Comptroller of the Treasury v. Zorzit , 221 Md. App. 274 ( 2015 )

REPORTED
IN THE COURT OF SPECIAL APPEALS
OF MARYLAND
No. 883
September Term, 2013
COMPTROLLER OF THE TREASURY
v.
JOHN ZORZIT
Zarnoch,
Nazarian,
Leahy,
JJ.
Opinion by Leahy, J.
Filed: January 30, 2015
*Judge Kevin Arthur did not participate, pursuant to Md. Rule 8-
605.1, in the Court’s decision to report this opinion.
In this appeal, we consider whether the Comptroller’s Notice of Lien for Unpaid
Taxes was properly challenged and vacated in the circuit court during pendency of the
taxpayer’s appeal in the Maryland Tax Court. Appellee John Zorzit (“Zorzit”)—the
taxpayer in this case—was the president of Nick’s Amusements, Inc. (“Nick’s”), a
company charged in federal court with money laundering and operating an illegal
gambling operation. Appellant, Comptroller of Maryland, assessed deficiency taxes and
penalties against Zorzit and Nick’s for under-reported gross income in Nick’s’ tax
returns.
Zorzit and Nick’s protested the amount of the assessment and the fraud penalties
before the Comptroller’s Hearings and Appeals Section. Following a hearing on the
matter, the hearing officer reduced the amount of taxes owed, but Zorzit and Nick’s
continued to protest the assessment by appealing to the Maryland Tax Court. While this
appeal was pending, the Comptroller filed a notice of lien against Zorzit, who then filed a
petition for declaratory and injunctive relief in the Circuit Court for Baltimore County.
Zorzit asked the court to vacate the lien, contending that the Comptroller was not
authorized to file the lien under Title 13 of the Tax-General Article prior to the Tax
Court’s disposition of his appeal, and that by filing the lien, the Comptroller deprived him
of his property without due process of law.
The circuit court found that although it was not necessary to conduct a hearing
prior to imposition of the lien, Zorzit’s due process rights under the United States
Constitution and the Maryland Declaration of Rights were violated because the Tax-
General Article of the Maryland Code fails to specify an exact deadline by which the Tax
Court must hold a post-deprivation hearing following imposition of a tax lien under § 13-
807. The court granted Zorzit’s motion for summary judgment, declared the statute
unconstitutional, and vacated the lien until the Tax Court rendered a decision in Zorzit’s
appeal. The Tax Court has since rendered a decision affirming, with some alterations, the
Comptroller’s assessment.
The Comptroller appealed and presents two questions for our review:
I. “Did the circuit court lack statutory authority to enter an order
voiding the tax lien because (a) the taxpayer[] failed to exhaust
administrative remedies and (b) § 13-[5]05 of the Tax-General
Article prohibits courts from enjoining or preventing the assessment
or collection of a tax?”
II. “Did the circuit court err in declaring that due process is denied by
the tax lien provision of Maryland’s statutory scheme, which affords
taxpayers both an opportunity to be heard prior to final assessment
and a prompt post-assessment de novo appeal to the Tax Court that is
subject to judicial review?”
Although the issues raised in this appeal are moot, similar cases may recur, and it
is a matter of significant public concern that similar challenges would obstruct the
Comptroller’s statutory duty to collect monies due under the tax laws of Maryland. For
the reasons set forth herein, we hold that the circuit court did not have the authority to
vacate the tax lien because Maryland Code (1988, 2010 Repl. Vol.), Tax-General Article
(“Tax-Gen.”), § 13-505 expressly prohibits courts from issuing an injunction or any other
process enjoining or preventing the Comptroller’s collection of a tax. Only in exceptional
2
and narrow circumstances may a taxpayer obtain collateral recourse from the judiciary to
prevent the assessment or collection of a tax. Because the underlying action was barred
under Tax-Gen. § 13-505, we do not reach the constitutional issue presented in the
Comptroller’s second question. Accordingly, we vacate the circuit court’s judgment and
remand the matter to that court with instructions to dismiss Zorzit’s petition for
declaratory relief.
THE STATUTORY PROCESS
A. Disputing Taxes
The Comptroller is charged with the duty to collect and account for certain
enumerated taxes, see Tax-Gen. § 2-102, and the General Assembly has assigned the
Comptroller broad authority and special powers to carry out these duties.1 The tax
assessed in the instant case was an admissions and amusement tax.2 A taxpayer is
required to submit an admissions and amusement tax return “on or before the 10th day of
the month that follows the month in which the person has gross receipts subject to the
admissions and amusement tax.” Tax-Gen. § 4-201(1). If an audit of the tax return
1
For example, officers in the Comptroller’s Field Enforcement Bureau “have all the
powers, duties, and responsibilities of a peace officer for the purpose of enforcing” certain
enumerated laws and taxes (not including admissions and amusement taxes). Tax-Gen. § 2-
107.
2
An admissions and amusement charge includes a charge for “use of a game of
entertainment[.]” Tax-Gen. § 4-101(b)(1)(ii).
3
reveals that “the tax due exceeds the amount shown on the return,” the Comptroller, or
another authorized tax collector,3 must assess the deficiency. Tax-Gen. § 13-401. The
Comptroller then must “mail a notice of assessment . . . to the person or governmental
unit against which an assessment is made.” 4 Tax-Gen. § 13-410. The assessment is
“prima facie correct.” Tax-Gen. § 13-411.
Within thirty days after the date on which the notice of assessment was mailed, the
taxpayer may submit an application to the Comptroller for revision of the assessment or,
if the taxpayer paid the assessment, a claim for a refund. Tax-Gen. § 13-508(a). If the
taxpayer fails to pursue either remedy, the assessment becomes final. Tax-Gen. § 13-
508(b). If the taxpayer does pursue these remedies, the Comptroller must “promptly”
hold an informal hearing and thereafter must “act on the application for revision” and
“may assess any additional tax, penalty, and interest due.” Tax-Gen. § 13-508(c)(1). A
3
A “‘tax collector’ means the person or governmental unit responsible for collecting
a tax.” Tax-Gen. § 13-101(c)(1).
4
Because the Tax-General Article does not define the term “assessment,” this Court
has looked to the Supreme Court’s description of an “assessment” in the context of
discussing the federal Tax Injunction Act. We stated that “‘an assessment is closely tied to
the collection of a tax, i.e., the assessment is the official recording of liability that triggers
levy and collection efforts.’” Bert v. Comptroller of the Treasury, 215 Md. App. 244, 269
(2013) (quoting Hibbs v. Winn, 542 U.S. 88, 101 (2004)). In comparison to the separate
federal provisions for a notice of deficiency and a notice of assessment, we have recognized
that Maryland’s statute providing for a “notice of assessment” is a “hybrid of the federal
provisions, i.e., the Maryland statute combines the notice of deficiency with the notice of
assessment so that the taxpayer effectively receives both at once.” Dun & Bradstreet Corp.
v. Comptroller of the Treasury, 86 Md. App. 258, 266 (1991).
4
notice of final determination is then mailed to the taxpayer. Tax-Gen. § 13-508(c)(2).
