AILEEN H. CHAR INTEREST v. Maricopa County, CV-03-0348-PR.
| Decision Date | 13 July 2004 |
| Docket Number | No. CV-03-0348-PR.,CV-03-0348-PR. |
| Citation | 208 Ariz. 286,93 P.3d 486 |
| Parties | AILEEN H. CHAR LIFE INTEREST, 629 Investments, a Hawaii Partnership, Remainder Interest; Aimco Properties LP; Aimco/Blossomtree Apts LP; Al-Said Anna F T; Alta Place Property Inc.; Arcadia Villa Apts, LLC; Arizona Grano-Palms Ltd; Camino Apts; Cinnamon Properties; Con Am Realty Investors; Cook Inlet Region of Arizona Inc; Delcastello Irene Trust; EQR Villa Manana Vistas Inc; EQR-Watson GP; Equity Residential Properties; ERP Operating LP; Evans Withycombe Finance PSHP Suite A200; Evans Withycombe Finance Partnership LP; Evans Withycombe Residential; Evans Withycombe Residential LP; Forest Park LLC; G & E Holdings Inc; Greenway Phoenix Association Ltd Partnership; Heatherwood Investors Ltd Partnership; Laurels Saddle Club LP; Magellan Northwood Inc; Mariposa Joint Venture; Moraru, Peter & Elizabeth; Mountain View Casitas LP; NHP Summer LP; Orchard Mesa Associates Ltd Partnership; OTC Apartments LP; Parkside; Parkside Partnership; Paso Robles LLC; Phoenix Courtyards Ltd Partnership; Pine Springs LLC; Professional Property Inv Ltd; Scottsdale Palms Ltd Partnership; Smith Melvin W Jr & Marjorie L TR; Sunset Shadows Inc; Sunshine Land Associates Lp; The Phoenix Apts LLC; The S Development Company; Thomson Thomas J; TPOC Ltd Liability Co; Verde Investment Inc; W.L. Properties LLC; Wellsford Residential Trust; YF Partners Green LP, Plaintiffs-Appellees, v. MARICOPA COUNTY, a political subdivision of the State of Arizona, Defendant-Appellant. Anthem Dunlap Square, LLC, a limited liability company, Plaintiff-Appellee, v. Maricopa County, a political subdivision of the State of Arizona, Defendant-Appellant. Century Properties Fund XIX; Farnam Companies Inc; Feiga/Cimmaron LP; Pacific Corinthian Life Insurance; Ronald L. Herrick Trustee; Sano Corporation; White, Howell and Hall, LLC, Plaintiffs-Appellees, v. Maricopa County, a political subdivision of the State of Arizona, Defendant-Appellant. Aileen H. Char Life Interest, 629 Investments, a Hawaii Partnership, Remainder Interest; Aimco Properties LP; Aimco/Blossomtree Apts LP; Alsaid Anna FT; Alta Place Property Inc; Arcadia Villa Apts. LLC; Arizona Grano-Palms Ltd; Camino Apts; Cinnamon Properties; Con Am Realty Investors; Cook Inlet Region of Arizona Inc; Delcastello Irene Trust; EQR-Watson GP; Equity Residential Properties; ERP Operating LP; Evans Withycombe Finance PSHP Suite A200; Evans Withycombe Finance Partnership L.P.; Evans Withycombe Residential; Evans Withycombe Residential LP; Forest Part LLC; G & E Holdings INC; Glenway Phoenix Assoc LED Partnership; Leatherwood Investors LED Partnership; Laurels Saddle Club LP; Magellan Northwood, Inc; Mariposa Joint Venture; Moraru, Peter & Elizabeth; Mountain View Casitas LP; NHP Summer, L.P.; Orchard Mesa Associated Ltd Partnership; OTC Apartments LP; Parkside; Parkside Partnership; Paso Robles LLC; Phoenix Courtyards Ltd Partnership; Pine Springs, LLC; Professional Property Inv Ltd; Scottsdale Palms Ltd Partnership; Smith Melvin W Jr & Marjorie L Tr; Sunset Shadows, Inc,; Sunshine Land Associates LP; The Phoenix Arts LLC; The S Development Company; Thomson Thomas J; TPOC Ltd Liability CO; Verde Investments, Inc,; W.L. Properties, LLC; Wellsford Residential Trust; YF Partners Green LP, Plaintiffs-Appellants, Cross-Appellees, v. Maricopa County, a political subdivision of the State of Arizona; and the Department of Revenue of the State of Arizona, Defendants-Appellees, Cross-Appellants. |
| Court | Arizona Supreme Court |
Fennemore Craig, P.C., by Paul J. Mooney, Jim L. Wright, and Paul Moore, Phoenix, Attorneys for Aileen H. Char, et al.
Helm & Kyle, LTD, by Roberta S. Livesay and Lisa J. Bowey, Tempe, Special Counsel for Maricopa County.
Terry Goddard, Attorney General, by Frank Boucek, III, Assistant Attorney General, Phoenix, Attorneys for Arizona Department of Revenue.
¶ 1 We granted review to clarify the elements a taxpayer must prove to establish discriminatory property tax valuation in violation of Arizona's Uniformity Clause. Ariz. Const. art. IX, § 1. We exercise jurisdiction pursuant to Article VI, Section 5.3 of the Arizona Constitution, Rule 23 of the Arizona Rules of Civil Appellate Procedure, and Arizona Revised Statutes (A.R.S.) § 12-120.24 (2003).
