Gruman v. State, Department of Revenue (379 So. 2d 1313, 1980)

OTT, Acting Chief Judge.

Following an administrative hearing the Department of Revenue (Department) assessed a documentary tax, penalties and interests totaling $11,432.60 against a transfer of real property by quitclaim deed from appellant to his wholly owned corporation. The hearing officer had recommended to the Department that the assessment be withdrawn on the ground that there was no consideration for the conveyance. The Department rejected that recommendation and ordered the assessment. We reverse that order.

Appellant’s wholly owned corporation, Gulf Standard Corporation, built an apartment complex in Tampa. Appellant and his wife were required to guarantee payments on a 1.85 million dollar mortgage. Gulf Standard became insolvent and conveyed all its assets, including the apartments, to appellant by quitclaim deed. Appellant assumed all the liabilities of the corporation. He made some of the mortgage payments and later quitclaimed the apartments to another wholly owned corporation, Northwest Liquor Industries, Inc., again without any money changing hands.

The Department assessed a documentary tax on both transfers, but later withdrew its assessments on the conveyance from Gulf Standard to appellant because no benefit resulted to appellant, who assumed responsibility for all its debts, and who had been liable for the mortgage payments at all times.

Appellant protested the tax on his conveyance of the property to Northwest Liquor. He claimed there was no consideration for it, that notwithstanding the conveyance he and his wife remained liable on the mortgage and that the fair market value of the apartments was less than the balance owing on the mortgage at the time of the transfer. He requested and got a formal hearing before a state hearing officer.

The Department relied upon language in an analogous provision of the Florida Administrative Code which provides that the unpaid balance of any mortgage on conveyed property is presumed to be part of the consideration for the conveyance. Rule 12B-4.13(7). To rebut that presumption, appellant introduced evidence (1) that Northwest Liquor Industries never made any payments on the mortgage, but instead went into bankruptcy almost immediately after the conveyance, and (2) the mortgage holder thereupon foreclosed on the property and obtained a deficiency judgment against appellant and his wife for over $500,000.

In his recommended order the hearing officer set forth his findings of fact and conclusions of law, as required by Section 120.57(l)(b)(8), Florida Statutes. He found that at the time of the conveyance the market value of the property was less than the mortgage guaranteed by appellant, that only a “captive grantee” would accept such a conveyance, and that appellant remained liable on the mortgage after the conveyance. He also found, but classified it as a “conclusion of law”, that Northwest Liquor had failed to make the mortgage payments when due. In express reliance upon American Foam Industries v. Florida Department of Revenue, 345 So.2d 343, (Fla.3d DCA 1977), he concluded that since Northwest Liquor did not make the mortgage payments after the transfer of the property, and since the conveyance did not relieve appellant of his liability on the mortgage, no consideration passed and the transfer to Northwest Liquor was subject to only minimal tax. He therefore recommended that the notice of proposed assessment b