A taxpayer must “exhaust all available administrative remedies before the
appropriate tax determining agency” before he or she may appeal the Comptroller’s final
determination to the Tax Court for a de novo hearing. Tax-Gen. §§ 13-514, 13-510(a)(2).
The Tax Court must “hear and determine [the] appeal[] promptly.”5 Tax-Gen. § 13-519.
The Tax Court, as a “quasi-judicial” agency, has the power to “hear, try, determine, or
remand any matter before it.” Tax-Gen. § 13-528(a)(1). It also “may reassess or
reclassify, abate, modify, change or alter any valuation, assessment, classification, tax or
final order appealed to the Tax Court.” Tax-Gen. § 13-528(a)(2). The Tax Court will
affirm the decision unless there is some “affirmative evidence in support of the relief
being sought or an error apparent on the face of the proceeding.” Tax-Gen. § 13-528(b).
If, after de novo proceedings in the Tax Court, the taxpayer still seeks to challenge
the assessment, Tax-Gen. § 13-532(a)(1) permits judicial review. The Tax Court’s final
order is enforceable “unless the reviewing court grants a stay upon such condition,
5
Under Tax-Gen. § 3-103(a), “[t]he Tax Court has jurisdiction to hear appeals from the
final decision, final determination, or final order of a property tax assessment appeal board
or any other unit of the State government . . . that is authorized to make the final decision or
determination or issue the final order about any tax issue, including:
(1) the valuation, assessment, or classification of property;
(2) the imposition of a tax;
(3) the determination of a claim for refund;
(4) the application for an abatement, reduction, or revision of any assessment
or tax; or
(5) the application for an exemption from any assessment or tax.”
5
security or bond as it deems proper.” Tax-Gen. § 13-532(a)(2).
B. The Tax Lien
The Tax-General Article provides that “[u]npaid tax, interest, and penalties
constitute a lien, in favor of the State, extending to all property and rights to property
belonging to: (1) the person required to pay the tax[.]” Tax-Gen. § 13-805(a)(1). “[A]
lien arises on the date of notice that the tax is due and continues to the date on which the
lien is (1) satisfied; or (2) released by the tax collector because the lien is: (i)
unenforceable by reason of lapse of time; or (ii) uncollectible.” Tax-Gen. § 13-806(a).
The Comptroller must file a notice of tax lien in order for it to have “the full force
and effect of a judgment lien.” Tax-Gen. § 13-808. The notice of lien is filed in the
circuit court for the county where the property that is subject to the lien is located. Tax-
Gen. § 13-807(a). A tax lien takes priority over the proceeds of any sale of the taxpayer’s
property, except that it is “not valid against any purchaser, holder of a security interest,
mechanic’s lienor, or judgment lien creditor until notice of the tax lien has been filed[.]” 6
Tax-Gen. § 13-809(a), (b)(1). Even upon the filing of the notice of lien, “the lien is not
valid against any claim described in § 6323(b), (c), or (d) of the Internal Revenue
6
A prior perfected security interest may be accorded priority over the State’s tax claim.
See, e.g., Farmers & Merchs. Nat’l Bank of Hagerstown v. Schlossberg, 306 Md. 48, 66
(1986) (comparing the commercial law statute governing the priority of a bank’s perfected
security interest in the debtor’s estate and the tax law statute governing the priority of the
state’s tax lien and, in resolving the conflict between them, concluding that “the bank’s
perfected security interest must be accorded priority over the State’s tax claim”).
6
Code[,]” which includes, for example, claims by purchasers of certain kinds of property
who did not, at the time of purchase and possession, have actual notice of the filed lien.
Tax-Gen. § 13-809(b)(2).
If the taxpayer fails to satisfy the properly filed lien within fifteen days after the
notice of lien is issued, or the tax collector does not otherwise release the lien, the
Comptroller “may bring an action in a court of the State to enforce the lien.” Tax-Gen. §
13-810(a). Upon the filing of such an action, “[t]he court, acting without a jury, shall: (1)
adjudicate all matters involved in the proceedings; and (2) determine the merits of all
claims or liens.” Tax-Gen. § 13-810(c).
C. Tax-Gen. § 13-505
A court “may not issue an injunction, writ of mandamus, or other process against
the State or any officer or employee of the State to enjoin or prevent the assessment or
collection of a tax.” Tax Gen. § 13-505. The unambiguous language of Tax Gen. § 13-
505 reflects the General Assembly’s intent to preclude courts from interfering with the
detailed administrative process available to taxpayers outlined above. Bancroft Info.
Grp., Inc. v. Comptroller of the Treasury, 91 Md. App. 100, 115 (1992).
FACTS AND PROCEEDINGS
A. Initial Tax Assessment and the Hearing before the Comptroller
A federal money-laundering investigation into Nick’s in connection with the
operation of illegal video-poker machines prompted the Comptroller to conduct a review
7
of Nick’s’ past tax returns.7 After completing this audit, the Comptroller issued a “Notice
of Assessment for Admissions & Amusement Taxes,” dated April 23, 2010, against
Nick’s for the tax period of January 1, 2000 through January 31, 2009. The assessment
totaled $8,184,360.87, comprising the tax assessed ($2,963,844.74), interest
($2,256,671.39), and penalties for purported fraud ($2,963,844.74). The Comptroller
issued an identical Notice to Zorzit personally as an officer of Nick’s.8 Upon receipt of
these notices, Nick’s and Zorzit requested an informal hearing before the Comptroller’s
Hearings and Appeals Section pursuant to § 13-508.
At the hearing held on October 6, 2010, witnesses testifying on behalf of the
Comptroller’s office explained that the Baltimore County Police Department and Internal
Revenue Service’s (“IRS”) investigation revealed that approximately 60% of Nick’s’
gross receipts were paid out to winning customers. Nick’s’ reported gross receipts on its
admissions and amusement tax returns were based on Nick’s’ net profits after paying
winning customers. To calculate Nick’s’ actual gross receipts, the Comptroller’s office
added the 59.13% payout to customers, as calculated in the police department’s report.
7
On November 12, 2010, Zorzit, on behalf of Nick’s, pleaded guilty in the United
States District Court in Baltimore, Maryland, to money laundering in violation of 18 U.S.C.
§ 1957 pursuant to a plea agreement dated October 26, 2010. In the plea agreement signed
by Zorzit, he admitted that “the principals of Nick’s Amusements knew that the property
[money] was derived from criminal activity.”
8
“If a corporation . . . is required to pay the admission and amusement tax, personal
liability for the tax and interest and penalties on the tax extends to any officer of the
corporation who exercises direct control over its fiscal management.” Tax-Gen. § 4-301(b).
8
Zorzit did not dispute his personal liability or that taxes were owed. Zorzit and
Nick’s did dispute, however, the penalty for fraud as well as the overall amount of taxes
owed. Specifically, they argued that the fraud assessment was based solely on Nick’s’
purported underpayment of the admissions and amusement tax, and that the mere
understatement of income is not sufficient under Maryland law to prove fraud.9 They
argued that the Comptroller’s office did not demonstrate, by clear and convincing
evidence, that Nick’s and Zorzit filed a false return with the intent to evade the payment
of taxes.
