First Nat. Bank of Birmingham v. Department of Revenue

• Decision Date: 18 October 1978
• Docket Number: No. HH-335,HH-335
• Citation: 364 So.2d 38
• Parties: FIRST NATIONAL BANK OF BIRMINGHAM, a federally chartered banking institution with its principal place of business in Birmingham, Alabama, Petitioner, v. DEPARTMENT OF REVENUE of the State of Florida, Respondent.
• Court: Florida District Court of Appeals

Page 38

364 So.2d 38

FIRST NATIONAL BANK OF BIRMINGHAM, a federally chartered banking institution with its principal place of business in Birmingham, Alabama, Petitioner, v. DEPARTMENT OF REVENUE of the State of Florida, Respondent.

No. HH-335.

District Court of Appeal of Florida, First District.

Oct. 18, 1978.

Rehearing Denied Dec. 6, 1978.

William Guy Davis, Jr. of Beggs & Lane, Pensacola, for petitioner.

Robert L. Shevin, Atty. Gen., E. Wilson Crump, II, Asst. Atty. Gen., for respondent.

ERVIN, Judge.

First National Bank seeks review of a final order of the Department of Revenue approving an assessment of intangible personal property taxes upon two notes held by the Bank which were secured by mortgages on leaseholds upon real estate in Santa Rosa Island.

In 1971, the Okaloosa Island Authority, a governmental agency, leased certain real property on Santa Rosa Island in Okaloosa County to the Okaloosa Development Corporation for a term of 99 years. Later certain sub-lessees under the Okaloosa Island Authority lease mortgaged their leaseholds as security for the payment of two promissory notes held by First National Bank. One note, dated January 11, 1974, was in the principal sum of $2,500,000 and the other, dated October 31, 1974, was in the sum of $45,000. The mortgages were recorded without protest and without any claim at that time by the clerk concerning any intangible taxes due and owing. On October 1, 1975, the Department of Revenue proposed an assessment against the Bank in excess of $5,000 for intangible property taxes on the notes pursuant to Section 199.032, ¹ Florida Statutes (1975). The Bank attacked the assessment as invalid and sought an administrative hearing. A DOAH hearing officer approved the assessment under 199.032(1), but determined that Section 199.032(2) did not apply because, in his opinion, a leasehold was not real property; however, subsection (1) did apply, and therefore he recommended the imposition of an annual recurring one mill tax. The Bank sought review to the Department of Revenue which disapproved the recommended order and found the assessment valid under subsection (2). It concluded that long term leaseholds constituted neither tangible or intangible personal property, but were rather interests in real property.

The Bank first argues that the intangible tax of two mills is not applicable to obligations secured by mortgages on leasehold interests because leaseholds are not realty. In support of its argument it traces the history of Section 199.032(2) as showing that the Department's interpretation was inconsistent with the legislative intent because, although the first intangible tax act adopted by legislature in Chapter 15789, Laws of Florida (1931), provided that an intangible tax be paid on "all notes . . . which are secured by mortgage . . . or other leases or liens upon real or personal estates situated in Florida . . .", the act was repealed by Ch. 20724, Laws of Florida (1941), which provided that an intangible tax be assessed against "notes . . . for payment of money which are secured by mortgage, . . . upon real property . . . ." No reference was made in that act or in subsequent enactments of the intangible tax statute to a tax upon leases. The Bank also relies upon two opinions of the attorney general, 1947 Op. Att'y Gen. Fla. 047-201 and 1960 Op. Att'y Gen. Fla. 060-56, ² which stated that a leasehold interest under common law was considered personal property. To the same effect, see also Wood v. Ford, 148 Fla. 66, 3 So.2d 490 (1941) and Simpson v. Lofton, 160 Fla. 20, 33 So.2d 230 (1948), which so held. In essence, the Bank's position is that the common law rule affecting leases has not been altered by statute, even though there is no constitutional provision precluding the legislature from so doing; therefore, its interest in the leases was not one in realty. As a result there is no legal authority for the assessment of the intangible personal property tax.

