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Larkin v. State Ex Rel. Rottas
Citations: 857 P.2d 1271; 175 Ariz. 417Docket: 1 CA-TX 91-006
Court: Court of Appeals of Arizona; January 8, 1993; Arizona; State Appellate Court
The Court of Appeals of Arizona addressed an appeal and cross-appeal regarding a tax refund action involving plaintiffs Kenneth J. Larkin and Murray W. Karsten against the State of Arizona and Richard Beissel. The tax court awarded attorney's fees totaling $29,550: $24,238 under A.R.S. § 12-348, $3,812 under A.R.S. § 12-349, and $1,500 against Beissel personally for willful disobedience of a court order. The plaintiffs cross-appealed for fees related to the state's appellate resistance to post-judgment orders. Key issues included: 1. The applicability of A.R.S. § 12-348 concerning fees incurred in “collection of judgment debts.” 2. Whether the tax court erred in awarding fees against the state for unreasonable delays and expansions in the proceedings, given the state’s unsuccessful attempts to challenge the judgment. 3. The legitimacy of the fee award against Beissel for his noncompliance with court orders. 4. The tax court's authority concerning the plaintiffs' attorney's fees linked to the state's post-judgment appellate actions. The taxpayers initially challenged the constitutionality of former A.R.S. § 15-991.01, which the tax court found violated the Arizona Constitution, leading to an injunction against tax levies under that statute. The court mandated the state to ensure the availability of funds for tax refunds and clarified the responsibilities for administrative costs between Maricopa County and the Department of Revenue. On April 25, 1990, the tax court issued a judgment mandating that the State of Arizona credit or refund 99.5% of the taxes paid by taxpayers under the 1988 Tax, along with interest at 10% per annum from January 1, 1989, to October 1, 1990. The State was ordered to either provide funds to a refunding agency by July 2, 1990, or deposit money for immediate access to cover refunds. However, the Arizona Legislature did not appropriate any funds by June 28, 1990, leaving the State Treasurer unable to set up the necessary account for refunds. In response to this inaction, the tax court issued an order on July 30, 1990, compelling Richard Beissel, the General Accountant and Assistant Director of Finance, to issue a warrant for $11,583,333.33 to pay the judgment. Beissel argued that without legislative appropriation, he lacked the authority to issue the warrant, fearing civil and criminal penalties. The tax court subsequently ordered him to issue the warrants, but Beissel petitioned for special action, resulting in an interlocutory stay from the court. However, the supreme court also issued a stay and later declined jurisdiction, vacating the stay and denying the taxpayers' request for attorney's fees. On November 8, 1990, the tax court ordered Beissel to execute the warrants by November 14 or show cause for non-compliance, but he did not comply. On November 19, 1990, Beissel filed motions to quash a court order and for reconsideration regarding his obligation to execute warrants for a judgment. The tax court denied these motions, held him in contempt, and ordered him to pay $1,500 in attorney's fees personally to the taxpayers. Beissel subsequently filed a petition for special action with the supreme court, which was dismissed as moot for lack of demonstrated good cause for an interlocutory stay. Later, during a court appearance, Beissel's counsel argued that the court's signature was necessary on the claim form for the warrants due to the court's prior judgment. The tax court agreed, signing the warrants and determining that Beissel had purged his contempt. The taxpayers later sought additional attorney's fees, which the tax court partially granted, but denied fees related to appellate court defenses, citing a lack of authority for such an award. The court also rejected a fee request under A.R.S. section 12-2030 but awarded $24,238 in attorney's fees against the state and the Department of Administration under A.R.S. section 12-348, due to the state's last-minute challenges to the judgment. Additionally, the court awarded $3,812 against the Department for unreasonably expanding proceedings after the supreme court declined jurisdiction. The court reaffirmed the $1,500 fee against Beissel and clarified its interpretation of A.R.S. 12-348, confirming the taxpayers' entitlement to fees for the entire litigation process after prevailing against the state on the merits. The Court interprets A.R.S. 12-348 as not permitting proceedings against the state to collect a judgment. It clarifies that A.R.S. 12-348(F)(4) refers to cases where a judgment creditor seeks to enforce a judgment against a debtor with whom the state has a relationship, precluding fees in such scenarios. The tax court had issued a "Partial Judgment," awarding $24,238 in attorney's fees to a taxpayer under A.R.S. 12-348(A) for a successful tax refund claim. However, A.R.S. 12-348(F)(4) exempts proceedings involving eminent domain, foreclosure, or collection of judgment debts where the state is a nominal party. The state contends that the post-judgment proceedings aimed at recovering fees were essentially for collecting a judgment debt, thus disqualifying the award under the statute. Conversely, taxpayers argue that their proceedings were not about collecting a debt but enforcing a tax court order for a refund, referencing prior case law to support their position that the state lacks authority over funds unless it possesses both legal and equitable title. Taxpayers contend that A.R.S. section 42-204(C) allows for the refund of illegally collected taxes, implying that the exclusion of attorney's fees for "collection of judgment debts" in A.R.S. section 12-348(F)(4) should not apply. They argue that the award of fees under A.R.S. section 12-348(A) was valid due to the unappealed judgment's reservation of the power to grant additional fees. The court