i
stated in § 162, or creases

(b) the delegation is forbidden b i
y statute or b
of the common law, or edb

(c) the delegation is prohibited by contract.

40a

APPENDIX G
Opinion of ine Attorney General
No. 1960-17
April 28, 1960
Dr. Roy H. Bornn
Chairman

Tax Exemption Board
St. Thomas, Virgin Islands

Dear Dr. Bornn:

I have your letter of March 2nd in which you request an
opinion as to the transferability of a tax exemption or sub-
sidy granted to an enterprise upon the event of a sale of
the enterprise.

I have looked over the statutes governing the granting
of exemptions and the making of subsidies to certain types
of businesses. At no place is found an express prohibition
concerning the transferability of such rights once vested in
a business with the exception of those sections which
provide for the revocation, modification or rescission of
the exemption or subsidy upon certain conditions of non-
compliance with the terms of the initial award.

It would seem thei that in order to determine whether
the intent of the Legislature was to affix this right unto
the business itself rather than to the specific owner of the
business, we must look to the declaration of intent as set
forth by the Legislature.

A key idea expressed in 33 V.I.C. § 404’ and in previous
declarations of policy in this type of legislation, is the idea
that the purpose is to attract new capital to the Virgin
Islands and to encourage the establishment of new industry
and to promote and stabilize the economy of the Virgin
Islands. Also, to have investment capital made available

1 So in original. Probably should be § 4001.

-
we.

4a

to new and existiug businesses. I think this declaration
of policy pretty well solves the problem for the reason that
investment capital to a certain extent is attracted by
these promoting mechanisms of the local economy where
the lender or timancier participant expects to have a fi-
nancial benefit not customarily found in competitive fields.
This benefit, of course, is the making of certain exceptions
to certain types of taxation and the granting of certain
money payments to those businesses which qualify. If,
therefore, an investor could look forward to the loss of the
special rights upon the sale of the business, he would be far
less willing to invest his money here. So, likewise, would be
a future investor by way of a purchaser of an existing
business. Upon purchase, he would lose the benefits of
the original owner. Indeed, where a corporation is in-
volved as the one named in the grant, the beneficial owner
of the corporation is, of course, the shareholder. A share
transaction in which the purchaser of a business instead
of purchasing the assets, bought only the stock would
probably not come to the attention of the Government. In
the transfer of ownership by an individual or partnership
the stock transaction would not be possible. From the
administrative standpoint the Legislature undoubtedly con-
templated that the form of the business activity, whether
individual, partnership, or corporate, was of no special
importance since each was entitled to the grant where
qualified.

It is our opinion, therefore, that the exemption and
subsidy attaches to the business and not to the ownership
and continues for the period of the award, subject to mat-
ters such as are contemplated by 33 V.I.C. § 4109(a) (3).

Respectfully,

Russe.u B. Jonnson
Attorney General

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385003_2386%3A1. Public record. Not legal advice.