FILED i DtlRT APPEALS Cif ISIOIII
2015 AUG - 4 AM 9: 56
ST
BY
IN THE COURT OF APPEALS OF THE STATE OF W4Q . ., 1.
DIVISION II
NANCY G. KISSNER, Executrix of the Estate No. 44809 -2 -II of Lillian M. Peste and MERVYN SETTLE, Executor of the Estate of Lillian M. Peste,
Respondents,
V.
WASHINGTON STATE DEPARTMENT OF REVENUE, a state agency,
Consolidated with No. 45032 -1 - II) ANNE D. HARRISON, as personal , representative of the Estate of HARRIET O. DAVIS,
Respondent,
DEPARTMENT OF REVENUE OF WASHINGTON STATE,
JOHANSON, C. J. — In this consolidated appeal, the Department of Revenue (DOR) appeals
1) the trial court' s summary judgment order in favor of Lillian M. Peste' s Estate, requiring DOR
to issue an estate tax refund; and (2) an agreed order in favor of Harriet O. Davis' s Estate, requiring
DOR to issue a release of estate tax liability. The trial court' s orders were based on In re Estate Consol. Nos. 44809 -2 -II / 45032 -1 - II
of Bracken, 175 Wn.2d 549, 290 P. 3d 99 ( 2012). In direct response to Bracken, in 2013, the
legislature amended portions of Washington' s Estate and Transfer Tax Act,' retroactive to estates,
like Peste and Davis,2 whose decedents died on or after May 17, 2005. LAWS of 2013, 2nd Spec.
Sess., ch. 2, § 9. Several estates challenged those amendments, but in In re Estate ofHambleton,
181 Wn.2d 802, 809, 335 P. 3d 398 ( 2014), our Supreme Court upheld the 2013 amendments,
specifically confirming the validity of the amendments' retroactive application..
The Estates here argue that, notwithstanding Hambleton, DOR ( 1) violated the
Administrative Procedure Act (APA)3 when it refused to issue a refund to Peste and a release of
liability to Davis, ( 2) should be equitably estopped from applying the 2013 amendments to them,
and ( 3) should be judicially estopped from applying the 2013 amendments to them.4 We hold that
DOR did not violate the APA when it denied Peste' s refund or Davis' s release of liability and that
DOR is neither equitably nor judicially estopped from applying the 2013 estate tax amendments
to the Estates. Accordingly, in Peste' s case, we reverse the trial court and remand with instructions
to enter judgment in DOR' s favor, and we reverse the trial court' s order requiring DOR to issue a
release to Davis.
Ch. 83. 100 RCW.
2 We refer to the parties collectively as " the Estates" and individually as " Peste" or " Davis."
3 Ch. 34. 05 RCW.
4 In its supplemental briefing, the Estates agree that Hambleton resolved the " legality of the retroactive application of the 2013 amendments" to the Washington Estate and Transfer Tax Act against them. Suppl. Br. of Resp' t at 10. They claim that their requested relief is now based on only their APA and estoppel However, the Estates specifically abandon the collateral theories.
estoppel argument raised in their opening brief.
2 Consol. Nos. 44809 -2 -II / 45032 -1 - II
FACTS
I. THE PESTE ESTATE
Fred Peste died in March 1985. Fred' s5 estate made the federal qualified terminable
interest property (QTIP) election. Lillian Peste died in July 2008. In October 2009, Peste filed its
Washington estate and transfer tax return and paid, under protest, the estate tax on the QTIP-
elected property included in Peste' s federal taxable estate. In June 2010, Peste requested a refund
of $717,239 in QTIP taxes. Six days later, DOR denied the refund.
In July 2010, Peste petitioned for judicial review of DOR' s denial of its refund. The trial
court stayed the action until the Supreme Court resolved Bracken. The parties' stipulated motion
for a stay provided, in relevant part; that "[ t]he central issue in Bracken is identical to that in this
action. Therefore, to prevent unnecessary litigation it would be in the interest ofjustice to issue a
stay." Peste Clerk' s Papers ( CP) at 33.
