EDWARD K. HALSEY, et al., )
vs. ) CASE NO. 76-939
Respondent. )
A hearing was held in the above-captioned matter, after due notice, at Vero Beach, Florida on November 3, 1976, before the undersigned Hearing Officer.
For Petitioners: William J. Stewart, Esquire
For Respondent: David K. Miller, Esquire
Petitioner's alleged liability for documentary stamp tax and surtax under Sections 201.02 and 201.021, F.S. as set forth in Proposed Notice of Assessment issued by Respondent.
The parties stipulated to the basic facts in the case. (Composite Exhibit 1). Additionally, one witness testified in behalf of Petitioners at the hearing.
The stipulated facts are as follow:
The Petitioners are purchasers of subleasehold interests in Ocean Club III, a condominium in Indian River County, Florida. All of the Petitioners purchased their subleasehold interests from Dye and Reeves Development Company in 1973, except the Petitioner Helen Bane, who purchased her subleasehold interest from the Petitioner Richard Long in 1974. The duration of the subleases was approximately 98 years, and they were paid for with present consideration consisting of cash and mortgages.
The document included as Exhibit "A", entitled Unit Sublease, represents the conveyance by which each of the Petitioners acquired his or her subleasehold. No documentary stamp taxes or surtaxes were paid on these conveyances.
Prior to closing with the Petitioners, the attorney for the Dye and Reeves Development Company requested William Stanley, Chief of the Documentary Stamp Tax Bureau, Department of Revenue, to give an opinion on whether the Unit Sublease, Exhibit "A", requires documentary stamp taxes and surtaxes. Stanley, in a letter dated July 3, 1973, stated his opinion to be that no documentary stamp taxes and surtaxes were due. A copy of this letter is attached as Exhibit "B."
On November 13, 1974, the Attorney General released an official opinion, AGO 074-350, which reversed the position earlier taken by Stanley regarding taxability of conveyances of subleasehold interests. The Department of Revenue has adopted this ruling as its own.
Based upon the letter from Stanley, the Dye and Reeves Development Company assured the Petitioners that no documentary stamp taxes or surtaxes would be required on the Unit Sublease. The Petitioners had knowledge of the letter or its contents at the time they closed the transaction, but at the time of closing nevertheless requested an Indemnification Agreement, Exhibit "C" herein, in which Dye and Reeves agreed to bear the cost of documentary stamp taxes due upon the Sublease. Exhibits "A," "B," and "C" represent all the relevant documents in this litigation.
The Department of Revenue has issued Proposed Notices of Assessment against the Petitioners based upon an alleged documentary stamp tax and surtax liability under the Unit Sublease. The Department of Revenue has not assessed any penalties against the Petitioners.
The Petitioners are unable to recover the sums alleged to be due as to taxes and surtaxes from the Dye and Reeves Development Company because the Company has no assets. Petitioners are also barred by limitations from recovering the money from the estate of Mr. Dye, who is deceased.
The Petitioners and the Department of Revenue's Tax Examiner have held an informal conference, in which the two parties were unable to resolve their differences concerning the aforementioned assessment.
If the Petitioners are found to be liable for documentary stamp taxes and surtaxes, the following amounts represent the proper computation of their liability:
NAME TAX SURTAX TOTAL
EDWARD K. HALSEY |
| 106.50 | 10.45 | 116.95 |
HELEN C. BANE |
| 117.60 | 43.45 | 161.05 |
W.B. WHITAKER, et ux. |
| 165.00 | 16.50 | 181.50 |
JAMES N. SKINNER |
| 115.50 | 11.55 | 127.05 |
MARY GLENNAN |
| 98.40 | 36.30 | 134.70 |
JOHN F. McFEATTERS, et | ux. | 127.50 | 46.75 | 174.25 |
ALLEN TOUZALIN |
| 121.50 | 14.85 | 136.35 |
RICHARD LONG, et ux. |
| 117.60 | 11.00 | 128.60 |
HOWARD BAIN, et ux. | 103.50 | 7.70 | 111.20 |
JOHN MYLES DEWAR, et ux. | 126.00 | 46.20 | 172.20 |
JOHN S. STEPHENS, et ux. | 99.00 | 7.70 | 106.70 |
PHYLLIS T. HERMAN | 103.50 | 10.45 | 113.95 |
CHARLES W. CHRISS, et ux. | 96.00 | 7.15 | 103.15 |
KATHRYN LOCKWOOD, et ux. | 97.50 | 35.75 | 133.25 |
KATHRYN LOCOD, et ux. | 163.50 | 59.95 | 233.45 |
KATHRYN LOCKWOOD, et ux. | 100.50 | 36.85 | 137.35 |
The sums stated above do not include any interest which may have accrued on the alleged liability.
