STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

58TH STREET, INC., )

)

Petitioner, )

)

vs. ) CASE NO. 76-2191

) FLORIDA 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 31, 1977, in Sarasota, Florida.

The following appearances were entered: Sy Sherr, of the firm Burnstein, Sherr, Hodges, Lancer and Brand, Sarasota, Florida, for the Petitioner, 58th Street, Inc.; and Edwin J. Stacker, Tallahassee, Florida, for the Respondent, Florida Department of Revenue.

On or about December l4, 1976, 58th Street, Inc. ("Petitioner" hereafter) filed a petition for administrative hearing with the Florida Department of Revenue ("Respondent" hereafter). In accordance with 120.57(1)(b)(3) Florida Statutes (1976 Supp.), the Respondent forwarded the petition to the Division of Administrative Hearings for the assignment of a hearing officer and the scheduling of a final hearing. On January 10, 1977, the Respondent filed its Answer to the petition. The final hearing was scheduled by notice dated January 6, 1977.

Neither party called any witnesses at the hearing. The parties stipulated to certain facts, and Hearing Officer's Exhibits 1 through 3, and Joint Exhibits

1 and 2 were received into evidence by stipulation. The parties have submitted PostHearing Memoranda of Law.

FINDINGS OF FACT

1. On or about January 31, 1974, the Petitioner purchased a certain tract of property from Rio Branco Corporation. As a part of the purchase price, the Petitioner executed a secured promissory note, and a purchase money mortgage. A copy of the mortgage and the promissory note were received in evidence as Joint Exhibit 1. Although the promissory note is in the form of a direct obligation for the Petitioner to pay the face amount of the note to Rio Branco Corporation, its obligations were limited. The note provides in Paragraph 12 as follows:

   
   

   "Mortgagor, (Petitioner] assumes no corporate liability for the payment of the debt evidenced by this note and mortgage.

   Mortgagee [Rio Branco Corporation] waives any corporate liability and agrees to look

   solely to the property securing such debt for payment thereof."

   
   

2. Petitioner apparently defaulted on the mortgage and the promissory note, and a foreclosure suit was initiated by Rio Branco Corporation. Petitioner was named as the defendant in this suit which was filed in Sarasota County, and given case number CA-75-1107. Prior to the completion of the foreclosure action, Petitioner executed a quitclaim deed conveying its interest in the subject property back to Rio Branco Corporation. The quitclaim deed was executed in lieu of foreclosure. A copy of the quitclaim deed was received in evidence as Joint Exhibit 2. The Petitioner stipulated that, it executed Joint Exhibit 2 in order to prevent any deficiency from being entered following a judicial sale in connection with the foreclosure proceeding. Despite the stipulation it is apparent that Rio Branco Corporation could not have enforced any such deficiency against the Petitioner due to the above quoted provision of the promissory note. The quitclaim deed was apparently recorded by a representative of Rio Branco Corporation.

   
   

3. Through a proposed notice of assessment dated September 9, 1976, the Respondent is seeking to impose documentary stamp taxes, documentary surtaxes, penalties and interest in the total amount of $745.13 upon Petitioner. It is not clear whether the Respondent is also seeking to impose the same taxes upon the grantee of the quitclaim deed, Rio Branco Corporation. Respondent contends that the Petitioner is liable for the documentary stamp taxes on the quitclaim deed, and that the amount of consideration for the deed is the amount of mortgage debt extinguished as a result of execution of the deed. Petitioner contends that as the grantor of the instrument, it has no responsibility for paying documentary stamp taxes, and that further no consideration was given for the deed as a matter of law since no debt which the Petitioner could have been forced to pay was extinguished.

   
   

   CONCLUSIONS OF LAW

   
   

4. The Division of Administrative Hearings has jurisdiction over the subject matter of this case and over the parties. Section 120.57(1), Florida Statutes (1976 Supp.)