In October 2012, our Supreme Court decided Bracken in favor of the taxpayers. 175 Wn.2d
at 554. On January 10, 2013, the court denied reconsideration of Bracken. 175 Wn.2d at 606. In
February 2013, legislation was introduced in the State House of Representatives amending the
definitions of " transfer" and " Washington taxable estate" to expressly include QTIP in the
Washington taxable estate of a decedent. Peste CP at 84; LAWS of 2013, 2nd Spec. Sess., ch. 2, §
2. The legislation included a retroactivity provision applying the, amendments to the estates of
decedents, like Lillian, who died on or after May 17, 2005. LAWS of 2013, 2nd Spec. Sess., ch. 1,
9. In March 2013, before the amendment to the Washington estate tax was enacted, Peste moved
5 For clarity, we refer to spouses who share the same last name by their first names, intending no disrespect.
3 Consol. Nos. 44809 -2 -II / 45032 -1 - II
for an order lifting the stay and for summary judgment, arguing that Bracken resolved all issues in
its favor. DOR opposed the Peste' s motion, arguing that ( 1) the trial court should continue to stay
the action so that the legislature had the opportunity to fully consider and act upon the pending
legislation, ( 2) Bracken should be overruled, and ( 3) Peste' s calculation of interest due on any
refund was excessive.
On April 12, 2013, the trial court granted Peste' s motion and ordered DOR to refund
Pestes' s principal and interest overpayment. On April 25, 2013, DOR appealed the trial court' s
order. On May 28, 2013, Peste moved to dismiss the appeal under RAP 18. 9( c) and . 14, alleging
that DOR' s appeal was frivolous, filed solely for the purpose of delay, and clearly controlled by
settled law. The legislation became effective on June 14, 2013. LAWS of 2013, 2nd Spec. Sess.,
ch. 2. On June 25, this court' s commissioner denied Peste' s motion to dismiss " in light of the
legislature' s recent action." Notation Ruling (Wash. Ct. App. June 25, 2013).
II. THE DAVIS ESTATE
John H. Davis died in September 2003, and his estate also made the federal QTIP election.
John' s wife, Harriet O.. Davis, died in September 2009. In June 2010, Davis filed its Washington
estate tax return but did not pay any estate taxes on QTIP- elected property. In November 2010,
DOR informed Davis that it owed $ 1, 403, 031. 29, including interest, in estate taxes on the QTIP-
elected property. Several weeks later, Davis replied, explaining that in its opinion it did not owe
any QTIP taxes and that it was its " full intention not to make a final distribution of the estate before
resolution of [Bracken] by the Washington Supreme Court." Davis CP at 47.
In October 2012, our Supreme Court decided Bracken. In December 2012, Davis sent
DOR a letter, reiterating its position that it did not owe estate taxes on QTIP- elected property and
rd Consol. Nos. 44809 -2 -II / 45032 -1 - II
DOR informed Davis that it was pursuing a motion for reconsideration of Bracken and would
notify it " when the decision is made." Davis CP at 180. The record does not show either that
DOR contacted Davis or that Davis made 'a new request for a release after the Supreme Court
denied reconsideration of Bracken. After receiving no new information from DOR, in May 2013,
Davis filed a petition for mandamus and for declaratory relief under the Trust and Estate Dispute 6 Resolution Act (TEDRA), seeking to compel DOR to issue a final release of liability to Davis and
for a declaratory judgment that Davis did not owe QTIP estate taxes. Davis amended its petition
several weeks later to include a petition for judicial review under the APA. Davis and DOR entered
into a " Stipulation and Agreed Order," under which the parties agreed that, based on Bracken,
Davis was entitled to a release under the APA. They also agree that their order
does not preclude [ DOR] from an appeal of this order that would otherwise be available had this order been entered by the court after a contested hearing .for the purpose of presenting a good faith argument for the reversal of [Bracken].
Davis CP at 282.
DOR appeals that order.7
ANALYSIS
The Estates argue that ( 1) the Hambleton decision does not address their argument that in
failing to issue the refund to Peste and the release of liability to Davis, DOR violated the APA,
Ch. 11. 96A RCW.
7 We stayed these cases until our Supreme Court' s decision in Hambleton. After Hambleton was decided on October 2, 2014, we ordered the parties to file supplemental briefing addressing Hambleton' s implications, particularly addressing the Estate' s arguments that its APA claims and its estoppel claims survived Hambleton.
5 Consol. Nos. 44809 -2 -II / 45032 -1 - II
and ( 2) DOR should be equitably and judicially estopped from applying the 2013 amendment to
them.
DOR argues that ( 1) it did not violate the APA because the relevant statutes do not specify
a time period within which a refund or release must be issued and it acted reasonably in giving the
legislature time to consider the 2013 amendment, and ( 2) the Estates cannot establish any of the
required elements of equitable or judicial estoppel. We agree with DOR that it did not violate the
APA and that the Estates cannot establish equitable or judicial estoppel.
