Forfeiture of $126,174, In re

• Decision Date: 08 October 1991
• Docket Number: Docket No. 128608
• Citation: 191 Mich.App. 453,479 N.W.2d 8
• Parties: In re FORFEITURE OF $126,174. 191 Mich.App. 453, 479 N.W.2d 8
• Court: Court of Appeal of Michigan — District of US

Page 8

479 N.W.2d 8

In re FORFEITURE OF $126,174.

Docket No. 128608.

191 Mich.App. 453, 479 N.W.2d 8

Court of Appeals of Michigan.

Submitted July 16, 1991, at Lansing.

Decided Oct. 8, 1991, at 9:20 a.m.

Released for Publication Feb. 3, 1992.

[191 MICHAPP 454] Hugh B. Clarke, Jr., Lansing, for Gregory L. Martin.

Frank J. Kelley, Atty. Gen., Gay Secor Hardy, Sol. Gen., and E. David Brockman and Charles E. Donahue, Asst. Attys. Gen., for Dept. of Treasury.

Before SHEPHERD, P.J., and MARK J. CAVANAGH and FITZGERALD, JJ.

PER CURIAM.

This appeal concerns whether claimant Gregory Martin's attorney, Hugh B. Clarke, Jr., or intervening claimant, Department of Treasury, is entitled to a cash fund of $73,873.21, plus interest, which was seized from Martin under this state's drug forfeiture laws, [191 MICHAPP 455] M.C.L. Sec. 333.7521 et seq.; M.S.A. Sec. 14.15 (7521)et seq., but ordered returned to Martin, subject to the competing claims of attorney Clarke and the department. The trial court awarded the department the amount attributable to Martin's tax liability for tax years 1984, 1985, and 1986. Attorney Clarke was awarded any remaining funds. In this appeal as of right, attorney Clarke seeks the entire $73,873.21.

Martin hired Clarke as his counsel in December 1987 to represent him in both the criminal and forfeiture proceedings. On January 12, 1988, a retainer agreement was executed by Martin and Clarke wherein Clarke agreed to represent Martin in exchange for $100,000. The agreement also specified that Martin intended to give Clarke an assignment of all funds seized by the Tri-County Metro Narcotics Squad, with Martin remaining liable for any deficiency in the funds.

On March 9, 1988, Martin executed an assignment to Clarke of "all right, title and interest he may have for legal services to be rendered." The assignment involved three of four seized funds. Martin also filed financing statements with the Secretary of State and the Ingham County Register of Deeds, listing Clarke as a "secured party" in all four seized funds. We are unable to determine from the record the particular section of the Uniform Commercial Code relied on by Martin for the filing.

On May 27, 1988, the department issued final tax assessments against Martin for four tax years commencing January 1, 1984, and ending December 31, 1987, totaling $143,666.29 plus interest. Notice of a tax levy against the seized funds was issued to the Tri-County Metro Narcotics Squad. The tax levy was issued under the Department of Revenue Act, 1941 P.A. 122, as amended, M.C.L. Sec. [191 MICHAPP 456] 205.1 et seq.; M.S.A. Sec. 7.657(1) et seq., and, specifically, M.C.L. Sec. 205.25; M.S.A. Sec. 7.657(25), which requires a person in possession of, or obligated with respect to, property or property rights upon which a tax levy has been made to surrender the property upon demand.

The issue, as presented to us, is whether, under M.C.L. Sec. 205.29; M.S.A. Sec. 7.657(29), as amended by 1986 P.A. 58, the state tax lien for tax years 1984, 1985, and 1986 had priority over attorney Clarke's assignment. Martin argues that a valid and perfected assignment of all seized funds was made before the state tax lien attached because the earliest the state tax lien could have attached was April 15, 1988. The department argues that, as an assignee of Martin, Clarke took Martin's property rights subject to the same state lien to which Martin would have been subject. Martin's money was subject to the state tax lien under the "afterwards acquired" clause of the statute, and the lien attached immediately in 1987 on the cash funds.

As an assignee, attorney Clarke stood in the shoes of his assignor. The rights he acquired were the same rights as those his assignor possessed. Damerau v. C.L. Rieckhoff Co., Inc., 155 Mich.App. 307, 313, 399 N.W.2d 502 (1986). Thus, an assignee cannot expand his rights simply by filing a financing statement. We therefore must determine what rights attorney Clarke acquired on March 9, 1988, when the assignment was executed.

