STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

LLOYD ENTERPRISES, INC., )

)

Petitioner, )

)

vs. ) CASE NO. 95-2118F

) DEPARTMENT OF REVENUE, )

)

Respondent. )

)

SUMMARY FINAL ORDER

This cause arises upon Petitioner, Lloyd Enterprises, Inc.'s Amended Petition. Petitioner seeks award of attorney's fees and costs pursuant to Section 57.111

F.S. as a prevailing small business party, and pursuant to Section 120.575 F.S. based upon Respondent, Florida Department of Revenue's (FDOR's) alleged failure to initially raise any justiciable issue of law or fact. This Summary Final Order disposes of the case upon a pending motion.

APPEARANCES

For Petitioner: Edgar M. Dunn, Jr., Esquire

DUNN and ABRAHAM, P.A.

Post Office Drawer 2600

Daytona Beach, Florida 32115-2600

For Respondent: Leland L. McCharen, Esquire

Department of Legal Affairs The Capitol, Tax Section

Tallahassee, Florida 32399-1050 STATEMENT OF THE ISSUE

May Petitioner be awarded attorney's fees and costs pursuant to Sections

57.111 or 120.575 F.S. upon the facts of this case?

PRELIMINARY STATEMENT

The original petition herein was filed with the Division of Administrative Hearings (DOAH) after the Fifth District Court of Appeal filed and published its opinion and decision reversing the Final Order and assessment of taxes, interest and penalty by Respondent agency. See, Lloyd Enterprises, Inc. v. Department of Revenue, 651 So. 735 (Fla. 5th DCA 1995), decided upon Lloyd Enterprises, Inc.

1. Department of Revenue, DOAH Case No. 92-2348, (RO entered by the undersigned Hearing Officer on 4/01/93; FDOR's FO entered 5/24/93).

   
   

   The case was set for formal hearing on January 23, 1996, but came on for consideration upon the Respondent agency's Motion to Dismiss With Prejudice For Lack of Jurisdiction. The motion was treated as a Motion for Summary Final Order and oral argument was heard thereon. During oral argument, the following

   stipulations were made with regard to the underlying case: (1) No request for fees was filed at the appellate level, and (2) No final agency order was entered after the appellate mandate.

   
   

   The parties agreed to the entry of a January 23, 1996 order cancelling formal hearing and giving the parties the opportunity to file further factual stipulations and written legal argument and abating the case, including formal hearing, pending a ruling on the motion. Both parties filed timely. This Order follows.

   
   

   FINDINGS OF FACT

   
   

   1. Petitioner, Lloyd Enterprises, Inc. (Lloyd) has requested that it be awarded $22,006.00 in attorney's fees and out-of-pocket expenses of $589.31 for a total of $22,595.31.

      
      

   2. All fees and expenses listed by Lloyd were incurred in its successful appeal of the adverse decision in its Section 120.57(1) F.S. proceeding challenging the Respondent agency's tax assessment. All fees and costs claimed were incurred during appeal after the recommended and final orders were entered against Lloyd in a formal tax assessment proceeding, Lloyd Enterprises, Inc. v. Department of Revenue, DOAH Case No. 92-2348.

      
      

   3. The formal tax assessment proceeding arose pursuant to Section 72.011 and Chapter 212 F.S. concerning the balance ($57,471.43) of a greater sales and use tax assessment levied against Lloyd for its alleged failure to pay sales tax on goods and services sold to customers of concession stands on Daytona Beach for an audit period before Lloyd owned and operated the stands. Because Lloyd was unable to provide records of predecessors in interest, the agency estimated tax on the basis of Lloyd's existing records after purchasing the stands. Also, Lloyd was assessed sales taxes (approximately $6,004.38 of the assessed tax liability) for all beach concession fees it had paid to Volusia County during the audit period of 11/1/85--12/31/90, pursuant to Section 212.031, F.S. [1989].

      
      

   4. Lloyd's petition for formal hearing before DOAH was a letter previously utilized in the parties' informal negotiations. FDOR moved for a more definite statement and time to file an answer if Lloyd were required to file a more definite statement or a more definite petition. An order dated May 19, 1992 denied the agency's request for more definite statement and provided, in pertinent part, "...As Respondent's motion has observed, an answer in this type of proceeding is not mandatory. Respondent is, however, granted 10 days from the date of this order in which to file an answer should the agency elect to do so." The agency elected to stand on its prior notices of proposed assessment. Therefore, for purposes of this proceeding, the agency's "petition," as contemplated by Section 120.575(5) F.S. is the original tax assessment.

