DBT Yuma, L.L.C. v. Yuma Cnty. Airport Auth.

• Decision Date: 24 November 2015
• Docket Number: No. CV–15–0019–PR.,CV–15–0019–PR.
• Citation: 726 Ariz. Adv. Rep. 38,238 Ariz. 394,361 P.3d 379
• Parties: DBT YUMA, L.L.C., an Arizona limited liability company; DBRT Yuma FBO, LLC, an Arizona limited liability company; DBRT Yuma Hangars, LLC, an Arizona limited liability company; DBRT Yuma Maintenance, LLC, an Arizona limited liability company, Plaintiffs/Appellants, v. YUMA COUNTY AIRPORT AUTHORITY, a body politic and corporate pursuant to A.R.S. § 28–8424; Yuma County, a political subdivision of the State of Arizona, Defendants/Appellees.
• Court: Arizona Supreme Court

238 Ariz. 394

361 P.3d 379

726 Ariz. Adv. Rep. 38

DBT YUMA, L.L.C., an Arizona limited liability company; DBRT Yuma FBO, LLC, an Arizona limited liability company; DBRT Yuma Hangars, LLC, an Arizona limited liability company; DBRT Yuma Maintenance, LLC, an Arizona limited liability company, Plaintiffs/Appellants,

v.YUMA COUNTY AIRPORT AUTHORITY, a body politic and corporate pursuant to A.R.S. § 28–8424; Yuma County, a political subdivision of the State of Arizona, Defendants/Appellees.

No. CV–15–0019–PR.

Supreme Court of Arizona.

Nov. 24, 2015.

Daryl M. Williams(argued), Michael C. Blair, Baird, Williams & Greer, LLP, Phoenix, Attorneys for DBT Yuma, L.L.C., DBRT Yuma FBO, LLC, DBRT Yuma Hangars, LLC, and DBRT Yuma Maintenance, LLC.

Paul S. Gerding, Jr., Marc R. Lieberman, Kelley E. Sucher, Kutak Rock, LLP, Scottsdale, Attorneys for Yuma County Airport Authority.

Jon R. Smith, Yuma County Attorney, William J. Kerekes(argued), Chief Civil Deputy County Attorney, Office of the Yuma County Attorney, Yuma, Attorneys for Yuma County.

Jeana R. Morrissey, Jeana R. Morrissey, PLLC, Gilbert, Attorney for Amici Curiae M–14P Inc., et al.

Opinion

Vice Chief Justice PELANDER, opinion of the Court.

¶ 1 Under A.R.S. § 28–8424(A)(3), a nonprofit corporation that leases airport property from a county “[p]erforms an essential governmental function as an agency or instrumentality” of the county. We here address whether, based solely on that statutory language, the Yuma County Airport Authority (“YCAA”) is an agent of Yuma County, making the County liable as principal for YCAA's alleged breach of its sublease with Plaintiffs (collectively “DBT Yuma”). We hold that § 28–8424(A)(3)by itself does not make YCAA the County's agent for purposes of imputed liability.

I.

¶ 2 In 1965, five persons formed YCAA as a nonprofit corporation to operate the Yuma International Airport under a lease from the County. That arrangement has continued for about fifty years. In 2008 and 2009, DBT Yuma subleased property at the airport from YCAA and operated a fixed base operation there as Lux Air. After YCAA evicted DBT Yuma and entered into a new sublease with another tenant, DBT Yuma sued YCAA for breaching its sublease and the implied covenant of good faith and fair dealing.

¶ 3 DBT Yuma later added Yuma County as a defendant, alleging that YCAA was the County's “political subdivision” and “instrumentality and alter ego,” making the County liable for YCAA's breach. The County and DBT Yuma each moved for summary judgment, and the trial court granted the County's motion under Arizona Rules of Civil Procedure 54(b)and 56.

¶ 4 The court of appeals affirmed, holding that YCAA was not the County's alter ego and that “A.R.S. § 28–8424does not impose vicarious liability on counties for the activities of airport operators that are nonprofit corporate lessees of county airport land.” DBT Yuma, L.L.C. v. Yuma Cty. Airport Auth.,236 Ariz. 372, 377 ¶ 20, 340 P.3d 1080, 1085 (App.2014).

¶ 5 We granted review because the interpretation of § 28–8424is a legal issue of first impression and statewide importance. We have jurisdiction under article 6, section 5(3) of the Arizona Constitutionand A.R.S. § 12–120.24.

II.

¶ 6 Although DBT Yuma's liability theory against the County has morphed over time, DBT Yuma acknowledged before this Court that its claim against the County rests solely on § 28–8424. We accordingly focus on the statutory scheme and do not address whether a principal-agent relationship could exist between a governmental entity and its authorized airport authority because of an alter-ego relationship or other common law doctrines.

A.

¶ 7 Yuma County's lease of airport property to YCAA was authorized by and executed pursuant to A.R.S. §§ 28–8411and –8423. Under A.R.S. § 28–8424(A)(1), a nonprofit corporation/lessee such as YCAA is a “body politic and corporate.” That subsection also identifies the corporation's public function—“exercising its powers for the benefit of the people, for the improvement of the people's health and welfare and for the increase of the people's traffic and prosperity.” A.R.S. § 28–8424(A)(1).

