Turf Paradise, Inc. v. Maricopa County, 1

Citation878 P.2d 1375,179 Ariz. 337
Decision Date28 July 1994
Docket NumberCA-TX,No. 1,1
PartiesTURF PARADISE, INC., an Arizona corporation, Plaintiff, Counterdefendant-Appellee, v. MARICOPA COUNTY, a political subdivision of the State of Arizona; and the Arizona Department of Revenue, Defendants, Counterclaimants-Appellants. 93-0006.
CourtCourt of Appeals of Arizona

CONTRERAS, Presiding Judge.

Maricopa County and the Arizona Department of Revenue (referred to hereinafter as "the County") appeal from the Arizona Tax Court's ("tax court") entry of judgment which dismissed plaintiff Turf Paradise, Inc.'s ("Turf Paradise") Complaint and Notice of Tax Appeal and struck the County's counterclaim. The issue presented is whether, once a taxpayer files an action challenging the valuation of its property and then moves to dismiss the action with prejudice, the County can nevertheless continue to maintain an action denominated a "counterclaim" seeking a higher tax valuation pursuant to Ariz.Rev.Stat.Ann. ("A.R.S.") section 42-178. We hold that A.R.S. section 42-178 does not grant a right to the County to independently "counterclaim" for a higher tax valuation, and thus we affirm the tax court's judgment.


Turf Paradise filed a complaint and notice of property tax appeal for both the 1990 and 1991 tax years, alleging that its property was overvalued. After a trial in the 1990 appeal, the tax court found that Turf Paradise's property was undervalued. However, because the County had not stated in its answer reasons to support its claim that the property was undervalued, the tax court refused to increase the valuation. 1

In the 1991 appeal, the County responded by filing an answer and what it designated a "counterclaim" alleging that the subject property's 1991 full cash value was insufficient under the cost method. Several months after the tax court's decision regarding the 1990 tax appeal, Turf Paradise moved to dismiss with prejudice its 1991 appeal and to strike the County's counterclaim. The tax court granted the motions and awarded $6,000 in attorney's fees to the County. The County timely appealed.

I. The Tax Court Did Not Err in Striking the County's "Counterclaim" for a Higher Tax Valuation of Turf Paradise's Property

On appeal, the County contends that the 1990 revisions to A.R.S. section 42-178(C) (Supp.1993) 2 give it the right to seek an increase in the full cash value of a taxpayer's property that survives even if the taxpayer requests dismissal with prejudice of the tax appeal. The County argues the legislature intended the revisions in A.R.S. section 42-178(C) to permit the taxing authorities to request an increase if, in the course of investigating and responding to a taxpayer's notice of appeal, they discovered supporting evidence for an increase and that the legislature could not have intended for the taxpayer to evade a tax court order increasing valuation by simply dismissing the appeal with prejudice.

Further, the County contends that by stating the reasons why Turf Paradise's property was undervalued in its answer to Turf Paradise's tax appeal and by filing a "counterclaim," it "perfected" a claim for an increase under A.R.S. section 42-178(B), (C), and (D)(3), even though it had no authority to file a direct action seeking an increase in valuation. We conclude, however, that the statute does not create either a permissive or compulsory counterclaim under the Arizona Rules of Civil Procedure that can stand on its own once the tax court dismisses the tax appeal.

Interpretation of a statute is a question of law, and we are not bound by a lower court's construction. Rather, we review the matter de novo. Hampton v. Glendale High Sch. Dist., 172 Ariz. 431, 433, 837 P.2d 1166, 1168 (App.1992). In interpreting a statute, we attempt to effectuate the legislative intent behind the statute. Id. at 434, 837 P.2d at 1169. We also give the words their ordinary meaning unless the statute offers a different definition or the context suggests a special meaning. Mid Kansas Fed. Sav. & Loan v. Dynamic Dev., 167 Ariz. 122, 128, 804 P.2d 1310, 1316 (1991).

First, the County is correct that it does not have the right to file a direct appeal of the valuation of Turf Paradise's property under section 42-178. The right to appeal from a property valuation exists only by virtue of an explicit statutory authorization. Maricopa County v. Superior Court, 170 Ariz. 248, 252, 823 P.2d 696, 700 (App.1991). See also Pima County v. Cyprus-Pima Mining Co., 119 Ariz. 111, 113, 579 P.2d 1081, 1083 (1978) (right to appeal is statutory and method is exclusive). The County insists, however, that if it complies with section 42-178(C) and states reasons in its answer to the taxpayer's appeal demonstrating why the property is undervalued, it has perfected a right to seek a higher valuation and that this right cannot be infringed by the taxpayer's unilateral act of filing a motion to dismiss the appeal even if the dismissal sought is "with prejudice."

