Seafirst Corp. v. Arizona Dept. of Revenue

Decision Date22 May 1992
Docket NumberNo. TX,TX
Citation172 Ariz. 54,833 P.2d 725
PartiesSEAFIRST CORPORATION v. ARIZONA DEPARTMENT OF REVENUE; County of Maricopa. 90-00871.
CourtArizona Tax Court
OPINION

MORONEY, Judge.

This is a property tax appeal pursuant to A.R.S. §§ 42-246 and 42-177. A.R.S. § 42-246 authorizes an appeal directly to superior court by a property owner dissatisfied with the determination of valuation or classification of property by a county assessor. The statute requires that the appeal be taken "in the manner provided in § 42-177."

A.R.S. § 42-177 provides, in pertinent part, that "[a]ll taxes levied and assessed against property on which an appeal has been filed by the owner thereof shall be paid under protest prior to the date the tax becomes delinquent." Arizona appellate courts, and this court, have repeatedly held that compliance with the quoted language is required in order for the Tax Court to maintain jurisdiction over the taxpayer's appeal. Pima County v. Cyprus-Pima Mining Co., 119 Ariz. 111, 579 P.2d 1081 (1978); County of Maricopa v. Chatwin, 17 Ariz.App. 576, 499 P.2d 190 (1972); RCJ Corp. v. Arizona Dep't of Revenue, 168 Ariz. 328, 812 P.2d 1146 (Tax 1991).

The tax year in dispute here is 1990. The Complaint brings in issue the Assessor's valuations for fifteen parcels of the Taxpayer's property. The first installments of 1990 taxes on all parcels were timely paid. The second installments on nine parcels were not paid until after they had become delinquent.

Maricopa County now seeks to have dismissed that part of the Complaint that challenges the Assessor's valuations on the nine parcels on which the taxes were not paid before becoming delinquent. Maricopa County argues that, because the second half 1990 taxes were not paid on time, the Court has lost jurisdiction.

The Taxpayer responds that it received no notice of the Assessor's valuations, and, therefore, to dismiss the Complaint would deprive the Taxpayer of due process.

The issue presented to the Court in this appeal is whether, under the circumstances presented in this case, direct notice to the Taxpayer of the taxing authority's valuation is a necessary prerequisite to a requirement that current taxes be timely paid in order to maintain a valuation appeal.

The Court holds it is not. The Motion to Dismiss is granted.

Maricopa County seeks dismissal because it claims the Court has lost jurisdiction over the subject matter of the controversy delineated in the Complaint. In such a circumstance, the Court should receive such evidence as is necessary to permit the Court to determine the merits of the motion. The factual scenario set forth below is essentially that presented by the Taxpayer.

The Taxpayer became the owner of the subject property at a deed of trust trustee's sale. The trustee's deed was recorded March 12, 1990, at the office of the Maricopa County Recorder. In August 1990, the Maricopa County Assessor was informed that the Taxpayer had acquired the nine parcels at issue, as well as some others. 1990 valuations were requested from the Assessor. Apparently nothing was done to change the Assessor's records to show the Taxpayer as the owner of the relevant parcels. The Assessor did not send the Taxpayer notice of the Assessor's 1990 valuation of the property.

The Taxpayer was able to determine what the first half tax bills were, however. It paid them all before they became delinquent.

The power to tax is an inherent power of government. The imposition, assessment, and collection of taxes is a process that is dictated entirely by statute. Subject to constitutional limitation, the legislature may make such provisions as it chooses to provide for funding the needs of state government. Southern Pac. Co. v. Pima County, 38 Ariz. 11, 296 P. 533 (1931); Pacific Fruit Express Co. v. City of Yuma, 32 Ariz. 601, 261 P. 49 (1927). If it chooses to do so, a state may impose a tax on property, measure the tax by the value of the property, and collect it from the property owner. Luhrs v. City of Phoenix, 52 Ariz. 438, 83 P.2d 283 (1938). Arizona has made that choice.

In Arizona, property taxation begins with an assessor classifying property, and determining a valuation for it. An assessment ratio dictated by the classification is applied to the valuation. A tax rate determined according to statute is applied to the product to produce the tax due.

