Woodbury Amsource, Inc. v. Salt Lake County

• Decision Date: 27 June 2003
• Docket Number: No. 20010939.,20010939.
• Citation: 73 P.3d 362,2003 UT 28
• Parties: WOODBURY AMSOURCE, INC., Plaintiffs and Appellants, v. SALT LAKE COUNTY, Defendants and Appellees.
• Court: Utah Supreme Court

73 P.3d 362

2003 UT 28

WOODBURY AMSOURCE, INC., Plaintiffs and Appellants, v. SALT LAKE COUNTY, Defendants and Appellees.

No. 20010939.

Supreme Court of Utah.

June 27, 2003.

Mark K. Buchi, Greggory J. Savage, Steven P. Young, Salt Lake City, for plaintiff.

David E. Yocom, Mary Ellen Sloan, Bill Thomas Peters, Salt Lake City, for defendant.

DURHAM, Chief Justice:

¶ 1 Appellants, a group of commercial property owners and landlords (the Landlords), appeal the trial court's grant of summary judgment to appellees, Salt Lake County, the Salt Lake County Board of County Commissioners, and the Salt Lake County Treasurer (collectively, the county).

BACKGROUND

¶ 2 Before it was revised in 1999, the Utah State Tax Commission rule governing taxation of leasehold improvements provided that "[l]easehold improvements under the control of the lessee shall be taxed as personal property of the lessee." Utah Admin. Code R884-24P-32P (1999) (revised 1999, effective Jan. 1, 2000). The rule also stated that any value of leasehold improvements not taxed as personal property of the lessee "shall be included in the value of the real property," on which the landlord paid real property taxes. See id. In practice, this rule was implemented by the personal property division of the County Assessor's office, which collected affidavits from tenants regarding the leasehold improvements under their control and collected taxes from the tenants for these improvements. The assessor used the cost approach in valuing the leasehold improvements. According to the county, the real property division assessed real property independently of the valuation of leasehold improvements, typically using actual lease rates to value the property using the income approach.

¶ 3 On November 30, 1999, the Landlords filed a letter with the county as well as a complaint in district court requesting property tax refunds for the years 1994 to 1999 under section 59-2-1321 of the Utah Code Ann. § 59-2-1321 (2000). Landlords alleged that the county erroneously assessed a double tax on tenant-owned improvements to the Landlords's property by imposing a personal property tax on the tenants for these leasehold improvements while also imposing real property taxes on landlords for the entire value of their property, including the value of the leasehold improvements. After the county's initial motion to dismiss was denied, it filed a motion for summary judgment on February 28, 2001. The Landlords opposed the motion and filed a motion for a rule 56(f) continuance to allow the Landlords to continue discovery of county tax records. Following a hearing, the trial court denied the Landlords' 56(f) motion and granted summary judgment to the county. The trial court held that section 59-2-1321 did not apply to the Landlords' claim because the claim essentially alleged an incorrect valuation of the Landlords' property rather than a double, erroneous, or illegal assessment of tax entitled to a refund. Accordingly, the court held, the Landlords' claim was governed by section 59-2-1004, which requires a claimant to file an application with the County Board of Equalization to appeal valuation within thirty days of the county auditor's mailing of the valuation notice. Utah Code Ann. § 59-2-1004(1)(a). Because the Landlords had failed to follow section 59-2-1004's requirements and the period for doing so had expired, the court dismissed the Landlords' claim for lack of jurisdiction. The Landlords appealed to this court.

STANDARD OF REVIEW

¶ 4 We review the district court's summary judgment ruling for correctness, granting no deference to its legal conclusions. Arnold Indus., Inc. v. Love, 2002 UT 133, ¶ 11, 63 P.3d 721; Wilson Supply, Inc. v. Fradan Mfg. Corp., 2002 UT 94, ¶ 11, 54 P.3d 1177. In reviewing a summary judgment decision pursuant to Rule 56(c) of the Utah Rules of Civil Procedure, we consider whether the trial court correctly concluded that no genuine issue of material fact exists and whether it correctly applied the law. Lovendahl v. Jordan Sch. Dist., 2002 UT 130, ¶ 13, 63 P.3d 705; Utah R. Civ. P. 56(c). A determination of whether the county's valuation of the Landlords' property constitutes double, erroneous, or illegal taxation under Utah Code section 59-2-1321 is a matter of law, which we review for correctness. Furthermore, "[w]e view the facts and all reasonable inferences drawn therefrom in the light most favorable to the non-moving party." Arnold Indus., Inc. v. Love, 2002 UT 133 at ¶ 11, 63 P.3d 721.

