J. PARRISH & COMPANY, INC., ) PAULINE BRYAN, )
vs. ) CASE NO. 77-429
Respondent. )
Pursuant to notice, the Division of Administrative Hearings, by its duly designated hearing officer, G. Steven Pfeiffer, held a public hearing in this case on April 26, 1977 in Titusville, Florida.
For Respondent: Edwin J. Stacker
On or about February 23, 1977, Jesse Jackson Parrish, Jr., Ralph Bernard Parrish, J. J. Parrish and Company, Inc., and Pauline Bryan ("Petitioners" hereafter) filed a petition for administrative hearing with the Florida Department of Revenue ("Respondent" hereafter). In accordance with 120.57(1)(b)(3) Florida Statutes (1976 Supp.) the Respondent forwarded the petition to the Division of Administrative Hearings for the assignment of a hearing officer and the scheduling of a hearing. On March 16, 1977, the Respondent filed its answer to the petition. The final hearing was scheduled by notice dated April 4, 1977.
At the commencement of the final hearing counsel for the Petitioners inquired as to which of the parties would have the burden of proof. The undersigned advised counsel that the burden if establishing the validity of the Respondent's proposed assessments rested with the Respondent. Hearing Officer's Exhibits 1 through 3 were received into evidence. The Respondent called no witnesses, but offered Respondent's Exhibits 1 through 5 into evidence. These were received without objection, and the Respondent offered no additional evidence. The Petitioner moved for a finding that the Respondent failed to establish a prima facie case. The undersigned advised counsel that he was inclined to agree that the Respondent failed to establish a prima facie case.
The undersigned advised counsel that he was inclined to agree that the Respondent had not met its burden of proof; however, no ruling to that effect
was made, and the Petitioner's motion was denied. Petitioner presented no additional evidence.
The Respondent is seeking to impose delinquent documentary surtaxes, penalties and interest against the Petitioners on warranty deeds for which the Petitioners were granted. IT appears that the deeds were executed in lieu of foreclosing upon mortgages of which the Petitioners were grantees. It appears that the deeds were executed in lieu of foreclosing upon mortgages of which the grantors of the subject deeds were mortgagors, and the Petitioner's were mortgages. Petitioners contend that the Respondent had failed to make a prima facie showing that its notices of proposed assessment are valid. Petitioners also contend that the documentary surtax statutes do not apply to deeds executed in lieu of foreclosure. The Respondent contends that it does not have the burden of establishing the prima facie validity of its proposed assessments, that insofar as it has any burden the burden has been satisfied in this case, and that the documentary surtax statute applies to deeds executed in lieu of foreclosure.
Paragraph 3 of the Petitioner's petition for administrative hearing provides: "That the Petitioners accepted a conveyance
of certain real property in Brevard County, Florida in lieu of foreclosure of a mortgage held by them. The Department of Revenue contends that the documentary surtax should be paid on the deeds based on the amount of the outstanding mortgage at the time of the conveyances. It has served notice of the proposed assessments against each of the Petitioners in the following amounts, to wit:
Jesse Jackson Parrish, Jr., tax - $187.00, penalty - $187.00, interest - $5.61, total due to date - $379.61; Ralph Bernard Parrish, tax - $187.00, penalty - $187.00, interest -
$5.61, total due to date - $379.61; J.J. Parrish & Company, Inc., tax - $374.55, penalty - $374.55, interest - $11.24, total due to date - $760.34, and Pauline Bryan, tax - $187.00, penalty - $187.00, interest
- $5.61, total due to date - $760.34, and Pauline Bryan, tax - $187.00, penalty - 187.00, interest - 5.61, total due to date -
$379.61. That the statutes, Florida Statutes, 201.02, does not require payment of the documentary sur tax in such a case. The condition of this statute, by the court, in Leadership Housing, Inc., a Delaware corporation vs. Department of Revenue of the State of Florida, Fla. App. 336 So 2d 1239, holds that the statute should be strictly construed in favor of the tax payer and against the Government."
