302 BIENNIAL REPORT OF THE ATTORNEY GENERAL

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1 302 BIENNIAL REPORT OF THE ATTORNEY GENERAL March 12, 1964 COUNTY SCHOOL SYSTEM COUNTY SUPERINTENDENT OF PUBLIC INSTRUCTION BUDGETING AND ADMINISTERING UNBUDGETED INTERNAL FUNDS (9), F. S. To: Thomas D. Bailey, State Superintendent of Public Instruction, Tallahassee Under provisions of (9), F. S.. and 130-S.26 (7), state board of education regulations, does the county board of public instruction have the authority in the administering of unbudgeted internal funds in a junior college to determine and to designate the purposes for which incidental funds not collected from students nor held in trust for a specific purpose shall be used? Section (9), F. S., provides: INTERNAL FUNDS.-The county board shall be responsible for the administration and control of all local school funds derived by any school, including junior colleges, from all activitie8 including the school lunch program, or any other source, and shall prescribe the principles and procedures to be followed in administering these funds consistent with regulations adopted by the state board of education. The state board of education shall adopt regulations governing the procedures for the handling of the receipt, expenditures, deposit and disbursement of internal funds, which regulations do not necessarily have to comply with the requirements set forth in (1) - (8). (Emphasis supplied.) In accord with the above statutory provision, your question is answered in the affirmative March 13, 1964 TAXATION TAX OBLIGATIONS ON TRANSFER OF INTEREST IN COOPERATIVE APARTMENTS , (1) (b); OH. 201, F. S. To: Ray E. Green, State CO'Inptroller, Tallahassee What taxes, excise or otherwise, are due upon a transfer of a share of stock and an interest in a cooperative apartment? Your file handed us with your request for opinion reveals. transactions concerning some 18 apartments in the Boca Ciega Apartments, Unit No.1, located at 1834 Shore Drive South in St. Petersburg, Fla. We gather from the file before us that the apartments were originally owned by Pasadena Plaza, Inc., a corporation, which apartments were sold and transferred by their said owner to Boca Ciega Apartments, Inc., Unit No.1, a Fla. corporation, around. the year 1958, for a consideration of around $215,000, on

2 BIENNIAL REPORT OF THE ATTORNEY GENERAL 303 \vhich documentary stamp taxes were paid under , F. S., in the sum of $430. Boca Ciega Apartments, Inc., Unit No.1, was incorporated under Ch. 608, F. S., around Sept. 17, 1958, and was dissolved, evidently for nonpayment of capital stock taxes, on May 24, One of the powers of the said corporation, as set out in its corporate charter, is to "operate, manage and conduct the apartment house thereon under a cooperative ownership plan whereof the entire stock of the corporation shall be held by the stockholders thereof in proportion to the number of apartments occupied or to be occupied by them in such apartment house building..." Under the said charter the corporation was authorized to issue 18 shares of corporate stock without nominal or par value, such number of shares of stock corresponding in number with the number of apartments in the apartment building. Under its charter the corporation has perpetual existence, is governed by 3 directors, and had 3 incorporators. We note in passing that (1) (b), F. S., provides that "cooperative associations shall have not less than ten incorporators." This requirement for 10 incorporators for cooperative associations appears to have originated with Ch. 7384, The supreme court, appellate division, 1st Dept., of N. Y., in Payson v. Caputa, 9 A. D. 226, 193 N. Y. S. 166, text 170, stated that "the word 'cooperative,' although of ancient usage and wellknown to the law, has variable meaning which is quite flexible, depending upon the context in which it is used. (18 C. J. S. 127; Cooperative Corporations Law, section 3, subsection (c); General Corporation Law, section 9)." "Cooperative. Acting together to accomplish the same end, helping, promoting the same end." A "cooperative" is a corporation organized for purpose of rendering economic services, without gain to itself, to shareholders or members who own and control it." "Cooperation" has been defined as the act of operating or acting together, or jointly with another or others (Costa v. Cox, Ohio App., 171 N. E. 2d 529, text 535; Edwards v. Hardwick, Okla. 350 P. 2d 495, text 502; Christman v. Reicholdt. Mo. App. 150 S. W. 2d 527, text 532). In United Grocers, Limited v. U. S. D. C. Cal., 186 Fed. Supp. 724, text 733, a cooperative was referred to as a corporation organized for the purpose of rendering economic services without gain or profit to itself, or to the stockholders or members who own and control it. Cooperative associations or corporations have been said to be neither corporations, in the ordinary business sense, nor partnerships (Kuhns v. Horn, 223 Nev. 547, 355 P. 2d 249, text 253). It is usually the obligation of a cooperative corporation or association to maintain and operate its property on a mutual and cooperative basis for the sole use of its stockholders or members without profit, gain, remuneration or rent to itself, excepting the assessments provided for necessary administration, upkeep, taxes, operation, etc., of the corporate or association property. Cooperative associations and corporations holding, administering, operating and caring for cooperative apartment buildings, hold their said property for the use and benefit of their stockholders and proprietary lessees, and not otherwise. Each membership certificate or certificate of stock and the apartment assigned thereto and under proprietary lease to the member or stockholder are appurtenant one to the other, and neither may be transferred separate and without the other. Such share of stock or membership certificate and the apartment