¶ 2 A group of property owners (the Taxpayers) brought this action against Maricopa County and the Arizona Department of Revenue (ADOR) to recover taxes allegedly collected illegally. The Taxpayers contend that the Maricopa County Assessor valued their apartment properties (Taxpayers' properties) in a discriminatory manner and thus violated the Uniformity Clause of the Arizona Constitution, Article IX, Section 1, and the Equal Protection Clause of the United States Constitution, Amendment XIV, Section 1. The Taxpayers sought a property tax refund under A.R.S. § 42-204.C (Supp.1997), repealed by 1997 Ariz. Sess. Laws, Ch. 150, § 9 (repeal effective 1999).1
¶ 3 For tax years 1996 and 1997, as in previous years, the Maricopa County Assessor implemented a computer program (valuation program) to determine the values of commercial properties, including multi-family residential properties, located in Maricopa County.2 The valuation program calculated each property's value using a computerized cost model. The county assessor, however, programmed the valuation program to "roll over" or "freeze" the value of certain parcels. If a multi-family residential property owner previously had appealed the property's valuation, the valuation program would roll over that property's valuation until one of several actions occurred.3 The valuation of these roll-over properties did not change from 1996 to 1997. If the valuation program did not roll over the value of a multi-family residential parcel, or if the parcel's value was not manually entered into the County's computer system, the assessor retained the value assigned by the valuation program.
¶ 4 The Taxpayers own sixty-two multi-family residential parcels in Maricopa County, all among the group of properties that the assessor valued by applying the cost model used as part of the valuation program. The tax court, comparing the valuations for 1996 and 1997, found that the Taxpayers' properties' valuations increased by an average of 37.6 percent, while the roll-over properties' valuations remained unchanged. The tax court then entered judgment in favor of the Taxpayers and ordered the County to refund to the Taxpayers "the difference between the 1996 property valuations and the 1997 increased property valuations of their properties." The County appealed the tax court's decision.
¶ 5 The court of appeals reversed. In its memorandum decision, the court relied primarily upon its conclusion that the tax court "failed to require evidence of disproportionate valuation with respect to the properties' full cash value."4 Aileen H. Char Life Interest v. Maricopa County, 1 CA-TX 02-0003 & 1 CA-TX 02-0013 at ¶ 11 (Ariz.App. Sept. 2, 2003) (mem.decision).
¶ 6 The Taxpayers petitioned this court for review. We accepted review to clarify the proper standard to apply in determining whether unlawful discrimination has occurred under Arizona's Uniformity Clause. We will not set aside the tax court's findings unless clearly erroneous. Ariz. R. Civ. Proc. 52(a). Whether the tax court applied the proper legal standard, however, presents a question of law reviewed de novo. Transp. Ins. Co. v. Bruining, 186 Ariz. 224, 226, 921 P.2d 24, 26 (1996).
¶ 7 The Arizona Constitution requires that "all taxes shall be uniform upon the same class of property within the territorial limits of the authority levying the tax." Ariz. Const. art. IX, § 1. Arizona's Uniformity Clause provides greater protection for taxpayers than does the Equal Protection Clause of the Fourteenth Amendment and is designed "to ensure `that each taxpayer's property bear the just proportion of the property tax burden.'" Am. West Airlines, Inc. v. Ariz. Dep't of Revenue, 179 Ariz. 528, 530-31, 880 P.2d 1074, 1076-77 (1994) (quoting Merris v. Ada County, 100 Idaho 59, 593 P.2d 394, 398 (1979)).
¶ 8 Four general elements comprise the formula by which Arizona measures a property tax: classification, valuation, assessment ratio, and tax rate. See, e.g., Berge Ford, Inc. v. Maricopa County, 172 Ariz. 483, 485, 838 P.2d 822, 824 (Tax Ct.1992). The first step, classification, involves the exercise of legislative power. Exercising this power, the Arizona legislature has established statutory classes of property. See A.R.S. §§ 42-12001 to - 12010 (Supp.2003). For most property in Arizona, a county assessor carries out the second step, valuation. An assessment ratio, dictated by the legislative classification, is then applied to the valuation. See A.R.S. 42-15001 to -15010 (Supp.2003). This result represents the property's assessed value. Finally, the applicable tax rate is applied to the property's assessed value to produce the amount of taxes due.
¶ 9 In this case, the Taxpayers' challenge involves the second step in the property tax formula, the county assessor's valuation of their properties. The Taxpayers do not argue that the assessor valued their properties in excess of full cash value, placed them in the wrong legislative classification, or applied a discriminatory tax rate or assessment ratio. Instead, the Taxpayers argue that the alleged undervaluation of similarly situated properties resulted in the Taxpayers being forced to bear a disproportionate share of the property tax burden. We use the term "discriminatory valuation" to describe this type of case.
¶ 10 We defined the elements a taxpayer must prove to make out a case of discriminatory valuation in McCluskey v. Sparks, 80 Ariz. 15, 19, 291 P.2d 791, 793 (1955). In McCluskey, without determining whether the particular facts presented amounted to discrimination in violation of the Uniformity Clause, we concluded...
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