ALJDEC

01F-A012013-BFS · Department of Building and Fire Safety · 2001-12-18

STATE OF ARIZONA IN THE OFFICE OF ADMINISTRATIVE HEARINGS

The above-entitled matter came on for hearing on December 10, 2001 at 9:00 a.m. pursuant to advance notice duly sent to all interested parties. The Appellant/Complainant, Donald H. Bruneau, appeared in his own behalf. Neither the named Respondent, Valley Manufactured Housing, nor the Arizona Department of Building and Fire Safety (herein called the “Department”) appeared. Evidence and testimony were presented, and based upon the entire record, the following Findings of Fact, Conclusions of Law and Recommended Order are made.

FINDINGS OF FACT

1. The start of the scheduled hearing was delayed for approximately twenty-five minutes in order to afford a reasonable opportunity for Respondent and/or the Department to appear and to participate. However, neither Respondent nor the Department appeared through any authorized individual or any legal representative.

2. Appellant/Complainant, Donald H. Bruneau, a disabled veteran, who has been and still is confined to a wheelchair, purchased a manufactured home designed for wheelchair accessibility to be installed on his property in Show Low, Arizona.

3. After having experienced numerous problems with an individual who had previously failed to complete the delivery and set-up of a selected CAVCO home unit, which individual was shown to have had some employment or other relationship with Respondent, the parties concluded a written contractual agreement in late November, 2000 pursuant to which Appellant agreed to pay a specified monetary amount to Respondent who expressly agreed to take over the prior purchase and installation contract, more specifically to properly complete and to transfer title to the manufactured home unit that had already been delivered onto Appellant’s property. This agreement also encompassed the making of any and all necessary repairs to the prior individual’s work and the securing of any necessary permits for the overall delivery and installation of the new manufactured home.

4. Appellant filed a formal claim for an award of his damages from the Consumer Recovery Fund (herein called the “Fund”). The Department’s assigned Investigator/Auditor, who did not appear at and participate in the administrative hearing, had determined that three elements of the filed claim, or perhaps all portions of the entire claim, were “Not Verified.” These determinations became the subjects of an appeal action on the part of Appellant who timely requested the instant hearing.

The issued Notice of Hearing formulated by the Department purported to limit the hearing issues to whether the designated items should or should not have been verified. However, the undersigned Administrative Law Judge would be remiss in his duties if he were to abide by such limitations that effectively further delay the obtaining of any relief, especially in this case where it can be shown by uncontroverted evidence that the Department’s determinations were incorrect and unwarranted except in one relatively minor respect. Consequently, in the event that the Department’s declining to verify all or any valid portion of the filed claim is found and determined to have been

erroneous, this tribunal must consider itself empowered not only to set aside and reverse such prior “not verified” determinations but also to evaluate the propriety and the amount of the Appellant’s entitlement to an award from the Fund.

6. The very essence of Appellant’s complaint and claim in this case was that the ultimate aggregate expenses incurred to complete and to occupy the purchased manufactured home unit were substantially greater that the amount he was contractually required to pay Respondent under the parties’ agreement. The Department’s representative mistakenly treated two of the three addressed elements of the claimed expenses as the product of a settlement, a matter asserted to be of a civil nature, and therefore deemed to be beyond the jurisdiction of the Department. It is further noted that no portion of Appellant’s claim related to site preparation elements that were admittedly the responsibility of the purchaser.

7. The concluded arrangements between the parties did not constitute a settlement but instead were part of a legal “Novation,” whereby Respondent became a new obligor who was substituted for the prior individual who had breached certain original duties. The Investigator/Auditor’s report failed to appropriately consider the contractual rights and obligations arising from the substituted agreement. In point of fact, this disabled purchaser is the very type of individual that the Department’s enforcement and recovery fund award powers are designed to protect from wrongful activities or omissions of licensees.

