ALJDEC

00F-L990026-BFS · Department of Building and Fire Safety · 2000-08-22

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: August 11, 2000 at 9:00 a.m. APPEARANCES: Petitioners appeared through their attorney, James F. Wees, Esq.; Respondents appeared through their attorney, Michael A. Parham, Esq. ADMINISTRATIVE LAW JUDGE: Diane Mihalsky _____________________________________________________________________

The parties presented evidence and argument with respect to whether Respondents violated the Arizona Mobile Home Parks Residential Landlord and Tenant Act (“the Act”) when San Estrella Resort Community increased the amount charged to Petitioners for trash collection, which is a component of Petitioners’ rent. Based on the entire record and applicable law, the undersigned makes the following Findings of Fact, Conclusions of Law, and Recommended Order to the Director of the Arizona Department of Building and Fire Safety (“the Department”). FINDINGS OF FACT Background Petitioners have lived in the San Estrella Resort Community since April 1986. Respondent San Estrella Resort Community is a mobile home park located in Phoenix. William Corrigan is a member of the limited liability company that has owned San Estrella Resort Community since 1998. Mr. Corrigan is not the manager; the manager of the park is the limited liability company owner’s employee Dorothy McCrohan, who was not named as a Respondent and did not testify at the hearing. The Parties’ Agreement and Related Documents The parties entered into a Rental Agreement for a term of 13 months, commencing on August 1, 1998, that provided in relevant part: 4. Unless [Petitioner] gives notice that he intends to terminate this agreement and vacate the Mobile Homesite not less than sixty (60) days before the expiration of the term of this agreement (or any automatic one year renewal), then this agreement shall be automatically renewed for an additional one year term, provided that there shall be a maximum of two (2) such automatic extensions. San Estrella Resort Community shall notify [Petitioner] at least sixty (60) days prior to the expiration of the original term of this agreement or any renewal term, of changes in the rent, special charges and payment arrangement which shall be in effect in the succeeding term.

5. Notwithstanding anything herein to the contrary, San Estrella Resort Community shall be entitled to an immediate rental increase during the term of this lease to compensate it for actual costs of insurance, taxes and rate increases for utilities, which it shall substantiate in writing to the homeowner.

6. To the extent not already being done, San Estrella Resort Community shall have the right to cause all utilities used by [Petitioner] to be sub-metered. Tenant shall pay, as metered to Homeowner’s space. Additional rent based upon the costs of utility service shall be due on the rental payment due date immediately following the mailing or delivery by [Respondents] of a billing Statement, in compliance with applicable law. All costs of providing and installing the utility sub-meter shall be borne by [Respondents]. All amounts to be paid for utility service shall be determined in compliance with A.R.S. § 33-1413.01, and shall be in addition to the charges itemized on the Schedule of Special Charges attached to this rental agreement. Until the utilities are in fact sub-metered, and the required billing is delivered to Tenant, the obligation to pay Additional Rent pursuant to this paragraph shall not apply.

7. Tenant shall pay, as additional rent, an amount equal to the single family residential charge, fee or rate for the removal of waste, garbage, rubbish, refuse and trash, and for sewer services, at such rates, fees or charges assessed by the private company or political subdivision which provides the services. Each payment of additional rent pursuant to this paragraph shall be due on the base rental payment due date immediately following the month for which service has been provided. For example, the charge for trash pickup and sewer services for May will be due with the June rate. Landlord will provide notice to Tenant of the monthly charges, as assessed by the service provider from time to time; that monthly charge will remain in effect until the rate, fee or charge is changed by the provider of services. Upon receipt of any notice of change in rates, fees or charges, Landlord will provide notice to Tenant of the change. The amount of additional rent attributable to the cost of trash and sewer services will be immediately changed to reflect the new rate, effective as of the date determined by the service provider, subsequent to notice from Landlord.

