SUPREME COURT OF ARIZONA
En Banc
LEVERAGED LAND COMPANY, L.L.C., ) Arizona Supreme Court
an Arizona limited liability ) No. CV-10-0196-PR
company; and NORMAN MONTGOMERY )
and CHERYL MONTGOMERY, husband ) Court of Appeals
and wife, ) Division Two
) Nos. 2 CA-CV 09-0093
Plaintiffs/Appellants, ) 2 CA-CV 09-0094
) 2 CA-CV 09-0095
v. ) (Consolidated)
)
MICHAEL W. HODGES, an unmarried ) Pinal County
man, ) Superior Court
) No. CV200500270
Defendant/Appellee. )
__________________________________)
)
RAVEN II HOLDINGS, L.L.C., an ) O P I N I O N
Arizona limited liability )
company; and HANNA 120 HOLDINGS, )
L.L.C., an Arizona limited )
liability company, )
)
Intervenors/Appellants, )
)
v. )
)
MICHAEL W. HODGES, an unmarried )
man; DAVID H. CAIN, a married )
man, )
)
Defendants/Appellees. )
__________________________________)
)
DAVID H. CAIN, a married man, )
)
Defendant/Counterclaimant/ )
Appellee, )
)
v. )
)
RAVEN II HOLDINGS, L.L.C., an )
Arizona limited liability )
company; and HANNA 120 HOLDINGS, )
L.L.C., an Arizona limited )
liability company, )
)
Intervenors/Counterdefendants/ )
Appellants. )
__________________________________)
DAVID H. CAIN, a married man, )
)
)
Defendant/Counterclaimant/ )
Appellee, )
)
v. )
)
LEVERAGED LAND CO., L.L.C., an )
Arizona limited liability )
company; and NORMAN MONTGOMERY )
and CHERYL MONTGOMERY, husband )
and wife, )
)
Plaintiffs/Counterdefendants/ )
Appellants. )
__________________________________)
)
DAVID H. CAIN, a married man, )
)
Defendant/Third-Party Plaintiff/ )
Appellee, )
)
v. )
)
BINGHAM ARIZONA LAND, L.L.C., an )
Arizona limited liability )
company, )
)
Third-Party Defendant/ )
Appellant. )
)
__________________________________)
Appeal from the Superior Court in Pinal County
The Honorable William J. O'Neil, Judge
VACATED AND REMANDED
________________________________________________________________
2
Opinion of the Court of Appeals Division Two
224 Ariz. 442, 232 P.3d 756 (App. 2010)
VACATED
________________________________________________________________
QUARLES & BRADY LLP Tucson
By Craig H. Kaufman
Jeremy A. Lite
Attorneys for Leveraged Land Co., L.L.C., Norman
Montgomery, and Cheryl Montgomery
BARRY BECKER, P.C. Phoenix
By Barry C. Becker
Attorney for Michael W. Hodges and David H. Cain
________________________________________________________________
B R U T I N E L, Justice
¶1 Under Arizona Revised Statutes (“A.R.S.”) section 42-
18206 (2010), a tax lien purchaser is entitled to a judgment for
costs and reasonable attorney fees if the delinquent taxpayer
redeems the lien after the purchaser commences a foreclosure
action. We hold that a tax lien purchaser is only entitled to
reasonable attorney fees incurred before the lien is redeemed
and a certificate of redemption issues.
I.
¶2 This protracted litigation began in March 2005, when
Norman and Cheryl Montgomery and Leveraged Land, L.L.C.
(collectively “Leveraged Land”) sued to foreclose Michael
Hodges’ right to redeem a tax lien it had purchased. Hodges
failed to appear after being served by publication, and default
judgment was entered in favor of Leveraged Land in June 2005.
3
¶3 In November 2005, Hodges moved to set aside the
default judgment, contending that he was able to redeem the tax
lien and that he had been improperly served. The superior court
denied his motion, but the court of appeals reversed, holding
that Hodges had timely demonstrated his ability to redeem and
remanding to allow him to do so. Leveraged Land Co. v. Hodges,
2 CA-CV 06-0210, 2007 WL 5556356, at *3, 5 ¶¶ 10, 19 (Ariz. App.
Aug, 8, 2009) (mem. decision). After Hodges redeemed the lien,
Leveraged Land filed an amended complaint challenging the
validity of the redemption. The superior court granted Hodges’
subsequent motion for summary judgment, dismissed Leveraged
Land’s amended complaint, and entered a final judgment. The
court of appeals affirmed. Leveraged Land Co. v. Hodges, 2 CA-
CV 09-0057, 2009 WL 3087551, at *6 ¶ 20 (Ariz. App. Sept. 24,
2009) (mem. decision).
