Maricopa County v. Superior Court In and For County of Maricopa

Citation823 P.2d 696,170 Ariz. 248
Decision Date31 December 1991
Docket NumberCA-SA,Nos. 1,s. 1
PartiesMARICOPA COUNTY, a body politic; the Arizona Department of Revenue, a department of the State of Arizona; Maricopa County Assessor; Maricopa County Board of Supervisors, et al., Petitioners, v. SUPERIOR COURT of the State of Arizona, in and for the COUNTY OF MARICOPA, the Honorable William T. Moroney, a judge thereof, Respondent Judge, FIRST INTERSTATE BANK OF ARIZONA N.A., Real Party in Interest. 91-156-TX, 1 91-157-TX, 1 91-158-TX and 1 91-159-TX.
CourtCourt of Appeals of Arizona
OPINION

JACOBSON, Presiding Judge.

Maricopa County seeks special action review of the tax court's denial of the county's motion to dismiss four consolidated tax appeals brought by First Interstate Bank of Arizona N.A. (First Interstate), the senior lienholder on the properties. The issue raised is whether a senior lienholder is entitled to appeal from the valuation or classification of real property as a "taxpayer" or "owner" when that lienholder has paid the property taxes under protest and has begun foreclosure proceedings on the property as a result of the default of the record owner. Because we hold that a nonowner lienholder is not entitled under the statutory scheme to bring such appeals, we grant relief by ordering dismissal of these four tax appeals.

FACTS AND PROCEDURAL HISTORY

First Interstate is the senior lienholder on each of the four separate parcels of real property involved in this case. All of the record owners have defaulted on their secured loans and have failed to pay the current property taxes.

The Maricopa County Assessor increased the valuations of each of the parcels for the 1990 tax year. The defaulting obligor-owners failed or refused to challenge the new valuations either administratively or judicially. First Interstate, as the senior lienholder, challenged the valuations, seeking refunds of property taxes that it claimed were erroneously paid as a result of the alleged valuation errors. At the time it filed these four identical tax appeals in superior court, First Interstate had initiated foreclosure proceedings on the properties, but those proceedings were not final. 1

Maricopa County filed motions to dismiss the appeals for failure to state a cause of action, pursuant to Rule 12(b)(6), Arizona Rules of Civil Procedure, arguing that a security holder is not entitled to assert the right of appeal granted under A.R.S. § 42-177, as it is neither a "taxpayer" nor an "owner" of the property. First Interstate responded that because an improper valuation affected the future taxes and interest owing on the property, thereby potentially adversely affecting the security interest of its lien, it possessed a sufficient ownership interest to entitle it to both a statutory and a due process right of judicial review.

After consolidated oral argument in all four cases, the tax court denied Maricopa County's motion to dismiss, reasoning as follows:

Maricopa County relies on language in the authorizing statutes which refers to the property owner and the taxpayer and claims a creditor is none of these. The creditor points out that the owner of the property is not able to pay the debt on the property, and consequently has no interest in whether or not current taxes are paid on the property. The creditor argues that an excessive valuation impairs its security, and, therefore, it should have standing.

The Court is of the view that the legislature did not contemplate a dilemma such as [First Interstate] finds itself in. Therefore, the Court is of the view that the legislature made no attempt when it drafted the relevant statutes to deal with the problem.

The Court is also of the view that the legislature did not intend that property subjected to an excessive valuation by the assessing authority would be left with no one able to test such a valuation. The Court holds, therefore, that, if there has been a default on the debt secured by the property, the defaulted creditor whose security interest constitutes the most senior lien among those defaulted has standing to appeal a property valuation.

IT IS THEREFORE ORDERED denying Maricopa County's Motion to Dismiss.

By this ruling, the Court is not deciding that [First Interstate] is a proper party. In order for [First Interstate] to be a proper party, a default in its debt must have occurred before the time for filing the appeal in Superior Court, and it must have the senior security interest among all defaulted indebtedness.

Cases have consistently held that a property owner for property tax appeal purposes is the person with the right to the beneficial interest in the property. Once a property owner has decided that he no longer has an interest in the property, then the beneficial interest shifts to someone else. In a circumstance as is presently before the Court, the Court holds that the beneficial interest shifts to the senior creditor with a right to foreclose.

