Bromley Group, Ltd. v. Arizona Dept. of Revenue
| Decision Date | 23 July 1991 |
| Docket Number | No. 1,CA-TX,1 |
| Citation | 826 P.2d 1158,170 Ariz. 532 |
| Parties | BROMLEY GROUP, LTD., a California limited partnership, Plaintiff-Appellee, Cross-Appellant, v. ARIZONA DEPARTMENT OF REVENUE, Defendant-Appellant, Cross-Appellee. 90-031. |
| Court | Arizona Court of Appeals |
Fennemore Craig by Timothy Berg, Paul Mooney, J. Scott Askew, Phoenix, for plaintiff-appellee, cross-appellant.
Robert K. Corbin, Former Arizona Atty. Gen. by Frank L. Migray, Former Asst. Atty. Gen., and Grant Woods, Arizona Atty. Gen. by Anthony B. Ching, Sol. Gen., Paula S. Bickett, Steven R. Partridge, Asst. Attys. Gen., Phoenix, for defendant-appellant, cross appellee.
Richard M. Romley, Maricopa County Atty. by Rachelle Z. Leibsohn, Deputy County Atty., Phoenix, for amicus curiae Maricopa County.
Stephen D. Neely, Pima County Atty. by Peter E. Pearman, Deputy County Atty., Tucson, for amicus curiae Pima County.
Bromley Group, Ltd. (taxpayer) brought a property tax valuation appeal in the tax court and prevailed on the merits. The Arizona Department of Revenue (Department) appeals from the portion of the judgment that awarded the taxpayer its attorney's fees, expert witness fees and taxable and nontaxable costs pursuant to former A.R.S. § 12-348(A)(2). The taxpayer cross-appeals from the tax court's determination to limit its award of attorney's fees against the Department to $10,000. The appeal and cross-appeal present the following issues:
(1) whether the tax court erred in determining that former A.R.S. § 12-348(A)(2) entitled the taxpayer to an award of attorney's fees against the Department because the Department did not qualify as a "nominal party" within the exception provided by former A.R.S. § 12-348(G)(4); and
(2) whether the tax court erred in limiting the taxpayer's award of attorney's fees against the Department to $10,000 pursuant to former A.R.S. § 12-348(D)(3).
The material facts are undisputed. The taxpayer owned four parcels of real property in Maricopa County. On November 1, 1989, the taxpayer filed an action in the Arizona Tax Court pursuant to A.R.S. §§ 42-176 and 42-177 to contest the full cash and limited valuations set by the Maricopa County Assessor for the four parcels for 1989. Pursuant to A.R.S. § 42-177(C), the taxpayer's "Notice of Appeal of Property Valuation" named both Maricopa County and the Arizona Department of Revenue as defendants.
In response to the taxpayer's notice of appeal, the Attorney General's Office filed on behalf of the Department a pleading entitled "Notice of Appearance" stating:
COMES NOW the Attorney General and enters his appearance as attorney for Defendant, ARIZONA DEPARTMENT OF REVENUE, in the above entitled action.
The defendant, Arizona Department of Revenue, at this time advises the Plaintiff(s) of its nominal party status in this litigation.
Defendant Maricopa County, represented by the Maricopa County Attorney's Office, responded to the taxpayer's notice of appeal on the merits. The county's answer included a cross-claim against the Department alleging that the county had chosen to defend the action because its board of supervisors had decided it was in the public interest to do so. The county further alleged that the Department also had a duty to defend and that its assertion that it was a nominal party was incorrect. The county alleged that it would have no obligation to pay attorney's fees in the event the taxpayer prevailed but that the Department would be obligated to reimburse the county in the event attorney's fees were awarded against it.
Maricopa County conducted the defense of the property tax appeal. Attachments to the parties' joint pretrial statement indicated that the Department intended to call no witnesses and introduce no exhibits. The deputy county attorney representing Maricopa County signed the joint pretrial statement on behalf of the assistant attorney general who represented the Department.
On April 20, 1990, the tax court issued a minute entry order establishing full cash values and limited values for the taxpayer's parcels lower than those originally fixed by the Maricopa County Assessor. The tax court also concluded that the taxpayer was entitled to an award of attorney's fees and expert witness fees against the State of Arizona pursuant to A.R.S. § 12-348(A)(2). 1
The Department filed an objection to the award of attorney's fees and expert witness fees and a motion for reconsideration or new trial on the applicability of A.R.S. § 12-348. The Department contended it was immune from an award of attorney's fees pursuant to A.R.S. § 12-348(G)(4), asserting as follows:
This case involved the valuation of commercial property. The assessment of commercial property is the primary responsibility of the County Assessor. Consequently, in order to avoid a duplication of effort and to conserve public resources, the Department of Revenue did not actively participate in the litigation of this case, and maintained a nominal party status.
