Miller and Respondent, DEPARTMENT OF REVENUE was represented by Edwin A. Bayo, Esquire, Assistant Attorney General.
By its Petition for Formal Proceedings, KANAPHA MEADOWS, INC. contests the DEPARTMENT OF REVENUE'S assessment of documentary stamp tax on that certain warranty deed to KANAPHA MEADOWS, INC., recorded July 17, 1981 in Official Record Book 1359, pages 522-523 of the Public Records of Alachua County, Florida.
Petitioner presented the testimony of C. L. Brice and David H. Miller.
Additionally, Petitioner's Exhibits numbered 1, 2, 3, 4, 5, 5A, 6, 7, 8, and 9 were admitted in evidence at the hearing. Some of these exhibits include composites of many pages. The Pre-Hearing Stipulation was admitted as the Hearing Officer's Exhibit 1. Respondent presented no testimony or exhibits.
Petitioner's late-filed Exhibit 10 was admitted after conclusion of the hearing, by agreement.
Both parties waived the opportunity to file proposed findings of fact and conclusions of law, but Respondent submitted a "Post Hearing Memorandum and preliminary Statement" in lieu thereof, which has been considered.
Ken La Pointe was predecessor in interest to Petitioner, KANAPHA MEADOWS, INC, in a number of land transactions. Mr. La Pointe sold 15 lots in "1000 Oaks Subdivision" to third parties. These sales generated 13 deeds and 15 mortgages. The deeds given by La Pointe reflect that they are subject to two prior mortgages. La Pointe sold these 15 lots without getting a release on a prior mortgage held for the same property by C. L. Brice, individually and C.
L. Brice, Trustee (apparently operating in some capacity as "Kanapha Ranch"), and also without getting a release on another prior mortgage held by Peoples' Bank. However, there is no contention by the parties that La Pointe did not place the proper documentary tax stamps on these deeds.
La Pointe continued collecting on the 15 mortgages generated by the 13 deeds and in turn paid interest payments on his mortgage to Peoples' Bank but did not pay anything on the mortgage to Kanapha Ranch, Inc. Accordingly, C. L. Brice (operating through Kanapha Ranch) demanded, with the leverage of threatened foreclosure, that La Pointe assign these 15 mortgages to Kanapha Ranch, Inc. for collection and that all such collections would be applied to the Kanapha Ranch, Inc. mortgage as long as La Pointe continued to owe Kanapha Ranch, Inc. Thereafter, by an Assignment of Mortgages dated June 12, 1980 La Pointe assigned these mortgages to Kanapha Ranch, Inc. for collection only.
Thereafter, La Pointe and Brice negotiated a deal, this time with Brice operating through Petitioner, KANAPHA MEADOWS, INC., whereby La Pointe provided a deed to KANAPHA MEADOWS, INC. for the balance of unsold property in "1000 Oaks Subdivision" and assigning to KANAPHA MEADOWS, INC. all mortgages due La Pointe (including the ones already assigned to Kanapha Ranch for collection) and whereby KANAPHA MEADOWS, INC., was to release La Pointe from all debts regarding the "1000 Oaks Subdivision."
There were 39 lots in "1000 Oaks Subdivision." Thirty three of these deeds were transferred with proper documentary stamps. Six of these lots deeded to KANAPHA MEADOWS, INC. form the fulcrum of the issue between the parties to this proceeding.
La Pointe and KANAPHA MEADOWS, INC. resorted to an elaborate percentage basis formula to determine the value of the property and the debts being assumed. After applying the mortgage amount against the indebtedness,
$53,529.86 of the indebtedness was calculated as applicable to the six lots conveyed. This was the amount upon which documentary stamps of $214.40 were calculated and affixed to the Warranty Deed from La Pointe to KANAPHA MEADOWS, INC. for Lots 5, 6, 15, 16, 17, and 21, which deed was dated October 15, 1980 and recorded July 17, 1981 in Official Record Book 1359, pages 522-533 of the Public Records of Alachua County, Florida. No money changed hands at that point and apparently the executed deed was not delivered to KANAPHA MEADOWS, INC. until later.
When the exact data and balance due on each mortgage was collected, approximately February 21, 1981, the parties were ready to close. On February 24, 1981, La Pointe assigned all 15 mortgages (most of them third mortgages because they had not been released from La Pointe's liability of the first two mortgages to Kanapha Ranch and Peoples' Bank) to KANAPHA MEADOWS, INC. At that time, La Pointe received an Assumption Agreement with Release from KANAPHA MEADOWS, INC. assuming the Peoples' Bank mortgage and also an Assumption Agreement with Release assuming the Kanapha Ranch mortgage. The 6 lots were received then and are now indicated on the KANAPHA MEADOWS, INC. books at an evaluation of $17,600.94. The October 15, 1980 Warranty Deed, the Assignment of Mortgages, and both Assumptions/Releases were recorded July 17, 1981.
