Title: Bail Bond Mortgages STATE OF FLORIDA DEPARTMENT OF REVENUE Jul 24, 1991 IN RE: PETITION OF CASE NO. 91-7DS FLORIDA SURETY AGENTS ASSOCIATION a Florida Corporation, DECLARATORY STATEMENT Petitioner a declaratory statement concerning the applicability of the Florida Documentary Stamp Tax as it relates to the facts described herein. The request for Declaratory Statement was filed May 24, 1991. ISSUE Whether documentary stamp tax is due on a recorded mortgage executed in favor of the petitioner, a bail-bondsman, where the mortgage secures a contingent promissory note. FACTS Petitioner is a Florida corporation, whose address is 1220 East Park Avenue, Tallahassee, Florida 32301. Petitioner's business includes advocating the interests of its approximately 200 surety agent members. The business of surety agents includes taking mortgages on real property in return for providing surety for bail in the event the mortgagor fails to appear as required by the Court in a criminal proceeding. The mortgages secure contingent promissory notes and are recorded with the Clerk of the Court. The Petitioner through its representation of surety agents, has been questioned by its
members concerning the application of documentary stamp tax to bail bond mortgages. A member of Petitioner's association received informal advice from the Department of Revenue on October 29, 1981 and May 19, 1986 that mortgages securing contingent obligations were not subject to documentary stamp tax. Petitioner states that in April 1990 the Clerk of the Court for Brevard County provided a member of Petitioner's association with a copy of a document titled "The Brevard county Clerk of The Circuit Courts Recording Department Procedures." This document contained instructions for the clerk to collect documentary stamp tax and intangible tax on bail bond mortgages. On April 27, 1990, the member of Petitioner's association again requested informal advice from the Department concerning the taxability of mortgages securing contingent promissory notes. The Department responded to the request by letter dated May 30, 1990 with an unofficial statement that mortgages incorporating contingent promissory notes would be subject to documentary stamp tax when recorded. In supplement to the petition, Petitioner has submitted a copy of a mortgage with promissory note incorporated. The mortgage provides in part:... that for good and valuable consideration, and also in consideration of the aggregate sum named in the promissory note... the mortgagor hereby grants, bargains, sells, aliens, remises, conveys and confirms unto the mortgagee all the certain land of which the mortgagor is now seized and in possession, situate in Dade County, Florida,... (emphasis added) The mortgage further provides: That this Mortgage Deed is solely to secure future advances which may be made by the mortgagee to the mortgagor up to and including the amount of... ($50,000) and interest thereon... That at the present time, the mortgagee has not loaned the mortgagor any money or other thing of value, and
as such, the present outstanding debt from the mortgagor to the mortgagee is Zero Dollars. The mortgagee may loan to the mortgagor up to and including the amount of... ($50,000), upon the occurrence of the stated contingency: Upon the forfeiture or estreature of the surety bond or bonds posted on behalf of... defendant... by mortgagee, or upon payment of any expenses incurred by the mortgagee to produce the defendant before the appropriate court or courts of competent jurisdiction in the above cause. Incorporated in the mortgage is the promissory note entitled "Contingent Promissory Note." It contains a statement that the mortgagor promises to pay to Accredited Surety & Casualty Company, Inc. $50,000 upon the forfeiture or estreature of the surety bond or bonds posted on behalf of the defendant. The mortgage and the contingent promissory note recite the same stated sum for which the mortgagor may be liable. The Petitioner challenges the application of the documentary stamp tax to a mortgage which is contingent upon a future event. The Petitioner offers the submitted mortgage as an example of the type of mortgage or similar to the type of mortgage used by its members. SCOPE OF DECLARATORY STATEMENT The issuance of declaratory statements by a state agency is provided for under Section 120.565, F.S., which provides: A declaratory statement shall set out the agency's opinion as to the applicability of a specified statutory provision or of any rule or order of the agency as it applies to the petitioner in his particular set of circumstances only. (emphasis supplied) Due to the limitation on the scope of a declaratory statement provided in the above-referenced section, the Department can render an opinion only as to the specific documents provided by the Petitioner and not as to any other or similar documents the petitioner's members may use.
