SC03-2063 – Crescent Miami Center, Llc V. Florida Department Of Revenue

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State: Florida

Court: Supreme Court

Docket No: sc03-2063

Case Date: 05/19/2005

Plaintiff: SC03-2063 – Crescent Miami Center, Llc

Defendant: Florida Department Of Revenue

Preview:Supreme Court of Florida
No. SC03-2063
CRESCENT MIAMI CENTER, LLC,
Petitioner,
vs.
FLORIDA DEPARTMENT OF REVENUE,
Respondent.
[May 19, 2005]
WELLS, J.
We have for review Crescent Miami Center, LLC v. Department of
Revenue, 857 So. 2d 904 (Fla. 3d DCA 2003), which expressly and directly
conflicts with the decision in Kuro, Inc. v. State Department of Revenue, 713 So.
2d 1021 (Fla. 2d DCA 1998).  We have jurisdiction.  See art. V, § 3(b)(3), Fla.
Const.
FACTS
Crescent Real Estate Funding IX, LP (Crescent Funding) is owned by
Crescent Real Estate Equities, LP (Crescent Equities), as the sole limited partner,
and CRE Management IX, LLC (CRE), as the general partner.  CRE is also wholly

owned by Crescent Equities.  On February 24, 2000, Crescent Equities formed
Crescent Miami Center, LLC (CMC), the petitioner in the present case.  Crescent
Equities then transferred 99.9 percent of its interest in CMC to Crescent Funding
and the remaining 0.1 percent interest to CRE.  That same day, CRE transferred
this 0.1 percent interest in CMC to Crescent Funding, so that Crescent Funding
became the sole owner of CMC.
On February 25, 2000, Crescent Equities transferred a tract of real property,
which is the subject of the present case, in fee simple to CMC.  According to the
deed, CMC paid ten dollars and “other good and valuable consideration” for the
property.  This transfer was made to separate the property from Crescent Equities’
other assets in order to facilitate future unsecured financing.  The deed was
recorded , and CMC paid $1,212,750 in documentary stamp tax, which was
comprised of the state documentary stamp tax and a Dade County documentary
surtax.
The documentary stamp tax as applied to deeds conveying real property is
set out in section 201.02(1), Florida Statutes (2003), which states:
On deeds, instruments, or writings whereby any lands,
tenements, or other real property, or any interest therein, shall be
granted, assigned, transferred, or otherwise conveyed to, or vested in,
the purchaser or any other person by his or her direction, on each $100
of the consideration therefor the tax shall be 70 cents.  When the full
amount of the consideration for the execution, assignment, transfer, or
conveyance is not shown in the face of such deed, instrument,
document, or writing, the tax shall be at the rate of 70 cents for each
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$100 or fractional part thereof of the consideration therefor.  For
purposes of this section, consideration includes, but is not limited to,
the money paid or agreed to be paid; the discharge of an obligation;
and the amount of any mortgage, purchase money mortgage lien, or
other encumbrance, whether or not the underlying indebtedness is
assumed.  If the consideration paid or given in exchange for real
property or any interest therein includes property other than money, it
is presumed that the consideration is equal to the fair market value of
the real property or interest therein.
(Emphasis added.)  The underlined text was added by a 1990 amendment and was
critical to the lower court’s analysis in the present case.  See ch. 90-132, § 7, at
451, Laws of Fla.
After paying this tax, CMC filed for a refund of the documentary stamp tax,
but the Florida Department of Revenue (DOR) denied the application.  CMC filed
suit and asserted that it should not have been required to pay the tax because it was
not a purchaser of real property under section 201.02(1).  Since beneficial
ownership of the property did not actually change, CMC argued, the transfer was a
mere book transaction and thus not subject to the documentary stamp tax.  The
DOR argued that the plain language of the statute, including its 1990 amendment,
required CMC to pay the documentary stamp tax.   Final summary judgment was
entered in favor of the DOR.
