STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

STEWART ARMS APARTMENTS, LTD., ) WORTHINGTON ASSOCIATES, LTD., )

Florida Limited Partnerships, ) VANGUARD CONSTRUCTION COMPANY, )

INC., a Florida corporation, )

)

Petitioner, )

)

vs. ) CASE NO. 76-1330

) 76-1331

STATE OF FLORIDA, DEPARTMENT ) 76-1332

OF REVENUE, and OFFICE OF )

COMPTROLLER, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, K. N. Ayers, held a public hearing in the above styled cases on October 20, 1976 at Miami, Florida.

APPEARANCES

For Petitioner: Edward C. Tietig, Esquire

505 Dadeland Towers North 9200 South Dadeland Boulevard Miami, Florida 33156

For Respondent: Patricia S. Turner, Esquire

Assistant Attorney General The Capitol

Tallahassee, Florida 32304

By these petitions Stewart Arms Apartments, Ltd. (Stewart), Worthington Associates, Ltd. (Worthington), and Vanguard Construction Company, Inc. (Vanguard) seek refund of intangible taxes and documentary stamp taxes paid on notes and mortgages. Since the same factual situation exists with respect to all of the petitions and the same issues of law are involved the cases were consolidated for hearing and one recommended order will be submitted. No factual issues were in dispute and the parties stipulated that the pleadings and admissions contained all relevant facts. Edward Tietig thereafter testified as an expert witness regarding his experiences recording construction loan mortgages in Dade and Broward counties.

FINDINGS OF FACT

1. Stewart executed a mortgage note dated February 3, 1972 in the amount of $2,943,400 payable to City National Bank of Miami. This note was secured by a mortgage executed by Stewart as mortgagor to City National Bank of Miami as

   mortgagee of same date. This mortgage was recorded on February 8, 1972 at which time documentary stamp tax and intangible taxes were paid. The note was designated a mortgage note in the face amount of $2,943,400 and taxes paid were predicated on this sum. The mortgage provided, inter alia, in item 24 thereof:

   
   

   "That the funds to be advanced herein are to be used in the construction of certain improvements on the land herein described, in accordance with a building loan agreement between the mortgagor and the mortgagee dated February 8, 1972, which building loan agreement (except such part or parts thereof as may be inconsistent herewith) is incorporated herein by reference to the same extent and effect as if fully set forth and made a part of this mortgage; if the construction of the improvements to be made pursuant to said building loan agreement shall not be carried on with reasonable diligence, or shall be discontinued at any time for any reason other than strikes or lockouts, the mortgagee, after due notice to the mortgagor or any subsequent owner, is hereby invested with full and complete authority to enter upon said premises, employ watchmen to protect such improvement from depredation or injury, and to preserve and protect the personal property therein, and to continue any and all outstanding contracts for the erection and completion of said building or buildings, to make and enter into any contracts and obligation wherever necessary, either in its own name or in the name of the mortgagor, and to pay and discharge all debts, obligations, and liabilities incurred thereby. All such sums so advanced by the mortgagee (exclusive of advances of the principal of the indebtedness secured hereby) shall be added to the principal of the indebtedness secured hereby and shall be secured by this mortgage and shall be due and payable on demand with interest at the rate of the same rate as provided in the note secured hereby, but no such advances shall be insured unless same are specifically approved by the Secretary of Housing and Urban Development acting by and through the Federal Housing Commissioner prior to the making thereof. The principal sum and other charges provided for herein shall, at the option of the mortgagee or holder of this mortgage and the note secured hereby, become due and payable on the failure of the mortgagor to keep and perform any of the covenants, conditions, and agreements of said building loan agreement. This covenant shall be terminated upon the completion of

   the improvements to the satisfaction of the mortgagee and the making of the final advance as provided in said building loan agreement;"

   
   

2. Prior to the completion of the project for which the note and mortgage were executed and before the full amount stated in the note had been advanced Stewart went into receivership. No advances were made under the note and mortgage subsequent to December, 1974, and only $1,935,378 had been disbursed to Stewart prior to foreclosure.

   
   

3. On March 17, 1976 Stewart requested a refund in the amount of $1512 for documentary stamp taxes and $2016 for intangible taxes paid on the difference between $2,943,400 and $1,935,378.29.

