Dixon v. Picopa Const. Co.

• Decision Date: 24 January 1989
• Docket Number: No. CV-88-0049-PR,CV-88-0049-PR
• Citation: 772 P.2d 1104,160 Ariz. 251
• Parties: Cheryl S. DIXON, a single woman, Plaintiff/Appellee, v. PICOPA CONSTRUCTION COMPANY, Defendant/Appellant, Home Insurance Company, Garnishee/Appellant.
• Court: Arizona Supreme Court

Page 1104

772 P.2d 1104

160 Ariz. 251

Cheryl S. DIXON, a single woman, Plaintiff/Appellee, v. PICOPA CONSTRUCTION COMPANY, Defendant/Appellant Home Insurance Company, Garnishee/Appellant.

No. CV-88-0049-PR.

Supreme Court of Arizona.

Jan. 24, 1989.

Law Firm of Timothy J. Tweeton by Timothy J. Tweeton, Phoenix, for plaintiff/appellee.

Crampton, Woods, Broening & Oberg by Neal B. Thomas, Phoenix, for defendant/appellant Picopa Const. Co.

Potts & Peterson by Richard G. Potts, Phoenix, for garnishee/appellant Home Ins. Co.

Shea & Wilks by Richard B. Wilks, Phoenix, for amicus curiae Salt River Pima-Maricopa Indian Community.

FELDMAN, Vice Chief Justice.

Plaintiff, Cheryl Dixon, petitions this court to review a decision of the court of appeals, 157 Ariz. 116, 755 P.2d 421. She argues that the court erred in recognizing the sovereign immunity defense asserted by the insurer of Picopa Construction Co. (Picopa), a corporation formed under the laws of the Salt River Pima-Maricopa Indian Community, an Indian tribe. The tribe is Picopa's sole stockholder. We granted review because the case presents important issues of first impression. See Rule 23(c)(4), Ariz.R.Civ.App.P., 17B A.R.S. We have jurisdiction pursuant to Ariz. Const. art. 6, § 5(3), A.R.S. § 12-120.24, and Rule 23, Ariz.R.Civ.App.P., 17B A.R.S.

In deciding the sovereign immunity issue, we necessarily examine the breadth of the "subordinate economic organization" doctrine first recognized by this court in White Mountain Apache Indian Tribe v. Shelley, 107 Ariz. 4, 480 P.2d 654 (1971). We conclude that Picopa is not a subordinate economic organization within the meaning of White Mountain Apache and, hence, not entitled to raise the tribe's immunity defense. Thus, we must also consider the reach of Rule 4, Ariz.R.Civ.P., 16 A.R.S., ¹ in securing effective service of process against Picopa.

I. FACTS AND PROCEDURAL HISTORY

On August 17, 1984, Cheryl Dixon was the driver of an automobile waiting to make a right turn while stopped at an intersection in Tempe, Arizona. At the intersection, a dump truck, owned by Picopa and operated by its employee, Dinah Hill, rear-ended Dixon's car causing property damage and physical injury to Dixon and her passenger. The accident occurred off-reservation; Dixon is not a tribal member.

Dixon and her passenger retained the same counsel soon after the accident. On August 29, 1984, counsel wrote Picopa's insurer, Home Insurance Co. (Home), and offered to begin settlement negotiations. Home acknowledged counsel's letter by its own letter dated September 14, 1984. Negotiations between Dixon's passenger and Home reached fruition relatively quickly; they settled the case within five months of the accident. Dixon's injuries, on the other hand, were more serious and a settlement was not as easily forthcoming. On April 10, 1985, with negotiations continuing, Dixon's attorney filed a damage action in superior court, naming Picopa and the truck driver as parties. We note that the complaint did not name the Salt River Pima-Maricopa Indian Community (the Community) as a defendant. Rather than serving the complaint and summons, Dixon's counsel sent a demand letter informing Home that a complaint had been filed against Picopa but not yet served. Deposition of Florence Lynch, filed June 30, 1988, at 15. During a telephone call on October 11, 1985, Dixon's attorney also told a Home supervisor that he had filed the complaint. Id. at 12-13.

When negotiations failed to reach a satisfactory result, Dixon's attorney attempted to serve the complaint and summons. The only address listed on the police accident report for Picopa Construction Co. was the "Salt River Pima Indian Reservation, Scottsdale, Arizona." Inquiries with the Arizona Corporation Commission revealed that the Commission had no records on Picopa and, thus, no listed statutory agent for service of process. ² A private process server's attempts to secure a better address for Picopa from a Community police officer met with similar failure. Attempts to enlist Home's aid in securing service on Picopa were fruitless. See Deposition of Florence Lynch, supra, at 20-23. Despite these efforts, the only address discoverable for Picopa was the address for the Community.

