Court Opinion

ID: 9846811
Source: CourtListenerOpinion
Date Created: 2023-09-24 03:48:51.415319+00
Date Added: 2024-06-11T09:19:50.442799
License: Public Domain

Hale, J.
(dissenting) — Conceding that the majority opinion rests on precedent, but being in disagreement with its rationale, I feel obliged to point out that this is the first time the whole court has considered the problem. Deer Park Pine Indus., Inc. v. Stevens Cy., 46 Wn.2d 852, 286 P.2d 98 (1955), the first in a line of cases interpreting the statute in issue, and subsequent cases, Doric Co. v. King Cy., 57 Wn.2d 640, 358 P.2d 972 (1961); Estep v. King Cy., 66 Wn.2d 76, 401 P.2d 332 (1965); and Ban-Mac, Inc. v. King Cy., 69 Wn.2d 49, 416 P.2d 694 (1966), were all departmental opinions.
Christensen v. Skagit Cy., 66 Wn.2d 95, 401 P.2d 335 *188(1965), however, involved the same statute and a similar transaction, but, in my opinion, departed from the rationale of the earlier cases and thus cast some doubt on Deer Park and its successors. But Christensen, too, lacks in decisive authority because it also was a departmental decision. In my mind, however, the rationale of Christensen comes closer to carrying out the intention of the legislature than do the other cases.
The issues, as I see them, are quite simple. Did Metropolitan sell real estate to Pantorium? Did it effect a transfer or conveyance for a valuable consideration? If the transfers are for a valuable consideration, théy are taxable sales under the pertinent statutes.
Did Metropolitan sell and convey $400,000 worth of real estate to Pantorium? Respondents William and John Weaver owned all of the capital stock of three corporations, Metropolitan Laundry Company, Aurora Launderers and Cleaners Corporation and Crescent Laundry and Cleaning Company. Respondents sold all of their capital stock in these three corporations to Pantorium Launderers and Cleaners, Inc., for one million dollars. Metropolitan Laundry Company owned the real estate in issue which the parties agree had a market value of $400,000. Pantorium, now the owner of all of the capital stock of Metropolitan voted to dissolve Metropolitan and had liquidating trustees appointed to execute the dissolution. It was the delivery of a statutory warranty deed from the liquidating trustee, conveying all of Metropolitan’s real estate to Pantorium which the county says was a taxable conveyance. I think so too.
We start the transaction with Metropolitan owning $400,000 worth of real estate and wind up with Pantorium owning it. Somehow or other the real estate was conveyed or transferred to Pantorium. I see no way, therefore, that this would be held other than a conveyance, grant, assignment or transfer of the ownership or title to real property for a valuable consideration, exactly as described in the following statute:
The real estate sales tax provided for herein shall be *189levied upon each sale of real property located within the county. RCW 28.45.060.
The term “sale” is defined in RCW 28.45.010 as follows:
As used in this chapter, the term “sale” shall have its ordinary meaning and shall include any conveyance, grant, assignment, quitclaim, or transfer of the ownership of or title to real property ... or any estate or interest therein for a valuable consideration . . . . (Italics mine.)
The case authority on which the majority appears to rely rests on the idea that a transfer of real-estate title from one entity to another by use of a conduit or intermediary, such as a trustee or escrow holder, either through a merger, consolidation, absorption, or acquisition of the grantor entity by or with the grantee, and a consequent dissolution of the grantor, all somehow constitutes a transfer without consideration and, hence, not a sale within RCW 28.45.010, supra, imposing a 1 per cent excise on all real-estate sales.
But, transfer of real estate from a dissolved corporation to its stockholders, or from a dissolved corporation to another which has acquired its capital stock, or from partners to a corporation in which the grantor will own the capital stock, or from a corporation merging or consolidating with or acquiring another, all, from their very nature, appear to me abundantly supported by consideration and should be held taxable as sales of real estate unless made by gift, devise, foreclosure, or through other exempted transactions.