I. APA VIOLATIONS
The Estates argue that DOR' s failure to issue a refund to Peste or a release to Davis violated
the APA because DOR' s action was ( 1) contrary to DOR' s legal authority, ( 2) arbitrary and
capricious, or ( 3) unconstitutional. We hold that DOR did not violate the APA because ( 1) it did
not act contrary to its legal authority, (2) waiting for the legislature to act was reasonable given the
attending facts and circumstances, and ( 3) the Estates cannot demonstrate that DOR violated their
substantive due process rights.
A. STANDARD OF REVIEW AND RULES OF LAW
When reviewing an appeal from summary judgment and from a trial court' s conclusions in
a tax refund case, our review is de novo. Bracken, 175 Wn.2d at 562 ( citing RCW 83. 100. 180;
RCW 11. 96A.200; Lamtec Corp. v. Dept ofRevenue, 170 Wn.2d 838, 842, 246 P.3d 788 ( 2011);
Simpson Inv. Co. v. Dep' t ofRevenue, 141 Wn.2d 139, 148, 3 P. 3d 741 ( 2000)). A party is entitled
to summary judgment where there is no dispute as to any material fact and the party is entitled to
judgment as a matter of law. CR 56( c).
0 Consol. Nos. 44809 -2 -II / 45032 -1 - II
DOR' s actions are subject to review under the APA. RCW 34.05. 570; see also, e. g., Dep' t
of Revenue v. Bi -Mor, Inc., 171 Wn. App. 1. 97, 201- 02, 286 P. 3d 417 ( 2012). The APA provides
for judicial review of "other agency action[ s]." RCW 34. 05. 570( 4). The Estates are entitled to
relief from DOR' s other agency actions if those actions are ( 1) unconstitutional; ( 2) "[ o] utside the
statutory authority of the agency or the authority conferred by a provision of law," or ( 3) arbitrary
or capricious. RCW 34. 05. 570( 4)( c)( i)-( iii). The Estates bear the burden of establishing the
invalidity of DOR' s actions. RCW 34. 05. 570( 1)( a).
Because no disputed issues of fact exist in this case, our review is confined to which party
is entitled to judgment as a matter of law.
B. DOR DID NOT ACT OUTSIDE ITS LEGAL AUTHORITY
The Estates argue that DOR violated the APA because it acted outside its legal authority
when it refused to issue the refund to Peste and the release to Davis because, after Bracken, it had
a duty to do so. DOR argues that the estate tax laws do not specify a time within which it must
issue a refund to Peste or a release to Davis.8 We hold that DOR did not violate the APA because
it did not act outside its statutory authority when it denied Peste' s refund and refused to issue
Davis' s release.
Peste points to RCW 83. 100. 130( 1), WAC 458- 20- 229( 7), and the trial court' s summary
judgment order as the legal authorities that define DOR' s statutory authority with respect to its
refund. We hold that DOR did not act contrary to any of the authorities that Peste identifies.
8 We assume without deciding that the Estates properly preserved their challenges to DOR' s failure to issue a refund to Peste and a release to Davis as alleged " other agency action[ s]" under RCW 34. 05. 570( 4)( b).
7 Consol. Nos. 44809 -2 -II / 45032 -1 - II
RCW 83. 100. 130( 1) states,
If, upon receipt of an application by a taxpayer for a refund, or upon examination of the returns or records of any taxpayer, [ DOR] determines that ... a person
required to file the Washington return under RCW 83. 100. 050 has overpaid ..., DOR] shall refund the amount of the overpayment. .
WAC 458- 20- 229( 7) provides that DOR "will grant refunds or credits required by a court or Board
of Tax Appeals decision, if the decision is not under appeal." The trial court' s summary judgment
order stated that DOR " shall within two weeks" issue a refund to Peste. Peste CP at 134.
In June 2010, Peste applied for a refund of the estate taxes it paid on QTIP- elected property.
Six days later, more than two years before Bracken, DOR determined that Peste had not overpaid
and was, thus, not entitled to a refund. DOR made this determination under RCW 83. 100. 130( 1)
and its determination was subject to judicial review and appeal.