      
      

   5. The tax assessment proceeding went to formal hearing pursuant to Section 120.57(1) F.S. without any motions to dismiss or for other summary relief filed by either party. The recommended order found in favor of the agency's assessment, with some minor arithmetical adjustments required. The final order adopted the recommended order in toto. Lloyd appealed the final order.

      
      

   6. In Lloyd Enterprises, Inc. v. Department of Revenue, 651 So. 735 (Fla. 5th DCA 1995), decided upon Lloyd Enterprises, Inc. v. Department of Revenue, DOAH Case No. 92-2348, (RO entered by the undersigned Hearing Officer on 4/01/93; FDOR's FO entered 5/24/93), Lloyd argued that Section 212.031, F.S.

      [1989], had been erroneously applied to the beach concession fees charged by Volusia County and that Section 212.10 [1989] was unconstitutional as applied to Lloyd in this case and that the "projection" method used by FDOR's auditors to determine the amount of taxes due was unauthorized, unreasonable, and arbitrary. FDOR argued that the transfer and annual fees charged by the County to beach concessionaires pursuant to its Unified Beach Code and Ordinance, (Volusia County Ordinance 88-32), constituted rent payments for the various beach locations. The Fifth District Court of Appeal partially agreed with Lloyd and reversed. The court did not reach Lloyd's argument that Section 212.10 F.S. is arbitrary and capricious and, therefore, unconstitutional but did agree with Lloyd that under the facts of this case and the statutory framework, the best estimate provisions of Section 212.12(5)(b), F.S. [1989], could not be invoked to impose liability upon Lloyd as a "successor" dealer. (615 So.2d 735 at 736).

      
      

   7. The appellate court ruled with regard to the first issue raised on appeal that,

      
      

      The hearing officer erred in deciding it was proper to impose a sales tax on the fees Volusia County charged Lloyd for the privilege of selling and renting goods and services to the public on public beaches and that these privileges constituted taxable events under

      Rule 12A-10.070 F.A.C. and Section 212.031 F.S..

      
      

      It ruled further that,

      
      

      The hearing officer arrived at this ruling simply by deferring to the Department's interpretation of the rule and by noting there was no contrary case law. The hearing officer correctly pointed out that deference should be given to an agency's interpretation of its rules and the statutes it

      is charged to administer. However, the agency's interpretation is subject to review and is not conclusive. (651 So.2d 735 at 736).

      
      

      The court went on to say,

      
      

      We hold that, in exercising the duties imposed on it by the Unified Beach Code, the County did not enter into the business of renting, leasing, or licensing real property. Accordingly, the tax liability assessed on the basis of the concession- aire fees being a license or lease of land is reversed. (651 So.2d 735 at 737)

      
      

   8. The appellate court also stated that,

      
      

      At the time Lloyd purchased the concessions, neither Lloyd nor the sellers were aware of the duties imposed by Section 212.10 [1989] which imposed on a purchasing or successor dealer the sales tax liabilities of a selling dealer under certain circumstances, and Lloyd concedes it did

      not comply with the statute. (651 So.2d 735 at 738).

   9. The Fifth District Court of Appeal majority opinion criticized the agency for relying solely on Lloyd's own, adequate records for the more current years after Lloyd purchased the concessions which are records not listed in Section 212.12(5)(b) F.S. as usable even if that section were applicable. It further criticized the agency for making no effort to obtain or project--or estimate--sales tax liabilities of the prior concessionaires on the basis of their own records which would have been for the relevant taxable period. However, the appellate court's ultimate ruling on the second issue raised on appeal was that the agency was not entitled to invoke Section 212.12(5)(b) F.S. without showing that Lloyd was guilty of a default listed by the statute. The opinion relies on the fact that, because there was no statutory or regulatory mechanism in place by which Lloyd could have ascertained the prior owners' tax liability, Lloyd, the taxpayer, could not be in default. The court observed the longstanding and frequently reiterated precedent that, "tax laws should be construed strongly in favor of the taxpayer and against the government with all ambiguities or doubts resolved in the taxpayer's favor." The opinion stops short of finding the statute unconstitutional as written or as applied to Lloyd.

      
      

   10. The foregoing rulings by the appellate court are res judicata for purposes of determining whether or not there was any justiciable issue of law or fact raised by the agency's initial tax assessment.

       
       

   11. The recommended and final orders appealed from did not reserve jurisdiction to determine entitlement to any fees or costs. The Petitioner made no request for fees and costs to the appellate court and none were awarded. There is no order of the appellate court requiring FDOR or DOAH to award fees or costs.

