MR. AND MRS. SAM GREENE, )
vs. ) CASE NO. 77-2305
Respondents. )
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 case on April 18, 1978 at West Palm Beach, Florida.
For Petitioners: Richard P. Zaretsky, Esquire Forum III
For Respondents: Cecil L. Davis, Jr., Esquire
By amended petition for administrative hearing filed February 14, 1978 Mr. and Mrs. Sam Greene, Petitioners, seek a refund of three hundred seven dollars and fifty cents ($307.50) in excess documentary stamps, and one hundred twelve dollars and seventy five cents ($112.75) in excess surtax stamps allegedly paid on deed recorded in Book 2270 p. 248 of the Official Records of Palm Beach County. By a second amended petition the demand for refund was changed to four hundred five dollars ($405) in excess documentary stamps and one hundred forty eight dollars and fifty cents ($148.50) in excess surtax. Two witnesses were called by Petitioners and 16 exhibits were admitted into evidence.
Petitioners were desirous of having a custom built home on a lot of their choice. During the course of this endeavor they met Jack Brolsma, President of Jack Brolsma & Associates (hereinafter called Brolsma) a builder, and also learned that a particular lot owned by Yanow in which they were interested was for sale at a price of thirty thousand dollars ($30,000) plus interest on mortgage.
On July 17, 1977 the Greenes entered into a contract with Brolsma to construct a house on Lot 12, Plat IV, The President Country Club in West Palm Beach, Florida for one hundred thirty five thousand dollars ($135,000).
Brolsma at all times here involved, was a builder of custom homes and not a land developer as that term is generally recognized. Jack Brolsma owned fifty percent of the corporation bearing his name.
The contract provided that Greene would obtain a construction money mortgage and pay to Brolsma one hundred thirty five thousand dollars ($135,000) for the house and lot with the understanding that the lot would be deeded to Greene at cost to Brolsma plus a cost for de-mucking which previous testings had indicated would be required to provide a stable foundation.
By Warranty Deed dated August 1, 1977 (Exhibit 10) Brolsma acquired title to Lot 12 from the Yanows. Documentary stamp taxes attached to this deed indicates that the total price was thirty one thousand nine hundred dollars ($31,900).
By Warranty Deed dated August 1, 1977 (Exhibit 4) Brolsma deeded Lot 12 to the Greenes. This deed was recorded August 9, 1977.
The Greenes qualified for a one hundred eight thousand dollar ($108,000) mortgage with Sun First National Bank of Delray Beach, and on August 8, 1977 executed a mortgage (Exhibit 7) and the transaction closed. Buyers and sellers closing statements are contained in Exhibit 3.
At the closing on August 8, 1977 documentary stamps in the amount of four hundred five dollars ($405) and surtax of one hundred forty eight dollars and fifty cents ($148.50) was charged to buyer and affixed to deed.
At closing buyers paid some twenty seven thousand five hundred dollars ($27,500) and the previous mortgage on the land was satisfied. Thereafter the construction was commenced with the mortgagee making disbursement to Brolsma per schedule (Exhibit 13).
Prior to the time Lot 12 was purchased by Brolsma, Petitioners were aware of the ownership of this lot and that it was for sale for approximately thirty thousand dollars ($30,000). Since Brolsma was more familiar with acquiring land than were Petitioners he agreed to obtain the lot upon which Petitioners had contracted to have their house built.
CONCLUSIONS OF LAW
Documentary stamp taxes on deeds and other instruments relating to land are provided for in Section 201.02 Florida Statutes which provides in pertinent part:
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
$100 of the consideration therefor the tax shall be 30 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 30 cents for each $100 or fractional part thereof of the consideration therefor.
Surtaxes on these documents are provided for in Section 201.021 Florida Statutes which provides in pertinent part:
A documentary surtax, in addition to the tax levied in s. 201.02, is levied on those documents taxed by s. 201.02 at the rate of
55 cents per $500 of the consideration paid; provided, that when real estate is sold, the consideration, for purposes of this tax, shall not include amounts of existing mortgages on the real estate sold. If the full amount of the consideration is not shown on the face of the document, then the tax shall be at the rate of 55 cents on each
$500 or fractional part thereof of the consideration.
Lot 12 was acquired by Petitioner on August 8, 1977 when the deed dated August 1, 1977 was delivered. At this time no construction had commenced and Petitioners purchased a developed lot which was ready for a dwelling to be constructed thereon. The price he had agreed to pay for the lot was the same price Brolsma had paid, viz. thirty one thousand nine hundred dollars ($31,900). This was the consideration paid by Petitioners for this lot. The proceeds of the mortgage that Petitioners executed to cover the costs of construction of the house was disbursed in accordance with the inspection and disbursement schedule as the building of the house progressed.
The imposition of the tax is triggered by the conveyance which occurred when a properly executed deed was delivered to Petitioners on August 8, 1977. It is the consideration given at this time for Lot 12 that determines the amount of taxes owed on the transaction. This was an arms length transaction between the Greenes and Brolsma, and the value of the lot was obviously what Brolsma had paid one week previously in an arm's length transaction with Yanow.
