ORDERS:
FINAL ORDER AND DECISION
STATEMENT
OF THE CASE
This
matter is before the Administrative Law Court (ALC or Court) pursuant to a
request for a contested case hearing filed by the Petitioner. The Petitioner
appeals the South Carolina Department of Revenue’s (Department’s) determination
that he is not entitled to a release of liens filed against him for outstanding
tax liabilities. The Department filed a Motion for Summary Judgment and the
Court scheduled a hearing on this motion. After notice of the date, time,
place, and nature of the hearing was timely given to all parties, a hearing on
the Department’s Motion for Summary Judgment was held on September 23, 2008.
STANDARD
OF REVIEW
Rule
68 of the Administrative Law Court Rules provides that “[t]he South Carolina
Rules of Civil Procedure may, where practicable, be applied in proceedings
before the Court to resolve questions not addressed by these rules.” Rule
56(c), SCRCP, provides that summary judgment shall be granted if it is shown
“that there is no genuine issue as to any material fact and that the moving
party is entitled to a judgment as a matter of law.” See also Gadson
v. Hembree, 364 S.C. 316, 613 S.E.2d 533 (2005); Cisson Constr. Inc. v.
Reynolds & Assoc. Inc., 311 S.C. 499, 429 S.E.2d 847 (Ct. App. 1993).
In determining whether summary judgment is proper, the court must construe all
ambiguities, conclusions, and inferences arising from the evidence against the
moving party. Byers v. Westinghouse Elec. Corp., 310 S.C. 5, 425 S.E.2d
23 (1992). Because it is a drastic remedy, summary judgment should be
cautiously invoked to ensure that a litigant is not improperly deprived of a
trial on disputed factual issues. Helena Chem. Co. v. Allianz Underwriters
Ins. Co., 357 S.C. 631, 594 S.E.2d 455 (2004). Summary judgment is also not
appropriate where further inquiry into the facts of the case is desirable to
clarify the application of the law. Wogan v. Kunze, 366 S.C. 583, 623
S.E.2d 107 (2005). On the other hand, the non-moving party may not rest upon
the mere allegations or denials of the pleadings, but a response by affidavit
or otherwise as provided in the rules must set forth specific facts creating a
genuine issue for trial. S.C.R. Civ. P. 56 (e); Moody v. McLellan, 295
S.C. 157, 163, 367 S.E.2d 449, 452-53 (Ct. App. 1988). Furthermore, summary
judgment should be granted “when plain, palpable and undisputed facts exist on
which reasonable minds cannot differ.” Bayle v. S.C. Dep’t of Transp.,
344 S.C. 115, 120, 542 S.E.2d 736, 738 (Ct. App. 2001).
UNDISPUTED
MATERIAL FACTS
The relevant, undisputed
facts are as follows: The Petitioner in this matter owned a One-Hour Photo
Shop in Santee, South Carolina during the 1990’s and early 2000’s. The
Petitioner failed to file sales tax returns or remit sales taxes to the
Department for the tax years 1996 through 2001. As a result, the Department
issued proposed assessments based on estimated taxes pursuant to its authority under
S.C. Code Ann. §12-60-430 (Supp. 2007). Certain of those proposed assessments
went unanswered, and by statute became final assessments after a lapse of time.
S.C. Code Ann. § 12-60-440 (Supp. 2007). Subsequently, the final assessments
were converted to liens pursuant to S.C. Code Ann. § 12-54-120 (2000), and
notices of tax lien were filed with the clerk of court in the Petitioner’s
County.
The Petitioner later
filed belated returns for these periods, and his liens were amended in the
Department’s internal records to reflect the amounts reported on his returns.
The associated notices of tax lien, having already been filed, were based on
estimated tax and reflected a higher dollar amount. For the remainder of the
Department’s proposed assessments, the Petitioner provided returns prior to the
filing of the liens, and the liens reflected the Petitioner’s self-reported
liabilities.
During
late 2007, the Petitioner requested that the Department release its liens
against him due to his inability to pay the underlying tax. The Department
denied his requested relief, and the Petitioner appealed.
CONCLUSIONS
OF LAW
The
Petitioner asserts several legal theories to support his claim for relief.
Federal Claims
The
Petitioner asserts two federal causes of action, one under The Fair Debt
Collections Practices Act of 1977 and the other under The Fair Credit Reporting
Act of 1977. This Court has subject matter jurisdiction to review decisions of
the South Carolina Department of Revenue pursuant to S.C. Code Ann. §§ 1-23-310 et seq. (Supp. 2007) and S.C. Code Ann. § 12-60-460 (Supp. 2007).