¶4 While Leveraged Land’s appeal of the summary judgment
was pending, it filed a request under § 42-18206, seeking
$153,182 in costs and attorney fees incurred in litigating
issues related to the tax lien foreclosure, including a
substantial amount incurred after Hodges’ redemption. The
superior court awarded Leveraged Land $1500, ruling that the
requested amount was “unreasonable” and further noting that it
was not “inclined to award costs for the unsuccessful appeal.”
A divided panel of the court of appeals reversed, finding that
4
the superior court had abused its discretion in awarding
Leveraged Land only $1500, and holding that Leveraged Land was
entitled under § 42-18206 to costs and reasonable attorney fees
incurred in contesting the redemption. Leveraged Land Co. v.
Hodges, 224 Ariz. 442, 449-50, 451 ¶¶ 25, 29, 232 P.3d 756, 763-
64, 765 (App. 2010).
¶5 We granted Hodges’ petition for review because the
scope of the attorney fees provision in this statute is a matter
of first impression and statewide importance. We have
jurisdiction under Arizona Constitution Article VI, Section 5(3)
and A.R.S. § 12-120.24.
II.
A.
¶6 The question before us is whether § 42-18206 permits
recovery of attorney fees and costs for litigation that occurs
after a taxpayer’s redemption. We review de novo the
interpretation of a statute, aiming to effect the legislature’s
intent. See Zamora v. Reinstein, 185 Ariz. 272, 275, 915 P.2d
1227, 1230 (1996). When, as here, the statutory language is not
clear, we consider not only the text, but also other factors
such as the statute’s context, subject matter, and history.
Id.; see also Ariz. Dep’t. of Revenue v. Action Marine, Inc.,
218 Ariz. 141, 143 ¶ 10, 181 P.3d 188, 190 (2008).
¶7 Section 42-18206 states:
5
Any person who is entitled to redeem under article 4
of this chapter may redeem at any time before judgment
is entered, notwithstanding that an action to
foreclose has been commenced, but if the person who
redeems has been served personally or by publication
in the action, or if the person became an owner after
the action began and redeems after a notice is
recorded pursuant to § 12-1191, judgment shall be
entered in favor of the plaintiff against the person
for the costs incurred by the plaintiff, including
reasonable attorney fees to be determined by the
court.
The court of appeals noted that this statute neither places a
“temporal limit” on recoverable fees nor limits eligibility for
fees “to certain matters and not others.” Leveraged Land, 224
Ariz. at 448 ¶ 21, 232 P.3d at 762. We agree that no express
limitations appear in the statute and that a plaintiff is
entitled to “fully and reasonably” litigate the validity of a
delinquent taxpayer’s redemption. Id. at 449 ¶ 24, 232 P.3d at
763. We do not agree, however, that the legislature intended
§ 42-18206 to relieve the tax lien purchaser from the financial
risk accompanying such litigation by awarding fees incurred
after the redemption.
¶8 Although the legislature did not expressly place
temporal and subject matter restrictions in the text of §42-
18206, such restrictions are apparent from the context of the
statutes governing tax lien redemption. See Action Marine,
Inc., 218 Ariz. at 143 ¶ 10, 181 P.3d at 190 (observing that we
read statutes as a whole, considering context). The legislature
6
has created a process for the redemption of tax liens.
Initially, a landowner pays his past-due taxes and redeems the
property through a non-judicial, ministerial event, complete
when the county treasurer issues a certificate of redemption.
See A.R.S. § 42-18154(A). Once redemption is complete, the tax
lien purchaser is eligible to recover costs and fees incurred in
the foreclosure action. See A.R.S. § 42-18206 (if owner
redeems, judgment shall be entered in favor of lien purchaser).
¶9 Because the redemption is complete when the
certificate of redemption issues, an action challenging the
validity of a redemption that has already occurred is not part
of the redemption. See, e.g., Friedemann v. Kirk, 197 Ariz.
616, 617 ¶ 1, 5 P.3d 950, 951 (App. 2000) (validity of tax lien
redemption challenged in quiet title action); see also Green v.
United States, 434 F. Supp. 2d 1116, 1125 (D. Utah 2006) (same).
Rather, the post-redemption litigation, whether a new legal
proceeding or, as here, an amended complaint in the ongoing
foreclosure action, is separate from the redemption. Therefore,
it is not part of the legal action to which § 42-18206 refers.
