Edw. C. Levy Co. v. Maricopa County

NOTICE: NOT FOR OFFICIAL PUBLICATION.
UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT
PRECEDENTIAL AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.

IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE

EDW. C. LEVY CO, a Michigan corporation,
Plaintiff/Appellant,

v.

MARICOPA COUNTY, a political subdivision of the State of Arizona,
Defendant/Appellee.

No. 1 CA-TX 14-0007
FILED 5-7-2015

Appeal from the Superior Court in Maricopa County
No. TX2012-000384
The Honorable Dean M. Fink, Judge

VACATED AND REMANDED

COUNSEL

The Lenihan Law Firm, PC, Tucson
By Stephen J. Lenihan
Counsel for Plaintiff/Appellant

Maricopa County Attorney’s Office, Phoenix
By R. Neil Miller
Counsel for Defendant/Appellee
 EDW. C. LEVY CO v. MARICOPA COUNTY
Decision of the Court

MEMORANDUM DECISION

Judge Lawrence F. Winthrop delivered the decision of the Court, in which
Presiding Judge Kent E. Cattani and Judge Peter B. Swann joined.

W I N T H R O P, Judge:

¶1 Plaintiff/Appellant Edw. C. Levy Co. (“Taxpayer”) appeals
the decision of the tax court granting summary judgment in favor of the
Defendant/Appellee Maricopa County determining that Taxpayer could
not utilize the error correction statutes to correct an error in the
classification of its real property. For the following reasons, we vacate the
decision of the tax court and remand for further proceedings.

FACTS AND PROCEDURAL HISTORY

¶2 Taxpayer is a sand and gravel company that owns a mined-
out gravel pit in Maricopa County (the “property”). The parties agree that
Taxpayer stopped mining the property in 2006. For tax years 2008 through
2011, the Maricopa County Assessor (the “Assessor”) classified and
assessed the property as commercial property. In 2011, Taxpayer filed a
notice of claim, pursuant to Arizona Revised Statutes (“A.R.S.”) section 42-
16254 (2015)1, asking the Assessor to correct the property’s classification
from class one (commercial or industrial) to class two (other) for tax years
2008 through 2011 because the property was not used for commercial
purposes.2 See A.R.S. §§ 42-16254(A), -16256(B) (authorizing a taxpayer to

1 Absent material revisions after the relevant dates, we cite the current
version of a statute unless otherwise indicated.

2 Arizona law establishes nine classes of property and prescribes
specific assessment ratios for each class. See A.R.S. §§ 42-12001 to -12009;
42-15001 to -15009. As relevant to this appeal, class one encompasses
property devoted to commercial or industrial use. See A.R.S. § 42-12001(12).
Class two encompasses “[a]ll other real property and improvements to
property, if any, that are not included in class one, three, four, six, seven or
eight,” including vacant land. See A.R.S. § 42-12002(1)(e). Class two has a
lower assessment ratio than class one and is, therefore, taxed at a lower rate.
See A.R.S. §§ 42-15001, -15002.

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 EDW. C. LEVY CO v. MARICOPA COUNTY
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file a notice of claim to correct a property tax error for the current year and
three preceding years). After both the Assessor and the State Board of
Equalization denied its claim, Taxpayer filed a complaint in tax court
pursuant to § 42-16254(G).

¶3 The parties filed cross-motions for summary judgment. The
tax court denied Taxpayer’s motion and granted the County’s motion,
concluding that relief under the error correction statutes was not available
because Taxpayer “should have known the error existed” in time to file an
appeal during the annual appeal process. After the tax court denied its
motion for new trial, Taxpayer timely appealed. We have jurisdiction
pursuant to A.R.S. § 12-2101(A)(1).

