State Dept. of Treasury, Revenue Division v. Campbell

• Decision Date: 07 July 1981
• Docket Number: Docket No. 49586
• Citation: 309 N.W.2d 668,107 Mich.App. 561
• Parties: STATE of Michigan DEPARTMENT OF the TREASURY, REVENUE DIVISION, Plaintiff-Appellant, v. Chester Wheeler CAMPBELL, James B. Feaster, Defendants, Patmon, Young and Kirk Professional Corporation, Defendant-Appellee.
• Court: Court of Appeal of Michigan — District of US

Page 668

309 N.W.2d 668

107 Mich.App. 561

STATE of Michigan DEPARTMENT OF the TREASURY, REVENUE DIVISION, Plaintiff-Appellant, v. Chester Wheeler CAMPBELL, James B. Feaster, Defendants Patmon, Young and Kirk Professional Corporation, Defendant-Appellee.

Docket No. 49586.

Court of Appeals of Michigan.

July 7, 1981.

Rehearing Denied Aug. 19, 1981.

Released for Publication Sept. 1, 1981.

E. David Brockman, Detroit, for plaintiff-appellant.

James B. Feaster, Detroit, for defendant Campbell.

Ulysses W. Boykin, Detroit, for defendant Feaster and defendant-appellee.

Before KAUFMAN, P. J., and KELLY and CYNAR, JJ.

PER CURIAM.

In this case, we are asked to determine the priority of a sales tax lien imposed under M.C.L. § 205.63; M.S.A. § 7.534, since repealed, 1980 P.A. 164 and placed upon a quantity of money found in the defendant's home. The state claims that its lien takes precedence over an attorney's charging lien placed upon the money by the appellees (defendant's attorneys), to secure payment for extensive legal services provided to the defendant.

On November 1, 1979, the lower court granted a defense motion for summary judgment on the basis that the state's lien had no priority over the appellee's charging lien. The lower court's opinion found first that the state was guilty of laches since it waited until April 9, 1979, to seek to impress the lien with knowledge that defendant's attorneys had been working on various aspects of the defendant's case since February, 1975. The court also based its opinion upon a finding that defendant's attorneys were "purchasers for value" of an interest in the disputed fund and thus were exempt under M.C.L. § 211.686; M.S.A. § 7.753(56) from the statutory priority otherwise accorded to state liens by M.C.L. § 205.63; M.S.A. § 7.534. Finally, the court found the charging lien to be equitable in nature and thereby entitled to priority. Plaintiff appeals the order of summary judgment by leave granted.

On February 27, 1975, Chester Wheeler Campbell was arrested for an unrelated offense. Pursuant to a subsequently obtained warrant, a search of his residence was conducted, resulting in a discovery and a seizure of firearms, contraband, and cash in the amount of $280,100. The following day, the Internal Revenue Service (I.R.S.) issued a jeopardy assessment and attached $137,823 of the seized funds for satisfaction of taxes due. That day the State of Michigan also issued a jeopardy tax assessment against Campbell for $314,304.90 for sales taxes allegedly due between September 1 and December 31, 1974.

On July 31, 1975, Federal District Judge Charles W. Joiner ordered that the money seized by Detroit police and turned over to the I.R.S. be returned to Mr. Campbell. This order was appealed to the United States Sixth Circuit Court of Appeals, which affirmed the order in an opinion issued March 16, 1976. Campbell v. United States, 532 F.2d 1057 (CA 6, 1976). On March 26, 1979, Judge Joiner again ordered the return of the money to Mr. Campbell, plus interest at the rate of 4% per annum from July 31, 1975, to the date of payment.

The I.R.S. began an entirely new proceeding against Mr. Campbell on March 9, 1975, by sending him a notice of deficiency for the taxable year 1974. Mr. Campbell then filed suit in the U.S. Tax Court for a redetermination of his tax liability. Campbell v. Comm'r of Internal Revenue (Docket No. 4774-76, decided June 16, 1980 (unreported)).

The I.R.S. entered a new jeopardy assessment against Campbell on April 27, 1976, and petitioned the Federal district court for permission to continue to hold the funds until the tax court rendered its decision. The Federal district court granted this request, which decision was also appealed by Campbell to the Sixth Circuit Court of Appeals. On February 5, 1979, that court again ordered that the funds held by the I.R.S. be returned to Campbell. Campbell v. United States, 592 F.2d 309 (CA 6, 1979).

In the meantime, action had also been taken by the defendant regarding the matter of the jeopardy tax assessment issued by the State of Michigan on February 28, 1975. After he received notice of the state's action, defendant requested, on March 25, 1975, an informal hearing on the validity of the state assessments. On April 1, 1975, Campbell received a form letter from the state, indicating that his request was timely. The letter also described the procedure for appeal on an "intent to assess" and advised the defendant to ignore any additional state assessments based upon the "intent to assess". See Campbell v. Dep't of Treasury, 77 Mich.App. 435, 437, 258 N.W.2d 508 (1977).

