299 F.3d 207 | 3rd Cir. | 2002
Before: BECKER, Chief Judge, NYGAARD and(cid:13) COWEN,* Circuit Judges.(cid:13) (Filed: July 29, 2002)(cid:13) _________________________________________________________________(cid:13) * Judge Cowen sat on this appeal, but discovered after oral argument(cid:13) that he was disqualified. He has taken no part in the disposition of the(cid:13) case.(cid:13) IVER A. STRIDIRON, ESQUIRE(cid:13) Attorney General(cid:13) FREDERICK HANDLEMAN,(cid:13) ESQUIRE(cid:13) Solicitor General(cid:13) RICHARD M. PRENDERGAST,(cid:13) ESQUIRE (ARGUED)(cid:13) Assistant Attorney General(cid:13) Office of the Attorney General(cid:13) of the Virgin Islands(cid:13) 6040 Castle Coakley(cid:13) Christiansted, St. Croix,(cid:13) Virgin Islands 00820(cid:13) Counsel for Appellants(cid:13) MARIA T. HODGE, ESQUIRE(cid:13) (ARGUED)(cid:13) DANIELLE C. COMEAUX, ESQUIRE(cid:13) Hodge & Francois(cid:13) 1340 Taarneberg Road(cid:13) St. Thomas, Virgin Islands 00802(cid:13) Counsel for Appellees(cid:13) OPINION OF THE COURT(cid:13) BECKER, Chief Judge.(cid:13) This appeal presents a close and difficult question(cid:13) concerning the meaning of an exemption provision in the(cid:13) Virgin Islands Stamp Tax Act. At the first level, resolution(cid:13) of the case requires investigation of the law of real estate(cid:13) financing, with consequent impact on foreclosure practice(cid:13) in the U.S. Virgin Islands. Ultimately, however, the case(cid:13) turns on the application of the rules of construction(cid:13) governing tax exemptions, and particularly the strength of(cid:13) the rule that such exemptions are construed narrowly(cid:13) against the party seeking them.(cid:13) BA Properties, Inc. ("BA") is a subsidiary of the Bank of(cid:13) America, N.T. and S.A., ("the Bank"), which represents the(cid:13) Bank with respect to real property acquired through(cid:13) 2(cid:13) foreclosure. When Pemberton Resorts, Inc. defaulted on a(cid:13) loan that was secured by a Bank of America, N.T. and S.A.(cid:13) mortgage on the Grand Palazzo Hotel in Estate Nazareth,(cid:13) St. Thomas, the Bank filed a foreclosure action in the(cid:13) District Court of the Virgin Islands. The District Court(cid:13) approved a consent judgment and issued an order of(cid:13) foreclosure, fixing the debt at $29,418,123. The District(cid:13) Court’s order instructed the U.S. Marshal’s Service to seize(cid:13) and sell the property at auction. BA was the sole bidder at(cid:13) the marshal’s sale, acquiring the property for $22,500,000,(cid:13) which it applied as a credit against the debt Pemberton(cid:13) owed to the Bank. The Marshal’s Service conveyed title to(cid:13) BA via a marshal’s deed.(cid:13) The Virgin Islands Stamp Tax Act imposes a two percent(cid:13) excise on the value of real property transferred"by(cid:13) instrument of conveyance." 33 V.I.C. S 121(a)(1) (1994). The(cid:13) provision that gives rise to the question on appeal is an(cid:13) exemption specifying that the excise tax "shall not apply to(cid:13) a transfer of title . . . solely in order to provide or release(cid:13) security for a debt or obligation." 33 V.I.C.S 128(a)(2)(cid:13) (1994). When BA attempted to record the marshal’s deed,(cid:13) the Recorder of Deeds in St. Thomas refused to record it(cid:13) until the Stamp Tax was paid. Instead of paying the tax, BA(cid:13) petitioned the Territorial Court of the Virgin Islands for a(cid:13) declaratory judgment that under S 128(a)(2), it was exempt(cid:13) from the Stamp Tax. It also sought a writ of mandamus(cid:13) ordering the Recorder to record the deed.(cid:13) Following a hearing, the Territorial Court denied BA’s(cid:13) petition, finding, with little explanation, that the post-(cid:13) foreclosure conveyance of property by marshal’s deed at(cid:13) issue in this case was not executed "solely in order to(cid:13) provide or release security for a debt or obligation," and(cid:13) that the transaction was therefore subject to the Stamp(cid:13) Tax. However, the Appellate Division of the District Court of(cid:13) the Virgin Islands reversed, concluding that the transaction(cid:13) at issue in this case falls under the S128(a)(2) exemption.(cid:13) We exercise plenary review over the Appellate Division’s(cid:13) construction of the Stamp Tax statute, much as we would(cid:13) when reviewing a district court’s construction of a statute.(cid:13) Following our established jurisprudence, we decline to(cid:13) apply the more deferential "manifest error" standard of(cid:13) 3(cid:13) review that BA urges us to use on account of the supposed(cid:13) implications for the development of indigenous Virgin(cid:13) Islands jurisprudence arising from Congress’s creation of(cid:13) the Appellate Division.(cid:13) We must begin our analysis with the rule of construction(cid:13) that "statutory exemptions from taxation, being a matter of(cid:13) grace, are to be strictly and narrowly construed," Tracy(cid:13) Leigh Dev. Corp. v. Gov’t of the Virgin Islands, 501 F.2d(cid:13) 439, 443 (3d Cir. 1974) (citation omitted), and that any(cid:13) doubt is to be resolved against the taxpayer. While we do(cid:13) not think BA Properties’ interpretation is unreasonable, we(cid:13) also think that the interpretation suggested by the GVI --(cid:13) that S 128(a)(2) was meant to apply to transactions in which(cid:13) a deed of trust is used as a mortgage substitute-- is not(cid:13) unreasonable. We therefore have no choice, applying the(cid:13) relevant rule of construction, but to reverse the order of the(cid:13) Appellate Division and reinstate the order of the Territorial(cid:13) Court. While this decision will of course be to the short-(cid:13) term revenue advantage of the GVI, it may very well impede(cid:13) the flow of credit to the Virgin Islands to finance similar(cid:13) projects because of the extent to which it increases the(cid:13) transaction costs in the event of foreclosure. The Virgin(cid:13) Islands Legislature may, of course, clarify or modify the(cid:13) scope of the exemption provided by S 128(a)(2) if it disagrees(cid:13) with the outcome of this case.(cid:13) I. Relevant Statutes and the Rulings of the Territorial(cid:13) Court and the Appellate Division(cid:13) The Virgin Islands Stamp Tax Act, 33 V.I.C. S 121(a)(1),(cid:13) provides that "[a] stamp tax at the rate of two percent (2%)(cid:13) of the value of the property is imposed on the transfer of(cid:13) title to . . . [r]eal property by instrument of conveyance." An(cid:13) exemption provision in the Act, 33 V.I.C. S 128(a)(2), states(cid:13) that "[t]he tax imposed by this chapter shall not apply to a(cid:13) transfer of title . . . solely in order to provide or release(cid:13) security for a debt or obligation." 