Opinion
1 CA-TX 12-0004
01-03-2013
SHR SCOTTSDALE X, L.L.C., Plaintiff/Appellant, v. MARICOPA COUNTY, a body politic, Defendant/Appellee
Mark Hyatt Tynan, Attorney at Law By Mark Hyatt Tynan Law Offices of Don C. Wilkinson By Don C. Wilkinson Co-counsel for Plaintiff/Appellant Helm, Livesay & Worthington, LTD By Roberta S. Livesay Raushanah Daniels Attorneys for Defendant/Appellee
NOTICE: THIS DECISION DOES NOT CREATE LEGAL PRECEDENT AND MAY NOT BE CITED
EXCEPT AS AUTHORIZED BY APPLICABLE RULES.
See Ariz. R. Supreme Court 111(c); ARCAP 28(c);
Ariz. R. Crim. P. 31.24
MEMORANDUM DECISION
(Not for Publication -
Rule 28, Arizona Rules of
Civil Appellate Procedure)
Appeal from the Arizona Tax Court
Cause No. TX2006-000429
The Honorable Dean M. Fink, Judge
AFFIRMED
Mark Hyatt Tynan, Attorney at Law
By Mark Hyatt Tynan
Scottsdale Law Offices of Don C. Wilkinson
By Don C. Wilkinson
Co-counsel for Plaintiff/Appellant
Phoenix Helm, Livesay & Worthington, LTD
By Roberta S. Livesay
Raushanah Daniels
Attorneys for Defendant/Appellee
Tempe DOWNIE, Judge ¶1 SHR Scottsdale X, L.L.C. ("Taxpayer") appeals from the tax court's grant of summary judgment to Maricopa County ("the County") and from the denial of its motion for new trial.Finding no error, we affirm.
The notice of appeal states that Taxpayer is appealing the grant of summary judgment and the denial of its motion for new trial, although the opening brief suggests Taxpayer is only appealing the denial of its motion for new trial. Because the underlying legal issues are the same, and Taxpayer does not advance different arguments regarding the two rulings, our substantive discussion focuses on the summary judgment ruling and accords Taxpayer the benefit of the de novo standard of review. See Andrews v. Blake, 205 Ariz. 236, 240, ¶ 12, 69 P.3d 7, 11 (2003) (grant of summary judgment reviewed de novo); Englert v. Carondelet Health Network, 199 Ariz. 21, 25, ¶ 5, 13 P.3d 763, 767 (App. 2000) (denial of motion for new trial reviewed for abuse of discretion).
BACKGROUND
¶2 The improvements at issue in this litigation, which include a resort hotel ("Improvements"), are part of the Fairmont Scottsdale Princess. In 1985, Taxpayer's predecessor-in-interest, the Scottsdale Princess Partnership (the "Partnership"), signed a 99-year ground lease (the "Lease") with the City of Scottsdale (the "City") for the land on which the Improvements are located. The Lease states that "Title to the Improvements . . . shall be and remain in Lessee until the expiration of the Term, unless sooner terminated as herein provided." The Partnership built the Improvements in accordance with the Lease. ¶3 In 1992, the tax court conducted a bench trial in a lawsuit filed by the Partnership that challenged property tax assessments for the Improvements. The court ruled that the Partnership owned the Improvements and was therefore liable for the taxes at issue. The court rejected the Partnership's contention that it held only a possessory interest in the Improvements, ruling in relevant part:
First, the Court finds that, contrary to The Princess' argument, it did "own" the improvements on the leased land. Second, because The Princess owned the improvements, the improvements are not possessory interests under A.R.S. §42-681 (those interests are things held by someone other than the owner of the improvements). Third, the improvements are personal property.The tax court entered final judgment in accordance with this ruling and others issued in that litigation. See Scottsdale Princess P'ship v. Maricopa County, 185 Ariz. 368, 372, 916 P.2d 1084, 1088 (App. 1995). The Partnership appealed but did not challenge the ruling that it, not the City, owned the Improvements. See id. at n.4; Scottsdale Princess P'ship v. Dep't of Revenue, 191 Ariz. 499, 500 n.1, 958 P.2d 15, 16 n.1 (App. 1997). ¶4 In 2006, Taxpayer purchased the "Land and Improvements" from the Partnership. In connection with that transaction, the Partnership assigned "all of its right, title, claim and interest" under the Lease to Taxpayer. Taxpayer then sought a refund for the 2006 tax year on the theory that the City owned the Improvements (Count One). Alternatively, Taxpayer argued it was entitled to Class Nine status, with a 1% assessment ratio pursuant to Arizona Revised Statutes ("A.R.S.") section 42-12009 (Count Two). ¶5 The parties filed cross-motions for summary judgment regarding Count One, and the County filed an unopposed motion for summary judgment as to Count Two. The tax court granted summary judgment to the County on both counts. It denied Taxpayer's motion for new trial relating to Count One. Taxpayer filed a timely notice of appeal.
