Tax Type
Taxes of Other Agencies
Description
Grantor's taxes
Topic
Court Case
Date Issued
03-14-1995
VIRGINIA:
IN THE CIRCUIT COURT FOR THE COUNTY OF LOUDOUN
THE CHASE MANHATTAN BANK, N.A.,
et al.,
Plaintiffs,
v. At Law No. 12839
COMMONWEALTH OF VIRGINIA,
DEPARTMENT OF TAXATION, et al.
Defendants.
------------------------------------------------------------
THE CHASE MANHATTAN BANK, N.A.,
et al.,
Plaintiffs,
v. At Law No. 12840
DEPARTMENT OF TAXATION,
COMMONWEALTH OF VIRGINIA, et al.,
Defendants
ORDER
Upon consideration of the parties' cross-motions for summary
judgment, the memoranda of law filled in support thereof and in opposition
thereto and oral argument presented by counsel for all parties on December
6, 1993 and for reasons more fully stated in this Court's opinion letter,
dated December 16, 1993, which is incorporated herein by reference;
IT APPEARING TO THE COURT that the recordation of Trustee's deeds
conveying property, which was sold at foreclosure sale, from the trustee to wholly owned subsidiaries of the successful bidder at sale, where the successful bidder at the foreclosure sale was also the holder of the mortgage which was foreclosed upon, and where the successful bidder assigned its rights to purchase to its wholly owned subsidiaries, was not exempt from state recordation tax pursuant to SB.1-811(A)(9) or (12) of the Code of Virginia and, therefore, was not exempt from state grantor tax pursuant to § 58.1-811(C) or county recordation tax pursuant to § 58.1-814;
AND IT APPEARING FURTHER that no lien or encumbrance remained on the property which was conveyed by the deeds recorded and, therefore, that the County Clerk did not err in his calculation of the amount of the grantor's tax which was imposed pursuant to §58.1-802(A);
IT IS HEREBY ORDERED, ADJUDGED and DECREED that the Defendants' Motion for Summary Judgment is granted on all issues and Plaintiff's Motion for Judgment is, accordingly, dismissed with prejudice; to which order the Plaintiff notes his exception.
ENTERED this 19th day of April , 1994.
Maureen Riley Matsen
Assistant Attorney General
Office of the .Attorney General
101 North 8th Street Richmond, Virginia 23219
804-786-6547
for the Department of Taxation, Commonwealth of Virginia
Seen and objected to: on the grounds set forth in the briefs filed by
Plaintiffs in these actions concerning the cross
motions for summary judgment
Howard H. Stahl, Esq.
Steven K. Davidson, Esq.
1330 Connecticut Ave NW
Washington, DC 20036
The Honorable Stephen D. Rosenthal
Attorney General of Virginia
The Honorable Mary Yancey Spenser
Deputy Attorney General
The Honorable Michael K. Jackson
Senior Assistant Attorney General
The Honorable Maureen Riley Matsen
Assistant Attorney General
101 North Eighth Street
Richmond, Virginia 23219
John R. Roberts, Esq.
County Attorney
County of Loudoun
M. Yvonne Demory
Assistant County Attorney
County of Loudoun
102 Heritage Way NE
Suite 300
Leesburg, Virginia 22075
Robert S. Corish, Esq.
P.0. Box 2908
Merrifield, Virginia 22116
16 December 1993
Dear Counsel:
This case is before the Court on cross motions for summary judgment. Plaintiff taxpayers assert in these consolidated actions that they are entitled to a refund of recordation and grantor's taxes erroneously assessed and paid. The taxpayers assert an exemption from taxation. At issue is a transfer by the Trustee under a deed of trust to the assignees of the noteholder. Upon default upon obligation owed the Bank, the Trustee conducted a foreclosure sale. Plaintiff Bank was the successful bidder at the foreclosure sale. At the direction of the Bank, the Trustee conveyed title to the various properties bought in by the Bank to several wholly owned subsidiaries of the Bank to which the Bank had assigned its interest.
