STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

AMERICAN NATIONAL BANK OF ) FLORIDA, )

)

Petitioner, )

)

vs. ) CASE NO. 87-1240

) OFFICE OF THE COMPTROLLER, )

)

Respondent, )

and )

)

DEPARTMENT OF REVENUE, )

)

Intervenor. )

)

RECOMMENDED ORDER

This matter came on for hearing in Jacksonville, Florida, before Robert T. Benton, II, Hearing Officer of the Division of Administrative Hearings, on June 28, 1988. The parties are represented by counsel:

For Petitioner: Michael A. Altes, Esquire

Dale & Bald, P.A.

2900 Independent Square

Jacksonville, FL 32202

For Respondent Kevin J. O'Donnell, Esquire and Intervenor: Assistant Attorney General

Department of Legal Affairs The Capitol, Tax Section Tallahassee, FL 32399-1050

These proceedings arise on the petition for formal proceedings upon final agency action American National Bank of Florida (American National) filed in response to the order denying application for tax refund that Gerald Lewis, as Comptroller of the State of Florida entered on February 27, 1987. Upon receipt of American National's petition, the Comptroller referred the matter to the Division of Administrative Hearings, in accordance with Section 120.57(1)(b)3., Florida Statutes (1987). At hearing, a motion to intervene stated ore tenus by counsel for the Department of Revenue was granted, without objection. To a considerable extent, fact findings reflect stipulations of counsel, including representations to which nobody took exceptions.

ISSUE

Whether American National can litigate its entitlement to a documentary stamp tax refund pursuant to Section 120.57, Florida Statutes (1987)? If so, whether American National is entitled to a refund of some or all of the $5,475 it paid in recording the first modification and consolidation of notes, mortgages and assignment of leases and rents executed by American National and General Electric Credit Corporation (GECC) on July 11, 1986?

FINDINGS OF FACT

Real estate in Escambia County which petitioner American National now holds as trustee (the property) once belonged to U.S.I.F. Pensacola Corporation (USIFP). On September 1, 1969, USIFP gave Town and Country Plaza, Inc. (T & P) a note for $1,500,000 and executed a mortgage on the property in favor of T & P as security for payment of the note. A separate $300,000 note was promptly repaid.

On July 5, 1973, U.S.I.F Wynnewood Corporation (USIFW), USIFP's successor in title, gave U.S.I.F. Oklahoma Corporation (USIFO) a note for $625,000, and executed a mortgage on the property in favor of USIFO as security for payment of its note.

On July 8, 1982, shortly after Trust No. 0008 acquired the property, Jacksonville National Bank, as trustee, gave First National Bank of Chicago (FNBC) two notes, each secured by a separate mortgage. One note was for

$767,481.98, and the other was for $2,000,000.

These two notes, along with the two notes originally given to T & P and USIFO, which were both subsequently assigned to FNBC, were the subject of the July 8, 1982, consolidation, modification and extension agreement. Documentary stamp tax owing on account of these notes (the consolidated notes) was eventually paid in its entirety.

All four mortgages with which the property was encumbered when petitioner American National succeeded Jacksonville National as trustee were duly recorded, intangible tax having been fully paid upon recordation.

In January of 1984, FNBC assigned the consolidated notes and the mortgages securing their payment to VPCO Properties, Inc., which itself assigned them later the same month to VPPI TCH, Inc. In July of 1986, GECC, the present holder of the consolidated notes acquired the notes and became the mortagee on the mortgages securing their payment.

As of July 11, 1982, when American National, as trustee of Trust No. 0008, borrowed an additional $1,150,000 from GECC, the outstanding principal balance on the consolidated notes aggregated $3,650,000.

On that date, GECC and American National, as trustee, executed the so- called first modification and consolidation of notes, mortgages and assignment of leases and rents, Petitioner's Exhibit No. 1, which recited the parties' understandings both with respect to the new borrowing and with regard to the existing indebtedness the consolidated notes reflected.

In addition to signing Petitioner's Exhibit No. 1, American National, as trustee, also executed and delivered to GECC a promissory note in the amount of

$1,500,000. This note, which was not offered in evidence, has never been recorded, nor have documentary stamps ever been affixed to it.

At GECC's insistence, American National paid a documentary stamp tax of

$7,920 at the time Petitioner's Exhibit No. 1 was recorded in Pensacola. Of this sum, $5,475 was paid on account of the indebtedness the consolidated notes evidenced; $1,725 was paid on account of the new borrowing; and $720 was paid because of the provisions in Petitioner's Exhibit No. 1, contemplating an increase in the principal amount of indebtedness.

