State, Dept. of Revenue v. Zuckerman-Vernon Corp.

Decision Date23 November 1977
Docket Number50908,ZUCKERMAN-VERNON,Nos. 50907,s. 50907
Citation354 So.2d 353
PartiesSTATE of Florida, DEPARTMENT OF REVENUE, Petitioner, v.CORPORATION, Respondent.CORPORATION, Petitioner, v. STATE of Florida, DEPARTMENT OF REVENUE, Respondent.
CourtFlorida Supreme Court

Robert L. Shevin, Atty. Gen., Tallahassee and Harold F. X. Purnell, Asst. Atty. Gen., Tallahassee, for petitioner State of Florida, Dept. of Revenue.

William L. Rogers, of Snyder, Young, Stern, Barrett & Tannenbaum, North Miami Beach, for respondent Zuckerman-Vernon Corp.

SUNDBERG, Justice.

This cause consists of consolidated petitions for writ of certiorari to review a decision of the District Court of Appeal, First District, reported at 339 So.2d 685. In Case No. 50,907, petitioner, Department of Revenue, alleges the district court's decision to be in conflict with Dominion Land and Title Corporation v. Department of Revenue, 320 So.2d 815 (Fla.1975), and Associated Dry Goods Corp. v. Department of Revenue, 335 So.2d 832 (Fla. 1st DCA 1976), upon the issues of: (1) whether imposition of the 100% Penalty assessment under Section 201.17(2), Florida Statutes (1975), 1 is mandatory; and (2) whether the district court's reduction of the 100% Penalty from $55,649.70 to $5,000 was proper in the instant case. In Case No. 50,908, petitioner, Zuckerman-Vernon Corporation, alleges that the same district court decision conflicts with River Park Joint Venture v. Dickinson, 303 So.2d 654 (Fla. 1st DCA 1974), upon the issue of whether conveyance of the property in question was by a trustee not pursuant to a sale and, therefore, was exempt from the documentary stamp tax. 2 We have jurisdiction, Article V, Section 3(b)(3), Florida Constitution. Pursuant to Fla.App Rule 2.1a. (2)(a), these cases were consolidated for consideration. 3

The relevant facts were articulated in the district court's opinion:

Zuckerman-Vernon Corp. has petitioned for review of the Department's assessment of documentary stamp taxes in the amount of $55,649.70 and a penalty in the same amount for petitioner's failure to affix documentary stamps to a deed from Bayshore 21, Inc., to petitioner and its joint venturer, Marvin Glick. . . . Petitioner insists that the conveyance from Bayshore to the joint venturers on August 27, 1973, was but part of the same transaction in which Bayshore acquired the property (on) August 23, 1973, as trustee for the joint venturers. Documentary stamps in the appropriate amount were affixed to the earlier deed.

Petitioner urges that the joint venturers provided Bayshore all the cash required for its acquisition of the property, personally guaranteed Bayshore's mortgage notes and intended that Bayshore should hold only a paper title for the brief period necessary to arrange Bayshore's financing on the strength of the guarantors' credit. The joint venture agreement dated August 23, to which Bayshore was not a party, recited that Bayshore "has taken title" as trustee. The hearing officer noted that interest rates at the time were higher than those which could lawfully be contracted for by an individual.

The hearing officer found as facts that Bayshore contracted to buy in its corporate name, not as trustee or in another representative capacity, placed $500,000.00 earnest money in escrow when executing the purchase and sale agreement, and took title in its own name, not as trustee. The hearing officer found it was Bayshore's funds, borrowed or otherwise, which made the purchase possible and found no evidence of an express trust relationship between Bayshore and the joint venturers. She further found no evidence that Glick provided Bayshore with cash to secure the purchase and sale agreement or, if he did, that he did so as petitioner's joint venturer rather than as Bayshore's principal. 339 So.2d 685, 686.

The district court found competent, substantial evidence to support the hearing officer's determination that Bayshore had not acquired the property as trustee for the joint venture. Therefore, the exemption for a conveyance by a trustee not pursuant to a sale was held inapplicable and the documentary stamp tax assessment was upheld. However, the district court reduced the penalty assessment of $55,649.70, noting:

Though petitioner's proof failed, it took a substantial position and advanced it in good faith with significant supporting evidence. The question was fairly debatable. If the amount of the penalty assessed pursuant to § 201.17(2), F.S., is a matter generally within the discretion of the Department, the record contains no evidence that the Department exercised informed discretion before acting to assess a $55,649.70 penalty.

