STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

D. I. RAINEY, JR., et al., )

Mortgagors; THOMAS COUNTY ) FEDERAL, Thomasville, Georgia, ) Mortgagee, )

)

Petitioners, )

)

vs. ) CASE NO. 75-1899

)

DEPARTMENT OF REVENUE, )

)

Respondent. )

)

RECOMMENDED ORDER

A hearing was held pursuant to notice on March 17, 1976 in Room 104, Collins Building, Tallahassee, Florida at 10:00 A.M. before Stephen F. Dean, assigned Hearing Officer of Division of Administrative Hearings.

This matter arose upon the assessment of the Petitioners of

$607.50 of delinquent documentary stamp tax on an amendment to note and mortgage and the assessment of $607.50 in penalties pursuant to Section 201.08 and 201.17(2), Florida Statutes, respectively. The Petitioners requested a formal hearing and the matter was referred to Division of Administrative Hearings for conduct of the hearing.

APPEARANCES

For Petitioner: Edgar M. Moore, Esquire

Smith and Moore, P.A. Post Office Box 1169

Tallahassee, Florida 32302

For Respondent: Joseph C. Mellichamp, III, Esquire

Assistant Attorney General Attorney for Respondent Department of Legal Affairs The Capitol

Tallahassee, Florida 32304

ISSUES

There are two issues raised in this case:

1. Whether the transaction evidenced by the written instrument is taxable-under provisions of Sections 201.08, F.S., 201.01 and 201.08(1), F.S.; and

   
   

2. Whether the amendment to the note and mortgage involved in this case is a promissory note taxable pursuant to Section 201.08(1), F.S.

FINDINGS OF FACT

1. The facts are that on February 28, 1974 the Petitioners, except for Joe R. Hughes, III, and W. Comer Cherry, executed a promissory note to Lewis State Bank for $405,000 with interest at

   10 percent per annum, payable monthly, beginning March 1, 1974, with the entire amount of the principle ($405,000) due on or before February 28, 1975. Said Petitioners executed a mortgage to Lewis State Bank as security for said loan. On April 8, 1975, the due date of the principle was extended to August 28, 1975. The Lewis State Bank then assigned the note and mortgage to Thomas County Federal on July 7, 1975.

   
   

2. On July 2 and July 7, 1975 the Petitioners including Hughes and Cherry, but not Rainey, signed the instrument in Tallahassee, Florida, upon which the tax being challenged is assessed. Rainey took the instrument which appears on its face to be an Amendment to the aforementioned Note and Mortgage dated February 28, 1974 to Thomas County Federal Savings and Loan, Thomas County, Georgia. At the time the Amended Note and Mortgage left Florida it was not enforceable because all the Petitioners had not executed it. The Amended Note and Mortgage was signed by Rainey and accepted by Thomas County Federal as assignee of said original note and mortgage in Thomas County, Georgia. See R-16-

1. Thereafter the money was delivered under the Amended Note and Mortgage by Thomas County Federal to the agent of the borrowers (Petitioners) in Georgia. Whether the instrument entered into between the Petitioners and Thomas County Federal is considered a new obligation or an amendment of the assigned note and mortgage, the essential factors are that the execution and delivery of the instrument, and exchange of the funds therefor occurred in Georgia.

   1. Based on the foregoing facts the Hearing Officer finds as a matter of law that the transaction was not completed in its essential elements in Florida. Therefore, there is insufficient situs in Florida to assess the tax. In the case of yStatev.Ga, 90 So.2d 132, the Florida Supreme Court, in a opinion of Justice Thornal stated regarding assessment of the documentary tax stamp as follows at page 135:

      
      

      "[1] We cannot read into the applicable Statute that the Florida Documentary Stamp Tax is in any sense a tax on the privilege of borrowing money." Certainly no such legislative intent is evidenced by the language of the Act. We are of the view that it is more nearly of the nature of a transaction tax that is imposed upon the particularly described transactions when they occur within the limits of this state. Such transactions are evidenced by the execution of certain types of written instruments and the stamps are affixed to the instruments as evidence of payment of the tax. While it is true that the "transaction" is the borrowing of money, nevertheless it is incomplete until documents evidencing the debt are executed and delivered, and the money exchanged there for. It is this execution and exchange of documents for money that creates the documentary tax liability. Thus it is that the tax is on the transaction itself and

      not upon the mere privilege of engaging in the transaction." (Emphasis Supplied)

