Department of Revenue v. Bank of America

• Decision Date: 05 January 2000
• Docket Number: No. 1D99-461.,1D99-461.
• Citation: 752 So.2d 637
• Parties: DEPARTMENT OF REVENUE, an Agency of the State of Florida, Appellant, v. BANK OF AMERICA, N.A., et al., Appellee.
• Court: Florida District Court of Appeals

752 So.2d 637

DEPARTMENT OF REVENUE, an Agency of the State of Florida, Appellant, v. BANK OF AMERICA, N.A., et al., Appellee.

No. 1D99-461.

District Court of Appeal of Florida, First District.

January 5, 2000.

Rehearing Denied March 22, 2000.

Robert A. Butterworth, Attorney General; Jarrell L. Murchison, Assistant Attorney General, Tallahassee, for Appellant.

Peter O. Larsen and David E. Otero of Milam, Otero, Larsen, Dawson & Traylor, P.A., Jacksonville; David M. Wells and R. Eric Bilik of McGuire, Woods, Battle & Boothe, LLP, Jacksonville, for Appellee.

Russell B. Hale and Virginia B. Townes of Akerman, Senterfitt & Eidson, P.A., Orlando, for Amicus Curiae Florida Bankers Association.

JOANOS, J.

The Florida Department of Revenue (Department) seeks review of a final judgment rendered by the trial court in favor of Bank of America, N.A. (Bank), the successor by merger to NationsBank, N.A. The issue presented is whether a lender/financer is entitled to receive the legislatively created sales tax refund provided to motor vehicle dealers under the provisions of section 212.17(2) and (3), Florida Statutes. We reverse.

This action commenced in April 1997, when the Bank filed a complaint seeking refunds and credits pursuant to section 212.17(2) and (3), for sales tax paid by dealers in connection with motor vehicle installment sales contracts. The complaint states that at the time of sale, the vendors contemporaneously assign to the bank all right, title, and interest in the contracts, and the bank pays the vendors all amounts due under the contracts, including the full amount of any sales tax to be remitted by the vendors to the Department. The Bank alleged it is entitled to a sales tax refund or credit because it qualifies as a "dealer" as defined by section 212.06(2), and is registered as a dealer with the Department. Alternatively, the Bank alleged entitlement to refunds or credits "under well-settled Florida contract law to claim any applicable tax refunds or credits as assignee to the Vendors' rights under the Contracts."

The Department answered the complaint, and raised various affirmative defenses. Among other things, the Department asserted that because the Bank is not the selling dealer, it cannot satisfy the requirements of section 212.17, Florida Statutes, and therefore lacks standing to seek a refund or credit for the subject taxes. The Department attached its "final denial" of the Bank's application for refund to the answer and affirmative defenses. This denial letter states in pertinent part:

Bank does not meet the statutory requirements which require the applicant to be "a dealer who has paid the tax". The motor vehicle dealer is the entity who collected the tax from the purchaser and pays the tax to the Department. Section 212.17, F.S., does not entitle a third party who is "assigned" a security interest in tangible personal property to a refund on a bad debt or repossessed merchandise since they are not the "dealer who paid the tax". When section 1 of Ch. 67-518 Laws of Florida was enacted, the Legislature chose not to track the general refund statute that specifically allowed assignees to qualify for refunds and credits. Instead, it employed the language it used to clearly and emphatically limit the refund and credit to the selling dealer....

When, as here, the car sales are made on the bank's security agreements and, at the time of the sale, contemporaneously assigned to the bank in exchange for the bank paying the dealer the buyer's loan proceeds, the dealer does not retain a security interest in the property sold. Also, since the dealer has been paid, there can be no unpaid balance due the dealer on which to base the refund. Finally, under the transactions at issue here, [Bank] repossessed the vehicles, not the dealer.

On March 17, 1997, the Department and the Bank entered into an agreement whereby the parties agreed the appropriate method of resolving the disputes between the Bank and the Department concerning the Bank's pending claims for sales tax refunds was through litigation filed in circuit court. The agreement included a methodology to ensure a proper and manageable record for litigation.

