Crescent Miami Center v. Dept. of Revenue

• Decision Date: 19 May 2005
• Docket Number: No. SC03-2063.,SC03-2063.
• Parties: CRESCENT MIAMI CENTER, LLC, Petitioner, v. FLORIDA DEPARTMENT OF REVENUE, Respondent.
• Court: Florida Supreme Court

903 So.2d 913

CRESCENT MIAMI CENTER, LLC, Petitioner, v. FLORIDA DEPARTMENT OF REVENUE, Respondent.

No. SC03-2063.

Supreme Court of Florida.

May 19, 2005.

Fred Owen Goldberg of Berger Singerman, P.A., Miami, FL, for Petitioner. Charles J. Crist, Jr., Attorney General, and Charles Catanzaro, Assistant Attorney General, Tallahassee, FL, for Respondent.

Gary V. Perko and Victoria L. Weber of Hopping Green and Sams, P.A. and Keith C. Hetrick, General Counsel, Tallahassee, FL on behalf of Florida Home Builders Association, for Amicus Curiae.

WELLS, J.

We have for review Crescent Miami Center, LLC v. Department of Revenue, 857 So.2d 904 (Fla. 3d DCA 2003), which expressly and directly conflicts with the decision in Kuro, Inc. v. State Department of Revenue, 713 So.2d 1021 (Fla. 2d DCA 1998). We have jurisdiction. See art. V, § 3(b)(3), Fla. Const.

FACTS

Crescent Real Estate Funding IX, LP (Crescent Funding) is owned by Crescent Real Estate Equities, LP (Crescent Equities), as the sole limited partner, and CRE Management IX, LLC (CRE), as the general partner. CRE is also wholly owned by Crescent Equities. On February 24, 2000, Crescent Equities formed Crescent Miami Center, LLC (CMC), the petitioner in the present case. Crescent Equities then transferred 99.9 percent of its interest in CMC to Crescent Funding and the remaining 0.1 percent interest to CRE. That same day, CRE transferred this 0.1 percent interest in CMC to Crescent Funding, so that Crescent Funding became the sole owner of CMC.

On February 25, 2000, Crescent Equities transferred a tract of real property, which is the subject of the present case, in fee simple to CMC. According to the deed, CMC paid ten dollars and "other good and valuable consideration" for the property. This transfer was made to separate the property from Crescent Equities' other assets in order to facilitate future unsecured financing. The deed was recorded, and CMC paid $1,212,750 in documentary stamp tax, which was comprised of the state documentary stamp tax and a Dade County documentary surtax.

The documentary stamp tax as applied to deeds conveying real property is set out in section 201.02(1), Florida Statutes (2003), which states:

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, 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.

(Emphasis added.) The underlined text was added by a 1990 amendment and was critical to the lower court's analysis in the present case. See ch. 90-132, § 7, at 451, Laws of Fla.

After paying this tax, CMC filed for a refund of the documentary stamp tax, but the Florida Department of Revenue (DOR) denied the application. CMC filed suit and asserted that it should not have been required to pay the tax because it was not a purchaser of real property under section 201.02(1). Since beneficial ownership of the property did not actually change, CMC argued, the transfer was a mere book transaction and thus not subject to the documentary stamp tax. The DOR argued that the plain language of the statute, including its 1990 amendment, required CMC to pay the documentary stamp tax. Final summary judgment was entered in favor of the DOR.

The Third District Court of Appeal affirmed the summary judgment decision. Crescent, 857 So.2d at 911. The Third District acknowledged that this Court has previously held that transfers from a corporation to its shareholders were not subject to the tax because the shareholders were not purchasers within the meaning of the statute. State ex rel. Palmer-Florida Corp. v. Green, 88 So.2d 493 (Fla.1956). We later defined the term "purchaser" for purposes of the tax as "one who obtains or acquires property by paying an equivalent in money or other exchange in value," and thus a transfer of an unencumbered interest in real property from a corporation to its sole shareholder was not taxable. Florida Dep't of Revenue v. De Maria, 338 So.2d 838, 840 (Fla.1976) (quoting Webster's New Twentieth Century Dictionary 1463 (2d unab. ed.1971)). However, the Third District asserted that these decisions were based on the statute as it existed prior to the 1990 amendment, before the addition of the final two sentences that, according to the court, "specifie[d] four types of exchange mediums which constitute consideration." Crescent, 857 So.2d at 907. Thus, according to the Third District, the decisions in Palmer-Florida and De Maria were valid before the 1990 amendment because the statute had not provided a means of determining consideration in those situations, so no consideration could exist when property was transferred to a wholly owned grantee. Id.

