Siler v. Arizona Dept. of Real Estate

• Decision Date: 04 June 1998
• Docket Number: CA-CV,No. 1,1
• Citation: Siler v. Arizona Dept. of Real Estate, 972 P.2d 1010, 193 Ariz. 374 (Ariz. App. 1998)
• Parties: Kenneth R. SILER and Sunburst Realty and Investment Corp., Plaintiffs-Appellants, Cross Appellees, v. The ARIZONA DEPARTMENT OF REAL ESTATE, Defendant-Appellee, Cross-Appellant. Andre G. Fleuridas, an individual, and Colt Realty, Inc., an Arizona corporation, Plaintiffs-Appellees, Cross Appellants, v. The Arizona Department of Real Estate, an agency of the State of Arizona; and Jerry A. Holt, in his capacity as commissioner, Defendants-Appellants, Cross Appellees. Joseph Mullen, Jr., individually and as Trustee of The Joseph Mullen Family Trust; The Joseph Mullen Family Trust; JLJ Limited Partnership; Michael A. Sahady; Marie Sahady; Bonnie Weekes; and James Weekes, Plaintiffs-Appellees, Cross Appellants, v. Jerry A. Holt, Commissioner of the Arizona Department of Real Estate; The State of Arizona, by and through the Arizona Department Of Real Estate; Colt Realty, Inc.; Andre G. Fleuridas; Sunburst Realty and Investment Corp.; Kenneth R. Siler, ANCR Growers Corp.; J.C. Kottgen; John J. and Lucia A. Franolich; and Copper Basin Partnership, Defendants-Appellants, Cross Appellees. 97-0360.
• Court: Arizona Court of Appeals

Page 1010

972 P.2d 1010

193 Ariz. 374

Kenneth R. SILER and Sunburst Realty and Investment Corp., Plaintiffs-Appellants, Cross Appellees, v.The ARIZONA DEPARTMENT OF REAL ESTATE, Defendant-Appellee, Cross-Appellant.

Andre G. Fleuridas, an individual, and Colt Realty, Inc., an Arizona corporation, Plaintiffs-Appellees, Cross Appellants, v.The Arizona Department of Real Estate, an agency of the State of Arizona; and Jerry A. Holt, in his capacity as commissioner, Defendants-Appellants, Cross Appellees.

Joseph Mullen, Jr., individually and as Trustee of The Joseph Mullen Family Trust; The Joseph Mullen Family Trust; JLJ Limited Partnership; Michael A. Sahady; Marie Sahady; Bonnie Weekes; and James Weekes, Plaintiffs-Appellees, Cross Appellants, v.Jerry A. Holt, Commissioner of the Arizona Department of Real Estate; The State of Arizona, by and through the Arizona Department Of Real Estate; Colt Realty, Inc.; Andre G. Fleuridas; Sunburst Realty and Investment Corp.; Kenneth R. Siler, ANCR Growers Corp.; J.C. Kottgen; John J. and Lucia A. Franolich; and Copper Basin Partnership, Defendants-Appellants, Cross Appellees.

No. 1 CA-CV 97-0360.

Court of Appeals of Arizona Division 1, Department B.

June 4, 1998.

Review Denied Feb. 23, 1999.

Jennings, Strouss & Salmon, P.L.C. by Douglas G. Zimmerman, James M. Ackerman, Phoenix, for Siler and Sunburst Realty.

Grant Woods, Attorney General by W. Mark Sendrow, Susan B. Lagerman, Assistant Attorneys General, Phoenix, for Arizona Department of Real Estate.

Gallagher & Kennedy, P.A. by Michael M. Grant, Don D. Skypeck, Phoenix, for Appellees, Cross Appellants Fleuridas and Colt Realty.

Walraven & Roberts by Richard Walraven, Prescott, for Appellees, Cross-Appellants Mullen.

OPINION

GERBER, Judge.

¶1 This is a consolidated appeal of several cases in which the Arizona Department of Real Estate alleged that three groups of persons or entities acted in concert to violate the statesubdivision laws.The land in question is located in a wooded area outside Prescott, Arizona.During the relevant time periods, the division of land "for the purpose of sale or lease ... into four or more lots, parcels, or fractional interests" triggered application of the subdivision laws.Arizona Revised Statutes Annotated("A.R.S.")§ 32-2101(41)(1992), amended by§ 32-2101(54)(1994).The laws required the seller to file a notice of intention to subdivide lands, A.R.S. section 32-2181, ¹ and to obtain a public report authorizing sales of subdivided lots or parcels.A.R.S. § 32-2183.²Neither was done here.

¶2 After a hearing, the real estate administrative law judge ("ALJ") issued findings of fact and conclusions of law.The Real Estate Commissioner ("Commissioner") adopted those findings and conclusions and issued a final order in which he(a) imposed fines; (b) suspended real estate broker's and salesperson's licenses; and (c) ordered some of the parties to obtain the permits, licenses, and reports necessary for a lawful subdivision; to bring the roads up to standard in the subject area; and to petition Yavapai County to accept all roads for perpetual maintenance.

¶3The parties subject to the final order appealed to the superior court, which affirmed in part and vacated in part the Commissioner's final order.It also awarded attorneys' fees to each of the appellants.

¶4 The Commissioner now appeals from the superior court judgment in the first two cases described below.The affected persons have cross-appealed.In the third case, the appellants challenge the superior court's finding that they acted in concert to violate the subdivisionstatutes, and the Commissioner cross-appeals.In all cases, we vacate the superior court judgment to the extent it vacated the remedies imposed by the Commissioner.We also vacate the awards of attorneys' fees against the Commissioner.We find that substantial evidence supported the agency determinations that the parties in these three matters violated the Arizona subdivision laws.We address the cases in turn and begin with the Mullen group.

