A Fab Engineering v. Tax Commission

2019 UT App 87
THE UTAH COURT OF APPEALS
A-F AB ENGINEERING,
Appellant,
v.
PROPERTY T AX DIVISION OF THE
U TAH S TATE T AX C OMMISSION ,
Appellee.
Opinion
No. 20180014-CA
Filed May 23, 2019
Second District Court, Farmington Department
The Honorable David M. Connors
No. 170700397
Lynn Kingston, Attorney for Appellant
Sean D. Reyes, Erin T. Middleton, and Chauntel M.
Lopez, Attorneys for Appellee
JUDGE D AVID N. M ORTENSEN authored this Opinion, in which
JUDGES JILL M. POHLMAN and DIANA H AGEN concurred.
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
1. Like many good quotations, there is some dispute as to this
quotation’s origin. The Yale Book of Quotations attributes the
saying to Christopher Bullock. See Fred R. Shapiro ed., The Yale
Book 	of 	Quotations 	610 	(Yale 	Univ. 	Press 	2006) 	(discussing
Christopher Bullock, The Cobler of Preston (1716) (“Tis impossible
to be sure of anything but Death and Taxes.”)). But since there is
apparently little doubt as to the use of this phrase in a letter from
Benjamin Franklin, we will lay our attribution there. See Letter
(continued…)

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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.
(…continued)
from Benjamin Franklin to Jean-Baptiste Le Roy (Nov. 13, 1789),
in 10 The Writings of Benjamin Franklin 68, 69 (A. Smyth ed., 1907).
2. Because this is an appeal from summary judgment, “we view
the facts and all reasonable inferences drawn therefrom in the
light most favorable to the nonmoving party and recite the facts
accordingly.” Ockey v. Club Jam, 2014 UT App 126, ¶ 2 n.2, 328
P.3d 880 (cleaned up).

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20180014-CA 	3 	2019 UT App 87
¶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
3. A-Fab argued for the first time at oral argument that it did not
regain 	ownership 	rights 	to 	the 	Property 	until 	early 	2016.
However, “[w]e do not address issues raised for the first time
during oral argument,” Porenta v. Porenta, 2017 UT 78, ¶ 33, 416
P.3d 487, and, in any event, this argument is unsupported by the
record and at odds with the position taken by A-Fab below and
in briefing before this court. First, the record demonstrates that
the settlement was executed in October 2014 and the bankruptcy
court approved the settlement in November 2014. Second, A-Fab
stated in its petition for review to the district court, “On October
29, 2014, A-Fab entered into a settlement agreement with the
Trustee of the CW estate, in which the Trustee relinquished his
claim 	on 	the 	Property.” 	Third, 	in 	its 	opposition 	to 	the
Commission’s motion for summary judgment, A-Fab did not
dispute the terms of the settlement agreement and affirmatively
(continued…)

A-Fab Engineering v. Tax Commission
20180014-CA 	4 	2019 UT App 87
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
(…continued)
alleged that upon the agreement’s approval in November 2014, it
“essentially purchased the [P]roperty” back from the bankruptcy
estate. Finally, A-Fab concedes these points in its opening brief
without arguing that it did not actually regain its rights to the
Property until 2016.
4. We note that A-Fab’s 2012 Return includes only the statement
“* NO ADDITIONS * . . . * NO DELETIONS *”—however, it was
undisputed below that the Property was listed on previous
returns for assessment. In other words, it is an undisputed fact
that the Property was included on A-Fab’s 2012 Return.

A-Fab Engineering v. Tax Commission
20180014-CA 	5 	2019 UT App 87
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
5. To timely challenge the Assessments, A-Fab was required to
request a hearing “on or before the later of June 1 or a day within
30 days of the date the notice of assessment is mailed by the
commission.” 	Utah 	Code 	Ann. 	§ 	59-2-1007(1)(a) 	(LexisNexis
2008) (emphasis added).

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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

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20180014-CA 	7 	2019 UT App 87
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
6. The district court noted that because it lacked subject matter
jurisdiction it declined to address A-Fab’s contention that the
Commission lacked the authority to tax the Property.

