NOTICE: NOT FOR OFFICIAL PUBLICATION.

UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT 

PRECEDENTIAL AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.

IN THE

ARIZONA COURT OF APPEALS

DIVISION ONE

DESERT GARDENS MOBILE HOMES, L.L.C. dba DESERT GARDENS 

MOBILE HOMES AND CLASSIC CARS, Plaintiff/Appellant,

v.

TOWN OF QUARTZSITE, Defendant/Appellee.

No. 1 CA-TX 14-0009

Appeal from the Arizona Tax Court

No. TX2011-000179

The Honorable Dean M. Fink, Judge

AFFIRMED

COUNSEL

Ryan Rapp & Underwood, PLC, Phoenix

By Ian A. Macpherson

Counsel for Plaintiff/Appellant

Berry Law Group, PLLC, Phoenix

By Christopher J. Berry, Richard W. Gilmour

Counsel for Defendant/Appellee
DESERT GARDENS v. TOWN OF QUARTZSITE

Decision of the Court

2

MEMORANDUM DECISION

Judge Lawrence F. Winthrop delivered the decision of the Court, in which 

Presiding Judge Kent E. Cattani and Judge Patricia K. Norris joined.

W I N T H R O P, Judge:

¶1 Desert Gardens Mobile Homes, LLC, appeals the decision of 

the tax court finding it liable for transaction privilege tax assessed by the 

Town of Quartzsite, arguing that the Town is estopped from collecting the 

tax. Because Desert Gardens has not proven the necessary elements of 

promissory estoppel, we affirm the decision of the tax court in favor of the 

Town.

FACTS AND PROCEDURAL HISTORY

¶2 Desert Gardens sells manufactured homes and motor vehicles 

in Quartzsite, Arizona. The Town audited Desert Gardens for the period 

from February 2006 through July 2007 and assessed transaction privilege 

tax of $44,716.61 plus interest.

1

¶3 After exhausting its administrative remedies, Desert Gardens 

filed a complaint in La Paz County superior court, which was transferred 

to tax court. See Ariz. Rev. Stat. (“A.R.S.”) § 12-163(A)(2015).

2 Desert 

Gardens did not plead estoppel in its complaint.

¶4 In the joint pretrial statement, Desert Gardens alleged facts 

supporting a claim for promissory estoppel, specifically that the Town

manager had offered Desert Gardens “amnesty for prior tax liabilities if 

 

1 Arizona’s transaction privilege tax is an “excise tax on the privilege 

or right to engage in an occupation or business in the State of Arizona.” 

Ariz. Dep’t of Revenue v. Mountain States Tel. & Tel. Co., 113 Ariz. 467, 468, 

556 P.2d 1129, 1130 (1976). The Town assessed transaction privilege tax on 

the income Desert Gardens realized from the sale of manufactured homes 

pursuant to the Quartzsite Town Code article 9-427.

2 Absent material revisions after the relevant dates, we cite the current 

version of a statute unless otherwise indicated.
DESERT GARDENS v. TOWN OF QUARTZSITE

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3

[Desert Gardens] would assist the Town by funding and operating the 

City’s defunded Chamber of Commerce which involved taking over the 

expenses and responsibilities for answering inquiries and manning the 800 

number lines established to help draw tourism to Quartzsite.” Desert 

Gardens further alleged that it acted in reliance on the Town manager’s

promise.3

¶5 At trial, Richard Oldham4, the owner of Desert Gardens, 

testified regarding the Town’s alleged promise and Desert Gardens’ 

reliance on that promise. The tax court entered judgment in favor of the 

Town, and Desert Gardens timely appealed. We have jurisdiction pursuant 

to A.R.S. § 12-2101(A)(1).

ANALYSIS

¶6 On appeal, Desert Gardens does not contest the transaction 

privilege tax assessment. Rather, the issue raised is whether the Town 

should be precluded from enforcing the tax assessment against Desert 

Gardens based on the doctrine of promissory estoppel.

I. Amendment of the Complaint

¶7 As a preliminary matter, Desert Gardens admits that the 

complaint did not include a claim for estoppel and requests that it be 

“allowed to conform the pleadings to the evidence litigated and adduced at 

trial by allowing its complaint to now be deemed amended.” In its brief, 

the Town agrees to the proposed amendment: “By hearing and considering 

[Desert Gardens’] evidence and argument on its promissory estoppel 

defense, [the tax court] de facto allowed an amendment of Desert Gardens’ 

pleadings to include that defense.”

¶8 As a general rule, “estoppel, whether the basis of a claim or a 

defense, must be specially pleaded.” Connolly v. Great Basin Ins. Co., 6 Ariz. 

App. 280, 289, 431 P.2d 921, 930 (1967) (citations omitted). Arizona Rule of 

Civil Procedure 15(b), however, provides for the amendment of pleadings 

to conform to the evidence:

 

3 Desert Gardens included the same facts in its proposed findings of 

fact and argued for the application of promissory estoppel in its trial brief.

