Findings Of Fact The parties stipulated to the facts-of the case as follows: On March 2, 1972, the petitioners, Fred W. Baggett and John S. Miller, Jr., along with one Michael W. Duggar, incorporated a Florida corporation known as Tallahassee Properties , Inc. and filed Articles of Incorporation with the Secretary of State, State of Florida. On June 29, 1972, the above described corporation took title to the property described as follows: All that part of Lot Number 176 in the Original Plan of the City of Tallahassee, in the County of Leon, State of Florida, described as follows: to-wit: Begin at the Northwest corner of said lot and run thence East along the South line of College Avenue (formerly Clinton Street) 39 feet to the wall of a brick building, thence run South along the side of said building 60 feet, thence run West 39 feet to the East line of Adams Street, thence run North along the East line of Adams Street 60 feet to the Northwest corner of said Lot 176, being the point of beginning; from LeRoy Collins and Mary Call Collins, said deed being recorded in Official Records Book 532, Page 327 of the Public Records of Leon County, Florida. On that same date, Tallahassee Properties, Inc. executed a note and mortgage in the amount of $55,000 to Leon Federal Savings and Loan Association, said mortgage being recorded in Official Records Book 532, Page 328 of the Public Records of Leon County, Florida. The said note was personally endorsed by John S. Miller, Jr., Fredric W. Baggett and Michael W. Duggar. On June 29, 1972, Tallahassee Properties, Inc. executed a note in the original principal amount of $72,405.84 to LeRoy Collins and Mary Call Collins secured by a second mortgage on the property and as recorded in Official Records Book 532, Page 376 of the Public Records of Leon County, Florida, The said note was personally endorsed by John S. Miller, Jr., Fredric W. Baggett and Michael W. Duggar. On September 8, 1972, an agreement was entered into between Michael W. Duggar and Ronald C. LaFace of Tallahassee, Florida, wherein the said Michael W. - Duggar conveyed his interest in Tallahassee Properties, Inc. to Ronald C. LaFace and the said Ronald C. LaFace agreed therein to hold Michael W. Duggar harmless and relieve him of liability and indemnifying him for any liabilities which Michael W. Duggar may or could have as a result of his interest in Tallahassee Properties, Inc. This is the reason that the said Ronald C. LaFace is the proper party petitioner in this action. On April 18, 1973, Tallahassee Properties, Inc. executed an additional note to Leon Federal Savings and Loan Association in the amount of $17,500 which said note was also secured by that certain mortgage dated June 29, 1972 and recorded June 29, 1972 in Official Records Book 532, Page 328 of the Public Records of Leon County, Florida. The said note was personally endorsed by John S. Miller, Jr., Fredric W. Baggett and Ronald C. LaFace. On April 23, 1973 by an instrument recorded in Official Records Book 584, Page 94 of the Public Records of Leon County, Florida, Tallahassee Properties, Inc. conveyed an equal one-third interest in the subject property to John S. Miller, Jr., Fred W. Baggett and 5 Ronald C. LaFace. Affixed to the said deed were documentary surtax stamps in the amount of 55 cents and State of Florida documentary stamp tax in the amount of 30 cents. By letter dated September 24, 1975, the respondent, State of Florida, Department of Revenue, informed the petitioners that they had failed to pay an additional documentary stamp tax in the amount of $434.70 due on that certain warranty deed described above as having been recorded on April 23, 1973 in the Public Records of Leon County, Florida. This proceeding was initiated by petitioners after having received said letter from the respondent for a determination that the assessment was improper in that the subject conveyance was not a taxable event. Respondent has asserted that a tax of $434.70 is due and owing from the petitioners. In addition, they have assessed an additional 100 percent penalty for a total claim of $869.40 exclusive of interest or other penalties. The assessment was determined by the Department of Revenue on the basis of adding the original principal balance of the three above described notes secured by mortgages. The original principal amount of the notes was $144,905.84. By the application of the tax imposed by Section 201.02, Florida Statutes, if the petitioners have any liability for payment of the documentary stamp tax, then the determination of $434.70 as an assessment is a correct figure. Petitioners' exhibits 1 through 4, respondent's exhibit 1 and 2, and posthearing briefs of counsel are appended to the record.
Recommendation That petitioners be, found not liable for the proposed assessment of documentary stamp tax and penalty under Chapter 201, Florida Statutes. Done and Entered this 10th day of August, 1977, in Tallahassee, Florida. THOMAS C. OLDHAM Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Edwin J. Stacker, Esquire Department of Legal Affairs the Capitol Tallahassee, Florida 32304 Daniel J. Wiser, Esquire Post Office Box 1752 Tallahassee, Florida 32302
The Issue Whether American National can litigate its entitlement to a documentary stamp tax refund pursuant to Section 120.57, Florida Statutes (1987)? If so, whether American National is entitled to a refund of some or all of the $5,475 it paid in recording the first modification and consolidation of notes, mortgages and assignment of leases and rents executed by American National and General Electric Credit Corporation (GECC) on July 11, 1986?
