Filed 12/29/17; Certified for Partial Pub. 1/25/18 (order attached)




IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                    SECOND APPELLATE DISTRICT

                                 DIVISION ONE


MACHAVIA, INC.,                                           B280735

        Plaintiff and Appellant,                          (Los Angeles County
                                                          Super. Ct. No. BC 523173)
        v.

COUNTY OF LOS ANGELES et al.,

        Defendants and Respondents.


     APPEAL from a judgment of the Superior Court of
Los Angeles County, Suzanne G. Bruguera, Judge. Affirmed.
                ____________________________

     Nemecek & Cole, Jonathan B. Cole, Mark Schaeffer and
Marshall R. Cole for Plaintiff and Appellant.
     Lamb & Kawakami, Michael K. Slattery, Shane W. Tseng;
Mary C. Wickham, County Counsel, and Richard Girgado,
Deputy County Counsel, for Defendants and Respondents.
                 ____________________________
      Plaintiff and appellant Machavia, Inc. challenges the trial
court’s grant of summary judgment in favor of defendants and
respondents the County of Los Angeles (the County) and John
R. Noguez, in his capacity as Los Angeles County Assessor (the
assessor).1 Machavia sued the County for a refund of property
taxes on two aircraft. The trial court granted summary
judgment on the ground that Machavia had failed to exhaust
its administrative remedies prior to filing suit. Machavia now
contends that it was not required to exhaust administrative
remedies because various exceptions applied. We affirm.

            FACTS AND PROCEEDINGS BELOW
       This case arises from the County’s assessment of property
taxes over two small jet aircraft Machavia owned. Machavia
purchased the first of these planes, a Cessna CJ2 (CJ2), in
2003, and sold it in 2006. Machavia purchased the second
aircraft, a Cessna CJ3 (CJ3), in 2007. Machavia is incorporated
in Delaware and claims that its principal place of business is the
U.S. Virgin Islands. According to the County, both aircraft have
been primarily located inside the County when not in use. The
County claims authority to tax the aircraft pursuant to Revenue
and Taxation Code section 5362,2 which provides that “[t]he
assessor of the county in which the aircraft is habitually situated
shall assess the aircraft at its market value.”
       The County began sending annual tax bills for the CJ2 to
Machavia in 2005. Until 2007, these bills were sent to a post
office box in Manhattan Beach where Machavia did not always
receive them. The bills went unpaid, and the County sent
Machavia notices of intent to enforce collection and notices of lien
to the same post office box. Machavia learned about the bills in

      1For the sake of convenience, this opinion refers to
defendants collectively as the County.
      2 Unless otherwise specified, subsequent statutory
references are to the Revenue and Taxation Code.

                                 2
2006, and the company’s president, Douglas Mockett, wrote a
letter to the County claiming that the County lacked authority to
levy taxes on Machavia because the company had moved to the
Virgin Islands.
       County officials met with Mockett in 2007 to discuss the
tax bills. At the meeting, Mockett told the County that Machavia
had sold the CJ2 prior to 2007, and the County officials agreed
to cancel the tax bill for 2007. According to the County, its
officials reviewed Machavia’s flight logs and agreed to reduce the
tax bills for 2005 and 2006 according to the time the CJ2 spent
in the Virgin Islands. The County official who led the meeting
stated that he told Mockett that, in order to preserve its rights
with respect to future tax disputes, Machavia would need to file
appeals with the County’s Assessment Appeals Board (AAB).
Machavia claims that Mockett left the meeting with the
understanding that Machavia owed no taxes for 2005 and 2006
because of its foreign status, and that the County never informed
him about the need to file further appeals with the AAB.
       After the meeting, the County sent new tax bills for the
years 2005 and 2006 to Machavia’s address in the Virgin Islands.
These bills reduced the taxes Machavia owed from the previously
assessed amounts, and they allowed for payment without penalty
until the end of 2008.
       In 2008, the County sent Machavia a tax bill for the CJ3,
which Machavia had purchased in 2007. Machavia did not
pay the bill, and the County imposed a lien on the CJ3. In
April 2009, Mockett wrote to the County that Machavia had
received the bill, but that “we have some issues with the bill”
and requested that the County remove its lien. The County
responded in July 2009 with a letter stating that, in the 2007
meeting, the County had “reduced the original assessments for
2005 and 2006 to allow for the apportionment of the time your
aircraft actually spent in the U.S. Virgin Islands.” The letter also




