STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

BERNARD HUTNER and SHIRLEY )

1. HUNTER, his wife )

   )

   Petitioner, )

   )

   vs. ) CASE NO. 75-1771

   )

   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 March 18, 1976, in Miami, Florida.

   
   

   The following appearances were entered: Bernard Hutner, North Miami, Florida, representing the Petitioners; and Harry F. X. Purnell, Tallahassee, Florida, representing the Florida Department of Revenue.

   
   

   On October 13, 1975, Bernard Hutner and Shirley R. Hutner ("Petitioners" hereafter) filed a petition seeking an administrative determination as to the validity of certain rules of the State of Florida Department of Revenue ("Respondent" hereafter) , and a hearing respecting the validity of a documentary stamp tax assessment imposed by the Respondent. All issues respecting the validity of the rules challenged by the Petitioners were resolved in an order entered by the undersigned on January 29, 1976. The final hearing respecting the validity of the tax assessment was scheduled in accordance with a Notice dated February 6, 1976. At the hearing Petitioners called the following witnesses: Bernard Hutner, Edward Mehler, and Sylvia Mehler. Petitioners Exhibits 1 - 6 were offered into evidence and were received. The Respondent called no witnesses, but offered Respondent's Exhibits 1 - 4 into evidence, and these were received. The parties have submitted legal memoranda in the form of letters to the undersigned.

   
   

   FINDINGS OF FACT

   
   

   1. On or about January 9, 1974, Petitioners and their partners, Edward Mehler, and Sylvia Mehler, sold certain property located in Broward County, Florida, to Leo Koehler, Pat Manganelli, and Walter Urchison. A copy of the deed was received in evidence as Respondent's Exhibit 1. The Petitioners and the Mehlers took a $50,000 mortgage from the buyers as a part of the purchase price. The mortgage deed was received in evidence as Respondent's Exhibit 2. The face amount of the mortgage is $50,000.

      
      

   2. The buyers defaulted on the mortgage to the Petitioners and the Mehlers without having made any payments on the mortgage. The Petitioners and the Mehlers were unsuccessful in negotiating any payment from the buyers. The buyers were apparently irresponsible, and were unsuccessful in business. The

      buyers had given their deed to the property to a Mr. Frank Post. Mr. Post apparently took the deed in payment for a debt. The Petitioners and the Mehlers were unsuccessful in negotiating any payment on the mortgage from Post. The Petitioners and the Mehlers were unsuccessful in locating any market for the mortgage. The mortgage had no market value.

      
      

   3. Rather than foreclosing one the mortgage, the Petitioners and the Mehlers took a warranty deed from the original buyers and a quitclaim deed from Post. These deeds were received in evidence as Respondent's Exhibits 3 and 4. The deeds were taken in lieu of foreclosure, and the effect of the deeds was to discharge the $50,000 mortgage obligation. Petitioners and the Mehlers placed minimum Florida documentary stamp tax and surtax stamps on each deed, taking the position that the consideration for the deeds was nothing.

      
      

   4. The Respondent took the position that the consideration for the deeds was the discharge of the mortgage obligation, and assessed $410 in stamp tax, surtax, and penalty obligations upon the Petitioners. The petitioners subsequently commenced this action.

      
      

   5. The property which is the subject of this matter has very little market value. The property has been on the market for some time, and no buyer has been found. The property has been valued at $12,500, but its market value is less than that.

      
      

      CONCLUSIONS OF LAW

      
      

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

      
      

   7. In 1959 the following question was put to the Attorney General of Florida:

"Where a mortgagor, in full or partial satisfaction of the mortgage indebtedness, conveys the mortgaged premises to the mortgagee, are documentary stamp taxes due on such transaction under Chapter 201 F.S "

The Attorney General answered the question Affirmatively, See: Op. Atty. Gen. 059-203 (1959), and stated:

"In the absence of a showing that the consideration for the release or satisfaction is otherwise, the tax should be computed on the unpaid portion

of the obligation secured by said mortgage."

This ruling was judicially confirmed in Indian diver Groves v Dickinson, 238 So.2d 175 (1 DCA Fla. 1970). Both the First District Court of Appeals and the Attorney General held that the mortgage debt would determine consideration for the purposes of the documentary stamp tax absent proof to the contrary. In the instant case the Petitioners offered proof to establish that the mortgage was worthless because it was uncollectible, had no market value, and related to property which has no market value. The fact nontheless remains that the debt discharged was $50,000. Proof was offered at the hearing to establish that this obligation had not been in any way reduced. The consideration for the warranty deed from Koehler, Manganelli, and Urchison to the petitioners and the Mehlers,

and the quitclaim deed from Frank Post and Associates, Inc. to the Petitioners and the Mehlers is $50,000.

8.. The proposed assessment issued by the Respondent on September 9, 1975 is correct and accurate, and should be affirmed and assessed against the Petitioners and the Mehlers.

RECOMMENDED ORDER

Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED

That the proposed assessment issued by the Florida Department of Revenue on September 9, 1975 to Bernard Hutner, Shirley R. Hutner, et al be affirmed, and assessed.

RECOMMENDED this day of April, 1976 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, Esquire Assistant Attorney General Department of Legal Affairs The Capitol

Tallahassee, Florida 32304

Bernard Hutner, Esquire P. O. Box 610488

North Miami, Florida 33181

Docket for Case No: 75-001771

Orders for Case No: 75-001771