The trial on the valuation of the property in question was scheduled for April 4 and 5, 1990. The Department was notified of the trial date, but did not appear since it was not going to be actively involved in the litigation of this locally (County Assessor) assessed property. Consequently, the Department has no objection to the County and the Taxpayer resolving the valuation question through stipulations. The Department does strenuously object to having expert witness fees and attorney's fees awarded solely against it since the nominal party exception to A.R.S. § 12-348 bars an attorney fee award against the Department.
Pursuant to the tax court's award, the taxpayer applied for $14,360 in attorney's fees and $4,950 in expert witness fees in addition to taxable and nontaxable costs. The Department again objected. It argued that the attorney's fees award claimed by the taxpayer should be reduced because A.R.S. § 12-348(D)(2) precluded reimbursement at a rate in excess of $75 per hour. 2
By minute entry the tax court issued its ruling on attorney's fees as follows:
THE COURT FINDS that the Arizona Department of Revenue was not merely a nominal party to this case for purposes of A.R.S. § 12-348(G)(4).
THE COURT FURTHER FINDS that an attorneys' fee higher than $75 per hour for Plaintiff's counsel is justified by the increase in the cost of living which has occurred since that limit was adopted by the Legislature.
THE COURT FURTHER FINDS that Plaintiff is entitled to recover attorneys' fees against the Arizona Department of Revenue in the amount of $10,000, the maximum amount permitted by A.R.S. § 12-348(D)(3). Mr. Mooney's fees are allowed in the amount of $5,600 and Mr. Askew's fees are allowed in the amount of $4,400.
....
Defendant Department of Revenue ("DOR")'s objections with respect to attorneys' fees are well taken only to the extent they call the Court's attention to the limitation on attorneys' fee awards contained in A.R.S. § 12-348(D)(3). The Court has taken note of that section, and limited the fees prayed for to $10,000. In doing so, it has allowed Plaintiff's senior attorney to be compensated at the rate of $100 per hour based on the Court's belief that the cost of living has so increased since the adoption of the $75 per hour limitation that allowance of fees at a higher rate is justified. The Court has also been guided by the Legislature's recent enactment of legislation increasing the limitation on the hourly rate allowable.
The more difficult question is whether the DOR was merely a nominal party to this proceeding. The Court concluded that it was not. At oral argument, it was made clear that the DOR through the Attorney General's office, was involved in this litigation in numerous ways, even though the first time an Assistant Attorney General appeared in court appears to have been to contest the allowance of fees against the Department.
The County Attorney signed a joint pretrial statement on behalf of the Attorney General and the DOR, after consulting with the Attorney General's office and obtaining its consent. The County Attorney also consulted with the Attorney General's office at other stages of the litigation, leading the Court to infer that the County Attorney was not free to act without the Attorney General's approval on behalf of the DOR. Similarly, the litigation could not be settled or compromised without the agreement of the DOR and, presumably, the Attorney General's office as the Department's counsel.
The DOR's policies, procedure, veto power, and active participation through counsel pervade the process of tax appeals. The Court cannot conclude that the DOR is merely a nominal party, where, as here, its representative at the Attorney General's office appears to be intimately involved in the litigation. The Department cannot use the County Attorney to act as its stalking horse, have its counsel consulted in person and by telephone with respect to the conduct of the litigation, and then seek to avoid attorneys' fees based on its claim to "nominal party" status.
The tax court entered formal judgment in accordance with its rulings. On the sixteenth day following entry of the judgment, the Department filed a "motion to clarify minute entry," which disputed the court's statements concerning the degree of the Department's involvement in the litigation. The motion attached an affidavit from the deputy county attorney who had represented Maricopa County who stated in part:
2. That I contacted Assistant Attorney General Frank Migray to ask whether he would authorize me to sign a pretrial statement on his behalf. The pretrial statement indicated that the Department of Revenue would be calling no witnesses, and would be introducing no evidence.
3. That the request was made in order save time by not having to send the document to Mr. Migray for his...
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