The benefits and corresponding detriments, the actions and expenses involved in dissolution of a corporation, or the creation of another, are so numerous and varied that they or the mere mutual promises to do any of these constitute a valuable consideration. Thus, I think that the series of decisions beginning with Deer Park Pine Indus., Inc. v. Stevens Cy., supra, followed by Doric Co. v. King Cy., supra; Estep v. King Cy., supra; and Ban-Mac., Inc. v. King Cy., supra, in denying taxability for want of consideration on transfers of this kind has overlooked the most fundamental nature of consideration — a benefit on the one side *190and a detriment on the other, or mutual benefits or mutual detriments. I do not see how a promise to create or dissolve a corporation or merge or consolidate two or more corporations is not a promise to confer a benefit or incur a detriment so as to support an agreement. How, then, can it be said that the performance of the promise, the doing of the promised act, is less than the promising of it? To hold the creation or dissolution of a corporation or the merger or consolidation of two or more corporations, or the acquisition of one corporation by another through control or ownership of the common stock are transactions without consideration, to me does violence to the doctrine of consideration.
Where there is either a detriment on the one hand or a benefit on the other, or mutual benefits, or eorrelatively a benefit and a detriment together, the benefits and the detriments singly or both together constitute a consideration legally sufficient to support a promise. If the consideration is sufficient to cement the agreement, the courts are not concerned with its adequacy, for the courts do not measure the comparative value of the promises or the acts exchanged. The weighing of the quid pro quo is left to the parties to the transaction. Where there is sufficient consideration to support the agreement, it is binding upon the parties thereto and inevitably must be treated as a valuable consideration. Browning v. Johnson, 70 Wn.2d 145, 422 P.2d 314 (1967).
Therefore, I see no difference in principle as far as the doctrine of consideration is concerned between conveyances to or from newly organized corporations and conveyances from a dissolving one, and, of course, the same applies to mergers, consolidations and acquisitions of one corporation with or by another. There exists little distinction as far as consideration is concerned between conveyances to a corporation on its formation or from the corporation on its dissolution.
Aside from the doctrine of consideration, it would seem that the transfer of real-estate ownership from individuals to a corporation, or from a corporation on dissolution to its *191shareholders, or from one corporation to another on a merger or consolidation of one with the other, or any transaction by which one legal entity acquires it from another, are taxable sales under the statute, for, as I see it, the legislature, in defining taxable sales, employed the very language essential to make such transactions taxable.
The legislature, in this statute (RCW 28.45.010), has expressly enlarged the ordinary meaning of a sale — that is, one where a buyer purchases from a seller for money or property — to specifically include every kind of grant, conveyance, or transfer of ownership for any valuable consideration. Alongside this extremely broad definition, lest there be any mistake as to its all-inclusive purpose, the statute sets forth in a subsequent paragraph specific exemptions, thus carving out from the broad definition of taxable sales such transfers as are accomplished by gift, devise, inheritance, forfeitures of conditional sales, deeds in lieu of foreclosure and partitions among tenants in common by agreement or court decree and divorce, etc.
The taxing section, therefore, under familiar rules of statutory construction, should be given a liberal construction and the exemption a narrow one for exemptions in a tax statute must be strictly construed in favor of the tax (Unemployment Compensation Dep’t v. Hunt, 17 Wn.2d 228, 135 P.2d 89 (1943)), whereas one who claims the exemption has the burden of demonstrating that his transaction falls within it. In re St. Paul & Tacoma Lumber Co., 7 Wn.2d 580, 110 P.2d 877 (1941). This is but another way of saying that the taxing section requires a liberal construction in favor of the tax and the exemptions, defeating the tax, a narrow one unless the act itself specifies differently. Therefore, the county is entitled to a broad definition of consideration — although I do not think it is needed here— and the taxpayer has the burden of showing want of consideration. When one lays the exempt transactions alongside the included transactions, I think no alternative remains in construing the statute but to place the instant transfer within the definition of sale.
