STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
LANDMARK BANK OF BREVARD, a Banking )
Corporation Organized and Existing ) Under the Laws of the State of ) Florida, formerly LANDMARK BANK ) OF MELBOURNE, N.A., )
)
Petitioner, )
)
vs. ) CASE NO. 79-2262
)
DEPARTMENT OF REVENUE, STATE )
OF FLORIDA, )
)
Respondent. )
)
RECOMMENDED ORDER
Pursuant to notice, a hearing was held before Charles C. Adams, a Hearing Officer with the Division of Administrative Hearings. This hearing was conducted in the Council Chambers, City Hall, 900 East Strawbridge Avenue, Melbourne, Florida, on March 11, 1980.
APPEARANCES
For Petitioner: J. Preston Silvernail, Esquire
Rossetter, Maxwell & Silvernail
268 North Babcock Street Melbourne, Florida 32935
For Respondent: Barbara Staros Harmon, Esquire
Department of Legal Affairs The Capitol, LL04 Tallahassee, Florida 32301
ISSUE
The issue here concerns the propriety of the Respondent, State of Florida, Department of Revenue's assessment of tax under authority of Sections 201.01 and
.08, Florida Statutes, in the amount of $11,557.20 and penalty of $577.86 against the Petitioner, Landmark Bank of Brevard. The specific nature of the assessment is one pertaining to items identified as detachable "Promissory Notes" which are attached to documents entitled "Trust Receipts."
FINDINGS OF FACT
The facts in this case reveal that the Petitioner Landmark Bank of Brevard, hereafter referred to as the "Bank," made loans to several motor vehicle dealers in Brevard County. The borrowers were Carl Schmidt Motors, Inc.; Bennie C. Chapman, who does business as Chapman Auto Sales; and Harley Davidson of Melbourne, Inc.
The arrangements for the loans were on the basis that the dealers would apply with the Bank to receive moneys which would be used to "floor plan" automobiles and motorcycles being sold through their retail outlets. The applications were processed through the loan committee and when the loans were approved a Promissory Note was signed by the appropriate persons acting in behalf of the dealers. (Copies of the notes executed were attached to the Petition for Formal Hearing and acknowledged to be correct through the answer filed in behalf of the Respondent and the notes as attached to the Petition are being provided with this Recommended Order together with those exhibits offered in behalf of the parties.)
The notes allow for the single disbursement of a stated amount of money, with the repayment of principal and payment of interest being due by one payment for which demand is made within a period as short as several months or as long as one year depending on the note conditions. Collateral is provided, according to the terms of the notes, either by the lease and rental autos listed on separate documents entitled "Trust Receipts," which Trust Receipts are held by the Bank or otherwise described as such motor vehicles as were then owned by the dealers at the time the execution of the note or as would thereafter be acquired.
These notes, meaning the initial Promissory Notes, had Documentary Stamps placed and canceled in the monthly journal of the Bank at the time of the execution of the Promissory Notes, in an effort by the Petitioner to comply with Section 201.08, Florida Statutes. The amount of Documentary Stamps utilized was in keeping with the face amount of the loan proceeds reflected on the Promissory Notes. Therefore, when the Promissory Notes are examined an impression is created that a single disbursement of loan proceeds has been made for which Documentary Stamp tax has been collected.
In reality, the arrangement between the dealers and the Petitioner was to the effect that the full amount of the loan proceeds would not be assigned to the account of the dealers upon execution of the note. What would happen, is that the dealers would be allowed to make "draws" against the loan proceeds on the basis of surrendering the title of a used motor vehicle which they had acquired or having the manufacturer of a new motor vehicle submit the Manufacturer's Certificate of Origin to the Bank. In turn, moneys were advanced to the dealer equal to the value of the used unit or commensurate with the amount reflected on the Manufacturer's Certificate of Origin if a new unit. These titles and Manufacturer's Certificates of Origin were held as collateral and the dealers would take possession of the actual vehicles to be placed in the dealer's inventory until a retail purchase had been made.
