Sedona-Oak Creek Airport Auth. Inc. v. Dakota Territory Tours ACC

• Decision Date: 03 June 2021
• Docket Number: No. 1 CA-CV 20-0330,1 CA-CV 20-0330
• Parties: SEDONA-OAK CREEK AIRPORT AUTHORITY INC, Plaintiff/Appellant/Cross-Appellee, v. DAKOTA TERRITORY TOURS ACC, Defendant/Appellee/Cross-Appellant.
• Court: Arizona Court of Appeals

SEDONA-OAK CREEK AIRPORT AUTHORITY INC, Plaintiff/Appellant/Cross-Appellee, v. DAKOTA TERRITORY TOURS ACC, Defendant/Appellee/Cross-Appellant.

No. 1 CA-CV 20-0330

ARIZONA COURT OF APPEALS DIVISION ONE

June 3, 2021

NOTICE: NOT FOR OFFICIAL PUBLICATION. UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.

Appeal from the Superior Court in Yavapai County

No. V1300CV201780272

The Honorable Krista M. Carman, Judge

AFFIRMED IN PART, REVERSED IN PART, AND REMANDED

COUNSEL

Gordon Rees Scully Mansukhani, Phoenix, AZ

By David O'Daniel

Co-Counsel for Plaintiff/Appellant/Cross-Appellee

Henze Cook Murphy PLLC, Phoenix, AZ

By Kiersten Murphy

Co-Counsel for Plaintiff/Appellant/Cross-Appellee

Buchalter PC, Irvine, CA

By Barbara E. Lichman, Paul J. Fraidenburgh, Daniel S. Shimell (argued)

Co-Counsel for Plaintiff/Appellant/Cross-Appellee

Ahwatukee Legal Office PC

By David L. Abney (argued)

Co-Counsel for Defendant/Appellee/Cross-Appellant

MEMORANDUM DECISION

Presiding Judge Paul J. McMurdie delivered the Court's decision, in which Judge Cynthia J. Bailey and Judge Lawrence F. Winthrop joined.

McMURDIE, Judge:

¶1 Plaintiff Sedona-Oak Creek Airport Authority, Inc. ("SOCAA") appeals from the superior court's summary judgment in favor of Defendant Dakota Territory Tours, ACC ("Dakota"). Dakota cross-appeals, asserting the court erred by applying a three-year statute of limitation to its restitution recovery. We affirm in part and reverse and remand for further proceedings consistent with this decision for the following reasons.

FACTS AND PROCEDURAL BACKGROUND

¶2 Dakota, an aerial tour company, leased space at the Sedona-Oak Creek Airport from SOCAA in various lease agreements tracing back to 2002. Over the years, the parties have had multiple disputes. One of these disputes resulted in Dakota filing a civil action against SOCAA in 2014. Sedona-Oak Creek Airport Auth. Inc. v. Dakota Territory Tours ACC, No. 1 CA-CV 20-0158, 2021 WL 97217, at *1, ¶ 3 (Ariz. App. Jan. 12, 2021) (mem. decision). The parties reached a settlement agreement in April 2017, before the lease expired. Id. The agreement provided Dakota would continue to lease the property on a month-to-month basis pending SOCAA's selection of a tenant through a request-for-proposal ("RFP") process. Id. Dakota and one other entity submitted proposals. Id. at ¶ 4. SOCAA selected the other entity and notified Dakota that it had thirty days to vacate the premises. Id. Dakota refused to leave and sought a restraining order to preclude SOCAA from evicting Dakota, arguing SOCAA had breached the settlement agreement in the RFP process. Id. at ¶ 5. After the superior court ruled against Dakota on the restraining order, SOCAA brought a forcible entry and detainer action to evict Dakota. Id. at ¶¶ 8-9. The court found that Dakota had wrongfully retained possession. Id. at ¶¶ 8-10.

¶3 Before obtaining the eviction order, SOCAA filed this breach-of-contract action in October 2017, claiming Dakota owed money under the expired leases. In the breach-of-contract action, SOCAA sought damages for Dakota's failure to pay the total amount due under the terms of the various leases. The most recent lease provided a fixed monthly rent of $2390 and a commercial activity fee ("CAF") of 2.5% of Dakota's gross receipts. SOCAA alleged Dakota had underpaid the CAF by approximately $390,000 between 2004 and 2017. In its answer, Dakota admitted, "leases and accompanying licenses have had provisions for monthly rent based in part on 2.5% of gross receipts." Dakota argued, however, the CAF was illegal per the federal Anti-Head Tax Act, 49 U.S.C. § 40116 ("AHTA"). Dakota also counterclaimed, alleging unjust enrichment and seeking restitution for the approximately $450,000 it had paid in CAF throughout its leases with SOCAA.

¶4 Dakota moved for summary judgment on its unjust enrichment counterclaim and provided a short supporting separate statement of facts per Arizona Rule of Civil Procedure ("Rule") 56(c)(3)(A). SOCAA adopted Dakota's statement of facts and cross-moved for summary judgment. SOCAA asserted the CAF was "unquestionably a charge imposed upon Dakota for using the facilities operated by SOCAA" and therefore fell within an exception to AHTA that allows for the collection of service charges from aircraft operators for their use of airport facilities. Determining that the CAF was not a service charge as contemplated by AHTA, the court ruled in favor of Dakota and against SOCAA on all claims by both parties.