In its answer the Respondent admitted the allegations contained in the first three sentences of the above quoted paragraph. In response to the last sentence
of Paragraph 3 of the petition, the Respondent answered as follows: "Respondent denies the following allegations
contained in the fourth sentence of paragraph three, if Petitioners are refering to section
201.021 Florida Statutes, and asserts that the conveyance which is the subject of this cause is subject to the imposition of documentary surtax stamps pursuant to section 201.021, Florida Statutes. Respondent, with respect to the allegations contained in the last sentence of Paragraph 3, admits to the existence of the decision in the Leadership Housing Inc., a Delaware corporation v. Department of Revenue of the State of Florida case, but asserts that such decision is not applicable in the instant cause."
Since the allegations of the first three sentences of Paragraph 3 of the petition have been admitted by the Respondent, the allegations will be accepted as facts, and are intended to be construed as findings of fact herein.
In Paragraph 2 of their petition, the Petitioners alleged: "There are no issues of material fact." In its answer the Respondent did not admit this allegation, but rather asserted that it was without knowledge with respect to it. The position taken by the Respondent at the final hearing clearly indicates that the Respondent is in agreement that there are no issues of fact to be determined in this case.
On or about December 23, 1975, Alexander H. Clattenberg, Jr. and John
Lowndes, Trustees, executed warranty deeds granting to Jesse Jackson Parrish, Jr., Ralph Bernard Parrish, and Pauline Parrish Bryan three separate parcels of land located in Brevard County, Florida. These warranty deeds were received in evidence respectively as Respondent's Exhibits 4, 2, and 3. On or about July 8, 1976, Alexander H. Clattenberg, Jr. and John F. Lowndes, Trustees, executed a warranty deed granting to J. J. Parrish & Company, Inc., certain real property located in Brevard County, Florida. A copy of this deed was received in evidence as Respondent's Exhibit 1.
On or about December 29, 1976, the Respondent issued notices of proposed assessment against Jesse Jackson Parish, Jr., Ralph Bernard Parrish, and J. J. Parrish & Company, Inc. based upon Respondent's Exhibits 4, 2, and 1. Copies of these notices of proposed assessment were received in evidence as Respondent's Exhibit 5. A copy of a proposed assessment against Pauline Parrish Bryan was neither offered into evidence nor received. It is alleged in the Petitioners' petition, and admitted in the Respondent's answer, however, that a notice of proposed assessment was served upon Pauline Bryan.
Except insofar as the pleadings contain undisputed allegations respecting the consideration for the warranty deeds that were received in evidence as Respondent's Exhibits 1 through 4, there was no evidence presented at the final hearing from which any findings can be made respecting the consideration for the deeds.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the parties to this action, and over the subject matter. Section 120.57(1), Florida Statutes (1976 Supp.)
The Respondent, Florida Department of Revenue, is seeking to impose a tax upon the Petitioner, and is therefore the moving party in this matter. In his treatise on State Administrative Law, Professor Cooper stated: "The State courts quite uniformly impose
on agencies the customary common-law
rule that the moving party has the burden of proof, including not only the
burden of going forward but also the burden of persuasion. This means, of course, that when an applicant appears before an agency seeking to establish a claim or obtain a license, the burden is on him. Conversely, when the agency is the moving party, the burden is on it." 1 Cooper, State Administrative Law 355 (1965)
The test for determining where the burden of proof lies in an administrative proceeding in Florida has been stated as follows: "As in court proceedings, the burden of proof is on the party asserting the affirmative of an issue before an administrative tribunal." 1 Fla. Jur., Administrative Law, 120, quoted with approval by Justice Drew in his concurring Opinion in Tropical Park v. Ratliff, 97 So.2d 169, 177 (Fla. 1957).