      
      

   2. Regarding the issue of whether the document would have been taxable as an amendment to the original note and mortgage, the Hearing officer finds that the document does evidence a transaction in which the taxpayer would have been obligated to pay money to the lending institution. Because the principal amount was increased from $406,000 to $412,000 there was a substantial change in principal amount. Therefore, the exemption provision of Section 201.09 would not apply. However, this finding is purely academic, because there was no taxable status in Florida as stated above.

RECOMMENDATION

The Hearing Officer recommends based on the foregoing findings fact and conclusions of law, than neither the tax or penalty be assessed. Done and ordered this 10th day of May, 1976, in Tallahassee, Florida.

STEPHEN F. DEAN, Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304

(904) 488-9675

COPIES FURNISHED:

Joseph C. Mellichamp, III, Esquire Assistant Attorney General Attorney for Respondent Department of Legal Affairs

The Capitol

Tallahassee, Florida 32304

Edgar M. Moore, Esquire Attorney for Petitioner Smith and Moore, P.A.

P.O. Box 1169

Tallahassee, Florida 32302

================================================================= AGENCY FINAL ORDER

=================================================================

STATE OF FLORIDA DEPARTMENT OF REVENUE

1. I. RAINEY, JR., et al., Mortgagors; THOMAS COUNTY FEDERAL, Thomasville, Georgia, Mortgagee,

   
   

   Petitioners,

   
   

   vs. CASE NO. 75-1899

   
   

   DEPARTMENT OF REVENUE,

   
   

   Respondent.

   /

   
   

   FINAL ORDER OF DEPARTMENT OF REVENUE

   
   

   This cause comes before the Department of Revenue after hearing having been held pursuant to Chapter 120, Florida Statutes, before a Hearing Officer of the Division of Administrative Hearings. Said Hearing Officer has heretofore submitted to the Department a Recommended Order dated May 10, 1976.

   
   

   Appearances at the Administrative Hearing were:

   
   

   Joseph C. Mellichamp, III, Esquire Assistant Attorney General Department of Legal Affairs

   The Capitol

   Tallahassee, Florida 32304

   
   

   Edgar M. Moore, Esquire Smith and Moore, P.A. Post Office Box 1169

   Tallahassee, Florida 32302

   As required by Chapter 120, Florida Statutes, the Department has allowed counsel for the respective parties the opportunity to file written exceptions to the Recommended Order.

   
   

   The Respondent, Department of Revenue, through its counsel, has filed exceptions but the Petitioners have not. The Department of Revenue has determined that the exceptions filed by the Respondent are well taken and accordingly rules as follows:

   
   

   FINDINGS OF FACT AND CONCLUSIONS OF LAW

   
   

   There are two issues raised in this case:

   
   

   1. Whether the written document which evidences the transaction is taxable under the provisions of Sections 201.01 and 201.08(1), F.S.; and

      
      

   2. Whether the amendment to the note and mortgage involved in this case is a promissory mote or written obligation to pay money and taxable pursuant to Section 201.08(1), F.S.

The facts are that on February 28, 1974, the Petitioners, except for Joe R. Hughes, III, and W. Comer Cherry, executed a promissory mote to Lewis State Bank for $405,000 with interest at

10 percent per annum, payable monthly, beginning March 1, 1974, with the entire amount of the principle ($405,000) due on or before February 28, 1975. Said Petitioners executed a mortgage to Lewis State Bank as security for said loan. On April 8, 1975, the due date of the principle was extended to August 28, 1975. The Lewis State Bank then assigned the note and mortgage to Thomas County Federal on July 7, 1975.