   
   

4. By letters dated June 16 and 17, 1976, each of the refund requests was denied by the Comptroller on the ground advanced by Department of Revenue that the claims were barred as not being timely filed.

   
   

5. Vanguard executed a note in the amount of $2,000,000 payable to the Chase Manhattan Bank secured by a building loan mortgage from Vanguard as mortgagor to Chase as mortgagee. This mortgage was recorded and documentary stamp taxes and intangible taxes were paid on April 19, 1973. Other than the amount of the note and the total advanced prior to Vanguard going into receivership, the basic facts were the same as in Stewart. At the time of the last payment in May, 1975 Vanguard had received $1,388,008 of the $2,000,000 evidenced by the note. Vanguard's application for refund of $1224 for intangible taxes paid was denied by the Comptroller for the same reason Stewarts was denied. Here the application dated April 19, 1976 was postmarked in Miami on April 20, 1976 and received by Respondent on April 22, 1976.

   
   

6. Worthington executed a building loan note dated October 25, 1972 in the amount of $2,750,000 payable to Trustees of C. I. Mortgage Group which was secured by a mortgage loan of same date. Worthington also went into receivership in December, 1974 after $1,962,750 had been advanced. Application for refund of documentary stamp taxes in the amount of $1180.80 and intangible taxes in the amount of $1574.50 filed March 17, 1976 was denied by the Comptroller on the grounds that the application was not timely filed.

   
   

7. All of the above loans, for which the mortgages were recorded, were construction loans and provided for periodic payments to the mortgagor as the construction progressed. Provided the mortgagor complied with the terms of the building agreement the mortgagee was legally required to advance funds when due.

   
   

8. In determining valuation for the purpose of computing the intangible taxes due clerks of the circuit court follow 199.122(7) F.S. which provides that obligations for payment of money secured by a mortgage shall be valued at the principal amount of indebtedness evidenced by such transactions. Accordingly in the cases at hand the clerks would have refused to record the mortgages unless the intangible taxes and documentary stamp taxes computed using the principal amount of the obligation were paid.

   
   

9. An application for refund of the intangible tax representing the difference between the face amount of the mortgage to secure future advances, and the amount advanced, will be disapproved by the Department of Revenue so long as advances on the face amount of the loan are still being made.

CONCLUSIONS OF LAW

10 Section 199.032 F.S. relates to tax levies on documents and provides in pertinent part for payment of:

"(2) A nonrecurring tax of two mills on the dollar of the just valuation of all notes, bonds, and other obligations for payment of money, which are secured by mortgage, deed of trust, or other lien upon real property situated in the sate."

1. Section 199.122 F.S. provides in pertinent part that intangible personal property shall be valued in the following manner:

   
   

   "(7) All notes, bonds, and other obligations for payment of money which are secured by mortgage, deed of trust, or other lien upon real property situated in the state shall be valued at the principal amount of indebtedness evidenced by such obligation."

   
   

2. With respect to the excise tax on promissory notes, written obligations to pay money, etc. Section 201.08 F.S. provides in pertinent part:

   
   

   "(1) On promissory notes, nonnegotiable notes, written obligations to pay money, assignment of salaries, wages, or other compensation, made, executed, delivered, sold, transferred, or assigned in the state, and for each renewal of the same on each one hundred dollars of the indebtedness or obligation evidenced thereby, the tax shall be fifteen cents on each one hundred dollars or fraction thereof. Mortgages which incorporate the certificate of indebtedness, not otherwise shown in separate instruments,

   are subject to the same tax at the same rate."

   
   

3. Liability of instrument for stamp duty and amount of such duty is determined by the form and face of the instrument and cannot be affected by proof of extrinsic facts. Bankers Trust Company v. Florida East Coast R. Co.,

   D.C. 8 F. Supp. 874 (1935) aff'd Lee v. Kenan, 78 F.2d 425, cert. den. 296 US 637. At the time the mortgages here involved were recorded the documentary stamp tax required to be paid was determined by the face amount of the note secured by the mortgages. Section 201.17 F.S. makes it a misdemeanor in the second degree to make, issue, etc. any instrument defined in this chapter without the full amount of the tax herein imposed being fully paid. Refusing to pay the stamp taxes based on the face amount of the note would not only result in the clerk refusing to record same, but also subject the maker to criminal prosecution.