Pursuant to stipulation of the parties, the testimony of Howard W. Bain, a Petitioner, was offered on behalf of all of the Petitioners in this case. He testified that he purchased a unit at Ocean Club III from Dye and Reeves Development Company in early June, 1973. Prior to the closing of that purchase, he was advised by his attorney that the latter expected to be provided by the developer's attorney a letter from the Department of Revenue that would state documentary stamps were not payable on the purchase of the condominium unit. Bain would not have closed the purchase if he had had to pay documentary stamp taxes on the transaction. It was his understanding that if any taxes did become due and payable they would be paid by the developer incident to the indemnification agreement. He was unaware at the time that Dye and Reeves Development Company might go out of business in the future. (Testimony of Bain).
CONCLUSIONS OF LAW
Section 201.01, F.S. provides that documentary stamp taxes shall be paid on documents described in following sections of Chapter 201 by any person who, inter alia, signs the same. The statutory provision states in pertinent part:
"201.01 Documents taxable, generally.--There shall be levied, collected and paid the taxes specified in this chapter, for and in respect to. . .documents, instruments, matters, writings, and things described in the following sections,. . .by any person, who makes, signs, executes issues, sells, removes, consigns, assigns, or ships the same, or for
whose benefit or use the same are made, signed, executed, issued, sold, removed, consigned, assigned or shipped in the state. . ."
Rule 12A-4.02(1)(a), F.A.C., provides that, with certain exceptions not here applicable, the tax is payable by any of the parties to a taxable transaction.
Section 201.02(1), F.S., imposes a documentary stamp tax on written transactions which convey an interest in real property. This subsection reads as follows:
"201.02(1) Tax on deeds and other instruments relating to lands, etc.--
(1) On deeds, instruments, or writings whereby any lands, tenements, or other realty, or any interest therein, shall be granted, assigned, transferred, or otherwise conveyed to, or vested in, the purchaser, or any other person
by his direction, on each $100 of the consideration therefor the tax shall be 30 cents. When the full amount of consideration for the execution, assignment, transfer, or conveyance is not shown in the face of such deed, instrument, document, or writing, the tax shall be at the rate of 30 cents for each
$100 or fractional part thereof of the consideration therefor.
Section 201.021 provides for a documentary surtax, in addition to the tax levied in Section 201.02, at specified rates.
The courts have construed Section 201.02(1) to require payment of documentary stamp taxes on documents conveying leasehold interests in realty where present consideration is paid therefor. DeVore v. Gay, 39 So.2d 796 (Fla. 1949); DeVore v. Lee, 30 So.2d 924 (Fla. 1947). The instant case concerns written conveyances of subleasehold interests in real property, paid for in cash and note obligations secured by mortgages. Conveyance of a subleasehold interest does not differ materially from conveyance of a leasehold and thus it is considered that the subleases herein properly are taxable under the above- cited statutory provisions as to documentary stamp tax and surtax. As purchasers of the leasehold interests, the Petitioners herein were subject to the aforesaid taxes.
Petitioners contend, however, that Respondent is estopped to recover such taxes by virtue of their reliance upon the letter of the latter's Chief, Documentary Tax Bureau, on July 3, 1973, whereby he advised the attorney for the developer that taxes were not required on the leasehold and subleasehold interests. This advice was erroneous under the state of the law at that time, but Petitioners claim that they relied on the ruling to their detriment by not requiring the developer to purchase and place documentary stamps on the subleases in question. Further, since the above-mentioned letter had not actually been received at the time of closing, certain of the Petitioners obtained an indemnification agreement from the developer and John E. Dye, individually, whereby they agreed to assume responsibility for payment of any documentary stamp taxes due on the transactions. Some three years later, when Respondent sought to impose the taxes, those Petitioners found that they would be unable to enforce compliance with the indemnification agreement due to the fact that Dye and Reeves had no assets and that they were bound by limitations from recovering against Mr. Dye's estate. Respondent contends that estoppel is not available as a defense where its effect would be to alter the substance of state tax policy.
