Findings Of Fact On July 8, 1983, Petitioner, B & D International Yacht Charters, Ltd., a California corporation, purchased the 96-foot motor yacht, Realite, from Broward Marine, Inc., 1601 Southwest 20th Street, Fort Lauderdale, Florida, for the sum of $2,495,787.02. Petitioner paid no Florida sales tax on the purchase of the Realite. On October 14 and 16, 1983, the Realite was observed operating in the State of Florida. On January 24, 1985, the Department issued a "Notice of Delinquent Tax, Penalty and Interest Due and Assessed," against Petitioner, on the purchase of the Realite. The Department's assessment claimed (1) Florida State Sales/Use Tax of 5% ($124,789.35), (2) a penalty of 5% per month, up to a maximum of 25% of the tax due ($31,197.34), (3) the statutory penalty of, 100% of the tax due ($124,789.35), and (4) interest on the tax due at the rate of 1% per month from the date of purchase. Petitioner, pursuant to Section 72.011, Florida Statutes, initiated a proceeding under Section 120.57, Florida Statutes, to contest the Department's assessment. Petitioner alleged it was not liable for the use tax because the Realite had been purchased in Nassau, Bahamas, and that her presence in the State of Florida, in October 1983, was for the sole purpose of having warranty repair work done. However, Petitioner offered no evidence that the purchase of the Realite occurred in Nassau, Bahamas, or that the reason for her presence in the State of Florida, in October 1983, was for warranty repair work.
The Issue The Department adopts and incorporates in this Final Order the Statement of the Issue as expressed in DOR's Proposed Substituted Order filed by Respondent. In rejecting the Hearing Officer's Statement of the Issue the Department is in essence substituting the word "mortgage" for the term "financing statement" as used by the Hearing Officer.
Findings Of Fact Based upon all of the evidence, the following findings of fact are determined: Background Petitioner, Bridgestone/Firestone, Inc. (petitioner or Firestone), is a foreign corporation doing business in Florida. During the relevant time period, it owned more than one thousand retail outlets throughout the country, including thirty-nine in Florida, which sold tires and provided additional automotive services. Petitioner was then known as The Firestone Tire and Rubber Company. Respondent, Department of Revenue (DOR), is the state agency charged with the responsibility of enforcing the Florida Revenue Act of 1949, as amended. Among other things, DOR performs audits on taxpayers to insure that all taxes due have been correctly paid. To this end, a routine audit was performed on petitioner covering the audit period from June 1, 1985, through December 31, 1988. During the course of the audit, a DOR field auditor reviewed a transaction that had occurred on October 22, 1985, between Firestone and Firestone Real Estate Leasing Corporation (FIRELCO). In very broad terms, the agreement provided for the sale of a substantial number of assets (land and buildings) to FIRELCO and a leaseback of the assets by Firestone. After concluding that this agreement was a lease arrangement between the two corporations, DOR issued a notice of decision on February 19, 1992, wherein it proposed to assess petitioner $1,233,942.67 in unpaid taxes, interest and penalties. Of this amount, Firestone did not contest $229,094.67. Therefore, $1,004,848.27 is in dispute. In the notice of decision, DOR concluded that "the sale/leaseback agreement between Bridgestone/Firestone, Inc. and Firestone Real Estate Leasing Corporation is a lease of real property rather than a mere financing arrangement, and the transaction is subject to the sales and use tax." Petitioner then filed its request for hearing contending generally that DOR had misunderstood the true nature of the transaction, the agreement was a financing arrangement rather than a leasing arrangement for both federal and state tax purposes, and the payments under the lease should not be subject to the commercial rental tax as DOR has proposed. Accordingly, petitioner has asked that the assessment be rescinded or withdrawn. The Transaction and its Genesis In 1979 Firestone hired as president an executive from outside the company for the first time. Previously, only members of the Firestone family or career Firestone employees had held that position. Deciding that Firestone should de-emphasize its manufacturing operations and concentrate on its retail operations, the new president quickly closed seven tire plants and opened a number of new retail outlets with an emphasis on stores in the Sunbelt states. A decision was also made to finance this expansion by using the real estate as collateral. The first group of stores was paid for by selling them to a real estate investment trust (REIT) known as One Liberty Firestone. This form of financing had been recommended for several reasons by Merrill Lynch, Firestone's investment banker. First, it gave Firestone "access to the public market". Second, it allowed Firestone to use off-balance sheet financing, that is, it removed the debt associated with the financing from Firestone's balance sheet and thus improved its debt-equity ratio. Finally, Firestone retained operations of the stores through a lease with the REIT. For financial reporting and state and federal tax purposes, the transaction was treated as a true sale. The payments by Firestone to the REIT were treated as rent on the books of both corporations. Because Firestone had lost the benefit of the appreciation of the value of the stores under the REIT form of financing, it decided to find a better form of financing for its next acquisition of retail outlets. After considering several alternatives, Firestone's then treasurer, Jack