(Emphasis added.)

Maricopa County filed these four special actions from the denial of its motions to dismiss, and this court consolidated them under cause no. 1 CA-SA 91-156-TX.

DISCUSSION
A. Special Action Jurisdiction

Although both parties have stipulated that special action jurisdiction is appropriate under these facts, we must undertake an independent evaluation for deviating from the general rule that we will not review, by special action, denials of motions to dismiss. See generally United States v. Superior Court, 144 Ariz. 265, 697 P.2d 658 (1985). Here, the only issue raised is one of first impression, involves a pure issue of law, and is of statewide importance. Maricopa County points out that because only the tax court hears property tax appeals under our statutory scheme, the court is likely to follow its own precedent in other tax cases; thus, a swift appellate decision would provide immediate guidance on an issue that is likely to recur. 2 Furthermore, our determination that the tax court lacks jurisdiction to proceed with these four tax appeals would effectively terminate the litigation and avoid four costly and unnecessary valuation trials. Under these circumstances, we accept special action jurisdiction to consider this denial of the motions to dismiss. See, e.g., Aetna Cas. & Sur. Co. v. Superior Court, 161 Ariz. 437, 778 P.2d 1333 (App.1989) (issue of law that would limit further litigation); City of Phoenix v. Superior Court, 158 Ariz. 214, 762 P.2d 128 (App.1988) (statewide importance).

B. Entitlement of Lienholder to Commence Property Tax Appeals

The parties agree that a right to appeal from a property tax valuation or classification exists only to the extent granted by constitutional or statutory provision. See County of Pima v. State Dep't of Revenue, 114 Ariz. 275, 560 P.2d 793 (1977). The only disputed issue is whether the applicable statutory scheme 3 afforded a right of appeal to senior lienholders.

The specific applicable statutes are the following:

Appeals directly to superior court

Any person dissatisfied with the valuation or classification of his property as determined by the county assessor may, whether or not he files an appeal with the assessor, county board or state board, appeal to the superior court in the manner provided in § 42-177 on or before November 1.

A.R.S. § 42-246 (emphasis added).

Appeal from state board of tax appeal

Any taxpayer dissatisfied with the valuation or classification of his property as reviewed by the state board of tax appeals may appeal to the superior court in the manner provided by § 42-177 and not otherwise....

A.R.S. § 42-176 (emphasis added).

Portions of section 42-177, which supplied the procedural mechanisms for such an appeal, provided:

All taxes levied and assessed against property on which an appeal has been filed by the owner thereof shall be paid under protest prior to the date the tax becomes delinquent....

A.R.S. § 42-177(E) (emphasis added).

The filing and appearance fees ... shall be paid to the clerk of the court by any taxpayer appealing.

A.R.S. § 42-177(F) (emphasis added).

Maricopa County contends that these statutes confer the right to appeal a property tax valuation or classification only on the taxpayer/owner, and not on a lienholder who neither is obligated to pay taxes nor is a record owner. It argues that the ordinary meaning of both A.R.S. § 42-176 and § 42-246 requires at a minimum that the appellant be the owner of the property. See County of Pima, 114 Ariz. at 278, 560 P.2d at 796 (interpreting former A.R.S. § 124.02(D) and § 42-146, the predecessor of A.R.S. § 42-176(A)).

First Interstate contends that an overview of the entire statutory scheme for property tax appeals supports its entitlement to commence a tax appeal. For example, it notes that "any interested person" can be heard by the Department of Revenue on Department-valued property. See A.R.S. §§ 42-143, -144.01, and -144.02. Additionally, county assessors must send annual valuation notices to "[e]very person who is the owner of record or who is the purchaser under a deed of trust or an agreement of sale of property which is by law valued by the assessor for placement on the roll...." A.R.S. § 42-221(D). Similarly, an agent may be designated to act, in relation to property valuation reviews by the county assessor, on behalf of any "person who owns, controls or possesses property valued by the county assessor...." A.R.S. § 42-221(J). First Interstate also offers in support for its broad interpretation the settled line of authority that no specific person is liable for taxes on a particular parcel, because property taxes are owed by the property, not its owner. See ...

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