George A. Hormel Ii v. Maricopa County

• Decision Date: 27 May 2010
• Docket Number: No. 1 CA-TX 07-0008.,1 CA-TX 07-0008.
• Citation: Hormel v. Maricopa County, 224 Ariz. 454, 232 P.3d 768 (Ariz. App. 2010)
• Parties: George A. HORMEL II and Jamie R. Hormel, Trustees of the George A. Hormel II Trust, dated September 29, 1995, as amended, Plaintiffs/Appellants/Cross-Appellees,v.MARICOPA COUNTY, Maricopa County Board of Supervisors, and David Schweikert, in his capacity as the Maricopa County Treasurer, Defendants/Appellees/Cross-Appellants.
• Court: Arizona Court of Appeals

224 Ariz. 454

232 P.3d 768

George A. HORMEL II and Jamie R. Hormel, Trustees of the George A. Hormel II Trust, dated September 29, 1995, as amended, Plaintiffs/Appellants/Cross-Appellees,v.MARICOPA COUNTY, Maricopa County Board of Supervisors, and David Schweikert, in his capacity as the Maricopa County Treasurer, Defendants/Appellees/Cross-Appellants.

No. 1 CA-TX 07-0008.

Court of Appeals of Arizona Division 1, Department T.

May 27, 2010.

Mooney, Wright & Moore, P.L.L.C. By Paul J. Mooney, Jim L. Wright, Mesa, Attorneys for Plaintiffs/Appellants/Cross-Appellees.

Law Office of Jerry A. Fries, By Jerry A. Fries, Phoenix, Attorney for Defendants/Appellees/Cross-Appellants.

OPINION

WINTHROP, Presiding Judge.

¶ 1 This appeal from denial of special action relief arises out of an attempt by George A. Hormel II and Jamie R. Hormel, trustees of the George A. Hormel II Trust (“Taxpayer” or “the Trust”) to enforce the payment of refunds based on reclassification of property known as the Wrigley Mansion (“the Property”) during tax years 2001, 2002, and 2003 pursuant to Arizona Revised Statutes (“A.R.S.”) section 42-16254 (Supp. 2009),¹ the property tax error correction statute. Maricopa County (“the County”) opposes the payment of the refunds, arguing that any reclassification was improper. After the parties filed cross-motions for summary judgment, the tax court granted judgment in favor of the County as to the refund payment issue, denying Taxpayer's request for refunds. As discussed below, we reverse that part of the judgment, and we remand, directing the tax court to enter judgment in favor of Taxpayer.

¶ 2 In a cross-appeal, the County challenges denial of the part of its cross-motion seeking to revert classification of the Property from Class Six to Class Two for tax year 2004. However, we conclude that subsequent events have mooted this issue. Finally, we hold that the tax court did not abuse its discretion in declining to impose sanctions under A.R.S. § 12-349 (2003).

FACTS AND PROCEDURAL BACKGROUND

¶ 3 In April 2004, Taxpayer filed a notice of claim with the Maricopa County Assessor (“the Assessor”) regarding the Property's classification for purpose of the Arizona real property tax. At that time, the Property operated as a private club with a restaurant and bar. Its members-both individuals and corporations-paid fees to use the Property for weddings, banquets, and corporate events.

¶ 4 Taxpayer, through its tax agent, Neil Wolfe, sought to change the Property's classification from Class Two, with a sixteen percent assessment ratio see A.R.S. §§ 42-12002 (2006), -15002 (2006), to Class Six (noncommercial historic property), with a five percent assessment ratio. See A.R.S. §§ 42-12006 (Supp.2009), -15006 (Supp.2009). The proposed change would cover tax years 2001, 2002, and 2003, and would permit Taxpayer to obtain property tax refunds for those years.

¶ 5 Socorro Candelaria, the County's appraisal coordinator, disputed the claim in writing, although she provided no substantive reason for the denial, and scheduled a meeting with Wolfe.² The case was subsequently assigned to Cindy Head, a field appraiser for the County. Head contacted the State Historic Preservation Office (“the Office”) in an effort to determine whether the Property qualified as noncommercial historic property.

¶ 6 On June 10, 2004, the Office faxed a response letter stating that the Property had been listed on the National Register of Historic Places since August 17, 1989. Head therefore concluded that the Property qualified for the requested Class Six, noncommercial historic classification, and she prepared the appropriate paperwork to grant the relief requested by Taxpayer. Steve Davis, Head's supervisor, approved the reclassification decision, and the Assessor corrected the classification on the “Parcel History” forms. On its own initiative and as a standard procedure, the Assessor (through Head) also updated the 2004 tax roll on the “Parcel History” forms to reflect the requested classification change.