At the time of the assignment, the possessor of the fund was the Tri-County Metro Narcotics Squad. The forfeiture action was an in rem civil proceeding, with Martin's right being whatever personal interest he could show in the res. See M.C.L. Sec. 333.7523; M.S.A. Sec. 14.15(7523); In re Forfeiture of $28,088, 172 Mich.App. 200, 431 N.W.2d 437 (1988). Martin's personal interest was already subject[191 MICHAPP 457] to the tax lien under M.C.L. Sec. 205.29(1); M.S.A. Sec. 7.657(29)(1), which provides in pertinent part:

Taxes ... shall be a lien in favor of the state against all property and rights to property ... owned at the time the lien attaches, or afterwards acquired by any person liable for the tax, to secure the payment of the tax. The lien shall attach to the property from and after the date that any report or return on which the tax is levied is required to be filed with the department and shall continue for 7 years after the date of attachment.

We reject Clarke's assertion that a conversion of Martin's house and car to cash in 1987 in some way affects the state tax lien. The guiding principle in statutory interpretation is to determine and effectuate legislative intent. Couture v. General Motors Corp., 125 Mich.App. 174, 178, 335 N.W.2d 668 (1983). The plain language of the statute clearly states that the lien applies to property owned or acquired after the date of attachment and that the date the lien attaches is governed by the required filing date for the tax year. Thus, a taxpayer's conversion of his property to another form, such as cash in the instant case, is irrelevant. All that is required is that the taxpayer owned the property or acquired it after the required filing date for a tax year and failed to pay all taxes due for that tax year.

It is undisputed that the filing date for tax years 1984, 1985, and 1986 was April 15 of the year following each of those years. Because the required filing dates for tax years 1984 to 1986 precede the 1988 assignment to attorney Clarke of Martin's rights as a claimant of the seized funds, it follows that Clarke took those funds subject to the tax lien. Clarke's lack of actual notice of any potential tax deficiency does not change the result [191 MICHAPP 458] because Clarke, as an assignee of Martin, stands in Martin's shoes.

For this reason, and because M.C.L. Sec. 205.29(2); M.S.A. Sec. 7.657(29)(2), makes no exception for assignees, the department may enforce the lien against the seized fund. The department's right to do so is based on the fact that the only property interest acquired by Clarke in 1988 was the interest possessed by Martin. Damerau, supra. See also 6 AmJur2d, Assignments, Secs. 119-121, pp 301-304.

Next, Clarke argues that he was a purchaser and that the state tax lien was void under M.C.L. Sec. 211.686; M.S.A. Sec. 7.753(56), which states:

A state tax lien not filed or recorded pursuant to this act shall be void against any mortgagee, pledgee, purchaser (including land contract purchaser) or judgment creditor who secured an interest in the property subject to the lien prior to the time such notice of lien was filed or recorded, as provided in this act.

The trial court concluded that Clarke was not a "purchaser." We note that the term "purchaser" is not defined in the relevant tax statutes. Thus, we must construe it in accordance with its common and approved usage. M.C.L. Sec. 8.3a; M.S.A. Sec. 2.212(1).

This Court has looked to the definition of "purchaser" in the provision of the Internal Revenue Code governing federal tax liens, 26 U.S.C. Sec. 6323(h)(6), for guidance in interpreting this term. Dep't of Treasury v. Campbell, 107 Mich.App. 561, 309 N.W.2d 668 (1981). While the term "purchaser" has been used in federal lien statutes since 1913, it was not statutorily defined until a 1966 amendment. Before the 1966 amendment, courts defined "purchaser" as a person who acquires title to property for a valuable consideration, with "valuable[191 MICHAPP 459] consideration" meaning more than a nominal amount. United States v. First National Bank of Memphis, 458 F.2d 560 (C.A. 6, 1972). The term "purchaser" is now defined by statute as

a person who, for adequate and full consideration in money or money's worth, acquires an interest (other than a lien or security interest) in property which is valid under local law against subsequent purchasers without actual notice. In applying the preceding sentence for purpose of subsection (a) of this section and...