City of Phx. v. Glenayre Elecs., Inc.

393 P.3d 919

CITY OF PHOENIX, Third–Party Plaintiff/Appellant,

v.GLENAYRE ELECTRONICS, INC.; William Lyon Homes, Inc.; KB Home Holdings, Inc.; Richmond American Homes, Inc.; MDC/Wood, Inc. ; UDC Homes, Inc., nka Shea Homes of Phoenix, Inc. (FN) and Elliott Homes, Inc.; Swengel–Robbins Contracting Co., Inc.; AZTEC Construction, Inc.; JNC, Inc.; UH Holdings, Inc.; Los Paisanos Development, Inc.; Michael Newsome ; CHI Construction Co.; Continental Homes, Inc.; Pulte Home Corp.; Del Webb Corp.; Wittman Contracting Co.; Jeff Blandford Investments, Inc., Third–Party Defendants/Appellees.

No. CV-16-0126-PR

Supreme Court of Arizona.

Filed May 10, 2017

Mary O'Grady (argued), Eric M. Fraser, Jana L. Sutton, Osborn Maledon, P.A., Phoenix; and Brad Holm, Phoenix City Attorney, Phoenix, Attorneys for City of Phoenix

Kevin E. O'Malley (argued), Mark A. Fuller, Thomas A. Maraz, Gallagher & Kennedy, P.A., Phoenix, Attorneys for CHI Construction Company and Continental Homes, Inc.

Dennis I. Wilenchik, John D. Wilenchik, Colleen C. Thomas, Wilenchik & Bartness, P.C., Phoenix, Attorneys for Jeff Blandford Investments, Inc.

Eileen Dennis GilBride, Jones, Skelton & Hochuli, P.L.C., Phoenix, Attorneys for Amici Curiae Apache, Cochise, Coconino, Graham, Greenlee, La Paz, Maricopa, Navajo, Pinal, Yavapai, and Yuma Counties, the Town of Gilbert, the League of Arizona Cities and Towns and the Arizona Municipal Risk Retention Pool

Thomas J. Shorall Jr., Jason J. Boblick, Shorall McGoldrick Brinkmann, Phoenix, Attorneys for Wittman Contracting Company

Richard K. Mahrle, Gammage & Burnham, P.L.C., Phoenix, Attorneys for Swengel–Robbins Contracting Co., Inc.

Katherine E. Baker, Green & Baker Ltd., Scottsdale, Attorneys for Glenayre Electronics Inc.

Brad D. Bleichner, Berkes Crane Robinson & Seal LLP, Los Angeles, CA, Attorneys for William Lyon Homes, Inc.

Holly P. Davies, Alexix G. Terriquez, Lorber Greenfield & Polito LLP, Phoenix, Attorneys for KB Home Holdings, Inc., Richmond American Homes, Inc. and MDC/Wood, Inc.

Jill Ann Herman, Wood Smith Henning & Berman LLP, Phoenix, Attorneys for UDC

Homes Inc., nka Shea Homes of Phoenix Inc. (FN) and Elliot Homes Inc.

Joseph A. Kula, Benjamin R. Eid, Law Office of Amy M. Hamilton, Scottsdale, Attorneys for Aztec Construction, Inc.

Daniel D. Maynard, Maynard Cronin Erickson Curran & Reiter PLC, Phoenix, Attorneys for JNC, Inc. and UH Holdings, Inc.

Vincent J. Montell, Michael J. Ponzo, Quintairos Prieto Wood & Boyer PA, Phoenix, Attorneys for Los Paisanos Development, Inc.

Michael S. Rubin, Stephen E. Richman, Dickinson Wright PLLC, Phoenix, Attorneys for Pulte Home Corporation and Del Webb Corporation

VICE CHIEF JUSTICE PELANDER authored the opinion of the Court, in which CHIEF JUSTICE BALES and JUSTICES BRUTINEL, BOLICK, GOULD, LOPEZ, and BERCH (Retired)^* joined.

VICE CHIEF JUSTICE PELANDER, opinion of the Court:

¶ 1 Under A.R.S. § 12–510, claims by governmental entities generally are not barred by statutes of limitations. For actions relating to real property, however, Arizona's statute of repose provides that, "notwithstanding any other statute," an action "based in contract" against certain identified parties must be filed within "eight years after substantial completion of the improvement of real property." A.R.S. § 12–552(A). We hold that governmental entities' contract-based actions (including claims for indemnification) that fall within § 12–552(A) are subject to that statute's proscription, notwithstanding § 12–510 or the common law doctrine known as "nullum tempus occurit regi" (time does not run against the king). For the contractors in this case having the requisite contractual relationship with the City of Phoenix, we hold that the statute of repose applies; but for the developers whose only relationship with the City is as permittees, the statute of repose does not apply.

I.

¶ 2 The superior court dismissed the City of Phoenix's indemnity claims under Arizona Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted. On review, therefore, we "assume the truth of all well-pleaded factual allegations" in the City's pleading and "indulge all reasonable inferences from those facts." Coleman v. City of Mesa , 230 Ariz. 352, 356 ¶ 9, 284 P.3d 863, 867 (2012) ; see also Watts v. Medicis Pharm. Corp. , 239 Ariz. 19, 22 ¶ 2, 365 P.3d 944, 947 (2016).

