Department of Treasury, Revenue Div. v. Comerica Bank

• Decision Date: 07 September 1993
• Docket Number: Docket No. 144045
• Citation: 201 Mich.App. 318,506 N.W.2d 283
• Parties: DEPARTMENT OF TREASURY, REVENUE DIVISION, Plaintiff-Appellee, v. COMERICA BANK, a Michigan banking corporation, successor in interest by merger to Manufacturers Bank, N.A., Defendant-Appellant.
• Court: Court of Appeal of Michigan — District of US

Page 283

506 N.W.2d 283

201 Mich.App. 318

DEPARTMENT OF TREASURY, REVENUE DIVISION, Plaintiff-Appellee, v. COMERICA BANK, a Michigan banking corporation, successor in interest by merger to Manufacturers Bank, N.A. Defendant-Appellant.

Docket No. 144045.

Court of Appeals of Michigan.

Submitted April 6, 1993, at Detroit.

Decided Sept. 7, 1993, at 9:10 a.m.

Released for Publication Oct. 19, 1993.

Frank J. Kelley, Atty. Gen., Thomas L. Casey, Sol. Gen., and E. David Brockman and Marci B. McIvor, Asst. Attys. Gen., for plaintiff-appellee.

Michael F. Main, Michael D. Boutell, Christian Nilson, Paul W. Creasy, Lawrence J. Sauter, Elias Muawad, and Kurt M. Carlson, Detroit, for defendant-appellant.

Before HOOD, P.J., and BRENNAN and CORRIGAN, JJ.

CORRIGAN, Judge.

In this action to determine rights to a delinquent taxpayer's assets, defendant bank appeals the circuit court's ruling, pursuant to the levy statute, M.C.L. § 205.25; M.S.A. § 7.657(25), that it should have paid over to plaintiff Department of Treasury the entire amount in an account held jointly by taxpayer Intissar Ismail and an innocent third party, Mariam Ismail, who was not named in the levy. We affirm.

On April 20, 1990, plaintiff issued a warrant and notice of levy for a joint account at Manufacturers National Bank (now Comerica Bank). The levy stated that Youssef and Intissar Ismail, who are husband and wife, owed $55,717.43 in Michigan personal income taxes and intangibles taxes. The warrant was served on April 23, 1990. ¹ On May 18, 1990, defendant paid to plaintiff the sum of $15,714.53. That sum represented one-half of the balance in the joint account at the bank, held by Intissar and Mariam Ismail (not Intissar and Youssef Ismail). Defendant did not remit the remaining one-half, contending that a joint tenant in a bank account is the presumptive owner of only fifty percent of the account.

On May 22, 1990, four days after defendant had paid plaintiff one-half of the balance of the account, a hearing was held regarding Youssef and Intissar Ismail's tax liability. From the facts before us, we cannot ascertain whether Intissar Ismail attended or was represented at that hearing. At the hearing, plaintiff's representatives determined that Youssef and Intissar Ismail were not liable for the unpaid personal income taxes or intangibles taxes as to which the warrant and levy had been issued. Youssef Ismail and plaintiff's representatives then agreed that all money obtained pursuant to the levy would be applied on an outstanding debt of $91,000 for sales tax owed by Youssef Ismail's business, "Scoopy's Fill-Up." The record is silent regarding Intissar Ismail's role, if any, in Youssef Ismail's business and her liability for the sales tax debt. It is also silent as to Youssef Ismail's authority to apply his wife's property to his business' sales tax debt. Although plaintiff apparently settled the matter with the taxpayers on May 22, 1990, the assessments for personal income taxes and intangibles taxes were not formally canceled by plaintiff until March 4, 1991, when plaintiff approved the May 22, 1990, determination.

Nonetheless, plaintiff continued in June and July of 1990 to attempt to recover from defendant the balance of the Intissar-Mariam account, culminating in a formal demand letter dated August 16, 1990. Defendant did not remit the remainder of the Intissar and Mariam Ismail joint account. Plaintiff filed suit in the Wayne Circuit Court on October 10, 1990, representing to the court that both taxpayers were indebted to plaintiff for unpaid taxes. However, as the proceedings on May 22, 1990, established, this representation in the complaint was no longer accurate. In addition to seeking the $15,714.53 remaining in the account, plaintiff sought a penalty of one-half that amount ($7,857.26), pursuant to M.C.L. § 205.25(3); M.S.A. § 7.657(25)(3). Neither the August 16 demand letter nor the October 10 complaint disclosed that plaintiff had agreed to cancel the underlying assessments against Intissar and Youssef Ismail; indeed, the complaint represented that "Youssef and Intissar Ismail are indebted" to plaintiff for 1983 and 1984 taxes [emphasis supplied]. ²

The matter was submitted to the court on stipulated facts, both parties agreeing to the need for a judicial determination of the question. Neither party, however, explained on what basis plaintiff continued to pursue a demand against the joint account of Intissar and Mariam Ismail, when--well before August 16, 1990--plaintiff knew that the only tax liability was Youssef Ismail's sales tax liability for the operation of his individual business, Scoopy's Fill-Up. By the time of the trial, plaintiff had abandoned its claim for the remaining $15,714.53 in the Intissar and Mariam Ismail account because the assessments had been formally canceled. The discussion of damages related to the fifty percent penalty. Plaintiff conceded that it had only a weak claim because defendant's withholding of the money was not "unreasonable."