Findings Of Fact Real estate in Escambia County which petitioner American National now holds as trustee (the property) once belonged to U.S.I.F. Pensacola Corporation (USIFP). On September 1, 1969, USIFP gave Town and Country Plaza, Inc. (T & P) a note for $1,500,000 and executed a mortgage on the property in favor of T & P as security for payment of the note. A separate $300,000 note was promptly repaid. On July 5, 1973, U.S.I.F Wynnewood Corporation (USIFW), USIFP's successor in title, gave U.S.I.F. Oklahoma Corporation (USIFO) a note for $625,000, and executed a mortgage on the property in favor of USIFO as security for payment of its note. On July 8, 1982, shortly after Trust No. 0008 acquired the property, Jacksonville National Bank, as trustee, gave First National Bank of Chicago (FNBC) two notes, each secured by a separate mortgage. One note was for $767,481.98, and the other was for $2,000,000. These two notes, along with the two notes originally given to T & P and USIFO, which were both subsequently assigned to FNBC, were the subject of the July 8, 1982, consolidation, modification and extension agreement. Documentary stamp tax owing on account of these notes (the consolidated notes) was eventually paid in its entirety. All four mortgages with which the property was encumbered when petitioner American National succeeded Jacksonville National as trustee were duly recorded, intangible tax having been fully paid upon recordation. In January of 1984, FNBC assigned the consolidated notes and the mortgages securing their payment to VPCO Properties, Inc., which itself assigned them later the same month to VPPI TCH, Inc. In July of 1986, GECC, the present holder of the consolidated notes acquired the notes and became the mortagee on the mortgages securing their payment. As of July 11, 1982, when American National, as trustee of Trust No. 0008, borrowed an additional $1,150,000 from GECC, the outstanding principal balance on the consolidated notes aggregated $3,650,000. On that date, GECC and American National, as trustee, executed the so- called first modification and consolidation of notes, mortgages and assignment of leases and rents, Petitioner's Exhibit No. 1, which recited the parties' understandings both with respect to the new borrowing and with regard to the existing indebtedness the consolidated notes reflected. In addition to signing Petitioner's Exhibit No. 1, American National, as trustee, also executed and delivered to GECC a promissory note in the amount of $1,500,000. This note, which was not offered in evidence, has never been recorded, nor have documentary stamps ever been affixed to it. At GECC's insistence, American National paid a documentary stamp tax of $7,920 at the time Petitioner's Exhibit No. 1 was recorded in Pensacola. Of this sum, $5,475 was paid on account of the indebtedness the consolidated notes evidenced; $1,725 was paid on account of the new borrowing; and $720 was paid because of the provisions in Petitioner's Exhibit No. 1, contemplating an increase in the principal amount of indebtedness. Under the agreement certain interest payments can be deferred, not to exceed $480,000, any such deferments being added to principal. The agreement provides: Notwithstanding the foregoing, so long as Borrower is making all payments on this Note when due, without giving effect to grace periods or requirements of notice, if any, and is otherwise not in default, taking into account, applicable grace periods, if any, under the Mortgage and other Security Documents Borrower shall be entitled to defer payment, in any month, of interest in excess of interest computed at the "Applicable Base Percentage Rate" (hereinafter defined) so long as the total interest deferred under this paragraph ("Deferred Interest"), including any and all Deferred Interest which has been added to the principal balance hereof, as hereinafter provided, does not exceed the lesser of ten percent (10 percent) of the outstanding principal balance hereof, excluding any and all Deferred Interest which has been added to the principal balance hereof, or $480,000. Such Deferred Interest, including any and all Deferred Interest which has been added to the principal balance hereof, shall be due and payable when and to the extent that, in any subsequent month, the Contract Index Rate is less than the "Applicable Base Percentage Rate", with the balance of such Deferred Interest being payable as provided below or on the maturity hereof, whether by lapse of time, prepayment or acceleration. The "Applicable Base Percentage Rate" shall mean the following per annum rates of interest, computed as aforesaid, for the periods indicated: Applicable Base Period Percentage Rate Date of This Note June 30, 1987 10.0 percent July 1, 1987-June 30, 1988 10.5 percent July 1, 1988-June 30, 1989 11.0 percent July 1, 1989-June 30, 1990 11.5 percent July 1, 1990-Maturity Date (hereinafter defined) 12.0 percent Unless previously paid by Borrower, the outstanding balance of Deferred Interest not previously added to principal in accordance herewith, if any, shall be added to the principal balance hereof on the first day of each calendar quarter beginning with October 1, 1986, and shall accrue interest thereafter at the Contract Index Rate provided for principal, which interest shall be payable in the same manner as is applicable to interest on the original principal balance hereof. Notwithstanding the foregoing, Borrower may pay Deferred Interest at any time without penalty. Of the documentary stamp tax American National paid, $720 was on account of future advances that Petitioner's Exhibit No. 1 was designed to secure, in the event GECC made them.