On July 2 and July 7, 1975, the Petitioners including Hughes and Cherry, but not Rainey, signed the instrument in Tallahassee, Florida, upon which the tax being challenged is assessed. Rainey took the instrument which appears on its face to be an Amendment to the aforementioned Note and Mortgage dated February 28, 1974, to Thomas County Federal Savings and Loan, Thomas County, Georgia. The Amended Note and Mortgage was signed by Rainey and accepted by Thomas County Federal as assignee of said original note and mortgage in Thomas County, Georgia, on July 7, 1975. The other obligors who were jointly and severally liable had signed in Florida. See R-16-21. The purpose of the amendment to the note and mortgage was to refinance the Jefferson Towers Apartments project located in Tallahassee, Florida. See R-14. Thereafter, the money was tendered under the Amendment to Note and. Mortgage,

in Georgia, by Thomas County Federal to the agent of the borrowers [Petitioners] Rainey. R-14. The Petitioners, on July 8, 1975, in Leon County, recorded the amendment to note and mortgage, the only instrument reflecting the new outstanding obligation of $412,000 and the only instrument setting forth the Petitioner's promise to pay this new obligation in O. R. Book 724, page 24, et. seq. The Petitioners affixed documentary stamp taxes in the amount of

$10.50 on the amendment to the note and mortgage. (See R-21) Whether the instrument entered into between the Petitioners and Thomas County Federal is considered a new obligation or an amendment of the assigned note and mortgage, the essential factors are that the execution and delivery of the instrument, and exchange of the funds therefor occurred in Georgia.

Based on the foregoing facts, the Department of Revenue finds as a matter of law that:

1. To be taxed there must be a Florida transaction evidenced by a promissory note or written obligation to pay money. Sec. 201.08(1), F.S.

   
   

2. The Amendment to Note and Mortgage involved in this case was made, signed and executed, in the State of Florida, save one signature of the multiple obligors, who were jointly and severally liable and the loan was used in Florida to refinance a Florida project which had been originally financed in Florida.

   The Amendment to Note and Mortgage, the only instrument reflecting the outstanding obligation of $412,000 and evidencing the Petitioners' promise to pay this new obligation, was recorded in Leon County, Florida, and has all essential factors of a Florida transaction percent thus subject to documentary stamp tax provided for in Sections 201.01 and 201.08(1), F.S.

   
   

3. The Amendment to Note and Mortgage clearly evidences a transaction between the Petitioners and Thomas County Federal pursuant to which the Petitioners are obligated to pay suns of money to Thomas County Federal.

   
   

4. Such a written obligation to pay money may be exempt if it meets the criteria of Sec. 201.09, F.S.

   
   

5. The document in question does not meet the criteria of Sec. 201.09, F.S., because it did not extend or continue only the identical contractual obligations of the original promissory note but there was a substantial change in the principle amount.

6. No documentary stamps have been affixed to the document which was recorded nor is there any notation on the document that said stamps were placed on any other document, except affixing of documentary stamps in the amount of $10.50; therefore, the document in question is subject to tax under Sec. 201.08(1), F.S., in the amount of $607.50 plus penalty at $607.50. Section 201.08(1) and Section 201.17(2), F.S.

Regarding the issue of whether the document would have been taxable as an amendment to the original note and mortgage, the Department concurs with the findings of the Hearing Officer that the document does evidence a transaction in which the taxpayer would have been obligated to pay money to the lending institution. Because the principal amount was increased from $406,000 to

$412,000 there was a substantial change in principal amount. Therefore, the exemption provision of Section 201.09, F.S., would not apply.

CONCLUSIONS

The assessment of the Department of Revenue in the amount of

$607.50 under Section 201.08(1), F.S., for delinquent documentary stamp taxes on the amendment to Note and Mortgage and the assessment for penalty under Section 201.17(2), F.S., in the amount of $607.50 are valid.

CERTIFICATION

I certify that the foregoing is the Final Order of the Department of Revenue adopted by the Governor and Cabinet on July 20, 1976.

J. Ed Straughn, Executive Director State of Florida

Department of Revenue

Room 102, Carlton Building Tallahassee, Florida 32304

Dated this 21st day of July, 1976

Docket for Case No: 75-001899

Orders for Case No: 75-001899