Before Schwelb, Farrell, and Reid, Associate Judges.
The opinion of the court was delivered by: Schwelb, Associate Judge
Appeals from the Superior Court of the District of Columbia Hon. Kaye K. Christian, Trial Judge
These consolidated cases arise out of attempts by two different taxpayers to recover recordation taxes paid, under protest, to the District of Columbia Recorder of Deeds following the recordation, in 1995, of certain deeds of trust. After having agreed on all material facts below, the parties in each case cross-moved for summary judgment. In the case brought by 1137 19th Street Associates, L.P. ("19th Street Associates"), which we shall call Case No. 1, the trial judge held that the taxpayer was obliged to pay the recordation tax, and she granted the District's motion for summary judgment. In the companion case, which was brought by 1828 L Street Associates, L.P. ("L Street Associates"), and which we shall call Case No. 2, the judge granted summary judgment in the taxpayer's favor and ordered the District to refund the full amount of recordation tax paid. We affirm in Case No. 1, but reverse and remand in Case No. 2.
I. FACTUAL AND PROCEDURAL BACKGROUND
The parties agree that the following material facts are undisputed:
Case No. 1 concerns square 140, lot 907, known as 1137 19th Street, N.W. in Washington, D.C. (the "19th Street property"). At all times relevant to this suit, the property has been owned by 19th Street Associates.
In June 1979, 19th Street Associates, as borrower, closed on a construction loan, with the 19th Street property serving as collateral. The construction loan deed of trust was recorded on June 14, 1979. Under the District's recordation tax statute in effect at that time, 19th Street Associates was not required to pay any tax on the recordation. D.C. Code § 45-722 (5) (1973). On June 30, 1980, the amount of the construction loan was increased to $22,000,000.00. At that time, the applicable statute likewise did not require the payment of a recordation tax on the amount of the loan. Id.
On January 14, 1981, 19th Street Associates refinanced its construction loan with a permanent loan in the amount of $23,500,000.00. When 19th Street Associates recorded the deed of trust and secured the permanent loan with the 19th Street property as collateral, it paid a recordation tax of 1.0%, as required by statute, on the difference between the principal of the permanent loan and the principal of the final construction loan (i.e., $15,000.00 of recordation tax on the $1,500,000.00 increase). D.C. Code § 45-923 (a) (1981).
On January 31, 1995, when the principal balance of this permanent loan was $22,296,975.00, 19th Street Associates obtained a new permanent loan in the amount of $22,000,000.00 to refinance the outstanding balance. When the taxpayer recorded the new $22,000,000.00 deed of trust encumbering the 19th Street property and securing its new loan, it paid, under protest, the 1.1% recordation tax, i.e., $242,000.00. D.C. Code § 45-923 (a) (1996) (as amended in 1994). *fn1 The present controversy arises from the taxpayer's claim that no recordation tax was due.
After having made this recordation tax payment, the taxpayer instituted an administrative proceeding, seeking a refund from the Recorder of Deeds. On June 2, 1996, after the Recorder had failed to act on the petition for more than six months, the taxpayer brought suit in the Superior Court for a refund. See id. §§ 45-935 (1996), 47-3310 (1997). The parties filed cross-motions for summary judgment. In an order entered on October 5, 1999, which resolved both Case No. 1 and Case No. 2, the judge concluded, as a matter of law, that the taxpayer in Case No. 1 was not entitled to a refund. The judge therefore granted summary judgment in favor of the District and against 19th Street Associates, holding that recordation of 19th Street Associates' 1995 deed of trust was not exempt from taxation. This timely appeal followed.
On April 2, 1962, the 1828 L Street Joint Venture ("Joint Venture") was organized for the purpose of acquiring a leasehold interest in the property at square 107, lot 74, known as 1828 L Street, N.W. in Washington, D.C. (the "L Street property"). A few days later, on April 6, 1962, the Joint Venture, as tenant, obtained a ninety-nine-year lease of the property. The lease authorized the Joint Venture, subject to the terms of the lease, to assign its tenancy, to construct improvements on the leased property, and to mortgage or encumber the leasehold interest.
