Department of Revenue v. Brookwood Associates, Ltd., Y--357

• Decision Date: 26 November 1975
• Docket Number: No. Y--357,Y--357
• Citation: 324 So.2d 184
• Parties: The DEPARTMENT OF REVENUE of the State of Florida, Appellant, v. BROOKWOOD ASSOCIATES, LIMITED, etc., Appellee.
• Court: Florida District Court of Appeals

Page 184

324 So.2d 184

The DEPARTMENT OF REVENUE of the State of Florida, Appellant, v. BROOKWOOD ASSOCIATES, LIMITED, etc., Appellee.

No. Y--357.

District Court of Appeal of Florida, First District.

Nov. 26, 1975.

Rehearing Denied Jan. 16, 1976.

Robert L. Shevin, Atty. Gen., and David M. Hudson, Asst. Atty. Gen., for appellant.

Joseph W. Gaynor, for Jacobs, Robbins & Gaynor, St. Petersburg, for appellee.

SACK, MARTIN, Associate Judge.

In this declaratory judgment action, appellee, plaintiff below, seeks to enjoin appellant from assessing and collecting additional documentary surtax payments on the sale of certain real property located in Alachua County. The primary issue in the case is whether the amount of an outstanding first mortgage constitutes part of the consideration for the conveyance of property upon which the amount of the documentary stamp surtax imposed by F.S. § 201.021 is computed when the purchase price includes a certain amount of cash and a purchase money wrap-around mortgage which wraps around an existing first mortgage and is subject to said first mortgage.

In its well-reasoned order of final summary judgment entered in favor of appellee, the trial court found the pertinent facts to be as follows:

'(a) The plaintiff at all times material to this cause was a limited partnership under Florida law and on December 29, 1972 was the purchaser of certain real estate in Alachua County from a general partnership named Brookwood Terrace Apartments. This property, known as Brookwood Terrace Apartments, was sold for a total purchase price of $2,460,000. To the warranty deed of conveyance the plaintiff attached documentary tax stamps, pursuant to F.S. 201.02 in the amount of $7,380. This reflects a tax of 30 (cents) per $100 of a consideration of $2,460,000. There were also attached documentary surtax stamps, pursuant to F.S. 201.021 in the amount of $506 which reflects a surtax of 55 (cents) per $500 on the sum of $460,000, which sum is based upon a total consideration of $2,460,000 less the amount of $2,000,000 which is the amount of the debt secured by a certain first mortgage held by Stockton, Whatley, Davin & Company on the property, which had been previously given by the seller. Such mortgage encumbered the property before, on, and after the date of sale and conveyance of the property to plaintiff.

'(b) A mortgage was given by plaintiff to the seller at the same time the deed was executed which secured part of the purchase price. This instrument recited the existence of the first mortgage to Stockton, Whatley, Davin & Company, and contained a covenant between the mortgagor and mortgagee that the morgagee would pay to the holder of the first mortgage the sum of $2,000,000 which was the balance remaining unpaid on the first mortgage, together with all interest thereon assruing thereunder, and together with certain payments as are due under the first mortgage under its terms. The covenants also included an agreement by the mortgagee to make all payments on the first mortgage before expiration of applicable grace periods provided.

'(c) The holder of the first mortgage agreed to this transaction. There was no release of the seller of its liability to the holder of the first mortgage, no novation occurred, and the obligation on the first mortgage remained solely in the seller.

'(d) The mortgage given by plaintiff to the seller of the property is commonly referred to as a 'wrap-around mortgage', whereby the total indebtedness represented by this mortgage includes the balance owed on the first mortgage. Such an arrangement enables the purchaser (and mortgagor to the seller) to make single installment payments on its total indebtedness with the seller transmitting to the holder of the first mortgage the amounts due under the first mortgage.

'(e) On or about November 21, 1973, defendant informed plaintiff that an assessment in the amount of $2,200 was due and owing on the documentary surtax stamps pursuant to F.S. 201.021 and that in addition a penalty assessment in a like amount was made pursuant to F.S. 201.17(2), for a total sum of $4,400.

'(f) Defendant contends that the surtax should apply also the the $2,000,000 of the first mortgage debt included in the total consideration. Plaintiff asserts that the plain terms and language of F.S. 201.02(1) exclude all 'amounts of existing mortgages on the real estate sold' from the consideration paid as the surtax of 55 (cents) per $500.

'(g) The defendant has adopted regulations as part of the Florida Administrative Code which purports, in effect, to discard 'wrap-around' mortgages as coming within the proviso of F.S. 201.021 which states: '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'. See Regulations 12A--4.12(3), (4), and 12A--4.13(23).'

Based on the foregoing facts, the trial court made the following conclusions of law:

'3. The defendants announced an intention of making a deficiency assessment with penalty and such is based upon a concept that the 'consideration' upon which the basic tax (F.S. 201.02) is based and that of the surtax (F.S. 201.021) is the same in both instances and includes the amounts involved in the first mortgage referred to in a wraparound mortgage. It is well established that the 'consideration' in F.S. 201.02(1) includes all sums paid or agreed to be paid by the purchaser of the land, not only the amount paid at the time the...