Howard County v. Fred W. Allnutt, Inc.

GILBERT, Chief Judge. This appeal involves a controversy among three lien creditors claiming priority in the distribution of $109,000.00 deposited with the Circuit Court for Howard County by Titan Group, Inc., a debtor of Fred W. Allnutt, Inc. (“All-nutt”). The State of Maryland has a lien in the amount of $25,975.96 for retail sales taxes owed by Allnutt; Howard County holds a lien totaling $186,791.89 for personal taxes owed by Allnutt 1 ; and James L. Meyer, Esq., entered a lien for $36,333.33 for unpaid legal services performed for All-nutt that actually produced the very funds now held in the coffers of the court. At the conclusion of a hearing on “Motion[s] to Release Property from Levy,” Md. Rule 2-643(e), the circuit court (Nissel, J.) decided that, pursuant to Md.Ann.Code art. 10, § 46, the State’s tax lien had priority over the attorney’s lien, which, in turn, had priority over the county’s tax lien.

Judge Nissel reasoned that the county’s tax lien was subordinate to the attorney’s lien because it did not fall within one of the exceptions enumerated in art. 10, § 46(c). The judge said that the county’s lien was subordinate to the State’s lien for the additional reason that, under art. 81, § 342 of the Annotated Code of Maryland, the State’s lien was “filed” first. The hearing court concluded that, after payment was made to the State of Maryland and James L. ⁴²⁵ Meyer, Esq., Howard County would receive the $46,640.71 remaining. Obviously dissatisfied with that ruling, the county, asserting priority over the State’s tax lien, filed a Motion to Alter or Amend the Judgment.

This appeal ensued when the motion was denied. The only issue we are called upon to resolve is whether the circuit court was correct in holding that the tax lien of the State of Maryland had priority over the tax lien of the county, even though the county was first in time in filing a notice of tax lien and in serving the garnishee, Titan Group, Inc., with a writ of garnishment. Md. Rule 2-645. We focus our discussion on § 342 of the Retail Sales Tax Act, 2 which states: “(b) Lien.—The tax, and all increases, interests and penalties thereon shall be a lien upon all the property, real and/or personal, of any person liable to pay the same to the State from and after the time when notice has been given that such tax has become due and payable as provided herein.

Notice of such lien shall be filed by the Comptroller with the clerk of the circuit court of the county in which said property is located. Each clerk of court shall accurately and promptly record and index all such notices of lien filed with him by the Comptroller and shall enter such lien in the judgment docket of the court, stating the name of the delinquent taxpayer, the amount of the lien and the date thereof. The lien provided for in this section shall have the full force and effect of a lien of judgment. Unless another date is specified by law, the lien arising at the date of nonpayment as in this section specified and provided for, shall continue with the same force and effect as a judgment lien.

Any such lien on personal property shall not be effective as against an innocent purchaser for value unless the personal property has been levied upon by an officer of a court.” ⁴²⁶ (Emphasis supplied). That section was construed by the Court of Appeals in Liquor Dealers Credit Control, Inc. v. Comptroller, 241 Md. 656, 660 , 217 A.2d 571 (1966), as conferring upon the State’s sales tax lien the full force of a perfected lien. The Court said: “The statutory clause ... [italicized in