Rooney, and its manager of domestic financing, Suzanne Palmer, concluded that the new financing must meet several objectives, including retaining of appreciation in value of the new properties, using the lowest cost of financing available, continuing off-balance sheet financing so that the assets and debt would not be carried on Firestone's balance sheet, and using the real estate as security for the financing. To meet these objectives, Rooney and Palmer selected a sale/leaseback form of transaction to be structured so that (a) it could be reported off-balance sheet, (b) it would be financed through the sale of commercial paper (unsecured promissory notes), and (c) the control of the properties would be retained by Firestone. To get the lowest rate possible for the commercial paper, it was necessary to have the issuance of the paper backed by a letter of credit issued by a bank with a very high rating. Ultimately, the Canadian Imperial Bank of Commerce (bank) was chosen. A credit agreement was prepared which set forth the obligations of the bank with respect to the issuance of the letter of credit. A depository agreement was also prepared naming Manufacturers Hanover Trust Company as the depository agent to handle the issuance and payment of the commercial paper as it was issued and reissued. The agreement was designed to protect the interest of the commercial paper note holders. In addition to the foregoing documents, a security agreement was created which provided the security for the bank by giving it an interest in the flow of funds to repay the debt, and ultimately gave it an indirect interest in the real estate. This was accomplished through the assignment of the lease and all rents to the bank. To achieve Firestone's goal of off-balance sheet financing, a separate, independent corporation named Firestone Real Estate Leasing Corporation (FIRELCO) was created. All of the stock of the corporation was owned by Case Western Reserve University, located in Cleveland, Ohio. When initially established, FIRELCO was a shell company with no assets, it had no working employees, and it had only the minimum number of directors required by law. It was not controlled by or related to Firestone since any common ownership between the two entities would have required Firestone to file consolidated financial statements. As a part of this transaction, Firestone transferred bare legal title in the properties to FIRELCO in return for cash (received by FIRELCO from the issuance of commercial paper), and under a lease agreement between the two, Firestone leased back the retail outlets from FIRELCO. Since all documents were executed on the same day, October 22, 1985, Firestone retained continuous physical possession of the stores. To summarize the transaction in simpler terms, FIRELCOinitially issued $35 million of commercial paper (short-term notes of thirty to one hundred eighty days duration) to investors. The letter of credit issued by the Canadian Imperial Bank of Commerce provided assurances to the investors that their funds would be returned. This was important since FIRELCO had no assets. The proceeds from the sale of the paper were used to purchase the properties of Firestone, who then immediately leased back the properties from FIRELCO pursuant to a lease agreement. FIRELCO assigned all of its rights to lease payments to the bank, as collateral agent. Thus, Firestone made periodic payments by wire transfer to the Canadian Imperial Bank of Commerce (as assignee of the lease payments), and pursuant to the depository agreement, the bank provided these funds to Manufacturers Hanover Trust Company, acting as fiduciary for the investors. Ultimately, the investors were repaid for their investment in the commercial paper. Since the transaction was an open ended one, additional properties were added by Firestone as late as 1987. By the end of that year, FIRELCO had issued paper in excess of $150 million as a financing tool for Firestone. By structuring the transaction in this manner, Firestone was able to secure "virtually 100 percent financing" for an interest rate on the commercial paper of less than that of passbook savings. Also, it was able to secure off- balance sheet financing; that is, it ended up with only cash on its books while transferring the fixed assets (land and buildings) and substantial debt to the books of FIRELCO, thus improving its balance sheet. Finally, it was able to retain control of the retail stores. The sale/leaseback form of financing was fairly common in the 1980's and had a number of advantages over other types of financing. First, it permitted the entity using that type of financing to maintain a good debt to equity ratio since the debt was shifted to the lessor. Also, commercial paper enjoyed a lower interest rate than a long-term mortgage, thus allowing the entity to realize savings in interest costs. In addition, unlike the typical mortgage, this type of financing allowed the entity to obtain 100 percent financing. Finally, the lessee was able to retain control of all of its assets. DOR's Audit and Conclusions As a part of the audit, a DOR field auditor visited Firestone's offices and examined all of the relevant documents pertaining to the lease. At that time, the auditor was told by a member of Firestone's tax department that the payments made by Firestone to FIRELCO were "rental payments". In addition, Firestone's records contained a monthly rental schedule indicating the "monthly rent" paid by each store. Further, these payments were characterized as rental payments in handwritten notes maintained in petitioner's "real property files." Finally, the Firestone representative never stated that the transaction was a "mortgage." Based on these considerations, the auditor