Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Sundevil Power Holdings, LLC v. Arizona Department of Revenue

Court of Appeals of Arizona, First Division

July 7, 2016

SUNDEVIL POWER HOLDINGS, LLC, Plaintiff/Appellee,
v.
ARIZONA DEPARTMENT OF REVENUE, an agency of the State of Arizona; MARICOPA COUNTY, a political subdivision of the State of Arizona, Defendants/Appellants.

         Appeal from the Superior Court in Maricopa County Nos. TX2013-000006; TX2013-000530; TX2014-000484 (Consolidated) The Honorable Christopher T. Whitten, Judge.

         COUNSEL

          Squire Patton Boggs (US) LLP, Phoenix By Brian M. McQuaid, Sara K. Regan, Kerryn L. Holman Co-Counsel for Plaintiff/Appellee.

          Santos Law Office, PLLC, Phoenix Domingos R. Santos, Jr., Co-Counsel for Plaintiff/Appellee.

          Arizona Attorney General's Office, Phoenix By Kenneth J. Love Counsel for Defendants/Appellants ADOR.

          Maricopa County Attorney's Office, Phoenix By Peter Muthig Counsel for Defendants/Appellants Maricopa County.

          Randall M. Howe, Judge delivered the opinion of the Court, in which Presiding Judge Kent E. Cattani joined. Judge Donn Kessler specially concurred.

          OPINION

          RANDALL M. HOWE, JUDGE.

         ¶1 The Arizona Department of Revenue ("Department") and Maricopa County ("County") appeal the tax court's summary judgment in favor of Sundevil Power Holdings, LLC ("Taxpayer") for tax years 2013, 2014, and 2015. The Department and the County argue that the court erred in granting summary judgment because it incorrectly applied A.R.S. § 42-14156 ("valuation statute") and erred in allowing Taxpayer's 2013 amended complaint to relate back to the date of the original complaint. Because the tax court did not err in interpreting the valuation statute, but did err in allowing the Taxpayer's 2013 amended complaint to relate back, we affirm with respect to the 2014 and 2015 appeals, but reverse with respect to the 2013 appeal.

         FACTS AND PROCEDURAL HISTORY

         ¶2 The Gila River Power Station ("facility") was constructed between 2001 and 2003 and consists of four identical power generation blocks. In 2005, the facility's original owners sought bankruptcy protection, and as a result, the bankruptcy court transferred the facility's ownership to Gila River Power LLC. At the time of transfer, the bankruptcy court approved a valuation for the facility based on an independent appraisal of the land on which the facility operated, the real property improvements to the facility, and the personal property in the facility. Since 2005, the Department's valuation of the facility for tax purposes has been based on the value the bankruptcy court has ascribed to the facility's real property improvements and personal property, which are known as Gila River's "book costs, " and the land's value as of December 31 of the preceding year.

         ¶3 In 2010, Gila River sold to Taxpayer one of the facility's four power blocks and a 25% interest in the facility's common generation facilities, and in 2011, it sold to Taxpayer another power block and an additional 25% interest. Thus, Gila River and Taxpayer each own 50% of the facility and common generation facilities. As part of the sale agreements, Gila River provided Taxpayer a copy of its book costs.

         ¶4 For tax year 2012, when Taxpayer owned a 25% interest in the facility, Taxpayer reported to the Department Gila River's book costs for purposes of valuing the property. The Department valued Taxpayer's 25% interest based on Gila River's book costs under A.R.S. § 42-14156(A)(6)(d)(i), which provides that if the buyer has the "cost information, " the property's valuation should continue as if no change in ownership occurred. For tax year 2013, when Taxpayer owned a 50% interest, Taxpayer again reported Gila River's book costs to the Department. But this time, Taxpayer received tax documents with different full cash values for the facility, resulting in an approximately $1 million increase in value. Instead of valuing the facility under subsection (d)(i), the Department valued it under (d)(ii), which provides that if the buyer does not possess the cost information, the acquisition cost in an arm's length transaction should be used. A.R.S. § 42-14156(A)(6)(d)(ii).