The vehicles for which the Petitioner had received title or the Manufacturer's Certificate of Origin were then listed on documents called "Trust Receipts." The "Trust Receipts" would show the vehicle description, make, serial number and price as described in the Manufacturer's Certificate of Origin or title. These descriptions were placed on individual "Trust Receipts" based upon the date the evidence of ownership was submitted from the dealer of the Bank. That is to say, if four Manufacturers' Certificates of Origin or titles were submitted to the Bank at one time, then four of the vehicles would be listed on a single "Trust Receipt" as opposed to listing the four new units on a "Trust Receipt" that already had a unit or units listed from another visit by the dealer.
Examples of the various "Trust Receipt" documents may be found in the Respondent's Composite Exhibit 3 admitted into evidence which contains copies of the "Trust Receipt" examples.
The "Trust Receipt" documents had attached to them an item entitled "Promissory Note," which item could be detached from the body of the "Trust Receipt."
Some examples in the Respondent's Composite Exhibit 3 have the "Promissory Note" affixed, reflecting a date and money amount equal to the amount arrived at by totaling the value related to the various units shown in the "Trust Receipt." These examples also list the borrower's name and are signed by Margy Driggers, the Assistant Cashier of the Petitioner. Some are signed by Margy Driggers, with the initials "P.O.A." placed in front of or after her title as Assistant Cashier. One other example is the same as above but without the initials "P.O.A." There is also an example signed by Bennie C. Chapman, one of the dealers who borrowed money. The Chapman example reflects the amount of value shown in the "Trust Receipt," to which the "Promissory Note" is attached and it has a date, but does not reflect the amount of interest to be paid if this is indeed a Promissory Note.
There was another category of "Trust Receipt" and attached "Promissory Note" reflecting motor vehicles for which money had been loaned and this was a type in which no entries had been made on the "Promissory Note"; however, an example of this type was not provided through the Respondent's Exhibit 3.
Both parties acknowledged that the initials "P.O.A." stand for power of attorney. They disagree on the question whether a power of attorney had been granted to the Petitioner to act in behalf of the subject dealers. The Petitioner through its witnesses claim that the designation "P.O.A." is simply an extension of a long standing policy of the Bank which predates the current Assistant Cashier and has no meaning. Therefore, no power of attorney has ever been granted from the dealers to the Bank to execute promissory notes on behalf of the dealers. The Respondent through its auditor, whose investigation led to the assessment in dispute, claims that Margy Driggers, the Assistant Cashier, told him that "P.O.A." means power of attorney and that she had the ability to sign for Carl Schmidt. (Carl Schmidt Motors, Inc.)
None of the dealers were presented in the course of the hearing to state their position on the granting of power of attorney to the Petitioner for purposes of executing the item known as "Promissory Note" attached to the various "Trust Receipts," and there are no written documents which would demonstrate the granting of a power of attorney to the Bank. Moreover, nothing in the original Promissory Notes executed by the dealers leads to the conclusion that the item known as "Promissory Note" attached to the "Trust Receipt" may be executed by a Bank official through power of attorney for the dealer. Consequently, no power of attorney has been shown to be granted from the dealers to Margy Driggers or any other employee of the Petitioner, on the subject of executing "Promissory Notes" attached to the "Trust Receipts."
When the items were filled out, copies of the "Trust Receipts" and attached "Promissory Notes" were forwarded to the several dealers.
When a dealer sold one of the automobiles for which the Petitioner held the title or Manufacturer's Certificate of Origin as security, then the dealer paid an amount equal to that amount reflected in the "Trust Receipt"
document and an entry was made in the date paid column of that document which showed that amount of debt had been satisfied by the dealer.
During the operative period of the initial Promissory Note, meaning that period between the time of the execution of the note and the time the note was due as reflected on the face of the note, the dealer could borrow an amount not to exceed the face amount of the loan proceeds and if some portion of that amount was retired, then an additional amount could be borrowed, which effectively meant that in the active life of the loan as shown by the initial Promissory Note more money could be borrowed during the life of the note than the amount reflected on the face of the Promissory Note. For example, hypothetically the Promissory Note could entitle the dealer to borrow $19,959.00 on May 10, 1976, to be repaid by May 10, 1977. That dealer could then borrow
$19,959.00 between those dates and pay back that amount of money with interest and borrow an additional $5,000.00 to be paid back before the expiration date of the loan and in actuality would have borrowed $24,959.00, ostensibly under the terms and conditions of the initial note.
