Wildwood Medical v. Montgomery County

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Wildwood Medical Center, L.L.C. v. Montgomery County, Maryland, No. 125, September Term 2007 HEADNOTE: Filing of opinion and issuance of mandate in Court of Special Appeals, following the death of the me mber of th e panel w ho facially authored the majority opinion, was a nullity. The cas e thus rem ained pen ding and u ndecided in the interm ediate appe llate court at the time the Court of Appeals granted a petition for writ of certiorari filed by Wildwood Medical Center, L.L.C. under the impression that the C ourt of Sp ecial App eals finally decided th e case. As such, the m atter properly is be fore the C ourt of A ppeals on its merits pursua nt to M aryland R ule 8-1 31(B) (2). Regarding the merits, no recordation or transfer tax w as due to Montg omery Cou nty upon the tra nsfer of title to real property from a partnership of co-ow ning individ uals to a limited liab ility company composed of the same individuals. Circuit Co urt for Mo ntgomery C ounty Civil Case No. 262295 IN THE COURT OF APPEALS OF MARYLAND No. 125 September Term 2007 Wildwood Medical Center, L.L.C. v. Montgomery County, Maryland Bell, C. J. Harrell Battaglia Greene Eldridg e, John C. (Re tired, specially assigned) Raker, Irma S. (Retired, specially assigned) Cathell, Dale R. (Retired, specially assigned), JJ. Per Curiam Cathell, J. joins ju dgment o nly Filed: August 22, 2008 Wildwood Medical Center, L.L.C., Appellee in the Court of Special Appeals and Petitioner here, requested o n April 28, 2004, a refund of certain real property recordation and transfer taxes it had paid upon presentation of a deed fo r recordation , under pro test, to Montgom ery County, Maryland, Appellant below and Respondent here. That request, after a hearing, ultimately was denied by the County. Petitioner took an appeal to the Maryland Tax Court. The Maryland Tax Court (a Sta te ad ministrative a gency) gr ante d Wildw ood's request for the refund on June 3, 20 05. From that final adm inistrative agency action, the County filed a Petition for Judicial Review with the Circuit Court for Mo ntgo mery Cou nty. The Circuit Court affirmed the decision of the Tax Court. Montgomery County then filed a Notice of Appeal to the Court of Special Appeals. 1 1 The questions presented in the County's brief in the Court of Special Appeals were: I. When prope rty is titled in the names of individuals, rather than in the name of the partnership, does a transfer of that property to a limited liability company qualify for an exemption from transfer and recordation taxes? II. Did the tax court and the circuit court fail to adhere to the longstanding judicial tenet that tax-exemption statutes are to be strictly construed in favor of the taxing authority, which resulted in an erroneous expansion of an exemption that conflicts with the prohibition against judicial legislation? The questions as reframed in Wildwood s responsive brief in the C ourt of Specia l Appeals were: I. Was the Maryland Tax Court correct in allowing appellee exemptions from transfer and recordation taxes upon the recordation of the subject deed, in accordance with §§12-10 8(y) and 13-405(c) of the T ax-Property Article, as appellee was a (contin ued...) On March 8, 2007, the intermediate appellate court filed a reported opinion vacating the judgment of the Circuit Court and rema nding the case for fu rther proceedings. Bef ore the mandate of the Court of Spec ial Appeals was issue d, however, the C ounty Attorney s Office sent a letter suggesting that the court consider revising its decision before the mandate issues and made several suggestions for changes it urged were necessary or appropriate. The opinion was recalled before the mandate issued. Ultimately, another purported opinion (on reconsideration) was filed on October 31, 2007. A mandate for this new opinion issued on the same date. T hereafter, Wildwo od filed w ith us a Petition for Writ of Certiora ri, which we gra nted on Febru ary 13, 20 08. Wildwo od Med ical v. Mon tgomery County , 403 Md. 304, 941 A.2d 1104 (2008). The sole question for which w e issued a writ of certiorari based on Wildwood's petition was: Whether the Maryland Tax Court and the Circuit Court for Montgom ery County, Maryland . . . were both correct in allowing appellant exemptions from transfer and recordation taxes upon the recordation of the subject deed, in accordance with §§12-108(y) and 13-405(c) of the Tax-Property Article, as appellant s predecessor entity held the title to the subject property as a general partnership. 