ALJDEC decisions subject to certification as final

07F-024-LAN · State Land Department · 2007-08-13

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: July 25, 2007. APPEARANCES: Appellant Victor Russell was present and represented by his attorney, Randal Studer, Esq. The Arizona State Land Department was represented by Assistant Attorney General John M. Jacobs. ADMINISTRATIVE LAW JUDGE: Brian Brendan Tully _____________________________________________________________________ This matter is an appeal of State Land Commissioner Order No. 276- 2006/2007, Denial of Renewal Application for Commercial Lease No. 03-102672 for the State Trust lands described therein. Based upon the evidence of record, the Administrative Law Judge makes the following Findings of Fact, Conclusions of Law and Recommended Order:

FINDINGS OF FACT

1. The Arizona State Land Department (“Department”) manages State Trust lands to maximize income for trust beneficiaries, which include the common schools in Arizona.[1] 2. On or about February 10, 1998, Victor Russell (“Appellant”) executed the Department’s Commercial Lease No. 03-102672 (“Commercial Lease”) for State Trust lands. The Commercial Lease was executed on behalf of the Department on March 31, 1998. The Commercial Lease had a term of ten years commencing on December 10, 1996 and expiring on December 9, 2006. 3. The Commercial Lease covered the following described State Trust lands: M & B in S/2S/2NE/4 of Section 10, Township 7 South, Range 2 East, Pinal County, Arizona. The subject lands consist of 11.94 acres. 4. Appellant had previously held a lease on the subject lands for 20 years prior to the issuance of the Commercial Lease. 5. Appellant owns 130 acres of fee property adjacent to the Commercial Lease lands. He operates a truck stop on the fee lands. 6. Article 1.2 of the Commercial Lease set forth the permitted use of the subject lands, which reads as follows:

Use. The Parcel shall be used solely and exclusively for a motel, restaurant and 12-hook up mobile home park. Lessee shall either refurbish and rebuild the restaurant and mobile homes on the Premises to a state whereby they can be used and/or operated in full compliance with all federal, state and local laws, rules and ordinances, or dismantle and remove same on or before December 31, 1998. No outdoor storage shall be permitted, with the exception of no more than five (5) vehicles, not dismantled, stored for a period of no more than fifteen (15) days per vehicle. Lessee shall not erect any sign on the Premises that advertises a business not located on the Premises. Lessee shall maintain its operation in compliance with ALL federal, state and local laws, rules and ordinances, and obtain, maintain, and keep on file on the Premises, all permits necessary to the permitted uses of this Lease. Lessee shall cause the septic tanks on the Premises to be pumped no less often than once every five (5) years, and provide Lessor with copies of the receipts for such pumping.

7. Article 4.1 reiterates the use of the leased lands as follows: “The premises shall be used solely and exclusively for the purpose described in Article 1.2 (Use). All others are prohibited.” 8. Article 21.9 of the Commercial Lease provides for Lessee’s responsibility, among other things, for the “removal of all waste and debris deposited by Lessee” at the Lessee’s sole cost and expense. 9. By letter dated June 23, 1999, Scott Kemp, the Department’s Lease Administrator, advised Appellant of the following breaches of the Commercial Lease:

• Article 1.2 Use. The motel and restaurant have not either been refurbished, rebuilt or dismantled and removed prior to December 31, 1998. • Article 4.6 Governmental Approval; Article 6.2 Prior Approval Required and Article 8.1 Lessee’s Obligations. My interpretation of these provisions indicate that an approval was necessary to reconstruct, construct, refurbish, etc., the septic system that services allowed uses under this Lease. That approval was not requested and apparently, by your own admission, the improvements were done. • Article 4.8 No Water Rights Conferred. You told me that you had so configured your pump system that State water could be pumped off of State land in an emergency. The Lease under Article 4.8 prohibits that usage.

10. Mr. Kemp requested that Appellant reconcile the lease violations by June 30, 1999. 11. By letter dated August 30, 1999, Mr. Kemp discussed Appellant’s lease violations. Appellant had filed a request to assign his interest in the Commercial Lease. Mr. Kemp stated that he would recommend that the assignment be denied due to the outstanding lease violations. Mr. Kemp advised Appellant that the deadline for full compliance with the Commercial Lease was extended to December 31, 1999. 12. By letter dated September 30, 2002, Roman G. Diaz, the manager of the Arizona Department of Environmental Quality’s (“ADEQ”) Water Quality Division, advised Appellant’s agent, Jerry Robles, that the water systems for the Saguaro RV Resort, Vija Truck Stop, Pullman Motel and Restaurant and Vija Employee Mobile Home Park were not in compliance with ADEQ Drinking Water Rules. Several of those facilities were on the Commercial Lease lands 13. ADEQ inspections resulted in the following determination:

The ADEQ inspections verified that Saguaro RV Resort water system, PWS 11-378 and Vija Truck Stop water system, PWS 11-377 (consisting of the Truck Stop, Pullman Motel and Restaurant, and the Vija Mobile Home Park are interconnected.

