Brown v. Prince George's County

. MURPHY, Chief Judge. This appeal from the Circuit Court for Prince George’s County presents the following question for our review: Was the denial of a claim for refund of county transfer taxes in error where there was a failure of the consideration for which transfer taxes were collected? We answer that question in the affirmative and therefore reverse the judgment of the circuit court.

FACTS This appeal stems from a rather complex real estate transaction involving Sidney J. Brown, appellant, and a variety of lenders, including Sovran Bank (“Sovran”). 1 On June 26, 1991, appellant recorded a Modification Agreement (“1991 Modification”) in the land records of Prince George’s County. The terms of this agreement between appellant and Sovran provided, inter alia, for an increase in the amount of the underlying indebtedness of a prior promissory note. The 1991 Modification purported to increase appellant’s indebtedness from $2,824,102.15 to $4,840,000.00 (a difference of $2,015,-897.85), although the agreement also provided that appellant must satisfy certain conditions before any additional funds would be advanced. When the 1991 Modification was recorded, appellant paid Prince George’s County transfer taxes in the amount of $30,238.47.

Appellant never satisfied Sovran’s conditions, however, and in July of 1992, Sovran sent appellant a letter stating that, ²⁴⁴ although the 1991 Modification secured $4,840,000.00, Sovran would not advance any additional funds above the outstanding balance. On August 6, 1992, appellant recorded a second Modification Agreement (“1992 Modification”) in the land records of Prince George’s County. The 1992 Modification provided, inter alia, for an extension of the repayment term and also confirmed that Sovran would not be obligated to advance any additional funds. Appellant then filed a claim for refund of the transfer tax paid on the $2,015,897.85 that had not been advanced and the Director of Finance for Prince George’s County denied that claim.

Appellant appealed that decision to the Maryland Tax Court where the decision not to refund the $30,238.47 transfer tax was affirmed. Appellant then petitioned for judicial review in the Circuit Court for Prince George’s County, where the decision of the Maryland Tax Court was affirmed. This appeal followed. Discussion The circuit court’s decision turned on its interpretation of Md.Code Ann., Tax-Prop. § 14-908 (1994).

Questions of law, including the circuit court’s interpretation of a statute, are reviewed under the “substitution of judgment” standard. Supervisor of Assessments v. St. Leonard Shores Joint Venture, 61 Md.App. 204, 212 , 486 A.2d 206 (1985); aff'd, 307 Md. 441 , 514 A.2d 1215 (1986). Accordingly, we are under “no constraints in reversing a ... decision that is premised solely upon an erroneous conclusion of law.” Prince George’s County v. Brown, 334 Md. 650, 658 , 640 A.2d 1142 (1994) (quoting Montgomery County v. Buckman, 333 Md. 516, 519-20 , 636 A.2d 448 (1994)). We are persuaded that appellant is entitled to a refund of the county transfer tax paid on the portion of the loan that was never advanced.

Such a right is provided for by provisions of the Prince George’s County Code and of the Md.Code Ann., Tax-Property Article. Section 10-188(a) of the Prince George’s County Code imposes a transfer tax on “actual ²⁴⁵ consideration paid or to be paid.” P.G, County Code § 10-188(a) (1983 & Supp.1994). Section § 14-908 of the Tax-Property Article provides: A person who submits a written refund claim for transfer tax that has been erroneously or mistakenly paid to or illegally or erroneously assessed or wrongfully collected ... is eligible for a refund from the Department, clerk, or Director of Finance that collected the transfer tax. Md.Code Ann., Tax-Prop. § 14-908 (1994 RepLVol.) (emphasis supplied).

Initially,