Findings Of Fact The area of dispute involves an alleged insufficiency of payment of documentary stamp tax and documentary surtax, and associated penalties for the insufficiencies, in transactions which are reflected in the Exhibit "C" to the Petition. The parties did not dispute the accuracy of the computation found in the Exhibit "C" to the petition, which was prepared by an investigator of the Respondent. The Petitioner contends that he is only responsible for paying the amount of documentary stamp tax and documentary surtax on the value of the real estate which was conveyed to the several grantees shown in Exhibit "C", as opposed to paying documentary stamp tax and documentary surtax on the value of the real estate, together with the value of the home which was built on that real estate. The facts show that the Petitioner has only paid documentary stamp tax and documentary surtax on the value of the real estate which he conveyed to the several grantees in Exhibit "C". In describing the arrangement between the Petitioner and his wife with the several grantees, The Petitioner and Respondent stipulated that Petitioner's Exhibit #1 accurately represents the documents involved in the initial contact between the Petitioner and the grantee. The Petitioner's Exhibit #1 is a composite exhibit which shows a blank sales contract and installment contract prepared by the Petitioner, together with a copy of an executed sales contract and installment contract in behalf of one of the several grantees. This document has as its function providing a rough estimate in behalf of the parties on the question of the cost of a lot and home, together with the attendant tangible property items that go with the sale. This document is subject to the special conditions of the Farmers Home Administration of the United States Department of Agriculture and is not binding on the grantee. The parties stipulated that Petitioner's Exhibit #2, a composite exhibit, was utilized in the case of the several grantees in this matter. The Petitioner's Exhibit #2 is a construction contract in blank form and a form as executed in behalf of one of the grantees. This construction contract is prepared by the Farmers Home Administration, United States Department of Agriculture. This construction contract identifies the price and contains a general description of the lot which was sold by the Petitioner, and is executed after the grantee has met with the Farmers Home Administration and been approved for a loan. Prior to the execution of the construction contract, the grantees came to the place of business of the Petitioner, which is an office in the back of his home. This meeting was not pursuant to any advertising other than communication by other parties who had sought the services of Jerry W. Thomas, who is a general contractor, certified by the Farmers Home Administration to build homes which the Farmers Home Administration is financing. The grantee would come to Mr. Thomas's office and discuss the construction of a home, and, in the case of the grantees in Petitioner's Exhibit "C", it is contemplated that that home would be built on a lot which Mr. Thomas and his wife owned and would convey to the grantee. In fact, in every instance reflected in Exhibit "C" the home was constructed by Mr. Thomas and was constructed on a lot which Mr. Thomas and his wife sold to the grantee. Before the construction contract was signed, it was necessary for the grantee to be approved for financing by the Farmers Home Administration. It was also necessary under the system that was utilized in financing the matters set forth in the Exhibit "C", that the Petitioner sign an irrevocable option to purchase realty, which was executed in favor of the several grantees. A replica of this form is made a part of the record as Petitioner's Exhibit #4. The meaning of the option to purchase real property, was that the Petitioner stated a price for his real estate and he was bound by that price and must sell the real estate to the grantee, whether or not the Petitioner ever built a home on the real estate. This option to purchase real property was a precondition to the overall financing scheme which was utilized by the Farmers Home Administration. This particular method was identified as a contract method. Should the appraisal of the property as conducted by the Farmers Home Administration indicate that the asking price stated in the option to purchase real property was in excess of the appraised value, then the Petitioner could have refused to sell. In the case of all the grantees found in Exhibit "C", the price stated for the real property was acceptable and the contract was consummated. The technique for executing the contract conditions once the option to purchase real property had been completed and accepted was as follows: A closing was held at which point a warranty deed was executed by the Petitioner and his wife in favor of the several grantees. Payment for the real estate was made from a supervised account in behalf of the several grantees. The warranty deed, which form is shown in Petitioner's Exhibit #3 and is stipulated as being the form utilized in all conveyances alluded to in Petitioner's Exhibit "C" was then recorded. At the moment of recording, documentary stamp tax and documentary surtax was paid on the amount of the real property only. On the day that the warranty deed was recorded, a mortgage and note was also recorded in favor of the Farmers Home Administration for the amount financed by the grantees. Subsequent to the closing alluded to in paragraph one and two of this explanation, the grantee, at his option, had the home constructed. The option referred to, pertains to the ability to hire any contractor that he desired to construct the home on the property which had been conveyed to him. The Petitioner would not have had the right to oppose the grantees' choice of contractor. Had the several grantees desired to choose other contractors, then the Petitioner would have been required to sell his real estate at the option price and that would have concluded the contract. In all cases shown in the Exhibit "C" to the petition, Mr. Thomas not only conveyed the property but constructed the homes on the property as the chosen contractor and was paid out of the supervised account through scheduled payments and a final disbursement made at the 100 percent completion point. Subsequent to the time that the warranty deed conveying the lot, together with the mortgage and note, were recorded, an audit was performed by the Respondent and an assessment placed for the additional value reflected in the the cost of constructing the home. This assessment was for the unpaid documentary stamp tax, documentary surtax and penalties associated with those deficiency assessments.