Consequently, on November 25, 1985, Dixon's counsel sent copies of the summons and complaint by certified mail, return receipt requested, to Picopa at the Community's reservation office. On November 26, 1985, Cecilia Nash received and signed for the certified mail. Nash was a receptionist at the Community's finance office and was the sole recipient of all mail, certified and otherwise, addressed to the Community. ³ Neither Picopa nor Home responded to the complaint and summons. On March 25, 1986, Dixon filed an application for entry of default. ⁴ The record discloses that at least by April 4, 1986, Home had notice that Dixon had attempted service of the complaint and summons by certified mail and that the default proceedings were imminent. The court entered the default judgment against Picopa after a hearing held on April 25, 1986. Neither Home nor Picopa appeared at the default hearing.

On May 13, 1986, at Home's request, Dixon's counsel sent Home copies of the complaint, summons, and default judgment. ⁵ Dixon filed a garnishment application against Home on May 30, 1986. Home made its first appearance in court by filing a motion to set aside the default judgment on June 5, 1986, and a motion to quash the writ of garnishment on June 9, 1986. Picopa and Home then filed a notice of appeal from the default judgment entered against Picopa, the trial court's denial of the motion to set aside the default, and from the judgment entered against Home on the return of the writ of garnishment.

II. DECISIONS BELOW

Home and Picopa argued below and here that the Community's tribal immunity insulates Picopa from suit in Arizona courts without the Community's consent or the consent of the United States Congress. They also argued that service of process on Picopa was defective because it did not comply with Rule 4, and if in compliance, service was nonetheless ineffective because our service of process laws have no force or effect within the boundaries of an Indian reservation.

The trial court found that (1) Picopa was not entitled to immunity because Picopa was not part of the Community, and (2) Picopa and Home received the best possible notice under the circumstances. It therefore denied Picopa's motions to set aside the default and quash the writ of garnishment. In a 2-1 decision, the court of appeals disagreed. Dixon v. Picopa Construction Co., 157 Ariz. 116, 755 P.2d 421 (Ct.App.1987). The court noted that Indian tribes, as quasi-sovereigns, are immune from non-consensual suit, and that any waiver of their immunity must be "unequivocally expressed." Id. at 118, 755 P.2d at 423. The court concluded that Picopa was a subordinate economic organization within the meaning of White Mountain Apache, and S. Unique, Ltd. v. Gila River Pima-Maricopa Indian Community, 138 Ariz. 378, 674 P.2d 1376 (Ct.App.1983), rev. denied (1984). Dixon, 157 Ariz. at 121, 755 P.2d at 426. Therefore, Picopa was a beneficiary of the Community's immunity. Id. at 119, 121, 755 P.2d at 424, 426. The court's majority opinion rejected the argument that Picopa waived its immunity either by its act of incorporation, or by the presence of a clause in its charter relieving the stockholder, directors, and officers from any corporate liability. Id. at 121-22, 755 P.2d at 426-27. Thus, we must decide whether Picopa is the Community's subordinate economic organization within the meaning of Arizona law, whether Picopa is otherwise entitled to assert the Community's tribal immunity, and, if not, whether process was properly served.

III. DISCUSSION

We begin this analysis by noting that the Community never was a party to this litigation. Dixon filed suit only against Picopa and the driver of the truck that collided with her. Because Dixon could not serve the driver, the driver was not a party to the appeal or the petition for review. Dixon, 157 Ariz. at 117, 755 P.2d at 422.

A. Tribal Immunity

1. The Picopa Charter

Before we can apply legal principles, we must first examine Picopa's relationship with the Indian Community. The Community incorporated Picopa pursuant to art. III, § 5(f) of the Community's constitution. Community Ordinance No. SRO-85-84 establishes Picopa's existence as a corporation under Community law and also functions as Picopa's corporate charter. It defines Picopa as an organization established for general business purposes and confers it with very broad corporate powers. ⁶ The charter establishes the Community as the corporation's sole stockholder. A clause exempts the stockholder, officers, and directors from any liability for corporate debts.

The charter creates a board of directors to control the corporation's operations. This board, like any other board of directors, is elected annually by the stockholder. Each board member serves until his successor is elected and qualified. The charter has no director removal provision. The board has the usual broad general powers over the corporation. For example, the board elects the corporate officers, determines the terms of stock subscriptions, has discretion to issue new classes of stock, and has authority to establish a pension plan and invest it as the board deems best. The charter does not require that either board members or corporate officers be selected from among Community officers or even members. Picopa also holds title to any acquired property in its own name and not in the Community's. The only express limitation the ordinance places on the board's discretion is on the board's ability to exceed the ordinance's corporate debt ceiling. Thus, the corporate board of directors, and not the Community Council, controls Picopa.

2. Subordinate Economic Organization

We recognized the...