33 V.I.C.S 128(a)(2). The(cid:13) Territorial Court rested its oral opinion largely on the canon(cid:13) of statutory construction that exemptions from tax(cid:13) obligations are to be construed narrowly and in favor of the(cid:13) government. The Court concluded that the S 128(a)(2)(cid:13) exemption was intended to apply exclusively to a deed in(cid:13) 4(cid:13) lieu of foreclosure. A deed in lieu of foreclosure is a "deed(cid:13) by which a borrower conveys fee-simple title to a lender in(cid:13) satisfaction of a mortgage debt and as a substitute for(cid:13) foreclosure." Black’s Law Dictionary 423 (7th ed. 1999).(cid:13) The Appellate Division reversed, relying on the provision(cid:13) in Virgin Islands law that a mortgage interest in property(cid:13) provides a lender with a remedy only against the mortgaged(cid:13) property, not against the debtor in its individual or(cid:13) institutional capacity. The Appellate Division noted that a(cid:13) foreclosure action is the only way that a lender may(cid:13) unilaterally recover mortgaged property in the case of(cid:13) default. A deed in lieu of foreclosure, the other method by(cid:13) which a lender may recover the secured property, must be(cid:13) executed voluntarily by the mortgagor. See Restatement(cid:13) (Third) of Property: Mortgages S 8.5 cmt. b (1997).1(cid:13) Therefore, the Appellate Division reasoned, the only realistic(cid:13) way of releasing security for the debt or obligation, a(cid:13) conveyance by marshal’s deed following a foreclosure sale,(cid:13) must be exempt from the Stamp Tax under S 128(a)(2).(cid:13) The Government of the Virgin Islands ("GVI") timely(cid:13) appealed and now argues that: (1) it is clear from the plain(cid:13) language of S 128(a)(2) that BA’s transaction was not(cid:13) exempt from the Stamp Tax; and (2) the language of(cid:13) S 128(a)(2) is at least ambiguous, i.e., it does not make clear(cid:13) that BA qualifies for the exemption, and that the Appellate(cid:13) Division erred by failing to resolve the ambiguity in the light(cid:13) most favorable to the taxing authority. The argument of the(cid:13) GVI is largely focused on the fact that multiple legal(cid:13) consequences follow from a creditor’s purchase of the(cid:13) property securing its loan at a foreclosure sale, and(cid:13) therefore that the transaction cannot be said to be"solely(cid:13) . . . to provide or release security for a debt or obligation."(cid:13) 33 V.I.C. S 128(a)(2). The GVI also suggests that S 128(a)(2)(cid:13) is intended to apply to transactions in which parties use(cid:13) the deed of trust as a mortgage substitute.(cid:13) _________________________________________________________________(cid:13) 1. "The rules of the common law, as expressed in the restatements of the(cid:13) law approved by the American Law Institute, and to the extent not so(cid:13) expressed, as generally understood and applied in the United States,(cid:13) shall be the rules of decision in the courts of the Virgin Islands in cases(cid:13) to which they apply, in the absence of local laws to the contrary." 1(cid:13) V.I.C. S 4 (1995).(cid:13) 5(cid:13) The Territorial Court has general jurisdiction over(cid:13) matters of Virgin Islands law. Callwood v. Enos , 230 F.3d(cid:13) 627, 631 (3d Cir. 2001). The Appellate Division had(cid:13) appellate jurisdiction based on 4 V.I.C. S 33 (1997). This(cid:13) court has jurisdiction from the final order of the Appellate(cid:13) Division pursuant to 28 U.S.C. S 1291 and 48 U.S.C.(cid:13) S 1613a(c). Ordinarily, we would go directly to an analysis(cid:13) of the legal contentions of the parties with the(cid:13) understanding that the issues just described present legal(cid:13) issues subject to plenary review. However, because of the(cid:13) argument forcefully pressed by BA, citing In re Alison, 837(cid:13) F.2d 619 (3d Cir. 1988), and Hess Oil Virgin Islands(cid:13) Corporation v. Richardson, 894 F. Supp. 211, 214-15 (D.V.I.(cid:13) App. Div. 1995) ("HOVIC"), for the proposition that the(cid:13) Third Circuit should defer to the Appellate Division’s(cid:13) interpretations of Virgin Islands law and review them only(cid:13) for "manifest error," we must first take up the standard of(cid:13) review question.(cid:13) II. Standard of Review(cid:13) In HOVIC, the Appellate Division of the District Court of(cid:13) the Virgin Islands purported to define the standard of(cid:13) review that the Third Circuit should apply when reviewing(cid:13) the Appellate Division’s interpretation of local Virgin Islands(cid:13) law. HOVIC’s analysis proceeds from this court’s statement(cid:13) in Alison that the creation of the Appellate Division(cid:13) "represents a step in th[e] direction" of "a local Virgin(cid:13) Islands appellate structure with greater autonomy with(cid:13) respect to issues of Virgin Islands law," rather than "the(cid:13) creation of a territorial federal appellate court with a place(cid:13) and role analogous to the place and role of the courts of(cid:13) appeals in the Article III court structure." Alison, 837 F.2d(cid:13) at 622.(cid:13) Seizing on this language from Alison, the HOVIC court(cid:13) expressed the view that the Third Circuit should review the(cid:13) Appellate Division’s interpretation of local law under the(cid:13) "manifest error" standard that the Supreme Court in some(cid:13) older cases has applied to the review of insular appellate(cid:13) courts in the territories of Puerto Rico and (pre-statehood)(cid:13) Hawaii. HOVIC, 894 F. Supp. at 215 (citing De Castro v. Bd.(cid:13) of Comm’rs, 322 U.S. 451, 458-59 (1944), and Waialua(cid:13) 6(cid:13) Agric. Co. v. Christian, 305 U.S. 91, 109 (1938)). We(cid:13) disagree. We have previously rejected the "manifest error"(cid:13) standard of review that HOVIC suggests. And at all events,(cid:13) we are convinced that HOVIC is incorrect because it(cid:13) proceeds from the flawed premise that the Appellate(cid:13) Division is the equivalent of a local appellate or supreme(cid:13) court.(cid:13) In several cases, we have rejected the interpretation that(cid:13) the HOVIC court espoused and that BA now advances. In(cid:13) Saludes v. Ramos, 744 F.2d 992, 994 (3d Cir. 1984), we(cid:13) held that we would exercise plenary review over decisions in(cid:13) which the District Court of the Virgin Islands interprets(cid:13) Virgin Islands law, and rejected the "manifest error"(cid:13) standard that BA urges us to apply in the present case. The(cid:13) HOVIC court attempted to distinguish Saludes because it(cid:13) "(1) was on direct appeal from the district court sitting as(cid:13) a trial court, not an appeal from the Territorial Court, and(cid:13) (2) preceded the 1984 amendments to the Organic Act(cid:13) which set up the present separate, insular judicial system(cid:13) for the Territory." HOVIC, 994 F. Supp. at 215 n.9.(cid:13) However, we have continued to exercise plenary review over(cid:13) the District Court of the Virgin Islands’s interpretation of(cid:13) Virgin Islands law after the 1984 amendments to the(cid:13) Organic Act. See Gov’t of the Virgin Islands v. Smith, 949(cid:13) F.2d 677, 680 (3d Cir. 1991) ("We exercise plenary review(cid:13) over the interpretation of Virgin Islands law.") (citing(cid:13) Saludes, 744 F.2d at 993-94); Virgin Islands Conservation(cid:13) Soc., Inc. v. Virgin Islands Bd. of Land Use Appeals , 881(cid:13) F.2d 28, 30 n.6 (3d Cir. 1989) (same).