         ¶5 Taxpayer contacted the Department and received updated tax documents, which reflected the higher full cash value for the facility as valued under subsection (d)(ii). The Department issued a notice of decision with the final full cash value as the higher amount for tax year 2013. Taxpayer appealed to the Board of Equalization, and the Board affirmed. Taxpayer timely appealed that determination to the tax court on January 11, 2013, naming only the Department as defendant. Four months later, the Department answered, but also moved to strike a portion of the complaint. Taxpayer responded soon after, but on May 14, the Department moved to dismiss the complaint for, as relevant, Taxpayer's failure to name and serve an indispensable party-Maricopa County, the county in which the facility was located. Taxpayer opposed the motion, arguing that the County did not need to be named a defendant to an action challenging the valuation of the facility because the tax was not yet due. Taxpayer nonetheless concurrently moved to add the County as a party pursuant to Arizona Rule of Civil Procedure 15(c).

         ¶6 The Department responded that Taxpayer could not add the County because the 60-day limitations period under A.R.S. § 42-16203(C) plus 120-day service period under Arizona Rule of Civil Procedure 4(i) had elapsed. Taxpayer replied that the proposed amendment nevertheless satisfied the requirements for relation back under Rule 15(c) because within the relevant time period, the County had sufficient notice to avoid prejudice in defending the merits and knew or should have known that it would have been named a party but for Taxpayer's mistake.

         ¶7 Taxpayer also argued that the Department should be estopped from asserting its argument because it had waited until the relevant time period had elapsed before filing its motion to dismiss. The Department had sought several extensions to file its answer, had filed numerous papers with the court, and had conversations with opposing counsel, but then waited until the time period expired before asserting that the County was a necessary party. Taxpayer further alleged that had the Department complied with Arizona Rule of Civil Procedure 12(b) to timely disclose its defenses, Taxpayer would have promptly added and served the County within the relevant time period. After oral argument, the tax court withheld ruling on the pending motions and allowed Taxpayer to conduct discovery on whether the County had notice.

         ¶8 While the tax year 2013 appeal was pending, Taxpayer appealed its tax year 2014 full cash value directly to the tax court in October 2013. This appeal named both the Department and the County as defendants. Taxpayer then moved to consolidate the appeals over the Department and the County's objection, but the tax court denied the motion. The parties subsequently moved and cross-moved for partial summary judgment and summary judgment on whether the Department correctly applied A.R.S. § 42-14156 to Taxpayer's facility for tax years 2013 and 2014.

         ¶9 Meanwhile, after discovery for the tax year 2013 appeal had concluded, the tax court granted Taxpayer's motion to amend the tax year 2013 complaint. The court ruled that the County had received notice sufficient to satisfy Rule 15(c). The court also concluded that neither the Department nor the County suffered prejudice by allowing relation back, but urged counsel "to make sure taxing jurisdictions are properly named in any action for a refund." Taxpayer filed and served an amended complaint to the County. The County then unsuccessfully moved to dismiss for lack of subject matter jurisdiction and failure to name and serve an indispensable party.

         ¶10 After briefing and oral argument on the summary judgment motions, the tax court granted Taxpayer's motion for summary judgment and denied the Department's cross-motion for summary judgment. The court concluded that the Department should have valued Taxpayer's facility under subsection (d)(i), not (d)(ii). The court found that because Taxpayer "'acquired' the facility 'from another taxpayer' and that [it] 'ha[d] possession of the cost information' - in this case the cost of Gila River Power Station's 'acquiring the property in an arm's length transaction'- the valuation [wa]s controlled by [subsection (d)(i)]." The court also found that although the information Taxpayer received when it acquired the facility did not contain the details that the original owners might presumably have possessed, it was still "cost information" as used in subsection (d).