In support of its contention that the burden of proof in this matter rests with the Petitioners, the Respondent has cited the Rules of the Administration Commission, Model Rules of Procedure, Rule 28-5.25(10), Florida Administrative Code, which relates to formal proceedings brought in accordance with 120.57 (1), Florida Statutes (1976 Supp.). The rule provides:
"Opening and closing statements may be presented. The Petitioner(s), shall make his presentation first, then the opposing party(s) shall make their presentations. All parties of record shall have an opportunity to rebut and respond to evidence and testimony introduced, through cross examination,
and the introduction of rebuttal evidence."
The Model Rules of Procedure have been promulgated in accordance with 120.54(10), Florida Statutes. The Model Rules are the rules of procedure for each agency subject to the Administrative Procedure Act. The question of which party in an administrative proceeding has the burden of proof is a question of substantive law. Insofar as the Model Rules place the burden of proof on one party or another in an administrative proceeding, the rules would clearly constitute an invalid exercise of the authority delegated by the Legislature to the Administration Commission. It does not appear that the framers of the Model Rules intended to place the burden on one party or another through the adoption of Rule 28-5.25(10). Insofar as this rule has any applicability to the instant
question, the rule would seem to indicate that the Department of Revenue should have been designated the Petitioner herein, and Jesse Jackson Parrish, Jr., et al. should have been designated Respondents.
The Respondent contends that its notices of proposed assessment are presumptively valid, and must be accepted as correct absent proof to the contrary. No Florida cases directly supporting this contention have been cited by the Respondent. The Respondent has cited Webre Steib Co. v. Commissioner of Internal Revenue, 324 U.S. 164 (1945); 72 Am. Jur. 2d State and Local Taxation 1151; and 31A Fla. Jur. 919. In the Webre Steib Co. case, the court discussed several of the presumptions which are applied in determining sugar processing taxes imposed under the Agricultural Adjustment Act of 1933 (7 U.S.C. 601 et seq.). The case does not stand for general authority that tax assessments have prima facie validity, because the presumptions discussed were created under the terms of the statute. No similar presumptions are created under the Florida Documentary Stamp, or Documentary Surtax Statutes (201.02, 201.021, Florida Statutes). The Am. Jur. and Fla. Jur. articles cited by the Respondent state that the burden of proof in tax cases is imposed upon persons seeking refund of taxes, or upon persons seeking to enjoin the collection of taxes, or upon persons seeking to declare the imposition of a tax unconstitutional, or upon persons assailing the good faith of taxing officials. The Petitioners in this case are not seeking to take any of these affirmative actions. Rather, it is the Respondent that is seeking to take affirmative action by imposing a tax upon the Petitioners through an administrative proceeding.
Finding no direct authority for the proposition that its notices of proposed assessment are presumptively valid, the Respondent has argued that there is a general presumption under Florida Law that public officials perform their duties in accordance with the law, and that it must therefore be presumed that officials of the Respondent acted in accordance with the law when they issued the notices of proposed assessment. In support of this contention Respondent cites Hillsborough County Aviation Authority v. Taller & Cooper, 245 So.2d 100 (2 DCA Fla. 1971). While the case does state the general legal proposition that public officials are presumed to perform their duties in accordance with the law, the case is simply not applicable to the instant matter. The case involved the equity jurisdicition of a circuit court on a question of whether the Hillsborough County Aviation Authority violated provisions of law in bid procedures on a public work project. The parties opposing the Authority's action had the affirmative side of the issue. The presumption that public officials act in accordance with the law does not operate to change the status quo in administrative proceedings. In O'Neil v. Pallot, 257 So.2d 59, 61 (1 DCA Fla. 1972), the court stated:
"It is only after an administrative hearing with all of the procedural safeguards has been had that a presumption of correctness can be indulged in by the courts as to any administrative action which is quasijudicial in character."