(cid:13) The HOVIC court’s interpretation of Alison also appears to(cid:13) be foreclosed by Semper v. Santos, 845 F.2d 1233 (3d Cir.(cid:13) 1988), which held that in the Territorial Court’s and(cid:13) Appellate Division’s "two-tiered system of appellate review[,](cid:13) . . . the [Third Circuit] should review the trial court’s(cid:13) determination using the same standard of review applied(cid:13) by" the Appellate Division. Id. at 1235 (citation omitted);(cid:13) see also Gov’t of the Virgin Islands v. Albert, 241 F.3d 344,(cid:13) 347 n.3 (3d Cir. 2001) (same).(cid:13) The HOVIC court reads our statement in Alison to mean(cid:13) that for purposes of review we should treat the Appellate(cid:13) Division as if it were a local appellate or supreme court. We(cid:13) 7(cid:13) think that this interpretation of Alison is incorrect. The(cid:13) Appellate Division of the District Court of the Virgin Islands(cid:13) is essentially a federal creature, and not an insular(cid:13) appellate court. It was created by federal law, and its(cid:13) panels always contain a majority of federal judges. 48(cid:13) U.S.C. S 1613a(b).2 To be sure, since 1984 the Virgin(cid:13) Islands Legislature has had the authority to create a Virgin(cid:13) Islands Supreme Court that would essentially have the final(cid:13) word on the interpretation of local Virgin Islands law, but(cid:13) it has not yet chosen to exercise that authority. 48 U.S.C.(cid:13) S 1611(a).3 While we sympathize with the spirit of Judge(cid:13) Moore’s discussion in HOVIC -- the desire for an(cid:13) indigenous Virgin Islands jurisprudence -- that endeavor(cid:13) _________________________________________________________________(cid:13) 2. The Revised Organic Act provides that:(cid:13) Appeals to the District Court of the Virgin Islands shall be heard(cid:13) and determined by an appellate division of the court consisting of(cid:13) three judges, of whom two shall constitute a quorum. The chief(cid:13) judge of the district court shall preside therein unless disqualified or(cid:13) otherwise unable to act. The other judges who are to sit in the(cid:13) appellate division at any session shall be designated by the(cid:13) presiding judge from among the judges who are serving on, or are(cid:13) assigned to, the district court . . . Provided , That no more than one(cid:13) of them may be a judge of a court established by local law.(cid:13) 48 U.S.C. S 1613a(b). The Judges of the District Court of the Virgin(cid:13) Islands are appointed by the President of the United States with the(cid:13) advice and consent of the Senate for a term of ten years. 48 U.S.C.(cid:13) S 1614.(cid:13) 3. The Revised Organic Act gives the Virgin Islands Legislature the(cid:13) authority to create an "appellate court and lower local courts," 48 U.S.C.(cid:13) S 1611(a), in which it "may vest . . . jurisdiction over all causes in the(cid:13) Virgin Islands over which any court established by the Constitution and(cid:13) laws of the United States does not have exclusive jurisdiction." S 1611(b).(cid:13) "[F]or the first fifteen years following the establishment of the [Virgin(cid:13) Islands] appellate court[,] . . . the United States Court of Appeals for the(cid:13) Third Circuit shall have jurisdiction to review by writ of certiorari all(cid:13) final decisions from the highest court of the Virgin Islands . . . ." 48(cid:13) U.S.C. S 1613. The Act also provides that the"Judicial Council of the(cid:13) Third Circuit shall submit reports" to specified committees in the Senate(cid:13) and House of Representatives "at intervals of five years following the(cid:13) establishment of such appellate court as to whether it has developed(cid:13) sufficient institutional traditions to justify direct review by the Supreme(cid:13) Court of the United States . . . ." S 1613.(cid:13) 8(cid:13) has proved and will continue to prove very difficult to attain(cid:13) until the Virgin Islands has its own appellate court(cid:13) composed entirely of locally appointed judges, which would(cid:13) essentially supplant the Third Circuit. See supra note 3; 48(cid:13) U.S.C. S 1613.(cid:13) The Appellate Division exercised plenary review over the(cid:13) Territorial Court’s interpretation of S 128(a)(2). We will also(cid:13) exercise plenary review over the Appellate Division’s order,(cid:13) much as we would when reviewing a district court’s(cid:13) interpretation of a statute. See Rosenberg v. XM Ventures,(cid:13) 274 F.3d 137, 140 n.1 (3d Cir. 2001).(cid:13) III. Is the Conveyance of Property by Marshal’s Deed(cid:13) to the Mortgagee Following a Court-Ordered(cid:13) Foreclosure Sale Exempt From the Stamp Tax(cid:13) Under 33 V.I.C. S 128(a)(2)?(cid:13) A. BA’s Contentions(cid:13) BA concedes that the marshal’s deed by which it took(cid:13) title to the property at issue effected a "transfer of title to(cid:13) . . . [r]eal property by instrument of conveyance" within the(cid:13) meaning of 33 V.I.C. S 121. Therefore, BA must pay the(cid:13) Stamp Tax unless its transaction is exempt under 33 V.I.C.(cid:13) S 128(a)(2), which provides that the Stamp Tax"shall not(cid:13) apply to a transfer of title . . . solely in order to provide or(cid:13) release security for a debt or obligation." Drawing on the(cid:13) Appellate Division’s opinion, BA submits that its(cid:13) transaction falls within the S 128(a)(2) exemption for two(cid:13) reasons.(cid:13) First, BA contends that because a foreclosure action is(cid:13) the only way under Virgin Islands law that a mortgagee(cid:13) may unilaterally recover the security for its loan in the(cid:13) event of default, the transfer of property to the mortgagee(cid:13) following a foreclosure sale is done "solely in order to(cid:13) release security for a debt or obligation." Second, BA argues(cid:13) that the GVI does not point to any transactions under(cid:13) Virgin Islands law that would be covered by S 128(a)(2) if(cid:13) not the one at issue in this case. It argues that conveyances(cid:13) by deed in lieu of foreclosure, which it asserts are in(cid:13) practice exempt from the Virgin Islands Stamp Tax, and(cid:13) 9(cid:13) which the Territorial Court found to be exempt under(cid:13) S 128(a)(2), are not functionally different from the(cid:13) transaction at issue in this case. BA also submits that the(cid:13) GVI’s argument that S 128(a)(2) applies only to "situations(cid:13) in which legal title is transferred by a debtor to his lender(cid:13) for the purpose of securing the debt -- not for transferring(cid:13) ownership," refers to the "title theory" of mortgage law,(cid:13) which does not exist in the Virgin Islands.4(cid:13) B. The GVI’s Approach and the Deed of Trust(cid:13) Interpretation(cid:13) The GVI relies primarily on the argument that the(cid:13) multiple legal effects of the transaction at issue in this case(cid:13) mean that it cannot be considered to have been executed(cid:13) "solely . . . in order to provide or release security for a debt(cid:13) or obligation" under S 128(a)(2). We address (and reject) the(cid:13) GVI’s primary argument in the margin.5 The GVI also(cid:13) _________________________________________________________________(cid:13) 4. BA also argued before the Territorial Court and the Appellate Division(cid:13) that it qualified for an exemption from the Stamp Tax under 33 V.I.C.