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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
the 	Assessments. 	See 	Utah 	Code 	Ann. 	§ 	59-2-1007(1)(a)
(LexisNexis 2008) (providing that to appeal an assessment, a
party must request a hearing “on or before the later of June 1 or
within 30 days of the date of the notice of assessment is mailed
by the commission”). A-Fab contends, however, that the district
court 	erred 	by 	concluding 	that 	it 	lacked 	subject 	matter
jurisdiction despite A-Fab’s failure to exhaust its administrative
remedies. Specifically, A-Fab argues that the Assessments are
void because the Commission “did not have jurisdiction to
assess a tax on the Property.” In other words, A-Fab asserts that
the Assessments suffer from “jurisdictional” defects and that its

A-Fab Engineering v. Tax Commission
20180014-CA 	9 	2019 UT App 87
appeal to the district court can therefore “be raised at any time”
and without exhausting administrative remedies. We disagree.
¶16 	Utah’s 	well-established 	body 	of 	relevant 	case 	law
demonstrates that parties contesting whether they are subject to
a tax or assessment must exhaust administrative remedies before
seeking judicial review. Nebeker, 2001 UT 74, ¶ 14; State Tax
Comm’n 	v. 	Iverson, 	782 	P.2d 	519, 	524 	(Utah 	1989); 	Pacific
Intermountain Express Co. v. State Tax Comm’n, 316 P.2d 549, 551–
52 (Utah 1957); State Tax Comm’n v. Spanish Fork, 100 P.2d 575,
577 (Utah 1940); State Tax Comm’n v. J. & W. Auto Service, 66 P.2d
141, 143 (Utah 1937); see also Amax Magnesium Corp. v. Utah State
Tax Comm’n, 796 P.2d 1256, 1257–58 (Utah 1990) (reviewing a
decision 	of 	the 	Commission); 	Action 	TV 	v. 	County 	Board 	of
Equalization of Salt Lake County, 1999 UT App 231, ¶ 1, 986 P.2d
108 (same). As noted, A-Fab does not dispute that it failed to
exhaust in this case—rather, it contends that it fits into an
exception to the general rule.
¶17 	This court has recognized an exception to the rule that a
party must exhaust when “it appears that exhaustion would
serve no useful purpose.” TDM, Inc. v. Tax Comm’n, 2004 UT
App 433, ¶ 4, 103 P.3d 190 (per curiam) (cleaned up). Exhaustion
would serve no useful purpose when the issue being reviewed
presents a “threshold legal issue that cannot be impacted or
avoided by any turn the case may take before the Commission.”
Id. ¶ 6. For example, a controversy raising a purely constitutional
question “with no alternative administrative basis that could
resolve the issue” and no “administrative determination that
could obviate the need to reach the constitutional issue” is not
required to first be presented to the administrative body. Id.
¶18 	However, “[e]xhaustion of administrative remedies is still
required when the administrative proceeding may obviate the
need 	to 	reach 	the 	constitutional 	[or 	other 	legal 	threshold]
question.” Id. ¶ 5. Because “[e]ven if the constitutional [or

A-Fab Engineering v. Tax Commission
20180014-CA 	10 	2019 UT App 87
threshold legal] issue is not avoided entirely, an administrative
proceeding may be useful to better frame the issues before the
court.” Id. “In contrast, where purely legal questions are raised
that 	cannot 	be 	finally 	determined 	in 	an 	administrative
proceeding, the pursuit of the administrative proceeding may
serve no purpose.” Id.
¶19 	A-Fab has not raised a constitutional issue, nor has it
articulated 	a 	“threshold 	legal 	issue” 	that 	would 	render
administrative review a waste. The crux of A-Fab’s challenge is
that the Commission lacked authority to assess and tax the
Property. A-Fab argues that the Assessments are “illegal and
void” because A-Fab is not a mining company, (citing Utah Code
Ann. 	§ 	59-2-201(1)(vi) 	(LexisNexis 	2018)7 	(authorizing 	the
Commission to assess and tax “all machinery used in mining . . .
that [is] primarily used by the owner of a mine . . . regardless of
actual location”)); and that in 2012 and 2013 the Property was
“inventory held for sale in the ordinary course of business and
thus 	was 	exempt 	from 	taxation,” 	(citing 	id. 	§ 	59-2-1114(1)
(providing an exemption for property “held for sale in the
ordinary course of business”)). These arguments fall short of
demonstrating that exhaustion would serve no useful purpose.
¶20 	As the Commission points out, A-Fab could have timely
appealed the Assessments and argued that it was not a mine
owner and that the Property was merely inventory. And if it
had, the Commission might have agreed and there would be no
need for judicial review.
¶21 	Further, the record does not indicate that the Commission
lacked authority “on its face” to assess the property. See State Tax
7. Because the statutory provision in effect at the relevant time
does not differ in any material way from that now in effect, we
cite the current version of the Utah Code.

