STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

NANA'S PETROLEUM, INC.; EDILIA ) PEREZ, AND EMILIO PEREZ, )

)

Petitioners, )

)

vs. ) CASE NO. 95-6174F

)

DEPARTMENT OF REVENUE, )

)

Respondent. )

)

FINAL ORDER

This cause came before the undersigned for determination based on the record in this cause and the files of the Division of Administrative Hearings.

APPEARANCES

For Petitioner: Dean L. Willbur, Jr., Esquire

Post Office Box 6917

West Palm Beach, Florida 33405-0917

For Respondent: Francisco M. Negron, Jr., Esquire

Office of the Attorney General The Capitol-Tax Section Tallahassee, Florida 32399-1050

STATEMENT OF THE ISSUE

The issue presented is whether Petitioners are entitled to an award of attorney's fees and costs pursuant to the Florida Equal Access to Justice Act.

PRELIMINARY STATEMENT

On December 20, 1995, Petitioners Nana's Petroleum, Inc., Edilia Perez, and Emilio Perez filed their Application for Attorneys Fees Pursuant to Florida Statute 57.111 and 57.105. The Department's Response in Opposition to Application for Attorney's Fees was filed on January 9, 1996. By Order entered February 13, 1996, the parties were advised that Section 57.105, Florida Statutes, does not authorize an award of attorney's fees and costs in an administrative proceeding but that Section 57.111 does authorize such an award. The Order further noted that the Department had asserted that Petitioners' Application for Attorneys Fees suffered from a number of deficiencies. The Order afforded Petitioners an opportunity to supplement their Application, if they desired, no later than March 4, 1996. Petitioners have filed no pleading or other document in response to that Order.

Rule 60Q-2.035(7), Florida Administrative Code, provides for an evidentiary hearing on an application or petition for attorney's fees and costs under Section 57.111, Florida Statutes, upon timely request. Since no request for an

evidentiary hearing has been filed, this cause may be determined based on the pleadings and supporting documents and on the files of the Division of Administrative Hearings.

FINDINGS OF FACT

1. The underlying proceeding, DOAH Case No. 94-3605, involved Petitioners' challenge to notices of final assessments for fuel taxes. The assessments had been issued by the Department against Nana's Petroleum, Inc.; Emilio Perez d/b/a Nana's Stations; Emilio Perez as Vice President of Nana's Petroleum, Inc.; Edilia Perez as Secretary of Nana's Petroleum, Inc.; Sun Petroleum, Inc.; and Emilio Perez as President and Manager of Sun Petroleum, Inc. At the commencement of the final hearing, Sun Petroleum, Inc., and Emilio Perez as President and Manager of Sun Petroleum, Inc., withdrew their challenge to the assessments against them, and those assessments became final.

   
   

2. Five assessments thereafter remained for determination in the underlying proceeding: one against Edilia Perez as secretary of Nana's; one against Emilio Perez as vice president of Nana's; one against Emilio Perez d/b/a Nana's Stations; and two against Nana's Petroleum, Inc. In the Recommended Order and in the Final Order entered in the underlying proceeding, only a portion of one of the assessments against Nana's Petroleum, Inc., was upheld.

   
   

3. The Department was substantially justified in issuing its assessments against Petitioners and in initiating this proceeding. Further, an award of attorney's fees and costs for the underlying proceeding would be unjust.

   
   

   CONCLUSIONS OF LAW

   
   

4. Section 57.111, Florida Statutes, entitled the Florida Equal Access to Justice Act, provides for an award of attorney's fees and costs to a prevailing small business party in an administrative proceeding and sets forth the procedure and criteria for obtaining such an award. In furtherance of that statutory procedure, the Division of Administrative Hearings has promulgated Rule 60Q-2.035, Florida Administrative Code.

   
   

5. The burden of proof is on Petitioners to show their entitlement to an award of attorney's fees and costs by demonstrating that they meet the definition of a prevailing small business party by satisfying the statutory criteria. Petitioners have failed to do so. According to Section 57.111(3)(d), Florida Statutes,

   
   

   [t]he term "small business party" means:

   l.a. A sole proprietor of an unincorporated business, including a professional practice, whose principal office is in this state, who is domiciled in this state, and whose business or professional practice has, at the time the

   action is initiated by a state agency, not more than 25 fulltime employees or a net worth of not more than $2 million, including both personal and business investments; or

   b. A partnership or corporation, including a professional practice, which has its principal office in this state and has at the time the action is initiated by a state agency not more than 25 fulltime employees or a net worth of not

   more than $2 million; or

   2. Either small business party as defined in subparagraph l., without regard to the number of its employees or its net worth, in any action under

   s. 72.011 or in any administrative proceeding under that section to contest the legality of any assess- ment of tax imposed for the sale or use of services as provided in chapter 212, or interest thereon, or penalty therefor.

   
   

6. The Application filed in this cause alleges that each of the Petitioners was a prevailing party in the underlying proceeding, that each of the Petitioners is a small business party as defined in Section 57.lll(3)(d), and that the Department was not substantially justified in issuing its assessments. Attached to the Application are affidavits from each of Petitioners' two attorneys merely stating the total number of hours that attorney spent "in connection with" this matter, that attorney's hourly rate, and the resulting arithmetic. Attorney Willbur recites that he spent 126.10 hours at $175 per hour, totaling $22,067.50, plus $1,811.51 as costs for a total of $23,879.01. Attorney Helgesen recites that he spent 54.90 hours at $210 per hour, totaling $11,529.00, plus $185.61 as costs for a total of $11,714.6l.

