E.C. Garcia and Co., Inc. v. Arizona State Dept. of Revenue

• Decision Date: 12 November 1993
• Docket Number: Nos. 1,CA-TX,CA-CV,s. 1
• Citation: 875 P.2d 169,178 Ariz. 510
• Parties: E.C. GARCIA AND COMPANY, INC., an Arizona corporation; FRA/Wescon I Limited Partnership, an Arizona limited partnership; John H. Miller Company, Inc., an Arizona corporation; R.C. Samuel & Company, Inc., a Washington corporation; John Does and XYZ Corporations, Plaintiffs-Appellants, v. ARIZONA STATE DEPARTMENT OF REVENUE; Pima County; Pima County Assessor; Pima County Board of Supervisors; Pima County Treasurer, Defendants-Appellees. 90-0024, 289-0250.
• Court: Arizona Court of Appeals

Page 169

875 P.2d 169

178 Ariz. 510

E.C. GARCIA AND COMPANY, INC., an Arizona corporation; FRA/Wescon I Limited Partnership, an Arizona limited partnership; John H. Miller Company, Inc., an Arizona corporation; R.C. Samuel & Company, Inc., a Washington corporation; John Does and XYZ Corporations, Plaintiffs-Appellants, v. ARIZONA STATE DEPARTMENT OF REVENUE; Pima County; Pima County Assessor; Pima County Board of Supervisors; Pima County Treasurer, Defendants-Appellees.

Nos. 1 CA-TX 90-0024, 2 CA-CV 89-0250.

Court of Appeals of Arizona Division 1, Department T.

Nov. 12, 1993.

Reconsideration Denied Nov. 12, 1993.

Review and Cross-Petition for

Review Denied June 21, 1994. ^*

Fennemore Craig by Paul J. Mooney, Jim L. Wright and Douglas C. Northup, Phoenix, for plaintiffs-appellants

Grant Woods, Atty. Gen. by Michael F. Kempner, Asst. Atty. Gen., Phoenix, for defendant-appellee Dept. of Revenue.

Stephen D. Neely, Pima Co. Atty. by Peter E. Pearman, Deputy Co. Atty., Tucson, for appellees Pima County.

OPINION

KLEINSCHMIDT, Judge.

These consolidated appeals concern attempts by Taxpayers to recover an overpayment of taxes for 1987 on four contiguous parcels of land in Pima County. The Taxpayers' appeal in Pima County Superior Court Cause No. 246360 challenges the superior court's dismissal of their 1987 property tax appeal because of their failure to serve the defendant, Pima County. Their appeal in Arizona Tax Court Cause No. TX 90-00031 challenges the tax court's refusal to accept jurisdiction of their subsequent special action seeking a refund of the same 1987 property taxes pursuant to Ariz.Rev.Stat.Ann. ("A.R.S.") section 11-506, the statute which permits refunds for a tax paid under an erroneous assessment.

In October of 1991, we issued our Opinion affirming the judgments of the Superior Court of Pima County and of the Arizona Tax Court in this case. In that part of the decision in which we addressed the refusal of the tax court to take jurisdiction of the special action, we rejected the Taxpayers' argument that there had been an erroneous assessment within the meaning of A.R.S. section 11-506. Our decision turned on an amendment to that statute which became law in 1991, after the Taxpayers had begun their action for a refund.

After we filed our Opinion, the Taxpayers filed a Motion for Reconsideration. We ordered additional briefing on the subject of the retroactive application of the amendment to A.R.S. section 11-506. We heard oral argument on the Motion for Reconsideration, and we requested supplemental briefing on the issue of the retroactivity of the statute. Following the supplemental briefing, we again heard oral argument, and the Motion for Reconsideration was taken under advisement. We now grant the Motion for Reconsideration and vacate our Opinion filed on October 22, 1991. We affirm the judgment of the superior court in Pima County Cause No. 246360 and reverse the judgment of the tax court in Cause No. TX 90-00031.

FACTS AND PROCEDURAL HISTORY

For several years before 1986, the Taxpayers' real property was used for agriculture and was valued as such for tax purposes. In 1987, however, although the property was still used for agriculture, the Pima County Assessor valued it as non-agricultural property, which increased the amount of the tax for that year.

The Taxpayers filed a timely tax appeal in the Superior Court of Pima County pursuant to A.R.S. sections 42-177 and 42-246, challenging the valuation of their property for 1987. Although both the Arizona Department of Revenue and Pima County were named as defendants as required by A.R.S section 42-177(C), the record in the Pima County action contains no affidavit of service of process as required by A.R.S. section 42-177(D).

The Department of Revenue, which had been served with process, moved to dismiss the tax appeal. It argued that the superior court lacked subject-matter jurisdiction because (1) the Taxpayers failed to serve Pima County as required by the statute, and (2) the Taxpayers failed to pay the full amount of the second installment of the 1987 tax bill before it became delinquent on May 1, 1988. The Department further contended that the action had abated pursuant to Rule 6(f), Arizona Rules of Civil Procedure, because the Taxpayers had failed to serve Pima County within one year of the filing of the complaint.