       
       

   12. Petitioner makes its claim herein only pursuant to Sections 57.111 and 120.575(5), F.S.

       
       

   13. The agency has never entered a final order on remand in accord with the decision of the Fifth District Court of Appeal, but clearly, Lloyd ultimately prevailed at the appellate level. Petitioner filed its original fees and costs petition with DOAH within 60 days of the appellate court's mandate. That petition was dismissed by an order herein dated June 28, 1995. The second paragraph of the June 28, 1995 order read, "Petitioner shall have 15 days from date of this order to amend its motion (sic=petition)." The fifteenth day was July 13, 1995. The Amended Petition was served and filed with DOAH on July 14, 1995. Respondent set forth no showing of prejudice by the one day's delay.

       
       

       CONCLUSIONS OF LAW

       
       

   14. The statutes applicable to this cause and the pending motion are Sections 57.111 and 120.575(5), F.S.

       
       

   15. The initial petition for costs and fees was timely. See, State of Florida Department of Health and Rehabilitative Services v. South Beach Pharmacy, 635 So.2d 117 (Fla. 1st DCA 1994). There being no showing of prejudice by Petitioner's late filing by one day of the amended petition, the amended petition also is deemed timely.

       
       

   16. The undisputed facts that Petitioner herein seeks no fees or costs for the original administrative action, now seeks only prior appellate fees and costs, and has never requested or been awarded appellate fees and costs by the appellate court are determinative. These facts permit entry of this summary

       final order dismissing the amended petition for costs and fees without formal evidentiary hearing to reach any of the other issues raised by the agency's response.

       
       

   17. Most recently, in Cochran v. Perruso, Case No. 95-0712, (Fla. 4th DCA February 7, 1996), 21 FLW D346, the Fourth District Court of Appeal reiterated that Florida case law is unequivocal that,

       
       

       A trial court may not compensate a prevailing party for services rendered during the prior appeal.

       Rule 9.400 Fla. R. App. P. requires that attorney's fees for preparation of an appeal be requested in the appellate court, and may be taxed by the trial court only after issuance of a mandate from the appellate court, Gieseke v. Gieseke, 499 So.2d 839 (Fla. 4th DCA 1986). Absent such a mandate, the trial court lacks authority to award appellate attorney's fees, Hornsby v. Newman, 444 So.2d 90 (Fla. 4th DCA 1984), citing Elswick v. Martinez, 394 So.2d 529 (Fla. 3d DCA 1981).

       
       

   18. School Board of Alachua County v. Rhea, 661 So.2d 331 (Fla. 1st DCA 1995), currently on conflict certiorari to the Florida Supreme Court, presents a situation remarkably similar to the one at bar. Therein, the School Board of Alachua County was sued on a claim that its holding of a workshop in Orlando, Florida violated Section 286.011, F.S. [1989], the "Government in the Sunshine Law". The Board prevailed in a summary judgment proceeding, but the summary judgment in the Board's favor was reversed and remanded to the trial court for proceedings consistent with the appellate opinion. The trial court awarded attorney's fees and costs to Rhea for the prior appellate proceeding. The trial court's decision was based on language in the statute that, on its face, mandated an award of fees to a prevailing party which had proven that a government agency had violated the statute. However, the First District Court of Appeal found that Rhea had not filed a motion for appellate fees under Rule

       9.400 Fla. R. App. P., and that even the mandatory language of the statute could not override or supersede the requirements of the appellate rule. The court's rationale was based on Salley v. City of St. Petersburg, 511 So.2d 975 (Fla. 1987), which held that the purpose of the rule is to direct the appellate court's attention to the claimed basis for the award so that the appellate court may determine whether such fees are justified in the appellate proceeding.

       
       

   19. Herein, Petitioner's claim is brought under Section 57.111, F.S. That statute does not apply to fees incurred in an appellate proceeding. This principle was clearly laid out in State of Florida Department of Health and Rehabilitative Services v. South Beach Pharmacy, supra., at page 120:

. . . the favorable judgment or order Section

57.111 makes prerequisite to an award of fees and costs is not the judgment or order of an appellate court. . . . The favorable "final judgment or order is the judgment or final order of the lower tribunal whether never appealed, affirmed on appeal, or entered

pursuant to mandate, after an appeal has concluded.

1. Herein, Petitioner's claim is also brought under Section 120.575(5)

   F.S. which applies specifically to tax contest proceedings. Section 120.575(5)

   F.S. provides, in pertinent part, as follows:

   
   

   The prevailing party, [in a proceeding under s.