(cid:13) S 128(a)(1) (1994), another section that exempts transfers of title "from or(cid:13) to the United States . . . or any instrumentality thereof." S 128(a)(1). The(cid:13) Territorial Court and the Appellate Division rejected BA’s S 128(a)(1)(cid:13) argument, and BA does not raise it before this court.(cid:13) 5. The GVI contends that under the plain language of S 128(a)(2), the(cid:13) marshal’s deed at issue in this case was not executed "solely in order to(cid:13) provide or release security for a debt or obligation." 33 V.I.C. S 128(a)(2).(cid:13) It submits that the term "solely" should be read to mean "exclusively,"(cid:13) and that if a transfer was executed "solely in order to . . . release(cid:13) security for a debt or obligation," it means that the transfer(cid:13) "accomplishe[d] only one thing and nothing more, . . . [i.e.,] the release(cid:13) of the mortgage lien on the subject property." It contends that not just(cid:13) one, but "several legal consequences flow from a foreclosure and sale(cid:13) followed thereafter by the execution of a Marshal’s Deed":(cid:13) First, once the right of redemption has passed, a properly concluded(cid:13) foreclosure sale "cuts off the [mortgagor’s] equity of redemption." 59(cid:13) C.J.S. [Mortgages] S 554 at 665. Second, "a completed foreclosure of(cid:13) a mortgage amounts to a satisfaction of the mortgage debt to the(cid:13) extent of the value of the mortgaged premises." 59 C.J.S., supra,(cid:13) S 553 at 664. Third, a "mortgage foreclosure sale terminates the(cid:13) relationship between mortgagor and mortgagee." In re Application of(cid:13) Small Business Administration, 14 Kan. App. 2d 600, 797 P.2d 879,(cid:13) 10(cid:13) suggests that S 128(a)(2) could be intended to refer to(cid:13) transactions in which a deed of trust is used as a mortgage(cid:13) _________________________________________________________________(cid:13) 883 (1990). Fourth, and most importantly, "[i]n general, a valid and(cid:13) completed foreclosure operates to divest the title to the mortgaged(cid:13) premises possessed by the mortgagor, to which the mortgage has(cid:13) attached." 59 C.J.S., supra, S 554 at 665.(cid:13) (citations omitted).(cid:13) From this list, the GVI concludes that "[c]learly, a foreclosure and sale,(cid:13) followed by execution of a Marshal’s Deed accomplishes several things(cid:13) and is not limited ‘solely’ to release of the property from the mortgage(cid:13) lien." The GVI then asserts that, of the many effects of a foreclosure sale(cid:13) (and the conveyance of title that follows), the"primary purpose" is to(cid:13) transfer title. In other words, the GVI contends that BA’s purpose in(cid:13) buying the property at the foreclosure sale was to take title, not to(cid:13) release the security on the property.(cid:13) We reject the GVI’s argument that the transfer at issue here is not(cid:13) "solely in order to . . . release security" because "several legal(cid:13) consequences flow from a foreclosure and sale followed thereafter by the(cid:13) execution of a Marshal’s Deed." (emphasis added). There are many(cid:13) problems with the GVI’s argument. First, the GVI conflates purpose and(cid:13) effect. The most natural reading of S 128’s language that limits the(cid:13) exemption to "a transfer of title . . . solely in order to . . . release security(cid:13) for a debt or obligation," is that the exemption is limited to those(cid:13) transfers for which the purpose is to release security for a debt. The GVI(cid:13) interprets S 128(a)(2) to mean that the transfer "must accomplish one(cid:13) thing and nothing more," i.e., that its sole effect is to release security for(cid:13) a debt or obligation. We think that it is incorrect to equate purpose and(cid:13) effect in this context. Something can have a single purpose, but can(cid:13) effectuate more than one thing, each being incidental to the action’s(cid:13) purpose.(cid:13) Second, and at all events, the four different effects that the GVI(cid:13) identifies in its brief and we quote above, are really restatements of only(cid:13) two things: (1) the release of security for a debt; and (2) the transfer of(cid:13) title. The GVI’s first argument is that the foreclosure cuts off the(cid:13) mortgagor’s "equity of redemption." The equity of redemption is the "right(cid:13) of a mortgagor in default to recover property before a foreclosure sale by(cid:13) paying the principal, interest, and other costs that are due." Black’s Law(cid:13) Dictionary 561 (7th ed. 1999). Therefore, to say that the period during(cid:13) which the mortgagor may exercise its redemption rights has ended, is no(cid:13) different from saying that title has been transferred conclusively from the(cid:13) mortgagor to the foreclosure sale purchaser. The GVI’s second argument(cid:13) 11(cid:13) substitute. The Virgin Islands Legislature has recognized(cid:13) transactions by deed of trust, which effect a transfer of(cid:13) equitable title that can be used as a mortgage substitute.(cid:13) See, e.g., 22 V.I.C. S 563 (defining "encumbrance" of "real(cid:13) property" "with respect to loans secured by mortgage, deed(cid:13) of trust, or other collateral . . . ."); 9 V.I.C.S 251 (defining(cid:13) "credit" to include "any loan, residential mortgage, [or] deed(cid:13) of trust"); 13 V.I.C. S 803 (defining the powers of a Virgin(cid:13) Islands corporations to include the ability to secure loans(cid:13) "by mortgage, pledge, [or] deed of trust"). A deed of trust is(cid:13) "[a] deed conveying title to real property to a trustee as(cid:13) security until the grantor repays a loan." Black’s Law(cid:13) Dictionary 423 (7th ed. 1999). "This type of deed resembles(cid:13) a mortgage," and has been used as a mortgage substitute.