ANALYSIS

¶4 We review the tax court’s grant of summary judgment de novo
to determine if there are “any genuine issues of material fact and if the trial
court correctly applied the law.” Aida Renta Trust v. Maricopa Cnty., 221
Ariz. 603, 608, ¶ 5, 212 P.3d 941, 946 (App. 2009), as amended (July 22, 2009)
(citation omitted). We view the facts in the light most favorable to
Taxpayer. See id. Applying that standard, we must determine whether the
tax court properly concluded that Taxpayer could not bring an error
correction claim because it had “constructive knowledge” of the error in
time to file an annual appeal. In so doing, we are mindful of the general
rule that courts will liberally construe statutes imposing taxes in favor of
taxpayers and against the government. See City of Phoenix v. Borden Co., 84
Ariz. 250, 252–53, 326 P.2d 841, 843 (1958) (holding that statutes establishing
property tax liability are “most strongly construed against the government
and in favor of the taxpayer”).

I. Taxpayer Was Not Required to Raise the Error During the Annual
Appeal Process.

¶5 Under Arizona law, the Assessor is charged with annually
valuing and assessing the majority of real property in the County.3 See

3 Section 42-13051, which defines the Assessor’s statutory duty,
provides in relevant part:

A. Not later than December 15 of each year the county
assessor shall identify by diligent inquiry and examination
all real property in the county that is subject to taxation

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A.R.S. § 42-13051. After the Assessor values and classifies the property, he
mails a notice of value to each taxpayer before March 1 of the year
preceding the tax year. See A.R.S. § 42-15101(A)-(B). After receiving the
notice of value, a taxpayer has sixty days to file an administrative appeal
with the Assessor challenging the valuation or classification of the property.
See A.R.S. §§ 42-15104(1), -16051(A), (D). Alternatively, a taxpayer may file
a direct appeal to tax court on or before December 15 of the same year. See
A.R.S. §§ 42-15104(2), -16201(A).

¶6 Above and beyond a taxpayer’s statutory right to appeal
during the annual appeal process, a taxpayer also has a statutory right to
correct a property tax error retroactively. See A.R.S. §§ 42-16251 to -16259.
The “error correction statutes” were enacted in 1994 to supplement the pre-
existing statutes authorizing annual property tax appeals. See 1994 Ariz.
Sess. Laws, ch. 323, § 53 (2d Reg. Sess.).

¶7 Pursuant to § 42-16254, a taxpayer may initiate an error
correction proceeding by filing a notice of claim. A.R.S. § 42-16254(A) (“If
a taxpayer believes that the taxpayer’s property has been assessed
improperly as a result of a property tax error, the taxpayer shall file a notice
of claim with the appropriate tax officer . . . .”). In addition, the error
correction statutes require the county assessor to correct known property
tax errors. A.R.S. § 42-16252(A) (2009) (“[I]f a county assessor or the
department determines that any real or personal property has been
assessed improperly as a result of a property tax error, the county assessor

and that is not otherwise valued by the department as
provided by law.

B. The assessor shall:
...
2. Determine the full cash value of all such property as of
January 1 of the next year by using the manuals furnished and
procedures prescribed by the department.
...
C. In identifying property pursuant to this section, the
assessor shall use aerial photography, applicable department
of revenue records, building permits and other documentary
sources and technology.

A.R.S. § 42-13051.

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or department shall send the taxpayer a notice of error . . . .”).4 The
legislature limited the time period over which an error can be corrected to
the year in which the notice is filed and “the three immediately preceding
tax years.” A.R.S. § 42-16256(B).

¶8 At the time it enacted the error correction statutes, the
legislature clearly stated its intended purpose:

The purpose of section 27 of this act is to provide a
simple and expedient procedure for correcting of
errors occurring in assessing or collecting property
taxes, whether they inure to the benefit of the
taxpayer or the government. The present statutes do
not provide such a procedure and because of
conflicting court interpretations of such laws,
the purpose of section 31 of this act is to provide
such a mechanism and to make it work for both
taxpayers and the taxing authorities. Because of
budget limitations and other constraints, it is
necessary to limit the scope of such legislation
and to prescribe a time limit within which such
claims may be asserted and after which they are
forever barred.

