FRED W. BAGGETT, et al., )
vs. ) CASE NO. 75-1748
Respondent. )
A hearing was held in the above-captioned matter, after due notice, at Tallahassee, Florida, on July 15, 1977, before the undersigned hearing officer.
For Petitioners: Daniel J. Wiser, Esquire
For Respondent: Edwin J. Stacker, Esquire
Petitioners' alleged liability for documentary stamp tax and penalty under Chapter 201, Florida Statutes.
On March 2, 1972, the petitioners, Fred W. Baggett and John S. Miller, Jr., along with one Michael W. Duggar, incorporated a Florida corporation known as Tallahassee Properties , Inc. and filed Articles of Incorporation with the Secretary of State, State of Florida. On June 29, 1972, the above described corporation took title to the property described as follows:
All that part of Lot Number 176 in the Original Plan of the City of Tallahassee, in the County of Leon, State of Florida, described as follows: to-wit: Begin at the Northwest corner of said lot and run thence East along the South line of College Avenue (formerly Clinton Street) 39 feet
to the wall of a brick building, thence run South along the side of said building 60 feet, thence
run West 39 feet to the East line of Adams Street, thence run North along the East line of Adams Street 60 feet to the Northwest corner of said
Lot 176, being the point of beginning;
from LeRoy Collins and Mary Call Collins, said deed being recorded in Official Records Book 532, Page 327 of the Public Records of Leon County, Florida. On that same date, Tallahassee Properties, Inc. executed a note and mortgage in the amount of $55,000 to Leon Federal Savings and Loan Association, said mortgage being recorded in Official Records Book 532, Page 328 of the Public Records of Leon County, Florida. The said note was personally endorsed by John S. Miller, Jr., Fredric W. Baggett and Michael W. Duggar.
On June 29, 1972, Tallahassee Properties, Inc. executed a note in the original principal amount of $72,405.84 to LeRoy Collins and Mary Call Collins secured by a second mortgage on the property and as recorded in Official Records Book 532, Page 376 of the Public Records of Leon County, Florida, The said note was personally endorsed by John S. Miller, Jr., Fredric W. Baggett and Michael
W. Duggar. On September 8, 1972, an agreement was entered into between Michael
W. Duggar and Ronald C. LaFace of Tallahassee, Florida, wherein the said Michael
W. - Duggar conveyed his interest in Tallahassee Properties, Inc. to Ronald C. LaFace and the said Ronald C. LaFace agreed therein to hold Michael W. Duggar harmless and relieve him of liability and indemnifying him for any liabilities which Michael W. Duggar may or could have as a result of his interest in Tallahassee Properties, Inc. This is the reason that the said Ronald C. LaFace is the proper party petitioner in this action.
On April 18, 1973, Tallahassee Properties, Inc. executed an additional note to Leon Federal Savings and Loan Association in the amount of $17,500 which said note was also secured by that certain mortgage dated June 29, 1972 and recorded June 29, 1972 in Official Records Book 532, Page 328 of the Public Records of Leon County, Florida. The said note was personally endorsed by John
S. Miller, Jr., Fredric W. Baggett and Ronald C. LaFace. On April 23, 1973 by an instrument recorded in Official Records Book 584, Page 94 of the Public Records of Leon County, Florida, Tallahassee Properties, Inc. conveyed an equal one-third interest in the subject property to John S. Miller, Jr., Fred W. Baggett and 5 Ronald C. LaFace. Affixed to the said deed were documentary surtax stamps in the amount of 55 cents and State of Florida documentary stamp tax in the amount of 30 cents.
By letter dated September 24, 1975, the respondent, State of Florida, Department of Revenue, informed the petitioners that they had failed to pay an additional documentary stamp tax in the amount of $434.70 due on that certain warranty deed described above as having been recorded on April 23, 1973 in the Public Records of Leon County, Florida. This proceeding was initiated by petitioners after having received said letter from the respondent for a determination that the assessment was improper in that the subject conveyance was not a taxable event.
Respondent has asserted that a tax of $434.70 is due and owing from the petitioners. In addition, they have assessed an additional 100 percent penalty for a total claim of $869.40 exclusive of interest or other penalties. The assessment was determined by the Department of Revenue on the basis of adding the original principal balance of the three above described notes secured by mortgages. The original principal amount of the notes was $144,905.84. By the application of the tax imposed by Section 201.02, Florida Statutes, if the
petitioners have any liability for payment of the documentary stamp tax, then the determination of $434.70 as an assessment is a correct figure.