(cid:13) Id.6(cid:13) _________________________________________________________________(cid:13) -- that "a completed foreclosure of a mortgage amounts to a satisfaction(cid:13) of the mortgage debt to the extent of the value of the mortgaged(cid:13) premises" -- is not conceptually different from saying that the security(cid:13) on the debt is released. The GVI’s third contention-- that a "mortgage(cid:13) foreclosure sale terminates the relationship between mortgagor and(cid:13) mortgagee" -- again is simply a slightly different way of saying that the(cid:13) foreclosure sale acted to release the security on the property. The GVI’s(cid:13) fourth and "most important" argument -- that"[i]n general, a valid and(cid:13) completed foreclosure operates to divest the title to the mortgaged(cid:13) premises possessed by the mortgagor, to which the mortgage has(cid:13) attached" -- is simply a different way of saying that title is conveyed(cid:13) from the mortgagor to the purchaser.(cid:13) The two categories into which these four supposed"multiple effects" of(cid:13) a foreclosure sale fall are both contemplated by theS 128(a)(2) exemption(cid:13) and therefore cannot be reasons why the S 128(a)(2) exemption should(cid:13) not apply to the transaction at issue in this case. All of the exemptions(cid:13) in S 128 apply to "transfer[s] of title," S 128, (the GVI’s first and fourth(cid:13) arguments). And S 128(a)(2) specifically applies to conveyances executed(cid:13) "solely in order to . . . release security,"S 128(a)(2), (the GVI’s second(cid:13) and third examples). Therefore, S 128(a)(2) specifically contemplates all(cid:13) four of the examples of additional effects that the GVI uses to argue that(cid:13) the transaction at issue in this case should not fall within the(cid:13) exemption.(cid:13) 6. The GVI also suggests that S 128(a)(2) is intended to exempt the "deed(cid:13) absolute intended as security" from the Stamp Tax. The deed absolute(cid:13) intended as security is an equitable doctrine of"constructive mortgage."(cid:13) 12(cid:13) C. Discussion(cid:13) 1. The Rule of Construction Governing(cid:13) Exemptions from Taxation(cid:13) Because this case requires us to interpret the scope of a(cid:13) statutory exemption from taxation, we must begin our(cid:13) analysis with the rule of construction that we have long(cid:13) applied to such questions. We apply the rule of(cid:13) construction that "statutory exemptions from taxation,(cid:13) being a matter of grace, are to be strictly and narrowly(cid:13) construed." Tracy Leigh Dev. Corp. v. Gov’t of the Virgin(cid:13) Islands, 501 F.2d 439, 443 (3d Cir. 1974) (citation omitted).(cid:13) We have held that pursuant to this rule of construction,(cid:13) "any doubt . . . must be resolved against the taxpayer." Bell(cid:13) Atlantic Corp. v. United States, 224 F.3d 220, 222-23 (3d(cid:13) Cir. 2000). Moreover, we have previously explained that a(cid:13) governmental authority’s construction of its own tax(cid:13) exemption must be accorded "great weight." Desco Prods.(cid:13) Caribbean, Inc. v. Gov’t of the Virgin Islands, 511 F.2d(cid:13) 1157, 1159 (3d Cir. 1975).(cid:13) This rule of construction is grounded in the separation of(cid:13) powers doctrine. See United Retail & Wholesale Employees(cid:13) v. Yahn & McDonnell, Inc., 787 F.2d 128, 142 (3d Cir.(cid:13) 1986), aff ’d by an equally divided Court, 481 U.S. 735(cid:13) (1987) (noting that separation of powers principles underlie(cid:13) _________________________________________________________________(cid:13) Some courts have applied it to deal with situations where a borrower(cid:13) conveys to his creditor what appears to be an absolute deed, but where(cid:13) the borrower intended (and can prove) that he or she intended for it to(cid:13) serve only as security for a loan. 4 Powell on Real Property S 37.18(cid:13) (Michael Allan Wolf ed., Matthew Bender 2001). Neither of the parties(cid:13) has cited any legal authority that shows that the Virgin Islands(cid:13) recognizes and enforces absolute deeds intended as security. In contrast,(cid:13) the Virgin Islands Legislature has specifically recognized the deed of(cid:13) trust. We therefore think it much more plausible that S 128(a)(2) was(cid:13) intended to apply to deeds of trust than absolute deeds intended as(cid:13) security. At all events, we need not reach the question whether the(cid:13) statute applies to both because, as we explain, as long as the statute(cid:13) does not unequivocally provide for an exemption for the present(cid:13) transaction, and if either alternative reading is not unreasonable, we(cid:13) must side with the taxing authority.(cid:13) 13(cid:13) rules of statutory construction). As one commentator has(cid:13) pointed out, the rule of construction compelling the narrow(cid:13) interpretation of an exemption from taxation also serves the(cid:13) purpose of forcing legislators to speak clearly when(cid:13) granting tax exemptions, which "are often the product of(cid:13) lobbying efforts by well organized private groups, and thus(cid:13) a reflection of factional influence." Cass R. Sunstein,(cid:13) Nondelegation Canons, 67 U. Chi. L. Rev. 315, 334 (2000).(cid:13) This rule of construction does not mean that a court(cid:13) must always accept the taxing authority’s interpretation of(cid:13) an exemption, even when that interpretation is(cid:13) unreasonable or contrary to the clear purpose of the(cid:13) exemption. See 3A Norman J. Singer, Sutherland Stat.(cid:13) Constr. S 66.09 at 43 (5th ed. 1992) ("It is generally held(cid:13) that the statutes exempting property from taxation should(cid:13) be strictly construed in favor of taxation, but should not be(cid:13) interpreted unreasonably.") (emphasis added); see also(cid:13) Symphony Space, Inc. v. Tishelman, 453 N.E.2d 1094, 1096(cid:13) (N.Y. 1983) ("While exemption statutes should be construed(cid:13) strictly against the taxpayer seeking the benefit of the(cid:13) exemption, an interpretation so literal and narrow that it(cid:13) defeats the exemption’s settled purpose is to be avoided.").(cid:13) A reflexive adherence to this canon without careful(cid:13) examination of the exemption in question may result in an(cid:13) abdication of the judiciary’s responsibility to interpret(cid:13) statutes in ways that are faithful to legislative intent.(cid:13) However, if the government’s interpretation of a tax(cid:13) exemption is not unreasonable, and not contrary to clear(cid:13) legislative purpose, we are bound by our rule of(cid:13) construction to interpret the exemption narrowly and in(cid:13) favor of the taxing authority. Therefore, under this analysis,(cid:13) we must determine first whether the statutory language of(cid:13) S 128(a)(2) unequivocally shows the Virgin Islands(cid:13) Legislature’s intent to exempt the present transaction from(cid:13) taxation. If so, then BA will prevail. If not, we must, under(cid:13) the applicable rule of statutory construction, determine(cid:13) whether the GVI’s alternative interpretation ofS 128(a)(2),(cid:13) i.e., that it applies to transactions in which a deed of trust(cid:13) is used in place of a mortgage, is not unreasonable. If such(cid:13) an interpretation is not unreasonable, then we must accept(cid:13) it.