Findings Of Fact By warranty deed dated July 9, 1973, Floyd L. and Michael Lewis conveyed the fee simple title to certain realty in North Miami Beach to Petitioners Eugene J. Howard and Herbert Seidel. The purchase price for the property was $405,000. The property sold consisted of a twenty-two (22) unit apartment building with twenty (20) furnished apartments and included storage shed, a pool, patio and dock furniture. The closing statement signed by the sellers and purchasers stated: "Florida documentary stamps - on deed - $1,215.00, Florida documentary surtax - on deed - $132.20." $1,347.20 was credited to the Petitioners Howard and Seidel. Petitioners actually paid $10.85 surtax and $132.20 documentary tax. The 1974 tax assessment of the Dade County Property Appraiser for the property was $241,769.00 realty and $14,500.00 for the personalty. Petitioner contends: That part of the purchase price was applicable to -personal property. That the Hearing Officer should make an allocation of the realty included and an allocation for the personalty included. That the Petitioners believe they are entitled to the equitable defense of laches in that the Respondent did not advise Petitioners of the possible error of miscalculation until approximately two years had passed. That if the stamp tax is found to be due and if a penalty is included, the penalty is "excessive penalty" under the Eighth Amendment of the Constitution of the United States of America, and Article I, Section 17, of the Florida Constitution. Respondent contends: That there was an agreement between the Parties, in a signed document that $1,215 in documentary stamps and $132.20 in surtax stamps, reflecting the actual consideration paid for the realty under consideration, would be affixed to the conveyance. That Petitioners failed to fulfill such a an agreement and affixed $132.20 in documentary stamps and $10.85 in surtax stamps to the deed. . That the Department is entitled to the delinquent taxes plus penalty. That the assessment is dated July 9, 1975 and a three- year statute of limitations is applicable. The Hearing Officer further finds: The purchase price for the property under consideration was $405,000. Documentary stamps required on such a purchase were $1,215.; that stamps actually paid were in the amount of $132.20, that $10.85 was actually paid and still due and owing is $121.35. That the Petitioners as well as the Sellers were aware of the proper amount of tax due and signed a receipt reflecting the monies allocable for documentary and surtax stamps. That the Petitioners failed either intentionally or negligently to pay the proper amount of documentary and surtax stamps at the time of recording the deed.
Recommendation Assess the documentary stamps and the documentary surtax against Petitioners together with applicable penalties. DONE and ORDERED this 9th day of July, 1976, in Tallahassee, Florida. DELPHENE C. STRICKLAND Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Eugene J. Howard, Esquire 2212 Biscayne Blvd. Miami, Florida 33137 Harold F. X. Purnell, Esquire Assistant Attorney General Department of Legal Affairs The Capitol Tallahassee, Florida 32304
The Issue By this petition, American Foam Rubber Distributors, Inc. (AFRD) and Edward Rothbard seek to have the Department of Revenue's assessment for documentary stamp tax and penalties on a transfer of real property by quit claim deed from Edward Rothbard to AFRD set aside. Petitioners contend that the transfer was without consideration and therefore nontaxable under sec. 201.02, F.S. , while Respondent contends that consideration flowed to the grantor by virtue of the grantee making the mortgage payments; and therefore, documentary tax stamps were due on the deed of conveyance computed on the amount of the mortgage at the time of transfer. One witness testified in behalf of Petitioners and four exhibits were admitted into evidence. From the pleadings, interrogatories and evidence presented at the hearing, the facts are largely undisputed and are as follows:
Findings Of Fact Edward Rothbard owns 100 percent of the outstanding stock of AFRD and he has been the sole shareholder and chief executive officer of the company since the company s inception in 1962. On March 9, 1973 the Seaboard Coastline Railroad (SCL) entered into an agreement with AFRD to sell a tract of land in Miami to the latter at an agreed price of $116,978.00 with certain conditions. The principal condition was that the grantee erect a warehouse on the property within one year from the date of the transfer. By deed dated August 23, 1973 the property was conveyed by SCL to Edward Rothbard rather than as per the contract. This deed was apparently delivered in late October, 1973 and the proper documentary stamp tax was paid on this transaction. Mr. Rothbard's testimony that the sole reason for taking the property in his name was to expedite the transaction was not rebutted. In exhibits 1 and 2 copies of letters from SCL dated September 21 and 26, 1973, SCL referred to Rothbard as nominee of AFRD to be grantee of the property. Exhibit 4, the title page of an interim title insurance binder, indicates that the title insurance policy on the property purchased from SCL was intended to be in the name of AFRD. In August, 1974 the building erected on the site for the use and benefit of AFRD was completed and Edward Rothbard mortgaged the property to secure a note in the amount of $550,000.00. His wife also executed the note and mortgage. AFRD occupied the building in September, 1975 and made all mortgage payments to the mortgagee including the first payment. By quitclaim deed executed February 26, 1975 Edward Rothbard conveyed the property here involved to AFRD subject to the mortgage. Minimum documentary tax stamps were placed on this deed. On February 26, 1975 the outstanding balance due on the mortgage was $543,969.59.
The Issue Whether or not the Respondent, State of Florida, Department of Revenue, is entitled to documentary stamp tax in accordance with Section 201.02, Florida Statutes, in the amount of $326.10 and penalty in the like amount of $326.10 in accordance with Section 201.17, Florida Statutes, for a transaction between Petitioners in an assignment of interest of Gallagher's of Miami, Inc., to the Petitioners.