Section 196.001(2), Florida Statutes (1975), first enacted as Chapter 71-133, Section 16, Laws of Florida, subjects all leasehold interests in any governmental property to ad valorem real property taxation. While subsection two does not expressly state that a lease from a governmental body is a real property interest for ad valorem tax purposes, this is a necessary conclusion which must be drawn since subsection two mandates that governmental leases, not used for public purposes, be taxed.

In Park-N-Shop, Inc. v. Sparkman, 99 So.2d 571 (Fla. 1957), the court stated that a leasehold interest in real property was neither tangible nor intangible property and, under the law existing at the time, was not subject to taxation. The court continued, however, it was not aware of any reason why the legislature could not by statute subject such interests to taxation. In answer to the court's observation in Park-N-Shop, Inc. v. Sparkman, supra, the legislature in 1961 enacted Section 192.62, subsequently enacted verbatim as Section 196.25. The statutes were the predecessors to Sections 196.001(2) and 196.199, Florida Statutes (1971). Section 192.62 generally provided that any real or personal property, otherwise exempt from taxation, when used in connection with a profit making venture, be assessed and taxed to the same extent and in the same manner as other real or personal property. As pointed out by Justice Sundberg in Williams v. Jones, 326 So.2d 425, 435 (Fla. 1976), the language used in 192.62(1) which permitted a lease to be taxed "to the same extent and the same manner as other real or personal property" allows judicial interpretation. Section 192.62 and its successor statutes have been interpreted by the courts on numerous occasions as authorizing the assessment of ad valorem real property taxes upon leases. For example, in Hillsborough County Aviation Authority v. Walden, 210 So.2d 193 (Fla. 1968), the court approved a trial court's determination that a leasehold interest of a motel operator from a tax exempt body was a separate, distinct interest in such property and, since it was being used for a predominantly private purpose, was subject to assessment and taxation as real estate to the lessee. Later, in Dade County v. Pan American Airways, Inc., 275 So.2d 505 (Fla. 1973), the court observed that Section 192.62 was enacted by the legislature in 1961 for the purpose of imposing ad valorem real property taxes upon public property which had been exempt or immune from taxation but which was being used by private lessees involved in profit making ventures. The successor statute to 192.62, Section 196.25, was repealed by Ch. 71-133, § 15, Laws of Florida, but certain of its provisions were replaced in Sections 196.001 and 196.199, Florida Statutes (1971), and apply to the transactions before us.

The subject of ad valorem taxes upon leases as real property was comprehensively treated by the Supreme Court in Williams v. Jones, supra, and the reader is directed to that opinion for the various types of situations which state that leaseholds are interests in realty. Williams v. Jones, supra, at 433-434. We recently held in Department of Revenue v. Dix, 362 So.2d 420 (Fla. 1st DCA, August 30, 1978), that a lease is a conveyance of an interest in land which may be subject to the purview of the Documentary Stamp Tax Act, Section 201.02(1), and that the assignee of a lease in realty who also assumes a mortgage upon the leasehold interest is subject to the payment of documentary stamps upon the recording of the lease.

The common thread running throughout later opinions of the Florida Supreme Court on the subject, e. g., Straughn v. Camp, 293 So.2d 689 (Fla. 1974); Williams v. Jones, supra; Volusia County v. Daytona Beach Racing, etc., 341 So.2d 498 (Fla. 1976), is that holders of leases upon publicly owned lands used for private purposes must bear their fair share of the tax burden to the same extent as owners of real property in the private sector, and that all property is subject to taxation unless expressly exempted. Since private owners of real property are subject to ad valorem taxes upon real estate, and the holders of notes upon mortgages secured by such real property are subject also to intangible personal property taxes, there is no logical reason why real property owned by a governmental authority, but leased for private purposes, which bears a burden for ad valorem property tax purposes, should not also be subject to the tax burden imposed by Section 199.032(2) on notes secured by mortgages upon such leases. There is no legislative vacuum as contended by the Bank. The legislature has spoken. The leases are an interest in realty and as such are subject to the tax imposed by Section 199.032(2) upon recordation of the mortgages encumbering the leases.

The Bank argues in the alternative, if it is determined that Section 199.032(2) is applicable, the Department of Revenue is estopped from assessing or collecting the intangible property tax because the clerk of the circuit court, when the two mortgages securing the notes were presented for recordation, recorded them without first...