A.C. Financial, Inc. v. Salt Lake County
| Decision Date | 14 November 1997 |
| Docket Number | No. 960136,960136 |
| Citation | 948 P.2d 771 |
| Parties | 330 Utah Adv. Rep. 9 A.C. FINANCIAL, INC., a Utah corporation, Plaintiff and Appellant, v. SALT LAKE COUNTY, Defendant and Appellee. Utah Association of Counties, Utah Bankers Association, Utah Land Title Association, and Utah State Tax Commission, Amici Curiae. |
| Court | Utah Supreme Court |
Don B. Allen, Salt Lake City, for Utah Bankers Association.
Bruce A. Maak, Salt Lake City, for Utah Land Title Association.
Jan Graham, Att'y Gen., John C. McCarrey, Asst. Att'y Gen., Salt Lake City, for State Tax Commission.
INTRODUCTION
A.C. Financial, Inc., appeals from a summary judgment entered against it and in favor of Salt Lake County in A.C. Financial's quiet title action regarding two parcels of its land against which the County asserts liens for personal and real property taxes. A.C. Financial contests the trial court's rulings that (1) the County established liens for personal property taxes on these parcels, and (2) these liens and liens for real property taxes on the same parcels were entitled to priority over A.C. Financial's trust deed.
On May 13, 1987, W.W. & W.B. Gardner ("Gardner"), an engineering and construction company, executed a trust deed to First Interstate Bank to secure a $500,000 promissory note. Beginning in 1988 and continuing until 1992, Gardner failed to pay taxes assessed by the County on Gardner's personal property and various parcels of real property. 1 In March 1988, an officer of Gardner wrote to the assessor's office, enclosing a description of a parcel of real property owned by Gardner and asking the assessor to "use this information to facilitate a deferral of our 1988 personal property tax assessment." The 1988 real property assessment made no mention of these personal property taxes; however, the 1989 real property assessment for one of Gardner's parcels (the "008 parcel") listed amounts owed for personal property taxes for both 1988 and 1989. These personal property taxes made up a large portion of the 1989 tax bill--approximately $45,000 of $48,000. In March 1990, another Gardner officer informed the assessor's office that Gardner "would appreciate your assistance in attaching the AFFIDAVITS OF PERSONAL PROPERTY to our real estate taxes due in November of 1990." 2 The subsequent 1990 real property assessment for a second parcel (the "004 parcel") included approximately $15,000 for personal property taxes. Substantially smaller amounts of personal property taxes were included on real property tax notices for 1991 and 1992. In early March 1992, A.C. Financial purchased the trust deed and promissory note from First Interstate Bank. 3 Later that month, A.C. Financial recorded a notice of default and intent to sell the property, giving notice to other parties, including the County. In May 1992, Gardner filed for bankruptcy. In December of that year, A.C. Financial bought the property for $50,000 at the foreclosure sale.
Following the December foreclosure sale, A.C. Financial brought a quiet title action to challenge the validity of the tax liens appearing on the County's real property records. The County's answer sought judicial foreclosure of those liens. The County claims that as of June 1995, a total of $63,049 in real and personal property taxes, interest, and penalties was owed on the 004 parcel and $112,037.60 was owed on the 008 parcel. Following discovery, A.C. Financial moved and the County cross-moved for partial summary judgment on the issue of whether liens on the real property for the unpaid personal property taxes existed. 4 The court ruled that the County had valid liens. Subsequently, the County moved and A.C. Financial cross-moved for summary judgment as to whether the liens had priority over the trust deed under which A.C. Financial claims title. The County's summary judgment motion relied on liens for both personal and real property taxes, while A.C. Financial's motion was directed only to the priority of the personal property tax liens. Relying on Union Central Life Insurance Co. v. Black, 67 Utah 268, 278, 247 P. 486, 487 (1926), the court ruled that the liens should be accorded priority over the earlier created trust deed and were thus not eliminated by foreclosure of the trust deed. A.C. Financial appealed both rulings to this Court.
