Michael Davis v. City of Philadelphia
821 F.3d 484
3rd Cir.2016Background
- Michael Davis, a U.S. Army Reserve member called to active duty (2004; deployments to Iraq and Afghanistan), owned a Philadelphia rental property that he and his wife transferred to Global Sales Call Center LLC, a Pennsylvania company solely owned and managed by Davis.
- Philadelphia assessed delinquent property taxes, interest, and penalties against Global; Davis sought relief under the Servicemembers Civil Relief Act (SCRA), which caps interest on a servicemember’s delinquent property taxes at 6% and forbids additional penalties for property owned individually by a servicemember or jointly with dependents.
- The Philadelphia Department of Revenue and the Philadelphia Tax Review Board denied SCRA relief, concluding the SCRA does not apply to a business owned by a servicemember.
- The City foreclosed on the property after a Court of Common Pleas judgment; Davis and Global sued under 42 U.S.C. § 1983 in federal court claiming SCRA violations. The District Court dismissed, holding Global lacked statutory standing and Davis lacked a viable claim.
- On appeal, the Third Circuit held Global (the corporation) is not a "servicemember" under the SCRA and thus lacks statutory standing; however, it found Davis (the servicemember) has statutory standing but nonetheless cannot state an SCRA claim because the property and tax liability are corporate, not personal.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a corporation owned by a servicemember qualifies as a "servicemember" under the SCRA | Davis argued the SCRA protections should cover his company’s property because he is the servicemember-owner | City argued a corporation is not a servicemember and SCRA applies only to individual servicemembers | Held: Corporation is not a "servicemember"; Global lacks statutory standing |
| Whether Davis personally has statutory standing to sue under the SCRA | Davis claimed he could invoke SCRA protections as a servicemember despite corporate ownership of the property | City argued Davis lacks relief because he is not personally liable for Global’s tax debt | Held: Davis has statutory standing as a servicemember but cannot prevail on the merits |
| Whether the SCRA protects property owned by a servicemember’s closely held company | Davis argued the Act’s purpose supports extending protections to servicemember-owned businesses | City argued the SCRA’s text limits protections to property owned individually or jointly with dependents | Held: SCRA text limits protection to individually or jointly owned property; corporate ownership excludes relief |
| Whether equitable veil piercing permits SCRA relief despite corporate ownership | Davis implied corporate form should not bar SCRA relief given sole ownership/control | City contended corporate separateness is respected absent evidence of fraud or sham | Held: Piercing not permitted on these facts; sole ownership alone insufficient to disregard corporate form |
Key Cases Cited
- Hynson By & Through Hynson v. City of Chester Legal Dep’t, 864 F.2d 1026 (3d Cir. 1988) (§ 1983 provides remedy for deprivation of federal rights under color of state law)
- Lujan v. Defenders of Wildlife, 504 U.S. 555 (U.S. 1992) (constitutional standing requirements)
- Warth v. Seldin, 422 U.S. 490 (U.S. 1975) (standing is prerequisite to jurisdiction)
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (plausibility standard for pleading)
- In re Deed of Trust of Rose Hill Cemetery Ass’n, 590 A.2d 1 (Pa. 1991) (corporate separateness not negated by concentrated ownership)
- Sams v. Redevelopment Auth. of City of New Kensington, 244 A.2d 779 (Pa. 1968) (shareholder status alone does not merge individual and corporate identity)
- Barium Steel Corp. v. Wiley, 108 A.2d 336 (Pa. 1954) (one-person ownership does not dissolve corporate entity)