ALJDEC

00F-RF0241-ROC · Registrar of Contractors · 2000-10-16

STATE OF ARIZONA IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: October 12, 2000.

APPEARANCES: The Plaintiffs were present and were represented by their attorney, Guy W. Bluff, Esq.

The Defendant was represented by its attorney, Whitney Cunningham, Esq.

ADMINISTRATIVE LAW JUDGE: Robert I. Worth _____________________________________________________________________

Evidence and testimony were presented, and based upon the entire case record, the following Findings of Fact, Conclusions of Law, Recommended Order and Award are made.

FINDINGS OF FACT

1. Plaintiffs, as owners and occupants of their residence, are found to be “injured persons” as that term is defined in A.R.S. § 32-1131(3), and they are entitled to recover monies from the Residential Contractor’s Recovery Fund (herein called the “Recovery Fund”) for provable damages sustained as a result of acts or omissions of Defendant.

2. Defendant’s contracting license has been previously revoked for cause by final Order of the Registrar of Contractors (herein called the “Registrar”) that was allowed to become final in the absence of any further administrative or judicial appeal therefrom. Such revocation is determined to render this Defendant statutorily unable to remedy the violation of the State’s contracting laws which gave rise to the instant claim for damages.

3. The license revocation was the result of a prior Decision and Order entered following an administrative hearing which Defendant failed to attend. The subject matter of such hearing was a disciplinary complaint filed by these same Plaintiffs alleging and subsequently proving substandard construction of the Plaintiffs’ home by Defendant. A claim for an administrative award from the Recovery Fund in the maximum allowable amount of $20,000.00 was filed and may properly be entertained by the Registrar concurrently with the pursuit of civil remedies by Plaintiffs seeking additional monetary damages.

4. The Registrar had received advance notification of the existence and amount of the above named Plaintiffs’ claim for an administrative payout from the Recovery Fund and has not elected to intervene, thereby effectively consenting to Plaintiffs’ entitlement to the entire claim, as filed

5. This hearing was convened following Defendant’s express request therefor, subsequent to its receipt of the formal notice of claim sent to all parties, thereby indicating its objection to the payment of any portion of the claimed amount.

6. The fault and responsibility of Defendant for the deficient construction of the dwelling, also admitted in the related civil proceedings, was established as a result of

the previously entered license revocation Order after the disciplinary proceedings, which may not be collaterally attacked in the instant administrative action seeking an award from the Recovery Fund.

7. The uncontroverted evidence revealed that Plaintiffs have fully paid all sums contractually owing to Defendant for the construction and purchase of the home and, moreover, they have made diligent but unsuccessful attempts to collect funds from other sources such as the Defendant’s license bond.

8. The evidence further demonstrated the obtaining by Plaintiffs of three separate bids from appropriately licensed contractors, all providing for the total demolition and rebuilding of the residential structure, the lowest of which was in the amount of $136,750.00. Such low bidder plus one of the other bidders testified at the scheduled hearing. The three contractors were the only ones from whom bids were obtained, and none were willing to undertake and perform work to rectify the severe differential settlement problems experienced in the home by any means short to demolishing the existing dwelling, re-compacting the underlying soils and re-constructing the identical residence.

9. The evidence presented was sharply conflicting with respect to the necessity to demolish the home as opposed to alternative remedial measures involving underpinning, a pier system and self-leveling concrete, following which all necessary repairs to the household features that were damaged or rendered unsightly would be addressed. No reliable evidence of the monetary costs for such alternative manner of remediation was presented, but credible indications were given that these costs, at the very minimum, would be at least twice the amount of the statutorily fixed maximum fund award on any individual residence.

10. It is determined to be unnecessary in this administrative Recovery Fund payout proceeding to resolve the conflict for several reasons. Firstly, and primarily, no evidence was presented that tended to indicate the existence of any viable proposal for costs that were less than those introduced into evidence at the hearing. Additionally, and of perhaps greater significance, a finding or at least a reasonable inference from the credible testimony is fully warranted that the minimum cost of every considered alternative method or manner of accomplishing effective remedial work was substantially in excess of the $20,000.00 Recovery Fund award sought herein by Plaintiffs.