aligns with the taxpayers, noting that A.R.S. section 12-348 is Arizona's equivalent of the federal Equal Access to Justice Act but with fewer restrictions on fee awards against the state. The statute aims to alleviate economic barriers for private parties challenging unreasonable government actions. The tax court's interpretation of A.R.S. section 12-348(F)(4) supports this public policy and clarifies that a prevailing taxpayer can recover attorney's fees in tax disputes. The court finds the state's argument illogical, asserting that the legislature would not intend to allow recovery of fees for obtaining a refund but not for enforcing that right. The reference to "collection of judgment debts" in subsection (F)(4) is interpreted to pertain to situations where the state acts as a neutral party. The decision does not require consideration of the taxpayers' additional claims regarding the nature of the refund or the authority of the final judgment to grant fees. Furthermore, the taxpayers argue for sustaining the attorney's fee award of $24,238.00 under A.R.S. section 12-2030 or the "private attorney general doctrine." The state counters that the taxpayers' failure to cross-appeal on these grounds prevents them from using these theories on appeal. The court disagrees with the state's position on this matter. In Bowman v. Board of Regents, the court established a three-part test for an appellee to raise a cross-issue in an answering brief without a cross-appeal: (1) the cross-issue must support the judgment, not attack it; (2) it must have been presented and considered by the trial court; and (3) it must not enlarge the appellee's rights or diminish the appellant's rights on appeal. The court clarified that merely rejecting an appellee's alternative contention does not necessitate a cross-appeal. In this case, although the taxpayers' contentions were considered by the tax court and supported the judgment, the state argued that the taxpayers would be enlarging their rights by seeking an augmented attorney's fee award. The court disagreed, stating that the right to recover attorney's fees already existed, and the taxpayers were not seeking fees beyond what the tax court awarded. Since the taxpayers were not aggrieved by the fee award and did not contest its amount, they were entitled to present their alternative theories as a cross-issue rather than a cross-appeal. The court also noted that amendments to Rule 13(b) diminished the relevance of the Bowman case in this context. The court evaluated the validity of a fee award under Arizona Revised Statutes (A.R.S.) section 12-2030 and the "private attorney general" theory. Under A.R.S. section 12-2030, a prevailing party in a mandamus action against the state or its subdivisions is entitled to fees and expenses. The taxpayers' case qualified as a mandamus action, compelling state officers to fulfill their legal duties. Consequently, the court affirmed the tax court's award of $24,238.00 in attorney's fees to the taxpayers under A.R.S. section 12-2030, making it unnecessary to assess the "private attorney general" theory. Furthermore, the tax court awarded the taxpayers $3,812.00 in attorney's fees under A.R.S. section 12-349, determining that the state had unreasonably prolonged the proceedings after both the court of appeals and supreme court declined jurisdiction over its petitions. The state contested this award, arguing that the judgment did not specify how it was to be satisfied and asserting that its challenge did not constitute a collateral attack. However, the taxpayers countered that the earlier judgment clearly outlined the required actions for compliance. The court concluded that the tax court did not abuse its discretion in awarding the fees, noting that the award was specifically for services rendered after the supreme court's refusal to accept the state's special action. The state had ample opportunity to present its arguments against the tax court's order to execute warrants, and the tax court determined that the state's continued resistance unreasonably delayed proceedings without a reasonable legal basis. Consequently, the court affirmed an award of $3,812.00 against the state. Regarding the tax court's award of $1,500.00 in attorney's fees against Beissel for willful disobedience, both Beissel and the state contended that the rationale from Perry v. O'Donnell could not support the fee award, arguing that A.R.S. section 12-349 provided the necessary relief. However, the court clarified that section 12-349 does not explicitly authorize fee awards as sanctions for disobedience to court orders. It distinguished the case from Perry, emphasizing that it did not limit the court’s inherent power to impose sanctions based on the availability of statutory remedies. The court noted that superior courts in Arizona have the discretion to award attorney's fees in cases of complete disregard for court orders without reasonable justification, reinforcing the integrity of the judicial process. The question of whether the $1,500.00 award was appropriate under the specific circumstances was examined, noting that Beissel was ordered to issue warrants for over $11 million without legislative appropriation, which framed the context for the court's decision. Counsel for Beissel, a new attorney in the case, advised that Beissel lacked legal authority to execute warrants, a position supported by Arizona case law. The Arizona Constitution prohibits state treasury payments without legal appropriation, necessitating clear legislative intent. Relevant statutes, A.R.S. sections 35-189 and 35-154, outline procedures for claims against the state and assert that unauthorized obligations are void, with violations classified as class 1 misdemeanors. Beissel attempted to quash a tax court order requiring him to execute warrants for a refund/credit procedure, but the court denied his motion. Following a series of stays and jurisdictional declines by both the court and the Arizona Supreme Court, Beissel was ultimately ordered to