¶ 7 At the scheduled meeting, Head and Wolfe formally documented the County's full consent to the classification change see A.R.S. § 42-16254(E), after signing on June 29, 2004, three documents previously prepared by Head entitled “A.R.S. § 42-16254 Notice of Claim Meeting Decision-Real Property,” each of which stated that the “Full Consent” was “the decision of the taxing authority.” Nothing in the documents indicated that they were conditional, and none of the documents identified any items remaining in dispute.

¶ 8 When the Assessor failed to issue the refunds, Taxpayer mailed a letter dated October 28, 2004, to David Schweikert, who was at that time the Maricopa County Treasurer (“the Treasurer”), to ascertain the reason for the delay. The Treasurer responded that, after contacting the Assessor's office, he understood the refund issuing process had begun.

¶ 9 Meanwhile, on January 29, 2005, Head received an e-mail from Candelaria, informing her that the internal paperwork, or “resolutions,” related to the reclassification claim had not been processed and that Head should refer any future inquiries about the matter directly to Candelaria. Candelaria ultimately claimed that an internal “three-tier review process” would have to be completed before approval.³

¶ 10 On March 15, 2005, Head advised Wolfe for the first time that the resolutions would not be processed because the Assessor wanted additional information to justify the classification change. The deadline to appeal disputed items to the State Board of Equalization had already passed-198 days earlier.⁴

¶ 11 On June 17, 2005, Taxpayer filed a complaint in the Arizona Tax Court seeking (1) a declaratory judgment whether the County's Board of Supervisors (“the Board”) and the Treasurer had fulfilled their statutory obligation under A.R.S. § 42-16254 to issue the refunds for tax years 2001 through 2003, and (2) a mandamus order directing the Board and the Treasurer to discharge their duties under A.R.S. § 42-16254(E) by issuing a refund of the taxes the Assessor had agreed were erroneously assessed. After the County answered, Taxpayer moved for summary judgment, arguing that the Assessor's consent obligated the Board and the Treasurer to issue the refunds as a matter of law. After obtaining an extension of time to respond under Rule 56(f), Ariz. R. Civ. P., the County on September 15, 2006, filed a response and cross-motion for summary judgment. In part, the cross-motion requested leave to reverse the County's correction of the 2004 tax roll.

¶ 12 The tax court's decision was highly critical of the County's handling of this matter, essentially concluding that the County had misled Taxpayer and improperly eliminated Taxpayer's ability to obtain further administrative review of the County's ultimate denial of the claim. However, the court, over the objections of Taxpayer, reached the merits of what it perceived to be the underlying issue as argued by the County, and ruled that the Property did not qualify for noncommercial historic status during the tax years at issue, thereby denying Taxpayer's motion for summary judgment. The court relied on A.R.S. § 42-12102(B) (2006), which requires a party filing an application for classification as historic property to file its application “during the valuation year preceding the first tax year for which classification is requested.” The court also denied the County's cross-motion for summary judgment, specifically denying the County's request for relief “with respect to tax year 2004 and subsequent tax years.” The court also noted that A.R.S. § 42-12102(C) provides that Class Six status, once requested, lasts for fifteen years before a new application must be submitted.

¶ 13 The County filed a motion for reconsideration, requesting in part that the tax court reconsider its characterization of the County's actions and its ruling on the 2004 tax year (and beyond). The court obliged in part, changing some of the descriptive language in its order, but it did not alter the substance of its ruling. The court denied “the issue of whether the property was properly assessed for tax year 2004” as “moot.” The court also clarified it had not ordered that the Property receive Class Six status for fifteen years, but stated that was a legal consequence of its finding that the classification was validly granted (when the Assessor made the change for the 2004 tax year). The County was, however, not precluded from instituting an administrative error claim under A.R.S. § 42-16252 (Supp. 2009) to correct the Property's Class Six classification for tax year 2004 and its effect on subsequent years, assuming that res judicata posed no bar.⁵

¶ 14 Approximately one month later, on March 6, 2007, the County sent notices of proposed correction for tax year 2004 to Taxpayer. Taxpayer timely consented to the 2004 correction, stating that it was doing so “ solely to prevent any additional tax, interest or penalty to be imposed for the 2004 tax year.” Taxpayer also reserved the right, however, to file a timely notice of claim to reclassify in future years.

¶ 15 On April 25, 2007, the tax court signed the form of judgment prepared by Taxpayer, reflecting the court's rulings on the cross-motions for summary judgment. The court adopted its previous findings of fact and conclusions of law, denied Taxpayer's motion for summary judgment with respect to tax years 2001 through 2003, and denied the County's cross-motion for summary judgment with respect to tax year 2004. We have jurisdiction to decide the subsequent timely appeal and cross-appeal pursuant to A.R.S. §§ 12-170(C) (2003) and 12-2101(B) (2003).

ANALYSIS

I. As A Matter Of Law, The Tax Court Erred In Denying Special Action Relief.

¶ 16 After the superior court has accepted jurisdiction and determined the merits of a special action petition, “we review whether the court abused its discretion by its grant or denial of...