recommended that the transaction be treated as a lease and that Firestone be liable for the sales tax associated with the lease payments. These taxes amounted to approximately $680,000. A subsequent review of Firestone's records by Tallahassee DOR personnel revealed that while Firestone had been assessed documentary stamp taxes on the assignment of rent portion of the transaction in 1987, and a notice of decision and closing agreement had been entered into by the parties after having reached an agreement as to how the total transaction would be apportioned to Florida, it had never paid intangible personal property tax or documentary stamp tax on the lease itself. This constituted further evidence to DOR that the transaction was a lease and not a financing arrangement since such taxes would be due on a mortgage. In further support of its position, DOR relied upon the various Form 10-K's filed by Firestone with the Securities and Exchange Commission (SEC) in which the reports referred to "rent payments for operating leases" and characterized the transaction as an "operating lease" as opposed to a capital or financing lease. Thus, DOR asserts the assessment is correct since the documents reviewed in the audit spoke of a "lease", "rental payments" and the like, there was a representation by Firestone that "rental payments" were being made under the lease, and Firestone had paid no documentary or intangible tax on the lease. Finally, DOR offered the testimony of a board certified real estate attorney who examined the one hundred eight page lease and noted some twenty provisions which he opined would be typically found in a lease agreement and not a mortgage. The expert concluded that the lease in form was also a lease in substance. The Relevance of FASB 13 For financial reporting purposes, Firestone recorded the transaction on its financial statements and other external reports in accordance with generally accepted accounting principles, the source of which includes, among other things, the standards issued by the Financial Accounting Standards Board (FASB). That board establishes accounting standards, which at last count numbered one hundred fourteen, to be used by the accounting profession in preparing financial statements. Among them is FASB 13, which is applicable to this controversy and, at the time the transaction occurred, governed the accounting for leases. Under FASB 13, a lease must be reported as a debt of the "lessee" on its balance sheet if any one of four conditions exists. Put another way, a lease will not be reported as a debt unless all four of the following tests are met: The lease transfers ownership of the property to the lessee. The lease contains a bargain purchase option. The lease term is equal to 75 percent or more of the estimated life of the leased property. The present value of the minimum lease payments equals or exceeds 90 percent of the fair value of the leased premises. As can be seen in the following discussion, none of these criteria were met. Therefore, Firestone was obliged to report the transaction as a lease in a footnote to its financial statements. For Firestone to have recorded the transaction in any other manner for financial reporting purposes would have contravened FASB 13 and generally accepted accounting principles. Under the terms of the lease agreement by Firestone and FIRELCO, Firestone retained the option to repurchase all of the leased properties at the end of a five year period for $137 million. Since the transfer of properties was not automatic, the first criterion requiring that "the lease transfers ownership of the property to the lessee" was not met. Under the second criterion, "the lease (must) contain a bargain purchase option." Since the purchase option in the lease agreement was for the unamortized portion of the debt, which was the book value, and a purchase at book value cannot be a bargain purchase, this part of FASB 13 was not met. Third, in order for the lease to be reported as a debt on the books of Firestone, "the lease term (must be) equal to 75 percent or more of the estimated life of the leased property." In this case, the lease called for a five year term. This is less than 75 percent of the estimated life of the improved real property since new retail stores have a probable useful life of 35 years or more. Therefore, this part of the test was not met. Finally, the lease called for the debt to be amortized at the rate of 3 percent per year or a total of 15 percent over the five year period of the lease. This left an unamortized debt of 85 percent at the end of the five year term. This meant that the minimum (and maximum) lease payments equaled only 15 percent of the value of the property at the end of the lease term. Since the fourth criterion requires that "the present value of the minimum lease payments equals or exceeds 90 percent of the fair value of the leased premises," the final part of the test was not met. Because none of the four tests of FASB 13 were met, the transaction had to be recorded in a footnote, as a lease, rather than on Firestone's balance sheet as a debt. This was consistent with generally accepted accounting principles. Therefore, in its 1984, 1985, 1986 and 1987 Form 10-K's, which are annual reports filed with the SEC, Firestone reported the lease in footnotes, and not as a balance sheet debt. In 1988, or after the transaction occurred, FASB 98 was issued. Had it not had prospective application only, the new standard would have required this transaction to be reported as a debt or liability on the balance sheet of the financial statements of Firestone. An Analysis of the Transaction Although a document may be called a lease on its face, this in itself is not dispositive of the issue. Rather, in