Larkin v. State ex rel. Rottas

• Decision Date: 13 November 1992
• Docket Number: No. 1,CA-TX,1
• Citation: Larkin v. State ex rel. Rottas, 857 P.2d 1271, 175 Ariz. 417 (Ariz. App. 1992)
• Parties: Kenneth J. LARKIN and Murray W. Karsten, individual residents and property taxpayers in Maricopa County, Plaintiffs-Appellees, Cross-Appellants, v. STATE of Arizona, ex rel. Raymond ROTTAS, the Department of Administration of the State of Arizona and Richard Beissel, Defendants-Appellants, Cross-Appellees. 91-006.
• Court: Arizona Court of Appeals

Page 1271

857 P.2d 1271

175 Ariz. 417

Kenneth J. LARKIN and Murray W. Karsten, individual residents and property taxpayers in Maricopa County, Plaintiffs-Appellees, Cross-Appellants, v. STATE of Arizona, ex rel. Raymond ROTTAS, the Department of Administration of the State of Arizona and Richard Beissel, Defendants-Appellants, Cross-Appellees.

No. 1 CA-TX 91-006.

Court of Appeals of Arizona Division 1, Department T.

Nov. 13, 1992.

As Amended on Denial of

Reconsideration Jan. 8, 1993.

Petition and Cross-Petition for

Review Denied Sept. 21, 1993. ^*

[175 Ariz. 419] Mohr, Hackett, Pederson, Blakley, Randolph & Haga, P.C. by Arthur W. Pederson, Thomas M. Quigley, Ronald P. Adams, Phoenix, for plaintiffs-appellees, cross-appellants.

Grant Woods, Atty. Gen. by Charles S. Pierson, Asst. Atty. Gen., Phoenix, for defendants-appellants, cross-appellees.

OPINION

GRANT, Presiding Judge.

The State of Arizona and Richard Beissel, the state's General Accountant, appeal from a tax court judgment that awarded the following sums as attorney's fees in post-judgment proceedings in a tax refund action: (1) $24,238.00 against the state pursuant to Ariz.Rev.Stat.Ann. ("A.R.S.") section 12-348; (2) $3,812.00 against the state pursuant to A.R.S. section 12-349; and (3) $1,500.00 against Beissel personally as a sanction for willfully disobeying a court order. The appellee taxpayers cross-appeal from the judgment to the extent it declined to award them attorney's fees incurred in defending three appellate court special actions filed by the state to resist post-judgment orders aimed at forcing it to fund reimbursement of taxes. The appeal and cross-appeal present these issues:

(1) Was A.R.S. section 12-348 inapplicable on the theory that the taxpayers' attorney's fees were incurred in "proceedings involving ... collection of judgment debts" within former A.R.S. section 12-348(F)(4) [now A.R.S. section 12-348(H)(4) ]?

(2) Did the tax court err in awarding additional attorney's fees against the state based on its finding that the state had unreasonably expanded or delayed the tax court proceedings within A.R.S. section 12-349(A)(3) by collaterally attacking the judgment after the court of appeals and the supreme court had declined to accept jurisdiction in appellants' special actions?

(3) Did the tax court err in awarding attorney's fees against Beissel as a sanction for willful disobedience of the court's order?

(4) Did the tax court err in concluding that it lacked authority to award the taxpayers attorney's fees incurred in connection with appellants' post-judgment appellate court special actions?

FACTS AND PROCEDURAL HISTORY

The taxpayers' complaint alleged that former A.R.S. section 15-991.01 (1988), ¹ which levied a tax on all property in the state outside organized school districts, was unconstitutional. On cross-motions for summary judgment, the tax court agreed that section 15-991.01 violated Ariz. Const. Art. IX, section 3. ² The court enjoined the state and county defendants from levying taxes under former section 15-991.01 for the 1989 tax year and directed the parties to file simultaneous memoranda on the questions of whether affected taxpayers were entitled to receive refunds of 1988 taxes and how such refunds would be determined.

After a series of status conferences on the refund question the tax court ruled:

With respect to the funding of the refund/credit plan, Maricopa County's position is that all of the necessary money for the refund or credit, interest, and administrative costs should be made available before the implementation of the plan. The Department of Revenue's position is that it should be able to hold the money and reimburse Maricopa County for administrative costs.

IT IS ORDERED that the Department of Revenue, or State Treasurer, either advance the total amount of the illegally collected tax plus interest as set forth in the judgment or arrange for the County Treasurer to draft upon a State account when he chooses to make a refund.

