Opinion
2 CA-CV 2023-0211
10-04-2024
Richard H. Williams, Plaintiff/Appellee, v. State of Arizona, ex rel. Arizona Registrar of Contractors, Defendant/Appellant.
JR Standring Attorney at Law, Tucson By James R. Standring Counsel for Plaintiff/Appellee Kristin K. Mayes, Arizona Attorney General By Shyla R. Freestone, Assistant Attorney General, Phoenix Counsel for Defendant/Appellant
Not for Publication - Rule 111(c), Rules of the Arizona Supreme Court
Appeal from the Superior Court in Cochise County No. S0200CV20100481 The Honorable Jason A. Lindstrom, Judge
JR Standring Attorney at Law, Tucson By James R. Standring Counsel for Plaintiff/Appellee
Kristin K. Mayes, Arizona Attorney General By Shyla R. Freestone, Assistant Attorney General, Phoenix Counsel for Defendant/Appellant
Judge Kelly authored the decision of the Court, in which Presiding Judge O'Neil and Judge Vasquez concurred.
MEMORANDUM DECISION
KELLY, Judge
¶1 The state, through the Arizona Registrar of Contractors, appeals from the superior court's entry of summary judgment granting it thirty days to redeem a tax lien certificate held by appellee Richard Williams. Specifically, the state urges that the court erred in directing that its own superior judgment lien against the property would be foreclosed if it did not first redeem Williams's lien. We vacate the court's order and remand for further proceedings consistent with this decision.
Factual and Procedural Background
¶2 The parties do not dispute the material facts in this case. Curtis Kuhn failed to pay property taxes on a parcel of land located in Cochise County between 2008 and 2018. In May 2019, Williams purchased from the Cochise County Treasurer the tax liens on Kuhn's property by paying its unpaid taxes, interest, and penalties. Williams then filed a complaint in October 2019 to initiate foreclosure proceedings on Kuhn's property, wherein he acknowledged the state held a 2016 judgment lien against the same property through the Arizona Registrar of Contractors. Williams did not properly serve the state until May 2022. The state filed an answer asserting that Williams's right to foreclose his own tax lien certificate did not enable him to foreclose the state's superior judgment lien.
¶3 The superior court ordered a summary judgment briefing schedule, and each party submitted a memorandum of law. The court ruled in favor of Williams, and while acknowledging that the state held a superior lien to Williams's tax lien certificate, the state nevertheless had thirty days "to redeem the tax certificate from [Williams]." The court directed that, if the state failed to redeem the tax certificate in that timeframe, its interest in the property "shall be foreclosed." The court later certified its order as final pursuant to Rule 54(b), Ariz. R. Civ. P. This appeal followed. We have jurisdiction pursuant to A.R.S. §§ 12-120.21(A)(1) and 12-2101(A)(1).
Discussion
¶4 As noted above, the state argues the superior court erred by ordering that its judgment lien would be foreclosed unless it redeemed Williams's tax lien certificate within thirty days. The material facts are not in dispute and we review the legal issues de novo. Pinal Vista Props., L.L.C. v. Turnbull, 208 Ariz. 188, ¶ 6 (App. 2004). We likewise review questions of statutory interpretation de novo. BSI Holdings, LLC v. Ariz. Dep't of Transp., 244 Ariz. 17, ¶ 9 (2018).
¶5 Unpaid property taxes become a lien on the property. Bauza Holdings, L.L.C. v. Primeco, Inc., 199 Ariz. 338, ¶ 2 (App. 2001). A county treasurer may sell a tax lien at a judicial sale to secure payment of any delinquent taxes. Turnbull, 208 Ariz. 188, ¶ 7; see also A.R.S. § 42-18101. "Upon a tax lien sale, the treasurer issues the purchaser a certificate of purchase, known as a tax lien certificate, reciting, among other things, the tax year or years for which the lien was sold." Bauza Holdings, 199 Ariz. 338, ¶ 2. Following this sale, the property owner may redeem, by paying off with interest, the tax lien within three years after the date of sale. A.R.S. §§ 42-18151 to 42-18153. If the property owner does not redeem the lien within three years, the "purchaser may bring an action in the superior court to foreclose the right to redeem." Bauza Holdings, 199 Ariz. 338, ¶ 5.