order to properly determine the true nature of the transaction, it is necessary to examine the intention of the parties and the substance of the agreement. In this case, the more credible and persuasive evidence supports a finding that the sale/leaseback agreement between Firestone and FIRELCO was a financing transaction rather than a lease. Initially, it is noted that a taxpayer can treat an item one way for financial reporting purposes and another way for tax purposes. A common example is depreciation, where a taxpayer can properly use straight line depreciation for book purposes and accelerated depreciation for tax purposes. Similarly, in cases such as this, a taxpayer can report a transaction as a lease in its financial statements but as a financing transaction for tax purposes. Thus, in accordance with FASB 13, Firestone was obligated to use such terms as "operating lease" and "rental payments" in its Form 10-K's filed with the SEC and to characterize the transaction as a lease in the footnotes to its financial statements. It could, however, treat the matter differently for tax purposes. Firestone established that its tax returns were prepared to reflect that no sale had occurred between Firestone and FIRELCO, and therefore the retail stores continued to be treated as depreciable assets of Firestone for all tax purposes. In doing so, Firestone relied upon advice from its tax counsel. Further, the monthly payments made to the bank were treated as principal and interest for all tax purposes, and not as rental payments. In addition, for internal accounting purposes, the transaction was treated in exactly the same way as for tax reporting purposes, that is, with the real estate remaining on Firestone's books as depreciable assets and with the payments being treated as payments of principal and interest, and not rent. Although DOR's expert found some twenty provisions in the agreement which are typically found in a lease, the greater weight of evidence supports a finding that the sale/leaseback here was used to effect a mortgage substitute through a deed absolute with collateral documents. For example, sections 4.1- 4.4, 5.2, 6.1, 7.1, 7.3, 8.1, 8.2, 9.1, 9.2, 10.1, 11.1, 11.3, 11.8, 12.1-12.3, 13.1, 15.1-15.4, 18.1, 23.3, 24.1, 25.1, 28.1, 28.2, 30.1, 31.1, and 31.2 of the lease are clear indicia that in reality the transaction was a financing arrangement for Firestone. Indeed, it was Firestone's primary aim in this transaction, as well as the intention of the parties, to raise money so that Firestone could acquire new retail outlets. By way of illustration, there are provisions in the lease which provide that the rent is tied to FIRELCO's carrying costs and not a reasonable return on the fair market of property (s. 4.1), Firestone bears the burden of making all repairs to the property, including major structural repairs (s. 5.2), the obligations of the tenant continue even in the event of termination such as condemnation (s. 6.2), the tenant must make all reports on the property required by law (s. 7.1), FIRELCO must grant any easements that Firestone determines are necessary (s. 8.2), in the event of an insurable loss, the insurance proceeds go to the tenant (s. 11.3), the landlord warrants that it will report to the federal government that the tenant owns the property and hence the tenant receives all federal tax benefits such as depreciation (s. 17.2), upon transfer of title, the landlord's liabilities are relieved and it has no liabilities under the lease (s. 23.3), the tenant reserves the right to substitute any retail properties and the replacement property can be no less than the unamortized cost of the substituted property (s. 24.1), and at the end of the lease, any accumulated equity in the property is paid to Firestone as a management fee (s. 28.1). In determining the practical business substance of the transaction, it is also necessary to determine if the buyer is a single purpose financing corporation, if the short and long term risks and benefits associated with ownership pass to the so-called buyer, and if the seller's aim is to borrow money. In this regard, the evidence shows that FIRELCO can properly be called a single purpose financing corporation since it existed only for the purpose of this transaction. That is, its sole purpose was to facilitate the issuance of commercial paper, and it was prohibited by the collateral documents from engaging in any other business or corporate activity. Further, FIRELCO did not enjoy any long or short-term benefits associated with ownership of property, it did not assume possession of the property, and the risks associated with ownership of the property did not pass to the lessor but rather remained with Firestone. Finally, as noted in the preceding paragraph, when it entered into the transaction, Firestone's principal aim was to borrow money. All of these considerations support a finding that the practical business substance of the transaction was that of financing new acquisitions for Firestone. In summary, FIRELCO was a single purpose financing corporation totally lacking in economic substance. The various deeds from Firestone to FIRELCO were "deeds absolute" and the various other documents, that is, the credit agreement, security agreement, depository agreement, purchase and sale agreement, lease, and assignment of rents and lease, were "collateral documents." In this regard, it should be noted that the parties did not intend for the deeds absolute to embody the whole agreement but rather for the agreement to include both the deeds and the collateral documents together. No sale actually occurred and FIRELCO held naked legal title for the sole purpose of providing security. There was no economic substance to the lease beyond insuring