Department of Revenue v. Rudd

• Decision Date: 26 May 1989
• Docket Number: No. 87-1725,87-1725
• Citation: 14 Fla. L. Weekly 1290,545 So.2d 369
• Parties: 14 Fla. L. Weekly 1290 DEPARTMENT OF REVENUE, Appellant, v. M.E. RUDD and Jean C. Rudd, Appellees.
• Court: Florida District Court of Appeals

Page 369

545 So.2d 369

14 Fla. L. Weekly 1290

DEPARTMENT OF REVENUE, Appellant, v. M.E. RUDD and Jean C. Rudd, Appellees.

No. 87-1725.

District Court of Appeal of Florida,

First District.

May 26, 1989.

Robert A. Butterworth, Atty. Gen., Lealand M. McCharen, Asst. Atty. Gen., for appellant.

Marion D. Lamb, Jr., Marion D. Lamb, III, and T. Whitney Strickland, Jr., Tallahassee, for appellees.

WENTWORTH, Judge.

This cause is before us on appeal of a summary judgment entered in a mortgage foreclosure case. We reverse based on issues presented by appellant as to (1) the untimeliness and insufficiency of appellee's challenge of the tax warrant, and (2) the existence of fact issues affecting the validity and priority of the mortgage foreclosed.

The judgment foreclosed a mortgage given March 11, 1987, by Joseph C. Rudd to his parents M.E. and Jean C. Rudd, appellees, in amount of $45,442.59, including fees and costs, and recorded March 12, 1987. The tax warrant in question was filed on March 12, 1987, by the appellant Florida Department of Revenue against Joseph Rudd to recover $290,000 (together with penalties) obtained by Joseph Rudd when he was an employee of the Department, based on applications of his co-conspirators claiming refunds of sales taxes which had not in fact been paid. The mortgage was executed in the course of divorce proceedings between Joseph and Valerie Rudd, and information given by Valerie to the Department and to law enforcement agencies was instrumental in producing the jeopardy tax warrant.

The reasons cited by the trial court for finding the warrant invalid are (1) the department may not issue warrants under section 212.15(4), Florida Statutes, except "for the amount of tax collected or otherwise due and not remitted"; (2) U.S. v. Assoc. Dev., 400 So.2d 17 (Fla. 1st DCA 1980), establishes that "tax funds are State funds from the moment of collection"; therefore (3) "the funds predicating the issuance of the warrant ... were not tax funds due but general revenue funds." Propositions (1) and (2) are substantially accurate as stated, but even assuming the appellee mortgagees could assert such a defense at foreclosure, the predicate statements do not support the quantum leap required for the entirely novel conclusion (3) for which we are referred to no precedent. Conversely, appellees present no persuasive response to appellant's alternative contentions that (1) the explicit terms of section 72.011(2), (3) and (5), ¹ Florida Statutes, preclude challenge of a warrant after 60 days from issuance; (2) even assuming the Rudds could challenge the warrant by motion for summary judgment in June 1987, the funds improperly refunded by the department to its employee Joseph Rudd and his co-conspirator sales tax dealer were claimed and refunded as sales taxes for recovery of which "the department is empowered ... when any tax becomes delinquent or is otherwise in jeopardy ... to issue a warrant [to] ... become a lien on any ... property of the taxpayer in the same manner as a recorded judgment," section 212.15(4), Florida Statutes; and (3) the affidavits presented by the parties upon motion for summary judgment clearly show material factual issues with respect to the status of the mortgage as a fraudulent conveyance lacking the bona fides required to establish priority over the warrant.

Section 72.011, Florida Statutes, and companion predecessor statutes have long imposed a requirement that the taxpayer shall begin contest proceedings within a specified time after the assessment becomes final, and also a requirement that prior to challenge the taxpayer shall pay any portion admittedly owed. ² Case law developed which held that the time limit requirement would not bar a tardy challenge claiming an assessment to be void due to lack of legal basis. Overstreet v. Ty-Tan, Inc., 48 So.2d 158 (Fla.1950); Chaves Construction Co. & Subsidiaries v. Metropolitan Dade County, 256 So.2d 545 (Fla. 3d DCA 1972). Distinctions between void and voidable levies were put at rest when the legislature amended chapter 194, Florida Statutes, in 1983 and section 72.011 in 1984 and 1985 to make the time limit and prepayment requirements jurisdictional. See Gulfside Interval Vacations, Inc. v. Schultz, 479 So.2d 776 (Fla. 2d DCA 1985), rev. denied 488 So.2d 830 (Fla.1986). Citing Gulfside, this court in Hirsh v. Crews, 494 So.2d 260 (Fla. 1st DCA 1986), held that the amendment made the requirements jurisdictional. The result is that, while there should be no bar to the Rudds' claim that their earlier filed mortgage had priority over the warrant if the mortgage was not a fraudulent conveyance (as the question of priority in no way impacts on whether the warrant is legally authorized by statute), the Rudds are barred from making their claim that the warrant was without statutory authority. Accordingly, the trial court had no jurisdiction to rule on this issue. See Hirsh, supra, at 262. ³

