Justia Contracts Opinion Summaries

Plaintiffs leased state trust land and owned all structures and improvements on the land. Under the terms of the lease, the improvements that existed on the land would become the state's property upon lease termination. After the leases were entered into, the legislature created a property tax classification ("Class Nine") in which property was taxed at a lower rate than that applicable to commercial property. For certain years, Maricopa County classified the improvements under the classification applicable to general commercial property and taxed Plaintiffs accordingly. The State Board of Equalization denied Plaintiffs' request for Class Nine classification. Plaintiffs then filed a declaratory judgment action in the tax court. The tax court granted summary judgment for the County based on Plaintiffs' failure to meet the requirements of Ariz. Rev. Stat. 42-12009(A)(1)(a), which provides that improvements on land leased from the state qualify for a reduced ad valorem tax rate if they become the property of the state on termination of the leasehold interest in the property. The Supreme Court remanded, holding that section 42-12009(A)(1)(a) applies when, at the time of taxation, improvements exist on the land that, under the terms of the lease, would become the state's property upon lease termination. View "CNL Hotels & Resorts, Inc. v. Maricopa County" on Justia Law

Dameware Development, LLC Defined Benefit Pension Plan and Trust bought several life insurance policies from American General Life Insurance Company. After Dameware was unable to obtain the tax benefits it hoped would result from purchasing the policies, it sued American General for damages and for rescission of the contract. The district court granted summary judgment to American General. The Fifth Circuit Court of Appeals affirmed, holding that Dameware had not shown any basis for rescinding the contract nor any contractual duties breached by American General, and therefore, the district court did not err in granting summary judgment to American General.

Plaintiffs appealed an order of the district court granting in part and denying in part the motion of defendant to dismiss the complaint for failure to state a claim. Plaintiffs contended that the IRS wrongfully withheld tax refunds to which plaintiffs were entitled as the result of the IRS's misinterpretation of contractual language in Offer-in-Compromise (OIC) agreements that plaintiffs entered into with the IRS. The principal issue on appeal was whether specialized tax terms in an OIC agreement derived their meaning from the Internal Revenue Code or from ordinary "plain English." The court held that, when used in IRS standard form documents, specialized tax terms such as "refund" and "overpayment" were interpreted in light of the Internal Revenue Code. Further, tax refunds made pursuant to the Economic Stimulus Act of 2008, I.R.C. 6428, related to the 2007 tax year, and so those refunds fell with the OIC agreements' temporal limitation. Finally, plaintiffs' agreement to forfeit their interest in "any" tax refund for the 2007 tax year encompassed anticipated as well as unanticipated tax refunds. Based on these holdings, the court concluded that the IRS correctly withheld the tax refunds at issue in this action from plaintiffs under the express terms of the OIC agreements.

John and Minerva Sutherland entered into a mining lease granting Meridian Granite Company the right to conduct mining operations on the Sutherlands' property. A dispute developed between the Sutherlands and Meridian regarding the Sutherlands' obligation to pay taxes relating to the mineral production. The dispute led to litigation. The district court granted Meridian's motion for summary judgment, ruling that the Sutherlands were obligated to pay the disputed taxes. The Supreme Court affirmed, holding that the district court did not err in allowing Meridian to deduct ad valorem and severance taxes from payments to the Sutherlands when such tax payments were not required by the State, as the Sutherlands and Meridian agreed in the mining lease that the Sutherlands would pay the taxes.

The Davises failed to pay the real estate tax for their property, resulting in a statutory tax. The Davises then filed a petition for bankruptcy, which was granted. Subsequently, the sheriff sold the tax lien. After the statutory time period that the Davises could redeem the property had passed and the property remained unredeemed, the tax lien purchaser received a tax deed conveying the Davises' property. The trial court set aside the tax deed, concluding that the tax lien sale should not have been held because the Davises had been in bankruptcy and because the sheriff did not give sufficient notice to the Davises of the tax delinquency, lien, and sale. The Supreme Court reversed, holding that the trial court erred (1) in considering issues relating to the sufficiency of the sheriff's service of the notices; (2) in considering the sheriff's pre-sale notices to the Davises, as only the post-sale notice to redeem is relevant in a lawsuit to set aside a tax deed; and (3) by granting judgment without making sufficient findings of fact and conclusions of law as to the effect the Davises' bankruptcy had on the tax lien. Remanded.

