Westin Tucson Hotel Co. v. State Dept. of Revenue

• Decision Date: 08 April 1997
• Docket Number: No. 1,CA-TX,1
• Citation: Westin Tucson Hotel Co. v. State Dept. of Revenue, 936 P.2d 183, 188 Ariz. 360 (Ariz. App. 1997)
• Parties: , 240 Ariz. Adv. Rep. 23 WESTIN TUCSON HOTEL CO., a Delaware corporation, dba Westin La Paloma Hotel and La Paloma Country Club, Plaintiff-Appellant, v. STATE of Arizona DEPARTMENT OF REVENUE, Pima County, a body politic and corporate, Ed Moore, Dan Eckstrom, Mike Boyd, Paul Marsh, and Raul Grijalva, as members of the Pima County Board of Supervisors, Rick Lyons, in his capacity as Pima County Assessor, and James L. Kirk, in his capacity as Pima County Treasurer, Defendants-Appellees. 96-0007.
• Court: Arizona Court of Appeals

Page 183

936 P.2d 183

188 Ariz. 360, 240 Ariz. Adv. Rep. 23

WESTIN TUCSON HOTEL CO., a Delaware corporation, dba Westin La Paloma Hotel and La Paloma Country Club, Plaintiff-Appellant, v. STATE of Arizona DEPARTMENT OF REVENUE, Pima County, a body politic and corporate, Ed Moore, Dan Eckstrom, Mike Boyd, Paul Marsh, and Raul Grijalva, as members of the Pima County Board of Supervisors, Rick Lyons, in his capacity as Pima County Assessor, and James L. Kirk, in his capacity as Pima County Treasurer, Defendants-Appellees.

No. 1 CA-TX 96-0007.

Court of Appeals of Arizona Division 1, Department T.

April 8, 1997.

[188 Ariz. 361] Munger and Munger, P.L.C. by John F. Munger, Mark E. Chadwick, Tucson, for Plaintiff-Appellant.

Stephen D. Neely, Pima County Attorney by Peter E. Pearman, Deputy County Attorney, Civil Division, Tucson, Grant Woods, Arizona Attorney General by Frank Boucek, III, Assistant Attorney General, Tax Division, Phoenix, for Defendants-Appellees.

OPINION

NOYES, Presiding Judge.

Westin Tucson Hotel Co. ("Westin") appeals from the Tax Court's summary judgment ruling in favor of the State of Arizona Department of Revenue ("DOR") and Pima County ("County") ¹ on Westin's refund claims. Westin also appeals the denial of its Motion for Sanctions. Finding no error, we affirm.

I.

On May 7, 1993 Westin filed its 1993 State of Arizona Business Personal Property Tax Statements, Form 82520 ("82520's") with the Pima County Assessor's Office. According to Susan Patent of the Assessor's Office, Form 82520 is used to indicate taxable personal property on hand as of January 1st of the year in question. Westin's 82520's summarized the general nature and amount of its personal property but did not provide an itemized list of assets.

Patent became doubtful of the numbers reported by Westin and decided to perform an audit. When Westin still was unable to supply an itemized list of its personal property, Patent reviewed Westin's general ledger accounts instead. Pima County then assessed taxes based on the general ledger accounts, rather than Westin's 82520's. Westin paid the taxes and did not appeal.

A similar situation arose in the 1994 tax year. Westin's figures on the 82520's were lower than those found in the general ledger accounts, but Westin did not provide an itemized list of its on-hand personal property. The Assessor's Office again relied on Patent's audit and used the higher of the two figures, the ledger accounts, to determine the cash value of Westin's personal property. Westin filed an administrative appeal under Arizona Revised Statutes Annotated ("A.R.S.") section 42-604.

During the course of the administrative appeal, Westin's Controller, Joan LeFevre, provided Patent with a copy of Westin's bank depreciation policy. This policy accounts for at least some of the discrepancy between the 82520 figures and those on the general ledger. Westin's bank depreciation policy requires it to list assets on the fixed asset registers for twelve years from the time of acquisition, even if it no longer owns the property. As Westin's personal tax representative, Michael Hellon, described:

Because of the way La Paloma keeps its books, the general ledger reflects original installed costs of all of the properties' assets and many assets which have been disposed of.

....

The problem is--let me give you an example. When they buy banquet chairs, they may buy 100 at a time and a couple of them get broken and tossed away. And this will happen over a period of years. Then they'll buy another 100. So it isn't a problem of accounting for what's there, it's a problem of overaccounting what's no longer there.

The general ledger therefore apparently overstates the actual property on hand by an undetermined amount.

After discussing the problem with LeFevre and Hellon, the County Assessor's Office negotiated a compromise and settlement for 1994. The parties agreed upon a specified percentage to be deleted from the acquisition cost, and settled on a 1986 acquisition date for property where the acquisition date could not be determined. The compromise resulted in a property valuation lower than that initially assessed by the County, but higher than would have been assessed based on Westin's 82520's.