Although Exhibit 13 indicates Greene paid Brolsma thirty three thousand three hundred fifteen dollars ($33,315) for the lot, the testimony was that Brolsma sold Lot 12 to Greene for the same sum he had paid. The difference was explained, and later refunded to Greene, by subsequent soil tests showing the land did not require de-mucking, thus eliminating this expense which had been included in the higher price.
In denying Petitioners' application for refund of taxes paid on this deed Respondent relied upon Rule 12B-4.13(22) Florida Administrative Code which provides:
Where corporations engaged in business of land development for residential purposes conduct their operations in conjunction with sister corporations (or even same corporation) engaged in building homes, and one individual is controlling
shareholder and principal officer of all corporations, tax is required on the deeds based upon the total price that home purchaser pays for house and lot and not limited to portion of consideration attributable to the lot. The tax attaches at the time the deed or other instrument of conveyance is delivered irrespective of the time the sale is made or the instrument is recorded. The critical factor is the intention of the parties. (Robert L. Dreher and Robert L. Dreher Construction Co., Inc.
v. Florida Revenue Commission, et al., Circuit Court, Pasco County, Florida; Raccoon Development, Inc. v. U. S. (1968) 391 F. 2d 610)
Here is it first to be noted that Brolsma is not engaged in the business of land development for residential purposes. Such a land developer is one who prepares raw land for residential construction by platting and installing access roads, water and sewer mains so building permits can be issued. Lot 12 was already "developed land" at the time Greene became interested in having a home built thereon.
Petitioner, by the second amended petition, contends that Brolsma acted as agent for Greene or as trustee when he acquired title to the land. However, no evidence was submitted that Greene provided the funds used by Brolsma as an earnest money deposit or to pay Yanow the balance of the purchase price when the deed was executed by Yanow on August 1, 1977.
Nowhere on this deed does Brolsma appear other than as a principal. Nor was any evidence submitted from which a trust relationship between Greene and Brolsma can be established. The only agreement between these parties prior to the deed to Lot 12 being executed by Brolsma was the contract dated July 17, 1977 which stated that Brolsma owned Lot 12. Despite testimony that Greene considered himself to be the owner of Lot 12 when it was acquired by Brolsma, here we are dealing with real property and the Statute of Frauds requires interest in such property to be in writing and signed by the party to be charged.
Finally, even if Brolsma could be found to be in the business of land development for residential purposes and covered by Rule 12B-4.13(22) Florida Administrative Code above quoted, this rule was held invalid in Department of Revenue v. Young American Builders, Case GG-152 filed April 12, 1978 (Fla. 1st DCA).
Respondent cites First Development Corporation of America v. State of Florida, Department of Revenue, affirmed per curium 286 So.2d 233 (Fla. 2DCA 1973) as authority for its position that, where the buyer contracts for the purchase of a house and lot, documentary stamp taxes are required on the total price of house and lot regardless of when the deed is delivered. First Development is distinguishable from the instant case in several respects. Initially, that case involved the sale of a condominium which included common elements and a Declaration of Condominium. Obviously the buyer would not have the privilege of selecting a builder of his choice or of the time schedule for the construction which was included in the contract. Secondly, the seller was a developer as the name implies and the trial court held; and what was being sold
was a unit of this development which was inseparable from the common elements of the condominium. Thus the purchaser could not acquire bare title to the land.
He could only acquire title to the residence. He was required to accept the Declaration of Condominium which could be amended by the seller without consent of the purchaser, "for the purpose of delineating more specifically and precisely the exact location and dimensions of the residence to be constructed hereunder for Purchaser."
The instant case involved the sale of a lot on which a single family residence was to be constructed by a builder as distinguished from a developer, and, at the time title to the property was conveyed to the buyer, no construction had commenced. The buyer could have breached the contract and the builder could not have maintained an action for specific performance. The consideration paid by the buyer at the time the deed was delivered was the value of the lot unencumbered by a residence.
From the foregoing it is concluded that Petitioner is entitled to a refund in the documentary stamp taxes in the amount of three hundred nine dollars and thirty cents ($309.30)(four hundred five dollars ($405) minus ninety-five dollars and seventy cents ($95.70) documentary stamp tax due on thirty one thousand nine hundred dollars ($31,900)) and a refund in the surtax of one hundred thirteen dollars and thirty cents ($113.30)(one hundred forty- eight dollars and fifty cents ($148.50) minus thirty-five dollars and twenty cents ($35.20) surtax due on cash above mortgage). It is therefore
RECOMMENDED that the petition of Sam Greene and Adeline R. Greene for a refund of documentary stamp tax and surtax in the amount of the overpayment noted above be approved.
DONE and ENTERED this 16th day of May, 1978, in Tallahassee, Florida.
K. N. AYERS Hearing Officer
Filed with the Clerk of the Division of Administrative Hearings this 16th day of May, 1978.
Richard P. Zaretsky, Esquire Forum III
Cecil L. Davis, Jr., Esquire Assistant Attorney General The Capitol, Room LL04 Tallahassee, Florida 32304