The exercise of jurisdiction by the Department in this case is fully warranted, if not mandated. Two of the three prior “Not Verified” determinations on behalf of the Department must be reversed. The testimony at the hearing, found to be fully credible, tended to demonstrate that, contrary to specific findings contained in the report by the

Department’s Investigator/Auditor, this Appellant/Complainant did NOT receive from Respondent the home for which he had contracted, and the Dealer/Respondent did NOT complete the items listed in the purchase agreement. The remaining element relating to the lack of entitlement to have attorneys fees reimbursed was correctly determined to be “Not Verified” in accordance with express language contained in the applicable statutory provisions defining the type of damages recoverable from the Fund.

9. The substituted agreement was adequately supported by valid consideration on both sides consisting of the mutual promises, respectively, to pay a new higher cost price that was specified for the unit and its installation and to perform all necessary work to repair and/or to complete the unit so as to enable occupancy. The credible and uncontradicted testimony at the hearing outlined a horror story with respect to the progress, or lack of same, on the part of Respondent who remained unresponsive to the repeated attempts by Appellant to have the promised work accomplished, thereby displaying a blatant disregard for the comforts and entitlements of its customer as well as of its duties as a licensed Dealer under the State’s manufactured housing laws. The most obvious examples of such wrongdoing were the unnecessary and nearly irreparable damage to the prematurely installed draperies, carpeting and pad before other work that generated much debris, dirt and traffic was finished.

10. But for the understanding and generous actions by the manufacturer of the unit, CAVCO, in replacing most of the damaged property without cost to Appellant except for the delivery of new floor covering materials, the resulting damage total traceable to Respondent’s misconduct would have been far greater. The resort by Appellant to other licensees or contractors to rectify errors and to achieve proper completion of a habitable unit was not only justifiable but also was prudent in an effort to satisfy his duty to mitigate further damages.

11. Appellant seeks to recover a Fund award for all expenses or losses incurred over and above the specified contractual cost price. However, with respect to reported and paid attorney fees of $4,525.00 (growing to approximately $5,000.00 subsequent to the Department’s evaluation) and to other claimed monetary losses attributable to completion delays that are more in the nature of consequential damages, such as storage charges and extra travel, lodging and meals expenses, no entitlement is found to exist for reimbursement from the Fund with respect to these type of expenditures under the applicable statutes.

12. Appellant is determined to have been entitled to have had the manufactured home delivered, placed on his property and properly completed and transferred for a cost price no greater than $95,217.51.

13. The actual total expenses paid by Complainant, generating an excess amount over and above the contract price, were sufficiently proven to be as follows:

a) No less than $71,000.00 for the cost of the manufacturer home unit, payable to CAVCO, the manufacturer.

b) $20,997.00 representing the total amount paid to a successor contractor, Muder Construction, for the correction and completion of the installation work that was to have been performed by Respondent.

c) $12,000.00 for the advance down payment deposit requested by and paid to Respondent.[1]

d) No less than $3,800.00 for direct purchases of materials by Appellant for necessary use in completing or repairing the home.

e) No less than $3,000.00 for the cost of the purchasing and installing of a 5-ton, 12 Seer, air-conditioning unit that was specified in the purchase agreement but never furnished by Respondent.

f) No less than $1,750.00 paid directly by Appellant to carpenters for added repair or completion work not included in amounts paid to the successor contractor.

g) No less than $200.00 for vehicle rental needed for transporting replacement floor coverings gratuitously made available by manufacturer for pick-up but not delivery to the jobsite.

f) $90.00 for the cost of a permit for the project paid by Appellant when it was learned that Respondent had failed to secure the required permit as per its contract obligations.

14. The above-enumerated elements of expenses, necessarily incurred to accomplish the repair, completion and ultimate occupancy of the unit by Appellant, were in the aggregate amount of no less than $112,837.00. Such total sum was at least $17,600.00 greater than the contract amount of $95,217.51 at which Appellant was entitled to have the manufactured home fully and properly completed.

15. The uncontroverted evidence tended to indicate that Respondent, through its owners, operators, representatives and employees wrongfully and illegally breached its contractual responsibilities resulting in substantial financial injury to Appellant.