Westin then requested that the County Assessor's Office apply the 1994 framework to the 1993 tax year, but the Assessor denied the request. Westin was precluded from filing an administrative appeal under A.R.S. section 42-604 because the time for appeal had passed.

Westin then filed a Petition for Special Action and Complaint and Appeal with the Arizona Tax Court seeking a refund for 1993 under a number of theories, including a claim pursuant to A.R.S. section 11-506 (1991). Under section 11-506, a taxpayer has three years from the payment of the tax in which to file a refund claim. On November 28, 1995, the Tax Court granted summary judgment in favor of Appellees and denied both parties' motions for sanctions. Westin timely appealed. This Court has jurisdiction pursuant to A.R.S. section 12-2101(B) (1994).

II.

Westin argues the following issues on appeal:

1) that the 1993 taxation of property no longer owned by Westin was an "erroneous assessment" under A.R.S. section 11-506;

2) that the availability of statutory appeal under A.R.S. section 42-604 does not foreclose Westin's right to recovery under A.R.S. section 11-506;

3) that the Tax Court committed reversible error in granting the Taxing Authorities' motions for summary judgment because A.R.S. section 42-179 (Supp.1996) defines "error" to include the "existence or nonexistence" of property;

4) that the Assessor violated A.R.S. sections 42-236 and 42-204 by not relying on Westin's 82520's to assess Westin's personal property taxes for the 1993 tax year 5) that the Tax Court erred when it granted summary judgment in favor of the Taxing Authorities, rather than Westin, on Westin's Equal Protection and Uniformity Clause claims;

6) that the Tax Court committed reversible error by denying Westin's Motion for Sanctions against Pima County; and

7) that Westin is entitled to recover attorneys' fees and costs.

We address these issues in turn.

III.

1. "Erroneous Assessment" under A.R.S. section 11-506

Westin argues that the County taxed property that it did not own, thereby imposing taxes based on an "erroneous assessment," and entitling Westin to a refund under A.R.S. section 11-506. The 1991 version of A.R.S. section 11-506 is applicable in this case and provides that:

A. If all or a part of a property tax has been paid on an erroneous assessment after such assessment is first verified by the county assessor and then 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 on a form approved by the department to the county treasurer within three years after the payment of such erroneous tax....

B. For the purposes of this section, an erroneous assessment is limited to a clerical or computational error or any other error not involving the exercise of discretion, opinion or judgment by the assessor or the department. This section does not apply to questions of valuation that can be appealed according to section 42-221 or 42-604....

A.R.S. § 11-506 (1991) (repealed by Laws 1994, Ch. 323, § 1, eff. Jan. 1, 1996) (emphasis added).

A.R.S. section 11-506 "is intended to provide redress to an aggrieved taxpayer who discovers an obvious, indisputable and nondiscretionary error." Ringier American v. Dept. of Revenue, 184 Ariz. 250, 255, 908 P.2d 64, 69 (App.1995).

That error must be "clear and indisputable." Id. at 253, 908 P.2d at 67. Furthermore, "a special action under A.R.S. section 11-506 is only allowable when the assessment error is so obvious that the Department may easily verify it and issue a refund without the need for a formal appeal." First Interstate Bank v. Dept. of Revenue, 185 Ariz. 433, 439, 916 P.2d 1149, 1155 (App.1995). This is not such an error.

In this case, there are numerous factual disputes regarding Westin's taxable personal property on hand for the 1993 tax year. The County Assessor's Office was unwilling to rely on Westin's 82520's and Westin is unable to provide an itemized list of its personal property. If there is an error, it is difficult to quantify. Based on calculations by Patent, Westin claims that "[b]oth the Taxing Authorities and taxpayer agree that the amount of the 'erroneous assessment' is $1,547,289.00." The Taxing Authorities do not agree, however. The Taxing Authorities contend that these calculations were not intended to determine the amount of an error, but rather were meant to "dispute Appellant's claims that the Form 82520's submitted by it were a true and accurate reflection of the personal property owned by it for the tax years 1993 and 1994." This is not a case where "the Department may easily verify [the error] and issue a refund." First Interstate Bank, 185 Ariz. at 439, 916 P.2d at 1155. We therefore conclude that Westin is not entitled to relief under A.R.S. section 11-506.

2. Availability of Appeal

The Taxing Authorities argue, based on A.R.S. section 11-506(B), that the availability of appeal under A.R.S. sections 42-221 and 42-604 forecloses Westin's claims under A.R.S. section 11-506. Westin disagrees, citing S & R Properties v. Maricopa County, 178 Ariz. 491, 875 P.2d 150 (App.1993) and Ringier American v. Dept. of Revenue, 184 Ariz. 250, 908 P.2d 64 (App.1995) to support its position.

In S & R Properties, this Court held that "failure to appeal in the current tax year" does not preclude "a refund for erroneous assessments." 178 Ariz. at 500-01, 875 P.2d at 159-60. However, this is only true where "the taxpayer's claim or the County's own records reveal a clear and indisputable error."...