Appellants )




) (Not for Publication -


) of Civil Appellate

Appellee. ) Procedure)


Appeal from the Arizona Tax Court
Cause No. TX 94-00072
The Honorable Jeffrey S. Cates, Judge



By Michael G. Galloway
Nicole E. Dorsey
Attorneys for Appellant

By Kimberley J. Cygan, Assistant Attorney General
Patrick Irvine, Assistant Attorney General
Attorneys for Appellee


B E R C H, Judge

General Motors Corporation ("GM") appeals from an order denying its motion for relief from judgment under Rule 60(c) of the Arizona Rules of Civil Procedure, filed after this Court affirmed a tax court judgment that had sustained an assessment of additional Arizona corporate income taxes against GM for tax years 1978 through 1983. See General Motors Corp. v. Arizona Depít of Revenue, 189 Airz. 86, 938 P.2d 481 (App. 1996), rev. denied July 1, 1997, mandate issued July 22, 1997. We must determine whether the tax court abused its discretion in declining to grant GM a new trial to determine whether, given the change in the law enunciated in Valencia Energy Co. v. Arizona Department of Revenue, 191 Ariz. 565, 959 P.2d 1256 (1998), the doctrine of equitable estoppel bars the Arizona Department of Revenue ("ADOR") from applying a method of apportioning GMís multi-state income to Arizona that differed from the apportionment method on which GM and ADORís predecessor agreed in 1966. We find no abuse of discretion and affirm the tax courtís judgment.


An Arizona income tax regulation in effect during tax years 1954 through 1963 required the use of a taxpayerís Arizona "solicitation sales" in the sales factor of the three-factor formula for apportioning multi-state income to Arizona. GM reported only minimal Arizona "solicitation sales" for those tax years.

The Arizona State Tax Commission later audited GM for tax years 1954 through 1963. The Commission proposed an additional $1.1 million assessment for the audit period based in part on using one hundred percent of GMís Arizona "destination sales" in the numerator of the sales factor. At a meeting in 1966 between the Commission and GM representative, the Commission agreed to use fifty percent of GMís Arizona "destination sales" in the numerator of the sales factor. The audit issues were resolved consistently with that agreement.

Commission personnel later took the position that the fifty percent figure was intended as an estimate of GMís actual solicitation sales. GM personnel claimed that the fifty percent figure was not intended to estimate solicitation sales, but rather related only to GMís concern that tehre was an insufficient constitutional nexus between GMís activities and the State of Arizona to permit Arizona to tax GMís income. GM further contended that the Commission had also agreed to allow it to use fifty percent of destination sales in its sales factor in the future. GM in fact used this percentage in filing its later Arizona returns.

Effective January 26, 1978, ADOR adopted an amended regulation that required the use of all Arizona "destination sales" in the numerator of the sales factor. See former A.C.R.R. R15-2-135-8(B)(5)(b)(i). ADOR applied this new regulation in April 1986 when it audited GM for tax years 1978 through 1983 and assessed additional taxes. GM protested the assessment, contending that ADOR was estopped from departing from its 1966 agreement. See General Motors, 189 Ariz. At 94, 938 P.2d at 489. This protest was unsuccessful at the administrative level and in the tax court. See id. at 89, 938 P.2d at 484.

On appeal this Court assumed arguendo that:

the State Tax Commission had authority to enter into the 1966 agreement, that competent evidence exists that both sides intended the settlement to apply to all future years, and that the 1978 rule change was legally insufficient to supersede the 1966 agreement.

Id. at 94, 938 P.2d at 489. We accordingly addressed the merits of GMís estoppel claim. We determined that controlling Arizona case law precluded application of equitable estoppel against the State based on representations of state personnel concerning substantive tax law. See id. at 95-96, 938 P.2d at 490-91.

This Court followed the same principles when it ruled in Valencia Energy Co. that ADOR was not estopped from collecting taxes owed by a statement of one of its tax analysts that a portion of Valencia Energyís revenue was not taxable. 189 Ariz. At 84, 938 P.2d at 479. The Arizona Supreme Court granted Valencia Energyís petition for review. On the same day, the supreme court denied GMís petition for review of our opinion in General Motors. This court accordingly issued the mandate in that case on July 22, 1997.

On October 28, 1997, ADOR issued a notice to GM modifying its proposed April 1986 assessment for the period 1978 through 1983. On November 26, 1997, GM mailed ADOR a partial payment of the modified proposed assessment. GMís letter of transmittal stated: "The differences are contested amounts for which a Protest is being prepared and will be filed." Several weeks later, on December 15, 1997, GMís counsel wrote to ADORís counsel asking that she not lodge a final form of judgment pending resolution of the "problems with the revised numbers." The record does not contain a copy of GMís promised protest or indicate whether one was filed.