¶ 8 Courts in other states have determined that a “body politic and corporate” entity serving a public function is a public corporation. See, e.g.,Rouse v. Theda Clark Med. Ctr., Inc.,302 Wis.2d 358, 735 N.W.2d 30, 37 (2007); Ferch v. Hous. Auth. of Cass Cty.,79 N.D. 764, 59 N.W.2d 849, 857 (1953). “A public corporation is a separate entity from a county, city, or town, and is not a subdivision of the state.” Dobbs v. Shelby Cty. Econ. & Indus. Dev. Auth.,749 So.2d 425, 430 (Ala.1999)(citations and emphasis omitted). “Moreover, a public corporation is not the alter ego or agent of the county ... in which it is organized.” Id.

B.

¶ 9 Despite the “body politic and corporate” language in § 28–8424(A)(1), DBT Yuma asserts that an airport authority is necessarily an agent of the authorizing governmental entity because the airport authority “[p]erforms an essential governmental function as an agency or instrumentalityof the city, town, county or state.” A.R.S. § 28–8424(A)(3)(emphasis added). The terms “agency” and “instrumentality” are not defined in A.R.S. §§ 1–215, 28–101, or elsewhere in Title 28. Absent statutory definitions, courts generally give words their ordinary meaning, State v. Cox,217 Ariz. 353, 356 ¶ 20, 174 P.3d 265, 268 (2007), and may look to dictionary definitions, State ex rel. Montgomery v. Harris (Shilgevorkyan),234 Ariz. 343, 344 ¶ 9, 322 P.3d 160, 161 (2014); seePrescott Newspapers, Inc. v. Yavapai Cty. Hosp. Ass'n,163 Ariz. 33, 39, 785 P.2d 1221, 1227 (App.1989)(referring to a dictionary definition of “instrumentality” in concluding that a Hospital Association was not an “instrumentality” of a county Hospital District).

¶ 10 In the public law context, however, the phrase “agency or instrumentality” is a term of art, for which dictionary definitions are not helpful in determining its meaning. We do not view statutory words in isolation, but rather draw their meaning from the context in which they are used. See Adams v. Comm'n on Appellate Court Appointments,227 Ariz. 128, 135 ¶ 34, 254 P.3d 367, 374 (2011). Viewed in context, the phrase “agency or instrumentality” in § 28–8424(A)(3)is directly linked to, and merely descriptive of, an airport authority's public role in “[p]erform[ing] an essential governmental function.” A.R.S. § 28–8424(A)(3). We conclude that those statutory terms were not meant to establish a principal-agent relationship for imputed liability purposes between a governmental entity and its authorized airport authority, particularly considering the latter's separate “body politic and corporate” status. A.R.S. § 28–8424(A)(1).

¶ 11 Our conclusion is buttressed by viewing both state and federal legislation more broadly. Many statutes, like § 28–8424, authorize the creation of a nonprofit corporation that is expressly made an “agency or instrumentality” of the government. See, e.g.,12 U.S.C. § 1452(creating the Federal Home Loan Mortgage Corporation as a “body corporate” and a federal agency); see also28 U.S.C. § 1603(b)(defining an “agency or instrumentality of a foreign state”), 42 U.S.C. § 1437a(b)(6)(defining “public housing agency” as “any State, county, municipality, or other governmental entity or public body (or agency or instrumentality thereof)”); A.R.S. § 36–1401(2)(defining “public housing authority” as “an agency of a city, town or county created and controlled pursuant to this article”); cf.A.R.S. § 30–102(B)(creating the Arizona power authority as a “body corporate and politic”). Such statutes authorize the creation of a separate juridical entity with powers to sue and be sued, own or lease property, enter contracts, and conduct other specified activities.

¶ 12 In addition, the designation as an “agency or instrumentality” often has consequences for sovereign immunity, inter-governmental tax immunity, or foreign sovereign immunity. See, e.g., First Nat'l City Bank v. Banco Para El Comercio Exterior,462 U.S. 611, 623–27, 103 S.Ct. 2591, 77 L.Ed.2d 46 (1983)(discussing background for governmental instrumentalities and concluding that “government instrumentalities established as juridical entities distinct and independent from their sovereign should normally be treated as such”); O'Neil v. Valley Nat'l Bank of Phx.,58 Ariz. 539, 541, 121 P.2d 646, 646 (1942)(discussing that a state may not tax an instrumentality of the United States and that the United States cannot tax an instrumentality of the state); Inco, Ltd. v. Lexington–Fayette Urban Cty. Airport Bd.,705 S.W.2d 933, 934 (Ky.Ct.App.1985)(concluding that the board operating the airport was entitled to state immunity because it was an instrumentality of the county).

¶ 13 Consistent with these observations, other courts have held that statutes describing an entity as an “agency and instrumentality” of a governmental body do not, by themselves, make the government liable based on a statutory principal-agent relationship. See Ciulla v. State,191 Misc. 528, 77 N.Y.S.2d 545, 550 (N.Y.Ct.Cl.1948)(“There is a distinct difference in legal connotation between words like ‘agency’ and ‘instrumentality’ on the one hand and the word ‘agent’ on the other.”); Pantess v. Saratoga Springs Auth.,255 A.D. 426, 8 N.Y.S.2d 103, 105 (1938)(noting that “when the State delegates the governmental power for the performance of a state function, the agency exercises its independent authority as delegated,” there is “no authority for making claim against the State”); see alsoLock v. City of Imperial,182 Neb. 526, 155 N.W.2d 924, 924 (1968)(determining that the “parent municipal corporation” was not liable for the airport authority's torts because the airport authority “is a supplementary, separate, and independent public corporation”). We are unpersuaded that the “agency or instrumentality” language in § 28–8424(A)(3)by itself makes YCAA an agent of the County, rendering the latter liable for the...