95-001247 Kenneth Blume And Linda Blume vs. Department Of Revenue Status: Closed Recommended Order on Monday, October 23, 1995.

Summary: Respondent properly assessed additional tax on quit claim deed transferring an interest in real property from husband to husband and wife.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

KENNETH AND TINA BLUME, )

)

Petitioners, )

)

vs. ) CASE NO. 95-1247

)

DEPARTMENT OF REVENUE, )

)

Respondent. )

_________________________________)

RECOMMENDED ORDER

Pursuant to notice, a telephone hearing was held in this case on September

1, 1995. Suzanne F. Hood, Hearing Officer with the Division of Administrative

Hearings, presided over the proceeding from her office in Tallahassee, Florida.

Petitioners Kenneth and Tina Blume were located in Fayetteville, Arkansas.

Counsel and witnesses for Respondent Department of Revenue were located in

Tallahassee, Florida.

APPEARANCES

For Petitioners: Mr. Kenneth Blume, Pro Se

Mrs. Tina Blume, Pro Se

159 West 29th Court

Fayetteville, Arkansas

For Respondent: Nancy Francillon, Esquire

Mark T. Aliff, Esquire

Assistant Attorneys General

Office of the Attorney General

The Capitol, Tax Section

Tallahassee, Florida 32399-1050

ISSUE

The issue in this case is whether Respondent Department of Revenue properly

assessed additional documentary stamp tax on a quit claim deed transferring

encumbered property from Petitioner Kenneth Blume to Petitioners Kenneth Blume

and Tina Blume, as husband and wife.

PRELIMINARY STATEMENT

On June 24, 1992, Petitioners Kenneth and Tina Blume (Petitioners) recorded

a quit claim deed at the office of the Clerk of the Circuit Court in and for

Santa Rosa County, Florida. Respondent Department of Revenue (Respondent)

subsequently assessed Petitioners additional documentary stamp taxes pursuant to

Sections 201.01 and 201.02, Florida Statutes (1991), and Rules 12B-4.004 through

12B-4.014, Florida Administrative Code. Petitioners protested the assessment

and filed a Petition for administrative hearing on March 7, 1995. Respondent

referred the case to the Division of Administrative Hearings for assignment of a

Hearing Officer on March 13, 1995.

The undersigned issued a Notice of Telephone Hearing and Order of

Instructions scheduling the hearing for August 11, 1995. On August 7, 1995, the

parties filed an Agreed Motion to Continue the Final Hearing. The undersigned

entered an order rescheduling the hearing for September 1, 1995. The parties

filed their Joint Pre-Hearing Stipulation on August 25, 1995. Respondent filed

an Amended Exhibit List on August 31, 1995.

During the hearing on September 1, 1995, Petitioner Kenneth Blume testified

on behalf of himself and his wife, Petitioner Tina Blume. Petitioners offered

one (1) exhibit which was accepted into evidence. Respondent presented the

testimony of one (1) witness and offered ten (10) exhibits which were accepted

into evidence.

The court reporter filed the hearing transcript on September 20, 1995. On

September 29, 1995, the undersigned entered an order granting Petitioners'

request for extension of time to file proposed findings of fact. The parties

filed their proposed recommended orders on October 9, 1995. The Appendix to

this Recommended Order contains specific rulings on each of the parties'

proposed findings of fact.

FINDINGS OF FACT

1. Petitioner Kenneth Blume, an unmarried man, purchased real property in

his name on December 19, 1988.

2. Petitioner Kenneth Blume obtained a mortgage on the property in his own

name with PNC Mortgage Servicing Company.

3. Petitioner Kenneth Blume married Petitioner Tina Blume on November 3,

1990.

4. Thereafter, Petitioner Kenneth Blume contacted a title company, Advance

Title, Inc. to refinance the property and transfer the property from himself, as

sole owner, to himself and his wife, Petitioner Tina Blume.

5. On June 19, 1992, as part of the refinancing transaction, Petitioner

Kenneth Blume transferred his individual mortgage with PNC Mortgage Servicing

Company to Foundation Financial Services, Inc. which paid off Petitioner Kenneth

Blume's original mortgage.

6. On June 19, 1992, Petitioner Kenneth Blume gave Petitioner Tina Blume a

legal interest in the property by transferring half of the encumbered property

to her by quit claim deed. Petitioner Kenneth Blume executed the deed in the

presence of Cheryl Scott, a notary public and an employee of Advance Title, Inc.