DISCUSSION
¶6 We review res judicata and collateral estoppel issues de novo as questions of law. Better Homes Constr., Inc. v. Goldwater, 203 Ariz. 295, 298, ¶ 10, 53 P.3d 1139, 1142 (App. 2002). We will affirm the grant of summary judgment if the tax court was correct for any reason. See Ariz. Bd. of Regents v. State ex rel. State of Ariz. Pub. Safety Ret. Fund Manager Adm'r, 160 Ariz. 150, 154, 771 P.2d 880, 884 (App. 1989). ¶7 "Under the doctrine of res judicata, a judgment on the merits in a prior suit involving the same parties or their privies bars a second suit based on the same cause of action." Pettit v. Pettit, 218 Ariz. 529, 531, ¶ 4, 189 P.3d 1102, 1104 (App. 2008). Collateral estoppel generally applies when: (1) an issue was actually litigated in a prior proceeding, (2) there was a full and fair opportunity to litigate the issue, (3) resolution of the issue was essential to the earlier decision, (4) there was a final judgment on the merits, and (5) there is common identity of the parties. Irby Constr. Co. v. Ariz. Dep't of Revenue, 184 Ariz. 105, 107, 907 P.2d 74, 76 (App. 1995) (citations omitted). ¶8 Applying these factors, we conclude Taxpayer is collaterally estopped from arguing that the City owns the Improvements. The parties or their privies actually litigated whether the City or the Partnership owned the Improvements. See Scottsdale Mem'l Health Sys., Inc. v. Clark, 157 Ariz. 461, 466, 759 P.2d 607, 612 (1988) ("Whether by way of res judicata or collateral estoppel, the preclusive effect of a judgment is limited to parties and persons in privity with parties."); Davis v. Kleindienst, 64 Ariz. 251, 259, 169 P.2d 78, 83 (1946) ("[P]rivity exits between two successive holders when the latter takes under the earlier by grant."); Longshaw v. Corbitt, 4 Ariz. App. 408, 413, 420 P.2d 980, 985 (1966) (privity exists when there is successive ownership of property from a common source). Taxpayer has not suggested the parties lacked a full and fair opportunity to litigate that issue. The tax court's 1993 ruling, adopted in a final judgment, included an express and essential finding that the Partnership owned the Improvements. See Scottsdale Princess, 185 Ariz. at 372, 916 P.2d at 1088. ¶9 Taxpayer contends there have been substantive changes in the law since the tax court's 1993 ruling, such that the ownership analysis and conclusion would be materially different today. We conclude otherwise. ¶10 The Restatement (Second) of Judgments recognizes an exception to the application of collateral estoppel when the issue "is one of law and . . . a new determination is warranted in order to take account of an intervening change in the applicable legal context." § 28(2)(b) (1982). This exception may apply when "a judicial declaration intervening between the two proceedings . . . change[d] the legal atmosphere as to render the rule of collateral estoppel inapplicable." Comm'r of Internal Revenue v. Sunnen, 333 U.S. 591, 600 (1948), superseded by statute on other grounds as stated in Vetrano v. Comm'r of Internal Revenue, 116 T.C. 272 (2001). ¶11 The tax court's 1993 ruling relied on Maricopa County v. Novasic, 12 Ariz. App. 551, 473 P.2d 476 (1970). In Novasic, the taxpayer challenged property tax assessments for improvements that his predecessor-in-interest built on land leased from the City of Phoenix. Id. at 552, 473 P.2d at 477. The underlying lease did not state whether the improvements were the lessee's or the lessor's property. Id. at 553, 473 P.2d at 478. In the absence of such a provision, the court was required to analyze various lease terms to make the ownership determination, ultimately concluding the lease revealed an intent of the parties to treat the City as owner of the improvements during the lease term. Id. at 553-54, 