But Peste claims that DOR acted outside its statutory authority and violating the APA
because, as soon as Bracken was decided, RCW 83. 100. 130( 1) required DOR to make an
immediate refund. This argument is unpersuasive because the statute' s language requires DOR to
issue a refund either ( 1) upon a taxpayer' s application or ( 2) upon DOR' s own examination and
determination that a refund is due. RCW 83. 100. 130( 1). Here, there is no evidence in the record
to suggest either that Peste applied for the refund post -Bracken or that DOR made a new
determination that Peste was not entitled to a refund. The application for a refund and the denial
occurred in 2010, before Bracken. Moreover, as DOR points out, RCW 83. 100. 130( 1) does not
prescribe a specific time within which it must issue a refund.
Second, Peste claims that WAC 458- 20- 229( 7) defines DOR' s statutory authority and since
DOR has not issued a refund, it is acting contrary to the regulation. This argument fails because
WAC 458- 20- 229( 7) specifically states that DOR must pay a refund " if the decision is not under
n Consols Nos. 44809 -2 -II / 45032 -1 - II
appeal." DOR' s order denying Peste' s refund was " under appeal," when Bracken was decided
because Peste filed a petition for judicial review in July 2010 and that appeal was pending until
April 2013, when the trial court granted Peste' s summary judgment motion. The trial court' s
summary judgment order is the subject of this appeal and, thus, DOR' s statutory duty was not
triggered by Bracken.
Finally., Peste relies on the trial court' s summary judgment order itself, which states that
DOR is to issue Peste' s refund " within two weeks." Peste CP at 133. Again, however, DOR has
appealed the summary judgment order and filed a notice that it is not required to post bond on
appeal pursuant to RCW 4. 92. 030 and RAP 8. 1( f). Thus, DOR did not have a duty to issue a
refund immediately after Bracken based on the trial court' s summary judgment order, WAC 458-
20- 229( 7), or RCW 83. 100. 130( 1) and Peste cannot establish that DOR violated the APA by acting
outside its statutory authority.
Davis points to a similar statute, RCW 83. 100. 080, to support its position that DOR acted
outside its statutory authority when it refused to issue a release. RCW 83. 100. 080 provides that
DOR " shall issue a release when the tax due under this chapter has been paid. Upon issuance of a
release, all property subject to the tax shall be free of any claim for the tax by the state."
But DOR' s position since November 2010 has been that Davis has not paid all the estate
tax it owes and, therefore, is not entitled to a release. Moreover, the agreed order that DOR entered
into with Davis specifically contemplates this appeal, provides DOR with the opportunity to seek
reversal of Bracken, and sets no timeline within which DOR must issue a release of liability.
Therefore, Davis cannot demonstrate that DOR is acting contrary to its statutory authority.
01 Consol. Nos. 44809 -2 -II / 45032 -1 - II
Accordingly, because the Estates fail to demonstrate that DOR had a legal duty to issue a
refund to Peste or a release to Davis, we hold that DOR did not violate the APA because its denial'
of the refund and refusal to issue a release is within its statutory authority.'
D. DOR' s DENIAL OF A REFUND AND REFUSAL TO ISSUE A RELEASE WAS NOT ARBITRARY AND CAPRICIOUS
The Estates argue that DOR' s " other agency actions" violated the APA because they were
arbitrary and capricious since it " knew that once Bracken [ sic] was final that it had a statutory
duty" to issue a refund to Peste and a release to Davis. Br. of Resp' t Peste at 20; Br. of Resp' t
Davis at 17. DOR argues that it did not process Bracken -related claims for refunds or releases out
of deference to the legislative process and for pragmatic reasons. We hold that DOR' s decision
not to issue a refund to Peste and a release to Davis was not arbitrary and capricious because both
decisions were taken with regard to attending facts and circumstances:
An " other agency action" is arbitrary and capricious when it is " willful and unreasoning"
and " taken without regard to the attending facts or circumstances." Squaxin Island Tribe v. Dep' t
of Ecology, 177 Wn. App. 734, 742, 312 P. 3d 766 ( 2013) ( citing Wash. Indep. Tel. Ass' n v. Wash.
Utils. & Transp. Comm' n, 149 Wn.2d 17, 26, 65 P. 3d 319 ( 2003)).
