Arizona Court of Appeals Division One Holds That Superior Court Did Not Abuse Its Discretion In Barring Use of Tax Protest Material To Impeach a Property Owner in a Condemnation Case, and That Sanctions Under Rule 68 May Be Awarded in Condemnation Cases.

SRP filed suit seeking to condemn real property owned by Miller Park. Prior to trial, Miller Park moved in limine to exclude evidence regarding Miller Park’s protest of the county assessor’s determination of “full cash value” of its property for tax purposes. SRP sought to introduce such evidence to impeach a Miller Park representative’s testimony as to the value of the property for condemnation purposes. The trial court granted Miller Park’s motion over SRP’s objection and the case proceeded to trial. Following a jury award favorable to Miller Park, SRP timely appealed.

On appeal, SRP argued that a property owner’s prior statement of value made for tax purposes is per se admissible to impeach the owner in a condemnation action if the owner testifies at trial regarding value. The court of appeals disagreed. The court explained that Arizona law takes different approaches to valuing property for tax and condemnation purposes. The former requires a determination of market value limited to present usage of the property, while the latter requires a determination of the property’s market value based on its highest and best use. As a result, an owner’s valuation prepared for tax purposes may not be relevant for impeachment in a condemnation proceeding. The court recognized that there may be instances in which such evidence could have impeachment value, but such determinations are left to the trial court’s discretion. In the present matter, where Miller Park had almost no participation in the preparation of the tax protest valuation, the trial court did not abuse its discretion in excluding such evidence.

Miller Park cross-appealed arguing that the superior court should have awarded it sanctions under Rule 68 because it obtained a judgment well in excess of an offer of judgment it made to SRP. SRP asserted that Rule 68 sanctions could not be awarded in condemnation proceedings because the Rule had been pre-empted by A.R.S. § 12-1128 (Supp. 2006). That statute grants a court discretion to award costs and jury fees in condemnation cases except in certain circumstances. SRP argued that the mandatory sanctions required by Rule 68 contravene the discretionary sanctions provided by the statute. Citing Pima County v. Hogan, 197 Ariz. 138, 3 P.3d 1058 (App. 1999), SRP argued that Rule 68 is inapplicable to all condemnation proceedings. Without commenting on the correctness of Hogan, the court of appeals disagreed, holding that Hogan was not controlling because that case dealt with a situation where Rule 68 and the statute were in direct conflict. The case at bar presents no such conflict. Because Miller Park recovered a verdict in excess of its offer of judgment, it became entitled to an award of costs under both the statute and the rule.

Presiding Judge Norris authored the unanimous opinion, joined by Judge Barker and Judge Thompson.