1 (...continued) Maryland general partnership? II. Was title to the property, that is described in what is referred to in these proceedings as the subject deed, vested in the general partnership at the time of transfer so that the appellee sh ould be granted exemptions from transfer and recordation taxes? -2- Because the material facts do not appea r to be dispu ted, we sha ll incorporate a recitation of them into our analysis of the question presented, as necessary. We shall reach and answer in the affirm ative this que stion, but only after some explanation of the serendipitous reasons the matter properly is before us on the merits. I. The panel assig ned to hea r and decid e the Cou nty's appeal in the C ourt of Specia l Appea ls consiste d of Judg es Theodore G. B loom , Ma ry Elle n Ba rber a, an d Jam es A . Kenney, III. Following oral argument, the panel filed a purported reported opinion, w ith a dissent, on March 8, 2007. Judge Bloom, writing for himself and Judge Barbera, would have vacated the judgment of the Circuit Court and remanded the case for entry of a judgment reversing the decision of the Tax Court. Judge Kenney, in dissent, wo uld have a ffirmed th e Circuit Court's judg ment. As noted previously, before the m andate issued, counsel fo r Montgomery County wrote to the pane l pointing out re asons w hy the erstwh ile majority opinio n required, in counsel's view, certain corrections or revisions. In effect, limited reconsideration was sought by the nomin al victor in the intermed iate appellate court proce eding. Th e court app arently agreed because the reported opinion was recalled before a mandate issued. Before a revised m ajority opinion in the Court o f Special A ppeals could be filed, Judge Bloom passed away; however, before he died, we are informed that he approved changes in a "new" draft majority opinion. We know this because the title page of the -3- reported opinion (on reconsideration), filed on October 31, 2007 (af ter Ju dge Bloom's passing), said so. 176 Md . App. 731, 934 A .2d 484 (2007). 2 Judge Kenney's dissent also was filed concurrently. The mandate issued on the same day the opinions were filed. The parties did no t question before this Court or the Court of Special Appeals the effect of Judge Bloom's death before a final opinion was filed below and a mandate issued. Because this factor, ho wever, be ars on the ju risdictional ba sis upon which we accepted the case, the parties' omission in this regard is no impediment to our consideration of the discov ered "p roblem ." Section 1-403 of the Courts & Judicial Proceedings Article of the Maryland Code (1973, 2006 Repl. Vol.) provides as to the Court of Special Appeals: Title 1. Court Structure and Organization * * * Subtitle 4. Co urt of Specia l Appeals * * * § 1-403. Sessions; panels; hearings in banc. 2 The relevant language on the title page of the October 31, 2007 opinion was: Bloom, J., participated in the hearing and conferenc e of this case, participated also in the decision and ad option of th is opinion, which he authored, and approved the requested changes, but died prior to the date on which the revised opinion was filed. -4- * * * (b) Panels. A case before the Court of Special Appeals shall be heard by a panel of not less than three judges. . . . The concurrence of a m ajority of a panel is necessary for the decisio n of a c ase." [E mpha sis adde d.] Thus, there was no long er a panel of three judges to hear and decide this appeal on October 31, 2007, when the opinions were filed finally in the Court of Special Appeals. Gen erall y, when a judge vacates office before submitting a decision in an assigned case, no other person is authorized to s ubmit th e decisio n on the judge's b ehalf. State v. Dowd ell, 55 Md. App. 512, 515-516, 464 A.2d 1089, 1091 (1983); see also Dept. of Human Res. v. Howard, 397 Md. 353, 367, 918 A.2 d 441, 45 0 (2007) (n oting that a jud ge genera lly is considered to have vacated office upon death). While the appeal in this case could have been reargued before a reconstituted or new panel in the Court of Special Appeals, there was no authority of w hich we a re aware f or Judge B loom's presu med revis ed draft opinion to have been filed by someone else on his