These additional amounts of loan proceeds cannot be seen by examining the initial Promissory Notes; they can only be discovered by adding the individual amounts reflected in the "Trust Receipts" and comparing the total to what is shown by adding the loan amounts depicted in the initial Promissory Notes. This is in fact what was done by the auditor in conducting the audit and it is the differential between the amounts shown in the "Trust Receipt" aggregate as contrasted to the initial Promissory Note aggregate for which the Respondent claims Documentary Stamp tax is owed.
The Respondent would have the Documentary Stamp tax applied to some combination of the so-called "Promissory Notes" attached to the "Trust Receipts" equal to an amount representing the differential spoken to before.
The Respondent did not establish which "Trust Receipts" with attached "Promissory Notes" would be subject to the assessment of Documentary Stamp tax.
Through this process, the Respondent in its Revised Notice of Assessment is claiming tax of $11,557.20 and a penalty of $557.86. (A copy of this notice may be found as Respondent's Exhibit 4 admitted into evidence.)
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the subject matter and the parties to this action.
The Respondent's claim for tax is promoted under the authority of Sections 201.01 and .08, Florida Statutes.
Section 201.08 imposes a tax on Promissory Notes executed in the state and for the renewal of those notes to the extent of 15 cents on each $100.00 or fraction thereof of the indebtedness or obligation evidenced by the Promissory Note. This provision of taxation is further implemented by Rule 12B-4.51, Florida Administrative Code.
The Documentary Stamp tax imposed under these provisions is a tax on documents, that is to say, an excise tax. See Choctawhatchee Electric Cooperative, Inc. v. Green, 132 So.2d 556 (Fla. 1961). More particularly, the tax relates to a "promise to pay" as described in the Promissory Note document and Rule 12B-4.53(1), Florida Administrative Code, requires that the note or
obligation, here a Promissory Note, and each renewal thereof, be signed by the maker or obligor if the "promise to pay" is to be valid and subject to tax. See Lee v. Quincy State Bank, 173 So. 909 (Fla. 1937).
In considering the detachable "Promissory Notes" affixed to the "Trust Receipt," for which Respondent wishes to assess a Documentary Stamp tax and penalty, clearly those situations in which no signature was entered on the detachable "Promissory Note" are instances in which no Documentary Stamp tax may be assessed because they are missing the requisite signature of the maker or obligor. Ergo, no signature means no "promise to pay" and no tax on the document may be claimed.
The next category of "Promissory Note" attached to the "Trust Receipt" for which the Respondent claims Documentary Stamp tax and penalty is that category in which the Respondent claims that Margy Driggers, Assistant Cashier for the Petitioner, had power of attorney to sign as maker or obligor and is constituted of those subcategories where she signed with the notation "P.O.A." or absent that notation. This power of attorney can only be found when it is expressly given or on those occasions where power of attorney is a necessary incident of the power or authority bestowed on an agent or employee. See Boored
v. Strauss, 22 So.2d 713, 715 (Fla. 1897). On this occasion, the facts do not show any express authority given by the dealers to the Petitioner's employee to act as power of attorney in executing the detachable "Promissory Notes" affixed to the "Trust Receipts," notwithstanding the signature of the Bank employee and attendant indication that she was acting for the dealer through power of attorney. Likewise, none of the facts of this case led to the conclusion that employees of the Petitioner had an implicit power of attorney to act in behalf of the dealers in executing a Promissory Note as a necessary incident of power or authority to administer the loans in question. There being no power of attorney, there is no signature by the maker or obligor and there is no responsibility to pay Documentary Stamp tax on this category of detachable "Promissory Note."