Findings Of Fact The Petitioners were the stockholders of Gallagher's of Miami, Inc. Among the assets of Gallagher's of Miami, Inc., were the rights under a sublease undertaken between B.G.L. Corporation and Gallagher's of Miami, Inc. dated September 25, 1976 and recorded in Official Record Book 5663, at page 261 of the Public Records of Dade County, Florida. This sublease was an amendment to a sublease which was dated June 1, 1976, recorded in Official Record Book 4768, Page 176 of the Public Records of Dade County, Florida, between B.G.L. Corporation, a Florida corporation as lessor, and KSJ Corporation, a Florida corporation as lessee. One of the conditions of Gallagher's lease obligation was responsibility for the payment of a mortgage dated May 1, 1965, recorded in Official Record Book 4592, at Page 161, of the Public Records of Dade County, Florida, from KSJ Corporation, a Florida corporation to Joseph Z. Lipsky and Evalyn Lipsky, as amended by agreement dated August 30, 1965 between KSJ Corporation and Joseph Z. Lipsky and Evalyn Lipsky. Pursuant to a plan of liquidation of Gallagher's of Miami, Inc. that corporation executed and delivered to Petitioners an assignment of the lessee's interest in the aforementioned lease to which Gallagher's of Miami, Inc. was a party. The assignment of lease can be found as Exhibit A to the Petition filed by the Petitioners. The contents of such assignment are found to be fact. By letters of July 30, 1975 and March 10, 1975, the Respondent indicated its intention to assess tax in the amount of $326.10 upon the document representing the assignment between Gallagher's of Miami, Inc. and the Petitioners. The amount of documentary stamp tax was premised on the aforementioned mortgage which at the time of the proposed assessment was valued at $108,750. In addition the Respondent indicated its intention to impose a penalty in a like amount of $326.10. The assignment was in fact executed, pursuant to a plan of liquidation, which plan is shown as Petitioners' Exhibit C attached to the petition. The Petitioners' Exhibit C is established as fact. Petitioners in receiving the assignment in liquidation of Gallagher's of Miami, Inc. received such assignment in proportion to their stock holdings in that corporation. The assessments of $326.10 for documentary stamp tax and $326.10 in penalty on such assessment, and the challenge to the assessments are the subject matter in this cause. Subsequent to the assignment of leases and agreement between Gallagher's of Miami, Inc. and the Petitioners a further assignment was made between the Petitioners and Stan-Mil, Inc. of the same property which took place on December 16, 1974.
Recommendation It is recommended that the assessment of documentary stamp tax under 201.02 F.S. in the amount of $326.10 and the penalty in the amount of $326.10, as a penalty pursuant to 201.17 F.S. be set aside. DONE and ENTERED this 28th day of February, 1977, in Tallahassee, Florida. CHARLES C. ADAMS Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 28th day of February, 1977. COPIES FURNISHED: Lewis M. Kanner, Esquire Williams, Salomon, Kanner & Damian 1003 DuPont Building 169 East Flagler Street Miami, Florida 33131 Caroline C. Mueller, Esquire Assistant Attorney General Department of Legal Affairs The Capitol Tallahassee, Florida 32304 =================================================================
Findings Of Fact At the beginning of the hearing in this cause, it was stipulated and agreed to that certain pleadings and exhibits would constitute the factual basis for consideration of the case. Specifically, the parties agreed that the First Amended Petition and its parts that were admitted by the Respondent; together with interrogatories propounded by the Respondent to the Petitioner and the answers thereto; and Exhibits A and C attached to the First Amended Petition; would be the underlying facts that could be examined in arriving at a statement of the facts, and ultimate conclusions of law. A further refinement in the stipulation and agreement of the parties was their acceptance of the stated amount of $952.05 in surtax owed, if it were concluded that any amount of surtax was properly assessed. Finally, the parties agreed that copies of the aforementioned Exhibits A and C could be utilized in deliberating this case. (Copies of the First Amended Petition, Answer to that Petition, Interrogatories propounded by the Respondent and Answers provided by the Petitioner, and Exhibits A and C attached to the First Amended Petition, are hereby made a part of the record herein and forwarded to the agency head in lieu of a transcript.) The Petitioner in this action is Wisconsin Real Estate Investment Trust, whose address is Marine Plaza, 111 East Wisconsin Avenue, Milwaukee, Wisconsin 53202. On or about April 11, 1975 the Petitioner was a grantee in the certain Warranty Deed from James E. Russell, Jr., as trustee to Wisconsin Real Estate Investment Trust, dated April 11, 1975, and recorded May 20, 1975, in Official Records Book 2620, Page 1812, Public Records of Orange County, Florida (hereinafter referred to as the "Warranty Deed"). A copy of the said Warranty Deed is a part of the First Amended Petition found as Exhibit A. The conveyance of the property as set forth in the Warranty Deed was subject to certain mortgages described in detail upon Exhibit A attached to the Warranty Deed and identified briefly as follows, to wit: A first mortgage to Prudential Insurance Company of America in the amount of three million three hundred thousand dollars ($3,300,000); Four "Second" mortgages to the Petitioner herein, said mortgages being in the total amount of eight hundred sixty five thousand, eight hundred fifty four dollars ($865,854); A "third" mortgage granted by Orlando Quadrant Development Limited to United Associates, Inc. in the amount of five hundred thousand dollars ($500,000). Exhibit A to the Warranty Deed also contained the following provision: "It is the intent of the Grantor and the Grantee that this conveyance shall not cause a merger of the mortgages held by the