In August of 1989, the Pima County Superior Court granted the Motion to Dismiss "for failure to join and serve an indispensable party." The Taxpayers appealed the Pima County Superior Court's ruling to Division Two of this court. That appeal was docketed as Case No. 2 CA-CV 89-0250.

In March of 1988, before the Department moved to dismiss the 1987 tax appeal, the Taxpayers filed a second action in Pima County Superior Court seeking to recover the alleged overpayment of the 1987 property taxes pursuant to A.R.S. section 42-204(C). Pima County and the Department of Revenue moved to dismiss the second Pima County action on the ground that, pursuant to A.R.S. section 42-204(E) and section 42-246, the action should have been filed no later than November 1, 1987. Through new counsel, who now represent them in this court, the Taxpayers stipulated with Pima County that their second action be dismissed with prejudice.

For the tax year 1988, the Pima County Assessor again valued the Taxpayers' property as non-agricultural. The Taxpayers prosecuted administrative and judicial appeals. In July of 1989, the tax court entered a judgment revaluing the property as agricultural property for 1988. For the tax year 1989, the Pima County Assessor valued two of the Taxpayers' four parcels as non-agricultural property. The Taxpayers appealed these valuations through the administrative process to the Arizona Tax Court. The Taxpayers, the Pima County Assessor, and the Department agreed to the entry of a judgment valuing the two parcels as agricultural property for 1989.

In August of 1989, the Taxpayers' current counsel wrote to the Pima County Treasurer requesting that the Taxpayers' property be revalued as agricultural property for the tax year 1987 and that appropriate refunds for overpayment be issued. The letter invoked A.R.S. sections 11-505 and 11-506. Section 11-505(A), as then written, provided in part:

The board of supervisors, subject to the prior approval of the department of revenue, may authorize the county treasurer to refund to any taxpayer or his agent, any overpayments of real or personal property taxes resulting from an error in billing such taxes or any duplicate payments of real or personal property taxes provided a claim for such refund is made by the taxpayer or his agent within three years from the date of such duplicate payment or overpayment....

Section 11-506 provided:

If all or a part of a property tax has been paid on an erroneous assessment after such assessment is verified by the department of revenue, the county board of supervisors shall direct the county treasurer to grant a refund to the taxpayer, to the extent of the erroneous tax paid pursuant to such erroneous assessment after correcting the tax roll, provided the taxpayer submits a claim therefor to the county treasurer within three years after the payment of such erroneous tax. Such claim shall be processed in the same manner and subject to the provisions as provided in § 11-505.

Pima County refused to correct the valuation of the Taxpayers' property for 1987.

In early 1990, the Taxpayers filed a special action complaint in the Arizona Tax Court seeking relief pursuant to A.R.S. section 11-506. Their complaint alleged that the Department of Revenue had agreed that their property had been erroneously assessed in 1988 and 1989 and that Pima County and the Department had agreed to revalue the property as agricultural property for those years. In its response to the special action complaint, the Pima County defendants answered in part:

[T]hese responding Defendants admit that for the tax years 1986, 1988 and 1989, the subject property has been valued as agricultural property for tax purposes. In addition as to the tax year 1987, these responding Defendants admit that if Plaintiffs would have submitted the appropriate documentation or timely appealed valuation of the subject property and paid the taxes before they became delinquent, that the subject property would have been valued as agricultural property for the tax year 1987.

The Pima County defendants and the Department of Revenue separately moved to dismiss the Taxpayers' special action complaint. They advanced at least four separate reasons why their motion should be granted. After argument, the tax court declined to accept jurisdiction of the special action. For purposes of its ruling, the court assumed "that the classification for agricultural use was the correct classification for the property for the entire period relevant to this inquiry." The tax court believed it would be inappropriate to entertain the special action because the issues overlapped with the issues presented on the appeal then pending. The tax court entered a formal judgment in accordance with its ruling, and the Taxpayers timely appealed.

Pursuant to stipulation of the parties, this court ordered the appeal from the tax court's judgment consolidated with the Taxpayers' earlier appeal in Case No. 2 CA-CV 89-0250. We have jurisdiction pursuant to A.R.S. section 12-2101.

THE APPEAL FROM THE PIMA COUNTY SUPERIOR COURT

We first address the Taxpayers' appeal from the Pima County Superior Court's order dismissing their 1987 tax appeal "for failure to join and serve an indispensable party." The Department of Revenue, which was served with process in that action, moved to dismiss on the ground, inter alia, that the Taxpayers had failed to serve a copy of the notice of appeal on Pima County or file an affidavit of such service as required by A.R.S. section 42-177(D). Pima County did not formally appear.

On appeal, the...