                                                                                                     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.




                                                                  14
Consol. Nos. 44809- 2- 11 / 45032 -1 - II



                                                   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


on appeal is not inconsistent with its position at trial.


                                                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.


        x




 MELNICK, J.
            lim * z




                                                          20