1994 Ariz. Sess. Laws, ch. 323, § 53 (2d Reg. Sess.) (emphasis added). Our
primary goal in interpreting statutes is to fulfill the legislature’s purpose.
State v. McDermott, 208 Ariz. 332, 334, ¶ 5, 93 P.3d 532, 534 (App. 2004).
Particularly when the legislature “specifies its purpose in the session law
that contains the statute, it is appropriate to interpret the statutory
provisions in light of that enacted purpose.” Grand Canyon Trust v. Arizona
Corp. Comm’n, 210 Ariz. 30, 40, ¶ 43, 107 P.3d 356, 366 (App. 2005).
Accordingly, we interpret the error correction statutes in light of their
remedial purpose. Lyons v. State Bd. of Equalization, 209 Ariz. 497, 502, ¶ 21,
104 P.3d 867, 872 (App. 2005).

4 The legislature amended § 42-16252 in 2014 and replaced the terms
“county assessor” and “department” with “tax officer.” A.R.S. § 42-
16252(A) (2015).

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 EDW. C. LEVY CO v. MARICOPA COUNTY
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A. Section 42-16251 Defines Error to Include Classification
Errors.

¶9 Despite a taxpayer’s pre-existing statutory right to
prospectively challenge the classification of property by means of an annual
appeal, the legislature chose to define “error” to include errors in
classification:

“Error” means any mistake in assessing or collecting property
taxes resulting from:
...
(b) An incorrect designation or description of the use or
occupancy of property or its classification pursuant to chapter
12, article 1 of this title.

A.R.S. § 42-16251(3)(b) (emphasis added). Thereby, the legislature granted
taxpayers the right to correct classification errors retroactively going back
three years.

¶10 Our supreme court recently confirmed that classification
errors fall within the scope of the error correction statutes:

[W]e address the County’s argument that
[taxpayer] was not entitled to relief under the
error correction statute. Section 42–16251(3)
authorizes correction of “any mistake in
assessing or collecting property taxes” when the
error is caused by any circumstance listed in
subsections (3)(a) through (3)(e). The County
maintains that the court of appeals wrongly
concluded that the statute applies to the kind of
“errors” [taxpayer] alleged.

Subsection (3)(b) includes “[a]n incorrect
designation or description of the use or
occupancy of property or its classification.” The
court of appeals correctly concluded that
because [the property] had been wrongly
categorized under Class One, [taxpayer] could
avail itself of the error correction statute.

CNL Hotels and Resorts, Inc. v. Maricopa Cnty., 230 Ariz. 21, 25, ¶¶ 22-
23, 279 P.3d 1183, 1187 (2012) (citation omitted).

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 EDW. C. LEVY CO v. MARICOPA COUNTY
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¶11 In this case, Taxpayer’s complaint alleged as follows:

The Subject Property was classified for the tax
years involved as Class 1 (commercial property)
by the Maricopa County Assessor. The
property was, prior to the tax years involved, an
active part of a gravel extraction business. Since
2006, the Subject Property has been mined-out
and has not been part of a commercial activity
since that time. Accordingly, the Subject
Property should be classified as Class 2 (vacant
land).

Taxpayer’s claim falls squarely within the definition of “error” set forth in
§ 42-16251(3)(b).

B. The Error Correction Statutes Provide Relief Beyond the
Annual Appeal Process.

¶12 The County contends that “Taxpayer may not obtain error
correction relief because it knew or should have known of the alleged error
in sufficient time to assert it in a tax appeal for the applicable tax year.”
(Emphasis and punctuation omitted). Taxpayer argues that the County’s
position has “the impermissible effect of merging the error-correction
statutes into the annual appeal statutes and making the error-correction
statutes meaningless.”

¶13 In arguing that Taxpayer should have asserted the alleged
error as part of the annual appeal process, the County relies on our decision
in Pima County Assessor v. Ariz. State Bd. of Equalization, 195 Ariz. 329, 987
P.2d 815 (App. 1999). In Pima County, we considered whether a taxpayer
could utilize the error correction statutes to raise a classification error after
having previously filed an administrative appeal for the same tax year. See
id. at 331, ¶ 1, 987 P.2d at 817. We held that an error correction claim can be
adjudicated separately following the conclusion of an administrative
appeal. See id. at 820, ¶ 19, 987 P.2d at 334. As our decision in Pima County
reflects, the error correction statutes provide a means of correcting property
tax errors that is separate and apart from the annual appeal process.

