Comptroller of the Treasury v. Zorzit
108 A.3d 581
| Md. Ct. Spec. App. | 2015Background
- Comptroller assessed admissions & amusement tax deficiencies and 100% fraud penalties against Nick’s Amusements, Inc. and its president John Zorzit after an audit tied to federal criminal investigation; hearing officer reduced but largely affirmed the assessment and held Zorzit personally liable.
- Zorzit appealed the hearing officer’s final determinations to the Maryland Tax Court (de novo review) within statutory time limits.
- While the Tax Court appeal was pending, the Comptroller filed and recorded a notice of tax lien against Zorzit to secure the State’s interest in the alleged unpaid tax.
- Zorzit filed a declaratory-judgment action in the Circuit Court for Baltimore County seeking vacatur of the lien, arguing the lien was premature under Title 13 and violated due process because the Tax Court hearing was not held within a specified prompt timeframe.
- The circuit court granted summary judgment, declared the statute unconstitutional as applied for lack of a specified post-deprivation hearing deadline, and vacated the lien pending Tax Court decision; the Comptroller appealed.
- During appeal, the Tax Court issued a decision largely affirming the Comptroller’s assessments (reducing fraud penalty), rendering the original dispute moot in part; the Court of Special Appeals nevertheless reviewed the non‑constitutional statutory issues as recurring public matters.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether circuit court had authority to void the tax lien while Tax Court appeal was pending | Zorzit: lien was premature under Title 13 and violated due process; circuit court can vacate lien | Comptroller: Tax-General provides exclusive administrative remedies and §13-505 bars courts from enjoining tax assessment/collection | Held for Comptroller: circuit court lacked authority; §13-505 bars injunctions or other process to enjoin tax assessment/collection; case dismissed below and remanded with directions to dismiss Zorzit’s petition |
| Whether exhaustion/administrative remedies required before collateral judicial relief | Zorzit: statutory scheme inadequate to protect post-deprivation rights absent a specified prompt hearing deadline | Comptroller: Zorzit had and used administrative remedies (hearing and Tax Court appeal); exceptions to exhaustion do not apply | Held: Zorzit failed to exhaust; Tax-General provides exclusive, adequate remedies and exceptions (no remedy/inadequacy/ facial challenge) do not apply |
| Whether the anti-injunction statute (Tax-Gen. §13-505) permits declaratory or equitable relief to block lien | Zorzit: equitable relief justified to prevent irreparable harm from lien | Comptroller: §13-505 unambiguously prohibits such relief; taxpayer’s remedy is to pursue administrative appeal and, if necessary, refund suit or challenge after enforcement | Held: §13-505 precludes circuit court relief; only narrow, exceptional collateral relief is available and not shown here |
| Whether court must reach due-process claim regarding lack of a specific prompt post-lien hearing deadline | Zorzit: statutory “prompt” hearing is unacceptably indefinite; violates due process as applied | Comptroller: statutory processes (informal hearing, prompt Tax Court de novo review, judicial review after Tax Court) suffice | Held: Court declined to decide on due-process claim because case resolved on statutory/anti-injunction ground; constitutional question left unaddressed |
Key Cases Cited
- Phillips v. Commissioner, 283 U.S. 589 (U.S. 1931) (post-deprivation postponement of judicial inquiry can satisfy due process when ultimate review is adequate)
- Fuentes v. Shevin, 407 U.S. 67 (U.S. 1972) (pre‑seizure hearing requirements and balancing test for property deprivations)
- Bob Jones Univ. v. Simon, 416 U.S. 725 (U.S. 1974) (anti-injunction principles protect government's need to collect taxes)
- Aircraft & Diesel Equip. Corp. v. Hirsch, 331 U.S. 752 (U.S. 1947) (exhaustion requires pursuing administrative remedies to conclusion before judicial intervention)
- Holiday Point Marina Partners v. Anne Arundel County, 349 Md. 190 (Md. 1998) (where legislature makes administrative review exclusive, constitutional-exception to exhaustion is inapplicable)
- Goldstein v. Time-Out Family Amusement Centers, Inc., 301 Md. 583 (Md. 1984) (constitutional challenge must be to statute as whole to bypass administrative remedies)
- Bancroft Info. Grp., Inc. v. Comptroller of the Treasury, 91 Md. App. 100 (Md. Ct. Spec. App. 1992) (Tax-General Article evinces legislative intent to have tax disputes resolved through statutory administrative procedures)
- Rossville Vending Machine Corp. v. Comptroller of the Treasury, 114 Md. App. 346 (Md. Ct. Spec. App. 1997) (upholding filing of tax liens and contemplating enforcement and adjudication procedures)