         ¶11 Taxpayer then appealed its tax year 2015 full cash value directly to the tax court, naming both the Department and the County as defendants. After receiving the court's ruling for the tax year 2013 appeal, the parties agreed to consolidate the appeals for tax years 2013, 2014, and 2015. The court subsequently issued a judgment-with language reserving the Department and the County's rights to pursue an appeal-and then an amended judgment awarding attorneys' fees and costs to Taxpayer. The Department and the County appealed the amended judgment. After the tax court entered the final judgment with Arizona Rule of Civil Procedure 54(c) finality language, the appeal proceeded.

         DISCUSSION

         1. The Valuation Statute

         ¶12 The Department argues that the tax court incorrectly applied the substantive law to the undisputed facts by interpreting the cost of acquiring a facility in an arm's length transaction as "cost information" in A.R.S. § 42-14156. Summary judgment may be granted when no genuine issue of material fact exists, and the moving party is entitled to judgment as a matter of law. Ariz. R. Civ. P. 56(c)(1). When the material facts are undisputed, our role is to determine whether the tax court correctly applied the substantive law to those facts. Duke Energy Arlington Valley, LLC v. Ariz. Dep't of Revenue, 219 Ariz. 76, 77 ¶ 4, 193 P.3d 330, 331 (App. 2008). We review de novo the tax court's grant of summary judgment. Scottsdale/101 Assocs., LLC v. Maricopa County, 238 Ariz. 291, 292 ¶ 7, 359 P.3d 1035, 1036 (App. 2015). We likewise review de novo the tax court's construction of applicable statutes. See Chevron U.S.A. v. Ariz. Dep't of Revenue, 238 Ariz. 519, 520 ¶ 6, 363 P.3d 136, 137 (App. 2015).

         ¶13 The primary goal in statutory interpretation is to effectuate the Legislature's intent, General Motors Corp. v. Maricopa County, 237 Ariz. 337, 339 ¶ 8, 350 P.3d 841, 843 (App. 2015), with the statute's plain language as the most reliable indicator of its meaning, Sempre Ltd. P'ship v. Maricopa County, 225 Ariz. 106, 108 ¶ 5, 235 P.3d 259, 261 (App. 2010). We consider the statute as a whole, including its context within a broader statutory scheme. General Motors, 237 Ariz. at 339 ¶ 8, 350 P.3d at 843. A statute "is to be given such an effect that no clause, sentence or word is rendered superfluous, void, or contradictory or insignificant." Guzman v. Guzman, 175 Ariz. 183, 187, 854 P.2d 1169, 1173 (App. 1993). We generally "liberally construe statutes imposing taxes in favor of taxpayers." CCI Europe, Inc. v. Ariz. Dep't of Revenue, 237 Ariz. 50, 52 8, 344 P.3d 352, 354 (App. 2015). As discussed below, because the tax court correctly applied the substantive law to the facts, Taxpayer was entitled to judgment as a matter of law on the 2014 and 2015 appeals. Accordingly, the tax court did not err in granting summary judgment in Taxpayer's favor and denying summary judgment to the Department and the County for the 2014 and 2015 appeals.

         ¶14 In Arizona, an "electric generation facility" is "all land, buildings and personal property that is situated in this state and that is used or useful for the generation of electric power." A.R.S. § 42-14156(B)(1). The valuation of these facilities is the sum of the values of (1) the land used in operating the facility, (2) the real property improvements to the facility, and (3) the personal property in the facility. A.R.S. § 42-14156(A)(1)-(3). Specifically, the value of land is "the cost to the current owner as of December 31 of the preceding calendar year"; the value of real property improvements is "the cost multiplied by valuation factors prescribed by tables adopted by the department"; and the value of personal property is "the cost multiplied by the valuation factors as prescribed by the department" with adjustment for the assessment year. A.R.S. § 42-14156(A)(1)-(3). For purposes of valuation, the statute lists the following methods for determining cost:

(a) "Cost" means the cost of constructing the property or acquiring the property in an arm's length ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.