Nick’s and Zorzit argued that the Comptroller’s assessment of the amount of taxes
owed was incorrect because the auditor’s calculations for the underpayment of the
admissions and amusement tax was based on erroneous assumptions. They claimed, inter
alia, that the Comptroller indiscriminately applied the payout percentage to receipts
generated from all amusement devices, not just the illegal video-poker machines.
Therefore, the Comptroller’s assessment wrongly included gross receipts from non-
gambling machines.
On February 13, 2012, the presiding hearing officer issued two Notices of Final
9
“The badges, indicia, or factors to look for in the tax fraud context include: (1)
consistent and substantial understatements of income (or sales, in the sales tax arena); (2)
failure to maintain adequate records; (3) implausible or inconsistent explanations of behavior,
including the lack of credible testimony before a tribunal; (4) concealment of assets; (5)
failure to cooperate fully with tax authorities; (6) awareness of the obligations to file returns,
report income or sales, and pay taxes; and (7) failure to file returns.” Genie & Co. v.
Comptroller of the Treasury, 107 Md. App. 551, 568 (1995) (citations omitted).
9
Determination for Nick’s and Zorzit, respectively, containing detailed findings of fact and
conclusions of law. According to the hearing officer, the record demonstrated that Nick’s
“operated an illegal gambling operation in the State of Maryland and [was] significantly
underreporting taxable gross receipts to the Comptroller’s office.” He found that the
Comptroller demonstrated fraud by clear and convincing evidence, outlining three
“badges” of fraud present, including the consistent and substantial underpayment of
income tax; the failure to maintain adequate records by reporting only net profits instead
of gross profits; and the awareness by Nick’s’ officers of their duty to file tax returns.
The hearing officer found, however, that it was “more likely than not” that the gross
receipts attributable to machines in certain counties were not derived from illegal video-
poker machines and adjusted the assessment accordingly. He adjusted the original payout
percentage reflected in the assessment from 59.13% to 55.09%. With this adjustment, the
hearing officer affirmed the Comptroller, revising the assessment to $6,453,690.16.
With respect to Mr. Zorzit, the hearing officer observed that Zorzit did not dispute
his personal liability for the underlying taxes and cited Tax-Gen. § 4-301(b) for the
precept that the admissions and amusement tax owed by a corporation “extends to any
officer of the corporation who exercises direct control over its fiscal management.” He
declared that Zorzit, as the 100% shareholder and president of Nick’s, was personally
liable for the taxes owed by Nick’s.
B. Appeal to the Tax Court
10
On March 13, 2012, within thirty days of the notice of final determination, Zorzit
and Nick’s filed petitions of appeal in the Tax Court of Maryland pursuant to Tax-Gen. §
13-510.10 Zorzit challenged, for the first time, the hearing officer’s decision that he was
personally liable for the admissions and amusement tax, interest and penalties due under
the final notice of determination.
C. The Lien and Declaratory Judgment Action in the Circuit Court
On June 7, 2012, and before the Tax Court held a hearing on Zorzit’s appeal, the
Comptroller filed a Notice of Judgment for Unpaid Tax against Zorzit in the Circuit Court
for Baltimore County in the amount of $6,453,690.16.11 The lien was recorded on July
12, 2012.
Zorzit then filed a petition for declaratory relief, as well as a motion for summary
10
Nick’s and Zorzit challenged several of the hearing officer’s findings and alleged that:
a. The Comptroller erroneously calculated the admissions and amusement
tax assessed for the Audit Period.
b. The Comptroller erroneously assessed a 100% fraud penalty under Md.
Code Ann., Tax-General § 13-703.
c. The amount of interest assessed by the Comptroller is erroneous.
d. The Comptroller extended the statute of limitations beyond four (4) years
from the date on which the claimed tax was due in violation of Md. Code
Ann., Tax-General § 13-1102 because, among other things, the Comptroller
did not sustain its burden of proving that the claimed tax was not paid due to
fraud or gross negligence.
11
The Comptroller also filed a lien against Nick’s in the amount of $6,477,015.18 in
the Circuit Court for Baltimore City.
11
judgment, in the Circuit Court for Baltimore County on July 23, 2012. In his Petition for
Declaratory Relief, Zorzit framed the issue as a question of statutory interpretation:
“when is a tax ‘due’ under the Tax General Article . . . such that the Comptroller is
permitted to file a tax lien against a taxpayer, which by statute has the effect of a
judgment lien[?]” Zorzit sought a declaration from the court “establishing that the Tax
Lien recorded by the Comptroller – before the Tax Court has determined the propriety of
the assessment – is premature, not authorized by the plain meaning of any section of Title
13 of the Tax Code and violative of Mr. Zorzit’s fundamental right to due process.”
Zorzit further claimed that he would be substantially and irreparably harmed by the
imposition of the tax lien, because he would be considered in default on his other loans
and lines of credit. Because the lien would effectively foreclose him from accessing
future lines of credit, it would have a “catastrophic” impact on him and his businesses.
After two hearings,12 the circuit court entered an order on April 17, 2013 granting
Zorzit’s motion for summary judgment and entering a declaratory judgment vacating the
lien until the “Maryland Tax Court has made a decision on the appeal by Mr. Zorzit that
probable cause exists for the imposition of the tax lien.” The court rejected Zorzit’s claim
that the Comptroller lacked the statutory authority to file the lien, and that taxpayers are
entitled to a pre-deprivation hearing in the Tax Court. Rather, the circuit court vacated
12
The court held a motions hearing on February 7, 2013, but held the matter sub curia
and instructed the parties to submit additional briefing. The court held a second hearing on
March 19, 2013.
12
the lien based on its conclusion that Maryland’s tax code fails to provide a sufficiently
prompt post-deprivation hearing after the Comptroller files a notice of tax lien under Tax-
Gen. § 13-806.13 The Court surveyed several Supreme Court cases, including
Commissioner v. Shapiro, 424 U.S. 614 (1976), Matthews v. Eldridge, 424 U.S. 319(1976), and Fuentes v. Shevin, 407 U.S. 67 (1972), and determined that Maryland’s
statutory scheme was insufficient:
The question then becomes whether there was a right to a later judicial
determination of the legal right for the imposition of a lien against Zorzit’s
property. There is no dispute but that the Maryland Tax Court acting in a
quasi-judicial capacity has the ability to make the probable cause
determination. Is Maryland’s statute sufficient to satisfy due process
considerations by stating that the tax court hearing is to be promptly held? I
think not.
The court noted that “in this case we are approaching 1 year from the time of the
Notice of the Lien,” and concluded “[f]rom the case law cited through Phillips, Fuentes,
Shapiro and state law cases, a set period of time appears to be a necessary requirement so
that a more than less bright line can be drawn to afford due process constitutional post
deprivations rights following a Notice of Tax Lien.”
On April 26, 2013, the Comptroller filed a motion to stay enforcement of judgment
and a motion to alter or amend judgment, arguing that the court violated Tax-Gen. § 13-
505, which prohibits courts from taking action to prevent tax collection. The court denied
13
We note that Zorzit did not challenge the promptness of the Tax Court hearing in his
complaint or in his motion for summary judgment.
13
both motions in a ruling entered on June 17, 2013. On July 2, 2013, the Comptroller filed
a timely notice of appeal.