DOR claims that if it had issued refunds and releases before the legislature had time to
consider the 2013 amendments, it would have ( 1) interfered with the legislature' s policy and
decision-making process and ( 2) created logistical problems and litigation if the legislature had
The Estates also identify DOR' s failure to issue a refund or release after the 2013 amendments as an " other agency action" that they challenge here. Br. of Resp' t Peste at 11; Br. of Resp' t Davis at 9. But they offer no argument as to why DOR' s refusal to issue a refund to Peste or a release to Davis after the 2013 amendments were enacted is outside DOR' s legal authority. RAP 10. 3( a)( 6).
10 Consol. Nos. 44809 -2 -II / 45032 -1 - II
changed the law because DOR would need to make new efforts to recollect any taxes that it
refunded and would be precluded from collecting taxes from estates that received a release. The
logistical and cost -related concerns make DOR' s decision not to issue a refund or a release
reasonable in light of the facts and circumstances at the time.
The Supreme Court denied DOR' s motion for reconsideration in Bracken on January 10,
2013. The first proposal to close the QTIP loophole was introduced in the legislature
approximately one month later on February 18. Early drafts of that bill contemplated that it would
be retroactive and would apply to the Estates. If DOR had issued refunds immediately after
Bracken, it would have incurred additional litigation expense and spent time trying to recover the
refunds it issued prior to the legislation' s enactment. If DOR had issued releases, the estates who
benefitted from them would get a windfall and there would have been a'fiscal impact because DOR
would be precluded from collecting estate taxes from those estates in the future. RCW 83. 100. 080
Upon issuance of a release, all property subject to the tax shall be free of any claim for the tax
by the state."). DOR' s decision not to issue refunds or releases until it knew whether there would
be a new law was reasonable in light of those facts and circumstances. Squaxin Island Tribe, 177
Wn. App. at 742- 43. And the delay, a mere five months, was reasonable under the circumstances.
It was also reasonable for DOR to not issue a refund to Peste while litigation was still
pending and to enter into the agreed order with Davis instead of issuing a release. These decisions
are consistent with the second issue that DOR identifies: issuing refunds and releases would create
logistical problems and litigation costs if the legislature changed the law. If DOR had issued a
refund to Peste once the 2013 amendment became effective, it would have needed to issue a new
delinquency notice and make new efforts to collect Peste' s estate taxes.
11 Consol. Nos. 44809- 241 / 45032 -1 - II
Instead of issuing a release to Davis before the legislature had the opportunity to act, DOR
negotiated an agreed order with it, giving the legislature time and avoiding additional litigation.
Again, had DOR issued a release to Davis, that release would have been a final determination that
Davis had no estate tax liability, precluding any future efforts to assess estate tax liability. RCW
83. 100. 080. Accordingly, we hold that, based on the facts and circumstances known to DOR at
the time, it was reasonable not to issue a refund to Peste or a release to Davis after Bracken was
decided and while a legislative fix was pending. Therefore, the Estates have not met their burden
to demonstrate that DOR' s other agency actions were arbitrary and capricious.
E. DOR' s REFUSAL To ISSUE A REFUND AND A RELEASE WAS CONSTITUTIONAL
The Estates argue that DOR violated the APA because failing to issue the refund to Peste
and the release to Davis violated their substantive due process rights. We hold that failing to issue
a refund to Peste and a release to Davis in the five months after Bracken and before the 2013
amendment took effect did not violate the Estates' substantive due process rights.
Both the Washington and the United States Constitutions mandate that no person may be
deprived of life, liberty, or property without due process of law. U.S. CONST. amends. V, XIV, §
1; WASH. CONST. art. I, § 3. " The due process clause of the Fourteenth Amendment confers both
procedural and substantive protections." Amunrud v. Bd. ofAppeals, 158 Wn.2d 208, 216, 143
P. 3d 571 ( 2006). It is the Estates' burden to demonstrate that DOR' s actions unconstitutionally
violated their substantive due process rights and, thus, invalid under the APA. RCW
34. 05. 570( 1)( a); Christianson v. Snohomish Health Dist., 133 Wn.2d 647, 660- 61, 946 P. 2d 768
1997).