ANALYSIS Chapter 201, Florida Statutes, imposes a tax on documents signed, executed, issued, sold, removed, consigned, assigned, recorded, or shipped in the state. In 1977, the Legislature amended Section 201.08(1), Florida Statutes, in pertinent part, to impose the tax: [o]n mortgages, trust deeds, security agreements, or other evidences of indebtedness filed or recorded in this state... Section 201.08(1), Florida Statutes, also imposes a tax on documents such as promissory notes, nonnegotiable notes, and written obligations to pay money. Documents such as promissory notes, non-negotiable notes, and written obligations to pay money are not taxable if they are contingent. See. De Vore v. Lee, 30 So.2d 924 (Fla. 1947); Metropolis Pub. Co. v. Lee, 170 So. 442 (Fla. 1936), Lee v. Kenan, 78 F. 2d 425 (CA5 1935) cert. denied 296 U.S. 637. Unlike these obligations, the contingent nature of a mortgage does not control its taxability, since all mortgages are contingent or executory. 36 Fla. Jur. 2d Mortgages section 1, (1982). In previous years the Department considered the contingent nature of the underlying obligation secured by the mortgage in applying Section 201.08. If the promissory note or written obligation secured by the mortgage was contingent the Department did not impose the tax on the mortgage. In 1989, however, in the case of Department of Revenue v. Lincoln Pointe Associates, LTD., 544 So.2d 291 (Fla. 1 DCA 1989), the court held that the amount of tax imposed under Section 201.08(1) is to be determined at the time of recordation based on information on the face of the document recorded and not on facts from other documents. In that case, the taxpayer executed promissory notes simultaneously with two mortgages. The first mortgage contained a hand written legend that the amount actually advanced under that document would not exceed $20,000,000. The second mortgage contained a full face amount of $5,950,000. Each mortgage contained the future advance
qualifying language "or so much thereof as may be advanced, to be paid in accordance with a note." The notes, which were not attached to the mortgage, provided that they evidenced a single loan in the aggregate amount of $23,800,000. The notes were not attached to the mortgage. 544 So.2d at p. 292. Despite the limitation on indebtedness imposed by the notes the court held that the Department had the authority to tax the mortgages for the full aggregate amount which could be advanced under the mortgage. The change in policy or practice by the Department to tax the mortgage regardless of whether the obligation it secures is contingent is controlled by Lincoln Pointe. Lincoln Pointe dictates that the Department look only to the four corners of the mortgage as the taxable document rather than looking beyond the document to determine the contingent nature of that which it secures. Over a year later, in Barnett Bank of South Florida v. Department of Revenue, 571 So.2d 527 (Fla. 3 DCA 1990), the Third District Court of Appeal considered the imposition of documentary stamp tax on a mortgage securing a line of credit and held:... that it was the intent of the Legislature to provide that mortgages are subject to the documentary stamp tax. The Legislature specifically added the word "mortgages" into the class of documents subject to the documentary stamp tax and `the Legislature must be assumed to know the meaning of the words and to have expressed its intent by the use of the words found in the statute... (citation omitted) 571 So 2d at 528. The Barnett bank court also noted that at the time the Legislature amended Section 201.08 to include mortgages, Section 697.01(1), which specifically recognized mortgages as a class of instruments which could be conditioned or defeasible, was in existence. Further, the court held that since the Legislature is presumed to have knowledge of prior existing laws, it is
clear that the Legislature expressly intended to put this conditional or contingent type of document into the class of documents subject to the documentary stamp tax. 571 So.2d at 529. After Lincoln Pointe and Barnett Bank it is the position of the Department that the contingent nature of a mortgage or of the obligation which it secures is of no consequence to the taxability of the Mortgage. The fact that the type of mortgages at issue here secure contingent promissory notes or are themselves considered contingent does not affect their taxability. The Department's Rule 12B-4.053(29). F.A.C.. follows the above cited case law wherein it provides:... All notes or written obligations to pay money delivered to the lender, including, but not limited to, master notes, and notes drawn in connection with a line of credit, letter of credit, bail bond or otherwise, executed in Florida or approved