¶ 3 In 2013, Carlos Tarazon sued the City and numerous co-defendants after he developed mesothelioma, allegedly resulting from long-term exposure to asbestos while installing and repairing water piping for the various defendants. (After Tarazon died in 2014, the personal injury action was converted to one for wrongful death.) The City filed a third-party complaint against eighty-two developers (the "Developers") and eight contractors (the "Contractors"), alleging that they had agreed to defend and indemnify the City against negligence claims arising from the construction projects on which Tarazon worked.

¶ 4 The City alleged that the Contractors separately contracted with it to perform certain water infrastructure projects between 1960 and 2000. The contracts include a provision stating, "[t]he Contractor agrees to indemnify and save harmless the City of Phoenix ... from all suits, including attorneys' fees and cost of litigation ... of any character or any nature arising out of the work done in fulfillment of the terms of this contract."

¶ 5 The Developers undertook their own water-system projects, but only after applying for and obtaining right-of-way permits from the City, as required by Phoenix City Code § 31–35. As permittees, the Developers were subject to Phoenix City Code § 31–40, which provides:

The permittee agrees to indemnify and save harmless the City of Phoenix ... from all suits ... arising out of or in connection with any act or omission of the permittee, his agents and employees, and of any subcontractor ... which results directly or indirectly in the injury to or death of any person or persons....

¶ 6 The permits also incorporated the Developers' project plans and specifications, which included the Maricopa Association of Governments Specifications (the "MAGS"). The MAGS obligated the Developers to "at all times observe and comply with all such laws, ordinances, regulations, codes, orders, and decrees." By incorporating the MAGS, the permits memorialized the Developers' preexisting obligation to comply with the City's laws, including City Code § 31–40.

¶ 7 The Developers and Contractors moved to dismiss the City's third-party claims under Rule 12(b)(6), arguing that those claims were based in contract and barred by the eight-year statute of repose in § 12–552(A). The City responded that the statute does not apply to the state's political subdivisions and that the Developers' indemnity obligation was not based in contract but instead arose under City Code § 31–40. The superior court rejected those arguments, ruled that § 12–552(A) applied to bar the City's claims, granted the motion to dismiss, and certified its decision as final under Arizona Rule of Civil Procedure 54(b).

¶ 8 The court of appeals affirmed, holding that the City's indemnity claims are "time-barred" because " A.R.S. § 12–552 applies to governmental entities and ... the City's claims are based in contract within the meaning of A.R.S. § 12–552(F)." City of Phoenix v. Glenayre Elec., Inc. , 240 Ariz. 80, 82–83 ¶ 1, 375 P.3d 1189, 1191–92 (App. 2016). The court concluded that the phrase "[n]otwithstanding any other statute" in § 12–552(A) plainly and "explicitly renders inapplicable the nullum tempus doctrine reflected in A.R.S. § 12–510." Id. at 84–85 ¶ 11, 375 P.3d at 1193–94. The court also agreed with the superior court that the Developers' permits contractually obligated them to indemnify the City, and thus the City's indemnity claims were based in contract and subject to § 12–552(A). Id . at 87 ¶ 18, 88 ¶ 22, 375 P.3d at 1196, 1197. We granted review because application of the statute of repose to governmental entities and interpretation of § 12–552(F) are issues of statewide importance that are likely to recur. We have jurisdiction pursuant to article 6, section 5(3) of the Arizona Constitution and A.R.S. § 12–120.24.

II.

¶ 9 We review the superior court's dismissal of claims under Rule 12(b)(6) de novo, as we do the interpretation of statutes. Watts , 239 Ariz. at 23 ¶ 9, 365 P.3d at 948.

A.

¶ 10 Arizona case law has consistently recognized the common law doctrine "nullum tempus occurrit regi"—time does not run against the king. See , e.g. , Kerby v. State ex rel. Frohmiller , 62 Ariz. 294, 307, 157 P.2d 698, 704 (1945) (noting the established rule that statutes of limitations "do not run or operate against the state"); City of Bisbee v. Cochise County (Bisbee III ), 52 Ariz. 1, 9, 78 P.2d 982, 985 (1938) (finding "ample justification for the rule, stated in the ancient maxim and confirmed by our Legislature from time to time, that statutes of limitations which govern between private individuals do not apply in proceedings on behalf of the state"). The doctrine is based on the premise that, although time limitations apply to private parties so as to prevent fraudulent, stale claims, time stands still, as it were, for the state because "[t]he officers who are charged with the active duty of enforcing [the] rights [of the state] have no personal profit to gain thereby, and therefore no inducement for the bringing of false and unwarranted actions." Bisbee III , 52 Ariz. at 9, 78 P.2d at 985.

¶ 11 In Bisbee III , this Court held, in the last of three opinions in that case, that the nullum tempus doctrine generally "applies not only to the state itself when suing in its own name, but to all of its subdivisions," including municipalities acting with a public purpose to recover tax-related monies. Id. at 18, 78 P.2d at 989. In that case, Bisbee sued Cochise County to recover certain penalties and fees on delinquent taxes collected by the county but...