This appeal presents two primary questions: first, whether valid liens for personal property taxes ever attached to the real property and, second, whether liens on real property for personal and real property taxes are subject to a trust deed interest created before accrual of the taxes underlying the liens. When we review a summary judgment, we accord no deference to the trial court's conclusions that there were no disputed issues of material fact and that the County was entitled to judgment as a matter of law.
We turn first to the priority question, which, because A.C. Financial does not dispute the existence of liens for real property taxes, we must decide irrespective of whether liens for personal property taxes attached. 5 Both issues were resolved below on summary judgment in favor of the County. "Summary judgment is proper only when there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law." Draper City v. Estate of Bernardo, 888 P.2d 1097, 1099 (Utah 1995). "In reviewing the trial court's grant of summary judgment, this court views the facts in the light most favorable to the nonmoving party." Schnuphase v. Storehouse Markets, 918 P.2d 476, 477 (Utah 1996). We therefore construe the facts in the light most favorable to A.C. Financial.
A.C. Financial argues that special priority cannot be accorded the County's tax liens because nothing in Utah statutory or case law affirmatively establishes such a priority. A.C. Financial acknowledges that Black, 67 Utah at 278, 247 P. at 489, held that tax liens enjoy priority over previously created contractual liens but argues that Black has been implicitly overruled and should now be explicitly overruled as unwise policy. The County argues that Black ensures that the State can collect necessary operating revenues and that therefore Black should be reaffirmed.
The primary question for us to resolve with regard to the priority issue is whether Black continues to be valid authority. Black held that liens for unpaid personal property taxes that were attached to the taxpayer's real property as well as liens for real property taxes on the same property were not subject to a previously created mortgage interest in the real property; therefore, this case is on all fours with Black. 6 In framing the issue, the Black Court recognized as a general principle of law that the Legislature has power to make its tax liens prior to any other lien but that to do so, "such intent of the Legislature must be found in the language used, either expressly or by necessary implication." Black, 67 Utah at 271, 247 P. at 487. Construing three adjacent sections of the tax code, the Court held that this requirement was satisfied. 7 The Black Court discerned the warrant for special priority in the following statutory language: "The judgment is not satisfied nor the lien removed until the taxes are paid or the property sold for the payment thereof." Id. at 272, 247 P. at 487. The Court reasoned that not granting special priority to tax liens would defeat the legislative purpose, evidenced in this language, that the lien remain on the property until the tax was paid or the property sold at tax sale. Id. at 277, 247 P. at 489. This provision remains in the code today, unchanged from the version considered in Black.
None of the Utah cases that has cited Black has explicitly overruled it. See Nelson v. Stoker, 669 P.2d 390 (Utah 1983); Phillips Petroleum Co. v. Wagstaff, 22 Utah 2d 177, 450 P.2d 100 (1969); State ex rel. Tax Comm'n v. Evans, 79 Utah 370, 6 P.2d 161 (1931). However, A.C. Financial, joined by amici Utah Land Title Association and Utah Bankers Association, argues that Nelson v. Stoker and Phillips Petroleum Co. v. Wagstaff implicitly overrule Black by rejecting its fundamental premises. We disagree. Both of these cases held that Black did not apply to the circumstances presented in those cases--in essence, each case distinguished Black on its facts.
In Phillips, the Court noted that unlike the liens for withholding taxes at issue there, the property tax liens challenged in Black were matters of public record. Phillips, 22 Utah 2d at 179, 450 P.2d at 102. Furthermore, the mortgagee could protect itself by foreclosing before multiple years' assessments accumulated. Id. That distinction is still clearly valid with respect to real property taxes, which attach automatically as of the beginning of the year in the amount assessed. However, the distinction may not apply to personal property tax liens on real property. Because the county must take affirmative steps to establish a lien for personal property taxes against the taxpayer's real property, the public record contains no indication that a claim for personal property taxes is being asserted against the real property until midway through the tax year. An additional difference not noted by the Phillips Court is that the lien in question in that case attached to all the personal and real property of the taxpayer rather than to specific property. See id. at 178, 450 P.2d at 100 (citing statute).
We are likewise not persuaded by A.C. Financial's argument that because the lien statute in Phillips contained language that more specifically provided for special priority for the withholding tax liens, 8 the Phillips Court's refusal to grant such priority weakens the argument for...
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