STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

H. R. THORNTON, JR., and )

BARBARA U. THORNTON, )

)

Petitioner, )

)

vs. ) CASE NO. 77-806

)

DEPARTMENT OF REVENUE, )

STATE OF FLORIDA, )

)

Respondent. )

)

RECOMMENDED ORDER

A hearing was held in the above-captioned matter, after due notice, at Kissimmee, Florida on August 3, 1977 before the undersigned Hearing Officer.

APPEARANCES

For Petitioners: H. R. Thornton, Jr., Esquire

Post Office Box 345

St. Cloud, Florida 32769

For Respondent: Daniel C. Brown, Esquire

Assistant Attorney General Department of Legal Affairs The Capitol

Tallahassee, Florida 32304 ISSUE PRESENTED

Petitioners' alleged liability for documentary stamp tax, penalty, and interest, pursuant to Chapter 201, Florida Statutes.

FINDINGS OF FACT

1. The facts in this case are derived from the exhibits submitted into evidence at the hearing and the testimony of petitioner H.R. Thornton, Jr. The pertinent documents show that a portion of a lot located in the toxin of St. Cloud, Florida, owned by Garold D. Doak, Sr. and Susan E. Doak, his wife, was mortgaged by the Doaks to Peachtree Mortgage Corporation on December 28, 1972, in the amount of $16,850.00. On January 4, 1973, Peachtree Mortgage Corporation assigned the Mortgage to the Hamilton Federal Savings and Loan association of Brooklyn, New York. On February 6, 1976, a lis pendens was filed against the property by the assignee of the mortgage in the Circuit Court of the Ninth Judicial Circuit of Osceola County, Florida, incident to an action to foreclose the mortgage. On March 15, 1976, the Doaks executed quitclaim deeds on the property to Stephene J. Houseman. On April 6, 1976, a final judgement of foreclosure was entered in the Circuit Court of the Ninth Judicial Circuit in

   favor of Hamilton Federal Savings and Loan Association of Brooklyn, New York. (Exhibit 1-6)

   
   

2. On April 27, 1976, Houseman executed a quitclaim deed on the property to petitioners. On April 30, 1976, the Thorntons conveyed their interest in the property by warranty deed to Jaiies Francis Wiczorek and Shirley Lillian Wiczorek, his wife. The deed recited that it was subject to the outstanding mortgage to Hamilton Federal Savings and Loan Association with a principal balance of sec. 16,224.52 which the grantees agreed to assume and pay. The deed further recited a consideration of $4,000.00 and documentary stamp tax in an appropriate amount was paid based on a consideration which included the cash payment and the mortgage amount. On July 30, 1976, the mortgage in question was satisfied. (Exhibits 8-10)

   
   

3. Only minimal documentary stamp tax of thirty cents was paid on the quitclaim deed from Houseman to petitioners. Respondent issued a notice of proposed assessment of additional documentary stamp tax in the amount of $48.60, surtax in the amount of $17.60, penalties in like amounts, and interest thereon, for a total of $158.51, on March 21, 1977. The proposed assessment was based on consideration stated to be the existing mortgage on the property in the amount of $16,224.52. On April 29, 1977, petitioners filed their petition for an administrative hearing, challenging the proposed assessment on the grounds that there was no evidence to show the taxable consideration as found by respondent. By an amended and revised notice of proposed assessment, dated April 29, 1977, the amount for documentary surtax, penalty and interest thereon was deleted leaving only the sums relating to documentary stamp tax, penalty, and interest in the amount of $102.30. (Exhibit 8)

   
   

4. Petitioner H.R. Thornton, Jr. took the quitclaim deed in question to cancel a $100.00 debt owed him by Houseman. He had no intent to make the mortgage payments or payments or pay any other consideration for the transfer. (Testimony of Thornton)

   
   

   CONCLUSIONS OF LAW

   
   

5. Petitioners challenge the proposed assessment of documentary stamp tax, penalty and interest asserted by respondent under Section 201.02(1), Florida Statutes, which reads as follows:

   
   

   "201.02 Tax on deeds and other instruments relating to lands, etc.-

   1. On deeds, instruments, or writings whereby any lands, tenements, or other realty, or any interest therein, shall be granted, assigned, transferred, or otherwise conveyed to, or vested in, the purchaser, or any other person by his direction, on each one hundred dollars of the con- sideration therefor the tax shall be thirty cents. When the full amount of the consideration for the execution, assignment, transfer, or conveyance

      is not shown in the face of such deed, instrument, document, or writing, the tax shall be at the rate of thirty cents for each one hundred dollars or

      fractional part thereof of the consideration therefor."

      
      

6. Petitioners contend that since they did not assume or in any manner agree to pay the outstanding mortgage on the property conveyed, they only took a

   bare legal title under the quitclaim deed in question. Respondent, on the other hand, claims that the objective fact of conveyance subject to an existing mortgage is determinative of tax liability regardless of the subjective intent of the parties thereto.

   
   

7. In determining the taxable consideration under subsection 201.02(1), Rule 12A-4.12 (2)(e), Florida Administrative Code, provides that the term "consideration" includes a conveyance subject to mortgage debt. The cases of Kendall House Apartments, Inc. v. Department of Revenue, 245 So 2d 221 (Fla. 1971) and Department of Revenue v. DeMaria, 338 So 2d 838 (Fla. 1976) both hold that where real property is transferred subject to an outstanding mortgage, such transfer carries with it a shifting of the economic burden of paying tide mortgage from the grantor to the grantee. The latter thereby becomes a "purchaser" for a "reasonably determinable consideration," i.e., as here, the balance of the mortgage in the sum of $16,224.52. As contended by respondent, the subjective intentions of petitions of petitioners in regard to the transaction are not controlling as to tax liability. Accordingly, it is concluded that petitioners are liable for documentary stamp tax as set forth in the amended proposed assessment.

   
   

8. Imposition of the 100 percent penalty under Section 201.17, however, is another matter. The state legislature recently reduced the penalty in such cases to 25 percent of the purchase price of the stamps not affixed to the document in question. (Chapter 77-281, sec. 1, Laws of Florida) Therefore, the assessed penalty should be reduced to the sum of $12.15.

RECOMMENDATIONS

That petitioners be held liable for payment of documentary stamp tax, penalty and interest under Chapter 201, Florida Statutes, as modified herein with respect to the penalty.

Done and Entered this 29th day of August, 1977, in Tallahassee, Florida.

THOMAS C. OLDHAM

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

(904) 488-9675

COPIES FURNISHED:

Daniel C. Brown, Esquire Assistant Attorney General Department of Legal Affairs The Capitol

Tallahassee, Florida 32304

H. R. Thornton, Jr., Esquire Post Office Box 345

St. Cloud, Florida 32769

Docket for Case No: 77-000806

Orders for Case No: 77-000806