The record is unclear as to the precise timing of the lien's sale, or whether Williams's foreclosure action complied with the timeliness requirements of A.R.S. § 42-18201(A). However, neither party raised this issue before the superior court or on appeal. Consequently, we do not address it. See BMO Harris Bank N.A. v. Espiau, 251 Ariz. 588, ¶ 25 (App. 2021) (arguments not raised below are waived on appeal).
¶6 A property tax lien is "superior to all other liens and encumbrances on the property, except: (a) [l]iens or encumbrances held by this state" and "(b) [l]iens for taxes accruing in any other years." A.R.S. § 42-17153(C)(3). Liens held by the state are "superior," Turnbull, 208 Ariz. 188, ¶ 12, while tax liens in different years are "in parity," Sun Valley Fin. Servs. of Phx., L.L.C. v. Guzman, 212 Ariz. 495, ¶ 4 (App. 2006). Priority is defined as a "creditor's right to have a claim paid before other creditors of the same debtor receive payment." Lewis v. Debord, 238 Ariz. 28, ¶ 18 (2015) (quoting Black's Law Dictionary (10th ed. 2014)). "Tax liens enjoy superpriority over all other liens except those held by the state." Bauza Holdings, 199 Ariz. 338, ¶ 16; see also Turnbull, 208 Ariz. 188, ¶¶ 12-13 (acknowledging Arizona law has historically treated an encumbrance held by the state as superior to private tax liens).
¶7 Williams asserted below that his purchase of the tax lien certificate enabled him to foreclose on all interest holders on the parcel, including the state unless redeemed by the state. Accordingly, he argued the state's judgment lien only provided the state the ability to redeem by paying off Williams's tax lien in order to acquire title to the property. The state, citing § 42-17153(C)(3), argued that because the state held a superior lien, its interest could not be foreclosed, and that Williams could only take title to the property subject to the state's lien.
¶8 In granting Williams's motion for summary judgment, the superior court acknowledged that § 42-17153(C)(3) "clearly gives the State's lien priority over [Williams's] tax lien." However, the court interpreted "this superior lien as entitling to the State a redemption right over the property, not a permanent lien over the title as to all future title holders." The court additionally reasoned that extending the state's lien as anything beyond a tax redemption "would lead to an absurd result that would run afoul of the government's ability to collect taxes and quiet title after tax defaults." Therefore, it ordered that the state had thirty days "to redeem the tax certificate from [Williams]," or the state's interest in the property "shall be foreclosed."
¶9 The state reasserts on appeal that Williams, being a private tax lien holder, cannot foreclose the state's superior judgment lien. Williams asserts the state's argument "is contrary to state law, would be inimical to the purpose of tax liens, would result in an absolute loss of revenue to Cochise County and, theoretically, create ambiguity for other counties regarding lien sales."
¶10 It is well-settled in Arizona law that "[o]nce attached, a judgment lien remains in place until it expires, is removed, or the judgment is satisfied." Lewis, 238 Ariz. 28, ¶ 6. A tax lien holder cannot extinguish a competing tax lien holder's lien by foreclosure because "one tax lien [does not have] priority over another." Bauza Holdings, 199 Ariz. 338, ¶ 23. Therefore, a private tax lien holder cannot extinguish a superior state lien by foreclosure. See id.; § 42-17153(C)(3).
¶11 The state's judgment lien against Kuhn's property did not expire, was not removed, and has not been satisfied. Therefore, it remains with the land and Williams takes title to the property subject to it. See Lewis, 238 Ariz. 28, ¶¶ 19-20; see also Bauza Holdings, 199 Ariz. 338, ¶ 23. The superior court's ruling that the state's judgment lien would be foreclosed if the state did not pay Williams the full value of his tax lien certificate within thirty days is contrary to legal authority. See Bauza Holdings, 199 Ariz. 338, ¶ 23.
Attorney Fees and Costs
¶12 Williams requests his attorney fees and costs on appeal under A.R.S. § 12-349. Because he is not the successful party, we deny Williams's request for attorney fees. See id. However, as the prevailing party on appeal, we award the state its reasonable costs on appeal upon compliance with Rule 21, Ariz. R. Civ. App. P. See A.R.S. § 12-341.
Disposition
¶13 We vacate the superior court's entry of summary judgment in favor of Williams, and remand the case for further proceedings consistent with this decision.