   
   

7. The Application does not allege which of the mutually-exclusive definitions of "small business party" each of the Petitioners contends applies to that Petitioner, and the Application is factually and legally insufficient in that regard. As to subparagraph 1.a., the Application does not allege that any Petitioner is a sole proprietor of an unincorporated business. Four of the five assessments are against a corporation and against two individuals in their corporate capacities. As to the assessment against Emilio Perez d/b/a Nana's Stations, the Application does not allege that he is a sole proprietor of an unincorporated business or that Nana's Stations is an unincorporated business. Further, the Application contains no allegation as to where the office of the unincorporated business (if it is) is located, as to where Emilio Perez is domiciled, the number of employees, or the personal and business net worth of Emilio Perez and Nana's Stations. Similarly, as to subparagraph l.b., the Application contains no allegation as to the location of Nana's Petroleum, Inc., or as to its number of employees or its net worth. Lastly, if Petitioners are relying on the more relaxed standard contained in Section 57.111(3)(d)2, Petitioners are still required to plead and prove that any of them meets the principal place of business or domicile requirement of Subsection 57.111(3)(d)l. It is axiomatic that statutes authorizing the award of attorney's fees and costs must be strictly construed. Accordingly, Petitioners have failed to meet their burden of showing that any Petitioner is a small business party as defined in Section 57.111(3)(d), Florida Statutes.

   
   

8. The Application fails to attach the documents upon which Petitioners rely, as required by Rule 60Q-2.035(2), Florida Administrative Code. Likewise, the Application fails to contain the itemized affidavit detailing the nature and extent of services rendered as required by both Section 57.111(4)(b)l, Florida Statutes, and Rule 60Q-2.035(3), Florida Administrative Code. Petitioners' omission of the required detailed affidavit is fatal. Creative Designs and Interiors, Inc. v. Department of Transportation, DOAH Case No. 89-0894F (May 18, 1989).

   
   

9. Even had Petitioners made the required prima facie showing that any of Petitioners meets the definition of small business party, all Petitioners are precluded from receiving an award of attorney's fees and costs for the reason

   that the Department was substantially justified in issuing its assessments against each Petitioner and in initiating and maintaining the underlying proceeding. Based upon the conflicts between the tax returns and corporate records of Nana's Petroleum, Inc., and the tax returns and corporate records of Nana's suppliers and based upon the sworn statements given to the Department by employees and former employees of corporate Nana's and of Nana's Stations, the Department had substantial justification to believe that each of the Petitioners was underreporting and underpaying taxes by using several different schemes. If the Department was correct in its belief that corporate Nana's was underreporting taxes due, then the corporate officers or directors with administrative control over the collection and payment of such taxes could also be responsible for the payment of taxes owed, pursuant to Section 213.29, Florida Statutes.

   
   

10. Although Petitioners were successful in their challenges to the remainder of the assessments involved in the underlying proceeding due to the quality of the evidence introduced in the final hearing in the underlying proceeding, Section 57.111, Florida Statutes, only requires that the Department have had a reasonable basis in law and in fact at the time the Department initiated the underlying proceeding. The Department did have that reasonable basis at the time it issued its proposed assessments and at the time it initiated the underlying proceeding.

    
    

11. In the underlying proceeding, the Department issued seven assessments which were challenged by some and/or all of the Petitioners. At the final hearing, two of the challenges were withdrawn, and those assessments became final. Only a portion of one of the remaining assessments was sustained. That portion covered five consecutive months during 1990 when Nana's Petroleum, Inc., filed its monthly fuel tax returns admitting it owed taxes for those months but failed to transmit the money to pay those taxes when it filed each of those returns. At the time of the final hearing in 1995, those taxes which Nana's admitted were due in 1990 still had not been paid to the Department. Accordingly, circumstances exist which would make an award of attorney's fees and costs in this case unjust in that the Department was required to initiate the underlying proceeding to enforce the tax laws of this State, including for taxes admittedly owed to the Department.

Based upon the foregoing Findings of Fact and Conclusions of Law, it is ORDERED that the Application for Attorneys Fees Pursuant to Florida Statute

57.111 and 57.105 filed in this cause be and the same is hereby denied.

DONE and ORDERED this 8th day of April, 1996, at Tallahassee, Leon County, Florida.

LINDA M. RIGOT, Hearing Officer Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 8th day of April, 1995.

COPIES FURNISHED:

Dean L. Willbur, Jr., Esquire Post Office Box 6917

West Palm Beach, Florida 33405-0917

Francisco M. Negron, Jr., Esquire Office of the Attorney General The Capitol-Tax Section Tallahassee, Florida 32399-1050

Linda Lettera General Counsel

Department of Revenue

204 Carlton Building Tallahassee, Florida 32399-0100

Larry Fuchs Executive Director

104 Carlton Building Tallahassee, Florida 32399-0100

NOTICE OF RIGHT TO JUDICIAL REVIEW

A party who is adversely affected by this final order is entitled to judicial review pursuant to Section 120.68. Florida Statutes. Review proceedings are governed by the Florida Rules of Appellate Procedure. Such proceedings are commenced by filing one copy of a notice of appeal with the Agency Clerk of the Division of Administrative Hearings and a second copy, accompanied by filing fees prescribed by law, with the District Court of Appeal, First District, or with the District Court of Appeal in the appellate District where the party resides. The notice of appeal must be filed within 30 days of rendition of the order to be reviewed.

Docket for Case No: 95-006174F

Orders for Case No: 95-006174F