behalf. Thus, the October 31, 2007 opinions and mandate were nullities, and the appeal technically remained pending at the time we issued our writ of certiorari to the in termediate a ppellate cou rt. When this Court g ranted W ildwood 's Petition for W rit of Certiorari and issued a writ in this case on February 13, 2008, it did so, in effect, prior to entry of a proper judgment by the Court of Special Appeals (Maryland Code (1974, 2006 Repl. Vol.), Courts & Judicial Proceedings Article, § 12-201 (stating that "petition can be filed and granted before or after a decision by the Court of Special Appeals")), and while a timely filed appeal remained -5- pending before that court. In such instances, wh en certiorari is granted bypassing the C ourt of Special Appeals, this Court considers all the issues that would have been cognizable by the intermediate appellate court. M d. Rule 8-131(b)(2); 3 Colburn v. Dep't of Pub. Safety & Corr. Servs., 403 M D. 115, 19 9, 939 A .2d 716, 71 9 (2008); Converge Serv. Group, LLC v. Curran, 383 Md. 462, 467, 860 A.2d 871, 874 (2004). That is why it is proper for us to reach and decide the merits of this case. II. On the merits, we shall affirm the ju dgment of the C ircuit Court. In doing so, w e hold that the conve yance and re cordation o f the deed in this case w as exemp t from the S tate recording tax and the Montgomery County transfer tax. A Surveyor s Certificate recorded in Montgomery County in 1990 details the provenance of Plat No. 17744, the subject property. The Certificate identifies Parcel B, the 3 Rule 8-131. Scope of review. * * * (B) In Court of Appeals Additional limitations. * * * (2) No prior appellate decision. Except as otherwise provided in Rule 8-304(c), when the Court o f Appe als issues a writ of certiorari to review a case pen ding in the court of Special Appea ls before a decision has been rendered by that Court, the Court of Appeals will consider those issues that would have been cognizable by the court of Special Appeals. -6- subject parcel, along with several surrounding properties, under the name Aubinoe and Griffith Limited Partnership. The Certificate characterizes Parcel B as 1) a resubdivision of part of Wildwood Manor Shopping Center . . . being part of lands conveyed by Wildwood Investment Corporation to Alvin L. Aubinoe, now deceased, and Dorothy B. Aubinoe by deed dated February 27, 1965; and 2) a subdivision of part of the lands conveyed by Cheshire Land Co., Inc. to Alvin . . . and Dorothy by deed dated September 25, 1962. A deed recorded on February 27, 1969, bearing the signature of Alvin as President of Wildwood Investment Corporation and Dorothy as its Secretary, transfers title to the subject property from Wildwood Investment Corporation to Alvin and Dorothy in equal interest incident to the dissolution of that corporation. The deed states that Alvin and Dorothy previously conveyed the subject property to Wildwood Investment Corporation by deeds dated J anuary 3 1, 1955 and Fe bruary 13 , 1956. After Alvin s de ath, Doroth y transferred title of Parcel B to Doroth y Aubinoe Griffith and Alv in L. Aub inoe, Jr. on M ay 19, 1983. L ater, at Doro thy s death, seve ral individua ls and family trusts acq uired title to portio ns of the p roperty through inheritance, as reflected in deeds recorded through the year 2000. In 2000, the co-owners began filing United States Partnership Tax Re turns. Not u ntil Decem ber 22, 200 3, howe ver, did the c o-owne rs execute a formal pa rtnership agreement. In the partnersh ip s operating agreeme nt, the partners listed as their capital contribution s their interests a s tenants in co mmon in the prop erties. Shortly thereafter, the partnership transferred title to Westwood Medical Center, L.L.C., claiming the -7- transfer qualified for a recording and transfer tax exemption under Maryland Code (2001, 2007 Repl. V ol.), Tax-Property Article, § 12-108(y)(2). 