Finally, there is a category of potential Promissory Note contained with "Trust Receipts" in which the dealer has signed the detachable documents entitled "Promissory Note." He has done so by signing the detachment which additionally has a date and amount reflected which is the total of the values placed on the individual motor vehicle units reflected on the "Trust Receipt" to which the "Promissory Note" is attached. This item does not reflect an interest rate for repayment. Nonetheless, it would appear that this is a "promise to pay" signed by the maker who has received proceeds and as such is a proper subject for Documentary Stamp tax. This argument would be convincing but for the fact that it is undetermined what amounts are reflected in this category of detachable "Promissory Note" and where this category fits in the chronology of events related to the execution of the initial Promissory Notes between the Petitioner and dealer in which Documentary Stamp taxes have been paid, premised on the amount of loan proceeds listed in the note; the utilization of "Trust Receipts" and the detachable "Promissory Note" which has been signed by the dealer; and the expiration of the term of the initial Promissory Note. These considerations are crucial because if the situation exists where the full amount of the proceeds reflected in the initial Promissory Note for which Documentary Stamp tax has been paid had not been used at the time that the detachable "Promissory Note" had been signed by the dealer, meaning the amount reflected in the detachable "Promissory Note" signed by the dealer when added to the amount of proceeds borrowed against the initial Promissory Note prior to this signature, did not exceed the amount of proceeds authorized through initial Promissory Note, obviously no Documentary Stamp tax would be due and owing. For
example, the initial Promissory Note would be for $20,000.00; $10,000.00 was then advanced as shown on a "Trust Receipt," followed by $5,000.00 more being advanced and shown on a "Trust Receipt" and detachable "Promissory Note" with dealer's signature bringing the total to $15,000.00 extended. No further tax would be due because the full amount of Documentary Stamp tax would have been paid at the time of the initial execution of the Promissory Note in the amount of $20,000.00. Tax would only be due under the circumstances of the counterpart to this hypothetical wherein it could be shown that during the operative period of the initial Promissory Note for which Documentary Stamp tax had been paid, proceeds were advanced to the dealers over and above the amount of proceeds authorized by the initial Promissory Note and the overages were shown on the "Trust Receipt" with detachable "Promissory Note" signed by the dealer. Again, by way of example, the initial Promissory Note is $20,000.00 and $10,000.00 has been advanced and shown on a "Trust Receipt." This sequence is followed by an
$11,000.00 advance reflected on a "Trust Receipt" with attached "Promissory Note" which had been signed by the dealer, bringing the total amount of advance during the life of the initial Promissory Note to $21,000.00. IN this hypothetical $1,000.00 would be subject to additional Documentary Stamp tax.
The proof offered in this case does not demonstrate which of the hypothetical possibilities had application as it relates to the detachable "Promissory Notes" signed by the dealer and under these circumstances the Respondent may not claim Documentary Stamp tax on the items pursuant to Section 202.08, Florida Statutes. The only Documentary Stamp tax due under the facts related to the Hearing Officer is a tax already paid on the initial Promissory Notes.
It is RECOMMENDED that the proposed assessment for Documentary Stamp tax and penalty made by the Department of Revenue, State of Florida, against the Petitioner, Landmark Bank of Brevard, a banking corporation organized and existing under the laws of the State of Florida, formerly Landmark Bank of Melbourne, N.A., be DISALLOWED. 1/
DONE AND ENTERED this 9th day of April 1980 in Tallahassee, Florida.
CHARLES C. ADAMS
Hearing Officer
Division of Administrative Hearings
101 Collins Building Tallahassee, Florida 32301 (904) 488-9675
Filed with the Clerk of the Division of Administrative Hearings this 9th day of April 1980.
ENDNOTE
1/ The parties in the person of their counsel have submitted Proposed Findings of Fact, Conclusions of Law and Recommendations and these proposals have been reviewed prior to the entry of this Recommended Order. To the extent that these
proposals are consistent with the Recommended Order, they have been utilized. To the extent that they fail to be consistent, they are hereby rejected.
COPIES FURNISHED:
J. Preston Silvernail, Esquire Rossetter, Maxwell & Silvernail
268 North Babcock Street Melbourne, Florida 32935
Barbara Staros Harmon, Esquire Department of Legal Affairs The Capitol, LL04 Tallahassee, Florida 32301
Robert A. Pierce, General Counsel Department of Revenue
Room 104, Carlton Building Tallahassee, Florida 32301
Randy Miller, Executive Director Department of Revenue
Carlton Building Tallahassee, Florida 32301
================================================================= AGENCY FINAL ORDER
=================================================================
STATE OF FLORIDA DEPARTMENT OF REVENUE TALLAHASSEE, FLORIDA
LANDMARK BANK OF BREVARD, a
Banking Corporation Organized and existing Under the Laws of the State of Florida,
formerly LANDMARK BANK OF MELBOURNE, N.A.,
Petitioner, CASE NO. 79-2262
v.