7. Said deed lists Petitioner Kenneth Blume as grantor and Petitioner

Kenneth Blume and his wife, Petitioner Tina Blume, as grantees.

8. On June 19, 1992, as part of the refinancing transaction, Petitioners

created a new first mortgage on the subject property in favor of Foundation

Financial Services, Inc. This mortgage is the obligation of both Petitioners.

9. The quit claim deed was prepared by Advance Title, Inc. on Petitioners'

behalf.

10. The quit claim deed showed that the consideration paid for the

transfer of the encumbered property was $10.

11. On June 24, 1992, Advance Title, Inc. went to the Clerk of the Circuit

Court's Office to record the quit claim deed.

12. As a condition precedent to the recordation of any deed transferring

an interest in real property, Section 201.022, Florida Statutes, requires that

the grantor, grantee, or agent for the grantee, execute and file a return with

the Clerk of the Circuit Court. The return is identified as a Form DR-219,

Return for Transfer of Interest in Real Property.

13. On June 24, 1992, Advance Title, Inc. filled out and signed the Form

DR-219, Return for Transfer of Interest in Real Property, as the agent of

Petitioners.

14. Advance Title, Inc., as Petitioners' agent, did not disclose the full

amount of consideration on Form DR-219 as required by question 3. Instead,

Advance Title, Inc. wrote that the property was sold for $10.

15. Advance Title, Inc. did not disclose the extinguished or refinanced

mortgage on Form DR-219. In response to the question whether the sale was

financed, Advanced Title, Inc. did not check the "yes" box on Form DR-219.

16. Form DR-219 defines the word "consideration", in pertinent part, as

follows:

the purchase price of the property or the

total amount paid or to be paid for the transfer

of any interest in real property. Consideration

includes: cash; new mortgages placed on the

property to finance all or part of the purchase;

existing mortgages on the property either assumed

or taken subject to; mortgages that are cancelled,

satisfied or rendered unenforceable, settled by

the sale or transfer or in lieu or foreclosure

. . . .

This definition is consistent with the Legislature's definition of consideration

set forth in Section 201.02(1), Florida Statutes (1991), applicable here.

17. Advance Title, Inc., as Petitioners' agent, stated on Form DR-219 that

documentary stamp tax in the amount of $.60 was due on the subject transfer

of interest in real property.

18. On June 24, 1992, Advance Title, Inc. presented the quit claim deed to

the Clerk of the Circuit Court for recordation together with the Form DR-219.

19. The Clerk recorded the quit claim deed and collected $.60 in

documentary stamp tax based on information that Advance Title, Inc. provided on

the Form DR-219.

20. The Clerk did not tell Advance Title, Inc. or Petitioners that

additional documentary stamp taxes were due on the transfer.

21. Respondent conducted a routine audit of the Clerk's records and

determined that additional documentary stamp taxes were due on the deed

transferring an interest in the encumbered property to Petitioner Tina Blume.

22. The record contains no competent substantial evidence to show that

Petitioners fall within an exception to or exemption from paying the additional

documentary stamp tax in question here. Moreover, there is no competent

persuasive evidence that an agent of the state of Florida or Santa Rosa County

misrepresented a material fact on which Petitioners relied to their detriment.

23. Petitioners have not met their burden of proving by a preponderance of

the evidence that they do not owe additional documentary stamp taxes on the real

estate transaction at issue here.

CONCLUSIONS OF LAW

24. The Division of Administrative Hearings has jurisdiction over the

parties and the subject matter of this proceeding. Section 120.57(1), Florida

Statutes.

25. Section 201.02(1), Florida Statutes, levies a tax on deeds an other

instruments relating to real property or interests in real property "prior to

recordation." Rule 12B-4.007(2), Florida Administrative Code, requires that all

instruments be properly stamped "prior to recordation."

26. Pursuant to Sections 201.02(1) and 201.022, Florida Statutes, the

amount of tax levied is related to the amount of actual consideration involved

in a real estate transaction.

