Plaintiffs-Appellants )



) (Not for Publication -

STATE OF ARIZONA, ex rel. ARIZONA ) Rule 28, Arizona Rules

DEPARTMENT OF REVENUE, ) of Civil Appellate

) Procedure)

Appellee. )


Appeal from the Arizona Tax Court
Cause No. TX 94-00082
The Honorable William J. Schafer, III, Judge



Grant Woods, The Attorney General
by Gail H. Boyd, Special Assistant Attorney General
and Patrick Irvine, Assistant Attorney General
Attorneys for Appellee Phoenix

Snell & Wilmer, L.L.P.
by Daniel J. McAuliffe, Martha E. Gibbs,
and Janet E. Barton
Attorneys for Appellants Phoenix


This appeal, accelerated pursuant to Rule 29 of the Arizona Rules of Civil Appellate Procedure, has been considered by Presiding Judge Noel Fidel and Judges Jefferson L. Lankford and James B. Sult. At the conclusion of oral argument, the court announced its decision from the bench. We embody that disposition in this order.

On December 19, 1994, pursuant to Rule V(e) of the Uniform Rules of Practice of the Superior Court of Arizona ("Uniform Rule V(e)"), the tax court placed this case on its inactive calendar, scheduling it for dismissal on February 20, 1995. On February 16, 1995, the taxpayers filed a "Motion to Continue In An Inactive Status by Placing This Matter on The Pending Appeals Calendar." The taxpayers asked the tax court to either: (1) place the case on the court’s pending appeals calendar pursuant to Rule 26 of the Rules of Practice for the Arizona Tax Court, or (2) continue the case in an inactive status for 90 days to permit the taxpayers to file a motion for summary judgment. In a March 2 minute entry, the tax court refused to rule on the motion, stating that the case had been dismissed on February 20. This was incorrect; the case had not yet been dismissed. But when the taxpayers promptly moved to reconsider and informed the tax court that the court administrator had not yet dismissed the case, the tax court refused to reconsider its prior ruling. In an April 10 minute entry, the court stated:

This Court considers this case dismissed as of February 20, 1995. If technically it was not, IT IS ORDERED dismissing this case now as of that date, February 20, 1995.

We find that the tax court abused its discretion in both its March 2 and April 10 minute entries by declining to consider the taxpayers’ arguments on their merits, by declining to continue the matter on the inactive calendar, and by dismissing the case for lack of prosecution. In Gorman v. City of Phoenix, our supreme court stated that "Uniform Rule V should be used to dispose of abandoned cases and to encourage litigants to resolve their disputes quickly. It should not be used to trap the unwary or the momentarily negligent . . . Uniform Rule V(e) should not be used to win a case by avoiding trial on the merits, unless the case, in fact, is not being prosecuted vigorously." 152 Ariz. 179, 183, 731 P.2d 74, 78 (1987). The tax court violated this precept in this case.

We first acknowledge that the taxpayers bear some responsibility for their dilemma. They should not have waited until four days before the calendared dismissal date to move for an inactive calendar continuance. Though they were dilatory in this motion, however, they have demonstrated by reference to other cases – and their demonstration is uncontested – that the tax court frequently granted similar motions that were comparably late.

More importantly, even if the taxpayers neglected to file a timely motion to extend on the inactive calendar, they had vigorously prosecuted their substantive case. Far from resembling the "abandoned" case that Gorman identifies as appropriate for dismissal for lack of prosecution, this case had been diligently and sensibly advanced by both the taxpayer and the State. That is to say:

The parties had extensively litigated this matter at the administrative level before bringing it to the tax court. Thus, even though tax court proceedings were de novo, the positions of each had been substantially developed and made known to the other side.

The parties had exchanged disclosure statements in the tax court, and neither party alleged deficiencies in the disclosures of the other.

In a pending appeal of a separate matter, the very same lawyers had contested an issue that, when finally resolved, would establish the standard for resolution of a significant issue in the present case. In a sense, by litigating the applicable standard in that separate case, the taxpayers’ lawyers were advancing the taxpayers’ position in the present case.

The taxpayers were not proposing a continuance to put off neglected discovery or avoid coming to grips with their case, but rather to permit this case to be determined in accordance with the standard about to be established in the other case. This purpose was economically prudent for the parties and administratively prudent for the court.

Just as a reasoned consideration of the factor of vigorous prosecution would have favored the taxpayer’s motion, so would a reasoned consideration of the prejudice that would result to either party from a grant or denial of continuance. Denial of the taxpayers’ motion subjected them to the time bar of a statute of limitations – precisely the type of prejudice that our courts have recognized as justifying a continuance under Uniform Rule V(e)(2). See Jepson v. New, 164 Ariz. 265, 270, 792 P.2d 728, 733 (1990). Conversely, the Department of Revenue did not advance before the tax court, and has not advanced before this court, any credible claim that the State would have been prejudiced by a continuance.

In short, at the time the taxpayers’ initial motion was presented, this case had not been dismissed, had not been neglected by the parties, and was proceeding reasonably toward resolution on the merits -- a resolution that our jurisprudence favors. The reasonable delay that the taxpayers proposed was intended to permit both the tax court and parties to be guided in resolution on the merits by a pending appellate decision on the standard to be applied. By declining to consider the motion, and by subsequently dismissing the action retroactively – still without considering the motion – the tax court deprived the taxpayers of their claim "despite diligent prosecution only because of a rule of practice designed to promote expediency and efficiency but which resulted in injustice." Jepson, 164 Ariz. At 276, 792 P.2d at 739.

For the foregoing reasons, we find that the tax court abused its discretion, we reverse the dismissal from the inactive calendar, and we direct th etax court upon remand to retain this case on its inactive calendar for a time reasonably sufficient to permit the filing of motions for summary judgment or a motion to set for trial.



© 1996 Michael G. Galloway

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