Crescent Miami Center, LLC v. DEPT. OF REVENUE, STATE

• Decision Date: 10 September 2003
• Docket Number: No. 3D02-3002.,3D02-3002.
• Citation: 857 So.2d 904
• Parties: CRESCENT MIAMI CENTER, LLC, Appellant, v. DEPARTMENT OF REVENUE, STATE OF FLORIDA, Appellee.
• Court: Florida District Court of Appeals

857 So.2d 904

CRESCENT MIAMI CENTER, LLC, Appellant,
v.
DEPARTMENT OF REVENUE, STATE OF FLORIDA, Appellee

No. 3D02-3002.

District Court of Appeal of Florida, Third District.

September 10, 2003.

857 So.2d 905

Berger Singerman, and Fred O. Goldberg, for appellant

Fowler White Boggs Banker, and Mitchell I. Horowitz, and Tracy R. Gunn (Tampa), Amicus for National Association of Office and Industrial Parks of Florida, Inc., for appellant.

Charles J. Crist, Jr., Attorney General, and Charles Catanzaro, Assistant Attorney General (Tallahassee), for appellee.

Before LEVY, GERSTEN, and GREEN¹, JJ.

GERSTEN, J.

Crescent Miami Center, LLC ("CMC"), appeals a final order entering summary judgment in favor of the Department of Revenue ("DOR"). We affirm based upon our determination that the transfer of real property from a parent company to a newly created subsidiary limited liability company owned by the general limited partner of the parent company, is subject to Florida's documentary stamp tax statute, Section 201.02(1), Florida Statutes (2000).

The real property at issue was owned by Crescent Real Estate Equities Limited Partnership ("Crescent"). On February 24, 2000, Crescent formed appellant CMC. Immediately after its formation, Crescent transferred 99.9% of its ownership interest in CMC to Crescent Real Estate Funding IX, L.P. ("Crescent Funding").² Crescent transferred the remaining 0.1% to CRE Management IX, L.L.C. ("CRE").³

857 So.2d 906

Immediately thereafter, and again on February 24th, CRE transferred its 0.1% interest in appellant CMC to Crescent Funding. On February 25, 2000, Crescent transferred the real property to CMC. The deed conveying the property states appellant CMC paid $10.00 and "good and valuable consideration" for the property. According to CMC, the sole purpose for the transfer was to separate the property from Crescent's other assets in order to facilitate future unsecured financing. CMC recorded the deed and paid $1,212,750 in documentary stamp tax. The tax is comprised of $693,000 in state documentary stamp tax pursuant to Section 201.02(1), and $519,750 in Dade County documentary surtax pursuant to Section 201.031(1).⁴

The chart below shows the relationship of the various parties and the property transfer:

Thereafter, appellant CMC applied for refund of the documentary stamp tax and surtax. The DOR denied the application, and CMC filed suit challenging the refund denial. Both parties moved for summary judgment. Final summary judgment was entered in favor of the DOR. CMC appealed the adverse summary judgment, and an agreed motion to allow the National Association of Office and Industrial Parks of Florida, Inc. ("NAOIP") to file an amicus brief was subsequently granted by this Court.

The documentary stamp tax applies to instruments conveying an interest in Florida real property to a "purchaser" and provides:

On deeds, instruments, or writings whereby any lands, tenements, or other real property, or any interest therein, shall be granted, assigned, transferred, or otherwise conveyed to, or vested in,

857 So.2d 907

the purchaser or any other person by his or her direction, on each $100 of the consideration therefor the tax shall be 70 cents. When the full amount of the consideration for the execution, assignment, transfer, or conveyance is not shown in the face of such deed, instrument, document, or writing, the tax shall be at the rate of 70 cents for each $100 or fractional part thereof of the consideration therefor. For purposes of this section, consideration includes, but is not limited to, the money paid or agreed to be paid; the discharge of an obligation; and the amount of any mortgage, purchase money mortgage lien, or other encumbrance, whether or not the underlying indebtedness is assumed. If the consideration paid or given in exchange for real property or any interest therein includes property other than money, it is presumed that the consideration is equal to the fair market value of the real property or interest therein.

See § 201.02(1), Fla. Stat. (2000).

CMC contends that the tax cannot be imposed in the present case because CMC was not a "purchaser" of the real property, within the meaning of Section 201.02(1). On the other hand, the DOR asserts that the deed tax applies based upon the plain language of the statute, a subsequent amendment, and existing case law.

In 1956, the Florida Supreme Court held that grantee shareholders who had been transferred unencumbered property from a corporation, were not "purchasers" because the transfer was a "mere book transaction." State ex rel. Palmer-Florida Corp. v. Green, 88 So.2d 493 (Fla. 1956). The grantees were not purchasers because they did not pay a "reasonably determinable, consideration for the conveyance as contemplated by Sec. 201.02."

Thereafter, in 1976, the Court defined a "purchaser" for purposes of the deed tax as "one who obtains or acquires property by paying an equivalent in money or other exchange in value." See Florida Dep't of Revenue v. De Maria, 338 So.2d 838, 840 (Fla.1976). In De Maria, the Court found there was no purchaser and no taxable exchange in the transfer of a corporation's equity in real property to its sole shareholder. However, the shareholder was considered a "purchaser" of the real property to the extent of the mortgage. Significantly, both Palmer-Florida and De Maria were decided under the prior language of Section 201.02(1). Applying the prior language, there was no reasonably determinable consideration, and thus no purchaser could be found. See also De Vore v. Gay, 39 So.2d 796 (Fla.1949)(consideration for deed tax purposes must have a reasonable and determinable value).

In 1990, Section 201.02(1) was amended and a statutory definition for "consideration" was added. The amended statute specifies four types of exchange mediums which constitute consideration: (1) the payment of monies; (2) the discharge of any obligation; (3) a mortgage on property whether discharged or not; and (4) the fair market value of the property exchanged. See Ch. 90-132, § 7, Laws of Fla.

The 1990 amendment also created a statutory presumption that non-monetary consideration for property is presumed to be equivalent to the fair market value for property exchanged. Thus consideration can now be reasonably determined by reference to the value of the property deeded, rather than by referencing the value of the property exchanged. In response to the 1990 statutory amendments, the DOR amended its rules to require the payment of stamp tax on property conveyances between shareholders and their respective corporations, see Fla. Admin. Code Rules 12B-4.013(7)-(8), and between partners

857 So.2d 908

and their respective partnerships, see Fla. Admin. Code Rules 12B-4.013(10).⁵

In 1998, the Second District applied the amended statute and found that a transfer from two equal shareholders to a corporation was not subject to the deed tax because there was no purchaser. See Kuro, Inc. v. State, Dep't of Revenue, 713 So.2d 1021 (Fla. 2d DCA 1998). In Kuro, a father and son purchased condominium units, formed a corporation for the purpose of taking title to the units, and thereafter transferred title to the corporation for the purpose of avoiding exposure to potential personal liability. The Second District held the conveyances were book transactions, not sales to a purchaser, because the father and...