27. Section 201.02(1), Florida Statutes (1991), defines consideration, in

pertinent part, as "the amount of any mortgage, purchase money mortgage lien, or

other encumbrance, whether or not the underlying indebtedness is assumed

(emphasis added)." According to this section, when the amount of consideration

for the transfer or conveyance is not shown on the face of the deed, the tax

shall be at the rate of $.60 for each $100, or fractional part thereof, of the

consideration therefor.

28. In the instant case, Petitioner Kenneth Blume transferred a legal

interest in the entire mortgaged property to his wife, Petitioner Tina Blume, by

virtue of a quit claim deed. The actual amount of taxable consideration, as

defined by Section 201.02(1), Florida Statutes, is one-half (1/2) the amount of

the mortgage at the time of conveyance.

29. Rule 12B-4.014(2)(d), Florida Administrative Code (1991), states in

relevant part, that "[w]here the property is encumbered, tax is based on the

mortgage balance in proportion with the interest transferred by the grantor."

The tax attaches at the time the deed or other instrument of conveyance is

delivered. Rule 12B-4.011(1), Florida Administrative Code (1991).

30. A tax assessment like the one in this case "must be considered prima

facie correct, with the burden of showing the contrary on the party against whom

the assessment is made." Department of Revenue v. Nu-Life Health and Fitness

Center, 623 So. 2d 747, 751-752 (Fla. 1st DCA 1992). Petitioners have not met

their burden of proving by a preponderance of the evidence that Respondent's

assessment was improper.

31. Petitioners did not provide any factual evidence that the Department's

assessment was wrong. Instead, Petitioners make various legal and equitable

arguments which have no merit.

32. First, Petitioners argue that they are not liable for additional taxes

because the transfer was not motivated by consideration. They claim Petitioner

Kenneth Blume made the transfer for estate planning purposes. Petitioners

assert that the transfer was unnecessary to give Petitioner Tina Blume an

interest in property she will own as the wife of Petitioner Kenneth Blume at his

death.

33. Petitioners fail to recognize that, by virtue of the quit claim deed

and the refinancing of the mortgage, Petitioner Tina Blume now owns a legal

interest in the whole of the property with rights of survivorship and shares the

economic burden of making payments on the new mortgage.

34. In Department of Revenue v. McCoy Motel, 302 So. 2d 440, 443, the

court refused to make a ruling on the legal effect of a hypothetical

transaction. In North American Company v. Green, 120 So. 2d 603, 610, the

Florida Supreme Court ruled that "we are not privileged to make the taxability

of a transaction dependent upon any consideration of some alternative procedure

which might not have been taxable." Similarly, the instant case must be decided

based on the property interest actually transferred and not in consideration of

possible future property interest.

35. Next, Petitioners argue that Respondent should rescind the transfer

and restore the parties to the relative positions they held before executing the

quit claim deed for two reasons: (a) Petitioners were unaware and uninformed of

the effect of Section 201.02(1), Florida Statutes, at the time of transfer; and

(b) enforcement of Section 201.02(1), Florida Statutes, is contrary to the

intent of the contract between Petitioners when they agreed to make the transfer

in consideration of the sum of $10.

36. Respondent is charged with the duty of enforcing the taxes levied and

imposed by Chapter 210, Florida Statutes. Section 201.11, Florida Statutes. A

real estate transaction cannot be rescinded based on one's ignorance of

applicable statutes and published rules. Respondent has no authority to reverse

the legal effect of a transaction based on the subjective intent of parties to a

contract.

37. Petitioners' analogy to consumer protection law and contract law is

inapposite here. Respondent's assessment is not controlled by laws that

regulate the marketplace. A buyer/seller relationship never existed between

Petitioners and Respondent. Advance Title, Inc., not Respondent, is in the

business of selling a service or product. Petitioners may have had a

contractual agreement between themselves and with the title company but not with

Respondent.

38. Last, Petitioners argue that Respondent should be estopped from

collecting the taxes in question because the Clerk of the Circuit Court failed

to inform them that additional taxes were due. This argument fails because

Petitioners' relied upon a title company to complete and file the Form DR-219

and to prepare and record the quit claim deed. The Clerk merely collected the

taxes based on information provided by the title company.

39. In any event, the Clerk's failure to require payment of the proper

amount of stamp taxes prior to recordation does not estop Respondent from

assessing Petitioners for those taxes.

40. To sustain estoppel against the state, Petitioners must show that:

1. There is a representation as to a material

fact that is contrary to a later-asserted position;

2. Reliance on that representation; and

3. A change in position detrimental to the

party claiming estoppel, caused by the representation

and reliance thereon.

