Arizona Supreme Court holds that A.R.S. § 12-510’s eight-year statute of repose applies to contract-based actions brought by governmental entities, but not to actions between parties without a contractual relationship.

A man sued the City of Phoenix and several other defendants, alleging that he was exposed to asbestos while working on the defendants’ water pipes.  Phoenix filed a third-party complaint against several contractors and developers seeking indemnification.  The contractors and developers had performed water infrastructure projects in accordance with contracts with or permits issued by Phoenix.  Phoenix City Code § 31-40 requires a permittee to indemnify Phoenix from all suits arising out of or connected with the permittee’s acts or omissions.

The contractors and developers moved to dismiss, arguing that A.R.S. § 12-552(A) barred Phoenix’s claims.  Section 12-552(A) states that, “[n]otwithstanding any other statute,” no action “based in contract” can be brought against a person who develops real property or performs, furnishes, or oversees construction of an improvement to real property more than eight years after the improvement’s substantial completion.  The superior court granted the motion and dismissed Phoenix’s claims as time-barred.  The Court of Appeals affirmed.

Phoenix petitioned the Arizona Supreme Court for review.  It contended that under the common-law doctrine of “nullum tempus occurit regi” (time does not run against the king), § 12-552(A) did not apply to it as a governmental entity, and even if the statute did apply, its claims against the developers were not “based in contract.”  The Arizona Supreme Court granted review and affirmed in part and reversed in part. 

Based on a review of the statutory text, the legislative history of pertinent statutes, and its prior caselaw, the Court held that § 12-552(A)’s statute of repose applied to governmental entities, notwithstanding the nullum tempus doctrine.  The Court therefore affirmed the dismissal of the claims against the contractors.

The Court also held, however, that Phoenix’s claims against the developers were not “based in contract” within the meaning of § 12-552(A) and (F).  Section 12-552(F) defines the types of agreements that are “based in contract” for purposes of the statute of repose, including written agreements “for the services set forth in subsection A.”  Looking to the nature of the agreements listed in subsection F and the legislative purpose behind the statute of repose, the Court concluded that the permits issued in accordance with the City Code were not written agreements for the services listed in § 12-552(A), and, therefore, that Phoenix’s indemnification claims under City Code§ 31-40 were not “based in contract.”  Accordingly, the Court reversed the dismissal of Phoenix’s claims against the developers.

Vice Chief Justice Pelander wrote for the unanimous Court.  Justice Timmer recused and Justice Berch (retired) sat by designation.