ANALYSIS

¶ 5 The issue on appeal is whether the Landlords' assertion that the County Assessor's appraisal practices resulted in double taxation of leasehold improvements states a claim under Utah Code section 59-2-1321, which allows refunds of taxes "paid more than once, or erroneously or illegally collected." The Landlords argue that during the 1990s it was common practice for counties to tax tenants for leasehold improvements under the Tax Commission (commission) rule while also taxing the Landlords for the same improvements by failing to account for their value in the total value of the Landlords' real property. As evidence for its argument, the Landlords point to four Board of Equalization (board) decisions and three commission decisions where the administrative decisionmaker deducted an amount for leasehold improvements when determining the correct valuation of a landlord's property. In all of these cases, the landlord originally filed an appeal with the board under section 59-2-1004.

¶ 6 In addition, the Landlords point to the commission's 1999 rule change, which became effective in 2000 and now requires that "the value of leasehold improvements ... be included in the value of the underlying real property and assessed to the owner of the underlying real property." See Utah Admin. Code R884-24-32P (2000). The commission indicated in its Notice of Proposed Rule that "[t]he intent of this amendment is also to reduce and eliminate the double assessment of leasehold improvements and to increase administrative consistency." Utah Bull., Apr. 15, 1999, at 61.

¶ 7 The Landlords' position, therefore, is that taxes on leasehold improvements were "paid more than once" during the period 1994-1999 and are therefore subject to refund under section 59-2-1321. The Landlords also assert that taxes on the leasehold improvements were "erroneously or illegally collected" because under the Utah Constitution, article XIII, Section 2(l),¹ it is illegal to assess property taxes against a nonowner of the property. The Landlords concede that if they were challenging the county's valuation of their property, they would be required to raise their claim with the board under Utah Code section 59-2-1004. However, the Landlords assert that there is no valuation issue because once it is settled that the county's procedures resulted in taxing leasehold improvements twice, it will only be necessary to subtract the value of the leasehold improvements from the value of the Landlords' real property in order to determine the proper refund amount.

¶ 8 In response, the county argues that section 59-2-1321 is a limited vehicle through which a taxpayer may seek a refund only when the county has collected a tax due to a mistake that is clear or apparent from county records. According to the county, the Landlords' claim is one of erroneous property valuation rather than double, erroneous, or illegal tax collection, and the Landlords therefore should have brought this claim before the board under section 59-2-1004. The county further asserts that its application of the income approach to assess the value of commercial buildings, using what it believes to be the actual lease rates for the property, results in a property valuation that captures only the owner's interest and not the value of leasehold improvements. This is because the tenant would not be paying rent on the improvements that the tenant owns. According to the county, in order for the leasehold improvements to have been taxed twice, the county would have had to add the value of the leasehold improvements, as determined by the Personal Property Division, to the value of the Landlords' real property. Since there is no indication that such a calculation occurred, the county asserts, the Landlords cannot establish double taxation.

¶ 9 At common law, "taxes when paid could not be recovered back unless paid under what amounted to duress or legal compulsion." Neilson v. San Pete County, 40 Utah 560, 571, 123 P. 334, 338 (Utah 1912). A taxpayer who paid a tax voluntarily, in other words, could not receive a refund of the tax under any circumstances, even when the taxing authorities had committed blatant error. Because this rule was "found to be unnecessarily harsh," states enacted statutes to provide for refunds of erroneously or illegally collected taxes. Id. The Utah statute that serves this function is section 59-2-1321, which provides:

Any taxes, interest, and costs paid more than once, or erroneously or illegally collected, may, by order of the county legislative body,² be refunded by the county treasurer, and the portion of the taxes, interest, and costs paid to the state or any taxing entity shall be refunded to the county, and the appropriate officer shall draw a warrant for that amount in favor of the county.

Utah Code Ann. § 59-2-1321 (2000). We think it clear, both from our prior decisions and from the statutory scheme as a whole, that the scope of this statute is relatively narrow.

¶ 10 Section 59-2-1321 must first be understood in relation to another statutory provision, section 59-2-1327, which allows a taxpayer to bring an action in district court to recover a tax or any portion thereof that the taxpayer claims is unlawful and has paid under protest. Utah Code Ann. § 59-2-1327 (2000). The pay-under-protest requirement is in accord with the common law rule; a tax paid under protest is the equivalent of a tax paid under...