State ex rel. Darwin v. Arnett
330 P.3d 996
Ariz. Ct. App.2014Background
- In 1981 a 12,000-gallon underground storage tank (UST) was installed at a Tucson property; William Arnett bought the property (and Yellow Cab assets) in 1982 and later formed Yellow Cab Company of Tucson, Inc. (Yellow Cab) which operated the site.
- In 1988 the UST leaked and failed tests; Arnett/Yellow Cab did not timely report the leak to ADEQ. Arnett submitted forms and reports identifying Yellow Cab as the UST owner.
- ADEQ issued a compliance order and in 1995 entered a consent decree and consent order with Yellow Cab (signed by Arnett) assessing penalties and remediation obligations against Yellow Cab.
- Yellow Cab later filed bankruptcy; during bankruptcy depositions (2005) ADEQ learned Arnett personally owned the UST and property, not Yellow Cab.
- In 2010 ADEQ sued Arnett for remediation costs and civil penalties. The superior court found Arnett liable, rejecting his defenses of res judicata, laches, and entitlement to a jury trial; Arnett appealed.
Issues
| Issue | Plaintiff's Argument (ADEQ) | Defendant's Argument (Arnett) | Held |
|---|---|---|---|
| Whether res judicata bars ADEQ’s suit against Arnett | ADEQ: res judicata inapplicable because Arnett’s misrepresentations prevented ADEQ from asserting claims against him earlier | Arnett: ADEQ could have raised claims against him in the prior Yellow Cab litigation; claim preclusion applies | Held: Res judicata does not bar ADEQ; Restatement misrepresentation exception applies because Arnett knowingly misrepresented ownership and ADEQ reasonably relied on it |
| Whether laches bars ADEQ’s claim | ADEQ: statutes displace laches; public interest in enforcement of UST laws | Arnett: ADEQ delayed unreasonably in suing him and was prejudiced | Held: Laches rejected — statutes remove limitations against the State for UST claims and laches is disfavored against the State in matters affecting public interest |
| Whether Arnett was entitled to a jury trial | ADEQ: claims are statutory enforcement/remedial actions without historical jury right | Arnett: requested jury for liability/penalties | Held: No jury right — remedies arise under modern statutory scheme (post-statehood) and no statutory jury right exists |
| Whether ADEQ failed to follow due diligence in investigating ownership | ADEQ: relied on self-reporting protocol and only investigates further if owner unknown or disputed | Arnett: ADEQ should have discovered deed/ownership earlier | Held: ADEQ followed its protocol; recorded deed did not constitute constructive notice of UST ownership and ADEQ reasonably relied on self-reported ownership |
Key Cases Cited
- Stearns v. Arizona Dep’t of Revenue, 231 Ariz. 172 (App. 2012) (res judicata framework and standard of review)
- Mohave County v. Mohave-Kingman Estates, Inc., 120 Ariz. 417 (1978) (laches generally inapplicable against the State in matters affecting public interest)
- Valencia Energy Co. v. Arizona Dep’t of Revenue, 191 Ariz. 565 (1998) (equitable defenses against state limited where state made no misleading representations)
- Stoudamire v. Simon, 213 Ariz. 296 (App. 2006) (standard of review for right to jury trial)
- Harnett v. Billman, 800 F.2d 1308 (4th Cir. 1986) (rejecting misrepresentation exception where plaintiff had discovery evidence of alleged fraud in the prior suit)