Judges: STEPHEN F. DEAN
Agency: Department of Financial Services
Latest Update: Sep. 12, 1978
Summary: Sale of an option on realty not taxable because it doesn't convey a real property interest, unlike contract for purchase and agreement for deed.
78-1069.PDFSTATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
ROBERT M. MENKE, )
)
Petitioner, )
)
vs. ) CASE NO. 78-1069
) OFFICE OF THE COMPTROLLER, STATE ) OF FLORIDA, AND DEPARTMENT OF ) REVENUE, STATE OF FLORIDA, )
)
Respondent. )
)
RECOMMENDED ORDER
This case was forwarded by the Department of Revenue to the Division of Administrative Hearings in order that a formal hearing could be conducted based upon Petitioner's request for such a hearing pursuant to the provisions of Section 120.57, Florida Statutes. Thereafter, the Department of Revenue filed its answer admitting all the essential factual allegations in the petition. The parties then stipulated to the facts as stated in his amended petition and admitted by the Respondent, and submitted the matter for determination without hearing. The parties further stipulated to the filing of briefs on or before September 5, 1978.
APPEARANCES
For Petitioner: G. Kristin Delano, Esquire
Post Office Box 180
St. Petersburg, Florida 33731
For Respondent: Maxie Broome
Assistant Attorney General Department of Legal Affairs The Capitol
Tallahassee, Florida 32304 FINDINGS OF FACT
The agencies affected by the petition are the Office of the Comptroller and the Department oil Revenue.
On December 15, 1977, Petitioner sold a portion of an option to purchase real property (having previously purchased said option from Seaboard Coast Line Railroad Company, the optionor) consisting of (two) lots located within the legal description of the option to the Great Atlantic & Pacific and Tea Company, for a sum of $342,426.50.
The Department of Revenue, State of Florida, expressed the opinion that the Petitioner would be required to affix to the bill of sale transferring a partial interest in the option documentary stamps in the amount of $1,027.50 and
surtax stamps in the amount of $376.75. The Petitioner paid these taxes and the stamps were attached to the document, whereupon a refund was sought.
A copy of the bill of sale and a copy of the option to purchase which are the subject of the controversy are attached as Exhibit A and Exhibit B respectively and thereby made a part of the record of this proceeding.
The issue presented is whether or not the option to purchase is an interest in real property and the sale of the option a transfer of an interest in real property subject to the taxes sought to be recovered.
On April 3, 1978, the Petitioner did file with the Department of Revenue, State of Florida, a claim for refund for the surtaxes paid and a claim for refund for the documentary taxes paid. Copies of these claims for refund are made a part of this record.
The Petitioner's claim for refund was denied by letter of the Office of the Comptroller, State of Florida, dated May 15, 1978. A copy of this letter is made a part of the record.
There are no other facts needed for determination of the legal issue involved in the controversy existing between the Petitioner and the Respondent.
The stipulation entered into by the parties is accepted and the Petitioner and Respondents have filed their legal briefs which have been fully considered.
CONCLUSIONS OF LAW
The taxes assessed were documentary stamp taxes and surtax stamp taxes levied pursuant to the provisions of Section 201.02 and Section 201.021, Florida Statutes. The document taxed was the bill of sale, Exhibit A. The issue presented is whether the bill of sale conveyed an interest in real property. Determination of this issue turns upon a factual determination of who effect of the option to purchase (Exhibit B)
The option to purchase, Exhibit B, has been examined and it constitutes a pure option, not a contract for purchase and sale. The option to purchase provides that the optionor grants an option to purchase certain real property for a stated price to the optionee, who is the Petitioner in this cause. The option recites a period of time the option is to be held open and the consideration paid by the optionee for the option. The option to purchase does not contain any promise by the optionee to purchase the property.
The Respondent asserts that the tax is due on the basis of Department of Revenue v. Mesmer, 345 So.2d 384, in which the court held that the taxes levied pursuant to Section 201.02 and 201.021, Florida Statutes, were due because of the conveyance of a contract for sale and purchase. The court found that the doctrine of equitable conversion created an interest in property in the vendee who subsequently sold the contract for sale and purchase. In support of application of the doctrine of equitable conversion the court referenced the cases of Arko Enterprises, Inc. v. Wad, 185 So.2d 732; H & L Land Co., Inc. v. Warner, 258 So.2d 293; In Re: Estate of Sweet, 254 So.2d 562; Hull v. Maryland Casualty Co., 79 So.2d 517; and Michaels v. Albert Pick and Co., 30 So.2d 493. Equitable conversion is an equitable theory whereby the legal and equitable title to real property are severed and equitable title deemed to have vested in the beneficial owner while legal title is retained in another. The doctrine is
applied to prevent injustice. To establish a conversion, the direction to convert the real property to personalty or personalty to real property must be positive and explicit. There must be an absolute direction to convert, irrespective of all contingencies and independent of all discretion. The doctrine becomes operative upon execution of an agreement to convey title to realty. However, an option lacks the definiteness needed for the doctrine to operate because the optionee has no obligation to purchase, only the right to, if he elects. Therefore, an optionee, unlike a vendee, cannot become the beneficial holder of vendor's equitable interest. Section 12 Fla. Jur., Equitable Conversion, Subsections 2, 4, and 6.
In the cases cited above there existed an underlying contract for purchase and sale or an agreement for deed consisting of mutual promises to sell and to purchase real property. As stated above, such mutual promises are necessary to establish a contract for sale and purchase which is necessary to establish definiteness regarding the conveyance of property. It is important to note that in an option, such as the one in the instant case, there exist no promise to purchase. The owner-optionor promises to hold an offer to sell open, generally in return for a stated consideration. However, there is no promise to purchase. Therefore, an option lacks definiteness and is contingent upon the optionee's decision to purchase. The doctrine of equitable conversion cannot be applied, and therefore, the optionee did not hold an interest in real property.
The Respondent argues that the bill of sale (Exhibit A) is the document which is taxes, and that present consideration was paid for the option. This may be, however, it is hornbook law that the seller may not convey more than he has. If the optionee-taxpayer did not possess an interest in real property under the option, he could not convey an interest in real property through the bill of sale. Therefore, although the bill of sale may transfer a valuable right, it does not convey an interest in land and is therefore not taxable under the provisions of Section 201.02 and 201.021, Florida Statutes.
RECOMMENDATION
Based on the foregoing findings of fact and conclusions of law the Hearing Officer recommends that the office of the Comptroller and the Department of Revenue honor the claims for refund of the documentary stamp taxes in the amount of $1,027.50 and the surtax stamp taxes in the amount of $376.75, refunding these amounts to the Petitioner.
DONE AND ORDERED this 12th day of September, 1978 in Tallahassee, Florida.
STEPHEN F. DEAN, Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304
(904) 488-9675
COPIES FURNISHED:
Maxie Broome
Assist Attorney General Department of Legal Affairs
The Capitol
Tallahassee, Florida 32304
G. Kristin Delano, Esquire Post Office Box 180
St. Petersburg, Florida 33731
Docket for Case No: 78-001069
Orders for Case No: 78-001069
| Issue Date |
Document |
Summary |
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Sep. 12, 1978 |
Recommended Order
|
Sale of an option on realty not taxable because it doesn't convey a real property interest, unlike contract for purchase and agreement for deed.
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