Florida Export Tobacco Co., Inc. v. Department of Revenue

Decision Date26 June 1987
Docket NumberNo. AY-145,AY-145
Citation12 Fla. L. Weekly 1579,510 So.2d 936
Parties12 Fla. L. Weekly 1579 FLORIDA EXPORT TOBACCO CO., INC., Miami International Airport Pharmacy, Inc., Sirgany International, Inc., and International Pharmacies, Inc., Appellants, v. DEPARTMENT OF REVENUE and Gerald Lewis, as Comptroller of the State of Florida, Appellees.
CourtFlorida District Court of Appeals

J. Riley Davis, of Taylor, Brion, Buker & Greene, Tallahassee, for appellants.

Joseph C. Mellichamp, III, Asst. Atty. Gen., and Barbara Staros Harmon, Asst. Atty. Gen., Tallahassee, for appellees.

ON MOTION FOR REHEARING

ZEHMER, Judge.

The Department of Revenue and the Comptroller, appellees, have moved for rehearing and rehearing en banc on several grounds. Many of the constitutional, statutory, and decisional authorities cited in the motion and in appellants' response were not previously presented in the parties' briefs of the issues on appeal. Failure to initially argue these pertinent authorities has compelled us to completely reexamine the issues and holding in our opinion.

The Tax Section of The Florida Bar has filed, as amicus curiae, a motion in support of appellees' motion for rehearing en banc. We have considered the authorities and argument contained in that motion; however, we deny the Tax Section's request to file a supporting brief.

After careful consideration of the motions for rehearing and the results of our own additional research, we are persuaded that the motion for rehearing should be granted in part. Accordingly, our original opinion is withdrawn and the following opinion is substituted therefor. The motion for rehearing en banc is denied.

I. THE FACTS

Appellants, Florida Export Tobacco Co., Inc., Miami International Airport Pharmacy, Inc., Sirgany International, Inc., and International Pharmacies, Inc., are plaintiffs in this class action against the Department of Revenue (DOR) and the Comptroller (appellees). In this suit appellants have contested the legality of DOR's assessment of certain taxes pursuant to section 212.031, Florida Statutes (1979), and have sought a refund of the taxes paid by them and the members of the class pursuant to such assessments. They appeal a summary judgment for appellees granted on the sole ground that the Comptroller's decision to deny a refund of the taxes in an administrative proceeding prosecuted by Florida Export pursuant to sections 215.26, 120.57, and 120.68, Florida Statutes (1979), is res judicata and bars this action in circuit court.

Appellants, concessionaires in the Miami International Airport terminal, leased property for this purpose from Dade County under a written lease agreement made in July 1977. Pursuant to this lease, appellants paid an annual rental computed on a square footage basis and paid their sales taxes due on that amount. In addition, they paid the county a profit participation charge computed as the amount by which a fixed percentage of appellants' gross revenues exceeded the rental payments. By letter to the lessor, Dade County, DOR demanded payment of the sales taxes on the profit participation charge in addition to the square footage charge, citing section 212.031 as authority, and appellants paid the taxes so demanded to the lessor for remittance to DOR. 1 On August 6, 1979, Florida Export filed a class action in the Leon County circuit court on behalf of itself and all similarly situated taxpayers. The suit, naming DOR as the sole defendant, contested the legality of the tax assessments on the profit participation charge and demanded refund of all such taxes previously paid. 2 DOR moved to dismiss the complaints on grounds that plaintiffs failed to exhaust available administrative remedies by not seeking a refund from the Comptroller under section 215.26. 3 The court dismissed the complaint with leave to amend "with sufficient time allowed to satisfy the requirements of § 215.26, Fla.Stat., so that the members of the class ... will be limited to those who have paid the challenged tax, applied for a refund, and were denied such refund" 4 (R. 37).

Each of the appellants then applied to the Comptroller for a refund on the ground that DOR's tax assessment on the profit participation charge was illegal because such funds did not constitute lease or rental payments within the meaning of section 212.031. 5 The refund application was referred to DOR, which reviewed its records and determined that the refund should not be paid. DOR so advised the Comptroller, and on July 24, 1980, the Comptroller notified appellants of his intent to deny the refund in accordance with DOR's recommendation. This notice also advised appellants that they had a right, under section 120.57, Florida Statutes (1979), to request an administrative hearing regarding the Comptroller's proposed decision and that, if no request were timely made, "this denial shall become final" (R. 111).