The County attempts to equate the grant of a statutory remedy with a counterclaim under the Rules of Civil Procedure. We disagree. A counterclaim "is a cause of action in favor of the defendant on which he might have brought a separate action against the plaintiff and recovered a judgment." W.J. Kroeger Co. v. Travelers Indem. Co., 112 Ariz. 285, 287, 541 P.2d 385, 387 (1975), citing Valley Gin Co. v. McCarthy, 56 Ariz. 181, 106 P.2d 504 (1940). Furthermore, "[i]f one is not entitled to relief in a direct action, he is not entitled to assert a setoff or counterclaim." Occidental Chem. Co. v. Connor, 124 Ariz. 341, 343, 604 P.2d 605, 607 (1979). There is nothing in section 42-178 that grants the County an independent cause of action against the taxpayer. The request for an increase in valuation is not a "counterclaim" as that term is used in the Rules of Civil Procedure.

Second, no support exists in the statute for the County's theory of "perfecting" a counterclaim simply by doing what the statute directs. If after the taxpayer files an appeal, the department or county requests an increase in valuation, "the response filed shall contain a statement of the reasons why the valuation ... is insufficient or erroneous." A.R.S. § 42-178(C). The County must state the reasons the value is insufficient in part because the statute presumes that the value originally assigned by the County is correct, and the taxpayer challenging the valuation must overcome that presumption. See A.R.S. § 42-178(B). If the taxpayer is permitted to contend the property is overvalued, the legislature has specifically provided that the County is permitted to contend it is undervalued.

Nevertheless, in requiring the County to state reasons why its valuation is insufficient, the legislature did not thereby create an independent right to counterclaim for an increase. If the legislature had intended to permit the County to independently pursue a tax increase even after a taxpayer dismissed the tax appeal, it could easily have done so. No evidence of such legislative intent exists here, and therefore, we will not enlarge the scope of the limited and specific statutory remedy provided to the County by A.R.S. section 42-178.

II. Arizona Rule of Civil Procedure 41(a)(2) Does Not Prohibit Dismissal with Prejudice of Turf Paradise's Appeal and the Striking of the County's Counterclaim

The County argues that Arizona Rule of Civil Procedure 41(a)(2) prohibited the tax court from dismissing Turf Paradise's complaint and striking the County's counterclaim against the County's objection. The rule provides:

Except as provided in paragraph 1 of this ... Rule, an action shall not be dismissed at the plaintiff's instance save upon order of the court and upon such terms and conditions as the court deems proper. If a counterclaim has been pleaded by a defendant prior to the service upon the defendant of the plaintiff's motion to dismiss, the action shall not be dismissed against the defendant's objection unless the counterclaim can remain pending for independent adjudication by the court. Unless otherwise specified in the order, a dismissal under this paragraph is without prejudice.

(Emphasis added.)

If, in seeking an increase in valuation, the statement of reasons why a valuation may be insufficient or erroneous does not constitute either a permissive or compulsory counterclaim under the Rules of Civil Procedure, however, the second sentence of Rule 41(a)(2) does not come into play. The court's discretion to grant the plaintiff's motion is guided only by the proviso in the first sentence, that dismissal be "upon such terms and conditions as the court deems proper." Here, the tax court conditioned Turf Paradise's dismissal upon payment of reasonable attorney's fees to the County. We find no abuse of discretion.

In the alternative, the County asserts that the court abused its discretion in granting Turf Paradise's motion to dismiss because once the County answered, it obtained a substantial right or advantage which would be lost or rendered less effective by a dismissal. The County claims that by failing to at least order a hearing before granting dismissal, the County lost the "substantial" right to take a second look at Turf Paradise's valuation and to seek an increase.

The County cites numerous cases involving dismissal without prejudice, 3 including Goodman v. Gordon, 103 Ariz. 538, 540, 447 P.2d 230, 232 (1968) (approving grant of plaintiff's motion to dismiss to permit refiling in federal court), to argue that the trial court erred in failing to consider the equities of both sides...

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