   120.57 authorized by s. 72.011(1), may recover all legal costs incurred in such proceeding, including reasonable attorney's fees], if the losing party fails to raise a justiciable issue of law or fact in its petition or response. [Emphasis supplied].

   
   

2. While there is no case specifically holding that the Section 120.575(5) F.S. language emphasized above would itself preclude an award of prior appellate fees in this instant proceeding, the foregoing precedents limiting the award of appellate fees and costs to the exclusive jurisdiction of the appellate courts militates against Section 120.575(5) F.S. being used to award prior appellate fees and costs in the instant case. See, directly on point, School Board of Alachua County v. Rhea, supra., See, by analogy only, Dade County v. Pena, (Fla. S.Ct. Case No. 85,023, December 14, 1995), 20 FLW S593.

   
   

3. Assuming arguendo, but not ruling, that Section 120.575(5) F.S. authorizes DOAH to award Petitioner herein appellate fees and costs for a prior appeal, the history of the underlying tax assessment case and the res judicata of the prior appellate court decision show that Lloyd did not demonstrate that there was "no justiciable issue" initially raised by the agency.

   
   

4. The case of Lauren, Inc. v. Department of Revenue, DOAH Case No. 93- 0256F (Final Order of HO Lerner entered 12/20/93) considered Section 120.575(5),

   F.S. That case did not award fees to the taxpayer because the hearing officer found there was a "justiciable" issue where, as here, the agency relied on its own interpretation of statutes and rules when issuing its notice of proposed tax assessment. Even though the agency in Lauren, Inc. eventually took the equivalent of a voluntary dismissal, the agency's initiation of the tax assessment was determined to be "substantially justified", an even higher standard than the agency has to meet under Section 120.575(5), F.S. See, Section 57.111, F.S.

   
   

5. The situation in the Lauren, Inc. tax assessment proceeding was remarkably similar to that in Lloyd's tax assessment proceeding. Therein, Hearing Offier Lerner found and determined that,

   
   

   . . . the assessment against Petitioner [Lauren Inc.] . . . had a reasonable basis in law and fact at the time the Notice issued, notwith- standing that the Department's interpretation of the transactions upon which the assessment was based as involving licenses to use real property, and therefore subject to the tax consequences prescribed in subsection (2)(c), rather than (2)(b), of the Rule, may not have been the only, or even, in the opinion of some,

   the most preferable, interpretation possible and further notwithstanding that such interpretation was subsequently rejected by the Department in favor of the interpretation urged by Petitioner,

   which was deemed to be more consistent with the interest of the parties to the transactions. Cf.-- Edward J. Seibert, Architect and Planner, P.S.,

   v. Bayport Beach and Tennis Club Association, 573 So.2d 889, 892 (Fla. 2d DCA 1990) ("[w]hen an agency with the authority to implement a statute construes the statute in a permissible way, that interpretation must be sustained even though another interpretation may be possible");

   Gentele v. Department of Professional Regulation, Board of Optometry, 513 So.2d 672, 673 (Fla. 1st DCA 1987) ("DPR's determination to prosecute essentially turned on a credibility assessment

   of the investigator's testimony and, as such,

   had a reasonable basis in law and fact"); Humhosco

   v. Department of Health and Rehabilitative Services, 476 So.2d 258, 261 (Fla. 1st DCA 1985)("[w]hen an agency committed with authority to implement a statute construes the statute in a permissible

   way, that interpretation must be sustained even though another interpretation may be possible or even, in the view of some, preferable").

   
   

6. Moreover, the standard set by Section 120.575(5) F.S. is identical to that established in Section 57.105 F.S. and cases determined under Section

   57.105 F.S. are instructive of how the Section 120.575(5) F.S. "fails to raise a justiciable issue of law or fact" standard is to be applied. The standard is that there can be no award without a complete absence of a justiciable issue, which is not the situation in the case at bar.

   
   

7. In Coral Springs Roofing Company, Inc. v. Campagna, 528 So.2d 557 (Fla. 4th DCA 1988), the court determined,

   
   

   This section [s.57.105 F.S.] authorizes awards

   of attorney's fees to the prevailing party in any civil action in which the court finds that there was [a complete absence of a justiciable issue of either law or fact raised by the losing party].

