STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

KBC DEVELOPMENT CORPORATION, )

a Florida corporation )

)

Petitioner, )

)

vs. ) CASE NO. 76-1596

)

GERALD LEWIS, as Comptroller of ) the State of Florida, and )

DEPARTMENT OF REVENUE, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, James E. Bradwell, held a public hearing in this case on January 18, 1979, in Clearwater, Florida. Following the close of the hearing, the parties were allowed an opportunity to submit posthearing memoranda which has been received and considered by the undersigned in preparation of this Remanded Order.

APPEARANCES

For Petitioner: Donald R. Hall, Esquire

Coza, Hall & Peacock, P.A.

100 North Belcher Road Clearwater, Florida 33518

For Respondents: Cecil L. Davis, Jr., Esquire

Assistant Attorney General The Capitol, LL04 Tallahassee, Florida 32304

On or about August 27, 1976, KBG Development Corporation, a Florida corporation (Petitioner herein), filed a petition requesting a formal proceeding for the purpose of reviewing the validity of an assessment made by the Department of Revenue (Respondent) in the amount of $55,212.40, which amount represents an assessment for documentary stamp taxes and a penalty which the Petitioner paid under protest. By its petition, Petitioner seeks a refund of all moneys paid except that which it contends it owes, i.e., $4.10.

Petitioner's Exhibits 1 through 8 were offered into evidence and were received.

ISSUE

The sole issue posed herein is:

Whether or not the transfer to Petitioner by individuals Hugh P. Conser, Stewart L. Krug and Sidney Barbane1 of certain real property located in Pinellas

County, Florida, on or about October 26, 1974, constitutes a conveyance subject to the Documentary Stamp Tax Act, pursuant to Chapter 201, Florida Statutes.

FINDINGS OF FACT

1. On or about October 26, 1974, the Petitioner received title to certain real property located Pinellas County, Florida, from Stewart L. Krug, Sidney Barbanel and Hugh P. Conser, the principals in KBC Development Corporation, which was recorded in Official Records Book 4229, page 1052, Public Records of Pinellas County, Florida. The only consideration, as evidenced by the deeds filed in the case, is that the conveyance was for "good and valuable consideration and ten dollars". This other good and valuable consideration, according to Petitioner and the other record evidence, consisted of the issuance of all one hundred shares of the authorized stock of KBC Development Corporation, Petitioner, as evidenced by the Minutes of the Shareholders Meeting of such corporation which was held on July 18, 1973. (See the minutes reflected in an attachment to Petitioner's Exhibit Number 1.) The issued stock had a par value of $5.00. The corporate entity, KBC, as Petitioner, was formed for the purpose of taking title to the property in question and, as evidenced by the record, had no other assets when the subject property was conveyed. On May 6, 1975, the Florida `Department of Revenue, Respondent, recorded in the office of the Circuit Court of Pinellas County, Florida, a warrant for collection of delinquent documentary stamp taxes in connection with the above-referenced transaction in the amount of $27,599.70, plus an identical amount of penalty, for a total sum of $55,212.40. Said warrant is recorded in O.R. Book 4286, page 31, Public Records of Pinellas County, Florida. Following a conference with the Department of Revenue, the taxes were paid by the Petitioner under protest. That payment set the stage for the Petitioner's filing of the claim for refund with the Respondent, the Comptroller of the State of Florida, pursuant to Florida Statutes section 215.26.

   
   

2. The Petitioner argues that the only taxable consideration resulting from the subject conveyance was the par value of the stock, of which amount sufficient documentary stamps were affixed to the deeds in question. In support of this position, the Petitioner cites the fact that there are no income tax returns filed by the corporation, FIG; no business activities pursued by the corporation; no bank account of the corporation; and no assets held by the corporation, except as agents for the three individuals, Krug, Barbanel and Conser, all of which were acknowledged by all of the mortgagees. Additionally, the Petitioner urges that the bank and lending institutions involved regarded and held each individual personally liable for the indebtedness in connection with the loans advanced for the property in question. Finally, the Petitioner urges that, based on the conveyance in question, there was no shift in the economic burden to the corporation and, therefore, no taxable transaction occurred when the property in question was conveyed from the individuals, Krug, Barbanel and Conser, to FIG Development Corporation.