3 304 BIENNIAL REPORT OF THE ATTORNEY GENERAL assigned thereto have no separate value, and must be jointly and not severally sold and transferred. They have no value except jointly and together and must be sold and transferred together, under the usual cooperative agreement or bylaws. The unanimous' consent of all stockholders or members under a cooperative apartment agreement or corporation is usually required to change an existing agreement, contract or bylaws regulating the same. We have before us a copy of that certain "Bill of Sale and Deed," bearing date of Nov. 15, 1962, from Charles F. Ewing and wife to Hugh White, whereby "Apartment. '4' in that certain cooperative apartment building known as Boca Ciega Apartments #1, situate at 1834 Shore Drive South, St. Petersburg, Fla.," was granted, bargained, sold, transferred and delivered to the said grantee, (party of the second part) his executors, administrators and assigns, "to have and to hold the same unto the said party of the second part, his executors, administrators and assigns, forever." In addition to describing said Apartment #4, there is also described' and included "all fixtures therein contained, and the unobstructed use of all common passageways in said apartment building together with all adjoining land known and described as Lot 4, Pasadena Plaza, as per plat thereof... limited only by the Charter, By-laws and official actions" of the said Boca Ciega Apartments, Unit #1, Inc. This bill of sale and deed further provide that the grantor "will warrant and defend the sale of the said property hereby made unto the said party of the second part, his executors, and assigns, against the lawful claims and demands of all persons whomsoever." Although other documents relative to the transaction have not been furnished us, such as the agreement between the stockholders or members of the association, corporate bylaws, etc., it is evident that the stockholder or member of the cooperative association or corporation has the exclusive right of use and occupancy of the apartment assigned to his share of stock or membership certificate, and the use of the common properties of the apartment and lands upon which the apartment building is located. As to the rights and interests of parties to a cooperative apartment proprietary lease, bylaws, articles of incorporation, and other documents, we have made free use of the cooperative apartment forms in 8 Am. JUl'. Legal Forms, pp. 177 to 233, inclusive. The stockholdertenant would seem to have a proprietary leasehold interest in the apartment assigned to his stock or membership interest, and in the common properties of the apartment house and lands upon which located. The copy of the bill of sale and deed, above-mentioned and quoted from, clearly indicates a perpetual right of occupancy of the apartment assigned to a stock or membership interest and use of the common properties, although the fee title to the apartment building and the lands upon which located appears to be vested in Boca Ciega Apartments, Inc., Unit No.1, a Fla. corporation, the lessee or grantees of the apartment and common properties described in the bill of sale and deed aforesaid. Section , F. S., imposes a documentary stamp tax on "deeds, instruments or writings, whereby any lands, tenements or other realty, or any interest therein, shall be granted, assigned, transferred or otherwise conveyed to or vested in the purchaser, or any other person by his direction..." (Emphasis supplied.) This quoted language has remained unchanged since the adoption of F. S., 1941, although the rate of the tax imposed has been "! -.

