R.O.I. PROPERTIES LLC, et al., Plaintiffs/Appellants,
BETH FORD, et al., Defendants/Appellees.
from the Arizona Tax Court No. TX2017-000016 The Honorable
Christopher T. Whitten, Judge.
& Nach, PC, Phoenix By Stuart Rodgers Counsel for
Plaintiff/Appellant R.O.I. Properties, LLC
Engelman Berger PC, Phoenix By Scott B. Cohen, Bradley D.
Pack Counsel for Plaintiff/Appellant Compass Bank
County Attorney's Office, Tucson By Andrew L. Flagg
Counsel for Defendants/Appellees Beth Ford, Bill Ford and
Kent E. Cattani delivered the opinion of the Court, in which
Presiding Judge Jennifer B. Campbell and Judge Paul J.
ROI Properties LLC and Compass Bank (collectively,
"Taxpayers") appeal the tax court's judgment
dismissing their complaint in which they asserted claims for
refund of property taxes paid, declaratory judgment, and
mandamus relief, all premised on an alleged entitlement to
the charter school exemption for the 2015 tax year. Because
the charter schools previously operating on the property
ceased operations in May 2015, the property was not exempt
for the 2015 tax year, and we thus affirm.
AND PROCEDURAL BACKGROUND
Under Arizona Revised Statutes ("A.R.S.") §
42-11104(C)(1), property owned by a § 501(c)(3)
nonprofit organization that operates as a charter school is
exempt from taxation if the property is used for education
and not used or held for profit. Luz Social Services, Inc., a
qualifying nonprofit corporation, owned three parcels of real
property (the "Property") in Pima County, where it
operated nonprofit charter schools.
Luz filed for bankruptcy protection in April 2014, at which
time the Property became part of the bankruptcy estate,
subject to the automatic bankruptcy stay. See 11
U.S.C. §§ 362(a), 541(a)(1). Compass, one of
Luz's creditors and the beneficiary of a deed of trust on
the Property, sought leave to pursue a sale of the Property.
In February 2015, the bankruptcy court granted limited stay
relief and authorized Compass to sell the property, but
further ordered that the schools could continue to operate
until May 29 and that no sale could be completed before that
date. As part of this process, ROI was appointed
as receiver with respect to the Property.
The schools ceased all operations on May 29, 2015. Although
the Pima County Assessor had classified the Property as tax
exempt under the charter school exemption and had applied the
exemption through the 2014 tax year (during which time the
schools had remained in continuous operation), the Assessor
did not apply the exemption for the 2015 tax year.
Accordingly, 2015 property taxes were fixed, levied, and
assessed against the Property (which remained part of the
bankruptcy estate); the taxes went unpaid, and the first
installment became delinquent as of November 2, 2015.
See A.R.S. § 42-18052(A)-(B).
The Property was eventually sold to a third-party on April
28, 2016. The next day, in conjunction with closing the sale
(and timely as to the second installment of 2015 taxes), Luz
(through ROI) paid the full amount of 2015 taxes owed on the
Property (including interest on the delinquent first
installment), totaling over $180, 000. See A.R.S.
§ 42-18052(B) (second installment not delinquent until
May 1 after close of tax year).
Less than one year later, in April 2017, Taxpayers filed a
tax claim in superior court, asserting that the Property
remained entitled to the charter school exemption for the
2015 tax year, seeking a declaratory judgment to that effect,
and requesting a refund of the 2015 taxes paid. See
A.R.S. § 42-11005(A). Taxpayers concurrently filed a
petition for a refund with the Pima County Board of
Supervisors, invoking a special administrative procedure
provided by the charter school exemption statute.
See A.R.S. § 42-11104(G) (directing that, upon
petition by a qualifying nonprofit charter school that failed
to timely file an eligibility affidavit but otherwise
qualified for the exemption, the county board of supervisors
order the county treasurer to refund property taxes paid
within the previous year and strike from the tax rolls any
unpaid taxes, interest, and penalties). After the Board
denied the petition, Taxpayers amended their tax court
complaint to add a special action claim seeking a writ of
mandamus directing the Board and the County Treasurer to
refund the 2015 tax payment.
The County Defendants (Pima County Treasurer, Pima County
Assessor, and Pima County) then moved to dismiss the
complaint, arguing that (1) the tax court lacked jurisdiction
over the illegal-tax claim because the 2015 taxes had not
been paid before delinquency as required by A.R.S. §
42-11004, (2) the tax court should decline to exercise
special action jurisdiction over the mandamus claim because
Taxpayers had access to an adequate remedy at law (an
illegal-tax claim), and (3) in the alternative, the complaint
failed to state a claim for which relief could be granted
because, as a matter of law, the Property was not exempt for
the 2015 tax year as it ...