   
   

   CONCLUSIONS

   
   

3. The documentary stamp tax provided by Florida Statutes section 201.02 is an excise tax imposed on particularly described transactions, and in the case of instruments relating to realty, is based upon the total consideration involved in the transfer or conveyance. Thus, the key point in determining whether documentary stamps are to be affixed to an instrument transferring an interest in realty is in the presence or absence of consideration for the transfer. Rule 12A-4 .14, Florida Administrative Code, describes conveyances not subject to the documentary stamp tax as those "conveyances of realty without

   consideration, including. . .a deed to or by a trustee not pursuant to a sale

   . . . ." The facts of this case clearly do not illustrate an express or resulting trust relationship between KBC Development Corporation and its principals, Stewart L. Krug, Sidney Barbanel and Hugh P. Conser. When KBC took title to the property from Krug, Conser and Barbanel, the consideration was

   $10.00 and other valuable consideration and, based on the face of the instrument, the conveyance was not made to KBC subject to payment of any mortgages, etc., by KPC (Petitioner's Exhibit No. 1). Section 201.02(1), Florida Statutes (1975). See Florida Department of Revenue v. De Maria, 338 So.2d 838 (Fla. 1976).

   
   

4. Additionally, the facts herein reveal that the banks and lending institutions involved in the transaction required the personal guarantees of the individuals, Krug, Barbanel and Conser. No evidence was introduced indicating that Petitioner, KBC Development Corporation, was anything more than an entity whereby the lending institutions had advanced funds for the primary mortgages to Continental Investment and Development Company, which was in no way related to the present corporation, KBC, and that the corporate entity was used to protect the lending institutions from any possible violations of usurious transactions. As stated, the personal endorsements and/or guarantees of the individuals, Barbanel, Krug and Conser, were required by the lending institutions before the primary mortgagee, Continental Investment and Development Company, would be released. Krug, Barbanel and Conser were no more nor less obligated to pay and perform under the obligation, after the conveyance than before. Although there was a change in the form of the obligation, there was no change in the substance. See e.g., Straughn v. Story, 334 So.2d 337 (Fla. 1st DCA 1976) cert. discharged 348 So.2d 954 (1977). (See Petitioner's Exhibits 2, 3 and 4.) For all of these reasons, it is the considered opinion of the undersigned that the Respondents have failed to demonstrate that the consideration for the conveyances in question were anything more than the par value of the stock and, accordingly, documentary stamp taxes should only be assessed in the amount of

   $4.10. Accordingly, I shall recommend that the excess assessments which Petitioner paid under protest be refunded.

   
   

   CONCLUSIONS OF LAW

   
   

5. The Division of Administrative Hearings has jurisdiction over the subject matter and the parties to this action. Chapter 120.57(1), Florida Statutes.

   
   

6. The authority of the Respondent is derived from Chapter 201, Florida Statutes.

   
   

7. Insufficient evidence was offered to establish that the assessments of the taxes and penalties set forth in the subject notice of assessment and warrant for taxes, penalties, etc., under Chapter 201, Florida Statutes, recorded in the Circuit Court of Pinellas County, Florida, on May 6, 1975, is based on consideration as set forth therein.

RECOMMENDATION

Based on the foregoing findings of fact and conclusions of law, it is hereby,

RECOMMENDED:

That the Petitioner be refunded the amount of taxes and penalties it paid to the Respondent, Department of Revenue, under protest, over and above the amount it should have paid on the par value of the stock of KBC Corporation when the abovedescribed conveyance was made during October, 1974.

RECOMMENDED this 3rd day of April, 1979, in Tallahassee, Florida.

JAMES E. BRADWELL

Hearing Officer

Division of Administrative Hearings Room 101, Collins Building

MAILING ADDRESS: 530 Carlton Building Tallahassee, Florida 32304

(904) 488-9675

COPIES FURNISHED:

Donald R. Hall, Esquire Goza, Hall & Peacock, P.A.

100 North Belcher Road Clearwater, Florida 33518

Cecil L. Davis, Jr., Esquire Assistant Attorney General The Capitol, Room LL04 Tallahassee, Florida 32304

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

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

STATE OF FLORIDA, DEPARTMENT OF REVENUE TALLAHASSEE, FLORIDA

KBC DEVELOPMENT CORPORATION,

Petitioner,

vs. CASE NO. 76-1596

GERALD LEWIS, as COMPTROLLER OF THE STATE OF FLORIDA, AND DEPARTMENT OF REVENUE,

Respondents.

/

NOTICE

TO: DONALD R. HALL, ESQUIRE ATTORNEY FOR PETITIONER GOZA, HALL & PEACOCK, P.A.

100 NORTH BELCHER ROAD CLEARWATER, FLORIDA 33518

CECIL L. DAVIS, JR., ESQUIRE ATTORNEY FOR RESPONDENTS ASSISTANT ATTORNEY GENERAL THE CAPITOL LL04 TALLAHASSEE, FLORIDA 32304

You will please take notice that the Governor and Cabinet, acting as head of the Department of Revenue at its meeting on the 12th day of June, 1979, approved the Respondent's Substituted Order, in lieu of the Division of Administrative Hearing's Recommended Order dated April 3, 1979. A copy of the Respondent's Proposed Substituted Order is attached. This constitutes final agency action by the Department of Revenue.