D. Tax Court Ruling
A few weeks later, on July 19, 2013, the Tax Court affirmed the Comptroller’s tax
assessments and the interest against Nick’s and Zorzit, but reduced the fraud penalty from
$2,159,794.97 to $1,079,862.45. The time between the institution of the tax lien (June 7,
2012) and the Tax Court’s ruling (July 19, 2013) spanned just over one year.
DISCUSSION
Standard of Review
The “‘standard of review of the declaratory judgment entered as the result of the
grant of a motion for summary judgment is whether that declaration was correct as a
matter of law.’” Md. Agric. Land Preservation Found. v. Claggett, 412 Md. 45, 61
(2009) (quoting S. Easton Neighborhood Ass’n v. Town of Easton, 387 Md. 468, 487
(2005)). Because our inquiry into whether the circuit court’s order vacating the
Comptroller’s lien violates the anti-injunction statute, Tax-Gen. § 13-505, is a question of
statutory interpretation, we conduct a de novo review. See Reier v. State Dep't of
Assessments & Taxation, 397 Md. 2, 26 (2007) (citations omitted).
Mootness
During pendency of this appeal, the Tax Court rendered its decision affirming the
Comptroller’s tax and interest assessments against Zorzit and Nick’s, and affirming the
14
fraud penalties with adjustments. Because there is no longer an actual controversy
between the parties for which we can provide a remedy, the instant appeal is moot.14 “The
test for mootness is ‘whether, when it is before the court, a case presents a controversy
between the parties for which, by way of resolution, the court can fashion an effective
remedy[.]’” Hamot v. Telos Corp., 185 Md. App. 352, 360 (2009) (quoting Adkins v.
State, 324 Md. 641, 646 (1991)). Indeed, Zorzit has not participated in this appeal, as the
timeframe for which he sought a remedy has passed, leaving him no incentive to
challenge the Comptroller’s appeal.
Notwithstanding that it is moot, this case demands consideration. “Unlike the
Article III constitutional constraints on the federal courts, . . . our mootness doctrine is
based entirely on prudential considerations” that do not constitutionally bar us from
reaching the merits of a moot action. Carroll Cnty. Ethics Comm’n v. Lennon, 119 Md.
App. 49, 57 (1998) (citing Reyes v. Prince George’s Cnty., 281 Md. 279, 296-97 (1977)).
Accordingly, we have the ability to express our views on the merits of a moot case under
two circumstances. J. L. Matthews, Inc. v. Md.-Nat’l Capital Park & Planning Comm’n,
368 Md. 71, 96 (2002). The first “is where a controversy that becomes non-existent at the
14
On July 29, 2013, the Comptroller filed a motion to restore notice of lien in the
circuit court. The court denied the motion, instructing: “This is a matter on appeal, though
in view of the subsequent Tax Court proceeding, it appears moot, but with that appeal, I have
no further jurisdiction over the decision I made.” The court also reasoned that the
Comptroller could, instead, file a new tax lien that was “legally and factually appropriate”
after the Tax Court’s decision.
15
moment of judicial review is capable of repetition but evading review.” Sanchez v.
Potomac Abatement, Inc., 198 Md. App. 436, 433 (2011) (citing State v. Parker, 334 Md.
576, 584 (1994)), aff’d, 424 Md. 701 (2012). Aside from class actions, the first exception
is applicable only in instances when: “(1) the challenged action was too short in its
duration to be fully litigated prior to its cessation or expiration” and (2) “there was a
reasonable expectation that the same complaining party would be subjected to the same
action again.” Parker, 334 Md. at 585.
The next “judicial gloss to the mootness doctrine allows us to express our views on
the merits of a moot case to prevent harm to the public interest.” Sanchez, 198 Md. App.
at 433. In Lloyd v. Board of Supervisors of Elections, the Court of Appeals expounded:
[O]nly where the urgency of establishing a rule of future conduct in
matters of important public concern is imperative and manifest, will
there be justified a departure from the general rule and practice of not
deciding academic questions. . . . [I]f the public interest clearly will be
hurt if the question is not immediately decided, if the matter involved is
likely to recur frequently, and its recurrence will involve a relationship
between government and its citizens, or a duty of government, and upon
any recurrence, the same difficulty which prevented the appeal at hand from
being heard in time is likely again to prevent a decision, then the Court may
find justification for deciding the issues raised by a question which has
become moot, particularly if all these factors concur with sufficient weight.
206 Md. 36, 43 (1954) (emphasis added).15
15
Maryland courts have subsequently referred to the Lloyd public-interest exception as
an “offshoot” to the mootness doctrine, because although it justifies discussion of the merits
of a moot issue, it permits appellate courts to dismiss the action as moot if desired. Sanchez,
198 Md. App. at 444 n.5 (citing Cottman v. State, 395 Md. 729, 745 (2006)).
16
We agree with the Comptroller that the case presented on appeal involves a matter
capable of repetition yet evading review and of significant public concern. In Exhibit 9 to
Zorzit’s motion for summary judgment, the Comptroller advised Zorzit in a letter that
“[a]lthough the Comptroller is legally authorized to file a . . . tax lien upon the issuance of
any fraud assessment, this practice is generally limited to cases where the taxpayer is
penalized for fraud.” The Comptroller echoed this policy at oral argument. Assuming
this assertion is true, the issues raised in this appeal will likely arise again if a taxpayer
assessed with a fraud penalty challenges the imposition of a lien while his or her appeal in
the Tax Court is pending. We believe that an action to challenge a lien during the
pendency of an appeal before the Tax Court is of sufficiently short length to evade review
by this Court before the issue ceases, or, in other words, the Tax Court renders its
decision on the appeal. Indeed, the Tax Court is required to promptly hear and determine
an appeal. Tax-Gen. § 13-519. Thus, delinquent taxpayers may obtain similar injunctions,
and even if these proceedings would not ultimately evade judicial review, the delay would
stymie the Comptroller’s duty to secure significant amounts of money due to be collected
under the tax laws of Maryland.
A taxpayer’s challenge to the Comptroller’s imposition of a tax lien while the
taxpayer’s appeal is pending in the Tax Court is clearly an issue that impacts the
relationship between the government and its citizens, and the Comptroller will likely
appeal a taxpayer’s future successful challenge to the imposition of a tax lien in these
17
circumstances. Given the extensive and comprehensive administrative remedies available
to taxpayers under the Tax-General Article, we are persuaded that it is important to
clarify and reinforce the necessity of exhausting those remedies before seeking relief in
the circuit court and to emphasize the circuit court’s lack of authority to enter orders, like
the order entered here, vacating tax liens before the Tax Court’s final determination of the
merits of the tax assessment. Therefore, we will not dismiss this instant appeal as moot,
and turn to the first issue presented.
I.
