§231-33  Tax debt due the State; lien. (a)  Within the meaning of this section:

(1)  The terms "mortgagee","pledgee", and "purchaser" do not include any person towhom property or an interest in property is conveyed (A) as security for or insatisfaction of an antecedent or pre-existing debt of a debtor who is insolventwithin the meaning of the Bankruptcy Act, or (B) as trustee, assignee, or agentfor the benefit of one or more creditors, other than mortgage bondholders.

(2)  The term "motor vehicle" means anyself-propelled vehicle to be operated on the public highways.

(3)  The interest of a party, if required to berecorded or entered of record in any public office in order to be valid againstsubsequent purchasers, does not arise prior to the time of such recording orentry of record.

(4)  An employer or other person who is required byany tax law to withhold tax at the source, or to collect a tax, and who is madeliable for the tax if the employer or other person does not fulfill theemployer's or other person's duties in that regard, shall be deemed a personliable for the tax.

(5)  The term "real property" includesleasehold or other interest in real property and also any personal propertysold or mortgaged with real property if affixed to the real property anddescribed in the instrument of sale or mortgage.

(b)  Any state tax which is due and unpaid is adebt due the State and constitutes a lien in favor of the State upon allproperty and rights to property, whether real or personal, belonging to anyperson liable for the tax.  The lien for the tax, including penalties andinterest thereon, arises at the time the tax is assessed, or at the time areturn thereof is filed, or at the time of filing by the department of taxationof the certificate provided for by subsection (f) whichever first occurs.  Fromand after the time the lien arises it is a paramount lien upon the property andrights to property against all parties, whether their interest arose before orafter that time, except as otherwise provided in this section.

(c)  The lien imposed by subsection (b) is notvalid as against:

(1)  A mortgagee or purchaser of real property, or thelien of a judgment creditor upon real property, whose interest arose prior tothe recording by the department of the certificate provided for by subsection(f);

(2)  A mortgagee or purchaser of a motor vehicle whobecomes the legal owner or owner at a time when the tax lien and encumbrancerecord provided for by section 286-46 does not show the lien.

(d)  As to tangible personal property,possession of which is held by a person liable for tax for the purpose of saleto the public in the ordinary course of the person's business, the lien imposedby subsection (b) is extinguished as to any such property sold in the ordinarycourse of the business by or under the direction of the person to any purchaserfor valuable consideration.  As to securities, negotiable instruments, andmoney, the lien imposed by subsection (b):

(1)  Is extinguished as to such property upon passageof title to a person without notice or knowledge of the existence of the lien,for an adequate and full consideration in money or money's worth;

(2)  Is not valid as against a mortgagee or pledgeefor an adequate and full consideration in money or money's worth, who islocated outside the State and takes possession of the property, if at the timeof taking possession of the property the mortgagee or pledgee is without noticeor knowledge of the existence of the lien.  The mere recording or filing of thecertificate provided for by subsection (f) does not constitute notice for thepurposes of this subsection.

(e)  Subject to the provisions of thissubsection, the lien imposed by subsection (b) is not valid as against amortgagee, pledgee, or purchaser who gives notice to the department on a formprescribed by it of the mortgage, pledge, or purchase made or about to be made,with a description of the property encumbered or conveyed or proposed to beencumbered or conveyed thereby, and whose interest in the property arises priorto the recording or filing by the department of the certificate provided for bysubsection (f) or within ten days after the filing.  If the notice is given thelien imposed by subsection (b) is valid against the party giving the notice, asto any taxes set forth in a certificate filed as provided in subsection (f)within the period of fifteen days after the notice.  The department may waiveall or any part of the period herein allowed.

(f)  The department may record in the bureau ofconveyances at Honolulu, or in respect of a lien on a motor vehicle, file withthe county director of finance, a certificate setting forth the amount of taxesdue and unpaid, which have been returned, assessed, or as to which a notice ofproposed assessment has issued.  The certificate shall identify the taxpayer,the taxpayer's last known address, and the tax or taxes involved.  Therecording or filing of the certificate has the effect set forth in thissection, but nothing in this section shall be deemed to require that acertificate recorded or filed by the department must include the amount of anypenalty or interest, in order to protect the lien therefor.  The certificate,if recorded or filed with the county director of finance, shall be entered ofrecord as provided by law.  Recordation of the certificate in the bureau ofconveyances shall be deemed, at such time, for all purposes and without anyfurther action, to procure a lien on land registered in the land court underchapter 501.  Any cost incurred in the filing of the certificate shall be apart of the lien for the tax therein set forth.

(g)  The department may issue a certificate ofdischarge of any part of the property subject to the lien imposed by thissection, upon payment in partial satisfaction of such lien, of an amount notless than the value as determined by the department of the lien on the part tobe so discharged, or if the department determines that the lien on the part tobe discharged has no value.  Any such discharge so issued shall be conclusiveevidence of the discharge of the lien as therein provided.

(h)  The lien imposed by subsection (b) may beforeclosed in a court proceeding or by distraint under section 231-25.

(i)  This section shall not apply to a taxlevied by a chapter which contains a specific provision for a lien for the taxlevied by the chapter, any provision in this section to the contrarynotwithstanding. [L 1957, c 185, §1; am L Sp 1959 2d, c 1, §16; am L 1963, c104, §1; Supp, §115-37.5; am L 1966, c 33, §2; HRS §231-33; gen ch 1985; am L1989, c 20, §1]

 

Case Notes

 

  Federal court's equitable discretion to award attorney's feesto the interpleader stakeholder was not precluded by the statutory prioritygiven by the state tax lien statute.  488 F. Supp. 2d 1084.

  Pre-hearing tax lien does not violate due process.  57 H. 1,548 P.2d 246.