DEPARTMENT OF REVENUE, STATE OF FLORIDA,
Respondent.
/
FINAL ORDER
Pursuant to notice, this matter was presented for consideration by the undersigned Executive Director of the Department of Revenue on June 26, 1980, pursuant to the provisions of Rule 12-3.02 - 3.05, Florida Administrative Code, based upon the Recommended Order entered by the Division of Administrative Hearings, Respondents' Written Exceptions to the Recommended Order and Memorandum of Law in Support of Said Written Exceptions, Respondents' Proposed Substituted Order, Petitioner's Reply to Respondents' Written Exceptions to said Recommended Order and Memorandum of Law in Support of Petitioner's Reply to Respondents' Written Exceptions to the Recommended Order, Petitioner's and Respondent's oral presentations and argument, the Stipulation of Petitioner and Respondent for submission of additional clarifying findings, and jointly submitted additional findings, the parties' joint Stipulations for extension of time pursuant to s. 120.59(1), Florida Statutes, for entry of a Final Order in this cause, and the Transcript of Hearing before the Hearing Officer of the Division of Administrative Hearings.
The undersigned has made a complete review of the entire record in this cause.
FINDINGS OF FACT
In accordance with s. 120.57(1)(b)(g), Florida Statutes, the Respondent, Department of Revenue, accepts most of the findings of fact made by the Hearing Officer, rejects others as such "findings of fact" are actually erroneous conclusions of law or are not supported by competent substantial evidence, after a review of the complete file having been made. These rejected findings of modifications of such findings will be stated with particularity and/or explained within the context of the findings of fact in this order.
The facts in this case reveal that the Petitioner, Landmark Bank of Brevard, hereafter referred to as the "Bank", made loans to several motor vehicle dealers in Brevard County. The borrowers were Carl Schmidt Motors, Inc.: Bennie C. Chapman, who does business as Chapman Auto Sales; and Harley Davidson of Melbourne, Inc.
The arrangements for the loans were on the basis that the dealers would apply with the bank to receive moneys which would be used to "floor plan" automobiles and motorcycles being sold through their retail outlets. The applications were processed through the loan committee and when the loans were approved a Promissory Note was signed by the appropriate persons acting in behalf of the dealers. (Copies of the notes executed were attached to the Petition for Formal Hearing and acknowledged to be correct through the answer filed in behalf of the Respondent and the notes as attached to the Petition were provided with the Recommended Order together with those exhibits offered in behalf of the parties.)
The notices allow for the single disbursement of a stated amount of money, with the repayment of principal and payment of interest being due by one payment for which demand is made within a period as short as several months or as long as one year depending on the note conditions. Collateral is provided, according to the terms of the notes, either by the lease and rental autos listed on separate documents entitled "Trust Receipts", which Trust Receipts are held by the Bank or otherwise described as such motor vehicles as were then owned by the dealers at the time the execution of the note or as would thereafter be acquired.
These notes, meaning the initial Promissory Notes, had Documentary Stamps placed and canceled in the monthly journal of the Bank at the time of the execution of the Promissory Notes, in an effort by the Petitioner to comply with
201.08, Florida Statutes. The amount of Documentary Stamps utilized was in keeping with the face amount of the loan proceeds reflected on the Promissory Notes. Therefore, when the Promissory Notes are examined an impression is created that a single disbursement of loan proceeds has been made for which Documentary Stamp tax has been collected.
In reality, the arrangement between the dealers and the Petitioner was to the effect that the full amount of loan proceeds would not be assigned to the account of the dealers upon execution of the note. What would happen, is that the dealers would be allowed to make "draws" against the loan proceeds on the basis of surrendering the title of a used motor vehicle which they had acquired or having the manufacturer of a new motor vehicle submit the Manufacturer's Certificate of Origin to the Bank. In turn, moneys were advanced to the dealer equal to the value of the used unit or commensurate with the amount reflected on the Manufacturer's Certificate of Origin if a new unit. These titles and Manufacturer's Certificates of Origin were held as collateral and the dealers would take possession of the actual vehicles to be placed in the dealer's inventory until a retail purchase had been made.