Exhaustion and Tax-Gen. § 13-505
The Comptroller contends that the circuit court lacked the authority to entertain
Zorzit’s declaratory judgment action for two reasons: (1) Zorzit failed to exhaust his
administrative remedies; and (2) Tax-Gen. § 13-505 prohibited the circuit court from
entering an order enjoining the collection of a tax.16 Zorzit has not participated in this
appeal by way of briefing or argument. Before the circuit court, however, Zorzit argued
16
Although not raised by the Comptroller, another threshold issue is the form of the
circuit court’s declaratory judgment. The court’s order, entitled “Declaratory Judgment,” is
a fourteen-page document in which the court entered a declaratory judgment via granting
Zorzit’s motion for summary judgment. As instructed by the Court of Appeals in Allstate
Insurance Co. v. State Farm Mutual Automobile Insurance Co., 363 Md. 106, 117 n.1
(2001), it is not sufficient that a declaratory judgment be part of a memorandum; rather, the
terms of the declaratory judgment must be set forth on a separate document. A failure to
issue a proper declaratory judgment is not a jurisdictional defect, however, and this Court has
the discretion to “review the merits of the controversy and remand for entry of an appropriate
declaratory judgment by the circuit court.” Bushey v. N. Assurance Co., 362 Md. 626, 651
(2001). We exercise our discretion to review the merits of this case.
18
there was no administrative remedy available to exhaust that would permit a challenge to
the propriety of a lien filed prior to the Tax Court’s resolution of his appeal. Zorzit
challenged the Comptroller’s interpretation of when a tax becomes “due” under Tax-Gen.
§ 13-806(a), claiming that the Comptroller’s reading—that an imposition of the lien
before the Tax Court’s resolution of an appeal is proper—violated his due process rights.
A. Zorzit Failed to Exhaust His Administrative Remedies
The Maryland Declaratory Judgment Act, Maryland Code (1974, 2013 Rep. Vol.),
Courts and Judicial Proceedings Article (“CJP”), § 3-409(b), provides:
If a statute provides a special form of remedy for a specific type of case,
that statutory remedy shall be followed in lieu of a proceeding under this
subtitle.
In light of this statute, the Court of Appeals has reiterated “that where there exists a
special statutory remedy for a specific type of case, and the Legislature intends that
remedy to be exclusive or primary, a party may not bypass the special statutory remedy
by bringing an action for a declaratory judgment or for equitable relief.” Furnitureland
S., Inc. v. Comptroller of the Treasury, 364 Md. 126, 133 (2001) (citations omitted). The
rationale underlying the exhaustion requirement stems from the “expertise which the
agency can bring to bear in sifting the information presented to it” and the notion that
permitting “interruption for purposes of judicial intervention at various stages of the
administrative process might well undermine the very efficiency which the Legislature
intended to achieve in the first instance.” Soley v. Comm’n on Human Relations, 277 Md.
19521, 526 (1976). Moreover, “‘administrative agencies [such as the Tax Court] are fully
competent to resolve issues of constitutionality and the validity of statutes or ordinances
in adjudicatory administrative proceedings which are subject to judicial review.’”
Furnitureland S., Inc., 364 Md. at 138 (quoting Montgomery Cnty. v. Broad. Equities,
360 Md. 438, 451 n.8 (2000)). “This includes the constitutionality of an enactment as
applied, as well as the constitutionality of an enactment as a whole.” Prince George's
Cnty. v. Ray's Used Cars, 398 Md. 632, 651 (2007) (citing Ins. Comm’r v. Equitable, 339
Md. 596, 622 (1995)).
When a plaintiff has failed to exhaust his or her administrative remedies, courts
normally dismiss the action, “because, although the court may well have subject matter
jurisdiction over the action before it, the exhaustion doctrine bars the court from
exercising that jurisdiction, thereby gratifying the paramount legislative intent that the
matter be dealt with first by the Executive Branch agency.” State Ret. & Pension Sys. v.
Thompson, 368 Md. 53, 65-66 (2002).
Specifically with regard to the tax scheme at issue here, the Court of Appeals “has
consistently treated the special statutory administrative remedies for the determination of
tax questions to be exclusive or primary.” Furnitureland S., Inc., 364 Md. at 134(cataloguing prior holdings); accord White v. Prince George’s Cnty., 282 Md. 641, 649-
50 (1978) These exclusive remedies are set forth in the Tax-General Article, which we
detailed at the outset of this opinion. That remedies are exclusive or primary means that
20
they cannot be bypassed by the pursuit of other remedies and that the remedies must be
invoked and exhausted before judicial intervention. Furnitureland S., Inc., 364 Md. at
133 (citations omitted); accord White, 282 Md. at 649; State Dep't of Assessments &
Taxation v. Clark, 281 Md. 385, 401 (1977); Balt. Cnty. v. Md. Dep't of Assessments &
Taxation, 47 Md. App. 88, 91 (1980). Moreover, it is important to note “the settled
principle that laws enacted for the collection of general taxes must be interpreted with
very great liberality; consequently, construction should not be undertaken with an eye to
defeating the legislation, but with both eyes focused on giving it force, if reasonably
possible.” Surratts Assocs. v. Prince George's Cnty., 286 Md. 555, 566 (1979) (citing
Casey Dev. v. Montgomery Cnty., 212 Md. 138, 147 (1957)).
B. Tax-Gen. § 13-505 Barred Zorzit’s Collateral Action
The General Assembly has unambiguously expressed its intent to preclude judicial
intervention in tax cases. Section 13-505 establishes that “[a] court may not issue an
injunction, writ of mandamus, or other process against the State or any officer or
employee of the State to enjoin or prevent the assessment or collection of a tax[.]”
Indeed, taxpayers typically must pay the tax and later seek a refund if that tax is
determined to be “erroneously, illegally, or wrongfully assessed or collected in any
manner.” Tax-Gen. § 13-901(a)(2) (emphasis added). We have interpreted § 13-505,
when read in conjunction with Tax-Gen. § 13-514 (requiring exhaustion before an appeal
to the Tax Court) and CJP § 3-409(b) (requiring pursuit of the statutory remedy instead of
21
a declaratory judgment action) to “demonstrate[] the Legislature's intent that tax disputes
be resolved through the procedures established in Md. Tax-Gen. Code Ann. §§ 13-510
through 13-529.” Bancroft Info. Grp., Inc., supra, 91 Md. App. at 115; see also Kuypers
v. Comptroller of the Treasury, 173 F. Supp. 2d 393, 396 (D. Md. 2001) (recognizing
that, pursuant to § 13-505, the General Assembly “has by statute expressed its intention
that no suit may be brought to interfere with the statutory process for the assessment or
collection of a state tax”).
In the realm of general tax law, anti-injunction statutes serve to ensure efficient
collection of unpaid taxes owed to the government. These statutes contemplate that
taxpayers may strive to dispute their tax liability, either armed with valid challenges or
equipped with unfounded ones, beyond the avenues provided by the legislature. As the
Supreme Court stated in 1880, taxes “may be vital to the existence of a government[,]”
and “[t]he idea that every tax-payer is entitled to the delays of litigation is unreason.”
Springer v. United States, 102 U.S. 586, 594 (1880).