Petitioners' exhibits 1 through 4, respondent's exhibit 1 and 2, and posthearing briefs of counsel are appended to the record.
CONCLUSIONS OF LAW
Respondent seeks to impose documentary stamp tax and penalty against petitioners in the total amount of $869.40 under Chapter 210, Florida Statutes. Subsection 210.02(1), the operative provision, reads as follows:
"201.02 Tax on deeds and other instruments relating to lands, etc.-
On deeds, instruments, or writings whereby any lands, tenements, or other realty, or any interest therein, shall be granted, assigned, transferred, or otherwise conveyed to, or vested in the purchaser, or any other person by his direction, on each one hundred dollars of the consideration therefor the tax shall be thirty cents. When the full amount
of the consideration' for the execution, assign- ment, transfer, or conveyance is not shown in
the face of such deed, instrument, document,
or writing, the tax shall be at the rate of thirty cents for each one hundred dollars or fractional part thereof of the consideration therefor.
Respondent's proposed assessment is predicated upon the warranty deed from Tallahassee Properties, Inc., dated April 23, 1973, to petitioners, its three stockholders, which conveys certain real property in Tallahassee, Florida. The deed recites that the conveyance is subject to a first mortgage in favor of Leon Federal Savings and Loan Association, Tallahassee, Florida, and that the grantees (petitioners) agree to assume to pay a second mortgage in favor of LeRoy and Mary Call Collins. The mortgages referred to in the deed secure promissory notes made by Tallahassee Properties, Inc. in the total sum of
$144,905.84 and the said notes are each individually endorsed by petitioners or a predecessor in interest. The question presented is whether such a transfer of realty from a corporation to its stockholders is subject to documentary stamp tax, notwithstanding the grantees' endorsements of the mortgage notes prior to the transfer.
Section 201.02, Florida Statutes, imposes the documentary stamp tax upon a deed which grants, transfers or otherwise conveys an interest in real property to a "purchaser" for "consideration" in an amount determined by the total amount of consideration. Rule 12A-4.12 (2), Florida Administrative Code, provides that the term "consideration" under Section 201.02 includes conveyance subject to mortgage debt, lien, or encumbrance.
The recent case of Florida Department of Revenue. v. DeMaria, 338 So.2d 838 (Fla. 1976) dealt with a transfer of real property by a corporation to its sole stockholder in which the latter did not assume the mortgage but made monthly payments thereon. The Supreme Court in that case determined that the transfer was subject to documentary stamp tax because it carried with it a shifting of the economic burden of paying the mortgage from the grantor corporation to the grantee shareholder.
In the instant case, however, petitioners maintain that there was no "shifting of the economic burden" in the transaction because they were already liable on the notes due to their endorsements thereof. They rely upon Straughn v. Story, 334 So.2d 337 (Fla. 1st DCA 1976) as authority for relief from liability. In that case, the Court held that where an individual executed a "guarantee of loan agreement" whereby he agreed to guarantee the payment of a promissory note secured by a mortgage on real estate executed by a corporate borrower in the event such corporation defaulted on its obligation thereunder, and thereafter the corporation deeded the property to the individual without requiring him to assume the mortgage, there was no consideration passing and therefore the transaction was immune from other than minimal documentary stamp taxes. The Court said that under such circumstances, there was no shifting of any burden of payment because the stockholder was already fully liable for the payment of the debt. Thus, he was not a "purchaser" as contemplated by Section 201.02, and not subject to the tax.
Respondent contends that Straughn v. Story is distinguishable from the instant transaction in that that case involved an independent guarantee of payment whereas petitioners here are only secondarily liable as endorsers on the notes. Such a distinction is insufficient to change the basic rationale of the Story decision. The petitioners as endorsers of the notes became liable to the payees thereof and, accordingly had already assumed an "economic burden" prior to the conveyance in question. Under these circumstances it is concluded that they are not liable for documentary stand tax.
Respondent's contention that the recent case of Zuckerman-Vernon v State Department of Revenue, 339 So.2d 685 (Fla. 1st DCA 1976) , supports its views is misplaced because the Court did not address matters in issue here.
That petitioners be, found not liable for the proposed assessment of documentary stamp tax and penalty under Chapter 201, Florida Statutes.
Done and Entered this 10th day of August, 1977, in Tallahassee, Florida.
THOMAS C. OLDHAM
Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304
Edwin J. Stacker, Esquire Department of Legal Affairs the Capitol
Daniel J. Wiser, Esquire Post Office Box 1752 Tallahassee, Florida 32302