It has been held generally in Florida that estoppel will not lie against the government unless exceptional circumstances are present. Trustees of Int. Imp. Fund v. Claughton 86 So.2d 775 (Fla. 1956); North American Corp. vs. Green, 120 So.2d 603 (Fla. 1959). The courts have found "exceptional circumstances" to exist in several cases involving estoppel against state taxing authorities. In Hardy, Hardy & Assoc., Inc. v. Department of Revenue, 308 So.2d
187 (Fla. 1st DCA 1975), the Court held the Department estopped to deny a refund claim on grounds that the statute of limitations had run. This holding was based upon a determination that prior correspondence and other transactions with the Department had caused the taxpayer to sit on its rights. Also, in State ex rel. Devlin v. Dickinson, 305 So.2d 848 (Fla. 1st DCA 1974), the Comptroller was held estopped to deny a refund claim on the grounds that the taxpayers had failed to exhaust their administrative remedies, where the taxpayers had relied
on forms and instructions previously furnished them by the Department of Revenue. Respondent asserts that the foregoing cases involve only procedural matters and not the substance of state tax policy, and therefore should not be controlling.
Although it is true that the doctrine of estoppel is not applied against the state and its agencies to the same extent as it is against individuals, the doctrine will lie where it is necessary to prevent manifest injustice and wrongs to private individuals, provided that any such restraint placed upon the governmental body does not interfere with the exercise of governmental power. Trustees of Int. Imp. Fund v. Claughton, supra. Many courts have recognized that the state may be estopped by misinformation given by a tax collector or other tax official when such official is acting within the scope of his authority and has not attempted to waive compliance with statutory requirements or consciously depart from the law. 72 Am Jur 2d, State and Local Taxation, 890. Here, a good faith attempt was made to ascertain whether tax was due on the lease transactions prior to their consummation, and an equally good faith, though incorrect, opinion was rendered in response thereto by the highest authority of the state documentary stamp tax bureau that such taxes were not required. This opinion was not rendered in a vacuum or on a hypothetical question, but involved an examination of the precise lease documents in question. Under such circumstances, the taxpayers were fully justified in reliance on the accuracy of the advice and it would be unconscionable to hold otherwise in the light of suceeding events. This is not a situation where to invoke the doctrine of equitable estoppel the state's ability to exercise vital police powers would be affected. Neither will it impair the ability of the state to carry out its mandate with regard to taxing powers. Indeed, one can visualize the chaos that would result in the assessment and collection of taxes if taxpayers could not rely upon seemingly authoritative statements of duly empowered officials. To deny relief under the circumstances in this case would operate to impair public confidence in the tax system and result in clear injustice. Accordingly, it is concluded that Respondent is estopped from asserting failure to comply with the law by the Petitioners who were parties to the indemnification agreement with Dye and Reeves Development Company.
The aforesaid indemnification agreement was executed in favor of only eight of the Petitioners, i.e., Lockwood, Bain, Long, Halsey, Glennan, Whitaker, Touzalin and McFeatters. As to remaining Petitioners Bane, Skinner, Dewar, Stephens, Herman and Chriss, the seller in the Purchase Agreement agreed only to pay "cost of preparation and recording of all documents pertaining to Ocean Club III". Payment of documentary stamp taxes, although normally payable upon recording the pertinent documents, was not encompassed within the seller's undertaking. Neither does the unit sublease specifically allocate the burden of paying documentary stamp taxes. Accordingly, these Petitioners cannot be heard to claim reliance and change of position to their detriment on the misinformation received from the state as to tax liability.
be held liable for the payment of documentary stamp tax, surtax, and interest thereon, pursuant to Chapter 201, Florida Statutes, in the amounts set forth in the foregoing Findings of Fact.
DONE and ORDERED this 9th day of December, in Tallahassee, Florida.
THOMAS C. OLDHAM
Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304
Filed with the Clerk of the Division of Administrative Hearings this 9th day of December, 1976.