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 EDW. C. LEVY CO v. MARICOPA COUNTY
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¶14 In Pima County, we analyzed § 42-16256(A), which provides
that:

In the case of real or personal property, the
correction of errors under this article is limited
to the period during which the current owner of
record held title to the property, if the owner is
a purchaser in good faith and without notice of
any error that could have caused proceedings to be
initiated to correct the tax roll when the owner
purchased the property.

A.R.S. § 42-16256(A) (emphasis added). We concluded that implicit in that
second clause of this statute, which specifically applies to new owners, “is
a requirement that taxpayers not delay in seeking redress if they are aware
of, or ought to be aware of, errors.” Pima County, 195 Ariz. at 336, ¶ 25, 987
P.2d at 822. From there, we inferred the following two principles relating
to the error correction statutes:

First, if the taxpayer knew of or reasonably
should have discovered an “error” within
A.R.S. section 42–16251(3) in sufficient time to
assert it through a tax appeal, then sections 42–
16251 to –16259 cannot later provide a remedy.
Second, if the “error” has escaped the taxpayer’s
attention despite the exercise of reasonable care
to discover it in time, sections 42–16251 to –
16259 can provide a remedy regardless of
whether the taxpayer prosecuted a tax appeal
for the tax year in question.

Id. at 336, ¶ 26, 987 P.2d at 822.

¶15 The present case is distinguishable from Pima County. First,
our interpretation of § 42-16256(A) applied to new owners only, and
Taxpayer here is the continued owner of the subject property. Second,
unlike the taxpayers in Pima County, Taxpayer had not previously filed an
administrative appeal. We believe the language from Pima County charging
a taxpayer with constructive knowledge is limited and only applicable
when an administrative appeal has been previously filed. This language
does not apply when no such appeal has occurred, as this would frustrate
the very purpose of the error correction statutes. In addition, nothing in the
record establishes that Taxpayer knew or should have known of this alleged

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error before 2011. To the contrary, Taxpayer’s general manager avowed
that: (1) tax consultants retained by Taxpayer did not detect the
classification error in time for an annual appeal; and (2) Taxpayer was not
aware of the error until 2011. Moreover, as the record reflects, the Assessor
provided no written guidelines for the classification of mined-out gravel
pits. While we affirm the general principle announced in Pima County that
taxpayers should not delay in seeking redress if they are aware of a
property tax error, we decline to extend the reach of that decision to impose
on Taxpayer in this case “constructive knowledge” of an alleged
classification error.5

¶16 After reviewing the classification statutes and the record in
this case, we respectfully disagree with the tax court’s conclusion that the
error was “glaringly obvious.” We do not find the classification of a mined-
out gravel pit to be obvious, and we decline to charge Taxpayer with
constructive knowledge of proper classification. Accordingly, Taxpayer
may proceed with its error correction claim in tax court.6

II. A.R.S. § 42-16255(B) Does Not Preclude Taxpayer’s Error
Correction Claim.

¶17 Relying on § 42-16255(B), the County alternatively argues that
“error correction relief is not appropriate when the taxpayer seeks an
independent review of the overall valuation or legal classification [of its

5 The tax court distinguished CNL Hotels from the present case by
reasoning that “[t]he legal issue governing classification in that case was a
complex one.” The error correction statutes, however, are not limited to the
correction of complex errors, but rather provide a remedy for the correction
of any error that satisfies the statutory definition. See § 42-16251(3).
6 In its decision, the tax court relied for guidance on our decision in
Church of Isaiah 58 Project of Ariz., Inc. v. La Paz County, 233 Ariz. 460, 314
P.3d 806 (App. 2013), review denied (Apr. 22, 2014). That case applies a
different set of statutes. There, we determined the taxpayer had waived its
claim for an exemption by failing to file a timely exemption request, as
required by statute. Id. at 463, ¶ 12, 314 P.3d at 809. In this case, Taxpayer
complied with all the applicable statutes and was not statutorily required
to take affirmative steps to preserve its error correction claim.

