TAXATION ‑- REAL ESTATE EXCISE TAX(1)

TAXATION ‑- REAL ESTATE EXCISE TAX

A deed naming no grantee which is given to a purchaser for a consideration vests equitable title in the purchaser, and the transaction constitutes a taxable sale.  Subsequent delivery of the deed by such purchaser to a third person named as grantee in the deed for consideration is also a taxable sale.

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                                                                   May 23, 1957

Honorable Don J. Clark
Prosecuting Attorney
Yakima County Court House
Yakima, Washington                                                                                                                Cite as:  AGO 57-58 No. 70

Dear Sir:

            You have requested our opinion as to the applicability of the real estate excise tax imposed pursuant to chapter 28.45 RCW upon the following transactions.

            A home owner lists his house with a realtor under an agreement that if the house is not sold within a stipulated time, the realtor himself will purchase the house at an agreed price.  The reason for the realtor's agreement to purchase is that the owner wishes to buy another house listed with the realtor within the stipulated time, and needs the funds obtained from the sale of his house to use as a payment upon the new house.  This is described in the trade, you advise, as a "trade‑in house plan."  If no buyer is obtained for the owner's house, the realtor purchases the owner's house and either uses it for his own purposes or continues to seek a buyer.  In such event the owner executes a deed in blank which is delivered to the realtor who is authorized to insert as grantee the name of the person to whom the realtor sells the house.  At the time the owner executes the deed, he also executes an instrument which sets forth the fact that a deed in blank has been given which authorizes the realtor to insert the grantee's name, and that the owner, by such deed, has divested himself of all interest in the property.  This latter instrument is recorded to give notice of the realtor's interest in the property.

            You inquire whether the tax would apply to the sale of the house to the realtor  [[Orig. Op. Page 2]] and also to the sale by the realtor to the new purchaser.  It is our conclusion that the tax applies to both sales.

                                                                     ANALYSIS

            The real estate excise tax is imposed by counties pursuant to authority of the enabling legislation enacted by chapter 11, Laws of 1951, 1st Ex. Sess., as amended.  Chapter 28.45 RCW.  RCW 28.45.050 authorizes imposition of a tax "upon sales of real estate."  Sale, is defined in part by RCW 28.45.010 (1955 Supp.):

            "* * * have its ordinary meaning and shall include any conveyance, grant, assignment, quitclaim, or transfer of the ownership of or title to real property, including standing timber, or any estate or interest therein for a valuable consideration, and any contract for such conveyance, grant, assignment, quitclaim, or transfer, and any lease with an option to purchase real property, including standing timber, or any estate or interest therein or other contract under which possession of the property is given to the purchaser, or any other person by his direction, which title is retained by the vendor as security for the payment of the purchase price."

            Under this definition, sale includes a transfer of any interest in real estate for a consideration.  Thus, if either of the transactions you have described effects the transfer of any interest, a sale occurs, and the tax applies.

            So far as we can find, our court has never ruled upon what interest, if any, is transferred by the delivery of a deed, blank as to the grantee, but otherwise complete, to a transferee who is authorized by the grantor to insert the name of some person as grantee, but who retains the deed and has not inserted a named grantee.  Our court has decided that such a deed effectively conveys title to the person named as grantee whose name was supplied by a transferee authorized to insert the name.  Clemmons v. McGeer, 63 Wash. 446;Barth v. Barth, 19 Wn. (2d) 543.

            Where the question has been considered, courts have concluded that the one who gives consideration and accepts such a deed blank, receives equitable title to the property.

            "It is thoroughly settled in this state that such a deed [one naming no  [[Orig. Op. Page 3]] grantee] carries to the purchaser the equitable title and lays upon him every obligation which he would have assumed if his name had been written into the blank space."  Gilmore v. Shearer, Iowa, 197 N.W. 631;Hoey v. Ebert, Mich., 258 N.W. 228.  See 175 A.L.R. 1297, and 4 Tiffany, Real Property (3d ed) § 969.

            We conclude that the delivery of the deed to the realtor vests in him at least an equitable title.  When he in turn finds a buyer, and inserts that person's name in the deed, the deed thereupon becomes operative to convey to such buyer the legal title.  At that time the realtor's equitable ownership is merged in the legal title and his recently acquired interest in the property is transferred for a consideration to the buyer.

            Under each transaction an "interest in real estate" passes for a consideration.  Each transaction, consequently, is within the above definition of "sale" and is taxable.

Very truly yours,

JOHN J. O'CONNELL
Attorney General

KEITH GRI
Assistant Attorney General