   
   

4. Similar conclusions follow regarding the imposition of the intangible tax on the notes as prescribed by Section 199.032 F.S. above quoted. In Opinion 064-12 of January 17, 1964 the Attorney General of Florida has stated:

   "The clerks of the circuit courts of Florida should not record mortgages, deeds of trust, and other liens encumbering real property given to secure the payment of money, without the payment of the intangible tax, even though

   it was stipulated that the maker of the security note was not personally liable therefor."

   
   

5. However Chapter 199 contains a provision not found in Chapter 201 with respect to the intangible tax on mortgages. Section 199.052 F.S. provides in pertinent part:

   
   

   "(7)(d) If the mortgage, deed of trust, or other lien subject to the tax levied by this chapter secures future advances, as

   provided in 697.04, the tax shall be paid at the time of execution on the initial debt or obligation secured, excluding future advances; at the time and so often as any future advance is made, the tax shall be paid on all sums then advanced "

   
   

6. Whether or not these mortgages were given as security for future adances and therefore subject to being taxed only upon the sums actually received depends upon whether the mortgage meets the requirement of 697.04 F.S.

   
   

7. Section 697.04 F.S. relates to mortgages and other instruments given for the purpose of creating a lien on real property and establishing the priority of other liens in relation to mortgages given to secure future advances. Construction money mortgages similar to the mortgages under consideration here were considered by the District Court of Appeals in Industrial Supply Corporation v. Bricker 306 So.2d 133 (Fla. App. 1975). The court reviewed the legal authorities relating to mortgages to secure future advances and found that where the mortgage expressly so stated on its face it was valid to secure future advances even against materialmen's liens filed before the advance was made. Since the mortgages here involved state on their face that they are given to secure funds to be advanced (Item 24 of the mortgage above quoted) all parties were put on notice that the mortgage would take priority over materialmen's liens for all funds advanced up to the face amount of the mortgage. Insofar as priority of the lien evidenced by these mortgages is concerned these are deemed mortgages to secure future advances. Accordingly, Petitioners could have filed a claim for refund of the intangible taxes paid on funds not advanced immediately after the clerk had refused to record the mortgage until such taxes had been paid.

   
   

8. Section 215.26 F.S. provides for refunds for taxes and states in pertinent part:

   
   

   "(1) The comptroller of the state may refund to the person who paid same, or his heirs, personal representatives or assigns, any moneys paid into the state treasury which constitute:

   1. An overpayment of any tax, license, or account due;

   2. A payment where no tax, license or account is due; and

   3. Any payment made into the state treasury in error;

      and if such payment has been credited to an appropriation, such appropriation shall at the time of making any such refund, be charged therewith. There are appropriated from proper respective funds from time to time such sums as may be necessary for such refunds.

      (2) Application for refunds as provided by this section shall be filed with the comptroller within three years after the right to such refund shall have accrued else such rights shall be barred and such application shall be on a form to be prescribed by the comptroller and shall be sworn to and supplemented with such additional proof as is necessary to establish such claim; provided, such claim is not

      otherwise barred under the laws of this state."

      
      

9. The principal issue to be here resolved is when Petitioners right to a refund accrued. In its brief Respondent takes the position that Petitioner is not entitled to any refund regardless of whether or not the claim was filed within three years of the payment of the documentary stamp tax. However, in answers to Request for Admissions Respondent, Department of Revenue, stated that if note is satisfied and Petitioner can show "no consideration" or "partial consideration" it would recommend approval of a refund request of documentary stamp taxes if said request was made within three years from the date of payment of the tax. Similarly it would approve a request for refund of intangible taxes if such taxes were paid in the full amount of the note, no disbursements are made and request is made for refund within three years of the date the tax was paid.

   
   

10. Respondent, Department of Revenue, further admitted that if a note on which the documentary stamp taxes had been paid remains outstanding and periodic disbursements continue at the time of the refund request it would recommend that the refund request be denied.

