CNL Hotels & Resorts, Inc. v. Maricopa County
230 Ariz. 21
Ariz.2012Background
- In 1993, two 99-year state trust land leases were granted to Desert Ridge Resort and adjacent golf course; lessee CNL owns improvements but must surrender them to the state at lease termination, with a right to remove them during the term.
- A Class Nine property tax classification (1% rate) was created for improvements on government land that would become government property on lease termination, or under certain primary-use conditions.
- From 2003–2006, Maricopa County taxed Desert Ridge under Class One; CNL appealed to the State Board of Equalization, which denied Class Nine and CNL sued in tax court.
- The tax court granted summary judgment for the County; the Arizona Court of Appeals reversed and held that Class Nine could apply where there is a demonstrable future ownership interest and that Desert Ridge met the primary-use requirement, with the County’s cross-appeal issue discussed.
- The Arizona Supreme Court granted review to interpret § 42-12009(A)(1)(a)/(b), clarifying the proper tax classification framework and remanding on remaining issues including primary use and error-correction relief.
- The Court vacated the Court of Appeals’ decision and remanded to tax court for further proceedings consistent with its opinion, denying attorney fees at this stage.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Proper interpretation of § 42-12009(A)(1)(a). | CNL: future ownership suffices if the improvement would become state property at termination. | County: must prove the improvement will exist and become government property at termination. | Ambiguous; court adopts CNL's current-existence interpretation with future ownership if termination occurs. |
| Whether primary use under § 42-12009(A)(1)(b) was established for Desert Ridge. | CNL meets primary-use criteria for Class Nine. | Need evidence and arguments on primary use; summary judgment improper without briefing. | Remanded for full litigation on primary use in tax court; no final ruling on this issue. |
| Whether golf course property should be classified separately from resort property. | Desert Ridge golf course may fall under different class. | Respectful to decide in first instance on remand. | Left to tax court to address on remand. |
| Applicability of the error-correction statute § 42-16251 to CNL’s claims. | CNL entitled to relief for misclassification under subsection (3). | Subsection (e) may bar relief, but not controlling. | Relief under § 42-16251(3) allowed; possible under multiple subsections; not barred. |
| Overall framework for Class Nine tax application at time of taxation. | Tax classifications should reflect current facts at taxation time. | Uncertainty about future contingencies complicates administration. | Adopted interpretation focusing on current existence and potential future ownership; annual reevaluation aligned with property-tax practice. |
Key Cases Cited
- Hayes v. Cont’l Ins. Co., 178 Ariz. 264 (1994) (statutory interpretation guiding contextual approach)
- Killebrew v. Indus. Comm’n of Ariz., 176 P.2d 925 (1947) (practical difficulties in applying ambiguous statutes)
- City of Phoenix v. Yarnell, 909 P.2d 377 (1995) (directing that issues not raised cannot be summarily decided)
- Santanello v. Cooper, 475 P.2d 246 (1970) (cross-appeal rules for appellees seeking to defend lower court judgment)
- Maricopa Cnty. v. Corp. Comm’n, 289 P.2d 183 (1955) (principle on when cross-appeal is required)