ALJDEC

00F-RF0248-ROC · Registrar of Contractors · 2000-08-14

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: July 31, 2000 APPEARANCES: Complainants : Stephen and Sherri Belcher appeared at the hearing pro se. Respondent : No representative appeared on behalf of Timothy A. Buzzard Construction, L.L.C. Registrar of Contractors : Patti Shelton, Assistant Attorney General, represented the Recovery Fund; Bob Mechsner, Inspector. ADMINISTRATIVE LAW JUDGE: Gary B. Strickland _____________________________________________________________________ Evidence and testimony were presented at the hearing and, based upon the entire record, the following Finding of Facts, Conclusions of Law, and Recommended Order are issued.

FINDINGS OF FACT 1. The Complainants have brought this matter before the Office of Administrative Hearings in an effort to recover the maximum allowable from the Recovery Fund in accordance with the provisions of Article 2.1, Title ( 1131, et seq., of the Arizona Revised Statutes.

2. Respondent’s license to operate as a contractor within the state of Arizona has been revoked. Further, Respondent has discharged its obligations in bankruptcy, including those owed to Complainants.

3. The undisputed evidence reveals that Complainants entered into a contract for the construction of a home with Respondent and that, prior to completion, Respondent breached the agreement leaving Complainants with an unfinished home. Complainants fall within the class of persons concerning which Article 2.1 of Title 32 was enacted to protect.

4. On May 12, 2000, Hester Scott, the Registrar’s Recovery Fund Manager, issued an offer to the Complainants wherein was stipulated that, based upon the examination of bids submitted by the Complainants, Complainants have been the victims of an actual damage totaling $24,942.65[1] as a result of the revoked contractor’s breach. Hearing Exhibit A. The Registrar’s legal representative at the hearing stipulated that $24,942.65 represents the Complainants’ actual damage.

5. The maximum restitutionary award available from the Recovery Fund is $20,000., limited to actual damages. A.R.S. ( 32-1132 (A).

6. A.R.S ( 32-1132 sets forth as a condition to recovery that the contractor licensee be in active license status at the time of the relevant contract’s execution. This contractor’s license was in active status at the time of the execution of the contract between the Complainant/homeowners and the Respondent/builder.

7. Title 32, Article 2.1 does not allow recovery to the injured homeowners for attorney’s fees or costs, except when successfully appealed to Superior Court.

8. The Registrar’s Recovery Fund Manager subtracted $15,000. from the $24,942.65 total adjusted bid to arrive at a final offer of $9,942.65. Hearing Exhibit A. The reason for the $15,000. set-off is that Chicago Title Insurance Company is currently holding back $15,000. in escrow because the company subcontracted by the Respondent/contractor for the construction of the swimming pool has filed suit against the Belchers in Superior Court, Maricopa County, (civil cause no. C99-18687, Ottens (Quality Pools) v. Belcher) for an unpaid balance concerning which the subcontractor is attempting to hold the Belchers liable.[2]

9. The weight and sufficiency of the evidence demonstrates that Complainants are entitled to a maximum payout from the Recovery Fund. The $15,000. currently in escrow is unavailable to the Complainants and does not constitute a sum having been recovered to compensate Complainants for their loss.

CONCLUSIONS OF LAW 1. The issues presented fall within the jurisdiction of the Office of Administrative Hearings pursuant to A.R.S. (( 41-1092.02 and 41-1092.07. The question posed concerns whether Complainants are entitled to a compensation for their loss as a result of action(s) taken by one licensed by the Registrar of Contractors that is determined detrimental to the interests of the Complainant/homeowners. The issue is complicated by the existence of funds held in escrow at the Chicago Title Insurance Company related to the construction contract. Do those funds fall within that which is contemplated by A.R.S. ( 32-1136 (E)?

2. Based upon the evidence presented and arguments made, it is determined that Complainants are entitled to recover the maximum allowable under the Recovery Fund.

3. The burden of proof generally at an administrative hearing falls to the party asserting a claim, right or entitlement or seeking to impose a penalty. Culpepper v. Arizona Board of Nursing, 187 Ariz. 431, 930 P.2d 508 (App. 1997); See also Ariz. Admin. Code R2-19-119 (B). Further, the standard of proof is that of the “preponderance of the evidence”. Smith v. Arizona Department of Transportation, 146 Ariz. 430, 706 P.2d 756 (App. 1985); See also Ariz. Admin. Code R2-19-119 (A). Proof by a preponderance means that the evidence is sufficient to persuade the finder of fact that the proposition is “…more likely true than not.” In re Arnold and Baker Farms, 177 B.R. 648, 654 (9th Cir. BAP (Ariz.) 1994). The evidence taken as a whole must convince the decision maker that the party who bears the burden, in this case the Complainants, is more probably correct on the issue(s) in dispute.

4. The evidence of record sufficiently established that the Respondent contractor took actions, or failed to act, all to the detriment of the Complainants. The evidence further established that Complainants have been damaged to a degree and in an ascertainable amount of not less than $24,942.65.

5. The evidence also establishes that the subject funds held in escrow, totaling $15,000., have not been recovered by the Complainants. Those funds yet remain in escrow and are the subject of litigation. The clear language of A.R.S. ( 32-1136 (E) requires that any set-off be made upon a demonstration that funds have been paid out on the claim by a third- party source prior to the payout from the Recovery Fund. That has not yet occurred here and there is no guarantee that it will occur. It is a mere contingency.

RECOMMENDED ORDER In view of the foregoing, it is recommended that the Registrar of Contractors enter an Order releasing to the Complainants herein $20,000., the maximum allowable from the Fund, payable commencing on the effective date of this Order in accordance with the Registrar’s policies and procedures for such pay-out.

Set forth this 17th day of August in the year 2000.

______________________________________ Gary B. Strickland 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 ___________________________

----------------------- [1] The low bid of $34,066. was reduced to reflect a sum ostensibly received by the Complainants from a third-party payor, as well as an amount concerning which the Inspector determined it a cost for additional work outside the original contract. [2] The Administrative Law Judge directed the Assistant Attorney General to request of the Chicago Title Insurance Company to set forth in writing its intent for the disbursement of the escrow and whether the company intends to interplead in the Superior Court action. The Assistant Attorney General wrote a letter to the escrow company on July 31, 2000. The letter is identified as Exhibit B and is made a part of this record. As of the date of this Recommended Decision, Chicago Title Insurance Company has not responded to the inquiry.

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

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