507 P.3d 500
Ariz.2022Background
- In 2018 ABOR contracted with Omni Tempe, LLC to build and operate a hotel and conference center on ABOR-owned (tax-exempt) ASU property; Omni would lease for 60 years, pay prepaid and annual rent to ABOR, and avoid property taxes while ABOR would contribute up to $19.5 million to construction.
- Attorney General staff learned of the deal (email thread referencing articles calling it a tax break) and the AG filed suit on January 10, 2019; an amended complaint adding Count IV was filed April 3, 2019.
- Complaint counts: Count I (tax challenge under A.R.S. § 42-1004(E)); Counts II–III (quo warranto under A.R.S. § 12-2041 alleging ABOR exceeded statutory authority); Count IV (public-monies/Gift Clause claim under A.R.S. § 35-212).
- The tax court dismissed Counts I–III for lack of AG authority and granted summary judgment on Count IV as time-barred under a one-year limitations period; it awarded ABOR attorney fees. The court of appeals affirmed; AG petitioned for review.
- Arizona Supreme Court: affirmed dismissal of Counts I and II; held AG may bring quo warranto challenging unlawful exercise of a franchise and remanded Count III; held public-monies claims by the AG are governed by a five-year limitations period under § 35-212(E) and that Count IV relates back, so remanded for further proceedings and vacated the fee award as premature.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| 1) Authority under § 42-1004(E) to sue to tax or void ABOR lease (Count I) | AG: § 42-1004(E) lets AG enforce tax laws; Omni deal is a tax-evasion conveyance so property should be taxable or deal void. | ABOR: ABOR is the State; its property is constitutionally tax-exempt, so there is no tax to enforce. | Dismissed—no actionable tax under Titles 42/43 because ABOR property is state-exempt; § 42-1004(E) inapplicable. |
| 2) Scope of quo warranto under § 12-2041—may AG challenge exercise (Counts II–III)? | AG: § 12-2041 allows challenging unlawful holding or exercising of a public office or franchise, including ultra vires exercises. | ABOR/court of appeals: quo warranto limited to right to hold office, not how office powers are exercised. | Held AG may challenge unlawful exercise (text includes “exercises”) but only for ultra vires acts outside statutory authority. |
| 3) Validity of conveyance-to-evade-taxation quo warranto claim (Count II) | AG: The lease is a conveyance to evade taxation and thus ultra vires. | ABOR: No tax exists to evade because ABOR property is tax-exempt. | Dismissed—fails as a matter of law because no tax exists to evade. |
| 4) Timeliness of public-monies/Gift Clause claim and relation back (Count IV) | AG: § 35-212(E) gives AG five years to sue for illegal public payments; amended complaint relates back to original complaint. | ABOR: § 35-212 incorporates § 12-821 so the one-year public-entity limitations applies; Count IV is untimely and does not relate back. | Held: § 35-212(E) supplies a five-year limitations period for AG public-monies suits (supplants § 12-821 for AG actions) and the amended Count IV relates back under Rule 15(c); remanded. |
Key Cases Cited
- State ex rel. Brnovich v. Ariz. Bd. of Regents, 250 Ariz. 127 (2020) (statutory grants limit AG authority; AG cannot rely on overly broad readings of general statutes)
- Bd. of Regents of Univs. & State Coll. v. City of Tempe, 88 Ariz. 299 (1960) (Board of Regents treated as State; property tax-exempt)
- Donaghey v. Attorney General, 120 Ariz. 93 (1978) (recognizes quo warranto to challenge unlawful exercise of a franchise)
- Pawn 1st, LLC v. City of Phoenix, 242 Ariz. 547 (2017) (ultra vires acts exceed statutory authority and are subject to challenge)
- Albano v. Shea Homes Ltd. P'ship, 227 Ariz. 121 (2011) (distinguishes statutes of repose from statutes of limitations)
- CTS Corp. v. Waldburger, 573 U.S. 1 (2014) (explains statute-of-repose concept measured from last culpable act)
- Marshall v. Superior Court, 131 Ariz. 379 (1982) (relation-back doctrine: amendment relates back if based on same transaction)
- Barnes v. Vozack, 113 Ariz. 269 (1976) (distinguished on facts where original and amended complaints alleged different transactions)