A-Fab Engineering v. Tax Commission
20180014-CA 	11 	2019 UT App 87
Comm’n v. J. & W. Auto Service, 66 P.2d 141, 143 (Utah 1937).
Whether the Commission lacked authority “on its face” was
visited in J. & W. Auto Service when a taxpayer argued that a
sales tax assessment was void because the Commission “had no
authority to tax interstate sales”—and, therefore, exhausting its
claim with the Commission was not necessary. Id. at 142. Our
supreme court disagreed, id. at 144, stating that even if the
Commission “made an error as to certain [jurisdictional] facts
and upon such error assumed to tax some sales it had no
authority to tax,” the Commission nonetheless has “jurisdiction
over the general subject-matter of taxing sales.” Id. at 143.
Therefore, even if the Commission lacked authority to assess
“some sales which it should really not have taxed,” it does not
follow that such a lack of authority was apparent on its face. See
id.
¶22 	Conversely, 	our 	supreme 	court 	has 	held 	that 	the
Commission 	lacked 	jurisdiction 	on 	its 	face 	when 	a
“constitutional challenge was the sole claim” at issue. Nebeker v.
Utah State Tax Comm’n, 2001 UT 74, ¶ 24, 34 P.3d 180. The court
in Nebeker elaborated that deciding constitutional issues is “not
within the [Commission’s] jurisdiction.” Id.
¶23 	Here, like in J. & W. Auto Service, the Commission did not
lack 	authority 	on 	its 	face 	to 	tax 	the 	Property. 	First, 	the
Commission reasonably believed it had the authority to assess
the Property because A-Fab identified the Property as “subject to
assessment by the State Tax Commission” on its 2012 and 2013
Returns. Second, but for the allegation that the Property was
being held as inventory, the Property would have been subject to
assessment by the Commission because it is mining equipment.
See Utah Code Ann. § 59-2-201(1) (authorizing the Commission
to assess and tax “all machinery used in mining . . . that [is]
primarily used by the owner of a mine . . . regardless of actual
location”).

A-Fab Engineering v. Tax Commission
20180014-CA 	12 	2019 UT App 87
¶24 	Whether the Commission should have taxed the Property
is precisely the type of issue that could have, and should have,
been brought before the Commission. Thus, A-Fab has failed to
demonstrate that it was justified in bypassing the administrative
appeal 	process—and 	therefore, 	the 	district 	court 	properly
dismissed A-Fab’s petition on the grounds that the court lacked
subject matter jurisdiction.
II. Equitable Tolling
¶25 	Alternatively, A-Fab contends that the district court erred
in concluding that equitable tolling did not apply as a matter of
law. A-Fab raises a single argument in support of its contention:
whether it received the Assessments is disputed, and therefore
summary judgment should not have been granted. A-Fab argues
that the Commission mailed the Assessments to its old address;
and consequently A-Fab did not learn about the Assessments
until 2016, when Carbon County mailed the delinquent tax
notice. We find this argument unpersuasive for three reasons.
¶26 	First, as the Commission points out, this disputed fact is
immaterial because the time to appeal is triggered by the mailing
of the assessment, not whether the assessment is received. See
Utah Code Ann. § 59-2-1007(1)(a) (LexisNexis 2008). And even if
this fact was material, A-Fab did not create a genuine dispute of
this fact. The record indicates that A-Fab presented an affidavit
claiming 	“it 	did 	not 	have 	any 	record 	of 	receiving” 	the
Assessments. This affidavit only avers that A-Fab did not have a
record of receipt, not that A-Fab did not indeed receive the
Assessments. 	A-Fab 	has 	declined 	to 	address 	these 	points
anywhere in the record or on appeal, and therefore, A-Fab’s
notice argument fails.
¶27 	Second, 	it 	is 	undisputed 	that 	the 	Assessments 	were
mailed to the address provided by A-Fab itself. The Returns filed
in 2012 and 2013—which were prepared, signed, and dated by
A-Fab—both list A-Fab’s old address. The certified mail receipts

A-Fab Engineering v. Tax Commission
20180014-CA 	13 	2019 UT App 87
for those Returns also list A-Fab’s old address. In other words,
any mistake in the mailing address to which the Assessments
were sent was invited by A-Fab. Accordingly, A-Fab is not
excused from its alleged ignorance.
¶28 	Finally, the record indicates that A-Fab was on notice of
the Assessments. Attached to A-Fab’s 2013 Return is a letter
requesting that the Commission reconsider the value of the
Property. This letter included an independent appraisal of the
Property and urged the Tax Commission to reconsider its 2013
assessment of the value of the Property. Simply put, A-Fab could
not ask for reconsideration of something it was not aware of.
Thus, A-Fab has not demonstrated a dispute of material fact
sufficient to preclude summary judgment, and therefore, the
district court properly granted summary judgment in favor of
the Commission.
CONCLUSION
¶29 	A-Fab 	failed 	to 	timely 	appeal 	the 	Assessments 	and
therefore the district court properly dismissed A-Fab’s petition
for review for lack of subject matter jurisdiction. A-Fab also
failed to demonstrate a dispute of material fact that would
preclude 	summary 	judgment 	on 	the 	issue 	of 	whether 	the
deadline 	to 	appeal 	should 	have 	been 	equitably 	tolled.
Accordingly, we affirm.