    
    

11. Thus, with respect to the documentary stamp taxes on the instruments here involved, Petitioner would be required to pay the taxes based upon the face value of the note, at the time the mortgage was recorded, and so long as advances were being made no refund request would be approved. Under these circumstances either Petitioners' right to a refund did not accrue until after advances were no longer being made or Respondent is estopped to claim as an affirmative defense the lack of a timely application for refund. cf Hardy, Hardy & Associates v. State of Florida Department of Revenue, 308 So.2d 189 (DCA 1st. 1975); State ex rel Delvin v. Dickinson, 305 So.2d 848 (DCA 1, 1974).

    
    

12. By virtue of section 199.032 F.S. above quoted different legal results follow. That statute clearly provides that Petitioners, under their mortgages covering future advances, were required to pay intangible taxes only upon the sums advanced. However, the actions of the various clerks of the circuit courts, as agents for the Department of Revenue, in refusing to record mortgages on which intangible taxes for the face amount of the notes secured thereby had not been paid, have estopped the Respondent from claiming as an affirmative defense Petitioners' failure to timely file for refund.

13. Here Respondent, Department of Revenue, advises recording clerks to require payment of intangible taxes in the face amount of the note or mortgage before accepting same for recording; acknowledges that it would recommend denial of a request for refund for these intangible taxes paid which represents future advances; and contends that Petitioners' claim for refund should be denied because it was not filed within three years of the time the excess intangible tax was paid. Section 215.26 F.S. above quoted clearly states that requests for refund shall be filed within three years of the time the right to refund accrued. If the Department of Revenue would not approve a request for refund of intangible taxes paid on future advances not yet received but still due and payable, it is difficult to see how it can contend that Petitioners had a right to such refund, yet, because they failed to claim the refund within three years of the payment thereof, their claims are barred. These circumstances present the classic case for estoppel. Hardy v. Department of Revenue, supra.

    
    

14. Respondent relies on State ex rel. Brunswick Corp. v. Kirk, 204 So.2d

    4 (Fla. 1967) to support its position that no refund can be made more than three years after the tax has been paid. That reliance appears misplaced. That decision adopted an Attorney General's opinion which held that sales taxes were due on retain title conditional sales contracts when made, the same as cash sales, and were not refundable if the buyer subsequently defaulted and returned the property. Nowhere in that opinion was the issue raised that seller had a right to a refund of sales tax if claim for refund was filed within three years of the sale. More important the Legislature forthwith modified the statute there involved, Section 212.17 F.S. to provide that a dealer selling tangible personal property under a retained title, conditional sale, or similar contract may obtain a refund of taxes paid on the unpaid balance if, and when, the property is returned to him.

    
    

15. From the foregoing it is concluded that Petitioners' right to refund for excess documentary stamp taxes paid accrued when Petitioners were no longer entitled to draws against the mortgage notes. Accordingly, their requests for refunds were timely filed. It is further concluded that the Petitioners' right to refund for excess intangible taxes paid accrued at the time these mortgages to secure future advances were recorded; that request for such refunds at that time would have been denied by the Department of Revenue; and, therefore, the Department of Revenue is estopped to claim the request for refund was not timely filed. It is therefore,

RECOMMENDED:

1. That the Petition of Stewart Arms Apartments Ltd. for refund of $1512 for excess documentary stamp taxes and $2016 for excess intangible taxes paid be APPROVED;

   
   

2. That the Petition of Vanguard Construction Company, Inc. for refund of

   $1224 for excess intangible taxes paid be APPROVED; and

   
   

3. That the Petition of Worthington Associates Ltd. for refund of

$1180.80 for excess documentary stamp taxes and $1574.50 for excess intangible taxes paid be APPROVED.

DONE and ENTERED this 14th day of December, 1976, in Tallahassee, Florida.

K. N. AYERS Hearing Officer

Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 14th day of December, 1976.

COPIES FURNISHED:

Edward C. Tietig, Esquire

505 Dadeland Towers North 9200 South Dadeland Boulevard Miami, Florida 33156

Patricia S. Turner, Esquire Assistant Attorney General The Capitol

Tallahassee, Florida 32304

Mr. J. Ed Straughn Executive Director Department of Revenue

Room 102, Carlton Building Tallahassee, Florida 32301

Honorable Gerald Lewis Comptroller

The Capitol

Tallahassee, Florida 32304

Docket for Case No: 76-001330

Orders for Case No: 76-001330