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DISTRICT OF COLUMBIA COURT OF APPEALS

No. 1 6

- TX

- 675
S MART A ZIKEN , A PPELLANT ,

V
. D ISTRICT OF C OLUMBIA , A PPELLEE
. Appeal from the Superior Court of the District of Columbia ( CVT

- 11389

- 13 ) (Hon. John M. Campbell , Motions Judge) (Argued April 5, 2018 Decided September 20, 2018 )
Richard D. Caldwell , with whom Patrick C. Horrell w as on the brief, for appellant. Mary L. Wilson , Senior Assistant Attorney General , Office of the Solicitor General , with whom Karl A. Racine , Atto rney General for the District of Columbia , and Todd S. Kim , Solicitor General at the time the brief was filed , and Loren L. AliKhan , Deputy Solicitor General at the time the brief was filed , were on the brief, for appellee.
Before E ASTERLY and M C L EESE , As sociate Judges , and R UIZ , Senior Judge

. R UIZ , Senior Judge : Appellant Smart Aziken refinanced a mortgage on a property deeded to his sole proprietorship and, as a condition to obtain the loan, was required to transfer the property to a lim ited liability company (“LLC”). 09 / 2 0 /20182

Appellant paid transfer and recordation taxes to record the transfer, but claims he is
entitled to a refund of those taxes pursuant to an ex emption for certain conversions from one form of business entity to another . Appellant argues th at the trial court erred in its interpretation of the exemption statutes when it held that “no conversion was effectuated under the law covering tax exemptions,” because, appellant claims, he met all the statutory criteria to be eligible for the tax exempt ion

. Appellant also argues that the trial court erred in granting summary judgment for the District because it used an incorrect standard to evaluate the motion and, if the correct standard had been applied , appellant could have “ma[d]e out, at the least, a prima facie case for an estoppel argument.” W e affirm.

I. Background 1

Appellant purchased the real property in 2002 for $505,000 and recorded the
deed in the name of S mart E. A ziken T/A F riendship Limousine T ransportation
S ervice, his sole propriet orship

. Ten years later , in order to refinance a mortgage on the property , the bank required that the property be owned by an incorporated entity to insulate it from appellant’s personal liabilities . Appellant filed articles of

______________

_ 1 The facts set out in this section are based on appellant’s complaint and motion for summary judgment supported by affidavit s
. There has been no trial or fact finding.3

incorporation for his LLC on July 6, 2012 , and h e attempted to obtain a
Conversion Certificate from the D.C. Department of Consumer and Regulatory Affairs (“DCRA”) in August of 2012 , that would permit appellant to claim eligibility for a tax exemption at the O ffice of Tax and Reven ue (“OTR”) , but the
Conversion Certificate was not issued. 2

To obtain the refinancing, appellant transferred the property to the LLC on September 19, 2012, by mea ns of a “No Consideration Deed.” In total, appellant was required to pay $59,225.26 in tran sfer and recordation taxes in connection
with the deed

. Still trying to obtain the Conversion Certificate, appellant attended a workshop with DCRA ’s Corporations Division, where Mr. Josef Gasimov , the Assistant Superintendent of Corporations , informed app ellant that he would have
to dissolve his LLC and reestablish it to rece ive the Conversion Certificate, which appellant claimed Gasimov said “should have been issued at the time that the
arti cles of organization were filed . . . .” As instructed, a ppellan t dissol ved the
LLC and created a new one on October 19, 2012 , and a Conversion Certificate was issued the same day. A ppellant applied for a refund of the transfer and recordation

______________

_ 2 Because appellant had not received the Conversion Certificate, he continued to postpone the closing date for the financing, which he claims resulted in additional charges for “substantial fees and interest.” Appellant does not indicat e the amount of the “substantial fees and interest,” nor did he seek to recoup those costs in his suit against the District.4

taxes, claiming the transfer was exempt ; however, his request for a refund was denied by OTR on the ground that the Conversion Certificate was issued “one month after the ‘No Consideration Deed’ had been recorded.”

Appellant sued the District of Columbia on December 7, 2012 , claiming that
the transfer of the property to the L LC was eligible for an exemption from transfer
and recordation taxes and asserting estoppel against the District. The District file d
a motion to dismiss for failure to state a claim and appellant filed a motion for summary judgment. After a hearing, the motions judge, the Honorable John Campbell, treated the District’s Motion to Dismiss as a motion for summary judgment and granted summary judgment for the D istrict.