The General Assembly has provided the Comptroller with a wide array of tax
collection expedients, including the right to sell estate property, to demand security
payments, and to file liens, actions to collect taxes, and jeopardy assessments.17 See Tax-
17
For example, provided that sufficient notice is given, the Comptroller may issue a
jeopardy assessment, constituting an immediate assessment of a tax, if it “finds that the
collection of a tax . . . will be jeopardized by the departure, from the State, of the person
required to pay the tax, the removal of property from the State, the concealment of the person
or the property, or any other act.” Tax-Gen. § 13-821(a). The Comptroller may also “require
acceptable security to be posted” in a set amount to secure payment of the tax, interest, and
22
Gen. subtitle 8 of Title 13. The tax lien in particular secures the State’s interest in the
taxpayer’s unpaid taxes until the taxpayer satisfies his or her tax debts or until the tax
collector seeks to enforce that lien and collect money from the taxpayer. See Black's Law
Dictionary 1063 (10th ed. 2009) (defining a “lien” as “[a] legal right or interest that a
creditor has in another's property, lasting usually until a debt or duty that it secures is
satisfied”). Because a tax lien does not take priority until it is filed, and even upon the
filing, is not valid against a bona fide purchaser, Tax-Gen. § 13-809(b)(2), the General
Assembly has authorized the Comptroller to file a notice of lien any time after the
taxpayer receives notice of the amount of tax that is due. Tax-Gen. § 13-806(a).
If Maryland taxpayers were permitted to seek relief collateral to the detailed
administrative procedures governing tax assessment and collection at their will, tax
litigation would be rampant, thereby vitiating the intent of the legislature in crafting the
Maryland tax framework as a primary, exclusive method to dispute taxes. Judge
Hollander explained this precept in Abington Center Associates Ltd. Partnership v.
Baltimore County:
In Brown v. Montgomery County, 30 Md. App. 107, 112 (1976), we
recognized a county’s duty to sell the property of delinquent taxpayers. We
therefore declined to stay the obligation to pay property taxes, based on a
final assessment, pending an appeal. Although the property owners filed
suit, seeking injunctive and declaratory relief, and argued that they were
penalty that is due or may become due in order to protect tax revenue. Tax-Gen. § 13-824;
see also § 13-825(a) (“The Comptroller may require a person whose gross receipts are
subject to admissions and amusement tax and whose business is not a permanent operation
in the State to post security for the tax in the amount that the Comptroller determines.”).
23
entitled to exhaust their rights in court, we disagreed, stating: “[I]f the law
were as appellants would have it, the capability of the taxing authority to
perform its public functions could be brought to a standstill by mass
appeals. The potential harm of such a rule is intolerable to government.”
Id. at 109-10.
115 Md. App. 580, 600, n.10 (1997) (alteration in original). The Maryland General
Assembly, like Congress and other state legislatures, has enacted an anti-injunction
statute in the form of Tax-Gen. § 13-505 to protect “the Government's need to assess and
collect taxes as expeditiously as possible[.]”18 Bob Jones Univ. v. Simon, 416 U.S. 725,
736 (1974).
C. Exceptions to the Exhaustion Doctrine
18
For example, the anti-injunction provision of the Internal Revenue Code is similar
in scope and intent to Tax-Gen. § 13-505: “[N]o suit for the purpose of restraining the
assessment or collection of any tax shall be maintained in any court by any person, whether
or not such person is the person against whom such tax was assessed[,]” unless otherwise
provided by law. I.R.C. § 7421(a). The federal courts have determined that this provision
does not deny due process so long as judicial review in a refund action is available. See, e.g.,
Prof’l Eng’rs, Inc. v. United States, 527 F.2d 597, 600 (4th Cir. 1975). Other states have
enacted anti-injunction statutes as well. See, e.g., Ariz. Rev. Stat. Ann. § 42-11006 (2014)
(“A court may not issue an injunction, writ of mandamus or any other extraordinary writ in
any action or proceeding against the state, a county or municipality or a state, county or
municipal officer to prevent or enjoin: 1. Extending an assessment on the tax roll. 2.
Collecting an imposed or levied tax.”); Cal. Rev. & Tax. Code § 6931 (2014) (“No injunction
or writ of mandate or other legal or equitable process shall issue in any suit, action, or
proceeding in any court against this State or against any officer of the State to prevent or
enjoin the collection under this part of any tax or any amount of tax required to be
collected.”); N.Y. Tax Law § 1140 (McKinney 2014) (“The remedies provided . . . shall be
exclusive remedies available to any person for the review of tax liability . . .; and no
determination or proposed determination of tax or determination on any application for
refund shall be enjoined or reviewed by an action for declaratory judgment, an action for
money had and received, or by any action or proceeding other than a proceeding under article
seventy-eight of the civil practice law and rules.”).
24
There are, however, “[l]imited exceptions to the exhaustion doctrine [that] permit a
party, in tax matters and other kinds of cases, to pursue alternative forms of relief in
court.” Abington, 115 Md. at 592-93. “These exceptions include (1) when the party
attacks the statutory scheme as facially unconstitutional; (2) when there is no
administrative remedy; and (3) when the administrative remedy provided by the statutory
scheme is inadequate.” Id. at 593 (citations omitted).
To determine whether this litigation falls within one of the exceptions, it is
appropriate, first, to re-examine the relief sought by Zorzit in the circuit court. As
summarized in his supplemental brief in support of his motion for summary judgment
filed below, Zorzit asserted:
Mr. Zorzit seeks to vacate a Notice of Lien Judgment for Unpaid Tax
(“Tax Lien”) in excess of $6,450,00 because filing the Tax Lien in advance
of any hearing before the Maryland Tax Court is both inconsistent with the
provisions of Title 13, Subtitle 8 of the Tax-General Article of the
Maryland Code (the “Tax Code”) and violative of Mr. Zorzit’s fundamental
rights to due process. [19]
19
We recognize that a “temporary, nonfinal deprivation of property is nonetheless a
‘deprivation’ in terms of the Fourteenth Amendment.” Fuentes v. Shevin, 407 U.S. 67, 85
(1972) (citations omitted). However, as the Supreme Court explained in Phillips v.
Commissioner, “[w]here only property rights are involved, mere postponement of the judicial
enquiry is not a denial of due process, if the opportunity given for the ultimate judicial
determination of the liability is adequate.” 283 U.S. 589, 596-97 (1931) (citing Springer,
supra, 102 U.S. at 593; Scottish Union & Nat’l Ins. Co. v. Bowland, 196 U.S. 611, 631
(1905)); see also De Pauw Univ. v. Brunk, 53 F.2d 647, 650 (W.D. Mo. 1931) (““So far as
taxation is concerned, due process of law is fully satisfied if at some stage in the proceeding
the taxpayer has notice and opportunity to be heard. He may not have that opportunity until
after the tax has been paid and he has brought suit to recover back, but, if he has it even then
the due process provision is not violated.”), aff'd sub nom. DePauw Univ. v. Brunk, 285 U.S.
527 (1932). Though we cite to Phillips for the foregoing principle, we caution that the
25
(Emphasis in original).
i. The Maryland Tax Code Constitutes an Adequate Administrative
Remedy
The Maryland tax code provides a full range of administrative procedures to
taxpayers. Administrative remedies are “‘not ‘inadequate’ so as to authorize
judicial intervention before exhaustion of the remed[ies] merely because [they are]
attended with delay, expense, annoyance, or even some hardship.’” Prince
George's Cnty. v. Blumberg, 288 Md. 275, 292 (1980) (quoting Bennett v. Sch.
