Arizona Department of Revenue v. Navopache Electric Co-Op, Inc.

Citations: 727 P.2d 813; 151 Ariz. 318; 1986 Ariz. App. LEXIS 601Docket: 1 CA-CIV 7660

Court: Court of Appeals of Arizona; February 27, 1986; Arizona; State Appellate Court

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An appeal was made by the Arizona Department of Revenue against Navopache Electric Co-op regarding the dismissal of the Department's appeal from a decision by the State Board of Tax Appeals. The superior court dismissed the appeal due to the notice of appeal not being received by the appellee within 10 days after being filed. The court concluded it lacked jurisdiction based on this timing. The key issue on appeal was whether service of the notice of appeal by mail under A.R.S. 42-151(D) is complete upon mailing. The court determined that the superior court's proceeding constituted an appeal, granting it appellate jurisdiction in a trial de novo context. Consequently, it ruled that service by mail is complete upon mailing, thus the trial court had jurisdiction to hear the tax appeal. The dismissal order was vacated. The facts indicated that the Department had appraised the appellee's property for tax purposes, and after the Board reduced the valuation due to economic obsolescence, the Department contested this reduction. The Department filed a notice of appeal, which was served by registered mail, but the appellee challenged the service's timeliness and sufficiency, leading to the initial dismissal. The Department argued that service by mail is complete upon mailing according to the rules of civil procedure. After oral arguments, the trial court dismissed the appeal.

The Department submitted a timely appeal challenging the dismissal of a prior case and addressed the interpretation of A.R.S. 42-151(D). The appellee contends that, as a 'taxing statute,' it should be strictly construed against the state and favor the taxpayer, citing Honeywell Information Systems, Inc. v. Maricopa County. Conversely, the Department asserts that A.R.S. 42-151(D) is a 'procedural' taxing statute with a neutral effect, arguing that its application is more pertinent than its construction. The statute does not impose or regulate a tax but establishes the procedural framework for appealing decisions from the State Board of Tax Appeals to the superior court, which applies equally to both parties. 

The legislature intended A.R.S. 42-151 to streamline the appeal process concerning property valuation or classification. Specifically, A.R.S. 42-151(D) mandates that a notice of appeal must be served on the defendants and the state board of tax appeals within ten days, using methods outlined in civil procedure rules or by certified/registered mail. The Department claims that service by registered mail is complete upon mailing, referencing analogous civil procedure rules, while the appellee insists that the original jurisdiction of the superior court makes these rules inapplicable, raising concerns about the implications of service being effective upon mailing. The court acknowledges the ambiguity in the statute, noting the appellee interprets its requirements as both mandatory and jurisdictional, necessitating prompt service within the specified ten-day period.

The legislative intent behind A.R.S. 42-152(A) is to allow appeals from the State Board of Tax Appeals to be reviewed by the superior court within 90 days, aiming to simplify appeal processes. The court emphasizes that statutory construction must align with legislative intent, considering potential consequences of different interpretations. A mandatory interpretation that necessitates dismissal without a merits determination contradicts this intent; thus, the statute should be viewed as directory. 

The trial court's dismissal of the action was deemed erroneous because A.R.S. 42-151(D) functions as a notice statute, and the superior court's review of tax appeals is not considered an original proceeding but rather an appeal. In tax appeals, the same parties from the administrative level are involved, and the court's review is confined to issues of property valuation. 

The appellee's argument for original jurisdiction requiring personal service was not supported by existing case law. The court referenced Madsen v. Fendler, which established that judicial review of administrative actions is limited to issues and parties originally involved in the administrative process. Consequently, the superior court lacks jurisdiction to entertain new claims or parties not present in the initial hearing.

In Rojas v. Kimble, the Arizona Supreme Court clarified the limitations of de novo review from justice court to superior court, rejecting the notion that such a review allows for treating the case as if it originated in the superior court. The court emphasized that while de novo review permits an independent judgment, it does not allow the superior court to ignore statutory constraints. Similar principles were reiterated in Berry v. Arizona State Land Department, where the court highlighted that the superior court's appellate jurisdiction is narrower than its original jurisdiction, bound by the subject matter jurisdiction of the administrative hearing from which the appeal arose. The court also referenced several cases to support this interpretation, affirming that the review process, although termed de novo, fundamentally remains an appeal and does not alter the nature of the proceeding. Furthermore, the court noted that A.R.S. 42-151 and 42-152 define the process as an appeal, with de novo review affecting only the scope of that appeal, not its essence. Lastly, it clarified that A.R.S. 42-151(D) does not require a responsive pleading before a hearing, based on previous rulings.

The issuance of a summons does not necessitate the action to proceed as a new complaint; it serves as a precautionary measure due to the lack of explicit procedural guidelines in the statute, which does not mandate the filing or issuance of a summons. The proceeding in question is classified as an appeal rather than an original action, representing a continuation of previous litigation with a de novo review scope by the superior court. The 'defendant' had made an appearance before an administrative tribunal, and A.R.S. 42-151(D) allows for alternative service methods, including registered mail, making Rule 5(c) applicable.

In Pesqueira v. Pima County Assessor, the superior court allowed taxpayers to amend their complaint after missing a statutory filing deadline, despite the Department’s argument that jurisdiction was lost due to noncompliance with A.R.S. 42-151(C) and (D). The court supported the amendment under Rule 15(c), affirming that the Department had notice. However, it was agreed that failing to file a notice of appeal by November 1 results in a lack of jurisdiction for tax appeals, as per A.R.S. 42-146. 

The current proceeding is viewed as an appeal, leading to the conclusion that A.R.S. 42-151(D) functions as a notice statute. Consequently, mailing the notice of appeal on October 21, 1983, was deemed sufficient service. Denying the alternative interpretation would contradict the legislative aim of simplifying the appeal process. The appellee's motion for attorney's fees under A.R.S. 12-348(A) and Rule 21(c)(1) is denied. The trial court's decision is reversed, and the case is remanded for further proceedings. 

Additional notes clarify that A.R.S. 42-151 was renumbered to 42-177 in 1986, and that the State Board of Tax Appeals operates independently from the Department of Revenue. Preliminary arguments raised by the parties are deemed unnecessary for this decision.

The Department contends that the appellee cannot argue the insufficiency of process or the inapplicability of Rule 4(e)(2)(a) because these points were not raised in the lower court. The appellee counters that the Department should not claim that A.R.S. 42-151(D) is 'directory' rather than 'mandatory,' which would permit the Department to ignore the ten-day response period, and also challenges the introduction of five new cases on appeal that were not previously presented. The court finds the Department's first argument lacking, acknowledges the correctness but irrelevance of the second, and determines the third argument to be incorrect, noting that the issues were indeed raised during the trial. Additionally, it is mentioned that the 90-day requirement has been amended to 180 days. During oral arguments, the appellee's counsel acknowledged that if the court views this matter as an appeal and recognizes some form of appearance, Rule 5(c) would apply, suggesting a continuation of previous litigation. The Department sent the notice of appeal via registered mail on the tenth day after filing, with the appellee’s statutory agent confirming receipt three days later. The court refrains from speculating on the implications had the appellee not received the notice. Lastly, the Honorable Yale McFate was authorized to participate in this case by the Chief Justice of the Arizona Supreme Court as per the Arizona Constitution.