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Gardner v. Department of Treasury

Supreme Court of Michigan

July 9, 2015

JAMES GARDNER and SUSAN GARDNER, Petitioners-Appellants,
v.
DEPARTMENT OF TREASURY, Respondent-Appellee. LIEM NGO and ALECIA NGO, Petitioners-Appellants,
v.
DEPARTMENT OF TREASURY, Respondent-Appellee. JOHN MASELLI and JENNIFER MASELLI, Petitioners-Appellants,
v.
DEPARTMENT OF TREASURY, Respondent-Appellee

After selling their principal residences, James and Susan Gardner, Liem and Alecia Ngo, and John and Jennifer Maselli sought refunds from the Department of Treasury of the transfer tax they had paid on the sales. The department denied the refund requests. Petitioners appealed in the Tax Tribunal, which reversed the department's decision in all three cases, holding that petitioners were entitled to refunds. The department appealed, and the appeals were consolidated by the Court of Appeals. The Court of Appeals, CAVANAGH, P.J., and STEPHENS, J. (OWENS, J., dissenting).

For JAMES GARDNER, SUSAN GARDNER, Petitioners-Appellees: JOSHUA THOMAS SHILLAIR, SOUTHFIELD, MI.

For DEPARTMENT OF TREASURY, Respondent-Appellant: MATTHEW B. HODGES, LANSING, MI.

Chief Justice: Robert P. Young, Jr. Justices: Stephen J. Markman, Mary Beth Kelly, Brian K. Zahra, Bridget M. McCormack, David F. Viviano, Richard H. Bernstein.

OPINION

[498 Mich. 3] BEFORE THE ENTIRE BENCH

Per Curiam.

In these consolidated appeals, we consider whether petitioners, who sold their principal residences in arm's-length transactions, are entitled to refunds of the real estate transfer tax under the real estate transfer tax exemption set forth in MCL 207.526(u) when the state equalized value of the properties at the time of sale was less than it was at the time of their original purchases. We hold that petitioners are entitled to refunds under the real estate

Page 200

transfer tax exemption in these circumstances. We therefore reverse the judgment of the Court of Appeals and remand these cases to the Tax Tribunal for further proceedings consistent with this opinion, including reinstatement of its judgments in favor of petitioners.

I. BASIC FACTS AND PROCEDURAL HISTORY

Petitioners in these consolidated cases are all homeowners who sold their principal residences at a time when the state equalized value (SEV) of their respective properties was less than the SEV at the time of their purchase.[1] Upon the sale of their homes, the petitioners paid a transfer tax under MCL 207.523 of the State Real Estate Transfer Tax Act (SRETTA), MCL 207.521 et seq., and then requested a refund from respondent, the Department of Treasury, under MCL 207.526(u). That statute exempts from this tax a sale [498 Mich. 4] or transfer of a principal residence when, at the time of the conveyance, the property has an SEV that is " equal to or lesser than the [SEV] on the date of purchase or on the date of acquisition by the seller or transferor for that same interest in property." Significantly, this subsection includes a penalty clause under which a 20% penalty is assessed against the seller or transferor of property in the event that the treasurer finds that the sale or transfer was for " a value other than" the property's " true cash value."

Respondent separately denied petitioners' requests for a refund of the transfer tax, concluding that they were not entitled to the claimed exemption because each property sold for more than its " true cash value," which respondent interpreted to mean two times the property's SEV or less in the year of sale. Each petitioner thereafter appealed in the Michigan Tax Tribunal, which awarded refunds to petitioners on the ground that the conveyances were exempt under MCL 207.526(u). In reaching this conclusion, the Tax Tribunal observed that the first portion of the statute unambiguously indicates that the exemption applies if, at the time of sale, the property's SEV is less than or equal to the SEV at the date of acquisition. However, the Tax Tribunal determined that the penalty clause renders the statute ambiguous because its literal reading would mean that the exemption applies only when the sale price of the property is exactly twice the property's SEV. The Tax Tribunal, reasoning that statutes must be construed to avoid absurd results, concluded that the Legislature intended for petitioners to be granted the exemption. Finally, when petitioners had presented market evidence that the sale of each property was for its " true cash value" and respondent had failed to provide any market evidence to the contrary, the Tax [498 Mich. 5] Tribunal found that the penalty clause did not apply.[2]

Page 201

The Court of Appeals consolidated these cases and reversed the Tax Tribunal's refund award in a split published opinion.[3] Contrary to the Tax Tribunal's determination, the majority concluded that MCL 207.526(u) is unambiguous in its entirety and that the exemption only applies if the property's SEV at the time of its sale is precisely twice the property's SEV at the time of its purchase. Relying on the definition of " true cash value" provided under the General Property Tax Act (GPTA), MCL 211.1 et seq., the majority defined the term as used in MCL 207.526(u) to " require[] consideration of how much claimants of the transfer tax exemption were paid for their respective properties compared to how much their properties were worth for taxation purposes." [4] Because petitioners sold their properties for a value that was not equal to twice the property's SEV at the time of purchase, the majority held that the ...


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