(Emphases added.) Schedule A to the Rental Agreement provided that Petitioners’ base rent would be $313.00 per month, but did not provide any specific charge for trash removal. Neither party disputes that the Rental Agreement remains in effect. Petitioners also were provided Respondents’ Statement of Policy, which provided in relevant part: 5. The amount of rent paid by a Tenant is described in each Tenant’s Rental Agreement. Changes in base rental for successive periods will be based upon Landlord’s evaluation of base lot rental in comparable parks, plus special charges, similar to those identified on Schedule A of Tenants [sic] lease. Additional rent attributable to utilities, sewer service and trash service shall be based upon the costs assessed by the service providers, limited by applicable law. . . . .

7. It is the policy of San Estrella Resort Community to collect, as additional rent pursuant to the Rental Agreement, an amount equal to the cost attributable to tenants [sic] use of water. Such additional rent is or will be assessed on after a separate meter is installed to measure Tenant’s use of those utilities. The additional rent for these utilities is only charged or collected after separate billing statements showing the opening and closing of the meter readings, the date of the meter readings, the cost of the charges for the stated period, and only as computed in accordance with the serving utilities [sic] billing format, all as provided by law.

8. It is the policy of San Estrella Resort Community to collect, as additional rent pursuant to the Rental Agreement, an amount for sewer service and the removal of waste, garbage, rubbish, refuse and trash. The additional rent attributable to waste, garbage, rubbish, refuse, and trash removal and sewer services will not exceed the prevailing single family residential charge, fee or rate for those services levied by the company or political subdivision that provides those services.

(Emphases added.) Petitioners were given a copy of Respondents’ Rules and Regulations, which provided in relevant part: 6. Rental Fees and Other Charges

From time to time as provided in the Arizona Residential Landlord and Tenant Act for Mobile home parks, San Estrella Resort Community shall notify the Homeowner of revised schedules of rent and charges for tenancy at San Estrella Resort Community. . . .

The amount of rent paid by a Tenant is described in each Tenant’s Rental Agreement. Changes in base rental for successive periods will be based upon Landlord’s evaluation of base lot rental in comparable parks, plus special charges, similar to those identified on Schedule A of Tenants [sic] lease. Additional rent attributable to utilities, sewer service and trash service shall be based upon the costs assessed by the service providers. . . . .

Trash service is provided by the City of Phoenix or a private company, solely at the discretion of San Estrella Resort Community. The cost of trash service will be paid by Tenant as additional rent limited to the prevailing single family residential rate, fee or charge assessed by the service provider. . . .

(Emphases added.) Respondent San Estrella Resort Community’s owners, agents, employees, or their predecessors drafted the Rental Agreement, Statement of Policy, and Rules and Regulations. The Parties’ Understanding and Subsequent Communications Petitioner Richard Paulin is a retired corporate attorney licensed to practice law in California and New York. Mr. Paulin reviewed the documents quoted above and the Act before entering into the Rental Agreement. He understood that Respondents would only charge tenants San Estrella Resort Community’s prorated actual cost of trash removal. Each month between August 1, 1998 and June 1, 1999, San Estrella Resort Community charged and collected from Petitioners, in addition to their base rent, $5.50 for trash collection. Respondents notified Petitioners of a rent increase on March 25, 1999, as follows: You were previously notified in August 1998 that San Estrella Resort Community has the right to charge, as additional rent, an amount equal to the cost incurred for the removal of waste, garbage, rubbish, refuse, and trash. That additional rent may not exceed the prevailing single family residential charge, fee or rate for these services levied by the political subdivision or provider, all in compliance with the provisions of Arizona law. San Estrella Resort Community has not actually collected that additional rent for period of time. However, it has now become necessary to begin collecting that additional rent, of which you were previously notified.

This notice is intended to inform you that the actual cost for the removal of waste, garbage, rubbish, refuse and trash, will be collected as additional rent pursuant to the terms of, and in compliance with the lease, the Rules and Regulations, and pursuant to the authority of Arizona law. These charges will be collected commencing June 1st, 1999. . . .