4 BIENNIAL REPORT OF THE ATTORNEY GENERAL 305 changed once or twice. The federal documentary stamp tax is imposed on deeds, instruments or writings "whereby any lands, tenements, or other realty sold shall be granted, assigned, transferred...," (Emphasis supplied.) The federal statute contains the word "sold" not contained in the Florida Statute. ( 4361, title 26, U. S. code). The Florida statute contains the phrase "or any interest therein" not contained in the federal statute. This brings us to the question of whether or not a leasehold interest in real property is an interest in lands, tenements or realty within the purview and intent of , F. S. The supreme court of Fla., in Baxter" v. Thompson, 134 Fla. 494, 184 So. 118, text 121, stated that "it has been held by this court that a sale of standing timber is a contract concerning an interest in land within the meaning of the statutes of frauds." In Flowers v. Atlantic Coast Line Railway Co., 140 Fla. 805, 192 So. 321, text 323, the same court, citing Campbell v. McLaurin Investment Co., 74 Fla. 501, 77 So. 277, held that "a valid lease of land for "a term of years is a conveyance of an interest in land" within the statute of frauds. However, it was held in DeVore v. Lee, 158 Fla. 608, 30 So. 2d 924, text 926, that such term of years in the hands of the lessee and his assigns is classified, at common law, as "chattels real and classified as personal property." In DeVore v. Gay, Fla., 39 So. 2d 796, the court remarked that "this court has already determined in this case, DeVore v. Lee, supra, that leases as a class come within the terms of , F. S., 1941, F. S. A., and said section levies a documentary stamp tax measured by the consideration" paid or obligated. However, the court further held that where the payments for the occupancy are made monthly during the life of the lease that nothing is due at the time of the making and execution of the lease but accrues monthly as the premises are occupied so that no tax is due at the time of making of the lease. See also Dundee Corp. v. Lee, 156, Fla. 699, 24 So. 2d 234, and DeVore v. Lee, supra. In the last mentioned case the court remarked that "a lease has been defined as 'a conveyance by the owner of an estate to another of a portion of his interest therein for a term less than his own' and 'it passes a present interest in the land for the period specified.' " Leaseholds have been held to be an interest in land in Owens v. Hughes, 188 Wis. 215, 205 N. W. 812; Jensen v. Nolte, 233 Iowa 636, 10 N. W. 2d 47; State Say. and Loan Assoc. v. Bryant, 159 Or. 601, 81 P. 2d. 116, text 128; Oahu Railway and Land CO. Y. Ewa Plantation Co. 15 Haw. 318; First Trust & Deposit Co. v. Syrdelco, Inc., 292 N. Y. S. 206, text 207; Moeller v. Gormley, 44 Wash. 465, 87 P. 507, text 508; Taylor v. Marshall, 255 Ill. 545, 99 N. E. 638, text 639; Chicago Attachment Co. v. Davis Sewing Mach. Co., 142 Ill. 171, 31 N. E. 438, text 440 and 441; Judd v. Landin, 211 Minn. 465, 1 NW 2d 861, text 865; Greene Line Terminal Company v. Martin, 122 W. Va. 483, 10 S. E. 2d 901, text 906; Milliken v. Faulk, 111 Ala. 658, 20 So. 594, text 595. See also 3 Thompson on Real Property, 1959 Replacement, 6, 1016, referring to "the dual nature of a leasehold being an interest in land and at thesame time a chattel." In Rogers v. Martin, 87 Fla. 204, 99 So. 551, text 552, the court referred to lessee's interest in realty as being "equivalent to absolute ownership" during the life of the lease. An easement has been said to be a right or privilege in one person's estate granted to another for his advantage or convenience,

5 306 BIENNIAL REPORT OF THE ATTORNEY GENERAL and is property in the nature of land. It is an interest in the land of the servient tenement, and may be a freehold or a chattel interest according to its duration (28 C. J. S. 619,.624, 1). An Annotation in 13 L. R. A. 158 and 159 collects several state court decisions which seem to hold that a sale or lease of a particular 'room above the first story of a building in perpetuity conveys' an easement in real property. An easement implies an interest in land (Burdine v. Sewell, 92 Fla. 375, 109 So. 648, text 652; Winthrop v. Wadsworth, Fla., 42 So. 2d 541, text 543). See also 14 Words and Phrases, Perm. Ed., pp. 67, 68 and 69. Due to the fact that the shares of stock in the average cooperative apartment corporation, and the proprietary lease from the cooperative to the stockholder-lessee, or the member-lessee, are inseparable and must be transferred or assigned together and not separatel;:, the shares of stock and the apartment assigned to it, and its proprietary lease, must be considered as a unit for the purpose of taxation under Ch. 201, F. S. The proprietary lease of an apartment and the common properties used in connection therewith in law convey an interest in "lands, tenements or other realty," within the purview of , F. S., and is subject to taxation thereunder, the same taxable on the consideration paid for the said stock and proprietary lease ~Iarch 18, 1964 To.' GAMBLING ADVERTISING, MATCHBOOK-NUMBERS SCHEME-AS CONSTITUTING A LOTTERY Don Genung, She't'iff, St. Petersburg Does the following scheme constitute a lottery in violation of the laws of this state? STATEMENT OF FACT: A local advertising company distributes matchbook covers 'which contain a number on the inside of each cover. Periodically winning numbers are selected and broadcast over local radio stations in the Tampa Bay Area. The winning number can be redeemed by the holder for either money or merchandise at any participating store. A subsequent telephone conversation on Feb. 20, 1964, with your office discloses that the matchbooks are available only in the participating stores, and that the advertising company is in the employment of the participating stores. A lottery is' a scheme consisting of 3 elements, Le., prize, award by chance. and consideration. The element of prize arises when the winning number is redeemed with merchandise or money. The element of chance is like\vise evident in the contest, being furnished by the random selection of a winning number. Such selection is one \vhich is beyond the control of the contestant, AGO holds that where a contestant is required to attend the sponsor's place of business in order to pick up entry blanks, such requirement constitutes consideration to a sufficient extent to cause the contest to be a lottery, providing the other elements of prize and chance are likewise present. Such rationale is