4 The State Land Instrument Intake sheet offered at the time of th e filing of the deed to Wildwood identified the property as non-residential property held by individuals doing business as Wildwood Medical Center General Partnership. The County rejected the claimed exemption on the ground that the property was never titled in the name of Wildwood Medical Center General Partnership as such. The limited liability company paid the taxes under protest and filed the requisite refund request forms. When the County denied the refund, Wildwood appealed to the Ma ryland Tax C ourt. The T ax Cou rt ruled that the transfer qualified for the exe mption, an d the ruling was affirmed by the Circuit Court for 4 Subsection 12-108(y)(2) of the Tax-Property Article states: An instrument of writing that transfers title to real property from a pr edecesso r entity . . . to a limited liability company is not subject to recordation tax if: (i) the members of the limited liability company are identical to the partners of the converting general partnership . ..; (ii) each member's allocation of the profits and losses of the limited liability com pany is identic al to t hat m emb er's allocation of profits and losses of the converting predecessor entity; and (iii) the instrument of writing that transfers title to real property represents the dissolution of the predecessor entity for purp oses of co nversion to a li mite d liab ility co mpa ny. A predecessor entity includes a Maryland general partnership. Maryland Code (2001, 2007 Repl. Vol.), Tax-Prop erty Article, § 12-108(y)(1). -8- Mon tgome ry Coun ty. By the plain and ordinary meaning of § 12-108(y)(2), the statutory exemptio ns apply to the subject deed. The transferor was a Maryland general pa rtnership. Th e partnersh ip confirmed its existence by the terms of a written partnership agreement. The in tent of the members to carry on as a partnership was manifested by the fact that they filed U. S. Partnership Tax Returns for years previous to executing the formal ag reement, specifically 2000 through 2003. The transferee was a limited liability company composed of the same members that comprised the partnership. The same members executed the subject deed, the instrum ent o f wr iting tha t tran sfer red title to the real p rope rty. Section 9A-101(i) of the Corporations and Associations Article of the Maryland Code defines a partnersh ip as an asso ciation of two or more persons who carry on as coowners in a mutua lly beneficial business relationship. Such an association creates a partnership whethe r or not [it] is calle d partnersh ip, joint venture, or a ny other n ame. Maryland Code (1975, 2007 Repl. V ol.), Cor poratio ns & A ssociatio ns Artic le, § 9A-202(a); Madison Nat l Ban k v. New rath, 261 Md. 321, 328, 275 A.2d 495, 499 (1971) (holding individuals who ca rry on a busine ss to mutual be nefit and sh are in its profits to be partners, whether they call themselves such or not ) (quoting McBrie ty v. Phillips, 180 Md. 569, 57374, 26 A.2d 400 , 403 (1 942)). McBriety held that a partnership . . . may be proved by express agreement or may be gathered from the intention of the parties as implied from their acts. Through this well-established principle, partnerships can be discerned from -9- surrounding circumstances. Vlamis v. Deweese, 216 Md. 384, 389 140 A.2d 665, 668, 670-72 (1958) (holding that regardless of the name on the record title, the land was the subject of a partne rship discern able from surrounding circumstances and therefore passed to the partn er as pa rtnershi p prop erty and n ot by dev ise to the widow and he r heirs). It is the inte ntion o f the pa rties, not th e record title alone , that determines whether property not held in the name of the partnership is partnership property nonetheless. Mad ison N at. Ban k, 261 Md. at 323; 275 A.2d at 497 (citing Vlamis v. Deweese, 216 Md. 384, 140 A.2 d 665 (19 58)); Williams v . Dovell, 202 Md. 351, 356-57, 96 A.2d 484, 487 (1953) (holding tha t property acquired as par tnership pro perty may be co nveyed to individuals within the partnership without reference to the partnership). To the extent that Montgom ery County places emphasis on the fact that the partnership in this instance was not formalized until 2003, it is o f note that the prop erty held to be partnership property in Dovell was acquired as joint tenants in 1937 and a formal partnership agreement was not executed until 1946. In the present case, the intent of the co-owners of Parcel B of Wildwood Shopping Center to carry on as partners dates back a t least as far as 1990, when they resubdivided the property and it was identified on the Survey Ce rtificate as partn ership prop erty. In addition, as early as 1965, Alvin and Do rothy Aubin oe clearly illustrated their intent to carry on as business partners in a commercial land development that included the subject property when they formed the Wildwood Investment