The record includes numerous Department memoranda reflecting the agency's efforts to devise a methodology for computing sales tax refunds consistent with the statutory provisions and Department rules. A memorandum dated December 18, 1996, includes extensive review of the factual background of the pending tax refund claims, together with a legal analysis of the issue. The memorandum makes reference to a September 13, 1967, bulletin issued by J. Ed Straughn, the Department's former Executive Director. The bulletin was issued the month following the effective date of the 1967 legislative amendments creating the repossession and bad debt refunds. The memorandum states in part:

The bulletin states that "... when the dealer (original seller) sells a retain title or similar contract to a third party, without recourse, neither the original seller nor the third party is entitled to a refund of any tax remitted to the state on the original transaction." The bulletin went on to state that "The new law, in our opinion, clearly restricts the right to a refund to the dealer who made the original sale when he repossesses the property sold." Until the present issue arose, in the nearly 30 years since this bulletin was issued, only the original selling dealer has qualified for a refund on repossessions and bad debts under the statute.

Under Florida law, this bulletin is a contemporaneous administrative construction of a statute by the official charged with its enforcement and interpretation. As such, although not necessarily controlling, it is entitled to great weight, and a court will not depart from the interpretation except for the most cogent reasons, and unless the interpretation is clearly erroneous. Green v. Stuckey's of Fanning Springs, 99 So.2d 867 (Fla.1958).

The writer of the memorandum included an analysis of the Washington case relied upon by the circuit court in this case, together with an analysis of legal authority favoring the refund. This portion of the memorandum states in pertinent part:

The banks will simply argue that whatever statutory rights a dealer has can be assigned and has been assigned to them under their agreements. Once the assignment occurs, the bank stands in the shoes of the dealer, and functionally becomes the dealer. This argument is appealing and potentially successful. There is little reason for a Florida court not to adopt Washington's analysis other than the fact that Florida's statutes are not identical to Washington's and, despite the legal effect of an assignment, a Florida Court could rule that Florida's legislature did not intend for the refund to apply to assignees.

The writer continued with legal authority in support of denial of the refund. This portion of the memorandum reasons:

As the courts held in Kirk and Victor Chemical Works cited above, without a specific statute providing for refunds on repossessed vehicles, there is no right to a refund. When this refund statute was enacted, it employed redundant language limiting the right to the refund to the original selling dealer and did not contemplate the refund to apply to circumstances where the dealer received full payment for the vehicle through assignment to a third party finance company. This interpretation is supported by long standing contemporaneous administrative construction.

It should be remembered that these repossession and bad debt tax refunds and credits differ from general refunds. Normally refunds and credits apply when no tax was due, or when there was an overpayment. Since the sales tax is a tax on the privilege of doing business, the taxes at issue here were fully due and payable at the moment of the sale on the full amount of the sales price. (citation omitted).

The Bank filed a Motion for Partial Summary Judgment and Supporting Memorandum of Law. The motion asked the court to determine, as a matter of law, that the Bank is entitled to sales tax refunds and credits under section 212.17, because it is an assignee of the rights afforded by the statute. Thereafter, the Department filed its motion for partial summary judgment with supporting affidavit.

On July 22, 1998, the circuit court issued an order granting the Bank's motion for summary judgment. Among other things, the court found that in enacting the section 212.17(2) and (3) refund provisions, the legislature intended "to provide relief to those who unjustly suffer an economic loss when they ultimately fail to collect amounts for which sales tax has already been paid." The court further found that Florida common law favors the assignment of contractual and statutory rights, and where, as here, the statute is silent on the issue of assignability, a court must fill the statutory gaps by relying on Florida common law. Since section 212.17 is silent with respect to assignment of statutory rights, and since Florida does not have an anti-assignment statute, the court concluded the Bank, as assignee, is entitled to the rights of the selling dealer to any tax refunds or credits. The court found agency deference was not required in this case, concluding the Department does not have a longstanding and consistent agency position with regard to assignability of sales tax refunds. Further, the court found the "determination of whether statutory rights are assignable is a legal issue that does not require agency expertise." The concluding portion of the order states:

Section 212.17(2) and (3) create a right to sales tax refunds or credits. Florida law recognizes the assignability of statutory rights unless the statute expressly prohibits assignment or the assignment offends some clearly articulated public policy. Section 212.17 does not prohibit assignment and nothing in the public policy of Florida prohibits assignment of sales tax

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