With regard to priority of the warrant over the mortgage recorded on the same date, the promissory note secured by the mortgage in this case was given by Joseph to his parents as a demand note. There was no fixed schedule of payments, and the elder Rudds filed a foreclosure suit on April 7, less than one month after the note was executed. The complaint alleged that Joseph had defaulted on April 1, 1987, by "failing to pay the principal payment due ... and all subsequent payments." The complaint further alleged that "demand has repeatedly been made." The foreclosure suit named Joseph Rudd and DOR as defendants. Joseph Rudd answered and admitted everything necessary to enter a judgment against him.

Appellant DOR answered the Rudds' complaint with a counterclaim that the mortgage was a fraudulent conveyance, relying on settled principles:

Ordinarily, a party that alleges fraud must prove it and in setting aside a fraudulent conveyance, the burden of proof rests on the complainant, the presumption being against the existence of fraud.... However, where the parties involved in the alleged fraudulent transaction are relatives or close associates of the transferor, such close relationship tends to establish a prima facie case which must be met by evidence on the part of the defendant, and transactions are regarded with suspicion.

Nally v. Olsson, 134 So.2d 265 (Fla. 2d DCA 1961), citing Tornwall v. Carter, 106 So.2d 96 (Fla. 2d DCA 1958). See also Trueman Fertilizer Co. v. Stein, 157 Fla. 769, 26 So.2d 893, 895 (1946) (Chapman, Chief Justice, concurring specially), for the proposition that where the parties to the conveyance are family members, they must provide "clearer and fuller proof" that the transaction was bona fide than if the parties were strangers.

The elder Rudds filed a motion for summary judgment on grounds that the mortgage was given for actual consideration received and attached copies of canceled checks or other receipts for each sum included in the total $39,387.58 promissory note figure. In opposition, the state filed a lengthy affidavit from Greg Marr, an FDLE inspector who investigated the case against Joseph. Although the affidavit sets out an extremely detailed account of Joseph's scheme, Marr had no knowledge about the mortgage and promissory note transactions and does not refer to them. The state also filed an affidavit by Valerie, stating that she informed the elder Rudds about the fraud in November 1986. She also stated that she told Joseph in January 1987 that she had reported him and that his property would be seized. The affidavit stated that many of the elder Rudds' loans to Joseph were actually made as gifts at the time and that, based on her knowledge of the Rudd family, she believed that the $24,136 the elder Rudds supplied Joseph to buy her interest in the marital home was really a gift.

To prove fraud, one may show "a series of distinct acts, each of which may be a badge of fraud and when taken together as a whole, constitute fraud." Allen v. Tatham, 56 So.2d 337 (Fla.1952). "Fraudulent intent usually must be proved by circumstantial evidence and such circumstances may, by their number and joint consideration, be sufficient to constitute proof." Nally, supra, at 267; Tornwall, supra, at 99. "Generally, the issue of fraud is not a proper subject of a summary judgment since it is a subtle thing requiring a full explanation of the facts and circumstances of the alleged wrong to determine if they collectively constitute a fraud." Amazon v. Davidson, 390 So.2d 383 (Fla. 5th DCA 1980). "Since the whole context is necessary for the determination, it is seldom that one can determine the presence or absence of fraud without trial." Alepgo Corp. v. Pozin, 114 So.2d 645 (Fla. 3d DCA 1959). See also Bryant v. Small, 236 So.2d 150 (Fla. 3d DCA 1970); and Automobile Sales, Inc. v. Federated Mutual Implement and Hardware Insurance Co., 256 So.2d 386 (Fla. 3d DCA 1972) ("unique" situation required for entry of summary judgment in a fraud case). "A litigant has a right to trial where there is the slightest doubt as to the facts" in a fraud case (emphasis added). Dean v. Gold Coast Theatres, Inc., 156 So.2d 546 (Fla. 2d DCA 1963). "Even where the facts are undisputed, issues as to the interpretation of such facts may be such as to preclude the award of a summary judgment." Franklin County v. Leisure Properties, Ltd., 430 So.2d 475 (Fla. 1st DCA 1983), citing Owens v. MacKenzie, 103 So.2d 677 (Fla. 1st DCA 1958).

The cited cases indicate that in addition to the affidavits filed by the parties, the trial court was required to consider the circumstances surrounding the execution of the note and mortgage. The circumstances alone can be sufficient to prove fraud regardless of whether any witnesses have direct knowledge of fraud as to which they can or will testify. The reason underlying this rule is that, if both parties to a transaction are acting collusively, it may be impossible ever to get direct testimony contradicting...