Section 120.57 provides that parties whose substantial interests are determined by an agency have the right to have a decision based upon evidence presented at a hearing. If the presumption of correctness of notices of proposed assessment were accepted, the Florida Department of Revenue would in effect be in a position of supporting its action at a hearing without ever presenting evidence in support of its position. In Thorn v. Florida Real Estate Commission, 146 So.2d 907 (2 DCA Fla. 1962) the court stated:
"Administrative officers, boards or commissions, who are required to make a determination upon or after a hearing in the exercise of a judicial or quasijudicial function, cannot act on their own information. All parties to such a hearing must be fully apprised of the evidence submitted
or to be considered, and nothing can be treated as evidence which is not introduced as such, for there is no hearing where a party cannot know what evidence is offered
or considered and is not given an opportunity to test, explain or refute. It is improper for such an officer, agency or commission
to base its decision or findings upon facts gathered from its own records without introducing the records into evidence."
From the allegations of the petition and the answer, it is apparent that the four warranty deeds received in evidence as Respondent's Exhibits 1 through 4 were given in lieu of foreclosure. A documentary surtax is imposed on deeds in accordance with 201.021, Florida Statutes (1975). The amount of the tax is determined based upon the consideration given for the document. The Respondent's rules provide that deeds given in lieu of foreclosure are subject to -`the taxes. Rule 12A-4.12 (4)(e). In a 1959 Opinion the Attorney General concluded that such conveyances are subject to the documentary stamp tax (201.02, Florida Statutes). Op. Atty. Gen. 059-203 (1959). The Attorney General concluded that consideration would be determined as follows:
"In the absence of a showing that the consideration for the release or satisfaction is otherwise, the tax should be computed on the unpaid portion of the obligation secured by said mortgage."
The same issues were before the court in Indian River Groves v. Dickinson, 238 So.2d 125 (1 DCA Fla. 1970). The trial court had held that deeds to real estate executed in satisfaction of a mortgage are subject to the documentary stamp tax. The Appeal Court Affirmed, quoting with approval the following language from the trial court's decision: "When a deed to real estate is executed by a
mortgagor to the mortgagee in satisfaction and discharge of the mortgage debt, the deed is subject to taxation under 201.02, Florida Statutes, the tax to be based upon the value of the debt discharged. In the absence of proof to the contrary, the mortgage debt will be presumed to have its face value.
The documentary surtax imposed under 201.021 is levied on all documents subject to the documentary stamp tax. It is therefore concluded that deeds executed in lieu of foreclosure are subject to the surtax.
The amount of the documentary surtax is based upon the amount of consideration given for the taxable document. Under the Indian River Groves decision consideration for a deed given in lieu of foreclosure is presumed to be
the face amount of the mortgage absent proof to the contrary. The mortgage extinguished through the four warranty deeds were not offered into evidence at the final hearing. Neither was any other evidence offered from which the consideration for the warranty deeds could be determined. Unless the pleadings herein resolve the question of consideration, the Respondent's proposed assessments must fail, because there is no other proof from which the validity of the amount of the assessments can be concluded. It is apparent from Paragraph 3 of the petition that the Petitioners were seeking a legal determination as to the applicability of the documentary surtax to the four warranty deeds. Petitioner did not allege that the proposed assessments were not based upon a proper determination of consideration, but only that the documentary surtax does not apply to the transaction. If Petitioners were asserting that the taxes, if enforceable, were erroneously computed, Petitioners would certainly not have alleged, as they did in Paragraph 2 of the petition, that there were no issues of material fact. It is therefore concluded that in their petition for administrative hearing the Petitioners conceded that the assessments, if enforceable at all, were based upon a correct determination of the consideration given for the warranty deeds.
Documentary surtaxes, interest, and penalties should be imposed upon the Petitioners on the warranty deeds received in evidence as Respondent's Exhibit 1 through 4 in the amounts set out in Paragraph 3 of the Petitioners' petition for administrative hearing.