L Street Associates, the taxpayer in Case No. 2, was formed on December 30, 1967, and acquired the Joint Venture's assets. On January 30, 1968, the Joint Venture assigned its ninety-nine-year lease to L Street Associates. In January 1970, L Street Associates, as borrower, obtained an $8,000,000.00 construction loan, secured by the ninety-nine-year lease, to finance improvements on the L Street property. These improvements consisted of a commercial office building then (and now) owned by L Street Associates. At the time of the transaction, the recordation of construction loan deeds of trust was not subject to taxation, D.C. Code § 45-722 (5) (1967), and L Street Associates was not required to pay any tax at the time the leasehold deed of trust that secured the construction loan was recorded.
On February 28, 1995, the construction loan had an outstanding balance of $1,073,493.28. On that date, the taxpayer refinanced that loan for an amount of $15,000,000.00. The refinanced loan was secured by the ninety-nine-year lease and by L Street Associates' ownership interest in the commercial office building it had constructed on the L Street property. The leasehold deed of trust was submitted for recordation on March 6, 1995. At that time, the recording of both construction and permanent loan deeds of trust was subject to the recordation tax. See D.C. Code §§ 45-921, 45-922, 45-923 (a) (as last amended in 1994). L Street Associates contested its liability, but it paid, under protest, 1.1% of the entire loan amount, i.e., $165,000.00, in recordation tax.
L Street Associates initially applied for a refund from the Recorder of Deeds. As in Case No. 1, more than six months passed without any action by the District on the taxpayer's administrative petition. *fn3 See id. §§ 45-945, 47-3310. On January 2, 1996, L Street Associates brought suit in the Superior Court, seeking a refund of its recordation tax. The facts not being in dispute, both parties cross-moved for summary judgment. In her dispositive order of October 5, 1999, the trial judge held that L Street Associates' 1995 leasehold deed of trust was not subject to the District's recordation tax. The judge therefore granted summary judgment in favor of L Street Associates, and she ordered the District to refund the entire $165,000.00 to the taxpayer. The District timely appealed.
We begin with a brief review of the relevant statutory framework. Both cases under review involve the District of Columbia's Recordation Tax Act (the "Act"), D.C. Code §§ 45-921 et seq. (1996 & Supp. 2000). The Act imposes a tax on the recordation both of specified deeds and of security interest instruments. *fn4 Id. § 45-923 (a). The tax applies only to instruments that transfer an interest in real property. Real property is defined in the Act as "every estate or right, legal or equitable, present or future, vested or contingent in lands, tenements, or hereditaments located in whole or in part within the District." Id. § 45-921 (4). In addition, the Act provides a number of exemptions from the recordation tax.
One of these exemptions, which has been invoked by the taxpayers in both of these cases, is the "permanent loan deed of trust" exemption. The Act specifies that, "[w]hen a permanent loan deed of trust . . . is submitted for recordation and the tax on the construction loan deed of trust . . . has been timely and properly paid," *fn5 no recordation tax is due "except where the amount of the obligor's liability secured by the permanent loan deed of trust . . . exceeds the amount of his liability secured by the construction loan deed of trust." Id. § 45-922 (11). If the amount of the permanent loan exceeds that of the construction loan, "the [recordation] tax shall be calculated only on the amount of such difference." Id.
The other exemption relevant to the issues presented in these cases is the "refinancing exemption" from the 1.1% tax on the recordation of security interest instruments. See D.C. Code § 45-923 (a)(3). Section 45-923 (a)(3) provides that, "when existing debt is refinanced, the recordation tax shall only apply to the amount of any new debt incurred over and above the amount of the principal balance due on existing debt if the existing debt was . . . subject to taxation under this paragraph."
These appeals require us to construe and apply the foregoing provisions. Case No. 1 involves a deed of trust through which a permanent loan was secured by the underlying property itself. That instrument is a security interest instrument, see D.C. Code § 45-921 (14), and Case No. 1 therefore involves both the permanent loan deed of trust exemption and the refinancing exemption. In Case No. 2, the instrument at issue is a deed of trust under which the permanent loan was secured by L Street Associates' ninety-nine-year lease as well as by its ownership interest in the commercial building located on the leased property. Case No. 2 requires us to determine, first, whether such a leasehold deed of trust is subject to the District's recordation tax, i.e., whether L Street Associates' ninety-nine-year lease falls within the Act's definition of "real property." Id. § 45-921 (4). If we conclude that it does, then we must consider the taxpayer's eligibility for the permanent loan deed of trust exemption.