Plaintiffs have outlined the following issues for determination upon the respective motions for summary judgment:
-
- 1. Whether the of Trustee's deeds conveying parcels of land located wholly in Loudoun County to Chases's wholly owned subsidiaries, following foreclosure sales of such parcels at which Chase was the successful bidder and at which Chase assigned its right to purchase such parcels to its wholly owned , should have been without the imposition of state recordation tax because the transfers giving rise to such deeds are exempt from imposition of. state recordation taxes pursuant to Va. Code §§ 58.1-811 (A) (12) and 58.1-811 (A) (9), as deeds conveying real property "to the original beneficiaries by a trustee holding title under a deed in trust" and "[t]o a subsidiary corporation from a parent corporation" in a "transaction which qualifies for gain or under the Internal Revenue Code of 1954, as amended";
2. Whether by reason of exemption from state recordation tax, recordation of the aforementioned Trustee's deeds should have been effectuated without imposition of state grantor tax and county recordation tax because the transfers giving rise to such deeds are exempt from state grantor tax by reason of Va. Code § 58.1-811 (C) and from County recordation tax by reason of Va. Code § 58.1-814; and
3. Whether the assessment and collection of state grantor tax in an amount greater than zero upon representation for recordation of deeds transferring title to Chase's wholly owned subsidiaries upon foreclosure sales violates the state grantor tax and, thus, are invalid, under circumstances where, after foreclosure sales, net deficiencies remained owing to Chase in respect of the debts previously secured by the properties sold in foreclosure.
- 1. Whether the of Trustee's deeds conveying parcels of land located wholly in Loudoun County to Chases's wholly owned subsidiaries, following foreclosure sales of such parcels at which Chase was the successful bidder and at which Chase assigned its right to purchase such parcels to its wholly owned , should have been without the imposition of state recordation tax because the transfers giving rise to such deeds are exempt from imposition of. state recordation taxes pursuant to Va. Code §§ 58.1-811 (A) (12) and 58.1-811 (A) (9), as deeds conveying real property "to the original beneficiaries by a trustee holding title under a deed in trust" and "[t]o a subsidiary corporation from a parent corporation" in a "transaction which qualifies for gain or under the Internal Revenue Code of 1954, as amended";
Based upon a review of the stipulation presented by the parties and the arguments and written submissions of counsel, the Court is of the opinion that the case is summary adjudication.
Without restating many of the arguments contained in the lengthy memoranda of counsel, the Court finds that with respect to the applicability of the. trust exemption contained in 58.1-811 (A) (12) to facts of the instant case, the prior opinion of the Attorney General cited by counsel, is both relevant and persuasive. The Attorney General has opined that the exemption applies to transfers arising out of a common law trust and not to a transfer by the Trustee under a deed of trust. 1987-1988 Attorney General Ann. Report, pp. 564-566. Not only is the opinion entitled to deference upon the issue of legislative intent, it is well reasoned and persuasive. See, Browning Ferris v Commonwealth, 225 Va. 157 (1983).
The Court agrees with the position of the Defendants that had the General Assembly intended to make such an exemption applicable to deeds of trust, they would have said so. As counsel have noted, the Trustee of a security deed of trust, while owing fiduciary duties to both the debtor and the secured party, bears only a nominal connection to the property prior to acting under the terms of the trust. Smith v Credico Industrial Loan Company, 234 Va. 514 (1987).
Nor does this Court find that the Clerk erred in calculating the grantor's tax owed pursuant to §58.1-802 (A), as no lien or encumbrance remained on the property when conveyed to the wholly owned subsidiaries.
Accordingly, the Motions for Summary Judgment of the Defendants will be granted and the Notion for Judgment dismissed. The Attorney General may draw a Final Order consistent with this opinion to which counsel may note their exceptions.
Very truly yours,
Thomas D. Horne
TDH/aea
Rulings of the Tax Commissioner