ALJDEC

00F-A0181-ROC · Registrar of Contractors · 2000-04-14

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: April 13, 2000 APPEARANCES: Susan Banks on her own behalf; Paul Roberts, Esq. on behalf of the Respondent ADMINISTRATIVE LAW JUDGE: Lewis D. Kowal _____________________________________________________________________ FINDINGS OF FACT George Banks and Susan Banks, also known as Susan Kavitz, husband and wife (“Complainants”), contacted Paul Jon Nicholson doing business as Nicholson Custom Homes (“Respondent”), to build them a house. On February 27, 1999, Complainants entered into a contract (“Contract”) with Respondent for construction of a home in Chino Valley, Arizona. Among other things, the Contract provided that Complainants would execute a quickclaim deed to the property they owned at 4880 N. Sauter Drive, East Prescott Valley, Arizona (“Prescott Valley Home”) with an estimated equity of $21,000.00 to be used as a downpayment on the Contract. The Contract also provided that Complainants would make certain payments to the Respondent as their share of the payment of the lot on which the Home was to be built, that Complainants would rent the Prescott Valley Home from Respondent during construction of the Home, and the Contract was a nonrefundable transaction should the Complainants decide to cancel the Contract or be unable to obtain financing. Additionally, the Contract provided that construction of the Home would commence after the Prescott Valley Home was placed in the Respondent’s name and Respondent would carry the loan for up to two years from the date of execution of the Contract to allow time for Complainants to obtain financing. It is undisputed that Complainants did not comply with the Contract, including failing to execute the above-mentioned quickclaim deed and failing to make the required payments to cover the lot. Despite Complainant’s failure to comply with the Contract, Respondent commenced construction of the Home. Evidence was presented that from February 22, 1999, through July 11, 1999, Complainants attempted to obtain financing but had difficulty in qualifying because of their financial situation. On July 11, 1999, Respondent offered Complainants an opportunity to either cancel the Contract or sign an Addendum if they still wished to purchase the Home. It is undisputed that the Complainants decided to sign the Addendum. Although Mrs. Banks claimed that she was forced to sign the Addendum, she failed to provide credible evidence to support that contention. Mrs. Banks credibly testified that, after signing the Addendum, Mr. Banks continued efforts to obtain a mortgage. Although the evidence presented during the hearing was conflicting as to the occurrence of certain events relating to the Complainants’ obtaining a mortgage, the weight of the credible evidence establishes that Complainants did not obtain the required financing by August 12, 1999, as required by the Addendum. The evidence of record establishes that Complainants executed a Joint Tenancy Deed signing the Prescott Valley Home over to Respondent. Mrs. Banks credibly testified that Complainants paid for a new dishwasher and stove that was eventually placed in the Home and paid $2,401.59 for carpeting in the Home. Mrs. Banks contends that Mr. Banks was approved at two financial institutions for a mortgage provided Respondent would carrying a $9,000.00 note on behalf of the Complainants and provided them with $9,000.00 so that Complainants could pay off their existing debts. According to Mrs. Banks, Respondent did not accept the mortgage obtained by Mr. Banks and would not execute the above-mentioned note. However, Respondent testified that he never agree to provide the $9,000.00 or accept such a note. According to Respondent, Complainants contacted him after August 12, 1999, and requested that he provide them with $9,000.00 so that they could obtain a mortgage which he refused to do. The evidence presented concerning the mortgage and note, as set forth above, is sharply conflicting such that the Administrative Law Judge has no reason to disbelieve the testimony of either party. Therefore, under the circumstance, Complainants did not meet their burden of proving this issue. The Addendum provides that the Complaints were to obtain financing by August 12, 1999, and that Respondent would not “carry” the Home for Complainants. The weight of the credible evidence establishes that Complainants did not obtain the required financing by August 12, 1999, and did not make certain payments to Respondent required. During the hearing, Mrs. Banks represented that she wants Respondent off of the deed to the Prescott Valley Home, she wants the dishwasher and stove returned to her, and wants to be refunded the $2,401.59 that Complainants paid for carpeting in the Home. Respondent did not specifically address the dishwasher, stove, and carpet issues in the presentation of his case but presented credible evidence that he has been financially injured as a result of Complainants’ breach of the Contract and Addendum. The items mentioned above in paragraph 16 involve a contract dispute that is unliquidated. Respondent presents credible evidence that as a result of Complainants’ breach of the Contract and Addendum, Complainants owe Respondent for expenses and damages. Because the there was no evidence presented as to what Complainants paid for the dishwasher and stove, or as to the amounts Respondent claims Complainants owe him, a good faith dispute exists as to whether Complainants are owed any money from Respondent. Under the facts and circumstances of this case, it is determined that a court of competent jurisdiction and not the Registrar of Contractors is the more appropriate forum to adjudicate and liquidate the sum due and owing to Complainants, if any. After that determination, the parties may be entitled to proceed further with the Registrar of Contractors. CONCLUSIONS OF LAW 1. The Registrar of Contractors is empowered to have administrative disciplinary hearings held by the Office of Administrative Hearings but is not empowered by law to adjudicate amounts alleged to be due and owing in the face of a good faith dispute as to such amounts. 2. Complainants failed to sustain the requisite burden of proving a valid liquidated debt properly due and owing by Respondent and has not sustained their burden of proving that Respondent violated the provisions of A.R.S. §32-1154(A)(7). RECOMMENDED ORDER Based on the above, it is recommended that the Complaint and Citation issued in this matter be dismissed. Done this day, April 18, 2000.

______________________________________ Lewis D. Kowal Administrative Law Judge

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

Registrar of Contractors Michael P. Goldwater Attn: Joyce Armijo 800 West Washington, 6th Floor Phoenix, AZ 85007

By ___________________________

-----------------------

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