However, these federal causes of action are not issues that are properly before
the Department and thus are not issues that are appropriate for review by the
ALC.
Liens and Levies
The
Petitioner asserts that he is suffering severe economic hardship and is
entitled to relief under S.C. Code Ann. § 12-58-120(4) (2000). Section
12-58-120 provides that:
The department shall release any levy issued or on any property in the
event of any of the following:
(4)
the department has determined that the levy creates an economic hardship due to
the taxpayer's financial condition.
Notably, Section
12-58-120 specifically applies to the release of a levy. Petitioner concedes
that there are currently no levies issued against him. Nevertheless, he seeks to
equate the term levy with that of a lien and thus argues that Section
12-58-120(4) should be applied to release his liens. Although “liens” and
“levies” are not statutorily defined in South Carolina, they are clearly
different procedures.
The
words of the statute must be construed in context and “must be given their
plain and ordinary meaning without resorting to subtle or forced construction
to limit or expand the statute's operation.” Municipal Ass'n of SC v.
AT&T Communications of S. States, Inc., 361 S.C. 576, 580, 606 S.E.2d
468, 470 (2004). Likewise, in construing a statute, this Court should not
consider the particular clause being construed in isolation, but should read
the clause in “conjunction with the purpose of the whole statute, and in light
of the object and policy of the law.” SC Coastal Council v. SC State Ethics
Comm’n, 306 S.C. 41, 44, 410 S.E.2d 245, 247 (1991). Here, the provisions of
the South Carolina Taxpayers' Bill of Rights clearly distinguish the treatment
of levies from liens. As noted above, Section 12-58-120 sets forth the
requirements for the Department’s release of a levy. On the other hand, S.C.
Code Ann. §§ 12-58-150 and 160 (Supp. 2007) provide the procedure for modifying
or releasing liens under Taxpayers' Bill of Rights. The distinctive treatment
of those terms reflects the General Assembly’s recognition that they are two
different concepts.
Furthermore,
where a word is not defined in a statute, our appellate courts have looked to the
dictionary for guidance in ascertaining its meaning. Lee v. Thermal
Engineering Corp., 352 S.C. 81, 91-92, 572 S.E.2d 298,303 (Ct. App. 2002); see also State v. Landis, 362 S.C. 97, 606 S.E.2d 503 (Ct. App.
2004.) (“When faced with an undefined statutory term, the court must interpret
the term in accord with its usual and customary meaning.”). “Liens” and
“levies” are plainly defined differently in the dictionary. Black’s Law
Dictionary defines a “lien” as “[a] legal right or interest that a creditor has
in another’s property….” 933 (7th ed. 1999). “Levy,” by contrast,
is “the imposition of a fine or tax” or “the legally sanctioned seizure and
sale of property.” Id. at 919.
Therefore,
although “liens” and “levies” are both statutory tools of tax collection, they
are separate, and in fact can exist without the other. The Department may file
a lien and never issue a levy to collect. Conversely, the Department might
file a levy on a taxpayer for a properly owed debt without filing a notice of
lien. Thus, while liens and levies may be comparable in certain contexts, the
Court concludes that liens and levies under Title 12 of the South Carolina Code
of Law are not equivalent instruments. As a result, S.C. Code Ann. §
12-58-120(4) affords the Petitioner no relief where no levy is issued against
him.
Amount
on Notice of Lien in Excess of Tax Actually Owed
Petitioner initially argued
that he is entitled to a release of the liens filed against him under S.C. Code
Ann. § 12-58-160(A) (2000). Section 12-58-160(A) provides that:
If the department determines that filing a lien was in error,
it shall mail a release to the taxpayer and the entity recording the lien as
soon as possible after this determination and the receipt of lien-recording
information and shall take necessary action to expunge the recording of the
lien from the taxpayer's record. The release must contain a statement that the
lien was filed in error. If the erroneous lien is obstructing a lawful
transaction, the department shall immediately issue a release of lien to the
taxpayer and the entity recording the lien.
This provision thus requires the
Department to issue a release of a lien if it determines that the filing of the
lien was in error. The Petitioner asserts that the liens against him were
filed in error because they were filed in an amount in excess of the amount
actually owed.
The liens filed against
the Petitioner were initially in excess of $50,000, while the amount Petitioner
actually owes the State of South Carolina is $26,626.78.