Corporation, subdivided the property, and c reated the su bject parcel. -10- The County s rationale for demanding payment of recordation and transfer taxes on the subject deed as it transfers title from a pa rtnership of co-own ing individu als to a limited liability company made up of the same individuals is that, by not transferring formally the title to the partnership, the family-based partnership avoids ever having to pay the tax. B ut, where real estate is acquired as partner ship prop erty, [and] is conveyed to the partners by name without reference to the partnership, every right of ow nership and disposition is in the partner ship. Dovell, 202 Md. at 356-57, 96 A.2d at 487 (emphasis added). No one contends that the Aubinoes did not pay recording and other taxes when they acquired the property and transferred it to the Wild wood In vestment C orporation . Surround ing circum stances ind icate that the Aubinoes intended and used the property as co-owners of a business venture; therefore, it was partn ership property. The fact that the p roperty was n ot titled in the name of the partner ship or tr ansfer red to th e partne rship, a trustee, or a no minee of the partnersh ip does not defea t the exem ption in itself. The record title is not dispositive as to whether the requireme nts for the claimed exem ption ar e satisfie d. Vlamis, 216 Md. at 384, 388, 393, 396, 140 A .2d at 66 7, 670- 72. Moreover, it was the partnership interest that the Aubinoe h eirs received on Do rothy s death. As this Court held in Dovell, the legal title to partnership property may not be conveyed, devised, or inherited as the individual property of any of the partners, either as joint tenant or as ten ant in co mmo n. Dovell, 202 Md. at 357, 96 A .2d at 487; s ee also Kay v. Gitomer, 253 Md. 32, 37, 251 A.2d 853, 856 (1969) (holding tha t partnership p roperty is -11- not subject to dower, [cou rtesy], allowances to widow s, heirs or next of kin ). Only the partner s interest in the real estate passes by devise, inheritance, or individual deed, except in the case of a conveyan ce to a purc haser for v alue witho ut notice. Id. at 357, 96 A.2d at 487; see also Dean v. Pinder, 312 Md. 154, 163-64, 538 A.2d 1184, 1189 (1988) (discussing the effect of issuing stock on conveyance for ben efit or v alue). With that exception, the legal title of individual partners is an empty technicality. Dovell, 202 Md. at 357, 96 A.2d at 487. Thus, the partner s interest in the partnership is all that the partner may assign or bequeath and, upon the partne r s death, it is the partnership interest that passes to the administrator as pe rson al property. Id. at 356-57, 96 A.2d at 487. The subject parcel became partnership property when Alvin and Do rothy created th e Wildw ood Inve stment Co rporation, in which they were President and Secretary, respectively, and transferred the subject parcel to the company for further subdivision and development. Dorothy inherited Alvin s partnership interest on his death, and it was this pa rtnership intere st that she trans ferred to Dorothy Aubinoe Griffith and Alv in L. Aub inoe, Jr. in 198 3 or passed by devise to subseque nt family trusts or individuals. The parcel remained partnership property, as long as the same in dividuals ide ntified on th e title, or their heirs and assigns, carried on the partner ship s b usiness activity. Maryland law does not require a title in the name of the partnership in order to transfer the partnership property in the course of business. Under the Maryland Revised Uniform Partnership Act, [a] partnership is an entity distinct from its partners. Maryland Code -12- (2007), Corporations & Associations Article, § 9A-201; Republic Prop. Corp. v. Mission West Prop., L.P., 391 Md. 732, 743, 895 A.2d 1006, 1012 (2006). Section 9A-203 expressly provides that [p]artnership property is property of the partnership and no t the partners individually. Section 9A-302(a)(3) of the Article states: Partnership property held in the name of o ne or more persons other than the partnership, without an indication in the instrument transferring the property to them of their cap acity as partners or of the existence of a partnership, may be transferred by an instrum ent of transfer executed by the persons in whose name the property is held. Under Maryland law, partnership property held in the name of an individual may be transferred to the formal business