On July 11, 1975, an order issued by the Commissioner of the State Department of Treasury effectively blocked the defendant's informal appeal. The order disclosed the department's practice of holding informal hearings on both jeopardy assessments and intent to assess matters. However, the commissioner relied upon advice of the Michigan Attorney General that the department had no statutory jurisdiction to hold such jeopardy assessment hearings. Id., 438, 258 N.W.2d 508. A subsequent appeal of this decision to the Board of Tax Appeals was dismissed for lack of jurisdiction on October 23, 1975. This determination was again appealed and, on August 22, 1977, this Court remanded the action to the Board of Tax Appeals for a hearing. Id., 443, 258 N.W.2d 508. On October 30, 1978, the Board issued an opinion and order refusing to cancel the assessment because such relief was said to be beyond the powers of that tribunal. The defendant did not pursue an appeal of this order.

On March 26, 1979, Judge Joiner issued an order directing the United States to issue a check for $137,823, plus interest, to Mr. Campbell and to deliver the check to the U. S. District Court on April 10, 1979. The order also required the United States prior to delivery of the check, to give the State of Michigan notice of the time and place of delivery. The required date of delivery was later changed to April 13, 1979, in an order signed by U. S. District Judge Thomas P. Thornton.

On April 9, 1979, the State of Michigan filed its complaint in this action and obtained a temporary restraining order enjoining Campbell and his attorneys from releasing, transferring, cashing, depositing, assigning, or otherwise disposing of the check. In response, the defendants filed the motion for summary judgment from which this appeal is brought.

I.

We first address the scope of M.C.L. § 205.63; M.S.A. § 7.534, the provision establishing the priority of state tax liens, in light of the attorney's charging lien. The statute provides in part:

"The tax herein imposed in addition to the interest and penalties provided in sections (MCL 205.59) and (MCL 205.61) hereof, and costs that may accrue in addition thereto, shall be a lien in favor of the state against all property and rights of property, both real and personal, then owned or afterwards acquired by any person or persons, firm, association or corporation, liable therefor, to secure the payment of such tax, interest, penalties and costs, which lien shall attach to the property from and after the date that any report upon which the specific tax is computed is required by this act to be filed. Such lien shall take precedence over all other liens and incumbrances whatsoever, irrespective of character or date, except previously recorded bona fide financing." (Emphasis added.)

Unlike the state's statutorily created incumbrance, an attorney's charging lien was recognized at common law and attaches to a judgment or fund resulting from the providing of legal services. Miles v. Krainik, 16 Mich.App. 7, 9, 167 N.W.2d 479 (1969), citing Shank v. Lippman, 253 Mich. 451, 235 N.W. 216 (1931).

In construing the disputed statute, we are governed by traditional rules of interpretation. First, a statute unambiguous on its face will not be subject to further interpretation or construction. Charter Twp. of Pittsfield v. City of Saline, 103 Mich.App. 99, 302 N.W.2d 608 (1981); Detroit v. Twp. of Redford, 253 Mich. 453, 235 N.W. 217 (1931). Where ambiguity is found, however, it is our duty to give effect to the intention of the Legislature which enacted the provision. Melia v. Employment Security Comm., 346 Mich. 544, 78 N.W.2d 273 (1956). To determine the meaning of ambiguous terms, we will look to the object of the statute and the problem which it is intended to remedy and will apply a reasonable interpretation which best accomplishes its remedial purpose. Bennetts v. State Employees Retirement Board, 95 Mich.App. 616, 291 N.W.2d 147 (1980). Also, statutes not clear on their face will be interpreted as a whole and construed so as to give effect to each provision and to produce a harmonious and consistent result. In re Petition of State Highway Comm., 383 Mich. 709, 178 N.W.2d 923 (1970); People v. Miller, 78 Mich.App. 336, 259 N.W.2d 877 (1977). Finally, specific words in a disputed statute will be given their ordinary meaning absent evidence of a contrary legislative intent. Oshtemo Twp. v. Kalamazoo, 77 Mich.App. 33, 39, 257 N.W.2d 260 (1977); M.C.L. § 8.3a; M.S.A. § 2.212(1).

To the above rules of construction, we add the additional principle that the Legislature, in enacting a statute, is presumed to have knowledge of contrary common law rules which the statute will abrogate. Garwols v. Bankers Trust Co., 251 Mich. 420, 424, 232 N.W. 239 (1930); 2A Sutherland, Statutory Construction (4th ed), § 50.01, p. 268 ("In cases of conflict between legislation and the common law, legislation is superior, and, being the latest expression of the law, it will govern.")

We do not think that the Legislature could have been more clear in drafting the statute at issue. By its terms, the state's lien takes priority over all competing liens regardless of their date or character. The absolute language employed by the Legislature in describing the precedence of state tax...