You will be notified of any subsequent changes in the amount of the monthly charges, as the costs assessed by the Service provider are changed from time to time. Any change attributable to the cost of trash services will be effective as of the date determined by the service provider.

Your cost for trash removal collected as additional rent, will be $5.70, due July 1st, 1999. This charge will be shown on your bill that is sent to you on or about July 1st, 1999.

(Emphases added.) For the next nine months, Petitioners paid $5.70 as additional rent for trash collection. 10. Respondents again notified Petitioners of a rent increase in a letter they received on March 18, 2000, although it was dated March 25, 2000: This notice is intended to inform you that the amount equal to the prevailing single family residential charge, fee or rate for the removal of waste garbage, rubbish, refuse and trash levied by the political subdivision or provider and charged as additional rent to the homeowner by San Estrella Resort Community all in compliance with the provisions of Arizona Law has increased. The new amount will be included in the April 2000 billing statements that you receive each month.

Your cost for trash removal collected as additional rent, will be $17.70, due April 1, 2000. This charge will be shown on your bill that is sent to you on or about April 1, 2000.

(Emphases added.) The Complaint Petitioners learned that Paradise Waste Management, Inc. provided trash removal services to San Estrella Resort Community and, on May 24, 2000, charged Respondents directly a flat rate of $1,683.54 for collecting trash from 270 90-gallon containers twice a week. San Estrella Resort Community has 305 units. The record does not contain any evidence with respect to how many of these units were occupied in May 2000. Petitioners calculated a pro rata cost of $5.52 per unit based on Paradise Waste Management, Inc.’s May 2000 bill to Respondents for trash removal. Petitioners protested the increase in rent based on the Rental Agreement, Statement of Policy, Rules and Regulations and A.R.S. § 33-1413.01(D). Petitioners also claimed that Respondents gave inadequate notice of the rent increase. Respondents continued to charge $17.70 for trash removal, in addition to the base rent and other charges not at issue. Petitioners continued to pay $5.70 for trash removal, in addition to the base rent and other charges. On May 30, 2000, Petitioners made a complaint to the Department, which subsequently issued a notice of hearing. Respondents filed a motion for summary judgment and Petitioners filed a hearing brief. Additional Findings of Fact On June 2, 2000, for the first time, Respondents posted on two public bulletin boards the rates charged tenants for water, sewer, and trash collection. The charge for trash collection was $17.70 per month. The City of Phoenix provides residential trash collection to the area where San Estrella Resort Community is located. In April 2000, the City charged owners and occupants of single-family residences $17.70 per month for trash collection. The City had recently raised the single family residential rate after it renegotiated its labor contract with the Teamsters union, which represented sanitation workers. No evidence was presented as to the rate charged before the recent increase. No evidence was presented showing that Paradise Waste Services, Inc. provides trash collection services directly to single-family residences in the area where San Estrella Resort Community is located or, if such services are provided, the amount Paradise Waste Services, Inc. charges for them. CONCLUSIONS OF LAW Petitioners bear the burden of proof and must establish statutory violations by a preponderance of the evidence.[1] “A preponderance . . . is such proof as convinces the trier of fact that the contention is more probably true than not”[2] or “evidence which is of greater weight or more convincing than evidence which is offered in opposition to it; that is, evidence which as a whole shows that the fact sought to be proved is more probable than not.”[3] Respondents are subject to the Act[4] and are regulated by the Department.[5] Whether $17.70 Exceeds the Amount Allowed by Statute for Trash Removal The Arizona legislature in A.R.S. § 33-1413.01(D) has allowed Respondents to “charge separately for removal of waste, garbage, rubbish, refuse and trash and for sewer services.” But Respondents may charge only up to “the prevailing single family residential charge, fee or rate for these services levied by the political subdivision or provider.”[6] Although the phrase “prevailing single family residential” is not defined in the Act, it has been construed to mean the rate that a provider in the geographical area levies directly on and that is paid by the owner or occupant of a single-family residence.[7] Neither Paradise Waste Services, Inc. nor the City of Phoenix directly provides to or bills Petitioners for trash collection and the amount that Respondents actually pay for trash collection, calculated on a pro rata basis, is not the applicable “prevailing single family residential rate, fee or charge.”[8] No evidence was offered showing that Paradise Waste Services, Inc. competes with the City of Phoenix by providing trash collection to single-family residences in the same geographical area as San Estrella Resort Community for a lesser rate. The applicable prevailing single-family residential rate established by the evidence therefore is the City’s monthly rate of $17.70. “The best and most reliable index of a statute’s meaning is its language. That language, when clear and unequivocal, controls the statute’s meaning unless it leads to absurd or impossible results.”[9] The adjectival phrase “prevailing single family residential,” the prepositional phrase “for these services,” and the participial phrase “levied by the political subdivision or provider” all modify the compound nouns “charge, fee or rate” in A.R.S. § 33-1413.01(D). The legislature’s two uses of the disjunctive “or” in the second sentence of A.R.S. § 33-1413.01(D) “express an alternative or to give a choice of one among two or more things.”[10] The plain language of the Act therefore does not prevent a landlord from charge more than its actual costs for trash collection if those costs are less than the prevailing single family rate or require a landlord to charge the lesser of the prevailing single family residential rate and the commercial or multi-unit service provider’s pro rata rate that they actually paid. Respondents did not violate A.R.S. § 33-1413.01(D) when they attempted to raise the monthly rent charge attributable to trash collection from $5.70 to $17.70. Whether the Parties’ Contract Allows Respondents to Raise the Amount of Rent Attributable to Trash Collection to the Statutory Maximum