11. It is not part of Plaintiffs’ burden of proof to demonstrate the absence of any and all potentially lower bid amounts for achieving admittedly needed corrective action. It was sufficiently shown that they were greatly damaged financially as a result of the substandard construction on the part of or attributable to Defendant, and that even the maximum permissible award from the Fund would serve to compensate them for only a very small portion of their loses. Moreover, the ongoing course of Defendant’s conduct in remaining unresponsive to repeated requests and demands for corrective action, in not appearing at jobsite inspections or at the scheduled disciplinary hearing, and in opposing and tactically delaying the Recovery Fund payout by requesting hearings and continuances combine to reflect highly questionable good faith.

12. It is found and determined that the amount of damages sustained by Plaintiffs arising from and caused by Defendant’s prior construction errors is not less than $20,000.00, and consequently that the sum of $20,000.00 represents a proper and fully warranted award to be paid to Plaintiffs from the Recovery Fund in this case. ……. …….

CONCLUSIONS OF LAW

1. Under the facts and circumstances of this case, the Registrar of Contractors is empowered to determine and award proper payment to Plaintiffs from the Residential Contractors’ Recovery Fund pursuant to A.R.S. § 32-1154(E).

2. The manifest purpose of the statutory Recovery Fund process is to compensate homeowner/occupants of residential property for damages or losses sustained as a result of dealings with licensed contractors. The securing of independent bids or proposals from other proper and current licensees has long been viewed as the most accurate and acceptable method for determining the appropriate measure of such damages.

3. It must be recognized that the unwillingness of many successor contractors to undertake and complete necessary remedial work in a less extensive or less expensive manner may not and should not always be equated with an upgrade of the original construction work or with an attempt at “padding” a proposal, but rather is indicative of a somewhat understandable reluctance on the part of such contractors to fully accept the results of the revoked licensee’s prior work that has been determined to be in need of corrective action.

4. In keeping with the spirit and intent of the statute’s provisions applicable to this administrative remedy leading to a potential award from the Recovery Fund, a realistic determination of the appropriate monetary amount that will provide reasonable compensation for rectifying prior damages attributable to acts or omissions of a licensed contractor must necessarily be influenced by the actual ability to get corrective work done for an awarded amount. The purported benefits of being entitled to payment from the Recovery Fund would be largely illusory if there is no licensed entity that is willing to address the overall construction problems by undertaking and performing more limited corrective measures for a lower price than that reflected in the lowest of the proposals obtained and submitted.

5. In any event, to merely assert that other methods may exist to rectify proven construction deficiencies or that other contractors may possibly be found who would perhaps be willing to undertake corrective action for lesser costs, while their licenses are at risk, does not, without more, defeat a showing of entitlement to an award of a higher amount. The Recovery Fund provisions, enacted for the purpose of enabling persons injured by a contractor to have necessary corrections accomplished, contemplate that some showing must be made that a qualified licensee is ready, willing and able to bid and perform lesser corrective measures for a lesser cost price.

6. The within record supports an award to Plaintiffs in the amount of $20,000.00, all of which shall be appropriately chargeable against Defendant and/or persons on the license as set forth in A.R.S. § 32- 1139(B).

RECOMMENDED ORDER

In view of the foregoing, it is recommended that on the effective date of this Order the Registrar of Contractors shall commence and finalize payment procedures from the Contractor’s Recovery Fund to Plaintiff in the amount of $20,000.00.

Dated: October 25, 2000. OFFICE OF ADMINISTRATIVE HEARINGS

______________________________________ Robert I. Worth Administrative Law Judge

Original transmitted on _____________________

by: _____________________________ , to:

Michael P. Goldwater, Director Registrar of Contractors 800 West Washington Street (6th Floor) Phoenix, AZ 85007

Attn: Joyce Armijo -----------------------

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