City of Phoenix v. Glenayre Elec. Inc. – 5/19/2016

June 2, 2016

Arizona Court of Appeals Division One holds that the repose period found in A.R.S. § 12-522 applies to governmental entities and that claims based on provisions of municipal permits can be considered as arising out of contract.

An individual filed claims against the City of Phoenix related to mesothelioma he allegedly developed while installing and repairing pipes for the City many years ago.  The City filed third-party complaints against developers and contractors responsible for the planning and development of the projects on which the individual had worked.  The City’s complaints sought defense and indemnification based on permits issued by the City to each third-party defendant.  The permits required the third parties to indemnify the City against claims arising out of the acts or omissions of the permittee.  The trial court found that the City’s indemnity claims were barred by the statute of repose found in A.R.S. § 12-522(A), which provides that contract claims against developers of real property must be brought within eight years after the completion of the improvement of the real property, “notwithstanding any other statute.”  The City appealed.

The Court of Appeals affirmed.  The City asserted that as a government entity, it was immune from the statute of repose under A.R.S. § 12-510, which exempts the state and its subdivisions from certain limitations periods.  The Court disagreed, finding that the City was not exempt from § 12-522’s limitation period because the statute states that it applies “notwithstanding any other statute.”  The Court noted that the legislature regularly uses such language to indicate that a statute is meant to trump conflicting statutes and presumed the legislature was aware of § 12-510 when it enacted § 12-522.  

The Court also concluded that the City’s complaints based on the permits issued to developers were “based in contract” for purposes of § 12-522, rejecting the City’s argument that the permits were not contracts because they were not “dickered as a deal.”  Although the permits were not negotiated, the Court reasoned, the developers accepted the terms of the permit, including the indemnification provisions, in exchange for access to City property to complete their projects.  Because the City’s claims sought performance of a promise, which was memorialized in writing and made in furtherance of a commercial activity, the Court concluded that the City’s claims were based in contract as contemplated by § 12-522.   

Judge Jones authored the opinion of the court, which was joined by Presiding Judge Johnsen and Judge Orozco. 

Disclosure:  Osborn Maledon attorneys were involved in this case.