comply by November 14, 1990. Instead of complying, he filed a motion to dissolve the order, which the tax court rejected, holding him in contempt and imposing $1,500 in attorney’s fees. The appellate opinion noted that Beissel's actions did not constitute a "complete and repeated disregard" of the court's order, as he only failed to comply once and had filed a timely challenge to the order shortly after. Beissel acted under legal counsel's advice, aware that executing warrants without legislative appropriation could expose him to civil and criminal liability. His actions did not reflect a complete disregard for the tax court's orders; rather, he was ordered to personally execute warrants based on the theory that only the state's general accountant had that authority. Ultimately, the tax court abandoned this theory, signing the claim form itself, which positioned Beissel as an unwitting participant in a conflict between the judicial and legislative branches. His reluctance stemmed from the fear of personal liability and legal advice, making his eventual compliance with the order ultimately unnecessary. Consequently, the tax court abused its discretion by imposing $1,500 in attorney's fees against him, leading to the reversal of this award. In regards to the taxpayers' request for attorney's fees while opposing Beissel's special actions, they sought compensation under A.R.S. sections 12-348 and 12-2030 and the "private attorney general doctrine." The court declined jurisdiction and instructed that each party bear its own costs. The supreme court similarly denied the taxpayers' fee requests in subsequent actions. Although the taxpayers filed for supplemental attorney's fees after the supreme court dismissed Beissel's final special action, the tax court ruled it lacked the authority to award these fees for services rendered in opposing Beissel's actions. The court affirmed that A.R.S. section 12-348 should apply to establish entitlement to fees related to post-judgment litigation, indicating the taxpayers had a valid basis for their request. A court is mandated to award fees and expenses to parties other than the state or its political subdivisions that prevail in civil actions aimed at compelling state officers to perform legally mandated duties. In the cases involving taxpayers against the state, neither the trial court nor the supreme court assumed jurisdiction, resulting in the taxpayers not prevailing on the merits. Consequently, the appellate courts' refusal to award fees under A.R.S. section 12-2030 reflects this lack of merit-based adjudication. Additionally, taxpayers cannot claim attorney's fees in appellate courts if they did not request them in the trial court, as established in Lacer v. Navajo County. This principle applies here, with the trial court correctly denying fee requests for the third special action and affirming the appellate courts' res judicata rulings on the first two special actions. Furthermore, according to A.R.S. section 12-349 and the "Private Attorney General Doctrine," parties in special actions can claim attorney's fees akin to civil actions, regardless of the appellate courts' jurisdiction decisions. However, the appellate courts' denial of fee awards constituted final adjudications on the taxpayers' claims for services rendered in opposing the first two special actions. The taxpayers failed to request fee awards for the final special action in the supreme court, missing the opportunity to assert their claims within the stipulated timeframe. Each special action was treated as a separate proceeding, not merely extensions of the initial tax court action. Taxpayers waived their claim for attorney's fees related to opposing Beissel's second special action by not presenting it to the supreme court. The tax court correctly denied this claim. However, it awarded attorney's fees to the taxpayers for efforts to enforce the April 25, 1990 judgment against the state, finding no error or abuse of discretion in this respect under A.R.S. section 12-349. The court did abuse its discretion by awarding fees against Beissel personally. The tax court also properly refused to grant fees associated with Beissel's three unsuccessful appellate special actions. The taxpayers requested appellate attorney's fees under A.R.S. sections 12-348 and 12-349, which were granted due to the state's unreasonable delay in the refund process. A.R.S. section 12-349 allows appellate courts to award fees for frivolous appeals and dilatory tactics, entitling the successful party to recover fees across all litigation stages. The taxpayers were instructed to comply with Rule 21(c) of the Arizona Rules of Civil Appellate Procedure. The decision was affirmed in part and reversed in part, with concurrence from Lankford and Toci, and Martone of the Supreme Court voting to grant review on one issue. Additional notes reference legislative changes and rulings related to the tax statute in question. A.R.S. section 12-348(B.7) and Rule 13(b) of the Arizona Rules of Civil Appellate Procedure, amended effective December 1, 1992, clarify the cross-appeal procedure, altering previous case law related to "forum defenses" established in Bowman v. Board of Regents. A.R.S. section 12-349 mandates that in civil actions, courts must assess reasonable attorney fees, expenses, and may impose double damages (up to $5,000) against parties or attorneys for specific misconduct, including: lacking substantial justification for claims, pursuing claims primarily for delay or harassment, unreasonably delaying proceedings, or abusing discovery. Additionally, it is noted that legislatures cannot delegate law-making authority except as constitutionally permitted, and that appropriations from the general fund must specify a maximum amount. Under Rule 4(f) of the Arizona Rules of Procedure for Special Actions, requests for attorney fees must be included in pleadings or motions before oral arguments, with statements of costs due within ten days following a decision or notice of declined jurisdiction.