Two Rules Conflict: Tagging vs Sorting

Hello everyone,
I'm facing quite controversial issue with running two Hazel rules that I've set up to manage my Photoshop files. Here's a quick rundown:

Rule 1: This rule looks for any file that contains the string "psedit" in its title and adds a "photoshop" tag to it.
Rule 2: This rule identifies psd files that contain the string "psedit" in their title and runs a shell script to combine these files into a single folder. I also tried choosing Sort into subfolder action instead of running script but the results are the same.
The Issue
When enabled one at a time - both rules are running perfectly. However, when both rules are enabled, Rule 2 does not execute. If I disable Rule 1, Rule 2 works fine. If I enable Rule 1, then disable it, then enable Rule 2 - all good too. As a workaround, I modified Rule 2 to also add the "photoshop" tag before running the shell script and disabled Rule 1. Now Rule 2 doesn't execute at all, even though the Rule Preview shows the files as matching.
I suspect that there is something about tags that somehow preventing Rule 2 from executing properly. But since each rule works fine by itself, I'm not sure why this would be the case.
Troubleshooting Steps Taken
Enabled debug mode in logs - didn’t find anything abnormal.
Tried changing the sequence of actions -didn't resolve the issue.
Has anyone else experienced this or have any insights on how to fix it?
Thank you for your time and assistance!
I'm facing quite controversial issue with running two Hazel rules that I've set up to manage my Photoshop files. Here's a quick rundown:

Rule 1: This rule looks for any file that contains the string "psedit" in its title and adds a "photoshop" tag to it.
Rule 2: This rule identifies psd files that contain the string "psedit" in their title and runs a shell script to combine these files into a single folder. I also tried choosing Sort into subfolder action instead of running script but the results are the same.
The Issue
When enabled one at a time - both rules are running perfectly. However, when both rules are enabled, Rule 2 does not execute. If I disable Rule 1, Rule 2 works fine. If I enable Rule 1, then disable it, then enable Rule 2 - all good too. As a workaround, I modified Rule 2 to also add the "photoshop" tag before running the shell script and disabled Rule 1. Now Rule 2 doesn't execute at all, even though the Rule Preview shows the files as matching.
I suspect that there is something about tags that somehow preventing Rule 2 from executing properly. But since each rule works fine by itself, I'm not sure why this would be the case.
Troubleshooting Steps Taken
Enabled debug mode in logs - didn’t find anything abnormal.
Tried changing the sequence of actions -didn't resolve the issue.
Has anyone else experienced this or have any insights on how to fix it?
Thank you for your time and assistance!