The vehicles for which the Petitioner had received title or the Manufacturer's Certificate of Origin were then listed on documents called "Trust Receipts". The "Trust Receipts" would show the vehicle description, make, serial number and price as described in the Manufacturer's Certificate of Origin or title. These descriptions were placed on individual "Trust Receipts" based upon the date the evidence of ownership was submitted from the dealer of the Bank. That is to say, if four Manufacturers' Certificates of Origin or titles were submitted to the Bank at one time, then four of the vehicles would be listed on a single "Trust Receipt" as opposed to listing the four new units on a "Trust Receipt" that already had a unit or units listed from another visit by the dealer.
Examples of the various "Trust Receipt" documents may be found in the Respondent's Composite Exhibit 3 admitted into evidence which contains copies of the "Trust Receipt" examples.
The "Trust Receipt" documents had attached to them an item entitled "Promissory Note", which item could be detached from the body of the "Trust Receipt".
Some examples in the Respondent's Composite Exhibit 3 have the "Promissory Note" affixed, reflecting a date and money amount equal to the amount arrived at by totaling the value related to the various units shown in the "Trust Receipt". These examples also list the borrower's name and are signed by Margy Driggers, the Assistant Cashier of the Petitioner. Some are signed by Margy Driggers, with the initials "P.O.A." placed in front of or after her title as Assistant Cashier. One other example is the same as above but without the initials "P.O.A." There is also an example signed by Bennie C. Chapman, one of the dealers who borrowed money. The Chapman example reflects the amount of value shown in the "Trust Receipt", to which the "Promissory Note" is attached and it has a date, but does not reflect the amount of interest to be paid if this is indeed a Promissory Note.
The hearing officer's findings that there was another category of "Trust Receipt" and attached "Promissory Note" reflecting motor vehicles for which there had been entries on the "Promissory Notes" is modified to make it clear that such unsigned notes were not made part of the assessment by Respondent and were not at issue in this cause.
Both parties acknowledged that the initials "P.O.A." stand for power of attorney. They disagree on the question whether a power of attorney had been granted to the Petitioner to act in behalf of the subject dealers. The Petitioner through its witnesses claim that the designation "P.O.A." is simply an extension of a long standing policy of the Bank which pre-dates the current Assistant Cashier and has no meaning. Therefore, no power of attorney has ever been granted from the dealers to the Bank to execute Promissory Notes on behalf of the dealers. The Respondent through its auditor, whose investigation led to the assessment in dispute, claims that Margy Driggers, the Assistant Cashier, told him that "P.O.A." means power of attorney and that she had the ability to sign for Carl Schmidt. (Carl Schmidt Motors, Inc.)
None of the dealers were presented in the course of the hearing to state their position on the granting of power of attorney to the Petitioner for purposes of executing the item known as "Promissory Note" attached to the various "Trust Receipts", and there are no written documents which would demonstrate the granting of a power of attorney to the Bank. Moreover, nothing in the original Promissory Notes executed by the dealers leads to the conclusion that the item known as "Promissory Note" attached to the "Trust Receipt" may be executed by a Bank official through power of attorney for the dealer.
Consequently, no power of attorney has been shown to be granted from the dealers to Margy Driggers or any other employee of the Petitioner, on the subject of executing "Promissory Notes" attached to the "Trust Receipts."
When the items were filled out, copies of the "Trust Receipts' and attached "Promissory Notes" were forwarded to the several dealers.
When a dealer sold one of the automobiles for which the Petitioner held the title or Manufacturer's Certificate of Origin as security, then the dealer paid an amount equal to that amount reflected in the "Trust Receipt" document and an entry was made in the date paid column of that document which showed that amount of debt had been satisfied by the dealer.