(cid:13) 14(cid:13) 2. Does the Statutory Language of S 128(a)(2)(cid:13) Clearly Exempt the Present Transaction(cid:13) from Taxation? (cid:13) The reasoning on which the Appellate Division relied, and(cid:13) that BA now submits as to why the present transaction is,(cid:13) or should be, exempt from taxation, is compelling from a(cid:13) policy standpoint. But as we explain below, the statutory(cid:13) language is ambiguous as to whether the present(cid:13) transaction is exempt from the Stamp Tax.(cid:13) BA’s undoubted purpose in buying in the Pemberton(cid:13) hotel property at the foreclosure sale in this case was to(cid:13) recover the money owed to the Bank, thereby discharging(cid:13) the mortgage. As the Appellate Division noted, a foreclosure(cid:13) action is the only method that a mortgagee has under(cid:13) Virgin Islands law for recovering in the event of default that(cid:13) does not require the borrower’s consent. The mortgagee(cid:13) may obtain title only "through the court by a judgment of(cid:13) foreclosure and a judicial sale, unless the mortgagor and(cid:13) mortgagee later agree to another arrangement, such as a(cid:13) deed in lieu of foreclosure." App. Div. Mem. Op. at 10; see(cid:13) also 28 V.I.C. S 290 (1996) ("A mortgage of real property(cid:13) shall not be deemed a conveyance so as to enable the(cid:13) owner of the mortgage to recover possession of the real(cid:13) property without a foreclosure and sale according to law,(cid:13) and a judgment thereon."). And the mortgagee may recover(cid:13) only against the property, not against the debtor in his or(cid:13) her personal capacity, unless the debtor has agreed in a(cid:13) separate instrument to be personally liable for the debt. See(cid:13) 28 V.I.C. S 10 (1996).7(cid:13) We acknowledge that BA’s purpose in buying the(cid:13) property at the foreclosure sale can be characterized as(cid:13) recovering the debt owed to the Bank and/or as taking title(cid:13) _________________________________________________________________(cid:13) 7. 28 V.I.C. S 10 provides that:(cid:13) A mortgage does not imply a covenant for the payment of the sum(cid:13) thereby intended to be secured. When there is no express covenant(cid:13) for such payment in the mortgage, and no bond or other separate(cid:13) instrument to secure such payment has been given, the remedies of(cid:13) the mortgagee are confined to the property mentioned in the(cid:13) mortgage.(cid:13) 15(cid:13) to the property for resale purposes.8 But taking title is(cid:13) arguably not an end in itself as the GVI suggests. The Bank(cid:13) is in the lending business; it made a huge loan(cid:13) ($29,418,123), and in view of the default, a huge mistake,(cid:13) and it had to protect itself and its shareholders. In this(cid:13) context, BA’s purpose of recovering on the Bank’s loan is(cid:13) arguably not, as we see it, meaningfully distinguishable(cid:13) from the purpose of "releas[ing] security for [the] debt," 33(cid:13) V.I.C. S 128(a)(2), for a foreclosure action is for practical(cid:13) purposes the principal method by which a lender may(cid:13) recover the collateral property, and the release of security is(cid:13) the necessary consequence of the foreclosure. To be sure, a(cid:13) deed in lieu of foreclosure may sometimes be obtained. But(cid:13) to obtain it, there must be a viable, available, and willing(cid:13) mortgagor, and this frequently will not be the case.(cid:13) We think that a mortgagee should have the right to(cid:13) recover the mortgaged property unilaterally; we see no good(cid:13) reason why tax consequences should be imposed as a price(cid:13) on its exercise of the remedy. If it were, the flow of credit to(cid:13) the Virgin Islands could be seriously impaired. Indeed, it(cid:13) seems unlikely that the Virgin Islands Legislature intended(cid:13) to give defaulting borrowers the power to determine(cid:13) whether or not the lender to whom they owe their debt(cid:13) must pay the Stamp Tax when recovering the property(cid:13) securing the loan.(cid:13) Even though BA’s policy arguments are compelling, we(cid:13) are required to interpret the legislature’s intent from the(cid:13) language of S 128(a)(2), which we must admit is ambiguous(cid:13) in the sense that it does not clearly indicate that the(cid:13) present transaction is exempt from the Stamp Tax. This(cid:13) would be a different, or at least, an easier case if the import(cid:13) of S 128(a)(2), which exempts from taxation transfers of title(cid:13) "solely . . . to provide or release security," were clear. But(cid:13) the meaning of the quoted phrase is not clear and it does(cid:13) not by itself mandate the interpretation that BA Properties(cid:13) proposes, or any other interpretation. More specifically, it(cid:13) does not tell us whether the transaction at issue here,(cid:13) transfer of title to the lender by marshal’s deed following a(cid:13) foreclosure sale, is one that is done "solely to provide or(cid:13) _________________________________________________________________(cid:13) 8. Obviously the transfer tax would have to be paid on resale.(cid:13) 16(cid:13) release security." It surely might be, but then again it might(cid:13) not.(cid:13) Section 128(a)(2)’s use of the terms "to . . . release(cid:13) security" contributes to the section’s ambiguity. The term(cid:13) "release," at least when employed as a noun, is a term of(cid:13) art in the law of real estate conveyancing. A borrower, upon(cid:13) fully meeting his obligation, may obtain a "release" of his or(cid:13) her indebtedness from the creditor. The "release" is a(cid:13) formal legal instrument, usually some type of document,(cid:13) given from the lender to the borrower. It is not conventional(cid:13) in the realm of real estate transactions to say that the(cid:13) mortgagee’s receipt of a deed after foreclosure sale(cid:13) "releases" much less "provides" "security." A "release" is a(cid:13) legal event that happens for the benefit of the borrower, not(cid:13) the creditor, like BA. See 4 Powell on Real Property(cid:13) S 37.33[2] (Michael Allan Wolf ed., Matthew Bender 2001)(cid:13) ("[W]hen the full obligation has been paid, a formal(cid:13) instrument of release . . . is executed by the mortgagee with(cid:13) the formalities required for recordation."); Blacks Law(cid:13) Dictionary 1292 (7th ed. 1999) (defining the specific phrase(cid:13) "release of mortgage" as "[a] written document that(cid:13) discharges a mortgage upon full payment by the borrower(cid:13) and that is publicly recorded to show that the borrower has(cid:13) full equity in the property."); see also Powell, at S 37.33[2](cid:13) ("In the case of modern deeds of trust, the trustee has the(cid:13) responsibility of executing a release deed or a deed of(cid:13) reconveyance after full payment [by the borrower] has been(cid:13) made.") (emphasis added).