473 P.2d at 478-49. The court concluded: "We hold because of the absence of clear and express language in this lease evidencing an intent to treat the improvements on the real property as personal property with ownership in the lessee, that the lease intended ownership of all the improvements in the lessor as real property during the term of the lease." Id. at 554-55, 473 P.2d at 479-80. ¶12 Post-Novasic decisions cited by Taxpayer do not compel a different analysis than that undertaken by the tax court in 1993. For example, Cutter Aviation, Inc. v. Arizona Department of Revenue, 191 Ariz. 485, 492, 958 P.2d 1, 8 (App. 1997), reiterates the rule cited by Novasic that parties may, by agreement, alter the general rule that improvements on leased land belong to the lessor and not the lessee. The leases in Cutter "contain[ed] no language that clearly and expressly provides that the improvements are to be treated as being owned by the tenants." Id. The court was thus required to consider the lease as a whole to make the ownership determination. Id. In the case at bar, on the other hand, the Lease expressly and unambiguously states that title to the Improvements "shall be and remain in Lessee until the expiration of the Term." ¶13 Similarly, in Havasu Springs Resort Co. v. La Paz County, 199 Ariz. 349, 18 P.3d 143 (App. 2001), no lease provision overrode the general rule that lessors own permanent improvements on leased property. Id. at 350, ¶¶ 5-6, 18 P.3d at 144. Indeed, the lease at issue defined the taxpayer's interest in one provision as merely possessory. Id. at 351, ¶ 9, 18 P.3d at 145. ¶14 In Calpine Construction Finance Co. v. Arizona Department of Revenue, 221 Ariz. 244, 211 P.3d 1228 (App. 2009), the lease stated that improvements on the leased land were the property of the lessee. Id. at 246, ¶ 3, 211 P.3d at 1230. The court discussed Novasic, recognizing that "parties can abrogate the general rule that the lessor owns improvements built by the lessee by expressly agreeing to treat the improvements as belonging to the lessee." Id. at 248, ¶ 16, 211 P.3d at 1232. It also examined other terms of the lease that were consistent with the parties' express determination of ownership. Id. at 248-49, ¶¶ 17-22, 211 P.3d at 1232-33. ¶15 Taxpayer focuses on Lease provisions that, absent an unambiguous contractual delineation of ownership, might be instructive in determining who owns the Improvements. None of these provisions, though, contradicts or vitiates the clear agreement of the parties that the lessee owns the Improvements during the lease term. ¶16 Finally, Taxpayer's reliance on the Government Property Lease Excise Tax is unpersuasive. As the County notes, this tax applies only to government-owned improvements and is payable by the "prime lessee." A.R.S. §§ 42-6201(2), (4), -6204(B).
We do not address Taxpayer's reliance on unpublished decisions of the tax court, which lack precedential value. See ARCAP 28(c); Sw. Airlines Co. v. Ariz. Dep't of Revenue, 197 Ariz. 475, 478, ¶¶ 11-12, 4 P.3d 1018, 1021 (App. 2000).
Cutter rejected the taxing authority's contention that Novasic was "outdated precedent." 191 Ariz. at 492, 958 P.2d at 8.
Moreover, under the sales contract with the Partnership, Taxpayer purchased "the buildings, structures, fixtures and other improvements."
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CONCLUSION
¶17 We affirm the tax court's grant of summary judgment to the County and the denial of Taxpayer's motion for new trial. We deny Taxpayer's request for an award of attorneys' fees incurred on appeal.
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MARGARET H. DOWNIE, Judge
CONCURRING: _____________
JOHN C. GEMMILL, Presiding Judge
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DIANE M. JOHNSEN, Judge