¶5 Both parties agreed that Dakota's claim, if cognizable, was subject to the three-year statute of limitation under A.R.S. § 12-543. Therefore, the superior court determined that Dakota paid approximately $127,000 in CAF within the relevant period and ordered SOCAA to refund the CAF payments in that amount.

¶6 SOCAA moved for reconsideration, arguing: (1) the court lacked subject matter jurisdiction, (2) there is no private right of action under AHTA; (3) Dakota did not exhaust its administrative remedies, (4) Dakota is estopped from disputing the CAF, and (5) the court erred in interpreting the law. After the briefing, the superior court denied the motion and entered judgment in favor of Dakota and against SOCAA in the amount of $127,092 and awarded attorney's fees of approximately $78,000.

¶7 SOCAA moved for a new trial under Rule 59, arguing there were several genuine disputes of material fact. It further claimed the courthad not previously had the opportunity to consider SOCAA's contested factual issues because Dakota's motion for summary judgment was based on stipulated facts not authorized by its Board, and the court should grant a new trial because the judgment was based on Dakota's mischaracterization of the CAF. SOCAA simultaneously filed a Rule 60(a) motion to correct possible technical errors in the judgment.

¶8 SOCAA also filed a second Rule 59 motion and a second Rule 60(a) motion. The court denied the motions based partly on the fact that SOCAA had previously stipulated to the factual basis. The court noted that SOCAA's counsel acted within the scope of her legal authority by making the stipulation and observed that SOCAA's cross-motion relied on those same facts.

¶9 SOCAA moved for a new trial under Rule 59 for the third time. The court denied the motion. Following entry of a final judgment, SOCAA appealed and Dakota cross-appealed. We have jurisdiction under A.R.S. § 12-2101(A)(1).

DISCUSSION

¶10 Summary judgment is proper when "there is no genuine dispute as to any material fact and the moving party is entitled to judgment as a matter of law." Ariz. R. Civ. P. 56(a). "We review a trial court's grant of summary judgment de novo and independently determine whether [the] court's legal conclusions were correct." Goldman v. Sahl, 248 Ariz. 512, 519, ¶ 16 (App. 2020) (quoting Ledvina v. Cerasani, 213 Ariz. 569, 570, ¶ 3 (App. 2006)); Sign Here Petitions LLC v. Chavez, 243 Ariz. 99, 104, ¶ 13 (App. 2017). "We view the facts in the light most favorable to the party against whom summary judgment was granted." In re Est. of Gardner, 230 Ariz. 329, 331, ¶ 7 (App. 2012). We review de novo the validity and enforceability of contracts and the construction and applicability of statutes. Buckholtz v. Buckholtz, 246 Ariz. 126, 129, ¶ 10 (App. 2019) (contracts); Stein v. Sonus USA, Inc., 214 Ariz. 200, 201, ¶ 3 (App. 2007) (statutes).

A. Contract Provisions Are Unenforceable if They Violate Legislation or Other Identifiable Public Policy.

¶11 "The ability to enforce a lease or contract is a right or privilege under Arizona law, subject only to reasonable regulation by the government when a public interest is involved." Green Cross Med., Inc. v. Gally, 242 Ariz. 293, 296, ¶ 10 (App. 2017); Schrey v. Allison Steel Mfg. Co., 75 Ariz. 282, 286-87 (1953). "Parties have the legal right to make whatever contracts they desire, subject to liability for their breach except when 'theacts to be performed under the contract are themselves illegal or contrary to public policy, or if the legislature has clearly demonstrated its intent to prohibit maintenance of a cause of action, then recovery should be denied.'" Green Cross, 242 Ariz. at 296, ¶ 10 (quoting E & S Insulation Co. of Ariz. v. E.L. Jones Const. Co., 121 Ariz. 468, 470 (App. 1979)).

¶12 Generally, an agreement is unenforceable for public policy reasons if the legislature has determined that such agreements are "illegal,"¹ e.g., prohibited. See 1800 Ocotillo, LLC v. WLB Grp., Inc., 219 Ariz. 200, 202, ¶ 7 (2008) ("Contract provisions are unenforceable if they violate legislation or other identifiable public policy."); White v. Mattox, 127 Ariz. 181, 184 (1980) ("Recovery will be denied if the acts to be performed under the contract are themselves illegal or contrary to public policy."); Landi v. Arkules, 172 Ariz. 126, 133, (App. 1992) ("An agreement is unenforceable if the acts to be performed would be illegal or violate public policy."); Mountain States Bolt, Nut & Screw Co. v. Best-Way Transp., 116 Ariz. 123, 124 (App. 1977) ("[I]f the acts to be performed under the contract are themselves illegal or contrary to public policy, or if the legislature has clearly demonstrated its intent to prohibit maintenance of a cause of action, then recovery should be denied."); see also Restatement (Second) of Contracts § 178 cmt. a ("Occasionally, on grounds of public policy, legislation provides that specified kinds of promises or other terms are unenforceable . . . . Assuming that [such legislation is valid], the court is bound to carry out the legislative mandate with respect to the enforceability of the term.").

¶13 "[A]bsent legislation specifying that a contractual term is unenforceable, courts should rely on public policy to displace the private ordering of relationships only when the term is contrary to an otherwise identifiable public policy that clearly outweighs any interests in the term's enforcement." 1800...