A-Fab Eng'g v. Prop. Tax Div. of the Utah State Tax Comm'n

• Decision Date: 23 May 2019
• Docket Number: No. 20180014-CA,20180014-CA
• Citation: 444 P.3d 547
• Parties: A-FAB ENGINEERING, Appellant, v. PROPERTY TAX DIVISION OF the UTAH STATE TAX COMMISSION, Appellee.
• Court: Utah Court of Appeals

444 P.3d 547

A-FAB ENGINEERING, Appellant,

v.PROPERTY TAX DIVISION OF the UTAH STATE TAX COMMISSION, Appellee.

No. 20180014-CA

Court of Appeals of Utah.

Filed May 23, 2019

Lynn Kingston, Attorney for Appellant

Sean D. Reyes, Salt Lake City, Erin T. Middleton, and Chauntel M. Lopez, Attorneys for Appellee

Judge David N. Mortensen authored this Opinion, in which Judges Jill M. Pohlman and Diana Hagen concurred.

Opinion

MORTENSEN, Judge:

¶1 "[I]n this world nothing can be said to be certain, except death and taxes."¹ Nearly as certain is the procedural bar attendant to court challenges when a party has failed to exhaust administrative remedies, resulting in an absence of jurisdiction. A-Fab Engineering (A-Fab) challenges two property tax assessments levied in 2012 and 2013 by the Utah State Tax Commission (Commission). The Commission dismissed A-Fab’s administrative appeal as untimely. A-Fab then petitioned the district court for review of the Commission’s decision. The district court summarily dismissed the petition because (1) A-Fab did not timely exhaust its administrative remedies; and therefore, the court lacked subject matter jurisdiction; and (2) A-Fab was not entitled to equitable tolling of the deadline to file an administrative appeal. We affirm.

BACKGROUND²

The Property

¶2 A-Fab is a Utah corporation that fabricates, refurbishes, and sells equipment. In or before 2007, A-Fab acquired and rebuilt a "long-wall mining system" (Property). In September 2007, A-Fab sold the Property to C.W. Mining (CW). The sale was financed through a capital lease. In January 2008, however, CW involuntarily entered into bankruptcy, and the bankruptcy court asserted jurisdiction over the Property.

¶3 In December 2008, A-Fab filed a proof of claim in the bankruptcy proceeding, asserting that it owned the Property, and sought "substantial amounts for lease rejection damages." The trustee of the bankruptcy estate responded by filing a complaint against A-Fab that included, among eleven claims for relief, a claim of ownership over the Property. In 2010, while the Property dispute was still pending, the bankruptcy court ordered that A-Fab could take possession of the Property, but that the Property would still be subject to the bankruptcy trustee’s authority before it could be sold or transferred in any way. A-Fab took possession of the Property shortly thereafter.

¶4 A-Fab regained full ownership rights to the Property in 2014 when it entered into a settlement agreement with the bankruptcy estate. Under the terms of the settlement, the bankruptcy estate relinquished any and all claims to the Property in return for a $ 225,000 payment from A-Fab. The bankruptcy court approved the settlement agreement in November 2014.³ In the motion to approve the settlement agreement, the bankruptcy trustee noted that "A-Fab asserted that it owned the [Property] and was leasing it to [CW] under a purported September 1, 2007 lease" and "A-Fab has asserted that it incurred substantial removal, storage and preservation costs, including the payment of personal property taxes , in connection with ... the [Property]." (Emphasis added.)

The Property Tax Assessments

¶5 As required by Utah Code sections 59-2-201 and 59-2-202(1), A-Fab completed and filed its 2012 annual return for assessment of personal property (Return) with the Commission on March 1, 2012. A-Fab’s 2012 Return listed the Property as being "subject to assessment by the State Tax Commission."⁴ Based on the 2012 Return, the Commission prepared a notice of assessment and mailed it—to the address provided by A-Fab on its 2012 Return—on May 1, 2012.

¶6 On February 27, 2013, A-Fab filed its 2013 Return and again listed the Property as being "subject to Assessment by the State Tax Commission." A-Fab attached to the 2013 Return a letter requesting that the Commission reconsider the value of the Property. In this letter, A-Fab included an independent appraisal of the Property and "urge[d] the Tax Commission to reconsider its 2013 assessment of the value of [the Property]." The Commission prepared a notice of assessment and mailed it on May 1, 2013, to the address provided by A-Fab on the 2013 Return. A-Fab did not appeal or pay the 2012 and 2013 assessments (Assessments) within the prescribed tax years.

¶7 A-Fab appealed the Assessments in December 2016. Earlier that year, A-Fab had "inquired of Carbon County whether there were any taxes owed [on the Property] before 2014"—when A-Fab’s ownership rights to the Property were restored—and Carbon County responded that there were not. On June 15, 2016, however, Carbon County mailed a delinquent tax notice, based on the Assessments, to the address provided by A-Fab on its Returns. A-Fab initially raised a challenge to the delinquent tax notice with Carbon County, but the county instructed A-Fab that a formal appeal would need to be taken up with the Commission.