Dist. of Royal Oak, 159 N.W.2d 245, 247 (Mich. App. 1968)).
Here, Zorzit availed himself of the procedures for disputing the taxes
assessed against him. Upon receiving the notice of assessment for admissions and
amusement taxes, Zorzit requested an informal hearing before the Comptroller’s
Hearings & Appeals Section pursuant to Tax-Gen. § 13-508(c), where he had the
opportunity to challenge his assessment. The hearing officer examined Zorzit’s
challenges and, heeding some of his arguments, reduced the amount of the
assessment. It is important to underscore that the General Assembly has conferred
broad and immediate powers on the Comptroller to collect and secure taxes upon
decision has limited application in this case. Phillips concerned federal tax statutes, which,
in this context, are notably different in that the IRS is not permitted to assess or begin
collection proceedings until the Tax Court has reached a final determination, unless the case
involves a jeopardy assessment. I.R.C. § 6213(a).
26
assessment. By operation of statute, “[u]npaid tax, interest, and penalties
constitute a lien, in favor of the State, extending to all property and rights to
property belonging to . . . the person required to pay the tax[,]” Tax-Gen. § 13-805
(emphasis added). Pursuant to Tax-Gen. § 13-806(a), “the lien arises on the date
of the notice that the tax is due and continues to the date on which the lien is: (1)
satisfied; or (2) released by the tax collector because the lien is: (i) unenforceable
by reason of lapse of time; or (ii) uncollectible.” (Emphasis added). The
Comptroller “perfects” the lien by filing a notice of tax lien in the circuit court.20
Tax-Gen. § 13-807(a).
After receiving his notice of final determination, Zorzit chose to further
appeal his assessment to the Tax Court pursuant to Tax-Gen. § 13-510(a)(2).
Thereafter, faced with concerns stemming from the millions of tax dollars owed in
this case, Zorzit’s fraud penalty, and his guilty plea for federal money-laundering,
the Comptroller exercised its statutory authority to file a lien—something the
Comptroller contends is an infrequently used tool at this stage along the tax-
dispute continuum—to safeguard the public’s interest in the monies owed by
20
In Rossville Vending Machine Corp. v. Comptroller of the Treasury, 114 Md. App.
346, 347-48 (1997), the Comptroller levied a tax assessment against the taxpayer, Rossville,
and filed a notice of tax lien in the Circuit Court for Baltimore County two days later.
Rossville then pursued his appeal rights concerning the validity of its tax assessment, which
was ultimately affirmed. Although the case concerned the effect of the statute of limitations
on the tax lien, the court’s opinion was premised on the viability of the notice of tax lien filed
by the Comptroller and that the lien was not subject to the statute of limitations.
27
Zorzit to the State of Maryland. Importantly, it was only after Zorzit had notice of
his assessment and the opportunity to challenge the amount of his assessment at
the informal hearing that the Comptroller filed the lien, in the reduced amount,
against Zorzit’s assets. Stated differently, the Comptroller, in exercising its broad
powers bestowed by the General Assembly, confronted the possibility that Zorzit’s
assets might be depleted during the pendency of the appeal, that other creditors
might initiate claims, or that more fraudulent acts might occur in choosing to file
the lien before the Tax Court’s final determination. Indeed, the Comptroller must
file the lien in order for it to have “the full force and effect of a judgment lien.”
Tax-Gen. § 13-808. If filed later, the lien may have become subordinate to a prior
perfected security interest. See, e.g., Farmers & Merchs. Nat’l Bank of
Hagerstown v. Schlossberg, 306 Md. 48, 66 (1986).
Had Zorzit not appealed to the Tax Court, the alternative scenario likely
would have been enforcement of the notice of lien. The tax code provides that if a
taxpayer fails to satisfy the properly filed lien within fifteen days after the notice of
lien is issued, or the Comptroller does not otherwise release the lien, the
Comptroller “may bring an action in a court of the State to enforce the lien.” Tax-
Gen. § 13-810(a). Upon the filing of such an action, “[t]he court, acting without a
jury, shall: (1) adjudicate all matters involved in the proceedings; and (2)
determine the merits of all claims or liens.” Tax-Gen. § 13-810(c). Here, the
28
Comptroller did not seek to enforce the lien, presumably because Zorzit pursued
his right to appeal before the Tax Court. In any case, the Comptroller could not
have enforced the lien against Zorzit without a full adjudicatory hearing in the
circuit court.
In sum, the exceptions to the exhaustion requirement for “when there is no
administrative remedy” and “when the administrative remedy provided by the
statutory scheme is inadequate” do not apply here. The Tax-General Article
provides Zorzit with adequate administrative remedies for his challenge to the
propriety of the lien and the underlying assessment through several alternative
methods of review: (1) an informal hearing before the Comptroller’s Hearings and
Appeals Section; (2) an appeal to and hearing before the Tax Court; or (3) upon
enforcement of the lien, an adjudication of the merits of the lien before the circuit
court. By virtue of his informal hearing, Zorzit already challenged the assessment
and, therefore, the amount of the lien ultimately filed pending his appeal to the Tax
Court. It was error for the circuit court to review the merits of the case before
Zorzit fully exhausted the mechanisms available to him for disputing his
assessment. As noted by the Supreme Court, “[t]he doctrine [of exhaustion of
administrative remedies], wherever applicable, does not require merely the
initiation of prescribed administrative procedures. It is one of exhausting them,
that is, of pursuing them to their appropriate conclusion and, correlatively, of
29
awaiting their final outcome before seeking judicial intervention.” Aircraft &
Diesel Equip. Corp. v. Hirsch, 331 U.S. 752, 767 (1947).
ii. The Constitutional Exception Does Not Apply
The “‘constitutional exception’” to the exhaustion rule “permits a judicial
determination without administrative exhaustion when there is a direct attack upon
the power or authority . . . of the legislative body to adopt the legislation from
which relief is sought.” Harbor Island Marina v. Calvert Co., 286 Md. 303, 308
(1979) (reviewing the holding in State Dep’t of Assessments & Taxation v. Clark,
281 Md. 385 (1977)). The Court of Appeals has described this exception as
“extremely narrow[,]” Ray’s Used Cars, supra, 398 Md. at 650, and has
significantly limited the scope of the exception over the years. Broad. Equities,
Inc., 360 Md. at 455.
For example, in Goldstein v. Time-Out Family Amusement Centers, Inc.,
301 Md. 583, 590 (1984), the Court of Appeals held that “the attack must be made
to the constitutionality of the statute as a whole and not merely as to how the
statute has been applied.” In Goldstein, the plaintiffs were the owners of a
company that operated family amusement centers that gained revenue by the
charge and operation of coin-operated games and amusement devices. Id. at 585.
After receiving its admissions and amusement tax assessment, the plaintiffs filed a
declaratory judgment action in the Circuit Court for Anne Arundel County,
30
seeking, inter alia, a judicial declaration that a statute containing various
exemptions and one of the Comptroller’s regulations were unconstitutional as
violative of the Equal Protection Clause of the Fourteenth Amendment of the
United States Constitution and Article 24 of the Maryland Declaration of Rights.
