STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

COMMERCIAL UNION INSURANCE )

COMPANY, as Surety for )

SANDESTIN, INC., )

)

Petitioner, )

)

vs. ) CASE NO. 75-1168

) FLORIDA DEPARTMENT OF REVENUE, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly designated hearing officer, G. Steven Pfeiffer, held a public hearing in this case on September 22, 1975, in Tallahassee, Florida. The following appearances were entered:

APPEARANCES

For Petitioner: Fred M. Johnson

Howell, Kirby, Montgomery, D'Aiuto and Dean

Jacksonville, Florida

For Respondent: Harold F. X. Purnell

Assistant Attorney General Tallahassee, Florida

On July 11, 1975, Commercial Union Insurance Company ("Petitioner" hereafter) filed a Petition for Administrative Hearing. The Florida Department of Revenue ("Respondent" hereafter) filed its Answer, basically admitting all of the factual allegations contained in the Petition. The final hearing was scheduled by notice dated August 11, 1975. At the hearing the parties offered a composite exhibit. No oral testimony was presented.

FINDINGS OF FACT

1. On approximately November 1, 1972, Sandestin, Inc., entered into a contract involving construction and improvement of realty known as the Sandestin Development, located on the north side of United States Highway No. 98, 8 miles east of Destin, Florida.

   
   

2. On or about May 14, 1973, the Florida Department of Revenue advised the owners of Sandestin, Inc. that the contractor had not secured a dealer's certificate of registration, or posted bond for payment of sales and use taxes as required by Florida Statute, Section 212.14(5). Sandestin, Inc., subsequently submitted an application for certificate of registration to the

   Department. The registration was processed with an effective date of July 1, 1973.

   
   

3. Sandestin, Inc., as principal, and Commercial Union Insurance Company as surety entered into a "contractor's sales or use tax bond" on June 1, 1973. This statutory bond provides that Sandestin, Inc., entered into a contract with an entity called Sandestin Project on June 1, 1973. The bond further provides that the principal applied for the bond pursuant to Florida Statutes, Section 212.14(5), and that the bond is conditioned upon the principal making all reports and remitting all sales and use taxes imposed and required by Florida Statutes, Chapter 212. There is no express provision in the bond providing that the surety would not be liable for sales and use taxes accruing prior to June 1, 1973.

   
   

4. Sandestin, Inc., subsequently defaulted in its sales and use tax obligations. Commercial Union Insurance Company paid $15,430.06 to the Respondent, which amount represents the total sales and use tax obligations, including interest, of Sandestin, Inc. Commercial Union Insurance Company paid

   $2,023.75 of that amount under protest. This latter figure represents the sales bond use tax obligations, including interest, which accrued prior to June 1, 1973. Commercial Union Insurance Company has maintained this action to recover that amount.

   
   

   CONCLUSIONS OF LAW

   
   

5. The Division of Administrative Hearings has jurisdiction over the subject matter of this case and over the parties.

   
   

6. The bond agreement between Sandestin, Inc., and Commercial Union Insurance Company is a penal bond, which was executed for the purpose of fulfilling the bond requirements imposed by Florida Statutes, Section 212.14(5). The statute requires that such bonds be conditioned upon the payment by the principal of all taxes which may accrue to the state under Florida Statute, Chapter 212. When a surety company executes a statutory bond, it will be held liable upon default of the principal for the conditions provided by the statute. United Bonding Insurance Company v. City of Holly Hills, 249 So.2d 720 (1 DCA Fla. 1971); Loveland v. Lazzara, 219 So.2d 74 (2 DCA Fla. 1969); W. F. Thompson Construction Co. v. Southeastern Palm Beach County Hospital District, 174 So.2d 410 (3 DCA Fla. 1965).

   
   

7. Statutory bonds should be construed most strongly against the surety and in favor of the granting of the broadest possible coverage to those intended to be benefited by the protection of the bond. Travelers Indemnity Co. v. Mercer, 250 So.2d 283 (4 DCA Fla. 1971); National Union Fire Insurance Co. v. Robuck, 203 So.2d 204 (1 DCA Fla. 1967); Phoenix Indemnity Co. v. Board of Public Instruction, 114 So.2d 478 (1 DCA Fla. 1959).

   
   

8. A surety's liability under a bond is generally held to be coextensive with the liability of the principal. National Union Fire Insurance Co. v. Benjamin, 150 So.419, 8 So.2d 476 (Fla. 1942); National Union Fire Insurance Co.

   v. Robuck, supra.

   
   

9. The fact that a public authority has accepted a statutory bond with provisions that would allow the surety to assume an obligation lesser than that imposed by the statute does not affect the validity of the bond. Conditions in a statutory bond which are repugnant to the statute should be rejected as surplusage. Where a statute imposes obligations which go beyond the maximum sum

   stated in a statutory bond, then the wording of the statute should be taken to indicate an intention to extend liability under the bond beyond the maximum sum stated in the bond. Travelers Indemnity Co. v. Askew, 280 So.2d 469 (1 DCA Fla. 1973); W. F. Thompson Construction Co. v. Southeastern Palm Beach County Hospital District, supra.

   
   

10. It is the duty of a surety, before executing a bond, to satisfy itself with respect to representations made by the principal, and terms of any pertinent contracts. National Union Fire Insurance Co. v. Robuck, supra.

RECOMMENDED ORDER

Based upon the foregoing Findings of Fact and Conclusions of Law, it is, hereby, RECOMMENDED as follows:

That the contractor's sales or use tax bond executed by Sandestin, Inc., as principal, and Commercial Union Insurance Company as surety on June 1, 1973, be construed so as to impose upon the surety liability for all sales or use taxes which accrued with respect to the Sandestin Development located on the north side of U.S. Highway 98, 8 miles east of Destin, Florida, including those obligations which accrued prior to June 1, 1973.

ENTERED this 3rd day of October, 1975, in Tallahassee, Florida.

G. STEVEN PFEIFFER, Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304

(904) 488-9675

COPIES FURNISHED:

Harold F. X. Purnell Assistant Attorney General Department of Legal Affairs The Capitol

Tallahassee, Florida 32304

Fred M. Johnson

Howell, Kirby, Montgomery, D'Aiuto and Dean

901 Blackstone Building

Jacksonville, Florida 32302

Docket for Case No: 75-001168

Orders for Case No: 75-001168