4 Oldham is a former mayor of Quartzsite.
DESERT GARDENS v. TOWN OF QUARTZSITE

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When issues not raised by the pleadings are 

tried by express or implied consent of the 

parties, they shall be treated in all respects as if 

they had been raised in the pleadings. Such 

amendment of the pleadings as may be 

necessary to cause them to conform to the 

evidence and to raise these issues may be made 

upon motion of any party at any time, even after 

judgment, but failure so to amend does not 

affect the result of the trial of these issues.

Ariz. R. Civ. P. 15(b). Our supreme court has applied Rule 15(b) to the 

pleading of estoppel: “[A]mendments may be made to conform to the 

evidence and to raise issues and present defenses not made by the original 

pleadings. Thus the defense of estoppel would not be deemed waived by 

failure to plead it originally if pleaded at the time of trial.” Keystone Copper 

Min. Co. v. Miller, 63 Ariz. 544, 561-62, 164 P.2d 603, 611 (1945); see also Webb 

v. Hardin, 53 Ariz. 310, 315, 89 P.2d 30, 32 (1939) (“[W]herever there is any 

evidence appearing in the record upon which the special defense of 

estoppel might have been predicated and urged at the trial, this court may 

itself raise, consider and apply such defense, notwithstanding that it had 

neither been pleaded nor urged as an issue by either party in the lower 

court.”).

¶9 Although Desert Gardens did not plead estoppel in its 

complaint, it did assert estoppel in pleadings filed prior to trial. Moreover, 

at trial, Desert Gardens offered testimony in support of its claim and argued 

for the application of promissory estoppel.5 Accordingly, we treat this case 

as if the complaint were amended to conform to the evidence. See Elec. 

Adver., Inc. v. Sakato, 94 Ariz. 68, 71, 381 P.2d 755, 757 (1963) (“If an 

amendment to conform the pleadings to the proof should have been made, 

an appellate court will presume that it was so made to support the 

judgment.”); State v. Barnum, 58 Ariz. 221, 225, 118 P.2d 1097, 1099 (1941)

(“[W]hen issues not within the pleadings have been made and tried 

between the parties, we will permit the pleadings to be amended to cover 

such issues, or we will treat the case as though such amendment had been 

made.”).

 

5 The Town’s counsel objected to the testimony on the basis of hearsay 

and Arizona Rule of Evidence 408 only.
DESERT GARDENS v. TOWN OF QUARTZSITE

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II. Promissory Estoppel

¶10 Desert Gardens argues the Town “should be bound by the 

doctrine of promissory estoppel to be without authority to enforce the 

assessment it has imposed on [Desert Gardens].” The Town argues that the 

evidence is insufficient to establish estoppel against a governmental entity.

¶11 Our supreme court has adopted the definition of promissory 

estoppel found in the Restatement (Second) of the Law of Contracts, which

provides:

A promise which the promisor should 

reasonably expect to induce action or 

forbearance on the part of the promisee or a 

third person and which does induce such action 

or forbearance is binding if injustice can be 

avoided only by enforcement of the promise. 

The remedy granted for breach may be limited 

as justice requires.

Restatement (Second) of Contracts § 90(1) (1981); Chewning v. Palmer, 133 

Ariz. 136, 138, 650 P.2d 438, 440 (1982) (adopting and applying the 

Restatement). The party asserting estoppel “has the burden of showing by 

clear and satisfactory proof that all the elements are present, and the acts 

relied upon to create it must be absolute and unequivocal.” Knight v. Rice, 

83 Ariz. 379, 381, 321 P.2d 1037, 1038 (1958); Fridenmaker v. Valley Nat’l Bank 

of Ariz., 23 Ariz. App. 565, 571, 534 P.2d 1064, 1070 (1975).

¶12 As a general rule, Arizona courts have held that promissory 

estoppel will not lie against the government. State ex rel. Romley v. Gaines, 

205 Ariz. 138, 143, ¶ 17, 67 P.3d 734, 739 (App. 2003). Nevertheless, in 

Valencia Energy Co. v. Arizona Dep’t of Revenue, 191 Ariz. 565, 959 P.2d 1256

(1998), our supreme court acknowledged that in rare situations the 

government can be equitably estopped from assessing a tax that is legally 

owed by a taxpayer. Id. at 576, 578-79, ¶¶ 34, 41, 959 P.2d at 1267, 1269-70.

In Valencia, the taxpayer contacted the Arizona Department of Revenue in 

order to determine if transaction privilege tax applied to its coal 

transportation activities. Id. at 579-80, ¶¶ 44-45, 959 P.2d at 1270-71. 