   Essentially, to award such fees, the court must

   find that the losing party's position was frivolous. McNee v. Biz, 473 So.2d 5 (Fla. 4th DCA 1985). [Emphasis and bracketted material supplied]

   
   

8. In Branch v. Charlotte County, 627 So.2d 577 (Fla. 2d DCA 1993) at 578, the court held,

   
   

   The standard under this statute [s.57.105 F.S.] is very stringent. There must be [a complete absence of a justiciable issue raised] by the losing party, which renders the action completely untenable. . . . [Emphasis and bracketted material supplied]

   
   

9. Moreover, in order for a Petitioner to prevail on a Section 57.105

   F.S. "no justiciable issue" theory, the entire case must fail to raise a justiciable issue of law or fact at its inception because the purpose of the statute is to discourage baseless claims, stonewall defenses, and sham appeals.

   If one part of the case raises a justiciable issue, then an award of fees on the "no justiciable issue" theory is unjustified. Even a party's good faith efforts to change existing law do not render an action frivolous for purposes of an award of attorney's fees and costs, and a party's defense of a trial court ruling on appeal is not frivolous as a matter of law. See, Carnival Leisure Industries v. Holzman, 660 So.2d 410 (Fla. 4th DCA 1995) and Wood v. Price, 546 So.2d 88 (Fla. 2d DCA 1989). See, particularly, Wood v. Price, supra., holding at 90,

   
   

   In order to award attorney's fees under the statute [s. 57.105 F.S.], it is necessary to find that the entire action, not merely a portion thereof was devoid of merit both as to law or fact.

   
   

   In accord, see, Eckhoff v. Revlon, Inc., 414 So.2d 1152 (Fla. 3d DCA 1982).

   
   

10. It is of some import that in a tax assessment proceeding, the agency's burden of proof is statutorily limited to a showing that an assessment has been made against the taxpayer and the factual and legal grounds upon which it made the assessment. See, Section 120.575(2), F.S.

    
    

11. That Lloyd's underlying tax assessment case went to formal evidentiary hearing pursuant to Section 120.57(1) F.S. without any motions to dismiss or for other summary relief demonstrates that the parties believed going into final formal evidentiary hearing that there were disputed issues of material fact.

    
    

12. That a recommended order was entered against Lloyd setting forth justiciable issues shows that there were justiciable issues raised at Lloyd's formal hearing. See, Coral Springs Roofing Company, Inc. v. Campagna, supra., holding that a successful appellant was not entitled to attorney's fees, pursuant to Section 57.105 F.S. in that "the appellee's defense of a trial court ruling could not be held frivolous as a matter of law because the judgment of a trial court carries with it a presumption of correctness."

    
    

13. That the hearing officer and the appellate court reached different legal conclusions on the facts as tried in Lloyd's underlying case does not diminish the justiciability of the factual and legal disputes raised in the initial notice of tax assessment. Also, the appellate court opinion herein clearly noted at least two factual reasons that the agency believed Petitioner could be taxed as assessed (see Finding of Fact 8, above).

    
    

14. That the appellate court and the hearing officer applied different legal principles to reach contrary results also does not mean there were no justiciable legal issues from the inception of the case. The recommended order contains citations of case law precedents. Apparently these precedents were not considered controlling by the appellate court under the circumstances of Lloyd's case, but the appellate court opinion did discuss as valid some of the legal propositions adhered to by the hearing officer below (see Finding of Fact 7, above).

Upon the foregoing findings of fact and conclusions of law it is, ORDERED that:

The Amended Petition herein is dismissed and Petitioner shall take nothing thereby.

DONE AND ORDERED this 18th day of March, 1996 in Tallahassee, Florida.

ELLA JANE P. DAVIS, Hearing Officer Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 18th day of March, 1996.

COPIES FURNISHED:

Lealand L. McCharen, Esquire Department of Legal Affairs The Capitol, Tax Section Tallahassee, FL 32399-1050

Edgar M. Dunn, Jr., Esquire DUNN and ABRAHAM, P.A.

P.O. Drawer 2600

Daytona Beach, FL 32115-2600

Linda Lettera, Esquire Department of Revenue

204 Carlton Building Tallahassee, FL 32399-0100

Larry Fuchs, Executive Director Department of Revenue

104 Carlton Building Tallahassee, FL 32399-0100

NOTICE OF RIGHT TO JUDICIAL REVIEW

A party who is adversely affected by this Final Order is entitled to judicial review pursuant to 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 agency clerk of the Division of Administrative Hearings and a second copy, accompanied by filing fees prescribed by law, with the District Court of Appeal, First District, or with the district court of appeal in the appellate district where the party resides. The notice of appeal must be filed within 30 days of rendition of the order to be reviewed.

Docket for Case No: 95-002118F

Orders for Case No: 95-002118F