not automatically operate to bring a transaction within the ambit of section 4361; instead, it urges that what is essential, according to both the language of section 4361 and the limited case law relating to that section, is the purpose of the transaction, and that in the present case the purpose of the conveyances of legal title was not to ultimately vest dominion over the property in the plaintiff, but was instead to provide plaintiff with security for its installment contract rights. Plaintiff additionally points to the provisions of section 4362, which excludes from the operation of section 4361 "any instrument or writing given to secure a debt. . . ." It is the conclusion of the court that documentary stamps need not have been affixed to the deeds from the VA to the plaintiff, and a verdict in this matter will be rendered in favor of the plaintiff.
In the court's view, the bare language of sections 4361 and 4362 goes against the Government's position. Firstly, section 4361 imposes the tax on "each deed, instrument, or writing by which any lands, tenements, or other realty sold shall be granted, assigned, transferred, or otherwise conveyed to, or vested in, the purchaser or purchasers . . . ." (Emphasis added.) From the language of that section it is clear that not all deeds, instruments, or writing conveying land or other realty are to have stamps affixed to them; only those deeds, instruments, or writings conveying land or other realty sold need have stamps affixed. Necessary, then, is an examination of the transaction being considered to see if there is a sale of realty; whether or not there is a sale depends, in the court's view, on whether or not the transfer of title was for consideration, and on the intention of the parties and the purpose for which the "purchasing" party desires the property. In the context of the present case, the court must conclude that in essence the plaintiff-VA transactions were not sales of realty; the plaintiff is not in the business of purchasing realty outright, and is in fact prohibited from doing so by New Jersey law,
and its acquisitions of the legal title to the property were merely incidental to its primary purpose in the transactions, which was to discount the installment purchasers' obligations to the VA. That this is the case is further indicated by the fact that the VA remained liable to the plaintiff even after legal title and the installment contracts passed to the plaintiff, by virtue of VA Regulation 4600. That regulation, which, it will be recalled, permitted the plaintiff to return the legal title and installment contract to the VA in the event of default by the installment purchaser, is most interestingly designated as applying to "Sale of Loans, Guarantee of Payment." Although it is clear that the VA in the present case did not sell to plaintiff any "loans," the fact that a regulation applicable to sale of loans should be deemed by the VA and plaintiff to be applicable to the VA's sale to plaintiff of its installment contract and legal title is most reflective of the intent of the contracting parties that the transfers of legal title from the VA to the plaintiff were for the purpose of security, and not for the purpose of sale. Furthermore, there is considerable doubt in the court's mind as to whether or not there was any consideration given to the VA for its transfers of title to the plaintiff. It will be recalled that both the legal title and the installment contract were transferred at the same time; both instruments recited that the transfer was for ten dollars and other valuable consideration. In the court's view, it is just as likely, considering the total content of the transactions, that the total sum of money paid by plaintiff to the VA was for the contracts rather than for the legal title to the property. Realistically speaking, the plaintiff was just as interested in obtaining the contract assignments as it was in obtaining the property; the court cannot conclude that the money paid by plaintiff to the VA need necessarily be held to have been paid for the transfers of legal title to the property.
Alternatively, even should the language of section 4361 not be deemed to compel a conclusion that documentary stamps need not have been affixed to the VA-plaintiff deeds, the language of section 4362 should settle the issue. Section 4362 provides that "the tax imposed by section 4361 shall not apply to any instrument or writing given to secure a debt." The reference in section 4362 to section 4361 makes clear that "instruments or writings" within the purview of section 4362 necessarily include deeds and other instruments mentioned in section 4361; this being clear, it quickly and once again becomes evident that not all deeds need have documentary stamps affixed, but that, instead, only those deeds not given to secure a debt - i.e., deeds given for "sale" - need stamps. The court would once again repeat that in essence the typical VA-plaintiff transaction was not a sale of land, but that, instead, the transfer of legal title to the plaintiff was for the purpose of securing the debt of the installment purchaser to the plaintiff. This being the case, section 4362, like section 4361 before it, operates to prevent taxation of the VA-plaintiff transactions involved in the present case.
Case law concerning section 4361 supports the court's position. Although there are apparently no reported cases analyzing section 4361 with respect to transactions of the same type as those involved in this case, cases involving section 4361 do support the proposition that not all conveyances of legal title to property by deed or otherwise come within the purview of that section, but that, instead, the court must consider whether, in essence, the transaction was a sale of the property. In Berry v. Kavanagh, 137 F.2d 574 (6th Cir. 1943), for example, the Sixth Circuit Court of Appeals found that the transfer by deed of an insolvent insurance company's assets to a reinsurer, as part of an arrangement whereby the reinsurer agreed to assume all valid outstanding obligations of the insolvent company, was not a sale within the meaning of the predecessor to section 4361, but was, instead, a creation of an agency relationship. The court pointed out that
Whether a taxable sale occurs depends upon the intention of the parties gathered from their whole writing when giving to the words and phrases used, their ordinary signification. . . .
If Congress had intended to levy a tax on every transfer of title it could have expressed its purpose in a sentence, but it is clear from the language of the section that it intended to confine the tax to actual sales.