Grantee which are described above, and the fee simple title of the Grantee received hereby in that said mortgage shall remain in full force and effect and shall continue to be a lien on the property." Documentary stamps were paid with respect to the full amount of the purchase price in the amount of four million, six hundred sixty five thousand, eight hundred fifty four dollars ($4,665,854.) and minimum stamps for surtax in the amount of fifty five cents ($.55) were paid. On or about August 20, 1975, the Respondent delivered to Petitioner a form letter styled "Request for Information and Response" requesting the reason why minimum surtax was paid. Petitioner replied that minimum surtax was paid because the transaction constituted a sale and not a deed in lieu of foreclosure. A copy of the "Request for Information and Response" was attached as Exhibit B to the First Amended Petition. On or about November 20, 1975, the Respondent sent to Petitioner a "Proposed Notice of Assessment" informing Petitioner of a proposed imposition of tax in the amount of nine hundred fifty two and 05/100 dollars ($952.05) and a penalty in the amount of nine hundred fifty two and 05/100 dollars ($952.05), for a total assessment of one thousand nine hundred four and 10/100 dollars ($1,904.10). A copy of the "Proposed Notice of Assessment" was attached to the First Amended Petition as Exhibit C. In response to the Proposed Notice, the Petitioner, through counsel, wrote to Respondent on December 11, 1975, questioning the necessity for surtax charge under the present status of Florida Law. In that letter there was a formal request for conference within thirty (30) days of the proposed assessment to discuss the assessment before it became final. A copy of the letter of December 11, 1975 was Exhibit D to the First Amended Petition. On December 24, 1975, the Petitioner wrote the Respondent with respect to a telephone conference that was held with Respondent wherein the Respondent indicated there was a legal authority for imposition of surtax against Petitioner. The Respondent sent the information to Petitioner under cover of a letter dated January 2, 1976, and the Petitioner responded to said letter by letter dated January 9, 1976 wherein the position of the Petitioner with respect to the imposition of the surtax was set forth in detail. A copy of the Petitioner's letter of January 9, 1976, was made Exhibit E to the First Amended Petition. Subsequent to the letter of January 9, 1976, Respondent requested by telephone that Petitioner provide Respondent with a copy of the Declaration of Trust of Petitioner, which said Declaration of Trust was sent to Respondent under cover letter dated June 7, 1976. On September 8, 1976, Respondent sent Petitioner a notice that a Tax Warrant and Execution had been prepared and would be filed. A copy of said letter of September 8, 1976 was made Exhibit F to the First Amended Petition. Informal efforts to resolve the dispute were not effective and this led to a formal hearing. A closer look at the events involved in the conveyance of the Warranty Deed points out that the first mortgage held by Prudential Life Insurance Company of America was in default at that time, and the institution of foreclosure proceedings was eminent. The Grantee, Petitioner, held three mortgages subordinate to the first mortgage held by Prudential Life Insurance Company, and it was felt that the conveyance from Grantor to Grantee was the best method of protecting Grantee's interest. The conveyance did not provide for merger of the ownership interest and the mortgage interest in favor of the Grantee, on the face of the Warranty Deed. In fact, the Warranty Deed disclaims such merger, as stated before. There was no agreement either in writing or verbally between the Grantor and the Grantee with respect to payment or non-payment of the second mortgages held by the Grantee, subsequent to the transfer. None of the second mortgages held by the Grantee, Petitioner, have been satisfied of record at the time of conveyance or since that time. There has been no payment of principal and interest on the second mortgages in question since the conveyance under the Warranty Deed. The Petitioner advances its argument in opposition to the documentary surtax premised on the assertion that such tax does not apply to amounts of existing mortgages on the real estate sold, and therefore no surtax should be levied, because the four second mortgages at issue are still in existence. In stating this position the Petitioner refers to 201.021, F.S. which states: "(1) A documentary surtax, in addition to the tax levied in s. 201.02, is levied on those documents taxed by s. 201.02 at the rate of 55 cents per $500 of the consideration paid; provided, that when real estate is sold, the consideration, for purposes of this tax, shall not include amounts of existing mortgages on the real estate sold. If the full amount of the consideration is not shown on the face of the document, then the tax shall be at the rate of 55 cents on each $500 or fractional part thereof of the consideration." The Petitioner also makes reference to Rule 12A-4.12(4)(e) pertaining to the definition of consideration as found in 201.021, F.S. The pertinent provision of that rule says: "For Consideration - Surtax: The term "consideration" under 201.021, F.S., includes but is not limited to: (e) Conveyance where outstanding mortgage debt, lien or encumbrance is cancelled, satisfied, or otherwise rendered unenforceable by the conveyance." According to the Petitioner the four subject mortgages are not cancelled, satisfied, or otherwise rendered unenforceable by the conveyance, and consequently there is no taxable "consideration". They rely on the aforementioned language of the Warranty Deed which disclaims the merger of the mortgage debt with the equity of redemption when the conveyance was made. Moreover, under the Petitioner's argument, because it has stated its intention not to have a merger that stated intention should control and no merger should apply. For this proposition the Petitioner cites the case of