The Third District Court of Appeal affirmed the summary judgment
decision.  Crescent, 857 So. 2d at 911.  The Third District acknowledged that this
Court has previously held that transfers from a corporation to its shareholders were
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not subject to the tax because the shareholders were not purchasers within the
meaning of the statute.  State ex rel. Palmer-Florida Corp. v. Green, 88 So. 2d 493
(Fla. 1956).  We later defined the term “purchaser” for purposes of the tax as “one
who obtains or acquires property by paying an equivalent in money or other
exchange in value,” and thus a transfer of an unencumbered interest in real
property from a corporation to its sole shareholder was not taxable.  Florida Dep’t
of Revenue v. De Maria, 338 So. 2d 838, 840 (Fla. 1976) (quoting Webster’s New
Twentieth Century Dictionary 1463 (2d unab. ed. 1971)).  However, the Third
District asserted that these decisions were based on the statute as it existed prior to
the 1990 amendment, before the addition of the final two sentences that, according
to the court, “specifie[d] four types of exchange mediums which constitute
consideration.”  Crescent, 857 So. 2d at 907.  Thus, according to the Third District,
the decisions in Palmer-Florida and De Maria were valid before the 1990
amendment because the statute had not provided a means of determining
consideration in those situations, so no consideration could exist when property
was transferred to a wholly owned grantee.   Id.
The Third District held that the deed in the present case was subject to the
documentary stamp tax because there was consideration for the conveyance, and
the value of that consideration was reasonably determinable as being equal to the
fair market value of the property under the 1990 amendment to section 201.02(1).
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Id. at 909.  Consideration existed in the transaction because Crescent Equities
surrendered its 100-percent interest in the property for an increase in the value of
its interest in Crescent Funding (as the value of CMC, wholly owned by Crescent
Funding, increased with the conveyance of property).  Consideration “follow[ed]
as a natural consequence of the commercial transaction transferring intangible
property with exchangeable value,” and the transfer “effectuated a complete
change in both the legal title and the beneficial ownership of the property.”  Id.
The Third District noted that this Court in De Maria had held that whenever there
is consideration, there is a purchaser, and thus the statute’s purchaser requirement
was also fulfilled in the present case.  Id.1
The Second District Court of Appeal came to a different conclusion under
similar facts in Kuro, where a father and son transferred condominiums which they
solely owned to Kuro, Inc., a corporation which they had formed and in which they
were the sole shareholders.  The transfer was made for the purpose of the Kuros
avoiding potential personal liability arising from the management of the
condominiums.   713 So. 2d at 1022.  The deeds recited the nominal consideration
1.   In support of its holding, the Third District cited to similar decisions in
Dean v. Pinder, 538 A.2d 1184 (Md. 1988) (increase in value of the grantors’ stock
in corporation they wholly owned following their transfer of real property to it was
sufficient “actual consideration” to impose documentary stamp tax on transfer),
and Carpenter v. White, 80 F.2d 145 (1st Cir. 1935) (conveyance to business trust
in return for shares issued by trust was subject to federal stamp tax because
equitable interests of new shares in property were not same as those of old shares).
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amount of ten dollars, and Kuro, Inc., paid the minimum documentary stamp tax.
The DOR argued that Kuro, Inc., owed the tax in proportion to the fair market
value of the property since the shareholders had received an increase in the value
of their interest in Kuro, Inc., by transferring property to the corporation.  The
Second District, however, did not hold Kuro, Inc., accountable for the
documentary stamp tax because the company was not a purchaser under section
201.02(1).   Id.   Moreover, the grantors received no interest in the corporation or
the property that they did not already have before the transfer; thus, the Second
District held that the conveyance was a mere book transaction like the transfer in
Palmer-Florida.   The Second District held that despite the conveyance, under De
Maria and Palmer-Florida, no documentary stamp tax was owed.  Id.  We granted
jurisdiction because of this express and direct conflict between Crescent and Kuro.