Ultimately, the Department advised the taxpayer that the transaction was 

not taxable and, in reliance on that assurance, the taxpayer did not collect 

tax from its customers of more than five million dollars. Id. at 579, 581, ¶¶

44, 53, 959 P.2d at 1270, 1272. Based on those circumstances, the Arizona 
DESERT GARDENS v. TOWN OF QUARTZSITE

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Supreme Court vacated the tax court’s ruling that had granted summary 

judgment to the Department. Id. at 582, 959 P.2d at 1273.

¶13 As the Valencia decision reflects, a party seeking to establish 

estoppel against the government has a greater “evidentiary burden” than 

would exist in cases not involving the government. See id. at 577, ¶ 36, 959 

P.2d at 1268. The court noted that the governmental action must bear a 

“considerable degree of formalism,” and that “[i]t is rare that satisfactory 

evidence of an absolute, unequivocal, and formal state action will be found 

unless it is in writing.” Id. In addition, the party seeking estoppel must 

demonstrate that its reliance is reasonable under the circumstances and that 

“it prospectively relied on the state action.” Id. at 577, ¶ 37, 959 P.2d at 1268.

Finally, there must be “substantial detriment to the party resulting from a 

repudiation of prior representations.” Id. at 577, ¶ 38, 959 P.2d at 1268.

6 The

court cautioned:

We recognize the force of the proposition that 

estoppel should be applied against the 

Government with utmost caution and restraint, 

for it is not a happy occasion when the

Government’s hands, performing duties in 

behalf of the public, are tied by the acts and 

conduct of particular officials in their relations 

with particular individuals. 

. . . It is to be emphasized that such situations 

must necessarily be rare, for the policy in favor 

of an efficient collection of the public revenue 

outweighs the policy of the estoppel doctrine in 

its usual and customary context. 

Id. at 578-79, ¶ 41, 959 P.2d at 1269-70 (quoting Schuster v. C.I.R., 312 F.2d 

311, 317 (9th Cir. 1962)).

 

6 In Valencia, the issue was whether the taxpayer could assert equitable 

estoppel against the state. Valencia, 191 Ariz. at 569, ¶ 8, 959 P.2d at 1260. 

The distinction between equitable estoppel and promissory estoppel has 

been explained as: “[T]o work an equitable estoppel or ‘estoppel in pais,’ 

the representation in question must be of some present or past fact, while 

promissory estoppel rests upon a promise to do something in the future.” 

Trollope v. Koerner, 106 Ariz. 10, 18, 470 P.2d 91, 99 (1970).
DESERT GARDENS v. TOWN OF QUARTZSITE

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¶14 Because questions of estoppel are fact intensive, “[w]e defer 

to the trial court with respect to any factual findings explicitly or implicitly 

made, affirming them so long as they are not clearly erroneous.” John C. 

Lincoln Hosp. and Health Corp. v. Maricopa Cnty., 208 Ariz. 532, 537, ¶ 10, 96 

P.3d 530, 535 (App. 2004), as amended (Sept. 1, 2004). Although the tax 

court’s ruling did not specifically address the issue of promissory estoppel, 

the court impliedly rejected Desert Gardens’ claim by ruling in favor of the 

Town. See Johnson v. Elson, 192 Ariz. 486, 489, ¶ 11, 967 P.2d 1022, 1025 

(App. 1998) (“[W]e may infer additional findings of fact and conclusions of 

law sufficient to sustain the trial court’s order as long as those findings are 

reasonably supported by the evidence, and not in conflict with any express 

findings.”). We review the tax court’s decision not to apply estoppel against 

the town for an abuse of discretion. See Flying Diamond Airpark, LLC v. 

Meienberg, 215 Ariz. 44, 50, ¶ 27, 156 P.3d 1149, 1155 (App. 2007).

¶15 The tax court did not abuse its discretion in deciding not to 

apply promissory estoppel. Desert Gardens failed to provide clear and 

satisfactory proof that all the elements of promissory estoppel were present, 

particularly in light of the heightened evidentiary burden that applies to 

estoppel against the government. At trial, Oldham testified regarding the 

facts of the alleged estoppel. He described his meeting with the Town 

manager, which occurred after Desert Gardens received the notice of 

assessment:

[The Town manager] asked us what we would 

like to do with the audit and we said, “Well, we 

think it’s very unfair and not correct.” But in the 

interest of trying to move along and settle the 

assertion that they were making, we would be 

willing, as we discussed, to take over the - - the 

Town had defunded the chamber of commerce 

and the Town of Quartzsite, and so we agreed 

that we would [ . . . ] answer the phones. There 

[were] a couple of phones that needed to be 

answered for the chamber of commerce that 

were going to be turned off. And there was at 

least one billboard that we would continue to 

pay for or to keep alive talking about the 

chamber of commerce and the services in 

Quartzsite.
DESERT GARDENS v. TOWN OF QUARTZSITE

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Oldham could not remember specifically when the meeting occurred, and 

he acknowledged that although the Town manager promised she would 

document their agreement, she never did.7

¶16 On cross-examination, Oldham admitted that, prior to any 

settlement conversation with the Town manager, Desert Gardens had

already assumed responsibility for paying for the phone lines:

Q: How soon after the communication that you 

had with [the Town manager] did your 

company assume the responsibility of paying 

the phone line?