Further, that the legislature had in mind all kinds of *192transfers of real estate even though involving no direct exchange of money or property may be seen in the provision of RCW 28.45.035 which authorizes the assessor to have an appraisal made, based on full market value, when the selling price is neither ascertainable at sale nor separately stated.
Accordingly, I am of the opinion that the conveyances of land from the liquidating trustee of Metropolitan to Panto-rium, the acquiring corporation, are clearly taxable under the rationale of Christensen v. Skagit Cy., 66 Wn.2d 95, 401 P.2d 335 (1965), (also heard departmentally). There we held that conveyances of three supermarkets in separate locations by several partners desiring to do business in corporate form, to three newly organized corporations in which the partners were the only incorporators and stockholders in exchange for stock in the corporations, constituted sales as defined in RCW 28.45.010. We epitomized it this way: “The major problem is whether the transfer of ownership of real property from members of the partnership to the corporation in exchange for stock in the corporation constitutes a ‘sale’ within the meaning of the term as defined in RCW 28.45.010,” and solved the problem by answering “yes,” that it did constitute a sale.
Finally, I think we should look at the whole statute to see if the legislature intended to tax the instant transaction. In 1951, at its first extraordinary session, the legislature enacted chapter 11 to provide additional funds for the support of public schools, giving the school boards in each county authority to compel the county commissioners to pay to each district attendance credit of 17 cents per day. As an alternative, the commissioners were allowed to escape this mandate only by levying the 1 per cent excise tax on real-estate transactions as defined in RCW 28.45.060, the statute at issue here, providing that the money realized from this tax be paid to the schools in lieu of the 17 cents per attendance credit day. Laws of 1951, Ex. Ses., ch.ll, § 1, p.108.
In view of this drastic legislative means employed to compel the counties to impose the tax or in the alternative *193pay 17 cents per pupil day to the schools, I doubt that the legislature contemplated that real-estate transfers to or from newly organized, dissolving, merging, consolidating or acquiring corporations be exempt from this tax unless such conveyances fell within the transactions specifically exempted.
A look at today’s economic scene, significantly similar to that of 1951, makes clear that the legislature did not intend to exempt transfers of real estate in corporate mergers, consolidations and acquisitions from the scheme of taxation. United States v. Von’s Grocery Co., 384 U.S. 270, 16 L. Ed. 2d 555, 86 Sup. Ct. 1478 (1966), while not otherwise in point, depicts some of the pertinent economic facts of life in this country concerning the instant type of transaction.
That case involved an antimerger complaint brought by the United States to block the merger of two giant grocery chains in Los Angeles County. Although that opinion is not otherwise relevant to the instant case, it does contain an abundance of statistical data showing the enormous number of mergers taking place in only one industry, the grocery business, in Los Angeles County, and one must assume that the same thing is going on perpetually in every line of business or industry throughout major population centers of the state of Washington. Thus, while the tax involved is only 1 per cent of the gross sale, in the course of time it probably runs into millions of dollars which the legislators, I am confident, intended to put into school financing.
If, as I contend, this court has erroneously construed this tax statute in a series of decisions which all came before the court departmentally, we can derive little comfort from the often but wistfully expressed notion that the legislature will soon see our error and correct it. In many instances, this legislative remedy simply does not take place, and this court, of course, cannot make it happen. See Peck, The Role of the Courts and Legislatures in the Reform of Tort Law, 48 Minn. L. Rev. 265 (1963). We have forthrightly corrected errors in the past. Greene v. Rothschild, 68 Wn.2d 1, 5, 402 P.2d 356, 414 P.2d 1013 (1966). We should not hesitate to do so now.
*194I would reverse under the authority of Christensen v. Skagit Cy., 66 Wn.2d 95, 401 P.2d 335 (1965), and let the county keep the tax.
Finley, C. J., concurs with Hale, J.
Rosellini, J., concurs in the result of the dissent.
March 22, 1968. Petition for rehearing denied.