on December 17, 1975, in Room 104 of the Collins Building, Tallahassee, Florida.
For Petitioner: Paul R. Lipton, of
Snyder, Young, Stern, Barrett & Tannenbaum, P.A. 17071 West Dixie Highway
For Respondent: Harold F.X. Purnell
Assistant Attorney General Department of Legal Affairs Tallahassee, Florida 32304
The sole issue in this cause is the validity of the respondent's assessment and demand for payment of delinquent documentary stamp taxes in the amount of
$55,649.70, and a penalty in a like amount, for a total amount of $111,299.40. The respondent seeks to impose this tax and penalty on a quitclaim deed dated August 27, 1973, from Bayshore 21, Inc. to Marvin Glick and Zuckerman-Vernon Corporation.
It is the contention of the petitioner, Zuckerman-Vernon Corp., that no such tax or penalty is due for the reason that the conveyance in question was without consideration and was pursuant to a trust agreement between Bayshore 21, Inc. and petitioner and Marvin Glick. It is the respondent's position that there was no trust situation here and that documentary stamp tax liability attaches to the transaction in question based upon the amount of the existing mortgages at the time of the conveyance.
Based upon the oral argument of the parties and the evidence adduced at the hearing, as well as the pleadings, the following pertinent facts are found:
On June 30, 1973, an agreement for purchase and sale was executed between Bayshore 21, Inc., as purchaser, and Arthree, Inc., as seller, for the purchase and sale of real estate commonly known as the Carriage House. This agreement was executed by Bayshore 21, Inc. in its corporate name, and not as a trustee or other representative capacity. The provisions of this agreement were individually guaranteed by Marvin Glick, the president and sole stockholder of Bayshore 21, Inc.
The purchase and sale agreement discloses that the total purchase price of the property is $19,500,000, payable by taking subject to a first mortgage held by the Prudential Insurance Company with the remainder, subject to certain prorations, to be paid in cash. An earnest money deposit in the amount of
$500,000.00 was placed in escrow by Bayshore at the time of execution of the purchase and sale agreement. Bayshore 21, Inc. represented and warranted in said agreement that it was a corporation duly organized and in good standing with full capacity to make and execute the agreement and to consummate the transaction embodied therein. Further, Bayshore warranted that there was no provision in its charter or bylaws, nor was it a party to any agreement, which would limit or prevent its consummation of the agreement. Also, Bayshore reserved the right to assign it's interests to any other party upon the assignee's assumptions of Bayshore's obligations or to direct Arthree, Inc. that the deed or other closing instruments would run in favor of a designated grantee other than Bayshore.
Pursuant to the agreement for purchase and sale described above, Arthree, Inc. conveyed the Carriage House to Bayshore 21, Inc. by warranty deed dated August 17, 1973. There was evidence that the transaction was not closed until August 23, 1973. Bayshore 21, Inc. took title in its own corporate name, and not as a trustee or in a representative capacity. Proper documentary stamps were attached to this document.
On either August 22 or 23, 1973, Bayshore 21, Inc. executed a
$1,300,000.00 note and mortgage to Commercial Trading Company, Inc. and a
$5,000,000.00 note and mortgage to Security Mortgage Investors. These notes and mortgages were in the corporate name of Bayshore 21, Inc. but were guaranteed by the petitioner and Marvin Glick. These guarantees contain language that the mortgagee may proceed directly against the guarantors in the event of default.
There was evidence that utilization of Bayshore 21, Inc. to effectuate the loans from Commercial Trading Company and Security Mortgage Investors was required by said mortgagees because of the fact that the then prevailing interest rate levels were in excess of the noncorporate statutory interest limit.
On August 23, 1973, a joint venture agreement was entered into between petitioner and Marvin Glick. This joint venture agreement provided that
"The parties acknowledge that BAYSHORE 21, INC. has taken title to certain property as trustee for ZUCKERMAN-VERNON CORP. and MARVIN GLICK
and, upon completion of the financing arrangements, will convey the property to ZUCKERMAN-VERNON CORP. and MARVIN GLICK, a
fifty (50 percent) percent interest being conveyed to each party.
The property that is the subject of this joint venture is the CARRIAGE HOUSE, located at 54th Street and Collins Avenue, Miami Beach, Florida, each party to this agreement having a fifty (50 percent) percent interest in said property."
On August 27, 1973, title to the Carriage House was conveyed by quitclaim deed from Bayshore 21, Inc. to Marvin Glick and petitioner, each to have an undivided fifty percent interest. Minimal stamps were affixed to this document, which bore the notation "No documentary stamps are required on this Deed inasmuch as the Grantor took title solely as Trustee for the Grantees herein."
Thereafter, the respondent Department of Revenue assessed the parties to this August 27, 1973 deed for the documentary stamp taxes due, based upon the
$18,550,000.00 existing mortgages on the property at the time of the conveyance ($12,250,000.00 to Prudential, $5,000,000.00 to Commercial Trading Company and
$5,000,000.00 to Security Mortgage Investors). The delinquent documentary stamp taxes were assessed in the amount of $55,649.70, and a penalty was assessed in a like amount, making the total amount due $111,299.40.
CONCLUSIONS OF LAW
The documentary stamp tax provided by F.S. 201.02 is an excise tax imposed on particularly described transactions, and in the case of instruments relating to realty, is based upon the total consideration involved in the transfer or conveyance. Thus, the key point in determining whether documentary stamps are to be affixed to an instrument transferring an interest in realty is the presence or absence of consideration for the transfer. Indeed, Rule 12A-
4.14 describes conveyances not subject to the documentary stamp tax as those "conveyances of realty without consideration, including. . .a deed to or by a trustee not pursuant to a sale. . ." The two issues determinative of this case are whether petitioner received its interest in the Carriage House by virtue of the August 27, 1973 quitclaim deed either without consideration or as a result of a trust situation either an express trust or a resulting trust.