JOHN D. MORIARTY, ATTORNEY DIVISION OF ADMINISTRATION DEPARTMENT OF REVENUE STATE OF FLORIDA

ROOM 104, CARLTON BUILDING TALLAHASSEE, FLORIDA 32301

CERTIFICATE OF SERVICE

I HEREBY CERTIFY that a true and correct copy of the foregoing Notice was furnished by mail to Donald R. Hall, Esquire, Goza, Hall & Peacock, P.A. 100 North Belcher Road, Clearwater, Florida 33518, Attorney for Petitioner; by hand delivery to Cecil L. Davis, Jr., Esquire, Assistant Attorney General, The Capitol LL04, Tallahassee, Florida 32304, Attorney for Respondents and James E. Bradwell, Esquire, Hearing Officer, Division of Administrative Hearings, Department of Administration, Room 530, Carrolton Building, Tallahassee, Florida 32304, this 14th day of June, 1979.

JOHN D. MORIARTY, ATTORNEY

Attachment STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

KBC DEVELOPMENT CORPORATION,

Petitioner,

vs. CASE NO. 76-1596

GERALD LEWIS, et al.,

Respondent.

/

PROPOSED SUBSTITUTED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, James E. Bradwell, held a public hearing in this case on January 18, 1979, in Clearwater, Florida. Following the close of the hearing, the parties were allowed an opportunity to submit post-hearing memoranda which have been received and considered by the undersigned in preparation of this Proposed Substituted Order:

APPEARANCES

For Petitioner: Donald R. Hall, Esquire

Goza, Hall & Peacock, P.A.

100 North Belcher Rd. Clearwater, Florida 33518

For Respondent: Cecil L. Davis, Jr.

Assistant Attorney General The Capitol, Rm. LL04 Tallahassee, Florida 32301

On or about August 27, 1976, KBC Development Corporation, Florida corporation (Petitioner herein) filed a petition requesting a formal proceeding for the purpose of reviewing the validity of an assessment made by the Department of Revenue (Respondent) in the amount of $55,212.40, which amount represents an assessment for documentary stamp taxes and a penalty which the Petitioner paid under protest. By its petition, Petitioner seeks a refund of all moneys paid except that which it contends it owes, i.e., $4.10.

Petitioner's Exhibit 1 through 8 were offered into evidence and were received.

ISSUE

The sole issue posed herein is:

Whether or not the transfer to Petitioner by individuals Hugh P. Conser, Stewart L. Krug and Sidney Barbanel of certain real property located in Pinellas County, Florida, on or about October 26, 1974, constitutes a conveyance subject to the Documentary Stamp Tax Act, pursuant to Ch. 201, Fla. Stat.

FINDINGS OF FACT

1. On or about October 26, 1974, the Petitioner received title to certain real property located in Pinellas County, Florida, from Stewart L. Krug, Sidney Barbanel and Hugh P. Conser, the principals in KBC Development Corporation, which was recorded in Official Records Book 4229, page 1052, Public Records of

   Pinellas County, Florida. The only consideration, as evidenced by the deeds filed in the case, is that the conveyance was for "good and valuable consideration and ten dollars." This other good and valuable consideration, according to Petitioner and the other record evidenced, consisted of the issuance of all one hundred shares of the authorized stock of KBC Development Corporation, Petitioner, as evidenced by the Minutes of the Shareholders Meeting of such corporation which was held on July 18, 1973. (See the minutes reflected in an attachment to Petitioner's Exhibit No. 1.) The issued stock had a par value of $5.00. The corporate entity, KBC, as Petitioner, was formed for the purpose of taking title to the property in question and, as evidenced by the record, had no other assets when the subject property was conveyed. On May 6, 1975, the Florida Department of Revenue, Respondent, recorded in the office of the Circuit Court of Pinellas County, Florida, a warrant for collection of delinquent documentary stamp taxes in connection with the above-referenced transaction in the amount of $27,599.70, plus an identical amount of penalty, for a total sum of $55,212.40. Said warrant is recorded in O.R. Book 4286, page 31, Public Records of Pinellas County, Florida. Following a conference with the Department of Revenue, the taxes were paid by the Petitioner under protest.

   That payment set the stage for the Petitioner's filing of the claim for refund with the Respondent, the Comptroller of Florida, pursuant to 215.26, Fla. Stat.

   
   

2. The Petitioner argues that the only taxable consideration resulting from the subject conveyance was the par value of the stock, of which amount sufficient documentary stamps were affixed to the deeds in question. In support of this position, the Petitioner cites the fact that there are no income tax returns filed by the corporation, KBC; no business activities pursued by the corporation; no bank account of the corporation; and no assets held by the corporation, except as agents for the three individuals, Krug, Barbanel and Conser, all of which were acknowledged by all of the mortgagees. Additionally, the Petitioner urges that the bank and lending institutions involved regarded and held each individual personally liable for the indebtedness in connection with the loans advanced for the property in question. Finally, the Petitioner urges that, based on the conveyance in question, there was no shift in the economic burden to the corporation and, therefore, no taxable transaction occurred when the property in question was conveyed from the individuals, Krug, Barbanel and Conser, to KBC Development Corporation.