                                 3
reiterated that, in order to challenge the County’s assessments,
Machavia would need to file an appeal with the AAB.
      In 2008, the County sent Machavia a notice of audit for the
years 2005 through 2008. In 2009, the County sent the result of
its audit, which stated that “the result is a ‘No Deficiency’ for all
the years audited.” An attached ledger listed “ND” for all
columns, which Machavia interpreted to mean that it owed no
further taxes for the years 2005 through 2008.
      Also in 2009, the County sent Machavia a tax bill for 2009
for the CJ3. Mockett replied with a letter stating that Machavia
believed it did not owe taxes, and referring to the “No Deficiency”
finding regarding the audit. The County replied, stating that
the 2009 tax bill was correct, and directing Machavia to file an
appeal with the AAB by November 30, 2009, if it disagreed
with the assessment. The letter also explained that “[t]he ‘No
Deficiency’ finding merely indicated that the initial assessment
was correct and no additional escape assessment will be made for
the year audited.”
      In January 2010, Machavia filed an appeal with the
AAB challenging the 2009 assessment. The assessor requested
two continuances, delaying the hearing until August 2010.
Machavia did not attend the hearing, claiming that it did not
receive notice of the continuance. The AAB decided the appeal in
favor of the County on the basis of Machavia’s non-appearance
and denied Machavia’s request for rehearing.
      The County sent another annual tax bill to Machavia
for 2010, and Machavia replied with another letter claiming
on the same bases as before that it did not owe any tax. In
October 2012, when it discovered that the County had placed a
lien on the CJ3, Machavia filed new appeals with the AAB. In
November 2013, the AAB denied the appeals as untimely.
      In response, Machavia filed a petition for a writ of
mandate in the trial court. Machavia and the AAB entered into a
stipulation to settle, under which the AAB agreed to hold a new


                                  4
hearing to address the validity of Machavia’s appeal for the
challenged years. After holding a hearing in 2015, the AAB again
denied Machavia’s petition on the ground that it was untimely.
       Machavia filed a complaint in the trial court in 2013.
In its operative complaint, Machavia sought a refund of the
property taxes, which it ultimately paid under protest. In
addition, Machavia alleges that it was deprived of due process
because it did not have a meaningful opportunity to have its
case heard. Next, Machavia contends that the assessor erred
in its assessment of the aircraft. Finally, Machavia sought
declaratory judgment, contending that the County is equitably
estopped from collecting taxes, penalties, and interest. The
County moved for summary judgment, which the trial court
granted on the ground that Machavia had failed to prove that it
had exhausted its administrative remedies.

                         DISCUSSION
      Machavia raises several arguments in support of its
contention that the trial court erred by granting summary
judgment in favor of the County. First, Machavia contends that
it exhausted its administrative remedies by filing appeals with
the AAB. Next, Machavia contends in the alternative that it was
unnecessary for it to exhaust its administrative remedies because
various exceptions applied. Finally, Machavia contends that the
County is equitably estopped from relying on failure to exhaust
administrative remedies because the County’s conduct induced
Machavia not to appeal various tax bills through the ordinary
administrative channels. We reject these arguments and affirm
the judgment of the trial court.3



      3  Machavia also contends that the trial court abused its
discretion by denying Machavia’s motion for a new trial. This
claim fails for the same reasons as Machavia’s challenges to the
trial court’s grant of summary judgment.

                                5
      I. Standard of Review
      Summary judgment is proper when all the papers
submitted on the motion show there are no triable issues of
material fact and the moving party is entitled to judgment
as a matter of law. (Aguilar v. Atlantic Richfield Co. (2001)
25 Cal.4th 826, 843; Code Civ. Proc., § 437c, subd. (c).)
A defendant moving for summary judgment bears an initial
burden of showing that one or more elements of the plaintiff’s
cause of action cannot be established or that there is a complete
defense to that cause of action. (Aguilar v. Atlantic Richfield Co.,
supra, 25 Cal.4th at p. 849.) If the defendant meets this burden,
the plaintiff has the burden to demonstrate one or more triable
issues of material fact as to the cause of action or defense. (Ibid.)
A triable issue of material fact exists “if, and only if, the evidence
would allow a reasonable trier of fact to find the underlying fact
in favor of the party opposing the motion in accordance with the
applicable standard of proof.” (Id. at p. 850.)
      In reviewing summary judgment, “[w]e review the trial
court’s decision de novo, liberally construing the evidence in
support of the party opposing summary judgment and resolving
doubts concerning the evidence in favor of that party.” (State of
California v. Allstate Ins. Co. (2009) 45 Cal.4th 1008, 1017-1018.)