I.THE MULLEN GROUP

¶5 The Commissioner argues that the superior court properly affirmed his administrative finding that this group had illegally subdivided land.The Commissioner contends, however, that the court erred in vacating the remedial aspects of the final order.The Mullen group cross-appeals from the administrative determination that it violated the subdivisionstatutes.

A.FACTUAL AND PROCEDURAL BACKGROUND

¶6Joseph Mullen, Jr.("Mullen") and John Franolich("Franolich") formed a partnership, JLJ Ltd., for the purpose of buying land near Prescott.The Commissioner found that Mullen, John and Lucia Franolich, JLJ Partnership, Bonnie (Mullen's daughter) and James Weekes, Michael (Mullen's stepson) and Marie Sahady, and the Mullen Family Trust (collectively "the Mullen group") acted in concert to subdivide land in violation of state subdivision laws.

¶7 Specifically, the Commissioner found that Mullen and Franolich used the partnership to buy land, divided the land between themselves, and further subdivided that land into a total of six lots.He also found that, at the same time, Mullen purchased a contiguous parcel and divided it into three lots.

¶8 Mullen later bought a ten-acre parcel from Copper Basin Partnership in the same area.The escrow instructions accompanying the sale provided for two-acre lot releases.Mullen ordered a survey splitting the parcel into five two-acre lots.Mullen sold two lots and conveyed the remainder to Sahady.Even before Sahady had title, he contracted to sell another two lots and retained one.Thus the parcel was divided into five lots, and the two sales by Sahady more than recouped what he paid for the six acres.The Commissioner concluded that the sale to Sahady was not "arm's length."

¶9 Additionally, Mullen purchased an eight-acre parcel from Kenneth Siler, not contiguous to the ten acres but nearby.The escrow instructions provided for two-acre lot releases, and a surveyor accordingly prepared legal descriptions for four lots.Mullen transferred the property to the Mullen Family Trust; Bonnie Weekes and the Sahadys were among the trust's beneficiaries.Mullen then transferred half the parcel to the Sahadys for virtually no consideration.Sahady sold a two-acre lot from his parcel and listed the other lot for sale.The trust had two lots surveyed on its four acres and listed one for sale.

¶10 Mullen purchased another ten acres in the same area and ordered a survey dividing the land into five lots.He immediately transferred six acres to Bonnie Weekes.The Commissioner found that within four months, Weekes and Mullen "acquired, divided and sold at a profit eight of the ten acres in this parcel."Weekes was left with a two-acre lot at no cost to her.

¶11 City and county officials testified at the administrative hearing about the nature of the land subdivided by these three groups.The officials stated that the mostly dirt and rock roads in the area did not meet county standards and were virtually unusable by fire trucks; no fire hydrants or water lines existed; the land was heavily forested and steeply graded; and that these conditions posed a very serious fire risk to the people living in the area as well as to neighboring residents and fire fighters.Therefore, in addition to suspending Sahady's real estate sales license and imposing civil fines on the Mullen group members, the Commissioner ordered Mullen, Franolich, and JLJ Partnership to obtain the documents necessary for a lawful subdivision, to bring all roads up to county standards, and to petition Yavapai County to accept the roads for perpetual maintenance.

¶12 In the Mullen group's appeal to the superior court, the court agreed that the evidence supported the Commissioner's factual findings, but it vacated as excessive the order to obtain necessary documents for a legal subdivision, to bring the roads up to county standards, and to petition for their acceptance by the county.It found no abuse of discretion in the fines and penalties imposed.The court awarded the Mullen group attorneys' fees of $2,000 and non-taxable costs in the amount of $1,510.

B.DISCUSSION

Standard of Review

¶13The superior court may reverse an agency's decision only if the court finds the decision illegal, arbitrary, or an abuse of the agency's discretion.Berenter v. Gallinger, 173 Ariz. 75, 77, 839 P.2d 1120, 1122(App.1992).The court does not conduct a trial de novo, act as the trier of fact, nor substitute its view of the evidence for that of the agency.SeeHavasu Heights v. Desert Valley Wood, 167 Ariz. 383, 386, 807 P.2d 1119, 1122(App.1990).

¶14We review the superior court's ruling"to determine whether the record contains evidence to support the judgment, and in doing so, we reach the underlying issue of whether the administrative action was illegal, arbitrary, capricious or involved an abuse of discretion."Id.The substantial nature of the evidence is a question of law about which we draw our own conclusion.Id. at 387, 807 P.2d at 1123.

The Appeal

¶15 The Commissioner contends that the superior court exceeded its authority under the Administrative Review Act, A.R.S. sections 12-901 to 914, in vacating that part of the final order directing that the Mullen group obtain necessary permits, improve the roads, and petition for acceptance of the roads.Neither we nor the superior court may substitute our judgment for that of the Commissioner.Schillerstrom v. State, 180 Ariz. 468, 472, 885 P.2d 156, 160(App.1994).The courts should affirm an agency order when substantial evidence exists to support it and the remedy ordered is within the range of permissible dispositions.SeeHoward v. Nicholls, 127 Ariz. 383, 388, 621 P.2d 292, 297(App.1980)(affirming superior court's order affirming revocation of real estate broker's license).

¶16The subdivision laws intend to protect the public health, safety, and...