The record reflects considerable uncertainty on the part of appellants' counsel regarding just how far to pursue the administrative proceeding with the Comptroller in order to satisfy the trial court's order requiring that application for refund must be administratively denied before the circuit court action could proceed. 6 In an apparent attempt to avoid waiver of administrative remedies and protect the rights of their clients, on August 6, 1980, counsel for appellants wrote a letter to the Comptroller indicating they did not intend to request a section 120.57 hearing unless failure to do so would be construed as failure to exhaust administrative remedies and prevent continued prosecution of the pending circuit court actions. DOR refused to agree that appellants need not completely exhaust all administrative remedies by applying for such hearing. Appellants, "out of an abundance of caution," requested an informal conference with the tax referee of DOR and filed a petition for a section 120.57 administrative hearing on behalf of themselves and "others in their class similarly situated" with the office of the Comptroller (R. 46). DOR was not made a party to that proceeding.

The Comptroller referred the petition to the Department of Administrative Hearings for assignment to a hearing officer. Prior to the section 120.57 hearing, all parties other than Florida Export took a voluntary dismissal and did not proceed to hearing. Counsel for petitioners stated on the record that, by proceeding to a section 120.57 hearing on the denial of refund, petitioners did not intend to waive any rights they had to continue prosecution of their circuit court action. 7 Counsel for petitioners, however, also stated on the record that the voluntary dismissal was taken with the understanding that the success obtained by Florida Export in the administrative proceeding would be "stare decisis" as to all appellants. 8 Counsel for Florida Export and the Comptroller then debated the merits of the case before the hearing officer, i.e., whether the Comptroller should have denied the refund because the profit participation charges were legally taxable under section 212.031, Florida Statutes (1979). DOR, not being a party, did not participate. On March 19, 1981, the hearing officer issued a recommended order on the merits, finding the charges legally taxable and recommending that the Comptroller deny Florida Export's application for a refund.

While the recommended order was under consideration by the Comptroller, all appellants filed a motion for determination of legal issues in the circuit court action. That motion contended that the circuit court had jurisdiction of the case without the necessity of appellants further exhausting administrative remedies (R. 56-58). On April 6, 1981, the circuit court entered an order finding that it had jurisdiction over the dispute and that, under the facts and circumstances of the case, there was no need for appellants "to utilize administrative hearing procedures or exhaustive prosecution of these causes." The circuit court ruled, nevertheless, that since Florida Export had an administrative proceeding pending on the issue of the validity of the tax assessments, the court action would be stayed pending a final resolution of the administrative proceeding (R. 63-65). 9

On April 27, 1981, the Comptroller issued a final order ruling that the refund would be denied because the profit participation payments were taxable under section 212.031. Florida Export appealed the order to this court, which affirmed without opinion. Florida Export Tobacco Co., Inc. v. Office of Comptroller, 412 So.2d 475 (Fla. 1st DCA 1982).

On November 19, 1982, all appellants filed an amended complaint in the pending consolidated circuit court actions, naming the Comptroller, in addition to DOR, as defendants. The amended complaint alleged that the taxes assessed by DOR on the profit participation charges were illegal, that appellants' applications for refund of taxes previously paid were denied by the office of the Comptroller, and that appellants were entitled to an order declaring such taxes unlawful and invalid. Defendants moved for summary judgment on the ground that the relief sought by plaintiffs was barred under the doctrine of res judicata by the Comptroller's administrative decision affirmed by this court. On February 24, 1984, the circuit court granted final summary judgment, concluding as a matter of law that the doctrine of res judicata prohibited relitigation of the legal issues raised in the petition for administrative hearing. That judgment is before us on this appeal.

II. THE ISSUES

Appellants raise two points. They contend that the Comptroller lacked jurisdiction to adjudicate the legality of the tax assessment by reason of section 20(c)(3), article V, Florida Constitution, as amended in 1972. This section states, "[U]ntil changed by general law consistent with sections 1 through 19 of this article," the circuit courts of this state "shall have exclusive original jurisdiction ... in all case...

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