A: Actually we were already doing it because 

the Chamber had pretty much run out of 

money.

Moreover, despite the Town’s failure to follow through on its alleged 

promise, Desert Gardens continued to maintain and fund the phone lines 

up to the time of trial.

¶17 Desert Gardens failed to prove that the Town’s actions were 

absolute and unequivocal. Even assuming the Town manager did offer tax 

amnesty, her promise, which was never reduced to writing, did not reflect

the “degree of formalism” required to establish estoppel against the 

 

7 Desert Gardens also relies upon Luther Constr. Co. v. Arizona Dep’t of 

Revenue, 205 Ariz. 602, 74 P.3d 276 (App. 2003), in which this court held that 

a taxpayer’s reasonable reliance on the Department of Revenue’s prior 

inconsistent positions precluded summary judgment in favor of the 

Department and left to the trial court the determination of whether 

equitable estoppel applied. Id. at 284, ¶ 44, 74 P.3d at 610. In Luther Constr., 

the taxpayer relied on: (1) a letter from the Department of Revenue 

indicating that income from contracting activity on a reservation was 

exempt from taxation; and (2) a refund reflecting the same. See id. at 277-

78, ¶¶ 3, 4, 205 Ariz. at 603-04. We determined the taxpayer could have 

viewed the audit results and refund decision as the Department’s 

“unequivocal affirmation of its position explicitly stated” in the letter that 

proceeds from such contracting were tax exempt. Id. at 280, ¶ 18, 74 P.3d at 

606. In the present case, the Town manager did not explicitly state her 

promise in a letter nor was there any other unequivocal affirmation of her 

promise.
DESERT GARDENS v. TOWN OF QUARTZSITE

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government. Moreover, Oldham’s alleged reliance on the promise was not 

justifiable under the circumstances. See Higginbottom v. State, 203 Ariz. 139, 

144, ¶ 18, 51 P.3d 972, 977 (App. 2002) (holding that a party can only recover 

under the theory of promissory estoppel if he or she had a “justifiable right 

to rely” on the alleged promise). A reasonable business owner, and former 

mayor, would not expect a brief and undocumented discussion to result in 

relief from a significant tax liability and act in reliance on the same.

8

¶18 In addition, Desert Gardens failed to establish that it 

“prospectively relied” on the Town’s action. As Oldham admitted on crossexamination, Desert Gardens had already agreed to assist and fund the 

Quartzsite chamber of commerce before his meeting with the Town 

manager and continued to do so after it became obvious that the Town was 

not going to grant tax amnesty. This suggests that Desert Gardens did not 

take these actions solely in reliance on the Town manager’s alleged 

promise.

¶19 Finally, the alleged detriment to Desert Gardens was not 

significant. Unlike the taxpayer in Valencia, Desert Gardens’ failure to pass 

along the tax liability to its customers was not a result of the alleged 

promise. Rather, Oldham met with the Town manager after the tax liability 

had already accrued and an assessment had been issued. Accordingly, the 

only detriment to Desert Gardens was the cost incurred in funding and 

maintaining the chamber of commerce phones and the cost of billboard 

 

8 The parties also dispute whether the Town manager had the 

authority to enter into an agreement for the abatement of tax liability 

without the approval of the Town Council. We need not reach this issue 

because, even assuming the Town manager did have such authority, Desert 

Gardens has still failed to prove the elements of promissory estoppel. We 

further note that, in support of its argument, the taxpayer has referenced a 

town council agenda and meeting minutes that reference some unresolved 

discussion about possible settlement of this tax assessment. These 

documents were not in evidence before the tax court and are not part of the 

record properly before us. In any event, these documents do not support 

the taxpayer’s position.
DESERT GARDENS v. TOWN OF QUARTZSITE

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advertising. This detriment was insignificant in comparison to the tax 

liability.

9

¶20 Accordingly, Desert Gardens has failed to provide clear and 

satisfactory proof of the elements required to establish estoppel against the 

Town.

CONCLUSION

¶21 For the foregoing reasons, we affirm the decision of the tax 

court. Pursuant to A.R.S. § 12-341 and the Town’s request, we award the 

Town its costs on appeal upon compliance with Arizona Rule of Civil 

Appellate Procedure 21.

 

9 The cost to Desert Gardens of maintaining the phone lines is between 

$40 and $50 per month, and the cost of the billboard was $300 to $400 per 

year.