      II.   Requirement to Exhaust Administrative
            Remedies in Property Tax Disputes
       Our Supreme Court recently explained that “[a]s a general
rule, a party must exhaust available administrative remedies
as a prerequisite to seeking relief in the courts. ‘In the property
tax context, application of the exhaustion principle means that a
taxpayer ordinarily may not file or pursue a court action for a tax
refund without first applying to the local board of equalization
for assessment reduction under . . . section 1603 and filing an
administrative tax refund claim under section 5097.’ ” (Williams
& Fickett v. County of Fresno (2017) 2 Cal.5th 1258, 1264.)


                                  6
Under the rule of exhaustion, “ ‘an administrative remedy is
exhausted only upon “termination of all available, nonduplicative
administrative review procedures.” ’ ” (Id. at p. 1267.)
       Even if the rule of exhaustion of administrative remedies
is satisfied, judicial review of decisions of the AAB is limited
and deferential. As the court explained in Norby Lumber Co. v.
County of Madera (1988) 202 Cal.App.3d 1352, 1362, “[t]he
assessment of property for the purpose of taxation is a function
of the executive branch of the government and the judiciary
has no power or jurisdiction to inquire as to the actual value
of property to determine whether or not it has been properly
assessed.” In any challenge to the actions of a board of
equalization’s determination, “[t]he trial court may overturn
the board’s decision only when no substantial evidence supports
it, in which case the actions of the board are deemed so arbitrary
as to constitute a deprivation of property without due process.”
(Ibid.) By the same logic, the courts must defer to the board of
equalization on questions of apportionment—in other words, in
determining what portion of a property is subject to taxation by
a county. (See Ice Capades, Inc. v. County of Los Angeles (1976)
56 Cal.App.3d 745, 755 [“The development of a formula of
apportionment is primarily the task of the authority imposing
the tax.”].)

      III.   Machavia Failed to Exhaust Its Administrative
             Remedies
       In Steinhart v. County of Los Angeles (2010) 47 Cal.4th
1298, our Supreme Court explained in detail the three-step
process a party must follow in order to challenge an assessment
in the trial court: “The first step is the filing of an application for
assessment reduction under section 1603, subdivision (a), which
provides: ‘A reduction in an assessment on the local roll shall not
be made unless the party affected or his or her agent makes and
files with the county board [of equalization] a verified, written
application showing the facts claimed to require the reduction


                                   7
and the applicant’s opinion of the full value of the property.’
The second step, which occurs after payment of the tax, is the
filing of an administrative refund claim under section 5097,
subdivision (a), which provides in relevant part that ‘[n]o order
for a refund . . . shall be made except on’ the timely filing
of a verified claim for refund. By statute, an application for
assessment reduction filed under section 1603 ‘also constitute[s]
a sufficient claim for refund under [section 5097] if’ it states that
it ‘is intended to constitute a claim for refund. If [it] does not so
state [the applicant], may thereafter and within the [specified
time] period . . . file a separate claim for refund of taxes extended
on the assessment which the applicant applied to have reduced
pursuant to [s]ection 1603 . . . .’ (§ 5097, subd. (b).) The third
and final step in the process is the filing of an action in superior
court pursuant to section 5140, which provides that a person
who paid the property tax may bring an action in superior
court against a county or a city to recover a tax which the board
of supervisors of the county or the city council of the city
has refused to refund on a claim filed pursuant to Article 1
(commencing with Section 5096) of this chapter.’ A court action
may not ‘be commenced or maintained . . . unless a claim for
refund has first been filed pursuant to Article 1 (commencing
with Section 5096).’ (§ 5142, subd. (a).)” (Id. at pp. 1307-1308.)
        To exhaust administrative remedies, a taxpayer must
challenge an assessment within established deadlines: “the
taxpayer must apply for a reduction to the county assessment
appeals board or county board of equalization during a specified
time period, generally in the same year in which the assessment
is made.” (Ellis v. County of Calaveras (2016) 245 Cal.App.4th
64, 70.) “The timely filing of a proper claim for refund is a
statutory prerequisite to a refund action.” (Plaza Hollister Ltd.
Partnership v. County of San Benito (1999) 72 Cal.App.4th 1, 34.)
        In this case, Machavia acknowledges that it did not
challenge the assessments for the years 2005, 2006, 2008,


                                  8
and 2010 until 2012. Machavia filed an appeal of the 2009
assessment in January 2010. None of these appeals were timely
filed. (See §§ 80, 1603.) By failing to file timely challenges with
the AAB, Machavia failed to exhaust its administrative remedies.
       Machavia contends that it exhausted its administrative
remedies because the AAB reached a stipulation with Machavia
to re-hear Machavia’s 2012 appeal, then once again rejected
the appeal as untimely. The stipulation and the AAB’s
decisions rejecting the appeal are not part of the record. We
may not conclude on this record that the AAB erred in rejecting
Machavia’s appeal as untimely, either in its initial decision or
after agreeing to rehear the case.