¶10 Nor does the purpose of § 42-18206 support the broad
construction the court of appeals gave it. See Leveraged Land,
224 Ariz. at 454 ¶¶ 43-44, 232 P.3d at 768 (Eckerstrom, J.,
dissenting). The legislature intended to encourage the
redemption of tax liens through a simple administrative
7
procedure, see A.R.S. § 42-18154(A), and to minimize the risks
of purchase by providing for fees and costs in the event of
redemption, see Hunt Inv. Co. v. Eliot, 154 Ariz. 357, 360, 742
P.2d 858, 861 (App. 1987) (when property owners redeem,
purchasers “will be made whole by recovery of all their costs
and attorney’s fees”). Nevertheless, the purchase of a tax lien
is an investment “involv[ing] inherent risks.” Ritchie v.
Salvatore Gatto Partners, L.P., 223 Ariz. 304, 308 ¶ 13, 222
P.3d 920, 921, 924 (App. 2010). Although the potential payoff
is ownership of the subject property for the price of the past
due taxes, the risk of buying a tax lien lies in the possibility
that the delinquent taxpayer will redeem. See Eliot, 154 Ariz.
at 361, 742 P.2d at 862 (lien purchasers risk possibility of
redemption for opportunity to “benefit greatly”). Thus, § 42-
18206 protects against a loss to the purchaser from pre-
redemption litigation, but it does not ensure a profit. Nor
should it subsidize unlimited litigation to contest redemption
in pursuit of that profit.
¶11 The purpose of the statute is merely to make a tax
lien purchaser whole if the landowner redeems. Leveraged Land
agrees that a lien purchaser is entitled to fees and costs under
§ 42-18206 only if redemption occurs. Thus, success in post-
redemption litigation voids the redemption and makes the tax
lien purchaser ineligible for costs and fees under the statute.
8
Only tax lien purchasers whose challenges fail, therefore, are
entitled to recover. Unlike the award of pre-redemption
attorney fees, allowing post-redemption attorney fees results in
1
awarding fees to the losing party.
¶12 Thus, interpreting § 42-18206 to allow post-redemption
fees and costs skews the statute to subsidize unsuccessful
litigation. Such a reading creates an incentive for protracted
and potentially meritless litigation. It allows tax lien
purchasers to coerce landowners otherwise able to redeem to
forfeit their property by the threat of continued litigation
conducted at the landowners’ expense. We discern neither a
legislative intent nor any sound policy reason to award fees for
a losing argument, especially when doing so encourages
protracted litigation, discourages redemption, and interferes
with litigants’ and the courts’ interests in finality. See N.
Valley Emergency Specialists, L.L.C. v. Santana, 208 Ariz. 301,
303 ¶ 9, 93 P.3d 501, 503 (2004) (court will not construe
statutes in a manner leading to absurd results). If a tax lien
1
To justify its proposed reading, Leveraged Land repeatedly
refers to § 42-18206 as a statute that awards fees to a “losing”
party. Unlike unsuccessful post-redemption litigation, failure
to foreclose does not involve espousing a legally incorrect
argument; it simply means the rightful owner exercised his or
her right to redeem. Moreover, failing to foreclose is not
“losing” in a practical sense. The lien holder recovers his or
her pre-redemption expenditure plus interest in the event of
redemption, and the only thing “lost” is the opportunity to own
the property.
9
purchaser thinks the value of the land, coupled with the
probability of success on the merits, justifies further
litigation to challenge the redemption, the lien purchaser may
pursue additional litigation; but neither the text of § 42-18206
nor sound policy supports requiring the landowner to subsidize
that litigation.
B.
¶13 The entitlement to costs and attorney fees under § 42-
18206 arises at the time of redemption and relates to work
performed before the treasurer’s certificate of redemption
issues. In cases such as this, in which the parties engaged in
substantive litigation before the certificate issued, we leave
it to the sound discretion of the trial court to determine how
much of the plaintiff’s costs and fees were reasonable. See
Associated Indem. Corp. v. Warner, 143 Ariz. 567, 570-71, 694
P.2d 1181, 1184-85 (1985) (trial courts have substantial
discretion in awarding attorney fees). We expressly decline to
adopt either party’s position that any fees incurred after
Hodges manifested his intent to redeem by filing an affidavit
under Arizona Rule of Civil Procedure 59(j) were presumptively
reasonable or unreasonable.
III.
¶14 For the reasons set forth above, we vacate the court
10
of appeals’ opinion and remand this case to the superior court
to award reasonable attorney fees consistent with this opinion.
_____________________________________
Robert M. Brutinel, Justice
CONCURRING:
_____________________________________
Rebecca White Berch, Chief Justice
_____________________________________
Andrew D. Hurwitz, Vice Chief Justice
_____________________________________
W. Scott Bales, Justice
_____________________________________
A. John Pelander, Justice
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