ANALYSIS
The issue to be resolved in the present case is whether the conveyance of
property from a grantor to its wholly owned grantee is taxable under section
201.02(1), Florida Statutes.  In order to assist in this analysis, a review follows of
the case law and administrative rules under the pre-amendment and post-
amendment statute.
Case Law Pre-1990 Amendment
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Prior to the 1990 amendment, this Court had encountered similar issues to
those presented in the instant case.  In State ex rel. Palmer-Florida Corp. v. Green,
88 So. 2d 493 (Fla. 1956), a corporation delivered a deed to property it owned to
its shareholders in proportion to their shares in the corporation.  The corporation
argued that the transfer should not be subject to the documentary stamp tax
because the shareholders had given nothing in exchange for the property.  Id. at
494.   We agreed and held that under the statute, the shareholders were not
purchasers; the transaction had not involved any form of consideration; and thus
the transaction was not subject to the documentary stamp tax.  Id. at 495.  The
transaction was termed “a mere book transaction” and was “in no sense a sale to a
‘purchaser’ as contemplated by” the statute.  Id.
We again considered the application of section 201.02(1) in Florida
Department of Revenue v. De Maria, 338 So. 2d 838 (Fla. 1976).  In De Maria, a
corporation transferred property to its sole shareholder, but part of the property
transferred was subject to a mortgage.  Id. at 839.  We reasoned that this
encumbrance on the property made the transfer different from that in Palmer-
Florida because the economic burden of the mortgage had been transferred to the
individual, and the grantor corporation received a benefit in not having to pay the
mortgage.  Therefore, the transaction involving that part of the property
encumbered by the mortgage was not a mere transfer of title.  Id.  This benefit and
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burden transfer constituted sufficient consideration to impose the documentary
stamp tax on that part of the property subject to the mortgage.  Id. at 840.  We also
adopted the definition in Webster’s New Twentieth Century Dictionary of the term
“purchaser” as “one who obtains or acquires property by paying an equivalent in
money or other exchange in value.”  Id.  Thus, since consideration existed in the
transaction because the burden of the mortgage had shifted, we concluded that the
sole shareholder was a purchaser as to that part of the property subject to the
mortgage.  Id.  However, we did not apply the documentary stamp tax to the
corporation’s unencumbered $25,000 equity in the real property--that portion of
the property not subject to the mortgage--because that transfer “was a mere
change in form of the stockholder’s equity in the corporation.”  Id.
Post-1990 Amendment
In 1990, the Florida Legislature amended section 201.02(1), listing potential
sources of consideration in a conveyance of real property.  The types of
consideration listed were (1) money exchanged, (2) the discharge of an obligation,
and (3) the amount of any mortgage, purchase money mortgage lien, or other
encumbrance.  The amendment also provided for the valuation of nonmonetary
consideration, presuming such consideration to be equal to the fair market value of
the real property or interest therein.
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Following this amendment, the DOR amended its rules concerning the
imposition of the tax on transfers to corporations.  Before the 1990 amendment to
the statute, rule 12B-4.013(7) of the Florida Administrative Code provided that
transfers of real property to corporations by their shareholders as a contribution to
capital were not subject to the documentary stamp tax if the transfer was not in
exchange for valuable consideration.  Bernard A. Barton, et al., Kuro and Muben-
Lamar In the Eye of the Beholder?, Fla. B.J., May 2002, at 49.  Following the 1990
amendment, the rule states that “[a] conveyance of realty to a corporation in
exchange for shares of its capital stock, or as a contribution to the capital of a
corporation, is subject to tax.  There is a presumption that the consideration is
equal to the fair market value of the real  property interest being transferred.”  Fla.
Admin. Code R. 12B-4.013(7).  Similarly, when the value of an interest in a
partnership is increased by a conveyance of real property to the partnership, this
transaction is also subject to the tax.  Fla. Admin. Code R. 12B-4.013(10).