      IV.   Exceptions to the Exhaustion Requirement
       Machavia contends that it was not required to exhaust its
administrative remedies before filing a claim in the trial court
for three reasons. First, Machavia contends that the County’s
assessments were void because they failed to give notice to
Machavia. Second, Machavia contends that its challenge did not
involve questions of valuation. Finally, Machavia contends that
the County failed to follow its own procedures by refusing to
apportion Machavia’s tax according to the time the aircraft spent
outside California. We find no merit in any of these arguments.4

            A.    Notice to Machavia
      Machavia contends that a taxpayer need not exhaust
administrative remedies when a county fails to follow statutory
procedures in assessing a tax, including by failing to give the
taxpayer notice of the tax. Even if we assume for the sake of


      4  Because it is clear that Machavia’s alleged exceptions
to the doctrine of exhaustion of administrative remedies do not
apply, we reject Machavia’s argument that the County failed
to meet its burden by failing to discuss these exceptions in its
motion for summary judgment.


                                 9
argument that Machavia’s position is correct, it does not excuse
Machavia from exhausting its administrative remedies. At most,
the County’s notice to Machavia was defective only with respect
to the 2005, 2006, and 2007 bills, which the County sent to a
post office box in Manhattan Beach that Machavia asserts was
incorrect.5 When Machavia found out about the tax bills, it wrote
to the County, and the County agreed to a meeting in 2007.
At that meeting, the County cancelled the 2007 tax bill because
Machavia did not own the aircraft in question in 2007, and sent
new reduced tax bills for the years 2005 and 2006 to Machavia’s
Virgin Islands address. Those bills allowed for payment
without penalty until December 31, 2008. The County sent its
subsequent bills to the Virgin Islands address, and Machavia
acknowledges having received them. By sending new bills
without penalty, the County cured any defect in its notice to
Machavia. Instead of challenging these new bills immediately,
Machavia waited four years before appealing these assessments
with the AAB. Thus, any defect in the County’s initial notice
regarding these bills did not prejudice Machavia.

            B.    Unconstitutional Application of Tax
      Machavia contends that it did not need to exhaust its
administrative remedies because its challenge was not based
on the valuation of the property, but rather was based on the
question of whether the County had the authority to tax its
aircraft at all. Machavia notes that in a letter to Machavia,
a County appraiser justified imposing a tax because “ ‘you
have a business, a home and a hangar here in Los Angeles
County and your aircraft spends the majority of its time here.’ ”
Machavia also notes that in a deposition, a County official stated

      5  The County denies that it provided inadequate notice to
Machavia by mailing the tax bills to the post office box, claiming
that this was the most recent address the County had on file at
the time. We need not address this point because we hold that
Machavia is not entitled to relief in any case.

                                10
that it takes the owner’s domicile into account in determining
where an aircraft’s primary situs is for purposes of property
taxes.
       But in challenging the County’s method of determining
what percentage of the value of the aircraft, if any, was subject to
taxation in California, Machavia is essentially raising a question
of apportionment. These issues are questions of fact in which we
defer to the judgment of the AAB, just as we do for determining
valuation. (See Ice Capades, Inc. v. County of Los Angeles, supra,
56 Cal.App.3d at p. 755.) We cannot conclude that the County is
unreasonable in taking into account, when determining whether
an aircraft is primarily located in California, the domicile of the
owner of a company that owns the aircraft. Machavia’s attempt
to reframe this matter as a constitutional issue does not
transform the dispute into a question of constitutionality in
which it need not exhaust its administrative remedies.

            C.    Refusal to Follow the County’s Own
                  Procedures
      Machavia contends that it was not required to exhaust its
administrative remedies because the County failed to follow
its own procedures and apportion the tax bills according to
the time Machavia’s aircraft spent in California as opposed to
other locations. In support of its position, Machavia cites two
references in the County’s papers supporting the motion for
summary judgment to an “unapportioned tax bill.” These
two statements are insufficient to support an inference
that the County was unwilling to follow its own procedures in
apportioning Machavia’s tax liability. Instead, they merely note
that the bill in question did not take the apportionment process
into account. In the same document, a County official made clear
that the County was willing to apportion the tax liability of the
aircraft. The official stated that “the Assessor’s Office agreed
to reduce the aircraft’s assessment for 2005 and 2006 on an
apportioned basis to remove from the assessment the portion of


                                 11
the value attributable to the time that the aircraft was actually
situated in the U.S. Virgin Islands.”