After a bench trial, the court ruled that pursuant to M.C.L. § 205.25; M.S.A. § 7.657(25), and upon presentation of a warrant and levy, the plaintiff may levy upon all property and rights to property belonging to the taxpayer, including "funds in a joint bank account based upon the taxpayer's rights to withdraw all of said funds." ³ The court ordered defendant to surrender the remaining funds in the Intissar and Mariam Ismail account, but did not impose any "costs or penalties ... because a public issue is involved." Defendant appealed. Although we would be inclined to find in plaintiff's favor on the underlying legal issue, we recognize that our opinion on this question is purely advisory. In the factual posture of this case, the issue presented is essentially hypothetical. We have no record evidence that Youssef Ismail had any legal right to the Intissar and Mariam Ismail joint account at the time of the complaint, the trial, or the final order. Nonetheless, we will attempt to respond to the parties' arguments because we recognize the importance of the underlying question. Our opinion regarding this question is, however, nonbinding dicta.

It is a fundamental rule of statutory construction that where the language of a statute is clear and unambiguous, no judicial interpretation is warranted. Victorson v. Dep't of Treasury, 439 Mich. 131, 137, 482 N.W.2d 685 (1992). Judicial construction is permitted where the language of a statute is susceptible to more than one interpretation. Id. at 138, 482 N.W.2d 685. When construing a statute, a court is obligated to ascertain and give effect to the intention of the Legislature. Id. Where the wording of a statute is ambiguous, we seek to discern the intent of the Legislature in light of the purpose sought to be accomplished. Energetics, Ltd. v. Whitmill, 442 Mich. 38, 48, 497 N.W.2d 497 (1993). Comerica Bank-Detroit v. Dep't of Treasury, 194 Mich.App. 77, 92, 486 N.W.2d 338 (1992). The scope of tax laws will not be extended by implication or forced construction. Id., citing Hart v. Dep't of Revenue, 333 Mich. 248, 251, 52 N.W.2d 685 (1952).

Plaintiff indisputably has statutory authority to pursue assets of delinquent taxpayers in the hands of others, such as banks. M.C.L. § 205.25; M.S.A. § 7.657(25) provides in part:

(1) ... Except as provided in subsection (5), the commissioner or an authorized representative of the commissioner ... may levy on all property and rights to property, real and personal, tangible and intangible, belonging to the taxpayer or on which a lien is provided by law for the amount of the deficiency, and sell the real and personal property of the taxpayer found within the state for the payment of the amount due, the cost of executing the warrant, and the additional penalties and interest. Except as provided in subsection (6) [permitting service by certified mail], the officer or agent serving the warrant shall proceed upon the warrant in all respects and in the same manner as prescribed by law in respect to executions issued against property upon judgments by a court of record.

The dispute in this case centers on the method by which such assets may be collected.

Regarding this question of first impression, no Michigan case is squarely on point. We find that United States v. Nat'l Bank of Commerce, 472 U.S. 713, 105 S.Ct. 2919, 86 L.Ed.2d 565 (1985), provides guidance. In Nat'l Bank of Commerce, a resident of Arkansas was delinquent in paying federal income tax. The Internal Revenue Service filed a notice of levy against two accounts at the National Bank of Commerce, both held in the name of the taxpayer and two other parties, neither of whom was subject to the IRS levy. Id. at 715, 105 S.Ct. at 2921-22. All three individuals were authorized to make withdrawals from either account. Id. at 716, 105 S.Ct. at 2922. The bank refused to comply with the levy and the United States brought suit. Id.

The analogous portion of the federal tax code is essentially identical to the relevant portion of M.C.L. § 205.25; M.S.A. § 7.657(25):

If any person liable to pay any tax neglects or refuses to pay the same within 10 days after notice and demand, it shall be lawful for the Secretary to collect such tax (and such further sum as shall be sufficient to cover the expenses of the levy) by levy upon all property and rights to property (except such property as is exempt under section 6334) belonging to such person or on which there is a lien provided in this chapter for the payment of such tax. [26 U.S.C. 6331(a).]

The Court explained that state law determines the taxpayer's property and rights to property, but that, once those are established, "the tax consequences ... are dictated by federal law." 472 U.S. at 722, 105 S.Ct. at 2925. The IRS "steps into the taxpayer's shoes," id. at 725, 105 S.Ct. at 2927 and acquires "whatever rights the taxpayer himself possesses." Id. Because the taxpayer had a right...