(cid:13) The precise meaning of the word "release" in the real(cid:13) property context can also be ascertained through another(cid:13) section of the Virgin Islands Tax Code. 33 V.I.C.S 1825(d),(cid:13) for example, employs the same choice of words as the(cid:13) exemption in 33 V.I.C. S 128. Section 1825(d) provides:(cid:13) Release to debtor(cid:13) In cases where real estate has or may become the(cid:13) property of the Virgin Islands by conveyance or(cid:13) otherwise, in payment of or as security for a debt(cid:13) arising under the laws relating to internal revenue, and(cid:13) such debts shall have been paid . . . to the Virgin(cid:13) Islands . . . it shall be lawful for the [Virgin Islands] to(cid:13) 17(cid:13) release by deed or otherwise convey such real estate to(cid:13) the debtor from whom it was taken. . . .(cid:13) 33 V.I.C. S 1825(d) (emphasis added). As Section 1825(d)(cid:13) demonstrates, a "release" is obtained by a debtor when the(cid:13) debt has been paid and a "release" may take place by(cid:13) transferring a deed. If the Virgin Islands Legislature’s use of(cid:13) the term "to . . . release security" in S 128(a)(2) were(cid:13) intended to refer to the "release" that a debtor obtains after(cid:13) paying off a debt, then that would likely preclude the(cid:13) section from applying to the present transaction, because a(cid:13) "release" is not the consequence of buying property at a(cid:13) foreclosure sale. Rather, once a "release" is made, a(cid:13) foreclosure is no longer possible. See 59 C.J.S. Mortgages(cid:13) S 485 (1998) (A "release" constitutes"a bar to any action for(cid:13) the foreclosure of the mortgage"); Id. atS 534 ("[T]he right(cid:13) to foreclose is precluded by . . . a release."); First Indiana(cid:13) Fed. Sav. Bank v. Hartle, 567 N.E.2d 834, 836-37 (Ind. Ct.(cid:13) App. 1991) (explaining that bank was "unable to foreclose"(cid:13) because of the "release of the mortgage"). While the(cid:13) language of S 128(a)(2) must be read in light of the(cid:13) structure of the Stamp Tax Act and the legislature’s likely(cid:13) policy goals, and while these considerations would lead us(cid:13) to resolve the uncertainty by concluding that the Virgin(cid:13) Islands Legislature likely intended to exempt the(cid:13) transaction at issue in this case from the Stamp Tax, we(cid:13) are dealing with the meaning of words. The fact is that the(cid:13) text of the exemption -- especially its use of the term(cid:13) "release" -- is ambiguous. As will appear below, this(cid:13) consideration is critical to our ultimate resolution of this(cid:13) case.(cid:13) 3. Is it Reasonable to Interpret S 128(a)(2)(cid:13) as Applying to Transactions in which a(cid:13) Deed of Trust is Used as a Mortgage Substitute?(cid:13) Having concluded that the language of S 128(a)(2) does(cid:13) not unambiguously exempt the present transaction from(cid:13) the Stamp Tax, we must determine whether the "deed of(cid:13) trust interpretation" that the GVI proposes forS 128(a)(2) is(cid:13) a reasonable reading of the section’s provision that the(cid:13) Stamp Tax "shall not apply to a transfer of title. . . solely(cid:13) 18(cid:13) in order to provide or release security for a debt or(cid:13) obligation." 33 V.I.C. S 128(a)(2).(cid:13) The GVI contends that S 128(a)(2) is aimed at those(cid:13) transactions in which parties use a deed of trust in lieu of(cid:13) a mortgage to secure a loan on a piece of real property. As(cid:13) noted above, a deed of trust is "[a] deed conveying title to(cid:13) real property to a trustee as security until the grantor(cid:13) repays a loan." Black’s Law Dictionary 423 (7th ed. 1999).(cid:13) "This type of deed resembles a mortgage," and has been(cid:13) used as a mortgage substitute. Id. In such a transaction, a(cid:13) borrower typically conveys title in the property that he is(cid:13) buying with the borrowed funds to the lender or another(cid:13) party as trustee. After the debt is repaid, the trustee(cid:13) relinquishes title to the property. See 4 Powell on Real(cid:13) Property S 37.33[2] (Michael Allan Wolf ed., Matthew Bender(cid:13) 2001). The arrangement is therefore similar in some ways(cid:13) to a traditional mortgage in which the lender holds a(cid:13) security interest in the property used to secure the loan(cid:13) until the borrow repays the debt. The interpretation that(cid:13) S 128(a)(2) is intended to apply to transactions by deed of(cid:13) trust used as mortgage substitutes is consistent with the(cid:13) language of the statutory section. A lender’s conveyance of(cid:13) equitable title back to a borrower after the loan is repaid in(cid:13) full could indeed be the conveyance of real property"solely(cid:13) to . . . release security" to which S 128(a)(2) refers.(cid:13) As noted above, the Virgin Islands Legislature has(cid:13) recognized the existence of the deed of trust. See, e.g., 22(cid:13) V.I.C. S 563 (defining "encumbrance" of"real property" "with(cid:13) respect to loans secured by mortgage, deed of trust, or(cid:13) other collateral . . . ."); 9 V.I.C. S 251 (defining "credit" to(cid:13) include "any loan, residential mortgage, [or] deed of trust");(cid:13) 13 V.I.C. S 803 (defining the powers of a Virgin Islands(cid:13) corporations to include the ability to secure loans"by(cid:13) mortgage, pledge, [or] deed of trust").(cid:13) The Achilles heel of the "deed of trust" interpretation of(cid:13) S 128(a)(2) is that it is unclear whether the Virgin Islands(cid:13) considers a transaction by deed of trust to transfer title to(cid:13) property. In order for the argument that S 128(a)(2) was(cid:13) intended to apply to deeds of trust to make sense, the(cid:13) Virgin Islands would have to construe them to convey title(cid:13) to the grantee rather than merely to convey a security(cid:13) 19(cid:13) interest, (because the stamp tax itself applies only to(cid:13) "transfers of title," 33 V.I.C. S 121(a)(1), and a transaction(cid:13) that is not considered to effect a transfer of title would(cid:13) therefore not need to be exempted). Jurisdictions that adopt(cid:13) the "lien theory" of mortgages (of which the Virgin Islands(cid:13) is one, see, e.g., Royal Bank of Canada v. Clarke, 373 F.(cid:13) Supp. 599, 601 (D.V.I. 1974)), are split as to whether they(cid:13) consider a deed of trust transaction to transfer title, or(cid:13) merely to create a security interest in the property.(cid:13) Compare 59 Macleod v. Moran, 94 P. 604, 605 (Cal. 1908)(cid:13) (recognizing that in California, a "lien theory" jurisdiction, a(cid:13) trust deed transfers title and not "mere[ly]" a lien) (cited in(cid:13) Hamel v. Gootkin, 202 Cal. App.2d 27, 29 (1962)) , and(cid:13) Brant v. Hargrove, 632 P.2d 978, 982-984 (Ariz. Ct. App.(cid:13) 1981) (recognizing Arizona as "lien theory" state but(cid:13) nonetheless concluding that a limited form of "title" does(cid:13) pass via a trust deed; trust deed "clearly destroys" the(cid:13) "unity of title" in a joint tenancy), and , C.J.S. Mortgages(cid:13) S 185 (1998) (explaining that in some states a trust deed(cid:13) does convey title, citing Georgia, Illinois, Virginia, Arkansas,(cid:13) and West Virginia as examples), with Brand v. First Fed.