amortization of the debt. Further, the practicalities of the situation and specific provisions of the lease insure that Firestone was at all times the actual owner of the property. Firestone treated the transaction as a financing arrangement for federal and state income tax purposes, for ad valorem tax purposes, for state sales and documentary tax purposes, and for internal accounting purposes. In compliance with FASB 13, however, Firestone reported the transaction as a lease for financial reporting purposes. Therefore, the transaction is found to be in the nature of a mortgage or financing arrangement. Estoppel During the field audit phase of this proceeding, a Firestone employee initially characterized the payments made by Firestone to FIRELCO as rental payments and did not refer to the document as a mortgage. As noted in an earlier portion of this order, there were also several documents shown to the auditor which contained the words "lease", "rental payments" and the like. At that point, the DOR auditor was inclined to treat the "monthly rent" under the lease as constituting rent for sales tax purposes and to make corresponding audit adjustments. Firestone disagreed, however, with the auditor's preliminary analysis and argued that the payments should be characterized as a "financing arrangement" rather than a true lease. Firestone also furnished the auditor with a copy of the opinion letter from its tax counsel which concluded that the transaction was not a lease. In determining whether to accept this assertion, the field auditor contacted his supervisor, and together they checked with the assistant bureau chief of multi-state audits. The field auditor testified at hearing that he knew this was a precedent setting case, other taxpayers had taken the same position as Firestone, and at that time he and his supervisor had already decided to treat the transaction as taxable. That position was approved by the assistant bureau chief. Thus, before the field audit was concluded and preliminary action taken, DOR was aware of Firestone's position on this issue. Therefore, DOR cannot claim that during the audit it was misled as to Firestone's position or that Firestone subsequently changed its position after the audit was completed. Moreover, DOR suffered no detriment by virtue of its reliance on Firestone's announced position.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that respondent enter a final order rescinding or withdrawing the assessment against petitioner. DONE AND ENTERED this 10th day of August, 1993, in Tallahassee, Florida. DONALD R. ALEXANDER 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 11th day of August, 1993. APPENDIX TO RECOMMENDED ORDER, CASE NO. 92-2483 Petitioner: Partially accepted in finding of fact 3. Covered in preliminary statement. 3. Partially accepted in finding of fact 3. 4. Partially accepted in finding of fact 1. 5-6. Partially accepted in finding of fact 29. 7. Partially accepted in finding of fact 3. 8-9. Partially accepted in finding of fact 4. 10. Partially accepted in finding of fact 5. 11-14. Partially accepted in finding of fact 6. 15. Partially accepted in finding of fact 7. 16. Partially accepted in finding of fact 8. 17. Rejected as being unnecessary. 18-20. Partially accepted in finding of fact 10. 21-28. Partially accepted in findings of fact 16-22. Partially accepted in finding of fact 9. Covered in preliminary statement and finding of fact 26. 31-40. Partially accepted in findings of fact 23-28. Rejected as being unnecessary. Partially accepted in finding of fact 25. Partially accepted in finding of fact 9. Partially accepted in finding of fact 28. 45-47. Partially accepted in finding of fact 25. 48. Partially accepted in finding of fact 13. Respondent: Partially accepted in finding of fact 3. Partially accepted in findings of fact 3 and 8. Partially accepted in finding of fact 3. Partially accepted in findings of fact 6 and 7. 5-9. Partially accepted in finding of fact 12. 10-11. Partially accepted in finding of fact 29. Partially accepted in finding of fact 13. Partially accepted in finding of fact 14. Partially accepted in finding of fact 12. Partially accepted in finding of fact 3. 16-22. Partially accepted in finding of fact 13. 23. Partially accepted in finding of fact 6. 24-25. Rejected as being unnecessary. Partially accepted in finding of fact 14. Partially accepted in findings of fact 14 and 22. Partially accepted in finding of fact 24. 29-31. Rejected as being contrary to the more credible and persuasive evidence. Rejected as being unnecessary. Rejected as being irrelevant. Rejected as being a conclusion of law. Rejected as being contrary to the more credible and persuasive evidence. 36-37. Rejected as being unnecessary. 38-41. Rejected. See finding of fact 26. Rejected as being unnecessary. Rejected as being contrary to the more credible and persuasive evidence. 44-49. Rejected. See finding of fact 26. 50. Partially accepted in finding of fact 27. 51-53. Rejected as being unnecessary. Note - Where a proposed finding has been partially accepted, the remainder has been rejected as being unnecessary, irrelevant, cumulative, subordinate, contrary to the evidence, or a conclusion of law. COPIES FURNISHED: Mr. Larry Fuchs Executive Director Department of Revenue 104 Carlton Building Tallahassee, FL 32399-0100 Linda Lettera, Esquire General Counsel Department of Revenue 204 Carlton Building Tallahassee, FL 32399-0100 Benjamin K. Phipps, Esquire P. O. Box 1351 Tallahassee, FL 32302 Leonard F. Binder, Esquire Jarrell L. Murchison, Esquire Department of Legal Affairs The Capitol-Tax Section Tallahassee, FL 32399-1050
The Issue The issue is whether Petitioners' Motions for Attorney's Fees should be granted, and if so, in what amount.