   
   

   CONCLUSIONS

   
   

3. The documentary stamp tax provided by 201.02, Fla. Stat., is an excise tax imposed on particularly described transactions, and in the case of instruments relating to realty, is based upon the total consideration involved in the transfer or conveyance. Thus, the key point in determining whether documentary stamps are to be affixed to an instrument transferring an interest in realty is in the presence or absence of consideration for the transfer. Rule 12A-4.14 F.A.C., describes conveyances not subject to the documentary stamp tax as those "conveyances of realty without consideration, including. . .a deed to or by a trustee not pursuant to a sale. . ." The facts of this case clearly do not illustrate an express or resulting trust relationship between KBC Development Corporation and its principals, Stewart L. Krug, Sidney Barbanel and Hugh P. Conser.

   
   

4. The transfer of the property in question from Krug, Barbanel and Conser to KBC was made subject to various outstanding mortgages for which KBC did not assume any responsibility.

5. Additionally, the facts herein reveal that the banks and lending institutions involved in the transaction required the personal guarantees of the individuals, Krug, Barbanel and Conser. No evidence was introduced indicating that Petitioner, KBC Development Corporation, was anything more than an entity whereby the lending institution had advanced funds for the primary mortgages to Continental Investment and Development Company, which was in no way related to the present corporation, KBC, and that the corporate entity was used to protect the lending institutions from any possible violations of usurious transactions. As stated, the personal endorsements and/or guarantees of the individuals Barbanel, Krug and Conser, were required by the lending institutions before the primary mortgagee, Continental Investment and Development Company, would be released. Krug, Barbanel and Conser were no more nor less obligated to pay and perform under the obligation, after the conveyance than before. Although there was a change in the form of the obligation, there was no change in the substance. See, e.g., Straughn v. Story, 334 So.2d 337 (Fla.1st D.C.A. 1976), cert. discharged 348 So.2d 954 (1977). (See Petitioner's Exhibits 2, 3 and 4.)

   
   

6. Further, the facts indicate that KBC did not make any of the monthly mortgage payments on the outstanding mortgages after the conveyance of the encumbered property to KBC. Thus, the evidence presented in this case establishes that there was no genuine shifting of the economic burden of paying the outstanding mortgages from the grantors, Krug, Barbanel and Conser, to the grantee, KBC. See Florida Department of Revenue v. DeMaria, 338 So.2d 838 (Fla. 1976)

   
   

7. For all of these reasons, it is the considered opinion of the undersigned that the Respondents have failed to demonstrate that the consideration for the conveyances in question were anything more than than par value of the stock, and accordingly, documentary stamp taxes should be assessed in the amount of $4.10. Accordingly, I shall recommend that the excess assessments which Petitioner paid under protest be refunded.

   
   

   CONCLUSIONS OF LAW

   
   

8. Tie Division of Administrative Hearings has jurisdiction over the subject matter and the parties to this action. Ch. 120.57(1), Fla. Stat.

   
   

9. The authority of the Respondent is derived from Ch. 201, Fla. Stat.

   
   

10. Insufficient evidence was offered to establish that the assessments of the taxes and penalties set forth in the subject notice of assessment and warrant for taxes, penalties, etc., under Ch. 201, Fla. Stat., recorded in the Circuit Court of Pinellas County, Florida, on May 6, 1975, is based on consideration as set forth therein.

RECOMMENDATION

Based on the foregoing findings of fact and conclusions of law, it is hereby,

RECOMMENDED:

That the Petitioner be refunded the amount of taxes and penalties it paid to the Respondent, Department of Revenue, under protest, over and above the amount it should have paid on the par value of the stock of KBC Corporation when the above-described conveyance was made during October, 1974.

RECOMMENDED this 13th day of June, 1979, in Tallahassee, Florida.

Randy Miller Executive Director Department of Revenue

COPIES FURNISHED:

DONALD R. HALL, Esquire

100 North Belcher Rd. Clearwater, Florida 33518

CECIL L. DAVIS, JR.

Assistant Attorney General The Capitol, Rm. LL04 Tallahassee, Florida 32301

CERTIFICATE OF SERVICE

I HEREBY CERTIFY that a true and correct copy of the foregoing Proposed Substituted Order has been furnished by U.S. mail to DONALD R. HALL, Esquire,

100 No. Belcher Rd., Clearwater, Florida 33518, this 7th day of May, 1979.

Cecil L. Davis, Jr. Assistant Attorney General

Docket for Case No: 76-001596

Orders for Case No: 76-001596