12 Consol. Nos. 44809 -2 -II / 45032 -1 - II
The Estates rely entirely on Sintra, Inc. v. City of Seattle, 119 Wn.2d 1, 829 P. 2d 765
1992), to support their argument that DOR' s failure after Bracken to issue a refund to Peste and
a release to Davis was unconstitutional and violated their substantive due process rights. In Sintra,
our Supreme Court held that a landowner' s substantive due process rights were violated by the
city of Seattle' s continued enforcement of a Housing Preservation Ordinance ( HPO) that the
superior court had invalidated in another case. 119 Wn.2d at 6, 21- 24. The purpose of the HPO
was to alleviate a shortage of low income housing. Sintra, 119 Wn.2d at 21. The court applied a
three -pronged test used for land use regulations and held that the HPO, as applied to Sintra, was
unduly oppressive. Sintra, 119 Wn.2d at 21- 22. Our Supreme Court concluded that while the
purpose of the statute was legitimate, Sintra' s property could not be singled out to resolve the
problem and the $ 218, 000 fee the city imposed on Sintra to develop its $ 670, 000 property was
enormous." Sintra, 119 Wn.2d at 22.
The Estates argue that the city of Seattle' s decision to continue enforcing HPO provisions
against the plaintiffs in Sintra is similar to DOR' s efforts to enforce the QTIP estate tax against
them. They argue that DOR ( 1) " intentionally flouted" Bracken and the trial court' s orders, ( 2)
has animus toward estates who made the federal QTIP election and would benefit from Bracken,
and ( 3) has acted irrationally and arbitrarily towards them. Br. of Resp' t Peste at 17; Br. of Resp' t
Davis at 14.
However, this case is distinguishable from Sintra on each of those three points. First, DOR
did not " flout" the trial court' s orders in this case, but appealed them in order to advocate for
overruling Bracken while allowing the legislative process to continue. In contrast, despite a trial
court' s determination that the HPO was unconstitutional in Sintra, the city of Seattle nevertheless
13 Consol. Nos. 44809 -2 -II / 45032 -1 - II
used the HPO to justify an " enormous" $ 218, 000 fee before agreeing to approve a development
plan. 119 Wn.2d at 22.
Second, there is no evidence that DOR acted with any animus toward the Estates. Unlike
the large fee the city of Seattle levied after the HPO was invalidated in Sintra, here DOR made its
decision on Peste' s refund request. in June 2010— more than two years prior to Bracken— and,
apart from continuing to litigate, there is no evidence that DOR continued to enforce any provisions
of the estate tax invalidated in Bracken. DOR denied Davis' s request for a release in November
2010 and, after Bracken, made no efforts to collect the money or enforce the law against it. Instead,
DOR disagreed with our Supreme Court' s decision in Bracken and sought, either through the
courts or the legislature, to have it overturned in a timely fashion. Neither of these activities is
illegal, irrational, or supports an inference that DOR has animus against those who made the QTIP
election.
Finally, as is stated above, DOR' s decision not to issue refunds or releases immediately
following Bracken was not arbitrary and capricious because it was based on a reasonable desire to
avoid the increased costs and logistical difficulties that would follow if the pending legislation
were adopted.
Apart from their reliance on Sintra, the Estates make no other argument that DOR' s actions
Were unconstitutional. Accordingly; the Estates have not met their burden to demonstrate that
DOR' s failure to issue Peste' s refund and Davis' s release were unconstitutional. We hold that
DOR did not violate the APA.
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R. EQUITABLE ESTOPPEL
The Estates argue that DOR should be equitably estopped from applying the 2013
amendments to them because DOR' s position at trial was that if Bracken were decided in the
Estates' favor, the Estates would be entitled to a refund and a release and, unlike in Hambleton
where the equitable estoppel claim was unsuccessful, the Estates here can demonstrate reliance on.
DOR' s position at trial. We hold that equitable estoppel does not apply because DOR' s position
on appeal is not inconsistent with its position at trial.
A successful claim of equitable estoppel requires clear, cogent, and convincing proof of
the following elements:
1) [ A] party' s admission, statement[,] or act inconsistent with its later claim; ( 2)
action by another party in reliance on the first party' s act, statement[,] or admission;
and ( 3) injury that would result to the relying party from allowing the first party to contradict or repudiate the prior act, statement[,] or admission."
Hambleton, 181 Wn.2d at 833- 34 ( quoting Kramarevcky v. Dep' t of Soc. & Health Servs., 122
Wn.2d 738, 743, 863 P. 2d 535 ( 1993)).
Claims of equitable estoppel against the government are disfavored and also require proof
that " equitable estoppel is necessary to prevent a manifest injustice and that the existence of
governmental functions will not be impaired as a result of the estoppel." Hambleton, 181 Wn.2d
at 833- 34. This court should be most reluctant to determine that the government is equitably
estopped "` when public revenues are involved."' Hambleton, 181 Wn.2d at 834 ( quoting
Kramarevcky, 122 Wn.2d at 744).