During the operative period of the initial Promissory Note, meaning that period between the time of the execution of the note and the time the note was due as reflected on the face of the note, the dealer could borrow an amount not to exceed the face amount of the loan proceeds and if some portion of that amount was retired, then an additional amount could be borrowed, which effectively meant that in the active life of the loan as shown by the initial Promissory Note more money could be borrowed during the life of the note than the amount reflected on the face of the Promissory Note. For example, hypothetically the Promissory Note could entitle the dealer to borrow $19,959.00 on May 10, 1976, to be repaid by May 10, 1977. That dealer could then borrow
$19,959.00 between those dates and pay back that amount of money with interest and borrow an additional $5,000.00 to be paid back before the expiration date of the loan and in actuality would have borrowed $24,959.00, ostensibly under the terms and conditions of the initial note.
These additional amounts of loan proceeds cannot be seen by examining the initial Promissory Notes; they can only be discovered by adding the individual amounts reflected in the "Trust Receipts" and comparing the total to what is
shown by adding the loan amounts depicted in the initial Promissory Notes. This is in fact what was done by the auditor in conducting the audit and it is the differential between the amounts shown in the "Trust Receipt" aggregate as contrasted to the initial Promissory Note aggregate for which the Respondent claims Documentary Stamp tax is owed.
The Respondent would have the Documentary Stamp tax applied to some combination of the so-called "Promissory Notes" attached to the "Trust Receipts" equal to an amount representing the differential spoken to before.
The parties stipulated at the hearing before the Division of Administrative Hearings that if there was a determination made that there was a distinction between the taxability of promissory notes attached to the trust receipts signed by the dealers and those signed by the bank officials, the actual calculations of documentary stamp taxability under either or both would be mutually determined by the parties after the taxability issue was determined. The hearing officer in this Findings of Fact in the Recommended Order found that the Respondent did not establish which "Trust Receipts" with attached "Promissory Notes" would be subject to the assessment of Documentary Stamp tax. This finding, after review of the complete record, is not based on competent substantial evidence in light of the stipulation of the parties as previously noted, and the testimony of the auditor at pages 55-63 of the Transcript of Hearing before the Hearing Officer establishing which notes were subject to assessment. Further, this finding is a legal conclusion, not a finding of fact.
Through this process, the Respondent in its Revised Notice of Assessment is claiming tax of $11,557.20 and a penalty of $557.86. (A copy of this notice was introduced into evidence as Respondent's Exhibit 4.)
CONCLUSIONS OF LAW
The Division of Administrative Hearings had jurisdiction over the subject matter and the parties to this action.
The undersigned has the authority to enter this final order pursuant to provisions of Rule 1203.02 - 3.05, Florida Administrative Code.
The Respondent's claim for tax is promoted under the authority of ss.
201.01 and .08, Florida Statutes.
Chapter 201, Florida Statutes, imposes an excise tax on certain documents.
Specifically, s. 201.08, Florida Statutes, imposes a tax on promissory notes executed in this state and for each renewal of the same. Additionally, Rule 12B-4.51, Florida Administrative Code, mirrors the language of s. 201.08, Florida Statutes. And Rule 12B-4.53, Florida Administrative Code, requires a tax on "promises to pay" which are signed by the maker or obligor.
The two types of promissory notes at issue in this cause are signed notes attached to trust receipts. Unsigned promissory notes attached to trust receipts are not included in the assessment at issue. One category of promissory note, included within the assessment, consists of those notes attached to trust receipts which were signed by dealers. The other category consists of promissory notes attached to trust receipts which were signed by bank personnel followed by the notation P.O.A.
The signed notes read as follows," on demand, the undersigned . . . promises to pay to the order of Landmark Bank of Brevard, at . . . Melbourne,
Florida . . ."(e.s.). These notes when signed constitute a promise to pay which is subject to tax as a second promise to pay, that is in addition to the first promise to pay, the original promissory note establishing a maximum line for borrowing.
The documentary stamp tax at issue herein is a tax on documents, that is to say an excise tax. See Choctawatchee Electric Cooperative, Inc., v. Green, 132 So.2d 556 (Fla. 1961). More particularly, the tax relates to a "promise to pay" as described in the promissory note document and Rule 12B-4.53(1), Florida Administrative Code, requires that the note or obligation, here a promissory note, and each renewal thereof, be signed by the maker or obligor if the "promise to pay" is to be valid and subject to tax. See Lee v. Quincy State Bank, 173 So.2d 909 (Fla. 1937).