Under the agreement certain interest payments can be deferred, not to exceed $480,000, any such deferments being added to principal. The agreement provides:

Notwithstanding the foregoing, so long as Borrower is making all payments on this Note when due, without giving effect to grace periods or requirements of notice, if any, and is otherwise not in default, taking into account, applicable grace periods, if any, under the Mortgage and other Security Documents Borrower shall be entitled to defer payment, in any month, of interest in excess of interest computed at the "Applicable Base Percentage Rate" (hereinafter defined) so long as the total interest deferred under this paragraph ("Deferred Interest"), including any and all Deferred Interest which has been added to the principal balance hereof, as hereinafter provided, does not exceed the lesser of ten percent (10 percent) of the outstanding principal balance hereof, excluding any and all Deferred Interest which has been added to the principal balance hereof, or $480,000. Such Deferred Interest, including any and all Deferred Interest which has been added to the principal balance hereof, shall be due and payable when and to the extent that, in any subsequent month, the Contract Index Rate is less than the "Applicable Base Percentage Rate", with the balance of such Deferred Interest being payable as provided below or on the maturity hereof, whether by lapse of time, prepayment or acceleration. The "Applicable Base Percentage Rate" shall mean the following per annum rates of interest, computed as aforesaid, for the periods indicated:

Applicable Base

Period Percentage Rate Date of This Note

June 30, 1987 10.0 percent

July 1, 1987-June 30, 1988 10.5 percent

July 1, 1988-June 30, 1989 11.0 percent

July 1, 1989-June 30, 1990 11.5 percent

July 1, 1990-Maturity Date

(hereinafter defined) 12.0 percent

Unless previously paid by Borrower, the outstanding balance of Deferred Interest not previously added to principal in accordance herewith, if any, shall be added to the principal balance hereof on the first day of each calendar quarter beginning with October 1, 1986, and shall accrue interest thereafter at the Contract Index Rate provided for principal, which interest shall be payable in the same manner as is applicable to interest on the original principal balance hereof.

Notwithstanding the foregoing, Borrower may pay Deferred Interest at any time without penalty.

Of the documentary stamp tax American National paid, $720 was on account of future advances that Petitioner's Exhibit No. 1 was designed to secure, in the event GECC made them.

CONCLUSIONS OF LAW

The court in Florida Export Tobacco Co. vs. Department of Revenue, 510 So.2d 936 (Fla. 1st DCA 1987)(on reh.) reversed a circuit court judgment which applied the doctrine of res judicata to preclude judicial litigation of the merits of a tax refund claim litigated in a formal administrative proceeding, even though the taxpayer had initiated the formal administrative proceeding only because the circuit court, to which the taxpayer had initially brought the claim for judicial resolution, ordered the taxpayer to pursue administrative remedies.

The Florida Export court treated a number of topics, but the antepenultimate paragraph of the court's opinion concludes:

Our decision today should be read as passing

. . . only on the narrow issues presented by these appellants . . . with particular emphasis on DOR's absence as a party to the administrative proceeding and the pendency of the refund action against DOR in the circuit court when that administrative proceeding was initiated. 510 So.2d at 956.

Perhaps remembering this language, counsel acquiesced in the hearing officer's suggestion, offered when the question of the significance of the Florida Export case arose at final hearing, that intervention by the Department of Revenue might cure any problem with going forward administratively.

But, on closer reading, the Florida Export decision speaks unequivocally of "the exclusivity of circuit court original jurisdiction in tax refund cases,"

510 So.2d 954, and

conclude[s] that the 1974 revisions to chapter 120, as enacted in chapter 74-310, Laws of Florida, did not explicitly or impliedly repeal the constitutional and

statutory provisions giving circuit courts both original and exclusive jurisdiction of cases contesting the legality of a tax assessment and seeking a refund of taxes paid. 510 So.2d at 952-3 (footnote omitted.)

While the Florida Export court did not hold that the Department of Revenue usurps judicial prerogatives in making or reconsidering tax assessments, it did hold that Section 120.57, Florida Statutes (1987), does not apply to assessment decisions, except to the extent contemplated by Section 72.011, Florida Statutes (1987). By its own terms, the latter statute "is not applicable to actions for refund of taxes previously paid." Section 72.011(6), Florida Statutes (1987).

Since the present proceedings were instituted in accordance with Section 120.57, Florida Statutes (1987), and since petitioner seeks a "refund of taxes previously paid," the hearing officer lacks jurisdiction to consider the merits of petitioner's claim, even with the intervention and participation of the Department of Revenue.

It is, accordingly, RECOMMENDED:

That the Comptroller deny the request for an administrative hearing on the propriety of the Comptroller's denial of petitioner's claim for refund of documentary stamp tax.

DONE AND ENTERED this 8th day of September, 1988, in Tallahassee, Florida.

ROBERT T. BENTON, II

Hearing Officer

Division of Administrative Hearings The Oakland Building

2009 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904)488-9675

Filed with the Clerk of the Division of Administrative Hearings this 8th day of September, 1988.

COPIES FURNISHED:

Michael A. Altes, Esquire Dale & Bald, P.A.

2900 Independent Square

Jacksonville, FL 32202

Kevin J. O'Donnell, Esquire Assistant Attorney General Department of Legal Affairs Tax Section, The Capitol Tallahassee, FL 32399-1050

Honorable Gerald Lewis Comptroller, State of Florida Department of Banking and Finance The Capitol

Tallahassee, FL 32399-0350

Docket for Case No: 87-001240

Orders for Case No: 87-001240