STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

INVESTORS REALTY TRUST, )

)

Petitioner, )

)

vs. ) CASE NO. 76-1362

)

DEPARTMENT OF REVENUE OF )

THE STATE OF FLORIDA, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, an administrative hearing was held before Diane D. Tremor, Hearing Officer with the Division of Administrative Hearings, in Room

103 of the Collins Building, Tallahassee, Florida, at 10:30 A.M. on February 25, 1977.

APPEARANCES

For Petitioner: David L. Kline

Abrams, Anton, Robbins, Resnick and Schneider, P.A.

Post Office Box 650 Hollywood, Florida 33022

For Respondent: David K. Miller, Assistant Attorney General Department of Legal Affairs, The Capitol Tallahassee, Florida 32304

FINDINGS OF FACT

1. Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant facts are found:

   
   

2. On May 10, 1973, petitioner, a Tennessee business trust, loaned Hunt- Florida Enterprises, Inc. the principal sum of $1,300,000.00, receiving in return a mortgage deed and mortgage note on property owned by Hunt-Florida located in Broward County. (Exhibits 1 and 2)

   
   

3. On September 30, 1975, petitioner loaned Hunt-Florida an additional sum of $125,000.00, receiving in return a "promissory note and mortgage modification agreement." This agreement reflected Hunt-Florida's entire indebtedness to petitioner for $1,425,000.00 and encumbered the mortgaged property for the full amount. This agreement ratified and confirmed the personal and individual guarantee of Richard E. Hunt and his wife, Joyce B. Hunt, of the mortgage note dated May 10, 1973. (Exhibit 3)

   
   

4. No payments were made by Hunt-Florida to petitioner to reduce its indebtedness. On February 13, 1976, Hunt-Florida executed to petitioner a

   quitclaim deed to the subject property. (Exhibit 4). This quitclaim deed had three covenants. It was agreed that by acceptance of the deed, petitioner would not institute suit for the amount owed it by Hunt-Florida in the amount of

   $1,300,000.00, plus interest, nor would petitioner sue the individual grantors. It was further agreed that the quitclaim deed was subject to the aforementioned mortgage and promissory note and mortgage modification agreement and it was provided that the same shall not merge so that the right to foreclose was not extinguished by the quitclaim deed. Finally, the quitclaim deed provided that it was subject to a purchase contract executed between Hunt-Florida and SLC Oil and Gas Corporation. Hunt-Florida assigned to petitioner all its rights, title and interest in said purchase contract and the proceeds of the same. This quitclaim deed bore only minimal documentary stamps.

   
   

5. The respondent Department of Revenue made a total assessment against petitioner in the amount of $16,086.80. This sum includes taxes and surtaxes on the February 13, 1976, quitclaim deed, taxes on the promissory note and mortgage modification agreement and penalties and interest. (Exhibit 5). Petitioner does not contest the mathematical computation or its liability for the assessment on the modification agreement. It does contest the taxes, surtaxes, penalties and interest as assessed upon the quitclaim deed.

   
   

   CONCLUSIONS OF LAW

   
   

6. It is petitioner's contention that no documentary taxes are due for the quitclaim deed inasmuch as there was no consideration given or received for said deed. Petitioner contends that the quitclaim deed simply represents additional security or collateral for the debt owned by Hunt-Florida. It is argued that petitioner did not gain title to the property by virtue of the quitclaim deed, and that it was not a deed in lieu of foreclosure.

   
   

7. Respondent argues that at the time of the quitclaim deed, legal title to the subject property resided in Hunt-Florida, irrespective of other outstanding mortgages or contracts for sale. The quitclaim deed conveyed such title to petitioner, and petitioner covenanted not to institute suit against the grantor for the $1,300,000.00 or sue the individual grantors on the note. Thus, contends respondent, the mortgage debt was rendered unenforceable by the quitclaim deed and this was the consideration for the deed.

   
   

8. A careful consideration of the applicable statutes and rules of the respondent Department of Revenue leads the undersigned to conclude that the amount assessed by respondents with respect to the quitclaim deed dated February 13, 1976, is valid. Petitioner clearly received legal title to the subject property from Hunt-Florida by virtue of the quitclaim deed. The consideration for such title was petitioner's covenant not to institute suit for the principal sum due and owing from Hunt-Florida in the amount of $1,300,000.00 plus interest, or to sue the individual grantors on the note. This agreement constitutes consideration upon which documentary stamp taxes and surtaxes are based. F.S. Ch. 201, F.A.C. Rules 12A-4.12 and 12A-4.13(2).

   
   

9. Petitioner further objects to the assessment of the penalty under F.S. 201.17(2), contending that the same is unconscionable and citing the case of Zuckerman-Vernon Corp. v. Dept. of Revenue, 339 So.2d 685 (Fla. App. 1st 1976). Even had petitioner pointed to circumstances which would merit a reduction in the penalty, it is doubtful that a Hearing Officer with the Division of Administrative Hearings has the authority to recommend a waiver of the penalty mandatorily imposed by F.S. 201.17(2). It appears that relief from the penalty provisions as they presently stand must come either through the legislature or

through the courts in the exercise of their equitable powers upon judicial review. See Dominion Land and Title Corp v. Dept. of Revenue, 320 So.2d 815 (Fla. 1975); Associated Dry Goods Corp. v. Dept. of Revenue, 335 So.2d 832 (Fla. App. 1st, 1976) and AGO 076-215.

RECOMMENDATION

Based upon the findings of fact and conclusions of law recited above, it is recommended that the assessment as set forth in the revised notice of proposed assessment of tax and penalty dated December 8, 1976, be upheld.

Respectfully submitted and entered this 22nd day of March, 1977, in Tallahassee, Florida.

DIANE D. TREMOR

Hearing Officer

Division of Administrative Hearings Room 530 Carlton Building Tallahassee, Florida 32304

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 22nd day of March, 1977.

COPIES FURNISHED:

John D. Moriarty, Esquire Department of Revenue

Room 104, Carlton Building Tallahassee, Florida 32304

David L. Kline, Esquire Abrams, Anton, Robbins,

Resnick and Schneider, P.A. Post Office Box 650

Hollywood, Florida 33020

David K. Miller

Assistant Attorney General Department of Legal Affairs The Capitol

Tallahassee, Florida 32304

Docket for Case No: 76-001362

Orders for Case No: 76-001362