Nearly 60 years ago, in State Tax Comm'n of Arizona v. Board of Supervisors of Yavapai County, 43 Ariz. 156, 29 P.2d 733 (1934), our Supreme Court reviewed the then existing scheme in Arizona for the imposition of property taxes. Its purpose in doing so was to test the Arizona scheme against the constitutional requirement of due process. In the intervening years, much has changed about property taxation in Arizona; but much, including statutory language, has remained the same. The principals of constitutional law set forth in Board of Supervisors remain as viable today as they were when written. This Court relies in large measure on Board of Supervisors for its rulings herein on due process.

The due process clauses in both the Arizona and United States Constitutions require that, in any scheme to impose a tax, there be provision whereby a putative taxpayer can appeal to an impartial tribunal any act of government which affects the validity or amount of any tax to which the government asserts the taxpayer is subject.

There is no requirement, however, that such an appeal be to a trial court, or even that it be to a court at all. Constitutional requirements of due process are satisfied even if the appellate tribunal be not of the judicial branch of government. Yuma County v. Arizona & Swansea R.R. Co., 30 Ariz. 27, 243 P. 907 (1926); De Pauw University v. Brunk, 53 F.2d 647 (D.Mo.1931), aff'd mem., 285 U.S. 527, 52 S.Ct. 405, 76 L.Ed. 924 (1932); Kelly v. Allen, 49 F.2d 876 (9th Cir.1931). What is required is that the tribunal provide the opportunity for the taxpayer to be heard, and, at the hearing, "the right to support his allegations by argument however brief, and, if need be, by proof, however informal." Londoner v. City of Denver, 210 U.S. 373, 386, 28 S.Ct. 708, 714, 52 L.Ed. 1103 (1908).

The Arizona scheme for resolving property valuation and classification disputes contemplates a series of administrative appeals to the State Board of Tax Appeals, and from there, by appeal, to the Tax Court. A.R.S. §§ 42-221(E), 42-241.01(A), 42-245, 42-176. The State Board of Tax Appeals is a state agency independent of any taxing authority. A.R.S. § 42-171. Hearings before the Board are conducted by permitting each side to present evidence and argument. Ariz.Corp.Admin.R. & Regs. R16-2-112 to -114. The due process requirement is satisfied by the appeal to the State Board of Tax Appeals if it is not satisfied at an earlier stage in the administrative process. There is no constitutional right to more than one opportunity to be effectively heard. Rosenberg v. Arizona Board of Regents, 118 Ariz. 489, 578 P.2d 168 (1978); Grisell v. Consolidated City of Indianapolis, 425 N.E.2d 247 (Ind.App.1981).

It is important to note that due process is satisfied by the opportunity for administrative review, not by its implementation. A.R.S. § 42-246 permits a taxpayer dissatisfied with a valuation or classification of its property by an assessor to appeal directly to the Tax Court, thus bypassing all of the available administrative appeals. The election by a taxpayer to appeal directly to the Tax Court pursuant to A.R.S. § 42-246 does not make the Tax Court the impartial oversight tribunal which due process requires.

In this case the Taxpayer may argue that it did not acquire the property until after the time for administrative appeal had passed. Therefore, the only appeal which lies of an excessive valuation or an erroneous classification is to the Tax Court under A.R.S. § 42-246. It does not matter. The Taxpayer has no constitutional right to an appeal to the Tax Court.

The tax is imposed on the property. Read v. Arizona Dep't of Revenue, 166 Ariz. 533, 536, 803 P.2d 944 (Tax 1991). The lien is effective on January 1 of the tax year. A.R.S. § 42-312. When property subject to a deed of trust is sold in a trustee's sale, it is sold at a public auction. A.R.S. § 33-810. The buyer is a stranger to the property, even if the buyer is the creditor who initiated the sale. If a property is sold after the time has passed to begin an administrative appeal, it is sold after the Assessor has determined valuation and classification. At the time the Assessor did to the property what assessors do, the buyer at a later sale had no property right of which the Assessor's acts could deprive it. Therefore, the Assessor's acts do not give the post-assessment buyer any right...

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