IT IS FURTHER ORDERED that the counties will pay the administrative costs as incurred and bill the Department of Revenue. The Department of Revenue is obligated to respond to the billing on a periodic basis as agreed upon by the two agencies but not less than monthly. ³

On April 25, 1990, the tax court entered formal judgment in accordance with its rulings of July 10, 1989, and February 26, 1990. The judgment provided in pertinent part:

4. The taxes collected by the State of Arizona pursuant to the 1988 Tax shall be credited and/or refunded to each taxpayer paying such taxes.... The State of Arizona is hereby ordered to credit or refund, at the taxpayer's option, ninety-nine and one-half percent (99.5%) of such taxes and interest calculated thereon at the rate of ten percent (10%) per annum from January 1, 1989, until October 1, 1990....

....

6. The State of Arizona is hereby ordered by July 2, 1990, to either:

(A) Provide the funds to any refunding agency to initiate the refund and/or credit procedure stated in paragraph 4 ... or (B) Deposit monies in an account upon which the refunding agency can draw immediately to pay the principal amount of the refund and interest. All costs of administering the refund and/or credit shall be billed by the refunding agency to the State of Arizona on such periodic basis as may be agreed upon, but at least monthly, and shall forthwith be paid by the State of Arizona to the refunding agency. The refunding agency and the State of Arizona shall take such actions as are necessary to comply timely with this judgment.

The state did not appeal.

The Second Regular Session of the Thirty-Ninth Arizona Legislature adjourned sine die on June 28, 1990, without appropriating any money with which to fund payment of the tax court's judgment. On July 13, 1990, counsel for the Department of Revenue wrote the taxpayers' counsel in part as follows:

The State Treasurer's office is an administrative agency, without power to raise or appropriate money. Had the Legislature appropriated the funds, the State Treasurer's office would certainly have done its part in the refunding process, but since no such funds presently exist, the State Treasurer is unable to set up the account contemplated by the Court's order. As a result, the refund procedures envisioned by the parties to this lawsuit and outlined in the Court's order cannot take place. Perhaps your clients can still proceed with the usual refund procedures established under Title 42....

On application of the taxpayers, the tax court issued an "order to show cause regarding issuance of warrant and citation for contempt" on July 30, 1990. The order directed nonparty Richard Beissel, General Accountant of the State of Arizona and Assistant Director of Finance, to appear and show cause why he should not be ordered to:

1. Issue a warrant in the amount of $11,583,333.33, plus additional interest accruing after July 31, 1990, drawn on the State Treasury in payment of the judgment;

2. Be compelled to issue such a warrant drawn upon the State Treasury by this Court's power to punish for contempt.

Beissel was served with the order to show cause on August 3, 1990. Through current counsel, he filed a response and motion to quash the order on August 10, 1990, arguing that without a legislative appropriation he had no legal authority to issue the warrant the taxpayers were seeking and would be subject to civil and criminal penalties if he did. After hearing argument, the tax court ordered Beissel to issue warrants to fund the refund/credit procedure contemplated by the judgment and compensate the counties in advance for the cost of administering it.

Beissel petitioned this court for special action (cause no. 1 CA-SA 90-190TX). We granted an interlocutory stay of the tax court's order, but on September 25, 1990, declined to accept jurisdiction of the petition. ⁴

The state filed a new petition for special action in the supreme court (cause no. CV-90-0376-SA). The supreme court issued an interlocutory stay on September 28, 1990, but on November 7, 1990, declined to accept jurisdiction of the petition and vacated the stay. Its order also denied the respondent taxpayers' request for attorney's fees.

At the taxpayers' request, on November 8, 1990, the tax court ordered Beissel to execute the required warrants by noon on November 14, 1990, or show cause on November 23, 1990, why he should not be held in contempt and sanctioned appropriately. Beissel did not comply. On November 19, 1990, Beissel filed motions to quash the new order to show cause and for reconsideration of the court's original order directing him to execute warrants to satisfy the judgment. After a hearing, the tax court denied the motions, held Beissel in contempt, and awarded the taxpayers $1,500.00 in attorney's fees against him personally.

The same day, Beissel filed another petition for special action seeking relief in the supreme court (CV-90-0437-SA). By order of November 26, 1990, Justice James Moeller found that Beissel had failed to demonstrate good cause for the issuance of an interlocutory stay and dismissed his petition for special action as moot.

Shortly thereafter, Beissel and his counsel appeared before the tax court. Beissel's counsel advised the court that, because it was the court's judgment that would effect the appropriation of state monies to fund the refund process the court had previously ordered, the court's signature was needed as the "authorized signature" on the claim form for the warrants. The tax court's minute entry reflects: "The Court finds that the signature of the Court is a substitute for the Order of the Court as the authority for the warrants to issue. The Court signs the warrants...." The tax court additionally found that Beissel had purged himself of contempt.

The taxpayers later requested an award of additional attorney's fees. After briefing and argument, the tax court granted the request in part...