However, as previously noted, that discrepancy was the not result of an error
by the Department but due to the fact that Petitioner failed to file a sales
tax return for several tax periods. The current figure was derived only after
Petitioner belatedly filed his tax return. Accordingly, since the liens were not
filed in error by the Department there is no remedy available under Section
12-58-160(A).
Petitioner nevertheless
alternatively argued that, barring the release of his tax liens, the Department
should be forced to modify the notices of lien filed against him to reflect the
amount actually owed. S.C. Code Ann. § 12-58-150 requires the Department to
“provide for an administrative appeal procedure for modifying or releasing liens.”
Indeed, the Department has modified the actual tax lien against the Petitioner
in response to his belatedly filed sales tax returns. However, what Petitioner
is actually seeking is the modification not of the tax lien itself, but of the
tax lien filing or the notice of lien.
At the hearing and in the
prior filings the Petitioner and Respondent both discussed (somewhat
imprecisely) the tax liens filed against the Petitioner. More accurately, the
“tax liens” referred to were the instruments which are filed with a clerk of
court or register of mesne conveyances pursuant to state law, and which reflect
a debt owed the state. S.C. Code Ann. § 12-54-122(G)(1). These instruments
are more precisely termed “tax lien notices”, “notices of lien” or “lien filings.” Id.; S.C. Code Ann. §§ 12-57-10 et. seq. (Supp. 2007) (Uniform
Federal Tax Lien Registration Act).
The distinction between
the tax lien itself and the notice of tax lien lies at the heart of
Petitioner’s confusion as to the purpose of Section 12-58-150. Under South Carolina law, a tax lien is “the amount of the tax [owed], including interest,
additional tax, addition to tax, or assessable penalty, plus accrued costs”
which a taxpayer refuses or neglects to pay after demand. S.C. Code Ann. § 12-54-120(A)(1)
(2000). This lien is effective from the date of assessment, whether or not the
lien is filed in a public forum. § 12-54-120(A)(2)(b). It continues for ten
years from the date of filing. § 12-54-120(A)(2)(e). A “[t]ax lien filing” is
simply “the filing of notice of the tax lien imposed by Section 12-54-120.”
S.C. Code Ann. § 12-54-122(A)(5) (2000).
As noted above, the tax
lien - the amount of tax owed - may be modified by payments made against the
liability, the accrual of interest and penalties[2],
or, as here, by the filing of a return which more accurately reflects the
liability owed the state. On the other hand, though Title 12 expressly
requires the Department to provide a procedure to modify or correct a lien
filed in error there is no equivalent statutory provision requiring the
Department to modify a notice of lien.[3]
The lack of authority requiring modification of the notice as circumstances
change is not result of legislative oversight but of the recognition of the
function of the notice.
The notice of lien
serves to provide notice to the public that a state interest exists and to
secure that interest against other creditors. Id. Its filing does not
serve, and cannot reasonably be expected to serve, as a precise reflection of
the exact debt owed the state at the time and place the notice is viewed. Tax
liens encompass not only the tax debt owed to the state, but also the interest,
penalties, and costs associated with its collection. S.C. Code Ann. §12-54-120
(2000). Interest continues to accrue on late taxes until the debt is paid in
its entirety. S.C. Code Ann. § 12-54-25(A) (2000). The amount of the lien
itself is constantly changing, and no static lien filing could consistently
reflect the actual debt owed. Therefore, the Court finds that Section
12-58-160(A) is not intended to provide the Petitioner with a right to have his
lien notices modified as a result of the adjustment in the amount of tax owed.
Moreover,
even if the filing of a notice was subject to review by the ALC, “[a] demand by
a lienholder of an amount in excess of that due does not waive a lien for the
amount actually due, if there is no fraud or bad faith in making the demand.”
51 Am. Jur. 2d Liens § 67, citing Mercer Steel Co. v. Park Const. Co.,
411 P.2d 262 (1966) (regarding the filing of a materialman’s lien in excess of
the amount actually owed). Here, there is no evidence of fraud or bad faith.
To the contrary the undisputed evidence reflects that the Department filed a
notice of tax lien on the basis of estimated tax assessments, and pursuant to
the statutorily prescribed method for creating and filing the lien.
ORDER
IT IS THEREFORE
ORDERED that Respondent’s Motion for Summary Judgment is hereby GRANTED.
AND
IT IS SO ORDERED.
_________________________________
Ralph
King Anderson, III
Administrative
Law Judge
November 20, 2008
Columbia, South Carolina
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