   
   

5. A documentary stamp tax, and a documentary surtax are imposed on written instruments through which any interest in realty is transferred in accordance with Sections 201.02, 201.021, Florida Statutes (1975). The amount of the taxes is determined based upon the consideration given for the document. The Respondent's rules provide that deeds given in lieu of foreclosure are subject to the taxes. Rule 12A-4.12(2)(f), 12A-4.12(4)(e), Florida Administrative Code. In a 1959 Opinion the Attorney General likewise concluded that such conveyances are subject to the tax. (Op. Atty. Gen. 059-203 (1959)). The Attorney General concluded that consideration would be determined as follows:

   
   

   "In the absence of a showing that the consideration for the release or satisfaction is otherwise, the tax shall be computed on the unpaid portion of the obligation secured by said mortgage."

   
   

   The same issues were before the court in Indian River Groves v. Dickinson, 238 So.2d 125 (l DCA Fla. 1970). The trial court had held that deeds to real estate executed in satisfaction of a mortgage debt are subject to the documentary stamp

   tax. The First District Court of Appeal Af firmed, quoting with approval the following language from the trial court's decision:

   
   

   "When a deed to real estate is executed by a mortgagor to the mortgagee in satisfaction discharge of the mortgage debt, the deed

   is subject to taxation under Section 201.02, Florida Statutes, the tax to be based upon the value of the debt discharged. In the absence of proof to the contrary, the mortgage debt will be presumed to have its face value."

   
   

6. When the Petitioner executed the quitclaim deed to Rio Branco Corporation, they received as consideration an extinguishment of a mortgage obligation in the face amount of $85,582.87. It is apparent from the promissory note that Rio Branco Corporation could not have recovered any part of the debt from the Petitioner, but was limited in its recovery to the real property. The fact remains nonetheless that there was a promissory note that was extinguished through execution of the quitclaim deed. The consideration for execution of the quitclaim deed was the discharge of the mortgage debt.

   
   

7. Petitioner contends that it is the grantee of a deed who is liable for payment of the taxes, not the grantor. Section 201.01, Florida Statutes (1975) does not specify whether the grantor or the grantee of a deed would be liable for payment of the tax. The statute does provide that the tax will be paid by "...any person, who makes, signs, executes, issues..." a writing through which an interest in real property is transferred. The statute would appear to impose the tax upon both the grantee and the grantor. This interpretation has been taken by the Respondent in adopting Rule 12A-4.02(1)(a), Florida Administrative Code, which provides: "...the tax is payable by any of the parties to a taxable transaction...". This interpretation has been followed in several Attorney General's opinions, including: Op. Atty. Gen. 075-206 (1975), 071-100 (1971), 070-171 (1970), 070-169 (1970), and 068-10 (1968). Generally the parties to a deed transaction will apportion or assign documentary stamp tax and surtax obligations by agreement. There is no evidence that the parties in the instant case made any such apportionment or assignment.

   
   

8. There was no evidence offered at the hearing from which it could be determined that the amount of the mortgage debt extinguished by the execution of the deed in lieu of foreclosure was other than the face amount of the promissory note, to wit:

   
   

9. Documentary stamp taxes, documentary surtaxes, penalties and interest should be imposed upon the Petitioner on the quitclaim deed received in evidence as Joint Exhibit 2 based upon the consideration for the deed being $85,582.87, the face amount of the mortgage indebtedness discharged through execution of the deed.

RECOMMENDED ORDER

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

That the Respondent assess documentary stamp taxes, documentary surtaxes, penalties and interest against the Petitioner on the quitclaim deed received in

evidence as Joint Exhibit 2, based upon the consideration for the deed being

$85,582.87.

RECOMMENDED this 5th day of May, 1977, in Tallahassee, Florida.

G. STEVEN PFEIFFER, Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304

(904) 488-9675

COPIES FURNISHED:

Arthur D. Vandroff, Esquire

523 South Washington Boulevard Sarasota, Florida 33577

Edwin J. Stacker, Esquire Assistant Attorney General Department of Legal Affairs The Capitol

Tallahassee, Florida 32303

Docket for Case No: 76-002191

Orders for Case No: 76-002191