Jurisdiction “The administrative law judge may order any party to abide by the statute or contract provision at issue . . . .”[11] The Act requires a landlord to state in the rental agreement the amount of rent that the tenant must pay, regardless of whether it is a lump sum to compensate the landlord for its investment and anticipated expenses or whether, as here, certain anticipated expenses like the cost of trash collection are separately charged as rent.[12] The Act also requires a landlord to adopt a Statement of Policy[13] and Rules and Regulations.[14] The Contract The Legislature passed the Act “[t]o simplify, clarify and establish the law governing the rental of mobile home spaces and rights and obligations of landlord and tenant.”[15] If the documents setting forth the parties’ rights and obligations are ambiguous, the Act contemplates that the administrative law judge will simplify and clarify the parties’ rights and obligations by interpreting those documents.[16] The Rental Agreement, Statement of Policy, and Rules and Regulations all refer both to the “single family residential charge” and to the amount actually assessed by the service provider.[17] Internal inconsistencies are construed against Respondents, who are responsible for drafting all three documents comprising the parties’ contract.[18] In addition, Respondents’ March 25, 1999 letter establishes that Respondent believed that the rental agreement required Petitioners to pay as rent the actual service provider’s charges, not the maximum allowed by law.[19] Respondents’ interpretation made subsequent to the rental agreement binds it in this proceeding.[20] Respondents’ Compliance with Statutes Allowing Modification of the Contract The issue then is whether the Rental Agreement and the Act allowed Respondents to modify the rental agreement unilaterally by raising the amount charged as rent for trash collection from the amount representing Respondents’ actual cost to the maximum allowed by statute. Respondents argue that the only statutory requirement for such unilateral modification is in A.R.S. § 33-1432(F), which requires that “[e]ach tenant shall be notified, in writing, at least ninety days prior to the increase . . . .”[21] The notice in this case was received on March 18, 2000, much less than ninety days before the purported April 1, 2000 effective date for the rental increase. The only circumstances under which the Act allows a landlord to modify the rental agreement unilaterally, with notice, is at the expiration or renewal of the rental agreement or to compensate the landlord for “actual costs of insurance, taxes and rate increases for utilities.”[22] Respondent does not claim that either of these circumstances existed at the time of the attempted rate increase.[23] Respondents’ claimed right to charge any amount up to the statutory maximum for any component of rent, regardless of the terms of the rental agreement, statement of policy, or rules and regulations and of the parties’ mutual understanding of these documents, turns the common-law of contracts on its head and finds no unequivocal support in the language of the Act.[24] Respondents may raise the portion of rent charged for trash collection to the rate charged by the City of Phoenix to single-family residential users. But Respondents must first comply with the requirements of A.R.S. §§ 33- 1413(G) and (I) and 33-1432(F), which they have not done in this case. Attorney’s Fees and Filing fee Petitioners requested an award of attorney’s fees at the administrative hearing. This request must be denied because the Legislature has not empowered either the Director of the Department or the Office of Administrative Hearings to award such fees.[25] Petitioners also requested an order that Respondents pay their filing fee under A.R.S. § 41-2198.01(A).[26] Although Petitioners’ construction of A.R.S. § 33-1413.01(D) were rejected, they obtained the immediate relief sought.[27] Respondents therefore are ordered to pay Petitioners’ filing fee. RECOMMENDED ORDER It is recommended that the Director order that Respondents can charge Petitioners no more than $5.70 in rent attributable to trash collection, unless and until Respondents’ actual costs exceed this amount, or Petitioners’ lease term expires or is renewed, and Respondents provide the notice required by statute. Done this day, August 22, 2000.