16. The within claim for damages, as filed by Appellant, although not verified by the Office of Manufactured Housing, a division of the Department, should properly have been verified to the extent and in the amounts explained and summarized above. Since such verification is a statutory requirement for the receipt of any claim for an award of damages from the Fund, a successfully pursued appealable agency action demonstrating that the Investigator/Auditor should have verified most all of the filed claim elements is found to satisfy the spirit and intent of the applicable statutory requirements.

17. The actions or, more properly the inaction, of Respondent in improperly failing to discharge its contractual duties constitute violations of the express provisions of the statute pursuant to which disciplinary measures may be imposed on the license holder. The monetary damages sustained by Complainants as a direct result of Respondent’s wrongdoing are found to be equal to the total by which the ultimate actual costs to Appellant exceeded the specified contract amount.

18. The evidence of record supports the granting of a monetary award from the Consumer Recovery Fund to Complainant in the amount of $17,600.00, such sum representing the total sum needed to fully compensate Appellant for the excess expenditures incurred to correct and complete the project after Appellant was effectively deprived of the benefit of his contractual bargain with Respondent.

CONCLUSIONS OF LAW

1. The Department of Building and Fire Safety has established a Consumer Recovery Fund from which an individual party, such as Complainants, pursuant to the provisions of A.R.S.§41-2188(B), may seek and obtain a monetary award limited to actual or compensatory damages, exclusive of attorneys fees.

2. If a consumer of a manufactured home is damaged by the failure of a licensed dealer to perform a sales agreement, the consumer may file a claim with the Department for a payment from the Fund. See A.R.S.§41- 2190(B). The filed claim must be verified by or on behalf of the Department or, alternatively, must be proven to be a claim that reasonably should have been verified by the Department.

3. The express provisions contained in A.R.S.§41-2190(D) mandate that the Department shall pay from the Fund whatever sum the Administrative Law Judge finds payable upon the claim.

4. Compensatory damages are those directly flowing from the breach of any breach of contract. The evidence revealed that Respondent had violated A.R.S.§41-2180 by failing to properly perform its obligations under the concluded contract with Appellant. Consequently, Appellant is entitled to compensation from the Fund in the amount of his actual damages.

5. In this case, the totality of the evidence of record supports a determination that Appellant has established that the sum of $17,600.00, representing the minimum combined sum by which all allowable expenditures exceeded the contract price, constitutes his actual or compensatory damages attributable to the acts or omissions of Respondent. The Department should have appropriately verified the originally filed claim, with the exception of any claimed attorneys fees, and therefore an award from the Fund should be granted.

6. By operation of law, as set forth in A.R.S.§41-2190(D), the Class D-8B license of Respondent, Valley Manufactured Housing, must be suspended until such time that the award to Appellant/Complainant has been repaid in full, plus interest at ten percent per year.

ORDER AND AWARD

In view of the foregoing, IT IS HEREBY ORDERED by the undersigned Administrative Law Judge that on the effective date of the Order entered in this matter, the Director of the Department shall commence and finalize payment procedures from the Consumer Recovery Fund to Appellant, Donald H. Bruneau, in the amount of $17,600.00 as damages that are properly chargeable against the account of Respondent.

IT IS FURTHER ORDERED that Respondent’s Class D-8B license shall be suspended until the sum of $17.600.00 that will be paid from the Fund, plus statutory interest, chargeable against Respondent’s account, is repaid or replenished to the Fund by or on behalf of Respondent.

Dated: December 19, 2001 OFFICE OF ADMINISTRATIVE HEARINGS

______________________________________ Robert I. Worth Administrative Law Judge

Original transmitted on _____________________

by: _____________________________ , to:

N. Eric Borg, Director Department of Building and Fire Safety East Virginia (Suite 100) Phoenix, AZ 85004

ATTN: Shawna Blank ----------------------- [1] This item was one of the elements addressed inappropriately by the Department as involving site preparation work instead of merely one of a series of expenditures by Appellant to complete and occupy the unit as a residence.

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