Findings Of Fact Based upon the stipulation of counsel, the papers filed herein, and the underlying record made a part of this proceeding, the following findings of fact are determined: Background In this attorney's fees dispute, Petitioners, Anderson Columbia Company, Inc. (Anderson Columbia) (Case No. 00-0754F), Panhandle Land & Timber Company, Inc. (Panhandle Land) (Case No. 00-0755F), Support Terminals Operating Partnership, L.P. (Support Terminals) (Case No. 00-0756F), Commodores Point Terminal Corporation (Commodores Point) (Case No. 00-0757F), and Olan B. Ward, Sr., Martha P. Ward, Anthony Taranto, Antoinette Taranto, J.V. Gander Distributors, Inc., J.V. Gander, Jr., and Three Rivers Properties, Inc. (the Ward group) (Case No. 00-0828F), have requested the award of attorney's fees and costs incurred in successfully challenging proposed Rule 18-21.019(1), Florida Administrative Code, a rule administered by Respondent, Board of Trustees of the Internal Improvement Trust Fund (Board). In general terms, the proposed rule essentially authorized the Board, through the use of a qualified disclaimer, to reclaim sovereign submerged lands which had previously been conveyed to the upland owners by virtue of their having filled in, bulkheaded, or permanently improved the submerged lands. The underlying actions were assigned Case Nos. 98- 1764RP, 98-1866RP, 98-2045RP, and 98-2046RP, and an evidentiary hearing on the rule challenge was held on May 21, 1998. That proceeding culminated in the issuance of a Final Order in Support Terminals Operating Partnership, L.P. et al. v. Board of Trustees of the Internal Improvement Trust Fund, 21 F.A.L.R. 3844 (Div. Admin. Hrngs., Aug. 8, 1998), which determined that, except for one challenged provision, the proposed rule was valid. Thereafter, in the case of Anderson Columbia Company, Inc. et al. v. Board of Trustees of the Internal Improvement Trust Fund, 748 So. 2d 1061 (Fla. 1st DCA 1999), the court reversed the order below and determined that the rule was an invalid exercise of delegated legislative authority. Petitioners then filed their motions. Fees and Costs There are eleven Petitioners seeking reimbursement of fees and costs. In its motion, Anderson Columbia seeks reimbursement of attorney's fees "up to the $15,000 cap allowed by statute" while Panhandle Land seeks identical relief. In their similarly worded motions, Support Terminals and Commodores Point each seek fees "up to the $15,000 cap allowed by statute." Finally, the Ward group collectively seeks $9,117.00 in attorney's fees and $139.77 in costs. In the Joint Stipulations of Fact filed by the parties, the Board has agreed that the rate and hours for all Petitioners "were reasonable." As to all Petitioners except the Ward group, the Board has further agreed that each of their costs to challenge the rule exceeded $15,000.00. It has also agreed that even though they were not contained in the motions, requests for costs by Support Terminals, Commodores Point, Anderson Columbia, and Panhandle Land in the amounts of $1,143.22, $1,143.22, $1,933.07, and $1,933.07, respectively, were "reasonable." Finally, the Board has agreed that the request for costs by the Ward group in the amount of $139.77 is "reasonable." Despite the stipulation, and in the event it does not prevail on the merits of these cases, the Board contends that the four claimants in Case Nos. 00-754F, 00-755F, 00-0756F, and 00- 757F should be reimbursed only on a per case basis, and not per client, or $7,500.00 apiece, on the theory that they were sharing counsel, and the discrepancy between the amount of fees requested by the Ward group (made up of seven Petitioners) and the higher fees requested by the other Petitioners "is difficult to understand and justify." If this theory is accepted, it would mean that Support Terminals and Commodores Point would share a single $15,000.00 fee, while Anderson Columbia and Panhandle Land would do the same. Support Terminals and Commodores Point were unrelated clients who happened to choose the same counsel; they were not a "shared venture." Each brought a different perspective to the case since Commodores Point had already received a disclaimer with no reversionary interest while Support Terminals received one with a reversionary interest on June 26, 1997. The latter event ultimately precipitated this matter and led to the proposed rulemaking. Likewise, in the case of Anderson Columbia and Panhandle Land, one was a landowner while the other was a tenant, and they also happened to choose the same attorney to represent them. For the sake of convenience and economy, the underlying cases were consolidated and the matters joined for hearing. Substantial Justification From a factual basis, the Board contends several factors should be taken into account in determining whether it was substantially justified in proposing the challenged rule. First, the Board points out that its members are mainly lay persons, and they relied in good faith on the legal advice of the Board's staff and remarks made by the Attorney General during the course of the meeting at which the Board issued a disclaimer to Support Terminals. Therefore, the Board argues that it should be insulated from liability since it was relying on the advice of counsel. If this were true, though, an agency that relied on legal advice could never be held responsible for a decision which lacked substantial justification. The Board also relies upon the fact that it has a constitutional duty to protect the sovereign lands held in the public trust for the use and benefit of the public. Because lands may be disclaimed under the Butler Act only if they fully meet the requirements of the grant, and these questions involve complex policy considerations, the Board argues that the complexity and difficulty of this task militate against an award of fees. While its mission is indisputably important, however, the Board is no different than other state agencies who likewise are charged with the protection of the health, safety, and welfare of the citizens. The Board