entity, as was done in this instance. A deed is an instrument that c onveys title to real property. To convey is to transfer or deliver (something, such as a right or property) to another, esp[ecially] by deed or other writing . . . . Black s Law Dictionary 357 (8th ed. 2 004). Th eref ore, convey and transfer are interchangeable terms. A deed of partnership property from the partners on behalf of the partnership to the limited liability company conveys or transfers title from the predecessor entity to the limited liability company. No one contends that the limited liability com pany do es not re ceive le gal title to proper ty as a resu lt of suc h a dee d. To require the converting general partnership first to title the partne rship property in the name of the partnersh ip in order to avail itself of the exemptions at issue is to ignore the past treatment of partnership property and the recognition that partnership property need not be held in the name of the partnership . Applied to the present c ontext, con version is [t]he -13- act of changing from one form to another . . . . Black s at 356. It is reasonable to view the intent of the Ge neral Asse mbly, as reflecte d by the statutory lan guage, as s imply to perm it, under certain spec ified cond itions, a gene ral partnersh ip convertin g to a limited lia bility company and to reflect that conversion in the land records without incurring recordation or transfer tax consequences. Such a reading is consistent with § 4A-213(b)(1) of the Corporations and Ass ociations A rticle, which p rovides tha t [a]ll prop erty owned by the converting general . . . partnership . . . remain s vested in the co nverted entity. (Empha sis added.) Recording the deed in the land record s merely reflects and confirms the statutory vesting of the p artnersh ip prop erty in the lim ited liabil ity compa ny. That interpretation is not inconsistent with the exemption provided in § 12-108(q) of the Tax-Property Article, that an instrument of writing conveying real property from corporations, limited liability com panies and partnership s to the original shareholders, members, or partners of the partnership on its liquidation, dissolution or termination is not subject to recordation tax . . . . In order to qualify for the exemption at issue in this case, the conversion of a general p artnership to a limited liability com pany must re present a dissolution of the predecessor entity, and the real prope rty of the dissolv ed partners hip must be co nveyed to an en tity made up of the identical partners with the same rights and obligations as to pro fits and losses. Exempting conveyances such as the present instance is not unlike exe mpting the conveyanc e of prop erty in a dissolved partnership to the original partners under § 12-108(q). In both situations, there is no change in the comp osite -14- membe rship of the group acting in partnership, and transferring the property title to the same individuals that make up the legal entity at the time of the entity s dissolution effects no real chang e in ow nership . Resting a determin ation of leg islative intent in such taxation matters on a distinction between title and ownership would resurrect an empty technicality that has long been put to rest by cas e law a nd statu tory law. Madison Nat l Bank, 261 Md. at 331, A.2d 495 at 500; Vlamis, 216 Md. at 394, 140 A.2d at 671. Instead, it should be presumed that the General Assembly was aware that long-established rules of partnership law hold that: 1) partnerships are separate entities from their individual partners; 2) partnership real property can be held by one or more persons without reference to the partnership in the instrument transferring the property to them; and, 3) those persons, in turn, may transfer that property by an instrument to another person or entity. See Taylor v. Mandel, 402 Md. 109, 131, 935 A.2d 671, 684 (2007) (noting the presumption that the Legisla ture has acte d with fu ll know ledge o f prior a nd exis ting cas e law, le gislation , and po licy). For these reasons, we affirm the judgment of the Circuit Court for Montgomery Coun ty holding that the d ecision of the M aryland T ax Co urt was correct . JUDGMENT OF THE CIRCUIT COURT F O R M O N T GO M ER Y C O UN T Y AFFIRMED; COSTS IN THIS COURT AND THE COURT OF SPECIAL APPEALS TO BE PAID BY MONTGOMERY COUNTY, MARYLAND. -15-

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