The Proceedings

¶8 On December 6, 2016, A-Fab filed an administrative appeal with the Commission challenging the Assessments. The Commission issued an order to show cause directing A-Fab to explain why its appeal should not be dismissed for failure to timely file.⁵ In its answer, A-Fab argued that equitable tolling should extend the deadline to appeal because the Property was subject to CW’s bankruptcy proceedings until October 2014. The Commission rejected A-Fab’s argument concluding that A-Fab failed to timely appeal the Assessments and further failed to "demonstrate extraordinary circumstances or due diligence sufficient" to toll the deadline to appeal. Specifically, the Commission concluded that A-Fab knew that it included the Property on its 2012 Return and 2013 Return and therefore knew the Property would be assessed for those years. The Commission also decided that A-Fab was not excused from missing the deadline to appeal because it had regained full ownership rights to the Property in October 2014 and "yet it still did not file this appeal until December 6, 2016." A-Fab then petitioned the district court for review of the Commission’s decision.

¶9 The parties filed cross-motions for summary judgment in the district court. The Commission argued that "A-Fab’s petition should be dismissed because it did not exhaust its administrative remedies by filing a timely appeal to the Commission" and that "equitable tolling would be inappropriate because A-Fab waited until December 2016—more than two years after it settled with the bankruptcy trustee—to appeal the [Assessments]." A-Fab argued that the Commission lacked the authority to assess the Property and that the untimely administrative appeal was therefore inconsequential. In the alternative, A-Fab argued that equitable tolling should apply and extend the deadline to appeal because: although the Commission had mailed the Assessments, A-Fab never actually received the Assessments because they were mailed to A-Fab’s old address.

¶10 The district court granted the Commission’s motion. In the court’s ruling and order, it found that "A-Fab did not file its appeals for the 2012 and 2013 tax years until December 6, 2016, well after the deadlines of June 1, 2012, and June 1, 2013, respectively," and thus concluded that "A-Fab did not exhaust its administrative remedies and therefore the Court does not have subject matter jurisdiction."⁶ The district court also concluded that equitable tolling did not extend the deadline to file an appeal because A-Fab "was given clear ownership of the Property in 2014"—and therefore, "[e]ven if equitable tolling were applicable, ... A-Fab’s appeal would still be untimely." The court reasoned that even if "A-Fab was uncertain regarding its obligations to pay taxes on the Property, A-Fab clearly knew that the Tax Commission believed the tax payments on the Property were A-Fab’s responsibility" because "an attorney for A-Fab sent a letter to the [Commission] disputing the valuation of the Property." Finally, "A-Fab asserted that it owned the property and was leasing it to [CW]," and therefore, "because A-Fab was asserting an ownership interest in the Property and had been provided [the Assessments], equitable tolling is inapplicable."

¶11 A-Fab appeals.

ISSUES AND STANDARDS OF REVIEW

¶12 The first issue raised is whether the district court erred by dismissing A-Fab’s petition for judicial review and finding that it lacked subject matter jurisdiction due to A-Fab’s failure to exhaust administrative remedies. A district court’s order dismissing a claim for lack of subject matter jurisdiction due to the failure to exhaust administrative remedies is reviewed for correctness. Nebeker v. Utah State Tax Comm’n , 2001 UT 74, ¶¶ 11–12, 34 P.3d 180.

¶13 The second issue is whether the district court erred in concluding that no genuine issue of material fact existed when it granted summary judgment in favor of the Commission on the issue of equitable tolling. "We affirm summary judgment only when there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law." Arnold Indus., Inc. v. Love , 2002 UT 133, ¶ 11, 63 P.3d 721 (cleaned up). "We grant the [district] court’s legal conclusions no deference, reviewing them for correctness." Id. And "in reviewing a grant of summary judgment, we view the facts and all reasonable inferences drawn therefrom in the light most favorable to the nonmoving party." Id. (cleaned up).

ANALYSIS

I. Administrative Remedies

¶14 "As a general rule, parties must exhaust applicable administrative remedies as a prerequisite to seeking judicial review." Nebeker v. Utah State Tax Comm’n , 2001 UT 74, ¶ 14, 34 P.3d 180 (cleaned up). This court has held that an untimely appeal to an administrative agency is the equivalent of failing to exhaust administrative remedies—which deprives a district court of subject matter jurisdiction. Republic Outdoor Advert., LC v. Utah Dep’t of Transp. , 2011 UT App 198, ¶ 30, 258 P.3d 619.

¶15 Here, it is undisputed that A-Fab failed to timely appeal...