II. Standard of Review

Interpretation of statutes presents a question of law that we c onsider de novo

. See Cherry v. District of Columbia , 164 A.3d 922, 925 (D.C. 2017). This court
also reviews a grant of summary judgment de novo , applying the same standard as the trial court in considering the motion for summary judgment. See District of Columbia v. District of Columbia Pub

. Serv. Comm’n , 963 A.2d 1144, 1155 (D.C. 2009). A party is entitled to summary judgment if, when the facts are viewed “in5

the light most favorable to the non

- moving party

. . . there [are] no genuine issue[s]
of mater ial fact and [] the moving party is entitled to judgment as a matter of law.” Super. Ct. Civ. R. 56 (c); Hosp

. Temps Corp. v. District of Columbia , 926 A.2d 131, 134 (D.C. 2007). On appeal , this court is required to “conduct an independent
review of the record . . . [to] determine whether any relevant factual issues exist by examining and taking into account the pleadings, depositions, and admissions along with any affidavits on file, construing such material in the light most favorable to the party oppos ing the motion.” District of Columbia v. District of
Columbia Pub

. Serv. Comm’n , 963 A.2d at 1155 (quoting Graff v. Malawer , 592 A.2d 1038, 1040 (D.C. 1991 ) ). Decisions of the tax division of D.C. Superior
Court are considered under the same standard of review as appeals from the court’s
other civil d ivisions

. Hosp

. Temps Corp

. , 926 A.2d at 134 ; Square 345 Ltd. P’ship v. District of Columbia , 927 A.2d 1020, 1023

- 24 (D.C. 2007) ( stating that summary judgment principles apply equally in tax cases)

.

III. Discussion
A. Statutory Interpretation

Generally, when a deed is filed in the District of Columbia, the parties to the
deed must pay transfer and recordation taxes. D.C. Code § § 47

- 903 (a)(1) & (c)6

(2012 Repl.) (transfer tax) , 42

- 1103 (a)(1) & (c) (2012 Repl.) (recordation tax)

. There are enumerated exceptions to these taxes. See D.C. Code § § 47

- 902, 42

- 1102 (2012 Repl.). In 2011, the District adopted an exemption that applies when a property transfer is made “in connection with the conversion of a co nverting entity to a converted entity.” D.C. Code § § 29

- 204.06 (h) ( 2013 Supp.), 42

- 1102 (22)(A), and 47

- 902 (16)(A) (2013 Supp.)

. 3 This recent exemption is part of a broad recodification of the law pertaining to business organization that included a
sub chapter, the “Entity Transactions Act of 2010,” D.C. Code § 29

- 201.01 et seq. (2012 Repl.) , and is based on the Model Entity Transactions Act (“META”)

. D.C. Council, Committee on Public Services and Consumer Affairs, Report on Bill No.

______________

_ 3 There are several conditions that the conversion must m e et to qualify for the tax exemption:

(A) The interest holders of the converted entity are identical to the interest holders of the converting entity; (B) Each interest holder’s allocation of the profits and losses of the converted entity is identical to the interest holder’s allocation of the profits and losses of the conve rting entity; and (C) There is no change in the interest holders of the converted entity or in the allocation to any interest holder in the profits and losses of the converted entity during the 12

- month period following the effective date of the conversion , other than by reason of the death of an interest holder or the involuntary dissolution of the converted entity. D.C. Code § 29

- 204.06 (h)(2) (201 3 Supp.).7

18

- 500, District of Columbia Code Title 29 (Business Organizations) Enactment
Act of 2010 at 9

- 10, 19 (Dec. 2, 2010).

The Act defines a “conversion” as involving a domestic or foreign “entity.”
D.C. Code § § 29

- 201.02 (defining “conversion”),

- 204.01 (authorizing certain

con versions by domestic entities). As defined in D.C. law, “[t]he term ‘entity’ does not include [] [a]n individual.” D.C. Code § 29

- 101.02 (10)(B)(i) (2012 Repl.). T he commentary to the META makes clear that “[s]ubparagraph (B)(i) of
this definition [defi ning the term “entity”] excludes a sole proprietorship from the concept of an ‘entity.’” N AT ’ L C ONF
. OF C OMM ’ R ON U NIFORM S TATE L AWS , 6A
U NIFORM L AWS A NNOTATED 1 5 ( 2016 ). This is because i n a sole proprietorship an
individual owns the business assets dir ectly, rather than through a partnership or corporation. “The sole proprietorship form of business provides ‘complete identity of the business entity with the proprietor himself,’” and “has no legal existence apart from its owner.” Bushey v. N

