STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

CHICAGO TITLE COMPANY, )

)

Petitioner, )

)

vs. ) CASE NO. 86-4955

) OFFICE OF THE COMPTROLLER, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, William J. Kendrick, held a public hearing in the above-styled case on April 13, 1987, in Tallahassee, Florida.

APPEARANCES

For Petitioner: Warren R. Tranzenfeld, Esquire

Kirkpatrick & Lockhart 1428 Brickell Avenue Forth Floor

Miami, Florida 33131

For Respondent: D. Alan Burns, Esquire

Department of Legal Affairs Tax Section, Capitol Building

Tallahassee, Florida 32399-1050 PRELIMINARY STATEMENT

At issue in this proceeding is whether a second amendment to mortgage and security agreement tendered for recording by Petitioner, Chicago Title Company, is exempt from the excise tax imposed by Section 201.08, Florida Statutes.

At hearing, the parties stipulated that the above-styled case be heard on a stipulated statement of facts, which would be subsequently filed with the Division of Administrative Hearings. The parties' stipulated statement of facts was filed June 8, 1987.

Petitioner and Respondent have submitted proposed findings of fact and conclusions of law. The parties' proposals have been addressed in the Appendix to this Recommended Order.

STIPULATED FACTS

By stipulation filed June 8, 1987, the parties agreed to the following facts:

1. On February 2, 1981, a Mortgage and Security Agreement was signed by the proper corporate officers of SNW Corp. (SNW"), PNW Corp. ("PNW"), and KNW Corp. ("KNW"), all Florida corporations securing a Note in the amount of

   $22,000,000.00 upon which documentary and intangible taxes were paid.

   
   

2. On October 1, 1903, an Amendment to the Mortgage was signed by the appropriate corporate officers of SNW, PNW and KNW. No documentary stamps were affixed to this document.

   
   

3. On March 13, 1986, a Second Amendment to Mortgage and Security Agreement (the "Second Amendment") was signed by the appropriate corporate officers of SNW, PNW, KNW, and Kenneth Wolofsky, Individually and as Trustee. The Second Amendment refers to the Mortgage and was intended to "secure that certain Renewal Note" from SNW, PNW and KNW in the amount of $10,000,000.00. The Renewal Note was executed by Kenneth Wolofsky solely in his corporate capacity on behalf of KNW not individually or as trustee.

   
   

4. Petitioner, Chicago Title Company, was acting in its capacity as agent for the borrowers and was responsible for having the Second Amendment to Mortgage and Security Agreement dated March 13, 1986, recorded.

   
   

5. Documentary stamps were paid under protest upon recordation of the Second Amendment in the amount of $16,125.00.

   
   

6. Petitioner filed an Application for Refund from the State of Florida for the documentary stamps paid on the Second Amendment which was denied by the Comptroller of the State of Florida. Thereafter, the Petitioner sought an administrative hearing.

   
   

   CONCLUSIONS OF LAW

   
   

7. The Division of Administrative Hearings has jurisdiction over the parties to, and the subject matter of, these proceedings.

   
   

8. Pertinent to this case, Section 201.08, Florida Statutes, provides:

   
   

   Tax on promissory or nonnegotiable notes, written obligations to pay money, or assignments of wages or other compensation ...

   
   

   1. On promissory notes, non- negotiable notes, written obligations to pay money, or assignments of salaries, wages or other compensation made, executed, delivered, sold, transferred, or assigned in the state, and for each renewal of the same, the tax shall be 15 cents on each $100 or fraction thereof of the indebt- edness or obligation evidenced thereby. On mortgages, trust deeds, security agreements, or other evidences of indebtedness filed or recorded in this state, and for each renewal of the same,

      the tax shall be 15 cents on each

      $100 or fraction thereof of the indebtedness or obligation evi- denced thereby ... When there is both a mortgage, trust deed, or security agreement and a note, certificate of indebtedness, or obligation, the tax shall be paid on the mortgage, trust deed, or security agreement at the time of recordation. A notation shall be made on the note, certificate of indebtedness, or obligation that the tax has been paid and the proper stamps affixed to the mortgage, trust deed, or security agreement....

      
      

9. The Second Amended Mortgage and Security Agreement dated March 13, 1986, (the renewal mortgage) is a mortgage securing a written obligation to pay money (the renewal note), and is taxable in accordance with Section 201.108(1) unless exempted under the provisions of Section 201.09, Florida Statutes. Second 201.09 provides:

   
   

   Renewal of existing promissory notes and mortgages; exemption. --

   
   

   1. When any promissory note is given in renewal of any existing promissory note, which renewal note 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 without enlargement in any way of the original contract and obligation, such renewal note shall not be subject to taxation under this chapter 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.

      
      

   2. When any mortgage, trust deed, security agreement, or other evidence of indebtedness evidences a promissory note which would not be subject to taxation pursuant to subsection (1), then such mortgage, trust deed, security agreement, or other evidence of indebtedness shall not be subject to taxation under this chapter.

