from the Superior Court in Maricopa County Nos.
TX2013-000006; TX2013-000530; TX2014-000484 (Consolidated)
The Honorable Christopher T. Whitten, Judge.
Patton Boggs (US) LLP, Phoenix By Brian M. McQuaid, Sara K.
Regan, Kerryn L. Holman Co-Counsel for Plaintiff/Appellee.
Law Office, PLLC, Phoenix Domingos R. Santos, Jr., Co-Counsel
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.
RANDALL M. HOWE, JUDGE.
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.
AND PROCEDURAL HISTORY
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.
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
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).
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).
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.
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.
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.
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
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).
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.
The Valuation Statute
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).
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
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