STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

AMI INVESTMENTS, INC., )

)

Petitioner, )

)

vs. ) CASE NO. 77-1842

) STATE OF FLORIDA, DEPARTMENT OF ) REVENUE, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, K. N. Ayers, held a public hearing in the above styled case on March 22, 1978 at Coral Gables, Florida.

APPEARANCES

For Petitioner: Mr. A. E. Elroy Arnason

Vice President

AMI Investments, Inc.

95 Merrick Way, Suite 103 Coral Gables, Florida 33134

For Respondent: Cecil L. Davis, Jr., Esquire

Assistant Attorney General Department of Legal Affairs The Capitol

Tallahassee, Florida 32304

By petition filed October 6, 1977 AMI Investments, Inc., Petitioner, seeks to have the assessment for documentary stamp taxes set aside on the transaction whereby Marco Cove deeded certain property subject to Petitioner's mortgage to the Barnett Bank of Naples, Trustee. Petitioner contends no consideration was paid for these conveyances.

The facts in this case are largely undisputed. One witness testified for Petitioner and 10 exhibits were admitted into evidence.

FINDINGS OF FACT

1. By warranty deed dated July 29, 1974 Marco Cove, Inc. conveyed certain property to the Barnett Bank of Naples, Florida as Trustee. At the time of these conveyances the properties were subject to a first mortgage dated September 14, 1971 in an original principal amount of $1,400,000 to AMI Investments, Inc. mortgagee and a second mortgage dated August 24, 1973 in the amount of $130,278 to Joseph R. Lynch, Inc.

2. By quitclaim deed dated November 5, 1974 (Exhibit 8) Donald P. Landis conveyed his interest in Apartment Number C-3 in the condominium here involved to the Barnett Bank of Naples, Trustee.

   
   

3. It appears that at the time of the conveyances here involved Marco Cove, Inc. was delinquent on both mortgages, owed materialmen's liens on the property, had sold some of the units to innocent purchasers without giving clear title, and had not placed in escrow the sums so received from these purchasers. Barnett Bank accepted title as trustee, so the various rights of the parties could be resolved without foreclosure proceedings.

   
   

4. Although Petitioner contested that Barnett Bank was Trustee for AMI Investments, Inc., Exhibit 10, which was admitted into evidence without objection, clearly shows the bank understood they were trustees for AMI Investments, Inc. and accepted the deeds here involved.

   
   

5. At the time of the conveyances the balance owned on the first mortgage was $63,356.16 and on the second mortgage $130,278.

   
   

6. Respondent's third Notice of Proposed Assessment (Exhibit 3) assesses documentary stamp taxes and penalties in the amount of $59.25 on each of the three condominium units conveyed to the Trustee and documentary stamp tax and penalty in the amount of $547.88 on the conveyance of the entire condominium for a total tax and penalty of $725.63. No surtax is claimed.

   
   

7. The conveyances to the Trustee did not extinguish the mortgages and the Trustee took title to the properties subject to these mortgages.

   
   

8. Petitioner has subsequently sold its rights as first mortgagee to a third party for some $66,000.

   
   

   CONCLUSIONS OF LAW

   
   

9. Section 201.02 Florida Statutes provides in pertinent part:

   
   

   1. On deeds, instruments, or writings whereby land, tenements, or other realty, or any interest therein, shall be granted, assigned, transferred, or otherwise conveyed to, or vested in, the pur- chaser, or any other person by his direction, on each one hundred dollars of the consideration therefor the tax shall be thirty cents. When

      the full amount of the consideration for the execution, assignment, transfer, or conveyance Is not shown on the face of such deed ... the tax shall be at the rate of thirty cents for each one hundred dollars or fractional part thereof of the consideration therefor.

      
      

10. Petitioner's contention that, since the mortgages were not extinguished, no consideration was paid by the bank for the properties conveyed, although meritorious on its face, is not supported by the Florida courts' interpretation of Section 201.02 Florida Statutes above quoted.

    
    

11. The fact that the property was conveyed "subject to" the mortgages was held to be sufficient evidence of consideration in Kendall House Apts., Inc. v.

    Department of Revenue, 245 So.2d 221 (Fla. 1971). The court there stated at p. 223:

    
    

    It is an economic fact that persons who acquire property "subject to" a mortgage normally pay the indebtedness represented by the mortgages in order to prevent the loss of the property to the same extent as those acquiring property "assuming and agreeing to pay" the mortgage.

    
    

12. A similar issue was resolved against the taxpayer in Florida Department of Revenue v. Maria, 338 So.2d 838 (Fla. 1976) where the court stated:

    
    

    It is this shifting of the economic burden and benefit which supplies the considera- tion required by Section 201.02, Florida Statutes. As pointed out by Judge Wigginton in Rasberry v. Dickinson, supra, a comparison of the language of the federal documentary stamp tax statute, 26 U.S.C.A. Sec.3461 and Section 201.021, Florida Statutes, with the language of Section 201.02, Florida Statutes, makes it apparent that the Legislature intended not to exempt the value of any lien or encumbrance from the tax imposed by the latter section.

    
    

13. This case is distinguished from Northwestern Financial Investors v. Florida Department of Revenue, DOAH Case No. 77-1088 in that only the surtax was there involved whereas here the Department does not claim any surtax is due.

From the foregoing it is concluded that consideration was given for the deeds here involved and documentary stamp taxes and penalties in the total amount of $725.63 are due on these transactions. It is therefore,

RECOMMENDED that the petition to have the Notice of Proposed Assessment dated March 16, 1978 set aside be dismissed and the Department take the necessary steps to collect the sum of $725.63 owed on these deeds of conveyance.

DONE and ENTERED this 29th day of March, 1978, in Tallahassee, Florida.

K. N. AYERS, Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304

(904) 488-9675

COPIES FURNISHED:

Cecil L. Davis, Jr., Esquire Assistant Attorney General Department of Legal Affairs The Capitol

Tallahassee, Florida 32304

Mr. A. E. Elroy Arnason Vice President

AMI Investments, Inc.

95 Merrick Way, Suite 103 Coral Gables, Florida 33134

Docket for Case No: 77-001842

Orders for Case No: 77-001842