Friedman v. Pohnl, 143 So.2d 690, (3 DCA Fla. 1962). Within the language of the case is reference to the case of Jackson v. Relf, 26 Fla. 465, 8 So. 184 (Fla. 1890). The Jackson case, supra, states that it is the intention of the person in whom the debt and equity of redemption are united that determines if there is a merger of the mortgage debt and equity of redemption, or if the mortgage debt continues to be in force and effect. The Petitioner also argues that the reason it elected not to merge the debt claim and equity of redemption, was to protect its priority position under the second mortgages over the third mortgage holder in the case of any sale to any third party and assumption of a second mortgage by a third party or in the case of any formal foreclosure. The Respondent counters the Petitioner's argument by claiming that the four subject second mortgages have been extinguished, thereby entitling the Respondent to impose a documentary surtax under the authority of 201.021(1), F.S. and Rule 12A-4.12(4)(e) F.A.C. The Respondent feels that you may look behind the disclaimer statement found in the Warranty Deed and by the facts of the conveyance determine that there is a merger for purposes of taxation. The Respondent relies upon a series of case decisions in arriving at this position. The first two cases Gay v. Inter-County Tel & Tel. Co., 60 So.2d 22 (Fla. 1952) and Choctawhatchee Electric Corp. v. Green, 132 So.2d 556 (Fla. 1961), it argues, stand for the proposition that the Documentary Stamp Tax Act in Florida is similar to the Federal Act 26 U.S.C.A. 1800 et. seq. and the same construction given to the federal tax cases in the federal courts, may be given to the Florida documentary stamp tax cases in the Florida cases. Using that theory as a basis for the persuasiveness of the federal authority, the Petitioner then cites the cases of Mutual Life Ins. Co. of New York v. United States, 110 F Supp. 606 (1953) and Railroad Federal Sav. & Loan Ass'n. v. United States, 135 F.2d 290. According to the Respondent, the two federal cases were sufficiently close in their facts to be applicable to the case at bar. Furthermore, since these cases required the payment of federal documentary tax, the Respondent believes that the rationale used in those cases would sustain a claim for documentary surtax and penalty in the case sub judice. An examination of the two federal cases shows them to be distinguishable in their facts. Mutual Life, supra, is distinguishable for two reasons. The first reason being that certain mortgage debts spoken of in that case had clauses indicating that the mortgage on the property was not to merge with the fee and that the mortgage would remain with the property notwithstanding conveyance; however, in all those cases a covenant had been given not to sue on the mortgage debt, which extinguished the mortgage debt. No such covenant has been given in the case at bar, and consequently the consideration, constituted of the extinguishment found in Mutual Life, supra, is not found in the case at bar. There is a second distinguishing factor between the Mutual Life case and the present case. That pertains to the fact that the action in Mutual Life involved the laws of the State of New York, which were being applied to a different set of facts. Under the New York Law, consideration was also found to exist notwithstanding a clause which disclaimed any merger of the fee and mortgage. This situation pertained to five mortgage cases in which no covenant not to sue had been given. The New York Law, according to the opinion in Mutual Life, called for the extinguishment of the mortgages in those five cases, due to the statutory statement which prohibited deficiency judgments on the mortgage indebtedness, because the fair market value of the property exceeded the debt claim. Therefore under the statement of the case, the mortgage indebtedness was extinguished as a matter of law, by transferring the interest in the fee to the mortgagee. A tax was placed on that transfer, based upon the extinguishment of the mortgage debt as consideration. The law in Florida does not prohibit a foreclosure suit by the second mortgage holder in the way set forth in the New York Law. In addition, the five mortgages in the Mutual Life case were not surrounded by first and third mortgages as is the case herein. The existence of the first and third mortgages, is a legitimate reason to maintain the second mortgages held by the Petitioner, as a protection against the other mortgagees. The other federal case cited by the Petitioner is the Railroad Federal case, supra. This case involved a deed in lieu of foreclosure and the imposition of a tax on the balance of principal and accrued interest due on the mortgages plus any cash amount paid. These mortgages involved in the Railroad Federal case were later cancelled by the resale or the subsequent purchase subject to the mortgages. The deed also contained an agreement not to seek a deficiency judgment on the part of the mortgagee which made it clear that the mortgagee was taking the property in full satisfaction of the mortgage indebtedness. In fact the mortgagee did not seek a deficiency judgment, nor was any further interest paid or demanded. This is distinguishable from the case at bar, in that the clear intent of the mortgagor and mortgagee herein is to keep active the second mortgages. The Respondent cited several administrative cases namely: Friedman v. State of Florida, Department of Revenue, Case No. 75-1304: Hutner v. State of Florida, Department of Revenue, Case No. 75-1771; and Atico Mortgage Investors v. State of Florida, Department of Revenue, Case No 77-1124. Respondent cited too, Opinion of the Attorney General, 059-203. Without discussing those administrative cases and the Attorney General's Opinion, they are all distinguishable in their facts and would not appear to have application to the case at bar. Based on an analysis of the evidential facts and the argument of the parties, the position of the Petitioner is well founded and the documentary surtax and penalty should not be paid.