The Third District held that the deed in the present case was subject to the documentary stamp tax because there was consideration for the conveyance, and the value of that consideration was reasonably determinable as being equal to the fair market value of the property under the 1990 amendment to section 201.02(1). Id. at 909. Consideration existed in the transaction because Crescent Equities surrendered its 100-percent interest in the property for an increase in the value of its interest in Crescent Funding (as the value of CMC, wholly owned by Crescent Funding, increased with the conveyance of property). Consideration "follow[ed] as a natural consequence of the commercial transaction transferring intangible property with exchangeable value," and the transfer "effectuated a complete change in both the legal title and the beneficial ownership of the property." Id. The Third District noted that this Court in De Maria had held that whenever there is consideration, there is a purchaser, and thus the statute's purchaser requirement was also fulfilled in the present case. Id.¹

The Second District Court of Appeal came to a different conclusion under similar facts in Kuro, where a father and son transferred condominiums which they solely owned to Kuro, Inc., a corporation which they had formed and in which they were the sole shareholders. The transfer was made for the purpose of the Kuros avoiding potential personal liability arising from the management of the condominiums. 713 So.2d at 1022. The deeds recited the nominal consideration amount of ten dollars, and Kuro, Inc., paid the minimum documentary stamp tax. The DOR argued that Kuro, Inc., owed the tax in proportion to the fair market value of the property since the shareholders had received an increase in the value of their interest in Kuro, Inc., by transferring property to the corporation. The Second District, however, did not hold Kuro, Inc., accountable for the documentary stamp tax because the company was not a purchaser under section 201.02(1). Id. Moreover, the grantors received no interest in the corporation or the property that they did not already have before the transfer; thus, the Second District held that the conveyance was a mere book transaction like the transfer in Palmer-Florida. The Second District held that despite the conveyance, under De Maria and Palmer-Florida, no documentary stamp tax was owed. Id. We granted jurisdiction because of this express and direct conflict between Crescent and Kuro.

ANALYSIS

The issue to be resolved in the present case is whether the conveyance of property from a grantor to its wholly owned grantee is taxable under section 201.02(1), Florida Statutes. In order to assist in this analysis, a review follows of the case law and administrative rules under the pre-amendment and post-amendment statute.

Case Law Pre-1990 Amendment

Prior to the 1990 amendment, this Court had encountered similar issues to those presented in the instant case. In State ex rel. Palmer-Florida Corp. v. Green, 88 So.2d 493 (Fla.1956), a corporation delivered a deed to property it owned to its shareholders in proportion to their shares in the corporation. The corporation argued that the transfer should not be subject to the documentary stamp tax because the shareholders had given nothing in exchange for the property. Id. at 494. We agreed and held that under the statute, the shareholders were not purchasers; the transaction had not involved any form of consideration; and thus the transaction was not subject to the documentary stamp tax. Id. at 495. The transaction was termed "a mere book transaction" and was "in no sense a sale to a `purchaser' as contemplated by" the statute. Id.

We again considered the application of section 201.02(1) in Florida Department of Revenue v. De Maria, 338 So.2d 838 (Fla.1976). In De Maria, a corporation transferred property to its sole shareholder, but part of the property transferred was subject to a mortgage. Id. at 839. We reasoned that this encumbrance on the property made the transfer different from that in Palmer-Florida because the economic burden of the mortgage had been transferred to the individual, and the grantor corporation received a benefit in not having to pay the mortgage. Therefore, the transaction involving that part of the property encumbered by the...