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property] and could have filed an appeal.” At the time Taxpayer filed its
complaint, § 42-16255(B) provided that:

This article does not authorize an independent
review of the overall valuation or legal classification
of property that could have been appealed pursuant
to article 2, 3, 4 or 5 of this chapter or chapter 19,
article 2 of this title. If an administrative or
judicial appeal is pending regarding the subject
property, the alleged error shall be adjudicated
as part of the administrative or judicial appeal
for the affected tax year. If a specific error of
fact, not previously known, was not addressed
in a prior appeal, an appeal may be brought
pursuant to this section.7

A.R.S. § 42-16255(B) (2009).8

¶18 In 2014, the legislature amended § 42-16255(B) to omit the first
sentence. See A.R.S. § 42-16255(B) (2015) (amended by S.B. 1352 (2d Reg.
Sess. 2014)). As part of those technical amendments, the legislature added
the following language to § 42-16256(D): “This article does not authorize
an independent review of the overall valuation or legal classification of
property that is not the result of an error as defined in § 42-16251.” A.R.S. § 42-
16256(D) (amended by S.B. 1352 (2d Reg. Sess. 2014)) (emphasis added).

¶19 “An amendment which, in effect, construes and clarifies a
prior statute will be accepted as the legislative declaration of the original
act.” City of Mesa v. Killingsworth, 96 Ariz. 290, 297, 394 P.2d 410, 414 (1964);
see also Ariz. State Senate, Fact Sheet for S.B. 1352 (2d Reg. Sess. 2014)
(noting that the purpose of the 2014 amendments were to make “various
technical and conforming changes”). Thus, while the amended version of
§ 42-16256 does not apply to the case at hand, which involves tax years 2008
through 2011, the amendment clarifies the legislature’s original intent and

7 The County also argues that Taxpayer’s claim is prohibited by the
last sentence of § 42-16255(B) because Taxpayer knew or should have
known about the error in time to bring an annual appeal. For the reasons
set forth above, we conclude that Taxpayer did not have such knowledge.

8 Prior to 2009, the statute did not include the phrase “or legal
classification.” A.R.S. § 42-16255(B) (2006).

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persuades us that the prior version of § 42-16255(B) does not prevent an
overall review of valuation or classification that results from the correction
of a statutorily defined error. See Police Pension Bd. v. Warren, 97 Ariz. 180,
187, 398 P.2d 892, 896 (1965) (“While subsequent legislation clarifying a
statute is not necessarily controlling on a court, it is strongly indicative of
the legislature’s original intent.”).

¶20 Again, we are mindful of the legislature’s stated purpose in
enacting the error correction statutes “to provide a simple and expedient
procedure for correcting of errors occurring in assessing or collecting
property taxes.” 1994 Ariz. Sess. Laws, ch. 323, § 53 (2d Reg. Sess.). To
adopt the County’s position that § 42-16255(B) prevents Taxpayer from
filing an error correction claim to correct this classification error would
undermine that legislative intent. State v. Seyrafi, 201 Ariz. 147, 150, ¶ 11,
32 P.3d 430, 433 (App. 2001) (holding that courts should “apply practical,
common sense constructions rather than hypertechnical ones that would
tend to frustrate legislative intent.”).

¶21 As the County points out: “The Assessor is responsible for
assessing and valuing 1.6 million parcels of property in Maricopa County
each year.” Given this large number of properties, errors in valuation and
classification are inevitable. The purpose of the error correction statutes is
to permit taxpayers and assessors the opportunity to correct errors that fall
within the scope of the statutory definition. See § 42-16251(3). Taxpayer’s
alleged classification error satisfies that definition.

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CONCLUSION

¶22 For the foregoing reasons, we vacate the decision of the tax
court and remand for determination of how this property should be
properly classified for tax years 2008 through 2011.9 We award Taxpayer
its attorneys’ fees and costs on appeal upon compliance with ARCAP 21.

:ama

9 Because the County has raised a material issue of fact regarding
whether a portion of the property was used to support Taxpayer’s
commercial mining operation during the relevant time period, we decline
to grant Taxpayer’s motion for summary judgment.

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