STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

HIALEAH, INC. and SOUTHEAST ) FIRST NATIONAL BANK OF MIAMI, )

)

Petitioners, )

)

vs. ) CASE NO. 78-1442

)

DEPARTMENT OF REVENUE, )

)

Respondent. )

)

RECOMMENDED ORDER

This matter came on for hearing in Coral Gables, Florida, before the Division of Administrative Hearings, by its duly designated Hearing Officer, Robert T. Benton, II, on November 20, 1978. The parties were represented by counsel:

APPEARANCES

For Petitioner, Robert C. Ward, Esquire Hialeaha, Inc.: 900 Concord Building

66 West Flagler Street Miami, Florida 33130

For Petitioner, Marc Lipsitz, Esquire Southeast First SOD Southeast First National National Bank Bank Building

of Miami: Miami, Florida 33131

For Respondent: William D. Townsend, Esquire

Assistant Attorney General The Capitol, Room LL04 Tallahassee, Florida 32304

By revised notice of proposed assessment dated July 26, 1978, respondent alleged a documentary tax deficiency in the amount of $13,000.00, together with penalty and interest, on account of a modification and assumption agreement recorded on March 18, 1977.

FINDINGS OF FACT

1. Petitioner Hialeah, Inc. purchased the Hialeah Park Race Track from its previous corporate owner pursuant to an agreement entered into by the parties on November 8, 1976. At the time, the race track was mortgaged to petitioner Southeast First National Sank of Miami (Southeast) and another bank for whom Southeast acted as an agent; and the mortgage was in default. Simultaneously with the acquisition of the race track, at the closing in Miami, Florida, on March 4, 1977, petitioner Hialeah, Inc. executed a modification and assumption agreement by which it became obligated to pay the mortgagees, upon execution of

   the agreement, principal and accrued interest in the amount of $3,724,843.34, thereby reducing the indebtedness secured by mortgage to $9,000,000.00; and to pay the balance by a time later than it had originally been due, together with interest at rates different than had originally been agreed upon. Also at the time of the closing, the parties executed a separate novation agreement, releasing the previous owner of the race track from further liability for the obligations assumed by petitioner Hialeah, Inc.

   
   

   CONCLUSIONS OF LAW

   
   

2. Section 201.08(1), Florida Statutes (1977), levies an excise tax on all written obligations to pay money executed in Florida "on each $100 of the indebtedness or obligation evidenced thereby . . . [at the rate of] 15 cents on each $100 or fraction thereof." Section 201.08(1), Florida Statutes (1977). Implementing this statutory provision, Rule 12B-4.53(19), Florida Administrative Code, makes clear that a written "assumption of mortgage agreement . . . in a transaction whereby the original maker of the note and mortgage is released from the obligation by the original mortgagee" is subject to the tax. Accord, St. Augustine Federal Savings & Loan Ass'n v. Dept. of Revenue, n. 77-974 (DOAH; Rec. Order entered September 17, 1977). As long as the release and assumption are part of the same transaction, it is immaterial that the release and assumption are separate documents. See Maas Brothers, Inc. v. Dickinson, 195 So.2d 193 (Fla. 1967) ("two or more instruments may be construed together" at 194).

   
   

3. A note renewing an existing obligation is exempt from tax when it "only extends or continues the identical contractual obligations of the original promissory note and evidences part or all of the original indebtedness evidenced thereby, not including any accumulated interest thereon . . . [and then only] if such renewal note has attached to it the original promissory note with canceled stamps affixed thereon showing full payment of the tax due thereon." Section 201.09, Florida Statutes (1977). In the present case, included in the sum agreed to be paid upon execution of the modification and assumption agreement is accumulated interest on the original indebtedness. With respect to the balance, contractual obligations in the modification and assumption agreement differ from the original contractual obligations as to rate of interest and time of payment and there is a new debtor. The original promissory note, moreover, has not been attached to the modification and assumption agreement. For these reasons, the modification and assumption agreement falls outside the purview of Section 201.09, Florida Statutes (1977).

RECOMMENDATION

Upon consideration of the foregoing, it is RECOMMENDED:

1. That the revised notice of proposed assessment be upheld.

   
   

2. That respondent make a supplemental assessment to recover the full amount of documentary stamp tax owed on account of execution of the modification and assumption agreement.

DONE and ENTERED this 15th day of December, 1978, in Tallahassee, Florida.

ROBERT T. BENTON, II

Hearing Officer

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

(904) 488-9675

COPIES FURNISHED:

Robert C. Ward, Esquire 900 Concord Building

66 West Flagler Street Miami, Florida 33130

Marc Lipsitz, Esquire

800 Southeast First National Bank Building

Miami, Florida 33131

William D. Townsend, Esquire Assistant Attorney General The Capitol, Room LL04 Tallahassee, Florida 32304

Docket for Case No: 78-001442

Orders for Case No: 78-001442