The facts of this case clearly do not illustrate an express trust relationship between Bayshore 21, Inc. and petitioner and Glick. When Bayshore executed the agreement for purchase and sale of the Carriage House on June 30, 1973, it did so in its corporate name and not in a representative capacity. When it later took title to the property from Arthree on either August 17th or 23, 1973, it again did so in its own corporate name. Bayshore thus received legal and beneficial title to the subject property by virtue of the deed from Arthree, since there was no disclosure on the face of said deed of the trustee status of Bayshore or the supposed beneficiaries and since the record herein fails to disclose a recorded declaration of trust. See F.S. 689.07 and Arundel Debenture Corp. v. Le Blond, 190 So. 765 (Fla. 1939). The fact that the joint venture agreement between petitioner and Glick recites that petitioner and Glick acknowledge that Bayshore took title to the Carriage House as trustee and would convey the Carriage House to petitioner and Glick upon the completion of financing arrangements is not sufficient to create an express trust. Bayshore itself was not a member of, nor did it sign, the joint venture agreement. Bayshore was subject to the purchase and sale agreement long before the
execution of the joint venture agreement. Prior to the August 27th quitclaim deed, the joint venturers had no control or dominion over the Carriage House property. As stated in Columbia Bank for Cooperatives v. Okeelanta Sugar Cooperative, 52 So.2d 670, 672 (Fla. 1951):
"An express trust cannot exist unless there is an execution of an intention to create such a trust by the one having legal and equitable dominion over the property made subject to it."
In the alternative, petitioner contends that the facts of this case dictate a finding of a resulting trust. The undersigned does not agree. A resulting trust arises where the purchase price of land is paid by one and the title is taken by another, the parties intending that the holder of the title is to hold on behalf of the other. Stated differently, where title is taken in the name of one who has used the funds of another to pay the purchase price, a resulting trust arises. Such trusts arise, if at all, at the time of the conveyance. They are not created or established by subsequent acts of any of the participants. Mitchell v. Grapes, 146 So.2d 591 (Fla. App. 3rd, 1962). In order to establish a resulting trust, the evidence must be so clear, strong and unequivocable as to remove every reasonable doubt as to the existence of the trust. Goldman v. Olsen, 31 So.2d 623 (Fla. 1947).
Petitioner contends that the evidence in this case clearly shows that it was the funds of petitioner and Glick, the joint venturers, which were used to acquire the Carriage House, with title initially being taken in the name of Bayshore 21, Inc. as trustee. It is the conclusion of the undersigned that the evidence in this case does not clearly, strongly and unequivocably illustrate that the joint venturers actually paid the purchase price of the Carriage House. The documents of record clearly demonstrate that it was Bayshore's funds, obtained through its agreement to take subject to the prudential first mortgage and through the loans from Commercial Trading and Security Mortgage (the payment for which it was primarily responsible), which enabled it to purchase the realty in question. In fact, petitioner admits that such funding could only be obtained by Bayshore and could not have been obtained on behalf of the joint venturers due to usury proscriptions. There is evidence to indicate that
$550,000.00 was disbursed to Marvin Glick and petitioner argues that this is evidence, along with the personal guarantees of the mortgages and notes, showing that the joint venturers supplied all funds for the purchase by Bayshore. The ledger sheet indicates that the $550,000.00 disbursement occurred on August 24, 1973 - one day after the closing of the deed to Bayshore. Even if it can be assumed that Glick provided the cash payment for the Arthree - Bayshore transaction, there is no showing that he did so in his capacity as joint venturer or as the President and sole shareholder of Bayshore 21, Inc. And, while petitioner and Glick guaranteed the notes securing the mortgages in favor of the two lenders, Bayshore remained primarily liable on said notes. A guarantor does not, by the mere act of its guaranty, acquire legal or equitable title to the property purchased with the proceeds of the guaranteed loan.
Petitioner having failed to demonstrate that it actually provided the funds for the purchase price of the subject realty, a resulting trust situation cannot be established.
Nor can petitioner be upheld on the theory of lack of consideration for the transfer of the Carriage House to it and Glick from Bayshore. As previously discussed, while petitioner and Glick were personally liable as guarantors under a portion of the original Arthree - Bayshore transfer, they were not solely or primarily liable. Even though the guarantees provided that
the mortgagees could go directly against the guarantors, the guarantors' liability was still secondary, contingent upon the default of Bayshore. Consideration, for the purposes of the documentary stamp tax, includes the value of outstanding mortgages on the property. It is the passage from grantor to grantee of the direct primary obligation for the payment of mortgage encumbrances, at the risk of the grantee - the joint venturers - losing its interest in the realty that provides the consideration for purposes of documentary stamp tax liability pursuant to F.S. 201.02. Kendall House Apartments, Inc. v. Department of Revenue, 245 So.2d 221 (Fla. 1971). This, plus the fact that petitioner and Glick took subject to the $12,250,000.00 mortgage in favor of Prudential, negates any contention that no consideration passed in the subject transaction.
Having failed to show lack of consideration or a trust situation between Bayshore 21, Inc. and petitioner and Glick, documentary stamp taxes and the corresponding delinquency penalty were properly assessed.