______________________________________ Diane Mihalsky Administrative Law Judge

Original transmitted by mail this ____ day of August, 2000, to:

Department of Building and Fire Safety N. Eric Borg, Director ATTN: Michelle M. Castañeda East Virginia, Suite 100 Phoenix, AZ 85004

By ___________________________

----------------------- [1] See A.A.C. R2-19-119; see also Culpepper v. State, 187 Ariz. 431, 438, 930 P.2d 508, 515 (App. 1996).

[2] Morris K. Udall, Arizona Law of Evidence § 5 (1960).

[3] Black’s Law Dictionary at page 1064 (6th ed. 1990).

[4] See A.R.S. §§ 33-1401 to 33-1905.

[5] See A.R.S. §§ 41-2155 to 41-2198.04.

[6] A.R.S. § 33-1413.01(D) (emphasis added).

[7] Cf. Fort Collins Motor Homes, Inc. v. City of Fort Collins, 30 Colo. App. 445, 449, 496 P.2d 1074, 1076-77 (1972) (contrasting single family residential rate with “minimum rates per living unit in an apartment [or mobile home park] with one meter”); Knotts v. Nollen, 206 Iowa 261, 263, 218 N.W. 563, 564-65 (1928) (“[T]he city has no control of the water after it passes the meter, or of the charges that may be made for it. While the rent charged must necessarily take into account the water furnished, if the apartment is not on a separate meter, nevertheless there is legally nothing to prevent the proprietor, in fixing rents, from charging the consumer on the basis of the maximum rate, while he is getting the wholesale rate.”); Oradell Village v. Township of Wayne, 98 N.J. Super. 8, 11-12, 235 A.2d 905, 907 (New Jersey Sup. Ct. 1967), aff’d, 101 N.J. Super. 403, 244 A.2d 513 (N.J. Sup. Ct. 1968), aff’d, 53 N.J. 496, 251 A.2d 441 (1969) (contrasting single rate with “cases where more than one living or business unit is supplied through one meter”); Caldwell v. City of Abilene, 260 S.W.2d 712, 713 (Tex. Civ. Ct. App. 1953) (same).

[8] The rate or charge that Paradise Waste Services, Inc. billed to Respondents for May 2000 is a commercial or a multi-unit residential rate, not a single-family residential rate.

[9] Lowing v. Allstate Ins. Co., 176 Ariz. 101, 103, 859 P.2d 724, 726 (1993).