Attorney General's Opinion 059-44 discussed the question of what documents used in connection with motor vehicle dealer financing are subject to documentary stamp taxes. The Opinion stated that the original promissory note, not the trust receipt, was subject to taxation. However, the Opinion indicated that any additional note would also be subject to taxation.
"The obligation to pay is evidenced by the written financial arrangements and the promissory note and not the trust receipts or the customer's check . . . The trust receipts, not being written obligations to pay but merely security agreements given to secure the line of credit established under the written financial arrangement and promissory note, are not written
obligations to pay money, and unless notes, other than the original one given in connection with the establishment of the line of credit, are made, executed, and delivered, there would seem to be no tax due, except on the obligation upon which the line of credit was based. (e.s.)
The first category of promissory notes at issue is that category in which the notes were signed by bank employees with the notation of P.O.A. The notation of P.O.A. has been established as indicating Power of Attorney, but conflicting evidence was submitted as to the existence of such a power of attorney between the dealer and the employees of the bank. As the Hearing Officer found, there was not sufficient evidence presented to establish that such a power of attorney did exist, the notes would have been taxable, however, the petitioner has effectively carried its burden of proof and these notes are determined not to be subject to taxation under the applicable provisions of Chapter 201, Florida Statutes.
The second category of promissory notes at issue herein is those notes attached to trust receipts which were signed by the dealer or its' authorized agents. These promises to pay are properly subject to documentary stamp tax. In the situation where the full amount of the proceeds reflected in the initial promissory note for which documentary stamp tax had been paid but had not been
used at the time that the detachable "Promissory Note" was signed by the dealer, (meaning the amount reflected in the detachable "Promissory Note" signed by the dealer when added to the amount of proceeds borrowed against the initial Promissory Note prior to this signature) did not exceed the amount of proceeds
authorized through the initial Promissory Note, no documentary stamp tax would be due and owing on the detachable promissory note attached to the trust receipt, in that the full amount of documentary stamp tax would have been paid at the time of the execution of the initial "Promissory Note" and the second promise to pay. Tax, however, would be due in the circumstances where during the operative period of the initial promissory note for which documentary stamp tax had been paid, proceeds were advanced to the dealers over and above the amount of proceeds authorized by the initial Promissory Note. Those promissory notes attached to trust receipts signed by the dealer or its authorized agents after the amount evidenced by the initial promissory note had already been advanced to the dealer are subject to tax. These notes are promises to pay above the amount upon which documentary stamp tax had been paid vis-a-vis the initial promissory notes.
In that the parties have stipulated that the dollar amount of tax liability would be determined after the legal issues were determined in this cause, if there was a distinction made between those promissory notes attached to the trust receipts signed by bank personnel and those signed by the dealer, it is determined that documentary stamp tax liability rendering interest and penalty applicable thereto exists and shall attach to those detachable promissory notes attached to the trust receipts signed by the dealer as previously described, but not to those detachable promissory notes attached to the trust receipts signed by bank personnel. The parties shall, therefore, determine the dollar amount of said taxability pursuant to the above noted stipulation. The parties have, pursuant to stipulation, attendant to the hearing of the matter before the undersigned, submitted certain stipulated listings of trust receipts which attempts to set forth the specific categories of notes previously specified herein. Said listing appears to be incomplete and pursuant to the stipulation of the parties at the hearing before the hearing officer, the particulars of those documents subject to tax under this determination shall be controlled by said stipulated entered before the hearing officer.
The assessment at issue and interest and penalties attendant thereto is affirmed in part and reversed in part.
DONE AND ENTERED this 15th day of August, 1980.
RANDY MILLER EXECUTIVE DIRECTOR DEPARTMENT OF REVENUE STATE OF FLORIDA
| Issue Date | Proceedings |
|---|---|
| Aug. 20, 1980 | Final Order filed. |
| Apr. 09, 1980 | Recommended Order sent out. CASE CLOSED. |
| Issue Date | Document | Summary |
|---|---|---|
| Aug. 15, 1980 | Agency Final Order | |
| Apr. 09, 1980 | Recommended Order | Disallow tax on detachable promissory notes held by bank. There was no proof which of the hypotheticals would apply to the situation. |