      V.    Equitable Estoppel
       Machavia contends that because the County misled it
and failed to provide proper notice of tax bills, the County is
equitably estopped from relying on Machavia’s failure to
exhaust administrative remedies. We are not persuaded.
       “Generally speaking, the doctrine of equitable estoppel
is a rule of fundamental fairness whereby a party is precluded
from benefiting from his inconsistent conduct which has induced
reliance to the detriment of another.” (In re Marriage of Valle
(1975) 53 Cal.App.3d 837, 840.) “Application of equitable
estoppel against the assertion of a limitations defense typically
arises through some misleading affirmative conduct on the part
of a defendant.” (Spray, Gould & Bowers v. Associated Internat.
Ins. Co. (1999) 71 Cal.App.4th 1260, 1268.) This can mean
that the defendant “engaged in some calculated conduct or
made some representation or concealed facts which induced the
plaintiff not to file a claim or bring an action within the statutory
time.” (Ortega v. Pajaro Valley Unified School Dist. (1998)
64 Cal.App.4th 1023, 1047.)
       Machavia points to several instances in which it claims
that the County either failed to notify Machavia of tax bills or
misled it regarding the need to pay. But none of these instances
show that the County engaged in “misleading affirmative
conduct” that would justify the application of equitable estoppel.
(Spray, Gould & Bowers v. Associated Internat. Ins. Co., supra,
71 Cal.App.4th at p. 1268.) First, Machavia notes that the
tax bills for 2005 and 2006 were sent to the Manhattan Beach
post office box, rather than Machavia’s address in the Virgin
Islands. But as we have already seen, if this was error, the
County corrected it by meeting with Machavia in 2007 and
issuing new bills for 2005 and 2006 with no interest and
penalties. Machavia contends that, at the 2007 meeting, the

                                 12
County misled it about the requirement to pay taxes for the years
2005 and 2006. But after the meeting took place, the County
sent Machavia—at its Virgin Islands address—new bills for
those two years. Even if County officials affirmatively misled
Machavia during the 2007 meeting, the new bills should have
been sufficient to disabuse Machavia of its misunderstandings,
or at least to put the company on notice to enquire further.6
       Machavia’s allegations regarding subsequent years do
not suggest affirmative misconduct by the County, but rather a
failure by Machavia to understand the accurate information the
County was providing. Thus, Machavia claims that it understood
the 2008 audit and finding of “ ‘No Deficiency’ ” to mean that the
County had cancelled its bills. But when Machavia raised this
point with the County, a County official wrote back and explained
that a finding of no deficiency meant merely that the County had
determined its previous assessment was correct. Furthermore,
on more than one occasion, County officials told Machavia that
the proper means to challenge an assessment was through an
appeal to the AAB. That Machavia disregarded or misunderstood
the County’s communications does not create a triable question of
material fact as to whether the County affirmatively misled
Machavia.
       This is not a case in which Machavia was blindsided
by misrepresentations or misstatements by County officials.
Instead, Machavia chose to ignore numerous accurate statements
from the County regarding its tax liabilities, and acted only
after—in some cases, years after—the relevant deadlines for
filing challenges had passed. Machavia has failed to show
that equitable estoppel should bar the County from asserting


      6   Machavia claims that when the company received
the corrected tax bills, “it believed that these bills had been
cancelled.” This is not a reasonable interpretation of a newly
issued tax bill received after a meeting regarding the taxpayer’s
liability for that tax year.

                                13
Machavia’s failure to exhaust administrative remedies as a
defense.

                        DISPOSITION
     The trial court’s order is affirmed. Respondents are
awarded their costs on appeal.




                                         ROTHSCHILD, P. J.
We concur:



                 CHANEY, J.




                 JOHNSON, J.




                               14
Filed 1/25/18
            CERTIFIED FOR PARTIAL PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                SECOND APPELLATE DISTRICT

                          DIVISION ONE


MACHAVIA, INC.,                             B280735

       Plaintiff and Appellant,             (Los Angeles County
                                            Super. Ct. No. BC 523173)
       v.
                                            ORDER MODIFYING THE
COUNTY OF LOS ANGELES et al.,               OPINION TO BE CERTIFIED
                                            FOR PARTIAL PUBLICATION
       Defendants and Respondents.




THE COURT:
       The opinion in the above-entitled matter filed on
December 29, 2017, was not certified for publication in the
Official Reports. For good cause, it now appears that the opinion
should be published with the exception of parts I, II, III, and IV
of the Discussion and it is so ordered.



____________________________________________________________
ROTHSCHILD, P. J.         CHANEY, J.          JOHNSON, J.