Petitioner contends that the $214.40 in tax stamps affixed thereto was appropriate based on the difference between the liabilities assumed and the assets received by KANAPHA MEADOWS, INC. from La Pointe. Respondent's position is that additional tax is due in the amount of $1,199.80 based upon the mortgages to which the deed was subject, which mortgages are reflected on the face of the deed and were specifically assumed by Petitioner.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the parties and the subject matter of this cause.
The only issue here is whether the documentary stamps for $53,529.86 were adequate in light of a face value reflecting two large mortgages. To reach that issue, the undersigned must determine whether the term "consideration" as used in the documentary stamp tax statutes includes the amounts of the two mortgages recited in that Warranty Deed which Petitioner expressly assumed in concurrently filed documents.
The language of the particular statutes and regulations is clear that the "consideration" to be levied on is not synonymous with "value" of the property conveyed, however that value may be calculated, but rather, is analogous to the face amount of the document accomplishing the conveying. Specifically, I have considered that, Section 201.02 Florida Statures provides:
(1)(a) On deeds, instruments, or writings whereby any lands, tenements, or other realty, or any interest therein, shall be granted, assigned, transferred, or other- wise 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 45 cents. When the full amount of the 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 45 cents for each $100 or fractional
part thereof of the consideration therefor.
The parties are agreed that Rules 12B-4.12 and 12B-4.13 Florida Administrative Code apply.
Rule 12B-4.12, Florida Administrative Code, provides in pertinent part:
Documentary Stamps; Rate, Computation; Effective July 1, 1981, The tax under Section 201.02, F.S., on deeds, instruments, documents, or writings whereby any lands, tenements, or other realty or any interest therein is transferred or conveyed is 45 cents on each $100 or fractional parte thereof of the consideration paid, or to
be paid. When the full amount of the consideration is not shown in the fact of such deed, instrument, document, or writing, the tax shall be at the rate of 45 cents on each $100 or fractional part thereof of the consideration therefor. However, tax under
Section 201.02, F.S., at the rate of 40 cents will apply to any document delivered prior to July 1, 1981, which conveys an interest in realty, regardless of date of recordation.
Consideration Documentary Stamps: The term "consideration under Section 201.02, F.S., includes:
(e) Conveyance subject to mortgage debt, lien or encumbrance.
Furthermore, Rule 12B-4.13, titled "Conveyances Subject to Tax," provides, in paragraph (25):
Mortgage on Property: When computing the documentary stamp tax under Section 201.02, F.S., on a deed of conveyance, the total consideration on which such tax is based includes a mortgage debt which the grantee pays or agrees to pay.
The documentary stamp tax is a tax on the document itself, therefore, the best evidence to determine the consideration is based on the document itself or related documents. The Petitioner received by the warranty deed in question title to six lots in the "1000 Oaks Subdivision, subject to those two mortgages described therein, which the Petitioner expressly assumed and agreed to pay. Even had Petitioner not expressly assumed or agreed to pay these two mortgages the result would have been the same.
When the buyer takes a deed subject to a mortgage, but does not assume it or agree to pay it, the usual attitude of the Courts
and the Attorney General is that this is not substantially different from cases where the debt is expressly assumed. The buyer must, as a practical matter, take over the obligation to protect his own interest.
55 Fla. Jur.2d, Taxation, Section 29.21; Kendall House Apts., Inc. v. Department of Revenue, 245 So.2d 221 (Fla. 1971), cert. den. 404 U.S. 832.
In this particular situation, not only did Petitioners expressly assume and agree to pay these two mortgages, they executed contemporaneous Assumption/Release which specifically detailed the amounts due on each of the two mortgages as of the date of the deed. These were the figures which the Department of Revenue used to arrive at its assessment on the deed recorded July 17, 1981 (after July 1, 1981). The release of La Pointe's debt was certainly a "consideration" to La Pointe, the seller.
It is not the value attributed by Petitioner upon its books but the face value upon the recorded document upon which the Respondent is entitled to make its assessment. Petitioner has presented no evidence of any error or computation by Respondent nor any evidence that La Pointe was legally required to pay the documentary tax in place of Petitioner.
Due to the "closely held family entity" nature of the relationship between Kanapha Ranch, Inc. and KANAPHA MEADOWS, INC. it is understandable that the principals may feel the taxes on the basis of the deed's recital of mortgage amounts diminish the monetary advantage they thought they had gained in this transaction, but in an arms length transaction, Petitioner is subject to all the disadvantages as well as all the advantages of doing business under separate corporate "hats." Further, Petitioner could have structured its transaction differently to reflect a face value more representative of what it was actually receiving and giving up. It did not.