. Assur. Co . of Am

. , 766 A.2d 598, 603 (Md. 2001) (quoting 1 Z. Cavitch, Business Organizations § 1.04[1], at 1

- 23 (Matthew Bender 2000)). 4 Thus, the plain meaning of the statute’s language is clear that a

______________

_ 4 See also Ladd v. Scudder Kemper Inv

. , Inc. , 741 N.E.2d 47, 49 (Mass. 2001) (“The term ‘sole pro prietor’ refers to a single individual who owns a business.”); West’s Tax Law Dictionary § S2380 (Robert Sellers Smith & Adele Turgeon Smith eds

. , 2018) (defining “Sole Proprietorship” as a “[b]usiness owned (continued .

. .)8

sole proprietorship , being equivalent to the individual owne r , is not an “ entity” that
can transfer or receive property without having to pay recordation and transfer

taxes.

Appellant nonetheless asks this court to interpret the tax exemption at issue to include transfer of a property as part of the change of his sole proprietorship into a single

- member LLC , arguing that : (1) he met “all of the requirements listed on
the Affidavit of Transfer Pursuant to Entity Conversion ,” 5 (2) to interpret the term “entity ” as excluding sole proprietorships is at odds with the D istrict’s

“ characterization of a Sole Proprietorship as a corporate form,” 6 and (3) the type of

_____________________ (.

. . continued) by one person and does not include a corporation , partnership or trust. A sole proprietor is liable for all the debts of the business.”).

5 The s e are requir ements set out in the statute. See supra note 3

.
6 Appellant cites no statutory or case authority for this characterization. Instead, he sub mitted an excerpt from the DCRA website that lists a variety of forms of business organization (sole proprietorships, general and limited partnerships, limited liability partnerships, general and S corporation s , and limited liability companies) under the r ubric “Choose a Corporate Structur e.” Notably, the website ad vises that DCRA “can provide general information on each structure but strongly suggests you contact an attorney and/or an accountant before making a final decision on what structure best suits your business needs.” With respect to sole proprietorships, it notes that a disadvantage is “difficulty obtaining long

- term financing.” https://dcra.dc.gov/service/choose

- corporate

- structure (July 8, 2014)

.9

conversion he completed “d[id] not violate the spirit of the law.” These arguments

run counter to the statutory language and are unsupported by the legislative history.

When the plain language of a statute is “unambiguous” and “does not produce an absurd result” that language dictates how a court interprets the statute. District of Columbia v. Brookstowne Cmty. Dev. Co. , 987 A.2d 442, 447 (D.C. 2010); Jackson v. D istrict of Columbia Bd. of Elections & Ethics , 999 A.2d 89, 101 (D.C. 2010) (“The words used in a statute are the primary, and ordinarily the most reliable, source of interpreting the meaning of the statute.” (internal quotation
marks omitted))

. T ax exemptions , in particular, “will never be implied” in a statute, but instead, must be “expressed in clear and unmistakable terms, or must appear by necessary implication from the language used.” D istrict of Columbia Office of Tax & Revenue v . BAE Sys. E n t er. Sys., Inc. (“ BAE ”) , 56 A.3d 4 77 , 484 (D.C. 2012) ( noting that t ax exemptions are “construed strictly against the claiming party”)

. If the statute is ambiguous, secondary sources will be consulted. See i d. at 485 (consulting legislative history for th e purpose behind ambiguous tax statute);
Brookstowne , 987 A.2d at 448

- 49

.

Here, no express language in the statute exempts appellant’s transfer from an individual to a limited liability company and none has to be implied by way of10

necessity . To the contr ary, as already discussed, the statut ory language and commentary to the model law, after which it was drafted , are clear that a “converting entity” does not include an individual / sole proprietorship

.