On May 19, 1998, in Valencia Energy Co. v. Arizona Depít of Revenue, 191 Ariz. 565, 582, ∂ 55, 959 P.2d 1256, 1273 (1998), the supreme court overruled its earlier cases on estoppel against the State in the revenue context Ė the same ones on which this Court relied in ruling against GM in General Motors Corp., 189 Ariz. At 86, 938 P.2d at 481. More than 8 months later, on February 3, 1999, GM filed a motion for relief from judgment. After briefing and oral argument, the tax court denied the motion. GM timely appealed. We have appellate jurisdiction. See Ariz. Rev. Stat. Ann. ("A.R.S.") section 12-2101 (C) (1994).


A. Standard of Review

We reviewed for abuse of discretion an order granting or denying relief under Rule 60(c) of the Arizona Rules of Civil Procedure. See City of Phoenix v. Geyler, 144 Ariz. 323, 328, 697 P.2d 1073, 1078 (1985). We will sustain the trial courtís ruling unless "undisputed facts and circumstances require a contrary ruling." Id. at 330, 697 P.2d at 1080 (quoting Coconino Pulp and Paper Co. v. Marvin, 83 Ariz. 117, 121, 317 P.2d 550, 552 (1957)).

Availability of Rule 60(c) Relief Based on a Change in Case Law

GM acknowledges that overturning final judgments is a major concern of courts and that a change in the law, by itself, does not necessarily justify relief from a judgment. Nonetheless, relying on Mooreís Federal Practice 3d ed. ß 60.48[5][b], GM asserts that a change in the law justifies relief when both the change and the motion for relief predate execution of the final judgment, the motion is made with great dispatch, and the change in the law concerns the same or a closely related transaction. GM argues that the judgment we affirmed in General Motors has prospective application and that all three of the conditions that Mooreís Federal Practice ß 60.48[5][b] identifies are met here.

GM first contends the judgment in General Motors has prospective effects because the dispute over the final numbers has not yet been resolved, and no judgment on the mandate has yet been entered. GM therefore contends that both Valenciaís change in the law and GMís motion for relief under Rule 60(c) preceded any "final" judgment in this case and that Rule 60(c) relief should have been granted.

Contrary to GMís assertion, this is not a case in which this Courtís mandate "direct[ed] the trial court to modify its decision in accordance with the opinion." This courtís opinion in General Motors directed no proceedings on remand at all. See 189 Ariz. at 86, 938 P.2d at 481. The tax courtís judgment unconditionally "upheld" "the validity of [ADORís] assessment," and this Courtís opinion unconditionally affirmed that judgment. See id. at 102, 938 P.2d at 497. Like every mandate issued by this court, our mandate to the tax court directed such proceedings "as shall be required to comply with the decision of this Court." Here, no such proceedings were required. The judgment thus became final on the issuance of the Courtís mandate on July 22, 1997. See Peabody Coal Co. v. Navajo County, 117 Ariz. 335, 337, 572 P.2d 797, 799 (1977).

GM asserts that the post-mandate dispute between GM and ADOR over the final numbers postponed the finality of the judgment. As far as the record reflects, however, this was a new controversy that did not turn on an interpretation of this Courtís opinion in General Motors. As GMís counsel stated in his letter to opposing counsel on December 15, 1997: "One of the adjustments seems to constitute a new assessment outside of the statute of limitations, and we may file a separate protest under A.R.S. ß 42-122 on this amount." Moreover, nothing in the record suggests that any issues regarding the calculations relate to the estoppel claim at issue in General Motors. Accordingly, GMís case does not fall within the exceptions to the general rule of finality of judgments that Mooreís Federal Practice 3d ed. ß 60.48[5][b] would recognize.

GM finally claims the benefit of an exception to the general rule "in situations where the change of law involves the same or closely related transaction or the constitutionality of the same statute." GM argues that this exception applies here because "[t]his case and Valencia involve the identical legal issues, and both concern the applicability of art. 9, ß 1 of the Arizona Constitution to the remedy of equitable estoppel."