10. Respondent, Office of the Comptroller (Comptroller), asserts that the exemption afforded renewal notes and mortgages under Section 201.09 is not available to Petitioner. The Comptroller suggests that, even though there was no material change between the terms of the original note and the renewal note, the addition of Kenneth Wolofsky, individually and as trustee, as a mortgagor on the renewal mortgage takes the transaction outside the exemption provided by Section 201.09. The Comptroller's argument is unpersuasive.

    
    

11. The tax imposed by Section 201.08, Florida Statutes, is levied on a written obligation to pay money, not on a security interest. Under the provisions of Section 201.09(2), a security interest (mortgage) is not subject to taxation if the written obligation to pay money (promissory note) is exempt from the tax. Therefore, whether the transaction is exempt is dependent upon whether there was any material change in the promissory note and the renewal note, and not whether there was any material change in the mortgage. Since, in the instant case, there was no material change between the original promissory note and the renewal note, it follows that the subject transaction is exempt from the tax levied by Section 201.08, Florida Statutes.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED:

That Petitioner's request for refund in the sum of $16,125.00 be GRANTED. DONE AND ORDERED this 10th day of June, 1987, in Tallahassee, Florida.

WILLIAM J. KENDRICK

Hearing Officer

Division of Administrative Hearings The Oakland Building

2900 Apalachee Parkway

Tallahassee, FL 32399-1550

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 10th day of June, 1987.

APPENDIX

Petitioner's proposed findings of fact 1-6 are addressed in paragraphs 1-6, respectively. Respondent's proposed findings of fact 1-6 are addressed in paragraphs 1-6, respectively.

COPIES FURNISHED:

Warren R. Tranzenfeld, Esquire Kirkpatrick & Lockhart

1428 Brickell Avenue Forth Floor

Miami, Florida 33131

1. Alan Burns, Esquire Department of Legal Affairs Tax Section, Capitol Building

   Tallahassee, Florida 32399-1050

   
   

   Honorable Gerald Lewis Comptroller, State of Florida The Capitol

   Tallahassee, Florida 32399-0305

   
   

   =================================================================

   AGENCY FINAL ORDER

   =================================================================

   
   

   STATE OF FLORIDA OFFICE OF THE COMPTROLLER

   
   

   In Re: ADMINISTRATIVE PROCEEDING NUMBER: 610-A&A-11/86

   CHICAGO TITLE CO.,

   Application for Tax Refund DOAH CASE NO. 86-4955 under Section 215.20, Florida

   Statutes,

   Petitioner.

   /

   
   

   FINAL ORDER

   
   

   The undersigned, Gerald Lewis, as Comptroller of the State of Florida (the Comptroller) being authorized and directed to administer and supervise the refund of monies paid into the State Treasury as provided by Section 215.26, Florida Statutes, upon due consideration of the subject matter and being otherwise fully advised in the premises, hereby approves the application of CHICAGO TITLE Co. (the Petitioner) for a refund of documentary stamp taxes paid in the amount of $16,125.00 with the recording of a second amendment to mortgage agreement securing a renewal note and in support thereof would state as follows.

   FINDINGS OF FACT

   
   

   1. On May 8, 1986, Petitioner filed with the Department of Revenue, as agent for the Comptroller, an application for documentary stamp tax refund in the amount of $16,125.00.

      
      

   2. Subsequently, the Department of Revenue recommended that the application be denied and on November 24, 1986, the Comptroller issued an Order denying the application.

      
      

   3. Thereafter Petitioner duly requested an Administrative Hearing pursuant to the provisions of Chapter 120, Florida Statutes, and such hearing was duly conducted by William J. Kendrick, Hearing Officer for the Division of Administrative Hearings, on April 13, 1987, in Tallahassee, Florida.

      
      

   4. On June 10, 1987, Hearing Officer Kendrick issued his Recommended Order in which he separately stated Findings of Fact and Conclusions of Law and recommended that the application be approved. Copies of that Recommended Order have been furnished to all parties. Petitioner has filed no exceptions to the Recommended Order as of the date hereof, however, the Assistant Attorney General, representing the Comptroller in this matter, has filed exceptions to paragraph 5 of the hearing officer's Conclusions of Law which reads as follows.

      
      

      The tax imposed by Section 201.08, Florida Statutes, is levied on a written obligation to pay money, not on a security interest. Under the provisions of Section

      201.09(2), a security interest (mortgage) is not subject to taxation if the written obliga- tion to pay money (promissory note) is exempt from the tax. Therefore, whether the transac- tion is exempt is dependent upon whether there was any material change in the promissory note and the renewal note, and not whether there as any material change in the mortgage. Since, in the instant case, there was no material change between the original promissory note and the renewal note, it follows that the subject transaction is exempt from the tax levied by Section 201.08, Florida Statutes.

      
      

   5. The Findings of Fact as determined by the Hearing Officer were by stipulated agreement of the parties filed with the hearing officer on June 8, 1987. Those findings are adopted as the Findings of Fact for this Order and were as follows:

      
      

      1. On February 2, 1981, a Mortgage and Security Agreement was signed by the proper corporate officers of SNW Corp. ("SNW"), PNW Corp ("PNW"), and KNW Corp. ("KNW"), all Florida Corporations securing a Note in the amount of $22,000,000.00 upon which documen- tary and intangible taxes were paid.