State, Department of Revenue v. Anderson, 403 So. 2d 397 (Fla. 1981).

41. The Clerk of the Court is an independently elected constitutional

officer. Article VIII, Section 1(d), Florida Constitution. The title company,

Advance Title, Inc., is a private company. Regardless of representations, if

any, made by the Clerk or the title company, the Petitioners did not rely to

their detriment on any representation made by Respondent which was contrary to a

later asserted position. Estoppel simply does not lie in this cause of action.

42. Respondent properly assessed Petitioners for additional documentary

stamp taxes.

RECOMMENDATION

Based on the foregoing Findings of Facts and Conclusions of Law, it is

recommended that Respondent enter a Final Order upholding its assessments as

revised in a Notice of Reconsideration dated January 9, 1995, of documentary

stamp tax, plus applicable interest and penalties against Petitioners Kenneth

and Tina Blume.

RECOMMENDED this 23rd day of October, 1995, in Tallahassee, Leon County,

Florida.

___________________________________

SUZANNE F. HOOD, Hearing Officer

Hearing Officer

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

[phone]

Filed with the Clerk of the

Division of Administrative Hearings

this 23rd day of October, 1995.

APPENDIX

The following constitutes the undersigned's specific rulings pursuant to

Section 120.59(2), Florida Statutes, on all proposed findings of fact submitted

by the parties to this case.

Petitioners' Proposed Findings of Fact

Petitioners' proposed recommended order for the most part is a memorandum

of law and does not designate proposed findings of fact. However, the

undersigned rules as follows on statements of fact contained within Petitioners'

memorandum:

1. Accept that Petitioner Kenneth Blume chose to sign the quit claim deed.

2. No competent persuasive evidence regarding the Clerk of the Circuit

Court's directions to Advance Title, Inc. or Petitioners. Uncorroborated

hearsay evidence.

3. Accept that Petitioners were not aware of Respondent's hotline service

at the time of the conveyance; however, irrelevant.

4. Reject that Petitioners made prudent and reasonable attempts to learn

the requirements of Section 201.02, Florida Statutes. Petitioners had

constructive notice of the published statutes and rules which were in effect at

the time of the conveyance.

5. Reject that the "system" deceived Petitioners. No competent persuasive

evidence to support this fact.

6. Reject that the "system" or "state" failed to disclose the law

controlling taxes on real estate transactions. Applicable statutes and rules

read together with the definition of consideration set forth on the Form DR-219

constitute sufficient notice to Petitioners.

7. The "system" or "state" did not draft the language in the quit claim

deed; therefore, the state was not required to include any language relating to

the cost of the transaction. The Form DR-219 included a definition of

consideration which is consistent with the language in the applicable statutes

and rules.

8. Reject that the state added new terms or changed the terms of the

agreement memorialized in the quit claim deed. The state was not a party to the

agreement between Petitioners.

9. Reject that the system failed to inform Petitioners of "all" the terms

in the contract as "offered" by the state. Respondent's assessment does not

involve a contractual relationship between Respondent and Petitioners with the

Respondent as a "seller" and Petitioner Kenneth Blume as a "buyer."

Respondent's Proposed Findings of Fact

The undersigned accepts the substance of Respondent's Proposed Findings of

Fact 1-28 as modified in Findings of Fact 1-23 of this Recommended Order.

COPIES FURNISHED:

Nancy Francillon, Esquire

Mark T. Aliff, Esquire

Office of the Attorney General

The Capitol - Tax Section

Tallahassee, FL 32399-1050

Kenneth and Tina Blume

159 W. 29th Court

Fayetteville, AR 72701

Linda Lettera, Esquire

Department of Revenue

204 Carlton Building

Tallahassee, FL 32399-0100

Larry Fuchs, Executive Director

Department of Revenue

104 Carlton Building

Tallahassee, FL 32399-0100

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions to this Recommended

Order. All agencies allow each party at least 10 days in which to submit

written exceptions. Some agencies allow a larger period within which to submit

written exceptions. You should contact the agency that will issue the final

order in this case concerning agency rules on the deadline for filing exceptions

to this Recommended Order. Any exceptions to this Recommended Order should be

filed with the agency that will issue the final order in this case.