Peste points to the stipulated motion for a stay pending Bracken as DOR' s statement is
inconsistent with its position on appeal because it "represents admissions and statements by the
DOR that the Estate is entitled to a resolution of its refund request based upon the outcome of
15 Consol. Nos. 44809 -2 -II / 45032 -1 - II
Bracken." Suppl. Br. of Resp' t at 13. Peste also argues that the caption of the stipulated motion,
which reads, " Stipulated Motion for Order Staying This Action Pending Supreme CourtResolution
of Dispositive Issue," makes DOR' s inconsistent position clear. The stipulated motion, in fact,
says only that "[ t]he central issue in Bracken is identical to that in this action. Therefore, to prevent
unnecessary litigation it would be in the interest of justice to issue a stay." Peste CP at 33. The
stipulated motion is not proof that DOR agreed to issue a refund or that DOR waived any appellate
review of the trial court' s decision on Peste' s claim. In light of Peste' s burden to present clear;
cogent, and convincing evidence, and our Supreme Court' s position that equitable estoppel should
be applied sparingly against the government in revenue cases, Peste fails at the first step of the
equitable estoppel analysis because it cannot demonstrate that DOR' s position on appeal is
inconsistent with its position at trial. 10
Davis, likewise, points to its stipulation and agreed order as evidence that DOR' s position
on appeal is inconsistent with its position at trial. But the stipulation and agreed order specifically
reserved to DOR the right to appeal: " This agreed order does not preclude [ DOR] from an appeal
of this order that would otherwise be available had this order been entered by the court after a
contested hearing for the purpose of presenting a good faith argument for the reversal of
Bracken]." Davis CP at 282. In its opening brief to this court, filed after the 2013 amendment
but before Hambleton, DOR specifically argued both that the 2013 amendment superseded
Peste argues that it relied on DOR' s position at trial because it agreed to the stipulated motion. It is hard to see how Peste was injured by this reliance, the next step in the equitable estoppel analysis. Had Peste not agreed, the trial court would either have ( 1) issued a stay anyway or ( 2)
decided its claim for a refund on the merits. Prior to our Supreme Court' s decision in Bracken, which provided controlling precedent, there is no way to know the result of that decision. This is not clear, cogent, and convincing evidence of injury.
16 Consol. Nos. 44809 -2 -II / 45032 -1 - II
Bracken and that Bracken should be reversed. DOR' s argument is consistent with the agreed.order
because it argued, based on the 2013 amendment, that Bracken should be reversed. The Estates
offer no authority for the proposition that equitable estoppel requires DOR to make the identical
argument here as it made to the trial court while ignoring a change in the controlling law. Because
Davis cannot demonstrate by clear, cogent, and convincing evidence that DOR' s position on 11 appeal is inconsistent with its position at trial, equitable estoppel does not apply.
Accordingly, we hold that DOR is not equitably estopped from applying the 2013
amendment to the Washington Estate and Transfer Tax Act to the Estates because DOR' s position
III. JUDICIAL ESTOPPEL
The Estates argue that DOR' s position on appeal is inconsistent with its position at trial, as
stated in its stipulation and agreed order with Davis and its agreement with Peste to stay the
proceedings pending Bracken. We hold that judicial estoppel does not apply because, based on
Hambleton, DOR did not take an inconsistent position nor did it mislead the trial court.
Judicial estoppel is an equitable doctrine that precludes a party from asserting one
position in a court proceeding and later seeking an advantage by taking a clearly inconsistent
position."' Anfznson v. FedEx Ground Package Sys., Inc., 174 Wn.2d 851, 861, 281 P. 3d 289
2012) ( internal quotation marks omitted) ( quoting Arkison v. Ethan Allen, Inc., 160 Wn.2d 535,
538, 160 P. 3d 13 ( 2007)). The two guiding principles that justify the application of judicial
11 The Estates do not argue that the failure to apply equitable estoppel against DOR in this case would work a manifest injustice or that governmental functions would not be impaired by the application of equitable estoppel in this case. Since they must argue these factors when seeking to equitably estop the government, their claims fail on that account as well. Hambleton, 181 Wn.2d at 834. 17 Consol. Nos. 44809 -2 -II / 45032 -1 - II
estoppel are " preservation of respect for judicial proceedings" and " avoidance of inconsistency,
duplicity, and waste of time." Anfinson, 174 Wn.2d at 861.
