Dbt Yuma LLC v. Yuma County Airport Authority

IN THE

SUPREME COURT OF THE STATE OF ARIZONA

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
Filed November 24, 2015

Appeal from the Superior Court in Yuma County
The Honorable John N. Nelson, Judge
No. CV201001309
AFFIRMED

Opinion of the Court of Appeals, Division One
236 Ariz. 372, 340 P.3d 1080 (App. 2014)
VACATED IN PART

COUNSEL:

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
 DBT YUMA V. YUMA CO.
Opinion of the Court

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.

VICE CHIEF JUSTICE PELANDER authored the opinion of the Court, in
which CHIEF JUSTICE BALES and JUSTICES BRUTINEL, TIMMER, and
BERCH (RETIRED) joined.

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.

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Opinion of the Court

¶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. § 28-8424 does 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 § 28-8424 is
a legal issue of first impression and statewide importance. We have
jurisdiction under article 6, section 5(3) of the Arizona Constitution and
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. §§ 28-8411 and -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,

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Opinion of the Court

e.g., Rouse v. Theda Clark Med. Ctr., Inc., 735 N.W.2d 30, 37 (Wis. 2007); Ferch
v. Hous. Auth. of Cass Cty., 59 N.W.2d 849, 857 (N.D. 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
instrumentality of 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); see Prescott 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).

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Opinion of the Court

¶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 also 28 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 (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, 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.,
8 N.Y.S.2d 103, 105 (App. Div. 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

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making claim against the State”); see also Lock v. City of Imperial, 155 N.W.2d
924, 924 (Neb. 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 former’s alleged contractual breach.

¶14 Our view also finds support in the Restatement, which
distinguishes common-law requirements for “agency” (which DBT Yuma
acknowledges are not met here) from statutory terms such as those
contained in § 28-8424(A)(3). See Restatement (Second) of Agency § 1 cmt. f
(Am. Law Inst. 1958) (“Whether the word ‘agent’ as used in a statute
corresponds to the meaning here given depends, with other factors, upon
the purpose of the statute.”); Restatement (Third) of Agency § 1.01 cmt. b
(Am. Law Inst. 2006) (“More generally, legal usage varies. Some statutes
and many cases use agency terminology when the underlying relationship
falls outside the common-law definition.”).

C.

¶15 The Arizona cases on which DBT Yuma relies are inapposite.
In Hertz Drive-Ur-Self System, Inc. v. Tucson Airport Auth., 81 Ariz. 80, 299
P.2d 1071 (1956), this Court determined that the Tucson Airport Authority
(“TAA”) and its officers were not immune from a mandamus action, which
generally seeks an order requiring public officers to perform their legal
duties. Hertz, 81 Ariz. at 83-84, 299 P.2d at 1073. We observed that “the sole
reason for [TAA’s] existence is to advance the public interest in the
operation, maintenance and improvement of the city-owned airport,” and
that TAA was “a public arm” and “instrumentality of the State,”
“performing public rather than private functions.” Id. The Court did not
discuss, much less decide, whether the City of Tucson (the airport
owner/lessor, but not named as a defendant in the case) could be liable for
TAA’s actions.

¶16 DBT Yuma’s reliance on two decisions by the court of appeals
likewise is misplaced. See Thompson v. Tucson Airport Auth., Inc., 163 Ariz.
173, 173–74, 786 P.2d 1024, 1024-25 (App. 1989) (holding that TAA was the
city’s agent and thus not subject to the Administrative Procedure Act,
A.R.S. § 41–1001 et seq., which excludes local governments); L.G. Lefler, Inc.

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v. Tucson Airport Auth., Inc., 141 Ariz. 23, 25, 684 P.2d 904, 906 (App. 1984)
(holding that TAA was city’s agent under public works statute and thus
was required to accept substituted security from a contractor constructing
improvements at the airport). Notably, the public works statute’s definition
of “agent,” at issue in Lefler, differs from the definition of agent for purposes
of determining a principal-agent relationship. Compare A.R.S. § 34-101 (“In
this title, unless the context otherwise requires: 1. ‘Agent’: (a) Means any
county, city or town, or officer, board or commission of any county, city or
town . . . .”), with Restatement (Third) of Agency § 1.01 (Am. Law Inst. 2006)
(“Agency is the fiduciary relationship that arises when one person (a
‘principal’) manifests assent to another person (an ‘agent’) that the agent
shall act on the principal’s behalf and subject to the principal’s control, and
the agent manifests assent or otherwise consents so to act.”).

¶17 Like Hertz, those cases neither addressed § 28-8424 nor held
that a nonprofit airport authority has a principal-agent relationship with its
authorizing governmental entity. They do not support DBT Yuma’s broad
contention that YCAA is the County’s agent merely because it manages the
airport.

D.

¶18 Finally, DBT Yuma’s reliance on A.R.S. § 28-8428 also is
misplaced. That statute exempts counties from liability for airport police
officers’ acts or omissions unless the county is the airport’s governing body.
A.R.S. § 28-8428(B). Because related statutes, including § 28-8424, contain
no similar exemption or immunity language, DBT Yuma argues that the
legislature must have intended counties to be liable for other acts or
omissions of nonprofit airport authorities in managing the airport.

¶19 As noted above, however, a nonprofit/lessee airport
authority operating an airport is a “body politic and corporate,”
§ 28-8424(A)(1), and as such is generally not deemed an agent of the county.
See supra, ¶ 8. To instead conclude, based solely on § 28-8428, that an
airport authority is an agent of the county for purposes of imputing the
former’s liability to the latter would flatly contradict § 28-8424(A)(1),
rendering that subsection superfluous. See Lemons v. Superior Court, 141
Ariz. 502, 505, 687 P.2d 1257, 1260 (1984) (“Whenever possible a court
should construe the meaning of several statutes so that effect can be given
to all.”); State ex rel. Larson v. Farley, 106 Ariz. 119, 122, 471 P.2d 731, 734

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(1970) (“If reasonably practical, a statute should be explained in conjunction
with other statutes to the end that they may be harmonious and
consistent.”). In sum, we cannot conclude from the specific exception in
§ 28-8428(B), regarding liability for airport police officers’ acts or omissions,
that the legislature generally intended to impute liability to the county for
any other act or omission of the airport authority.

III.

¶20 For the foregoing reasons, we affirm the trial court’s summary
judgment in favor of Yuma County. Although we agree with the result
reached by the court of appeals, we vacate paragraphs 11 through 19 of its
opinion.

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