      2. On October 1, 1983, an Amendment to the Mortgage was signed by the appropriate corporate officers of SNW, PNW AND KNW. No documentary stamps were affixed to this

         document.

      3. On March 13, 1986, a Second Amend-

         ment to Mortgage and Security Agreement (the "Second Amendment") was signed by the appro- priate corporate officers of SNW, PNW, KNW, and Kenneth Wolofsky, Individually and as Trustee. The Second Amendment refers to the Mortgage and was intended to "secure that certain Renewal Note" from SNW, PNW AND KNW in the amount of $10,000,000.00. The Renewal Note was executed by Kenneth Wolofsky solely in his corporate capacity on behalf of KNW not individually or as trustee.

      4. Petitioner, Chicago Title Company,

         was acting in its capacity as agent for the borrowers and was responsible for having the Second Amendment to Mortgage and Security Agreement dated March 13, 1986, recorded.

      5. Documentary stamps were paid under protest upon recordation of the Second Amend- ment in the amount of $16,125.00.

      6. Petitioner filed an Application for Refund from the State of Florida for the documentary stamps paid on the Second Amend- ment which was denied by the Comptroller of the State of Florida. Thereafter, the Peti- tioner sought an administrative hearing.

         
         

         CONCLUSIONS OF LAW

         
         

   6. The Conclusions of Law as set forth by the hearing officer in his Recommended Order are adopted as the Conclusions of Law of this Final Order. Fundamentally, the hearing officer has concluded that even though there was a change in the terms and conditions of the second amendment to the mortgage agreement there was no change in the terms and conditions of the renewal note secured by that mortgage. (See Stipulation Agreement) Consequently, since the renewal note was exempt from further documentary stamp tax under the provisions of Section 201.09(1), Florida Statutes, as a necessary corollary the mortgage agreement was also exempt from such tax under Section 201.09(2), Florida Statutes, despite any changes which may have been made in the terms and conditions of such security instrument.

      
      

   7. The exception to paragraph 5 of the hearing officer's Conclusions of Law is based on the provisions of Section 201.08, Florida Statutes, which imposes this tax on all written obligations to pay money and on mortgages, trust deeds and security agreements. The statute is somewhat ambiguous in that it is not clear whether the tax is payable on both a promissory note and the mortgage used to secure such note where separate documents are used. However, in this case a renewal note and mortgage were used. Consequently, this case falls squarely within the exemption from the tax provided by Section 201.09, Florida Statutes. The exception is therefore not well taken.

FINAL ORDER

BASED UPON THE foregoing Findings of Fact and Conclusions of Law, it is: ORDERED that the application for documentary stamp tax refund of CHICAGO

TITLE Co. in the amount of $16,125.00 is hereby approved and the Department of Banking and Finance is directed to make such refund upon receipt of proper vouchers and such other supporting documents from the Department of Revenue.

DONE AND ORDERED at Tallahassee, Florida this 3rd day of September, 1987.

GERALD LEWIS, as Comptroller of the State of Florida and Head of the Department of Banking and Finance

COPIES FURNISHED:

William J. Kendrick, Hearing Officer Division of Administrative Hearings 2009 Apalachee Parkway

Tallahassee, Florida 32399-1550

D. Alan Burns, Esquire Assistant Attorney General Department of Legal Affairs Tax Section, Capital Building

Tallahassee, Florida 32399-1550

Warren R. Tranzenfeld, Esquire Kirkpatrick & Lockhart

1428 Brickell Avenue, Fourth Floor Miami, Florida 33131 Paul

Joanos, Refunds Administrator Refunds Section

Department of Revenue Walter W. Wood, Esquire Deputy General Counsel Office of the Comptroller The Capitol, Suite 1302

Tallahassee, Florida 32399-0350

NOTICE OF RIGHT TO JUDICIAL REVIEW

A party who is adversely affected by this Final Order is entitled to judicial review as provided by Section 120.68, Florida Statutes. Review proceedings are governed by the Florida Rules of Appellate Procedure. Such proceedings are commenced by filing one copy of a Notice of Appeal with the Clerk, Office of the Comptroller, Room 1302, The Capitol, Tallahassee, Florida 32301 and by filing a second copy, together with the filing fee prescribed by law, with either the Clerk of the First District Court of Appeal in Tallahassee,

Florida or with the Clerk of the District Court of Appeal wherein the party resides. The Notice of Appeal must be filed within thirty days of the date of the Order to be reviewed.

CERTIFICATE OF SERVICE

The undersigned certifies that true and correct copies of the foregoing Final Order and Notice of Rights were duly mailed to Warren R. Tranzenfeld, Esquire, Kirkpatrick & Lockhart, 1428 Brickel Avenue, Fourth Floor, Miami, Florida 33131 this 3rd day of September, 1987.

WALTER W. WOOD

Docket for Case No: 86-004955

Orders for Case No: 86-004955