On this record, we find such a penalty unconscionable. Therefore, in the exercise of our equitable powers, we will permit assessment of a penalty in a lesser and reasonable amount necessary for protection of the State's interest. Dominion Land & Title Corp. v. Department of Revenue, 320 So.2d 815, 818 (Fla.1975). A penalty of no more than $5,000 is appropriate. 339 So.2d 685, 687.

For the reasons hereinafter expressed, we approve that portion of the district court's decision upholding the finding that the conveyance in issue constituted a sale subject to a documentary stamp tax assessment. However, we do not concur in that part of the decision which reduced the amount of the penalty, and, as later explained, we find that the tax (and therefore the penalty) was miscomputed due to an erroneous calculation of the consideration.

The hearing officer properly concluded that no trust relationship existed between Bayshore and the joint venture. We are not persuaded by the taxpayer's argument that a resulting trust arose out of the transaction. A resulting trust arises where one party pays the consideration for purchase of realty, but title is taken in the name of another. Pyle v. Pyle, 53 So.2d 312 (Fla.1951); Martin v. Wilson, 115 So.2d 573 (Fla. 1st DCA 1959). In the instant case, the evidence reflects that Bayshore purchased the property with its corporate funds. The taxpayer's guarantee of Bayshore's mortgages on the property cannot be equated with payment of the purchase price necessary to establish a resulting trust. Bayshore was primarily liable on the guaranteed mortgages. Bayshore was relieved of this liability only upon satisfaction of the mortgages which occurred some three to four months after its conveyance of the property to the joint venture.

The taxpayer's contention as to the existence of an express trust must fail for the reason succinctly stated in Columbia Bank for Cooperatives v. Okeelanta Sugar Cooperative, 52 So.2d 670, 672 (Fla.1951):

An express trust cannot exist unless there is an execution of an intention to create such a trust by the one having legal and equitable dominion over the property made subject to it. (Emphasis supplied)

The joint venture agreement which declared that Bayshore was holding the property in question as trustee for the joint venture, was executed between the taxpayer and Marvin Glick, the owner of the capital stock of Bayshore, on August 23, 1973. Glick, however, executed the agreement in his individual capacity; Bayshore was not a party to the agreement. Since Bayshore's funds were used to purchase the property on August 17, 1973, and Bayshore took title solely in its corporate name, it was impossible for the joint venture to create an express trust in its favor with Bayshore as trustee. The corpus of the trust, the property, was never within the legal or equitable dominion of the taxpayer or Marvin Glick until after Bayshore divested itself of title.

The hearing officer's determination that Bayshore's conveyance to the joint venture was for financial consideration is also supported by the record. The shifting of economic benefit and burden when the taxpayer took subject to the various mortgages at the time of the conveyance, constituted the consideration necessary to invoke the documentary stamp tax under Section 201.02(1), Florida Statutes (1975). Florida Department of Revenue v. De Maria, 338 So.2d 838 (Fla.1976); Kendall House Apartments, Inc. v. Department of Revenue, 245 So.2d 221 (Fla.1971). However, the Department miscalculated the amount of the consideration subject to the tax imposed by Section 201.02(1), Florida Statutes (1975). Tax was assessed by the Department predicated on a consideration of $18,550,000. This sum was arrived at by totaling the outstanding principal balance of mortgages encumbering the property at the time of the conveyance to the joint venture. The indebtedness to which the joint venture took subject was represented by (i) a mortgage payable to Prudential Insurance Company in the amount of $12,250,000 which encumbered the property at the time of conveyance from Arthree, Inc. to Bayshore; (ii) a mortgage payable to Security Mortgage Investors in the sum of $5,000,000 secured at the time of conveyance to Bayshore; and (iii) a mortgage payable to Commercial Trading Company, Inc. in the sum of $1,300,000 likewise secured at the time of the conveyance to Bayshore.

The obligation of Bayshore to Security Mortgage Investors was unconditionally guaranteed at its inception by Irwin Zuckerman, Melvin Zuckerman, Arthur Siegel, Harold Vernon, and Marvin Glick. Apparently the two Zuckermans, Siegel and Vernon were the principals in Zuckerman-Vernon Corporation. Glick was the sole shareholder of Bayshore. The obligation of Bayshore to Commercial Trading Company, Inc. was unconditionally guaranteed at its inception by the two Zuckermans, Siegel, Vernon, Glick, and Zuckerman-Vernon Corporation. By the terms of this latter guaranty the guarantors (i) waived any right to require the mortgagee to first proceed against Bayshore or pursue any other remedy, (ii) agreed to direct recourse against them, and (iii) unconditionally guaranteed payment and performance of the obligation. The instrument expressly acknowledged...

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