Man, not state, had priority in breeder’s award proceeds

A Marshall County trial court erred when it granted summary judgment in favor of the Indiana Department of Revenue on a man’s attempt to collect breeder’s award proceeds owed to another man who had outstanding tax warrants.

The Department of Revenue filed four tax warrants in Marshall County against Dale Dodson in 2000 and 2010 for unpaid income taxes he owed. Gordon Etzler filed a UCC financing statement later in 2010 asserting an interest in the breeder’s award proceeds owed to Dodson by the Indiana Horse Racing Commission. More than $11,000 in breeder’s awards were levied against Dodson and were intercepted by the state to pay his outstanding tax liabilities.

Etzler demanded from the revenue department those funds. When the state refused to pay them, Etzler sued in Porter County. The case was transferred to Marshall County, where the trial court ruled in favor of the state.

In Gordon A. Etzler v. Indiana Department of Revenue, 50A04-1406-PL-285, the Court of Appeals concluded that Etzler is entitled to summary judgment, so it reversed the lower court. The department argued that since it filed the tax warrants before Etzler filed his UCC financing statement, it was entitled to the breeder’s award proceeds.

Indiana Code 6-8.1-8-8 limits the department’s authority to collect upon its lien “without judicial proceedings” to the property “in the county” in which the tax warrant was issued and a judgment created pursuant to I.C. 6-8.1-8-2. The state only filed a tax warrant in Marshall County and did not attempt to enforce the judgment by any action available to it in order to satisfy the judgment.

“We conclude that because the judgment resulting from the Department’s Marshall County tax warrant only creates a lien on property ‘in the county,’ Ind. Code § 6-8.1-8-2(e), and because the Department did not take measures to establish a lien on property located in any other county, the Department’s ability to levy on Dodson’s property was limited to Marshall County,” Judge Margret Robb.

“The Department levied on the breeder’s award proceeds prior to their deposit in Dodson’s bank account and thus prior to the Department’s ability to collect directly from a financial institution under Indiana Code section 6-8.1-8-8(1). The Department does not dispute that the funds were located outside of Marshall County at the time they were seized. Consequently, we conclude that the Department did not have authority to levy on the breeder’s award proceeds and that it is not entitled to summary judgment.”