Id. at 586. The plaintiffs did not seek injunctive relief. The circuit court agreed
with plaintiffs and issued a declaration that the statutory exemptions and the
regulation were unconstitutional. Granting certiorari before this Court heard the
appeal, the Court of Appeals reversed. Id. at 587.
The Court determined that the constitutional exception was not applicable
in that case because “[a]lthough [the plaintiffs] originally claimed to attack the
exemptions statute in its entirety, it is clear . . . that [their] real protest focused
upon the statutory exemptions granted to recreational businesses, and not upon the
exceptions for non-profit and charity institutions[.]” Id. at 590. The Court held
that the plaintiffs were not attacking the legislature’s power to enact the statutory
exemptions; the company “merely attacked certain exemptions granted to
businesses similar to its own.” Id. Further, the Court concluded that plaintiffs’
challenge to the regulation related only to how the exemption was applied to their
company, not how the exemption applied to all companies. Id. at 591. Therefore,
the Court held that the plaintiffs were required to exhaust their administrative
remedies before seeking a judicial determination.
31
Here, in his petition for declaratory relief and motion for summary
judgment, Zorzit challenged the Comptroller’s interpretation of when a tax
becomes “due” under Tax-Gen. § 13-806(a), claiming that the Comptroller’s
reading—that of the filing of a notice of lien under that statute before the Tax
Court’s resolution of an appeal is proper—violated his due process rights. Zorzit
expressly invokes the validity of the statute by arguing that the Comptroller’s
action violated it. In our view, the crux of Zorzit’s argument is that the statute was
unconstitutional as applied in his case because the Comptroller filed the notice of
lien before the Tax Court rendered a decision on his appeal. In other words, Zorzit
does not contend that any tax lien filed under the statute would be unconstitutional
in any taxpayer’s case; therefore, he does not attack the constitutionality of the
statute as a whole. Indeed, to fall within the constitutional exception, the attack
must be made as to “all of [the statute’s] parts and all of its applications.” Ray’s
Used Cars, 398 Md. at 652.
Unlike the plaintiffs in Goldstein, here, Zorzit sought to vacate the lien in
addition to a declaration that the statute was unconstitutional. Therefore, because
this case invokes the anti-injunction statute, Tax-Gen. § 13-505, even if Zorzit had
articulated a constitutional challenge to the whole statute, under Holiday Point
Marina Partners v. Anne Arundel County, 349 Md. 190 (1998), the constitutional
exception does not apply.
32
The Court of Appeals has established that “where the legislature has
expressly provided or intended that the administrative and judicial review remedy
be the ‘exclusive’ remedy, the [constitutional] exception is inapplicable, and a
declaratory judgment or equitable action challenging the validity of an enactment
‘as a whole’ will not lie.” Broad. Equities, Inc., 360 Md. at 457 (citations
omitted). In Holiday, the plaintiff-marina applied for a zoning variance that was
necessary pursuant to county law to obtain a permit to construct additional boat
slips on its pier. 349 Md. at 194-95. The Zoning Hearing Officer denied the
application, and the plaintiff filed a timely appeal to the Anne Arundel County
Board of Appeals. Id. at 195. Before the disposition of its administrative appeal,
however, the plaintiff filed a declaratory judgment action in the Circuit Court for
Anne Arundel County challenging the county ordinance requiring the zoning
variance as unconstitutional by virtue of being preempted by state and federal law.
Id. The circuit court entertained the action based on its conclusion that the
plaintiff attacked the county’s authority to adopt the disputed law, citing Harbor
Island Marina, supra, and issued a declaratory judgment that the county was
authorized to adopt the law and that the ordinance was not otherwise
unconstitutional under the doctrine of preemption. Id. at 197. This Court
affirmed.
33
On appeal, the Court of Appeals issued a mandate vacating our affirmance
and remanding to this Court with directions to vacate the circuit court’s judgment.
After reviewing the General Assembly’s “express” statement that the
administrative and judicial review remedy applicable in that case was exclusive,
the Court concluded that “[t]he effect of such [express] language is to abrogate any
alternative legal or equitable remedies that might otherwise have existed” and that
“where the administrative and judicial review procedures are exclusive, neither a
declaratory judgment action nor a common law or equitable action will lie.” Id. at
202-03 (citations omitted). The Court established that “[t]he so-called
‘constitutional’ or ‘validity’ exception to the requirement that a primary
administrative remedy be first invoked and exhausted ordinarily has no application
when the administrative and judicial review remedy is exclusive.” Id. at 203
(citations omitted).
Here, the Court of Appeals has determined that the Tax-General Article
provides the exclusive, primary remedies for tax-related disputes, and the General
Assembly enacted Tax-Gen. § 13-505 to establish an explicit prohibition against
judicial interference with the tax assessment and collection process. Therefore,
even if Zorzit articulated a challenge to the legislature’s authority to enact the
statute or to the validity of the statute as a whole, he could not obtain relief from
the judiciary pursuant to the constitutional exception without first exhausting his
34
administrative remedies. Indeed, the Court of Appeals has quoted the Supreme
Court as stating:
It is true that the presence of constitutional questions, coupled with a
sufficient showing of inadequacy of prescribed administrative relief and of
threatened or impending irreparable injury flowing from delay incident to
following the prescribed procedure, has been held sufficient to dispense
with exhausting the administrative process before instituting judicial
intervention. But . . . this rule is not one of mere convenience or ready
application. Where the intent of [the legislature] . . . is clear to require
administrative determination, either to the exclusion of judicial action
or in advance of it, a strong showing is required, both of inadequacy of
the prescribed procedure and of impending harm, to permit short-
circuiting the administrative process. . . . commands for judicial
restraint in this respect are not lightly to be disregarded.’
Poe v. City of Baltimore, 241 Md. 303, 310 (1966) (emphasis added) (quoting Aircraft &
Diesel Equip. Corp., supra, 331 U.S. at 773-74) (internal quotation marks omitted).
In sum, the instant case does not fall within the exceptional and narrow
circumstances under which a taxpayer may obtain collateral recourse from the judiciary
prior to exhausting the primary and exclusive remedies contained in the Tax-General
Article.
II.
Procedural Due Process
35
Maryland appellate courts “adhere[] to the established principle that a court will
not decide a constitutional issue when a case can properly be disposed of on a non-
constitutional ground.” McCarter v. State, 363 Md. 705, 712 (2001) (quoting Balt. Sun v.
Mayor & City Council of Balt., 359 Md. 653, 659 (2000)) (internal quotation marks
omitted). The “strong and established policy is to decide constitutional issues only when
necessary.” VNA Hospice of Md. v. Dep’t of Health & Mental Hygiene, 406 Md. 584,
604 (2008). Because we conclude that § 13-505 precluded the court from enjoining the
tax lien filed by the Comptroller in this case, we need not and shall not resolve the
constitutional issue raised in this appeal.
JUDGMENT OF THE CIRCUIT COURT
FOR BALTIMORE COUNTY VACATED
AND CASE REMANDED TO THAT
COURT WITH DIRECTION TO DISMISS
THE ACTION.
COSTS TO BE PAID BY APPELLEE.
36