Following the 1990 amendment to section 201.02(1), conflict has developed
among the Florida district courts as to how to impose the statute on transactions
conveying property between grantors and their wholly owned companies.  In Kuro,
as stated above, the Second District held that the documentary stamp tax did not
apply to a transfer of property from two sole stockholders to their corporation.   713
So. 2d at 1022.  The Second District considered the DOR rules on transfers to
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corporations and the 1990 amendment to section 201.02(1), but held that the
shareholders had rebutted the presumption that the stock issued to them was
consideration valued as equal to the fair market value of the condominiums
transferred.  Id.
In Muben-Lamar, L.P. v. Department of Revenue, 763 So. 2d 1209 (Fla. 1st
DCA 2000), the First District Court of Appeal held that the issuing of partnership
interests for real property was consideration and thus a transaction subject to the
documentary stamp tax.  In Muben-Lamar, however, the partnership was made up
of three partners, only two of whom owned the property prior to transferring it to
the partnership as a capital contribution.  Id. at 1210.  The third partner, who
owned one percent of the partnership, contributed a promissory note as a capital
contribution.  Id.  Thus, while the majority of the First District certified conflict
with Kuro, Judge Lawrence specially concurred in result only, arguing that the
decision in Muben-Lamar did not conflict with Kuro.   Judge Lawrence
distinguished the facts in Muben-Lamar from those in Kuro because of the
“various and diverse interests” in the partnership, “each [partner] contributing
property in which the other previously had no interest.”  Muben-Lamar, 763 So. 2d
at 1210 (Lawrence, J., specially concurring).   We granted review in Muben-Lamar
on the basis of its conflict with Kuro, but we subsequently dismissed review.
Muben-Lamar, L.P. v. Fla. Dep’t of Revenue, 789 So. 2d 337 (Fla. 2001).
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Analysis of Present Case
Although the 1990 amendment to section 201.02(1) added three
nonexclusive definitions of consideration, as well as providing a means of
assessing the value of nonmonetary consideration, we hold that there is nothing in
the statute that indicates any intent or attempt to alter the interpretations of the
statute in Palmer-Florida or De Maria.   A determination of legislative intent “is
derived primarily from the language of the statute.”  State v. Bodden, 877 So. 2d
680, 685 (Fla.), cert. denied, 125 S. Ct. 628 (2004).   If statutory intent is unclear
from the plain language of the statute, only then may “we apply rules of statutory
construction and explore legislative history to determine legislative intent.”
BellSouth Telecommunications, Inc. v. Meeks, 863 So. 2d 287, 289 (Fla. 2003).  In
applying the plain language of the statute in Palmer-Florida and De Maria, we held
that the tax is not applicable to transactions involving a conveyance of property
between a corporation and its sole shareholders where nothing of value is
exchanged for the property.  Thus, “a mere change in form of the stockholder’s
equity in the corporation” is not sufficient consideration to meet the statute’s
requirements.  De Maria, 338 So. 2d at 840.  Furthermore, since there is no
consideration for such transfers and thus no “exchange in value,” there is no
purchaser.  Id.
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The plain language of section 201.02(1), even following the 1990
amendments, did not eliminate the requirements of consideration and purchaser
that existed at the time of our decisions in Palmer-Florida and De Maria.  The new
language simply provided nonexclusive examples of consideration.  None of these
examples change our prior holdings that a change in the form of ownership of
property, without any exchange of value, does not constitute consideration.  While
the last sentence added a means of determining the value assigned nonmonetary
consideration, it did not change the requirement that consideration actually exist
for the transfer.  Thus, based on the plain language of the amendments, the statute
does not recede from the statutory requirements employed by this Court to reach
the results in Palmer-Florida and De Maria.                                             “Florida’s well-settled rule of
statutory construction [is] that the legislature is presumed to know the existing law
when a statute is enacted, including ‘judicial decisions on the subject concerning
which it subsequently enacts a statute.’”  Wood v. Fraser, 677 So. 2d 15, 18 (Fla.