Three core factors" determine whether judicial estoppel applies: "( 1) whether `a party' s
later position' is ` clearly inconsistent with its earlier p , osition'; ( 2) whether `judicial acceptance of
an inconsistent position in a later proceeding would create the perception that either the first or the
second court was misled'; and ( 3) ` whether the party seeking to assert an inconsistent position
would derive an unfair advantage or impose an unfair detriment on the opposing party if not
estopped."' Arkison, 160 Wn.2d at 538- 39 ( internal quotation marks omitted) ( quoting New
Hampshire v. Maine, 532 U.S. 742, 750- 51, 121 S. Ct. 1808, 149 L. Ed. 2d 968 ( 2001)).
The Estates point to the stipulation and agreed order in Davis as proof that DOR' s position
was that Bracken controlled the outcome in both Davis' s and Peste' s cases and that if the Bracken
court ruled in the taxpayers' favor, the Estates were entitled to a refund and release. Their
argument is unpersuasive because, in a footnote, Hambleton specifically stated that judicial
estoppel did not apply and Hambleton is procedurally very similar to the procedural stance here.
In Hambleton, our Supreme Court, perhaps anticipating judicial estoppel claims in cases
like this one, addressed the issue in a footnote. 181 Wn.2d at 833 n. 5. In Hambleton, the estate
did not pay taxes on its QTIP- elected property and DOR, after disallowing the QTIP deduction,
sought to recover over $ 1 million in estate taxes. 181 Wn.2d at 815. DOR and the estate agreed
to stay their proceedings pending Bracken and once Bracken was decided, the trial court entered
summary judgment for the estate. Hambleton, 181 Wn.2d at 815. Although no party raised judicial
estoppel in Hambleton, our Supreme Court addressed it in a footnote, concluding that " O] udicial
estoppel is not applicable. The parties have not taken inconsistent positions, nor have they misled
18 Consol. Nos. 44809 -2 -II / 45032 -1 - II
the court. It was the legislature that changed the law that applies to the cases." 181 Wn.2d at 833
n.5
The procedural posture in Peste' s case is almost identical to Hambleton. In Peste, the
parties agreed to a stay pending Bracken because the central issue in Bracken -was identical. After- -
Bracken was decided, Peste moved to lift the stay and for summary judgment, which the trial court
granted. At trial, in its response to Peste' s motion for stay and summary judgment, DOR argued
that ( 1) the case should continue to be stayed to give the legislature the opportunity to fully
consider the pending legislation, ( 2) Bracken should be overruled, and ( 3) Peste' s calculation of
interest was excessive. DOR' s position is not clearly inconsistent on appeal— where it now argues
that, in light of the 2013 amendment and Hambleton, Peste is not entitled to a refund— nor did it
mislead the trial court. As in Hambleton, the legislature merely changed the law that applies to
their case. DOR should not be judicially estopped from applying the 2013 amendments to Peste.
In Davis' s case, Davis petitioned for review under the APA after Bracken and the parties
entered into a stipulation and agreed order. In that stipulation, DOR agreed that if Bracken
controlled the case' s outcome, Davis would be entitled to a release. However, DOR expressly
reserved the right to appeal in any manner " that would otherwise be available had th[ e] order been
entered by the court after a contested hearing" in order to seek reversal of Bracken. Davis CP at
282. As their stipulation anticipated, DOR appealed and, shortly thereafter, the legislature changed
the law. Again, DOR' s position on appeal is not inconsistent with its position at trial because the
applicable law changed and the new law applies retroactively to Davis.
19 Consol. Nos. 44809 -2 -II / 45032 -1 - II
Accordingly, because the law that applies to these cases changed, we hold that DOR did
not take inconsistent positions and did not mislead the court. We reverse and remand with
instructions to enter judgment in DOR' s favor.
IV. -ATTORNEY FEES -
The Estates argue that they are entitled to attorney fees under RAP 18. 1( a) and 18. 9( a)
because DOR' s appeal is " solely for the purpose of delay." Br. of Resp' t Peste at 45; Br. of Resp' t
Davis at 40. Since DOR is the prevailing party, we deny the Estates' requests for attorney fees.
We reverse and remand.
A majority of the panel having determined that this opinion will not be printed in the
Washington Appellate Reports, but will be filed for public record in accordance with RCW 2. 06.040,
it is so ordered.
We concur: bY )9 NSON, C. J.
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MELNICK, J. lim * z