and accepted in Florida, are subject to documentary stamp tax. Tax is due on the face amount of the note whether or not funds are advanced at the time of delivery. If the note is secured by a recorded mortgage, stamps shall be affixed to the mortgage at the time of recording and a notation made on the note that proper stamps and amount thereof are affixed to the mortgage... (emphasis supplied) Mortgages securing notes drawn in connection with a bail bond are taxable under this rule. The Petitioner tries to liken the bail bond mortgage to the document in the recent case of Department of Revenue v. Sun Bank, 556 So.2d 1154 (Fla. 1st DCA 1990). In that case the court found a document entitled "First Supplemental Indenture of Mortgage and Deed of Trust" to be a mere guaranty which was not subject to tax. There can be no logical comparison between the bail bond mortgage and the Sun Bank document for purposes of imposing the
documentary stamp tax on mortgages, since the Sun Bank document was found by the court not to be a mortgage at all. Unlike Petitioner's bail bond mortgage, the Sun Bank document did not pledge or mortgage any property and simply guaranteed a previously secured debt. The mortgage submitted by the Petitioner pledges property and is clearly a mortgage. The Petitioner also cites as authority the First District Court of Appeal case of Department of Revenue v. Dix, 362 So.2d 420 (Fla. 1st DCA 1978). This case is completely inapplicable to the issues presented by the Petitioner. In Dix the issue was whether the economic burden of making mortgage payments passed to a lessee of mortgaged property so as to form consideration upon which to impose documentary stamp tax under Section 201.02(1), Florida Statutes. Section 201.02(1), imposes documentary stamp tax on transfers of interests in real property for consideration. The finding by the court that the economic burden of making mortgage payments is merely coextensive with the burden of making rent payments, has no bearing on whether a mortgage at the time of recordation is subject to documentary stamp tax under Section 201.08, Florida Statutes. The Petitioner further asserts that the mortgage submitted with the Petition secures only future advances. Section 201.08(1) provides that on mortgages which secure future advances the tax shall be paid at the time of recordation on the original initial debt or obligation secured, excluding future advances. The Petitioner asserts that the mortgage secures nothing at the time it is recorded. The mortgage provides that it is given in consideration of the aggregate sum named, that sum being $50,000. The mortgage by its own terms is given to secure this amount. Fifty thousand dollars is not just the maximum sum contemplated by the agreement, it is the only sum contemplated by the agreement. The "so-called" future advance clause of this mortgage further states that "at the present time the mortgagee has not loaned the mortgagor any money or other thing of value..." (emphasis added) Certainly the mortgagor's posting of a bond on behalf of the defendant was of some value, as is satisfied the $50,000 bail requirement and secured the release of the
defendant. Section 903.0-45, Florida Statutes provides in pertinent part that: It is the public policy of this state and the intent of the legislature that a criminal surety bail bond... shall be construed as a commitment by and an obligation upon the bail bondsman... The bond deposited with the court on behalf of the defendant is a current obligation of the bail-bondsmen. This obligation was undertaken in exchange for the mortgage and other consideration. The mortgage secures the aggregate sum, albeit contingent, named in the mortgage and promissory note. Like the mortgage in the Lincoln Pointe case which secured a maximum amount "or so much thereof as may be advanced..." and the mortgage in Barnett Bank which secured a line of credit, this mortgage is taxable on the aggregate sum named. tax. The above mortgage is properly subject to documentary stamp IT IS THEREFORE SO ORDERED Any Party to this Order has the right to seek judicial review of the Order as provided in Section 120.68, Florida Statutes, by the filing of a Notice of Appeal as provided in Rule 9.110, Florida Rules of Appellate Procedure, with the clerk of the Department in the Office of the General Counsel, Post Office Box 6668, Tallahassee, Florida 32314-6668 and by filing a copy of the Notice of Appeal accompanied by the applicable filing fees with the appropriate District Court of Appeal. The Notice of Appeal must be filed within 30 days from the date this Order is filed with the clerk of the Department. DONE AND ORDERED this 24th day of July, 1991. STATE OF FLORIDA DEPARTMENT OF REVENUE J. THOMAS HERNDON Executive Director