(cid:13) Sav. & Loan Ass’n of Fairbanks, 478 P.2d 829, 832 (Alaska(cid:13) 1970) ("[A] deed of trust conveys only a lien. . . ."), and(cid:13) Hohn v. Morrison, 870 P.2d 513, 516 (Col. App. 1993)(cid:13) ("Colorado has adopted the lien theory of mortgages under(cid:13) which the mortgage or deed of trust creates a lien against(cid:13) real property but does not convey title."), and Olympic Coast(cid:13) Inv. Inc. v. U.S. Nat’l Ass’n, 2000 WL 713932, *2 (Wash.(cid:13) App. Div. 2 2000) (noting that "Washington is a‘lien theory’(cid:13) jurisdiction [and thus] a deed of trust merely creates a(cid:13) security interest, and title to the property remains with the(cid:13) grantor"), and Wicker v. Texas Bank of Garland, N.A., 1995(cid:13) WL 141152, *3 (Tex. App. Mar. 31, 1995) (noting that(cid:13) "Texas follows the lien theory, not the title theory of(cid:13) mortgages," and that "a deed of trust . . . does not convey(cid:13) title to the property") (citing Taylor v. Brennan, 621 S.W.2d(cid:13) 592, 593 (Tex. 1981)).(cid:13) Neither the Virgin Islands Legislature, nor the Virgin(cid:13) Islands courts appear to have spoken on this issue.(cid:13) Construing a deed of trust to create only a lien interest(cid:13) rather than to convey title would be the interpretation most(cid:13) consistent with Virgin Islands law. As noted above, the(cid:13) 20(cid:13) Virgin Islands is a lien theory jurisdiction, and it has(cid:13) specified by statute that mortgages create only liens, and(cid:13) do not constitute transfers of title. See 28 V.I.C. S 290 ("A(cid:13) mortgage of real property shall not be deemed a conveyance(cid:13) . . . .").9 Consistency is often the wisest course in the law.(cid:13) Nevertheless, we have no guidance from the Virgin Islands(cid:13) on this arcane rule of mortgage law, i.e., whether a deed of(cid:13) trust conveys title or only a lien. In the absence of such(cid:13) authority we will rely on our canon of statutory(cid:13) construction of exemption provisions in tax statutes and(cid:13) resolve this uncertainty in favor of the government’s(cid:13) interpretation, and assume that the Virgin Islands(cid:13) considers transactions by deed of trust to transfer title. We(cid:13) therefore conclude that the reading that S 128(a)(2) is(cid:13) intended to exempt transactions from taxation in which the(cid:13) parties use a deed of trust as a mortgage substitute is a not(cid:13) unreasonable.10(cid:13) _________________________________________________________________(cid:13) 9. Restatement (3d) of Property: Mortgages is arguably authority for the(cid:13) notion that the Virgin Islands accepts absolute deeds intended as(cid:13) security. While the Restatement may acknowledge the possibility of such(cid:13) an instrument, it rejects "absolute deed as security" as a mortgage(cid:13) substitute. See Restatement, intro. at 4 ("Lenders in the United States(cid:13) have made use of a variety of real estate security devices . . . [including](cid:13) the deed of trust . . . [and] the absolute deed as security . . . . The result(cid:13) has been a plethora of devices and a corresponding profusion of legal(cid:13) uncertainty in most jurisdictions. The picture is not a tidy or efficient(cid:13) one. This Restatement proceeds on the premise that only one real(cid:13) property security device is necessary. It is here referred to simply as a(cid:13) mortgage . . . ."). See also 4 Powellon Real Property S 37.18. "Use of [the(cid:13) deed absolute intended as security] in creating a mortgage will generally(cid:13) involve unsophisticated lenders -- relatives and friends unassisted by(cid:13) legal counsel," and is disfavored because it creates a "considerable"(cid:13) "temptation to false swearing."(cid:13) 10. The Government of the Virgin Islands puts great weight on the New(cid:13) Hampshire Supreme Court’s decision in Apte v. Department of Revenue(cid:13) Legislation, 437 A.2d 319 (N.H. 1981), which construed a statutory(cid:13) provision similar to the one at issue here not to include transactions in(cid:13) which a lender purchased the underlying property at a foreclosure sale.(cid:13) That two-page opinion devotes no more than a single paragraph to the(cid:13) issue, and decides it in a single sentence which perforce does not more(cid:13) than state its conclusion. Because Apte does not explain its reasoning,(cid:13) it is unhelpful in resolving the questions before this court. Moreover Apte(cid:13) 21(cid:13) As suggested above, we think that BA Properties has the(cid:13) better policy arguments on its side. If we were not(cid:13) constrained by the rules of statutory construction governing(cid:13) tax exemptions, we would hold that the legislature intended(cid:13) to include both deeds of trust and the present transaction(cid:13) in the S 128(a)(2) exemption. As we have explained,(cid:13) however, the text of S 128(a)(2) is ambiguous and the GVI’s(cid:13) suggestion that S 128(a)(2) is intended to apply to(cid:13) transactions involving deeds of trust is not unreasonable(cid:13) given the language of the statute. Therefore, we agree that(cid:13) in this case, the proper interpretation of S 128(a)(2) is not(cid:13) "so clear that there can be neither reasonable doubt nor(cid:13) controversy about its terms." Bailey v. Magwire, 89 U.S.(cid:13) 215, 226 (1874). And therefore, that doubt "must be(cid:13) resolved against the taxpayer." Bell Atlantic Corp., 224 F.3d(cid:13) at 223.(cid:13) We think that this outcome may be contrary to the intent(cid:13) of the Virgin Islands Legislature, in that it has the potential(cid:13) to impede the flow of credit to the Virgin Islands, which has(cid:13) long needed offshore development capital, by raising the(cid:13) costs of recovering a loan when a borrower defaults. If these(cid:13) thoughts resonate with the legislature, it may, of course,(cid:13) amend the statute to clarify or modify the scope of the(cid:13) S 128(a)(2) exemption.(cid:13) The order of the Appellate Division will be reversed and(cid:13) the order of the Territorial Court reinstated.11(cid:13) _________________________________________________________________(cid:13) appears to rely on the fact that the New Hampshire Department of(cid:13) Revenue Administration had recently promulgated a rule providing that(cid:13) "[a]ll foreclosure deeds shall be subject to the tax imposed by RSA 78-(cid:13) B:1, even though the buyer and the seller may be the same parties." Rev.(cid:13) 802.07 (eff. Sept. 9, 1981).(cid:13) 11. Although the Territorial Court held thatS 128(a)(2) exempts(cid:13) transactions by deed in lieu of foreclosure from the Stamp Tax, we do(cid:13) not reach the question because it was not presented to us in this appeal.(cid:13) 22(cid:13) A True Copy:(cid:13) Teste:(cid:13) Clerk of the United States Court of Appeals(cid:13) for the Third Circuit(cid:13) 23