The only case on which Mooreís relies for this exception, and indeed for all three of the exceptions it recommends, is Ritter v. Smith (Ritter II), 811 F.2d 1398 (11th Cir. 1987). Ritter I, 726 F.2d 1505, 1516 (11th Cir. 1984), concerned a successful appeal from the denial of federal habeas relief in a death penalty case. The Eleventh Circuit found Alabamaís statutory procedure for imposing the death penalty unconstitutional and remanded for a new sentencing hearing.

Before the new sentencing hearing was held, the United States Supreme Court granted certiorari in Ex Parte Baldwin, 465 So. 2d 129 (Ala. 1984). See Baldwin v. Alabama, 472 U.S. 372 (1985). It did so for the express purpose of resolving the conflict between the holding of the first Ritter opinion and the Alabama Supreme Courtís contrary determination that the Alabama death penalty procedure was unconstitutional.

The re-sentencing hearing in Ritter was postponed pending the Supreme Courtís ruling. In Baldwin, the Court adopted the Alabama Supreme Courtís view and upheld the constitutionality of Alabamaís death penalty procedure. 472 U.S. at 390. The State then moved successfully in Ritterís case for relief under Rule 60(b) of the Federal Rules of Civil Procedure from the federal district courtís judgment on remand from the Ritter I decision. The district court granted relief, and the Eleventh Circuit affirmed. See Ritter II, 811 F.2d at 1405.

Contrary to GMís interpretation of the courtís ruling, the court did not hold that Rule 60(b) relief was appropriate whenever inconsistent rulings are made on the constitutionality of the same statute:

Baldwin v. Alabama was expressly decided to resolve the conflict between our decision in Ritter v. Smith and the Alabama Supreme Courtís decision in Baldwin. Further, the two cases are related insofar as they concern the constitutionality of the exact same statute. After the Baldwin decision, there can no longer be any doubt that Ritter was constitutionally sentenced the first time. As the district court correctly noted, this case and Baldwin are virtual legal twins. The Supreme Courtís decision is directly on point.[fn] Thus, the Supreme Courtís decision in Baldwin properly carries great weight in satisfying the extraordinary circumstances which require relief from judgment.

Ritter II, 811 F.2d at 1403 (footnote omitted). Ritter did not hold that a "close relationship" justifying relief exists whenever an intervening case law change concerns an issue decided differently in the case that concerns the litigant before the court. A "close relationship" was found in Ritter only because the Supreme Court accepted certiorari expressly to resolve a conflict between the first Ritter opinion and a federal appellate decision concerning the same state statutory procedure.

In contrast to the Ritter/Baldwin relationship, no relationship existed between the instant case and Valencia, other than the common legal question whether equitable estoppel will lie against the State in tax assessment and collection matters. Our supreme court did not grant review in Valencia to resolve any conflict between this courtís decisions in that case and this one. The supreme court recognized, as we do now, that the instant case was over.

The judgment in this case became final on July 22, 1997. Valencia was decided almost ten months later, and GM did not file its Rule 60(c) motion until more than eights after that. No reason appears from the record that would have required the tax court to treat the circumstances of this case as invoking an exception to the general rule that "change in decisional law should not, by themselves, be the basis for relief from judgments that have no prospective application." Mooreís Federal Practice 3d ed. 60.48{5][b]; cf. Jean F. Rydstrom, Annotation, construction and Application of Rule 60(b)(6) of Federal Rules of Civil Procedure Authorizing Relief from Final Judgment or Order for "Any Other Reason," 15 A.L.R. Fed. 193 (1973); Restatement (Second) of Judgments ß 73 cmt. C. (1982) ("[Federal Rule 60(b)(5)] has been construed as also applying to a situation where a subsequent judicial decision changes the law that was applied in reaching an earlier judgment, but this seems a misinterpretation of the rule and a very unsound policy."). The tax court did not abuse its discretion in denying GMís motion for relief under Arizona Rule of Civil Procedure 60(c).

General Motors next argues that the tax court abused its discretion in denying its motion for a new trial or to hold additional proceedings. We review the denial for abuse of discretion, considering all conflicting evidence in the light that supports the judgment. See Home Indem. Co. v. Bush, 20 Ariz. App. 355, 356, 513 P.2d 145, 146 (1973).

For the reasons set forth in our discussion of GMís Rule 60 motion, GM has failed to show that the trial court abused its discretion in denying a new trial or declining to hold additional proceedings. The tax courtís order indicates that the court considered the memoranda submitted and oral argument presented by the parties. We therefore find no abuse of discretion.

GM has requested attorneysí fees pursuant to A.R.S. section 12-348. Because GM has not prevailed in this appeal, we deny the request.



© 1996 Michael G. Galloway

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