14. On or about September 30, 2002, ADEQ issued a Notice of Violation for the water systems servicing the Saguaro RV Resort, Vija Truck Stop, Pullman Motel and Restaurant and the Vija Employee Mobile Home Park. 15. On or about November 27, 2006, Appellant filed a Commercial Lease Application (“Renewal Application”) for renewing the Commercial Lease for an additional ten years. 16. Paragraph 12 of the Renewal Application asks, among other things, the following question: “If it is determined that the annual rental will be a percentage of gross sales, what is your estimate of gross sales per year?” Appellant gave the following answer to that question: “Business closed for remodeling.” 17. At the end of the Renewal Application, Appellant signed the following certification: “I HEREBY CERTIFY, UNDER PENALTY OF PERJURY, THAT THE INFORMATION AND STATEMENTS CONTAINED HEREIN, TOGETHER WITH ALL EXHIBITS AND ATTACHMENTS ARE TRUE, CORRECT AND COMPLETE AND THAT I/WE HAVE AUTHORITY TO SIGN THIS DOCUMENT.” 18. Attached to and made a part of the Renewal Application is an ADEQ Disclosure Questionnaire. On page one of the Disclosure Questionnaire, Appellant was requested to “indicate…the type(s) of potential environmental impacts from your current or proposed use.” Appellant answered “No” to the following items, indicating that they were not used on the Commercial Lease lands: waste tires, lead acid batteries, discharge impacting groundwater, pesticides, dry wells, potable water (drinking water) systems, wastewater collection and treatment systems, air contaminants/air pollution control, solid waste – general, solid waste – medical waste, solid waste – sewage sludge/septage, used oil, recycling activities, special waste, hazardous waste generator and hazardous waste treatment, storage or disposal. 19. After completing an investigation of Appellant’s Renewal Application, the State Land Commissioner issued Order No. 276-2006/2007 Denial of Application. The stated reason for the denial was due to “the various lease violations and the [Appellant’s] failure to either refurbish and rebuild a motel, restaurant and mobile homes in operational condition or dismantle and remove the same on or before December 31, 1998, as indicated by his signature on the lease agreement, it has been determined that it is not in the best interest of the Trust to approve the subject application.” 20. By letter dated June 7, 2007, Robin A. McCroskey and Appellant responded to the Department regarding the denial of his Renewal Application. In that letter it was disclosed that several years ago he allowed an unnamed manager to operate both his Commercial Lease lands and his adjoining fee property. 21. Appellant further disclosed that on or about September 1, 2006 he “as informed that the facilities were in bad condition and that there was a possibility that the manager had abandoned the sites.” 22. Appellant requested a hearing on the denial of his Renewal Application. 23. On June 15, 2007, the Department issued a Notice of Hearing advising that an evidentiary hearing would be conducted by the Office of Administrative Hearings, an independent agency, on July 25, 2007 at 9:00 a.m. The Notice of Hearing stated that “[t]he Administrative Law Judge will consider evidence and testimony concerning whether or not Commissioner’s Order No. 276/2006/2007, which denied the subject renewal application, should be reconsidered.” 24. On June 28, 2007, an informal settlement conference was conducted at the Department. On July 3, 2007, the Department issued Notice of Results of Informal Settlement Conference, which advised that the parties had not reached a settlement agreement and that the hearing would be conducted as scheduled. 25. On or about January 22, 2007, Garret Miner, a land disposition project leader II for the Department, performed a site visit of the subject Trust lands. He observed numerous violations by Appellant of the Commercial Lease, such as: above ground storage tank being stored; stored oil; storage of waste tires; trash; numerous vehicles being stored; and, abandoned trailers. 26. The photographic evidence admitted into evidence showing Appellant’s lease violations is compelling and supports a finding that Appellant used the Commercial Lease Trust lands as a salvage storage site. 27. There is also credible evidence that Appellant has since taken steps to clean up the Commercial Lease trust lands.

CONCLUSIONS OF LAW

1. The Department has jurisdiction over the subject matter in this case. 2. Pursuant to A.A.C. R2-19-119(A), the standard of proof is preponderance of the evidence. 3. The Administrative Law Judge concludes that Appellant violated the provisions of Article 1.2 Use of the Commercial Lease. 4. The Administrative Law Judge concludes that Appellant violated the provisions of Article 4.3 Waste of the Commercial Lease. 5. Appellant committed multiple misrepresentations in his Renewal Application concerning the storing of waste tires, above ground storage tank and the used and stored oil. 6. Appellant’s violations of the Commercial Lease support the Department’s determination to deny his Renewal Application. 7. Appellant’s misrepresentations in his Renewal Application, given after certifying under penalty of perjury that his application was true and correct, support the Department’s determination to deny his Renewal Application.

RECOMMENDED ORDER

Appellant’s appeal in this matter is dismissed, and Commissioner Order No. 276-2006/2007 denying Appellant’s Renewal Application is upheld and affirmed.

Done this day, August 13, 2007

______________________________________ Brian Brendan Tully Administrative Law Judge

Original transmitted by mail this ____ day of ____________, 2007, to:

Mark Winkleman, Commissioner State Land Department ATTN: Roz Sedillo 1616 West Adams Phoenix, AZ 85007

By ___________________________

----------------------- [1] The Arizona-New Mexico Enabling Act granted millions of acres of land to Arizona in trust for trust beneficiaries when Arizona was admitted into the Union.

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