further relies on the fact that the rule was never intended to affect title to Petitioners' lands, and all Petitioners had legal recourse to file a suit to quiet title in circuit court. As the appellate court noted, however, the effect of the rule was direct and immediate, and through the issuance of a disclaimer with the objectionable language, it created a reversionary interest in the State and made private lands subject to public use. During the final hearing in the underlying proceedings, the then Director of State Lands vigorously supported the proposed rule as being in the best interests of the State and consistent with the "inalienable" Public Trust. However, he was unaware of any Florida court decision which supported the Board's views, and he could cite no specific statutory guidance for the Board's actions. The Director also acknowledged that the statutory authority for the rule (Section 253.129, Florida Statutes) simply directed the Board to issue disclaimers, and it made no mention of the right of the Board to reclaim submerged lands through the issuance of a qualified disclaimer. In short, while the Board could articulate a theory for its rule, it had very little, if any, basis in Florida statutory or common law or judicial precedent to support that theory. Although Board counsel has ably argued that the law on the Butler Act was archaic, confusing, and conflicting in many respects, the rule challenge case ultimately turned on a single issue, that is, whether the Riparian Rights Act of 1856 and the Butler Act of 1921 granted to upland or riparian owners fee simple title to the adjacent submerged lands which were filled in, bulkheaded, or permanently improved. In other words, the ultimate issue was whether the Board's position was "inconsistent with the . . . the concept of fee simple title." Anderson Columbia at 1066. On this issue, the court held that the State could not through rulemaking "seek to reserve ownership interests by issuing less than an unqualified or unconditional disclaimer to riparian lands which meet the statutory requirements." Id. at 1067. Thus, with no supporting case law or precedent to support its view on that point, there was little room for confusion or doubt on the part of the Board. E. Special Circumstances In terms of special circumstances that would make an award of fees unjust, the Board first contends that the proposed rule was never intended to "harm anyone," and that none of Petitioners were actually harmed. But the substantial interests of each Petitioner were clearly affected by the proposed rules, and the appellate court concluded that the rule would result in an unconstitutional forfeiture of property. The Board also contends that because it must make proprietary decisions affecting the public trust, it should be given wide latitude in rulemaking. It further points out that the Board must engage in the difficult task of balancing the interests of the public with private rights, and that when it infringes on the private rights of others, as it did here, it should not be penalized for erring on the side of the public. As previously noted, however, all state agencies have worthy governmental responsibilities, but this in itself does not insulate an agency from sanctions. As an additional special circumstance, the Board points out that many of the provisions within the proposed rule were not challenged and were therefore valid. In this case, several subsections were admittedly unchallenged, but the offending provisions which form the crux of the rule were invalidated. Finally, the Board reasons that any moneys paid in fees and costs will diminish the amount of money to be spent on public lands. It is unlikely, however, that any state agency has funds set aside for the payment of attorney's fees and costs under Section 120.595(2), Florida Statutes (1999).
Findings Of Fact In Spring, 1976 Menkes was employed by FAR to secure property listings for resale. At that time, FAR was engaged in an enterprise whereby advanced fee listings were obtained from Florida property owners. Salesmen known as "fronters" or "qualifiers" were employed to place calls to Florida property owners whose names and phone numbers had been provided to the salesmen by FAR. The prospects were asked if they cared to list their real estate with FAR in anticipation of resale. It was explained that there would be a refundable fee to be paid by the property owner for the listing. The refund was to occur upon sale of the property. If the prospect was interested, then certain literature was mailed out to them. Other salesmen were employed as "drivers" who would make the second contact of the prospect who indicated an interest in listing his property. The driver would secure a signed listing agreement along with a check for $375.00 which constituted the refundable listing fee. There was no evidence that any of the listings obtained by FAR were ever resold. There were, however, three parcels of land in negotiation for sale when the operations of FAR were terminated in June, 1976. There was to be a division separate and apart from the "fronters" and "drivers" to do the actual selling of the property. The listings were advertised in the Fort Lauderdale area but there was no evidence to establish whether or not other advertising occurred. There was a total absence of evidence and, hence, a failure of proof as to the allegations of misrepresentations by Menkes. FREC introduced no evidence to show that Menkes represented that the property could be sold for several times the purchase price, that it would be advertised nationwide and in foreign countries or that the company had foreign buyers wanting to purchase United States property listed with the company. There was no evidence introduced to show that Menkes either made the representations or knew them to be false. There was no evidence introduced to show that Menkes knew that no bona fide effort would be made to sell the property listed. There was no evidence of any nature introduced by FREC to show that Menkes was dishonest or untruthful.