Defendant-Appellant International Bancshares Corporation (IBC) appealed the judgment of the district court in favor of Plaintiff-Appellee MCC Management of Naples (Colliers). The Colliers sued for breach of contract and fraud in a dispute over tax benefits. The dispute arose over the parties' disagreement over the entitlement to $16 million in benefits that accrued over a period of years in Local bank. Brothers and investors Miles and Barron Collier owned Local at the time the tax benefits arose. IBC now owns the bank. Local bought troubled loan assets. An agency (now the FDIC) guaranteed the value of the assets. In return, Local had to "share" some of its profits. When Congress repealed the deductions Local claimed on the losses from the assets, Local stopped paying its share from those assets and sued in federal court. The FDIC counterclaimed for non-payment. The Townsend Group had purchased Local Bank from the Colliers while the lawsuit was pending. Townsend required the Colliers promise to indemnify Townsend/Local in the event the FDIC won the lawsuit for more than the potential liability in the suit. Local eventually settled the suit for approximately $25-27 million. Townsend/Local and the Colliers signed a Resolution and Modification Agreement from which the Colliers claimed entitlement to the aforementioned tax benefits. Furthermore, through the "excess basis deduction," Local claimed a deduction on principal payments made to the FDIC and for attorney's fees. In addition to the dispute over the tax benefits, Local's former "tax director" quit over what she believed was the bonus owed to her for discovering the excess basis deduction. She began consulting for the Colliers and notified them of the millions in deductions that Local claimed. IBC counterclaimed against the Colliers, and added third-party claims against the former tax director for breaching confidentiality and tortious interference with contract. The Colliers and tax director prevailed after a jury trial. IBC appealed, arguing it was entitled a judgment as a matter of law. But after review, the Tenth Circuit found no error in the district court's findings at trial.

Gibraltar brought this action against Boston Private for specific performance of Boston Private's obligations under the tax allocation provision of the stock purchase agreement between the parties. Both parties moved for judgment on the pleadings under Court of Chancery Rule 12(c) on the question of how the tax payment provided for in the Stock Purchase Agreement should be calculated. In support of their respective motions, both parties argue that Section 5.5(d) of the Stock Purchase Agreement was unambiguous and that their respective interpretation was the only reasonable interpretation. The court held that the relevant portion of Section 5.5(d) was ambiguous. Since each party had advanced a reading of Section 5.5(d) that was reasonable, neither party had met its burden of demonstrating that its interpretation was the only reasonable interpretation. Accordingly, judgment on the pleadings was denied.

This appeal concerned tax deductions that Altria claimed in 1996 and 1997, and which the IRS disallowed. The claimed deductions resulted from Altria's participation in nine leveraged lease transactions with tax-indifferent entities. The jury found that Altria was not entitled to the claimed tax deductions. Applying the substance over form doctrine, the jury rejected Altria's contention that it retained a genuine ownership or leasehold interest in the assets and therefore was entitled to the tax deductions. The district court denied Altria's motion for judgment as a matter of law or for a new trial and entered judgment for the government. The court affirmed and held that Altria had not shown that the district court erred in instructing the jury regarding the substance over form doctrine.

Chevron, the franchisor, brought suit for declaratory judgment against one of its franchised dealers, M&M Petroleum Services, Inc. M&M responded with a counterclaim of its own, a counterclaim that was not only found to be frivolous, but the product of perjury and other misconduct. The court held that had M&M merely defended Chevron's suit, it could not have been held liable for attorneys' fees. The court held, however, that in affirmatively bringing a counterclaim that was reasonably found to be frivilous, M&M opened itself up to liability for attorneys' fees under the Petroleum Marketing Practices Act, 15 U.S.C. 2805(d)(3). Therefore, the district court did not err in determining that Chevron was eligible to recover attorneys' fees, nor did the district court abuse its discretion in determining that M&M's counterclaim was frivolous and awarding attorneys' fees to Chevron under section 2805(d)(3).

The National Treasury Employees' Union (Union) sought review of an adverse ruling by the Federal Labor Relations Authority (Authority) where the Union filed a grievance alleging that the IRS was processing its members' dues revocation forms without following contractually-mandated procedures. After the parties filed exceptions to the arbitrator's award with the Authority, the Authority denied the parties' exceptions and confirmed the award in its entirety. The Union petitioned the court for review. The court held that because the Authority's decision upholding the arbitrator's award was not arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law, the court had no warrant to disturb the Authority's decision.