T he legislative history , even if it were necessary to resolve an ambiguity in the statutory language , does not support appellant’s argument. Appellant does not point the court to any mention made of sole proprietorships in the committee report or in any subsequent amendments to the statute , and we have foun d none

. See D.C. Council, Committee on Consumer and Regulatory Affairs, Report on Bill No.
10

- 277 (Feb. 22, 1994) ; D.C. Council, Committee on Public Services and Consumer Affairs, Report on Bill No. 18

- 500, District of Columbia Code Title 29 (Business Org anizations) Enactment Act of 20 10 at 4

- 5 , 19

- 20 (Dec. 2, 2010) ; D.C. Council, Committee on Public Services and Consumer Affairs, Report on Bill
No. 19

- 532, District of Columbia Title 29 Technical and Harmonizing
Amendments Act of 2012 at 6

- 7, 32 (June 22, 2012).

Appellant argues that he complied with the “spirit of the law , ” because the
transfer he effectuated comports with the purpose of the exemption

. Whatever the merits of his position, it amounts to a plea that the court overlook the clear statutory l anguage and come to our own determination of what the exemption11

should cover. This is a matter of legislative policy, not one of judicial interpretation

. 7

B. Equitable Estoppel

Our conclusion that the statutory exemption do es not apply to a transfer of
p roperty from a sole proprietorship to an LLC is dispositive of appellant’s estoppel
claim. 8 We begin by noting that estoppel , when a sserted against “the public . . .

. should not be invoked except in rare and unusual, or exceptional, circumstances.”
D ist rict of Columbia Office of Tax & Revenue v. Exxonmobil Oil Corp. , 141 A.3d

______________

_ 7 We are unpersuaded by appellant’s argument t hat his circumstance is no different than “a partnership giving to an LLC.” Unlike sole proprietorships, p artnerships (general and limited) are expressly included in the definition of “entity.” D.C. Code § 29

- 101.02 (10)(A)(iii) and (iv). The D.C. Code defines a partnership as “an entity distinct from its partners , ” D.C. Code § 29

- 602.01 (a) (2012 Repl.) , in contradi stin ction to the complete overlap in identity between a sole proprietorship and its individual owner , who is expressly excluded from the def inition of “entity.”

8 The trial court dismissed this argument, finding that : (1) appellant could not show a promise was made because the District employees only provided him general information regarding the process and made no specific promise; (2) e ven if the District ’s agents did make a promise, it was unreasonable for appellant to rely on it because they “plainly lack the authority to grant such a refund” ; and (3) appellant did not allege any “affirmative misconduct” on the part of any District emp loyee. As discussed in the text, we reject appellant’s estoppel claim as a matter of law and need not address the trial court’s other stated reason s or appellant’s argument that the trial court misapplied the standard for summary judgment.12

1088, 109 2 (D.C. 2016) (internal quotation marks omitted)

. Our case law
establishes that e stoppel claims against the District must meet four elements: (1) a promise made, (2) reas onable reliance on that promise , (3) an injury caused by breach of the promise , and (4) a showing that enforcement of th e promise would be in the public intere st and would prevent injustice. Brookstowne , 987 A.2d at 450. Appellant’s estoppel cl a im founde rs on the second element because claimants are imputed with knowledge of the scope of an agency’s authority. Thus, as a matter of law, it is not reasonable to rely on a promise by an agent who “plainly lacks the authority to do whatever he has promised.” Id. (noting that reliance was unreasonable where statute “clearly provides that only the three enumerated categories of [] entities are eligible”). As e stoppel against the District is limited to circumstances where the equities are strongly in favor of t he party seeking to
invoke it and in which the agency ha s the authority to act , District of Columbia v.
Stewart , 278 A.2d 117, 119 (D.C. 1971); Coffin v. District of Columbia , 3 20 A.2d 301, 305

- 06 (D.C. 1974), appellant could not succeed on a claim of esto ppel.

Appellant alleges that his reliance on the promised refund was reasonable
because the statements were made by agents of the Office of Tax and Revenue, experts on the matter of tax exemptions who acted “within the purview of their actual authority. ” We disagree . Actual authority denotes that the agent has lawful13

authority to complete the action, see Perkins v. District of Columbia , 146 A.3d 80, 85 (D.C. 2016) , in this case , to effect a refund because the taxes collected were not
due

. This argumen t fails to consider the statut e imposed requirements that District employees had the obligation to apply, and did not authorize a discretionary
refund.

W e conclude that D.C. law clearly provides that the transfer effectuated by appellant from himself to an LLC did not come within the exemption from applicable transfer and recordation taxes, and that appellant therefore cannot demonstrate that any reliance on his part to a contrary understanding was reasonable , such that the government should be estopped f rom denying his claim
for a refund . The grant of summary judgment to appellee is

Affirmed

.