vs. ) CASE NO. 77-2214
Respondent. )
Pursuant to notice, an administrative hearing was held before Michael R.N. McDonnell, Hearing Officer for the Division of Administrative Hearings, at 9:00 a.m., on October 5, 1978, in Room 104, Collins Building, Corner of Gaines and South Adams Streets, Tallahassee, Florida.
Petitioner was represented by James A. Hauser, Esquire, 1401 Brickell Avenue, Miami, Florida. Respondent was represented by Cecil L. Davis, Esquire, Assistant Attorney General, The Capitol, Room LL04, Tallahassee, Florida 32301.
On November 15, 1976, the Outrigger Club, Inc., a Florida corporation, through its president, Ervin Freeman, and its Secretary, Joan Dimon, executed a warranty deed conveying all right, title and interest, in and to certain property located at Northeast 135th Street and Biscayne Boulevard, North Miami, Florida, to Petitioner, Biscayne South, Inc. (hereafter Biscayne South), a Florida corporation. The warranty deed was recorded with the Clerk of the Circuit Court of Dade County, Florida, on November 16, 1976.
On November 22, 1976, Biscayne South executed a mortgage deed in favor of Fidelity Mortgage Investors, a Massachusetts business trust, as a second mortgage on the same parcel of land to secure the payment of a promissory note in the principal sum of $1,500,000.00 which note was made by Outrigger Club, Inc., on the same date in favor of Fidelity Mortgage Investors.
On November 22, 1976, Outrigger Club, Inc., as the "borrower" executed a future advance agreement with Fidelity Mortgage Investors as "lendor". The future advance agreement provides for the advancement of the sum of
$1,500,000.00 to be secured by a prior mortgage dated October 27, 1972, executed by Outrigger Club, Inc., in favor of Fidelity Mortgage Investors, which mortgage provided for future advances.
On November 22, 1976, a construction loan and disbursement agreement was executed by the parties thereto which provided that the $1,500,000.00 advance be paid to Miami National Bank as disbursement agent for the benefit of Biscayne South.
On November 23, 1976, the mortgage deed and the future advance agreement were recorded in the public records of Dade County, Florida, and on that same date, the warranty deed was rerecorded in the public records of Dade County, Florida.
Because the 1.5 million dollars was paid to Miami National Bank to be disbursed for future construction work on a draw-down basis, Outrigger Club, Inc., the grantor, never received the 1.5 million dollars.
The warranty deed provides in paragraph 9 thereof that the conveyance is subject to:
a second mortgage wherein the Outrigger Club Inc., is mortgagor and the trustees of Fidelity Mortgage Investors, a
Massachusetts business trust, is mortgagee, dated the day of November, 1976, which said mortgage is given as additional collateral for payment of certain sums as provided under a settlement and release agreement between the Outrigger Club, Inc., a Florida corporation, and Lawrence F. Lee, Jr., and others as trustees of Fidelity Mortgage Investors, a Massachusetts business trust dated the 16th day of January, 1976.
Neither the Department of Revenue nor Biscayne South have introduced evidence to establish that such a mortgage in fact exists or if it did, the value of such mortgage. The only mortgage in evidence is Respondent, Department of Revenue's Exhibit 2, which shows Biscayne South as mortgagor rather than the Outrigger Club, Inc., as recited in the warranty deed.
However, the future advance agreement introduced as Respondent's Exhibit No. 3, establishes the existence of a mortgage encumbering the subject property in which the Outrigger Club, Inc., is mortgagor and Fidelity Mortgage Investors is mortgagee. Such mortgage is dated October 27, 1972, and not dated with the month of November, 1976, as recited in paragraph 9 of the warranty deed.
As recited in the future advance agreement, the mortgage of October 27, 1972, secured an indebtedness of $7,214,000.00. The mortgage provided that future advances could be made to Outrigger Club, Inc., not to exceed in the aggregate $16,500,000.00. The future advance agreement provides that an additional advance of $1,500,000.00 is to be made to Outrigger Club, Inc., thereby increasing the indebtedness represented by the October 27, 1972, mortgage to the aggregate sum of $8,715,000.00.
In other words, the buyer of the property sought to borrow an additional 1.5 million dollars. The lender, in order to achieve priority of lien to secure its loan, treated the funding as an advance against a preexisting mortgage originally binding the seller, but then delivered the 1.5 million dollars directly to Miami National Bank for the benefit of the buyer. Accordingly, the seller never received the proceeds of the loan but rather participated in a "book transaction" for the benefit of the buyer and the lender.
CONCLUSIONS OF LAW
The Department of Revenue contends that the 1.5 million dollar advance constitutes a portion of a consideration for the conveyance of the realty in question from Outrigger Club, Inc., to Biscayne South and that, therefore, documentary stamp taxes and surtaxes should be paid as to that amount.
In the first instance, the property in question was conveyed prior to any obligation being incurred on the part of any party as to the 1.5 million dollar advance. The warranty deed was dated November 15, 1976, and was recorded November 16, 1976. Under Florida Law, the recording of a deed is either (1) equivalent to a formal delivery thereof in the absence of any showing of fraud of the grantor or (2) creates a presumption of delivery, which when coupled with other circumstances showing an intention to deliver the instrument to the grantee evidences an absolute delivery. The latter presumption may be rebutted by evidence that no delivery was in fact intended and none was made. 10 Fla. Jur. Deeds Section 85. The Department of Revenue has offered no evidence to establish that fraud existed on the part of the grantor or that no delivery was intended or made in this case.
While there was a reservation in the deed of an assumption of a second mortgage with the Outrigger Club, Inc., as mortgagor and Fidelity Mortgage Investors as mortgagee dated November 19, 1976, there is no evidence to establish the existence of such described mortgage on the date of recordation of the deed or on the date of re-recordation.
Furthermore, Outrigger Club, Inc., never received or was it intended that it ever receive the 1.5 million dollars. Instead, this advance was paid to Miami National Bank for the benefit of Biscayne South. Accordingly, Outrigger Club, Inc., had no duty to respond to an obligation it never incurred.
In determining whether this transfer is subject to the tax in question, the substance of the transaction rather than its mere form must be considered. Roberts v. Roberts, 133 So.2d 121 (Fla. 1st DCA 1961); River Park Joint Venture 315076 v. Dickenson, 303 So.2d 654 (Fla. 1st DCA 1974).
The substance of this transaction is that no consideration passed to Outrigger Club, Inc., with regard to the 1.5 million dollar loan. Outrigger Club, Inc., did not have the burden of repaying the loan in question and, hence, there was not a shifting of the economic burden and benefit from Outrigger Club, Inc., to Biscayne South so as to supply the consideration required by Section 201.02, Florida Statutes. Florida Department of Revenue v. DeMaria, 338 So.2d 838 (Fla. 1976). Accordingly, where no consideration passes to the grantor and where the burden of making payments does not change hands, no documentary stamps are required. American Foam Industries v. State Department of Revenue, 345 So.2d 343 (Fla. 3rd DCA 1977). It is, therefore,
RECOMMENDED that the proposed assessment be denied.
DONE and ENTERED this 16th day of July, 1979, in Tallahassee, Florida.
MICHAEL R. N. McDONNELL
Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301
James A. Hauser, Esquire 1401 Brickell Avenue Miami, Florida
Cecil L. Davis, Esquire Assistant Attorney General The Capitol, Room LL04 Tallahassee, Florida 32301