2d DCA 1996) (quoting Collins Inv. Co. v. Metro. Dade County, 164 So. 2d 806,
809 (Fla. 1964)).  Without any clear express changes on the statute’s face, the
amendment did not recede from our decisions rendered prior to the amendment’s
enactment.  The statute still covers only those situations in which property is
exchanged for something of value.
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The Third District held in the present case that the conveyances in Palmer-
Florida and De Maria could not be taxed under the statute prior to the 1990
amendment because the conveyances had neither reasonably determinable
consideration nor a purchaser.  Crescent, 857 So. 2d at 907.  Accordingly, the
Third District implies that this situation has changed because the amendment
provides a means by which to value the interests in the company that were
exchanged and that the transfers in Palmer-Florida and De Maria could now be
taxed under the amended statutory scheme.  However, we objected to the tax being
applied in these situations not because consideration was not reasonably
determinable but, rather, because there was no consideration at all involved in the
transactions.  Hence, in the present case, the documentary stamp tax does not apply
to the transfer because nothing was exchanged by CMC for the grant of property
from Crescent Equities; thus, there was no consideration or purchaser in the
transaction, just a “mere change in form of the stockholder’s equity in the
corporation.”  De Maria, 338 So. 2d at 840.
The Third District and the DOR also rely on the rules promulgated by the
DOR following the 1990 amendment to section 201.02(1).  Those rules provide
that a conveyance of realty to a corporation “as a contribution to the capital of a
corporation, is subject to tax.”  Fla. Admin. Code R. 12B-4.013(7).  The Third
District held that these “agency rules are presumed valid ” and thus refused to
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deviate from them.  Crescent, 857 So. 2d at 908 n.4.  While “administrative rules . .
. should be accorded considerable persuasive force,” State ex rel. Szabo Food
Services, Inc. v. Dickinson, 286 So. 2d 529, 531 (Fla. 1973), decisions of this
Court interpreting the same statute have a much greater persuasive force.  In the
absence of any statutory amendment by the Legislature contrary to the holdings in
Palmer-Florida and De Maria, those opinions are to be followed.
CONCLUSION
We conclude that the transfer of property between a grantor and its wholly
owned grantee, absent any exchange of value, is without consideration or a
purchaser and thus not subject to the documentary stamp tax in section 201.02(1).
The 1990 amendments to the statute did not repudiate or alter our holdings in
Palmer-Florida or De Maria.  While CMC received the property, it gave nothing to
Crescent Equities in exchange for that property except for the continuing interest in
the same property that Crescent Equities owned before the transaction occurred.
This transaction was merely a change in the form of ownership by the entities who
had owned and continued to own the property.  The argument that the increase in
the value of Crescent Equities’ interest in CMC constituted consideration is not
persuasive, as this increased interest resulted from the transfer and was not the
consideration for making the transfer.
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For the foregoing reasons, we quash the Third District’s decision in this case
and remand this case to the district court for further consideration consistent with
this opinion.
It is so ordered.
PARIENTE, C.J., and ANSTEAD, LEWIS, QUINCE, CANTERO, and BELL, JJ.,
concur.
NOT FINAL UNTIL TIME EXPIRES TO FILE REHEARING MOTION, AND
IF FILED, DETERMINED.
Application for Review of the Decision of the District Court of Appeal - Direct
Conflict of Decisions
Third District - Case No. 3D02-3002
(Miami-Dade County)
Fred Owen Goldberg of Berger Singerman, P.A., Miami, Florida,
for Petitioner
Charles J. Crist, Jr., Attorney General, and Charles Catanzaro, Assistant Attorney
General, Tallahassee, Florida,
for Respondent
Gary V. Perko and Victoria L. Weber of Hopping Green and Sams, P.A. and Keith
C. Hetrick, General Counsel, Tallahassee, Florida on behalf of Florida Home
Builders Association,
for Amicus Curiae
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