[10] State v. Pinto, 179 Ariz. 593, 595, 880 P.2d 1139, 1141 (Ct. App. 1994) (quoting Rutledge v. Arizona Board of Regents, 147 Ariz. 534, 556-57, 711 P.2d 1207, 1229-30 (Ct. App. 1985); also citing Miller v. City of Tucson, 153 Ariz. 380, 381, 736 P.2d 1192, 1193 (App. 1987)).

[11] A.R.S. § 41-2198.02 (emphasis added); Cactus Wren v. Department of Building and Fire Safety, 177 Ariz. 559, 562, 869 P.2d 1212, 1215 (Ct. App. 1994) (“[A]n administrative agency may resolve disputes between private parties if this authority is auxiliary to and dependent upon the proper exercise of legitimate regulatory power.” (citations omitted)).

[12] See A.R.S. § 33-1413(A); see also A.R.S. § 33-1436(B)(3) (requiring the landlord to provide tenants with a written statement of policy containing the method of determining rent charges) and A.R.S. § 33-1452 (requiring landlord to adopt rules and regulations that promote the purposes of the Act ).

[13] See A.R.S. § 33-1436.

[14] See A.R.S. § 33-1452.

[15] A.R.S. § 33-1402(1).

[16] See also A.R.S. § 33-1403 (“Unless displaced by the provisions of this chapter, the principles of law and equity, including the law relating to capacity to contract, mutuality of obligations, principal and agent, real property, public health, safety and fire prevention, estoppel, fraud, misrepresentation, duress, coercion, mistake, bankruptcy or other validating or invalidating cause supplement its provisions.”).

[17] Compare italicized portions of documents quoted at Findings of Fact Nos. 3, 4, and 5, supra.

[18] See, e.g., Abrams v. Horizon Corporation, 137 Ariz. 73, 79, 669 P.2d 51, 57 (Ct. App. 1983).

[19] See Finding of Fact No. 9, supra.

[20] See, e.g., Gerber v. Cook, 90 Ariz. 390, 393 n.1, 368 P.2d 458, 460 n. (1962).

[21] This statutory subsection further provides that “[t]he mobile home parks hearing officer has jurisdiction to determine whether notices have been served properly and in a timely manner.”

[22] See A.R.S. § 33-1413(G) and (I).

[23] The Legislature has excepted disputes concerning application of these provisions from the administrative law judge’s jurisdiction. See A.R.S. § 41-2198.03 (“The administrative law judge may hear and adjudicate all matters relating to the Arizona mobile home parks residential landlord and tenant act and rules adopted pursuant to this article, except that the administrative law judge shall not hear matters pertaining to rental increases pursuant to A.R.S. § 33-1413, subsection G or I.” (emphasis added)).

[24] It is well established in Arizona that civil or regulatory statutes in derogation of the common law are to be strictly and literally construed. See, e.g., Murdock v. Balle, 144 Ariz. 136, 138, 696 P.2d 230, 232 (Ct. App. 1985).

[25] Cf. A.R.S. § 33-1408(C) (allowing court, not Department, to award attorney’s fees “[i]n any contested action arising out of an agreement entered into pursuant to this chapter or for violation of any provisions of this chapter”); see also Semple v. Tri-City Drywall, Inc., 172 Ariz. 608, 611, 838 P.2d 1369, 1372 (Ct. App. 1992) (“The common definition of ‘action’ is ‘a proceeding in a court of justice by which one demands or enforces one’s right.”).

[26] “If the petitioner prevails, the administrative law judge shall order the Respondent to pay the petitioner the filing fee required by § 41- 2198.01.

[27] Cf. City of Cottonwood v. James L. Fann Contracting, Inc., 179 Ariz. 185, 195, 877 P.2d 284, 294 (Ct. App. 1994) (applying A.R.S. § 12- 341.01(A)).

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Office of Administrative Hearings 1400 West Washington, Suite 101 Phoenix, Arizona 85007 (602) 542-9826