Recommendation It is recommended that the subject assessment of documentary surtax and penalty be set aside. DONE and ENTERED this 6th day of October, 1977, in Tallahassee, Florida. CHARLES C. ADAMS, Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: R. Lee Bennett, Esquire Lowndes, Peirsol, Drosdick & Doster, P.A. Suite 443, First Federal Building Post Office Box 2809 Orlando, Florida 32802 Edwin J. Stacker, Esquire Assistant Attorney General Department of Legal Affairs The Capitol Tallahassee, Florida 32304 John D. Moriarty, Esquire Department of Revenue Division of Administration Carlton Building Tallahassee, Florida 32304
Findings Of Fact On December 27, 1976, Petitioner entered into an Assumption Agreement and Release of Seller, a copy of which is appended to this recommended order as Exhibit "A". The agreement contains, in writing, the obligation of Flagler Hospital, Inc., to pay Petitioner the sum of $238,464,52. The document is not a renewal of an existing obligation. On April 25, 1977, Respondent gave Petitioner notice that a penalty and interest under Section 201.08, Florida Statutes, had been assessed against it in the amount of $729.42 because the agreement constituted a note or written obligation to pay money. The agreement was executed in the State of Florida. No documentary stamp taxes have been paid regarding the agreement. The mathematical computation of the tax, penalty and interest is correct. The agreement represents the assumption of an existing debt between Petitioner and Inter-Medic Health Centers, Inc., by Flagler Hospital, Inc. The original debt is evidenced by a note and mortgage dated February 11, 1976. Documentary stamp taxes in the amount of $360.00 were paid as to the original note. No additional indebtedness was created by the agreement, but the agreement releases the original obligor, Inter-Medic Health Centers, Inc., from liability.
Findings Of Fact The Petitioner inherited the property which is the subject of this matter from his uncle who died on June 30, 1971. Petitioner sought to sell the property, and on February 7, 1972 a Mr. Skinner made an offer to purchase the property for $412,000. Petitioner rejected the offer. On July 23, 1973, Petitioner entered into a contract to sell the property for $915,000 to Virgil Norris and Mavis Y. Norris. The contract called for a $50,000 deposit or binder, $200,000 cash to be delivered at the time of closing, and a $665,000 purchase money mortgage. Just prior to closing the Norrises informed Petitioner that they did not have the $200,000. Petitioner assisted the Norrises in arranging a $200,000 mortgage to the Barnett Bank. Petitioner subordinated his own mortgage to the mortgage with Barnett Bank. On February 7, 1974, the Norris transaction was consummated. Joint Exhibits 1-3 were executed and recorded. The Norrises were unable to make payments on either mortgage. On January 13, 1975, the Petitioner initiated foreclosure proceedings. In lieu of foreclosure the Norrises executed a quitclaim deed to the Petitioner. The quitclaim deed and an accompanying agreement were received in evidence as Joint Exhibit 4 and 5. When the quitclaim deed was executed the Norrises had made no payments on their purchase money mortgage to the Petitioner, and had paid only interest on the purchase money mortgage to the Barnett Bank. The Norrises' mortgage to the Petitioner was satisfied through the execution of the quitclaim deed. The face amount of the mortgage, and the amount of the mortgage debt extinguished by the quitclaim deed was $665,000. Petitioner also agreed to assume the mortgage to the Barnett Bank. The face amount of that mortgage was $200,000 and the amount of debt that was extinguished through the quitclaim deed transaction was $200,000. The total amount of debt extinguished through the quitclaim deed was $865,000. When the quitclaim deed from the Norrises to the Petitioner was executed the actual market value of the subject property was $450,000. Documentary stamp tax and documentary surtax stamps were affixed to the quitclaim deed based upon the consideration for the deed being the actual market value of the property. Petitioner contends that the consideration for the quitclaim deed which was taken in lieu of a foreclosure action was the actual market value of the property. Respondent contends that the consideration for the quitclaim deed was the amount of mortgage debt extinguished as a result of execution of the deed.
The Issue Whether the petitioners are entitled to a refund of the documentary stamp taxes paid on a Special Warranty Deed conveying real property from the Federal Home Loan Mortgage Corporation to one of the petitioners.
Findings Of Fact Based on the facts alleged in the petition for administrative hearing, the responses to requests for admission, and the facts stipulated to at the hearing on the motion for recommended summary final order, the following findings of fact are made: On September 27, 1994, Freddie Mac conveyed to Abe Saada by a Special Warranty Deed real property located in Dade County, Florida. Regina Saada is not a party to the Special Warranty Deed. The U.S. Department of Housing and Urban Development Settlement Statement prepared for the closing on the property showed that $9,600.00 in "state tax/stamps" was owed on the deed, of which $4,800.00 was to be paid from the funds of the seller, Freddie Mac, and $4,800.00 was to be paid from the funds of the borrower, Abe Saada. Pursuant to its agreement with Mr. Saada, Freddie Mac paid $9,600.00 to the Clerk of Court as the documentary stamp tax on the deed on or about September 28, 1994. The deed was recorded in the Dade County Official Records at Book 16525 at pages 3583-3585. Abraham Saada is not exempt from the documentary stamp tax.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue enter a Final Order dismissing the Petition for Chapter 120 Administrative Hearing to Contest Denial of Stamp Tax Refund filed by Abraham Saada and Regina Saada. DONE AND ENTERED this 8th day of May, 1997, in Tallahassee, Leon County, Florida. PATRICIA HART MALONO Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (904) 488-9675 SUNCOM 278-9675 Fax Filing (904) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 8th day of May, 1997.