Findings Of Fact At all times relevant hereto, Respondent was secretary to Kingsland, Inc., Ferndale Estates, Inc., and Fairwood villas, Inc., all corporations controlled by C. Thomas Petersen. Kingsland, Inc., is engaged in land development. Ferndale Estates and Fairwood Villas are corporations holding title to real estate for investment purposes. Respondent was not a director in any of these corporations. By mortgage dated June 30, 1981 (Exhibit 1), Kingsland, Inc. mortgaged certain registered properties to secure a loan from Metropolitan Bank and Trust Company without approval from Petitioner. Respondent's signature appears on that conveyance as corporate secretary attesting to the signature of Petersen as president of Kingsland, Inc. Similarly, Respondent attested to Petersen's signature on mortgage dated July 9, 1981 (Exhibit 2), on modification of mortgage dated February 8, 1982 (Exhibit 4), on mortgage dated May 12, 1982 (Exhibit 7), on mortgage dated May 20, 1982 (Exhibit 8), on deed to Winokur dated May 27, 1981 (Exhibit 9), and on deeds to nine separate third party purchases (Exhibit 10). On mortgage from Kingsland, Inc. to City National Bank of Miami (Exhibit 3), encumbering lots previously sold to third party purchasers and on mortgage dated March 5, 1982 (Exhibit 6), Respondent's signature does not appear. By mortgage dated March 9, 1982 (Exhibit 5), Respondent signed as a witness. All of those mortgages and deeds in Exhibits 1-10 involve the encumbering registered land without prior approval from Petitioner, or conveying to the mortgagee or buyer lands- previously sold to third party purchasers on contract for deed or unrecorded deed. Proceeds from those mortgages and sales went into bank accounts controlled by Petersen. At the time of these transactions, Respondent was handling the accounts of the so called Pan American Investors, a group of individuals who had purchased the land installment sales contracts from Kingsland, Inc., and was entitled to the monthly payments with interest being paid by the purchasers of lots in these subdivisions. During this period, Respondent exchanged letters with several of these investors and knew many of these lots were paid for or nearly so and that interim deeds were being issued to the original purchasers. No credible evidence was presented regarding who picked the lots to be included in those transactions involved in Exhibits 1-10, or that Respondent had any responsibility for or control in those selections. In 1977, when Suncoast Highlands Corporation owned by Petersen and Leonard Lenhardt acquired the stock of Kingsland, Inc. and Illinois Corporation from the Oehlerking family, Kingsland owned registered subdivisions in Marion County, Florida, known as Ocala Waterway Estates, Section 27 and 34, Kingsland Country Estates, Units 1 and 22, Kingsland Country Estates, Whispering Pines and Forest Glen. On the date of acquisition of Kingsland, Section 34 had 19 unsold lots, Section 27 had 51 unsold lots, and Unit 22 had 43 unsold lots. The most accurate office record of the transactions involving lands sold by Kingsland were the Alpha listings (Exhibits 11 and 12), a computer printout showing the names of purchasers alphabetically by subdivision. This listing contained numerous errors. No evidence was presented that Respondent was made aware, before attesting to Petersen's signature, that the mortgages and deeds in Exhibits 1 through 10 were being prepared or that she was given any opportunity to have input into the specific lots to be included in those instruments. She received no recognizable benefit from the proceeds received by Kingsland from those mortgages and deeds.
Findings Of Fact From March 22, 1976, through April 21, 1976, Glober was a registered real estate salesman in the employ of FAR. From September 22, 1975, through December 24, 1975, Fisch was a registered real estate salesman in the employ of FAR. From December 29, 1975, through January 15, 1976, and from January 23, 1976, through March 31, 1976, Davidson was a registered real estate salesman in the employ of FAR. FAR was a registered corporate broker, located in Dade County, Florida. During those periods of time, FAR was engaged in an enterprise whereby advanced foe listings were obtained from Florida property owners. Salesmen known as "fronters" or "qualifiers" were employed to place calls to Florida property owners whose names and phone numbers had been provided to the salesmen by FAR. The prospects were asked if they cared to list their real estate with FAR in anticipation of resale. It was explained that there would be a refundable fee to be paid by the property owner for the listing. The refund was to occur upon sale of the property. If the prospect was interested, then certain literature was mailed out to them. Other salesmen were employed as "drivers" who would make the second contact of the prospect who indicated an interest in listing his property. The driver would secure a signed listing agreement along with a check for $375.00 which constituting the refundable listing fee. There was no evidence that any of the listings obtained by FAR were ever resold. There were, however, three parcels of land in negotiation for sale when the operations of FAR were terminated in June, 1976. There was to be a division separate end apart from the "fronters" and "drivers" to do the actual selling of the property. The listings were advertised in the Fort Lauderdale area but there was no evidence to establish whether or not other advertising occurred. There was a total absence of evidence and, hence, a failure of proof as to the allegations of misrepresentations by Respondents. FREC introduced no evidence to show that Respondents represented that the property could be sold for several times +he purchase price, that it would be advertised nationwide and in foreign countries or that the company had foreign buyers wanting to purchase United States property listed with the company. There was no evidence introduced to show that Respondents either made the representations or knew them to be false. There was no evidence introduced to show that Respondents knew that no bona fide effort would be made to sell the property listed. There was no evidence of any nature introduced by FREC to show that Respondents were dishonest or untruthful. No evidence was introduced to establish the amended allegation that Glober and Davidson were guilty of a violation of a duty imposed by law.
