ALJDEC

01F-R001026-BFS · Department of Building and Fire Safety · 2001-07-03

STATE OF ARIZONA IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: June 6, 2001. (Record closed on July 3, 2001)

APPEARANCES: The Complainants were represented by their attorney, Alicia Montoya-Sanchez, Esq. The Respondent failed to appear.

ADMINISTRATIVE LAW JUDGE: Robert I. Worth _____________________________________________________________________

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 over twenty minutes in order to afford a reasonable opportunity for Respondent to appear and to participate. However, no legal representative or other authorized individual appeared for or on behalf of Respondent.

2. At the outset of the formal hearing, a requested amendment to the complaint, to the claim and to the case caption was permitted to as to reflect that Celina

Esperecueta Sanchez, the “significant other” of Felipe de Jesus Avena, is an additional co-Complainant in this administrative action. She (Celina) was shown to be a realistic party-in-interest in both the ownership and occupancy of the manufactured home that is the subject matter of the within claim for a monetary award from the Consumer Recover Fund (herein called the “Fund”). Moreover, she has held and still holds a duly executed power of attorney from Felipe Avena as well as a specific written authorization to handle all aspects of the purchase contract.

3. At the specific and reasonable request of counsel for Complainants, the record of this case was, by Interim Order duly entered, held open until June 29, 2001 so as to enable the filing of certain additional documentation considered necessary to fully complete the evidentiary presentation bearing upon Complainant’s entitlement to payment of the amount sought from the Fund. At or near the aforesaid deadline date, a further request was communicated by or on behalf of Complainant for the extending by several more days of the previously designated deadline date for closure of the record, which subsequent request was granted by further Interim Order of the tribunal for sufficient cause demonstrated, thereby effectively holding the case record open for four more calendar days (two more business days), or until July 3, 2001.

4. The parties had concluded a written contract on August 20, 2000 pursuant to which Complainants agreed to purchase and Respondent agreed to sell a certain designated manufactured home unit. Neither Complainant was shown to speak or to read English.

5. The specified contractual cost price was $28,457.00, all of which was subsequently fully paid in cash by Complainants. The agreement contemplated that Complainant was to pay $7,000.00 as and for a down payment, a sum that was duly paid upon the concluding of the written sale and purchase contract.

6. Shortly thereafter, on August 26, 2000, Complainant tendered and Respondent accepted a further payment of $5,000.00 together with a promissory note for 16,960.00, representing the balance of the contract price plus an additional $503.00, shown to be for an apparent payment of a promised extra commission or bonus to a third party. Such funds should more properly have come out of the proceeds of the concluded sale, as did the basic commission, but instead the extra bonus was added to the purchase price, thereby serving to effectively increase Complainants’ overall price and aggregate payments to the sum of $28,960.00.

7. The installments set forth in the promissory not were not only timely made by Complainant but also were transmitted earlier than the stated due dates so as to pay off the obligation earlier. In summary, Complainants have paid the following, all in cash, to Respondent:

$ 7,000.00 Down Payment $ 5,000.00 Second payment $ 5,300.00 Third payment (first under the note) $11,660.00 Final payment (combining the last two note installments)

$28,960.00 Total contract payments

8. The overall terms of the purchase and sale necessarily contemplated that free and clear title to the unit would be given to Complainant from Respondent. However, the unit’s prior owners who had arranged through Respondent for the ultimate sale to Complainant had a substantial balance due on the previously existing loan in their names, secured by the mobile home. The lender, Oakwood, had and still has lien rights for any unpaid balance of such loan, carried under its Loan Number 0644856. The amount of the sales proceeds received from Complainants was significantly more

than the loan balance, and most all of such overage, after applicable sales commissions, was to be transmitted by Respondent to such prior owners.

9. The uncontroverted evidence tended to indicate that Respondent, through both its owner and one of its authorized sales personnel, wrongfully and illegally misappropriated all payments by Complainants. No payments were forwarded to the lender in satisfaction of any portion of the previously outstanding loan which has continued to accrue charges, fees and penalties. Nor were any payments transmitted by Respondent to the previous owners.

10. Respondent was not even entitled to retain all of the sales proceeds in excess of the loan balance, since the unit’s former owners on whose behalf they were selling same were to receive all balances over and above the usual applicable sales commissions earned by Respondent. Moreover, the failure to reduce or satisfy the entire loan has operated to severely harm the credit of the former owners who remain liable to the lender.

11. The testimony demonstrated that Complainants are unable to obtain a valid legal title to the purchased and paid-for unit in their names until and unless the loan balance is fully satisfied, and they also remain in danger of a foreclosure action by the lender, Oakwood, who still presently possesses a secured interest in this property. The credible testimony at the hearing and the undisputed documentary avowals subsequent to the hearing tended to demonstrate that the monetary amount presently necessary to clear the lien and to satisfy the entire balance, including any and all applicable charges and fees, is $21,670.56.

12. The within claim for damages, as filed by Complainants, was duly verified by the Office of Manufactured Housing, a division of the Arizona Department of Building

and Fire Safety (herein called the “Department”). Such verification is a statutory requirement for pursuit of any claim for an award of damages from the Fund.

13. The actions or, more properly the inaction, of Respondent in improperly failing to forward to the lender that portion of the collected purchase price payment which would have fully satisfied the remaining loan balance. Instead, Respondent’s course of conduct in impermissibly retaining all periodically transmitted proceeds of this transaction, is found to constitute a violation 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 all sums presently necessary to satisfy and pay off the lenders interests and to preclude any exercise of lien rights.[1]

14. The evidence of record, including post-hearing documentation, supports the granting of a monetary award from the Consumer Recovery Fund to Complainant in the amount of $21,670.56, such sum representing the total sum needed to fully satisfy the loan due to Oakwood, as the lender, including all accrued charges, fees and penalties attributable to prior collection efforts, thereby enabling Complainants to obtain title to the unit so as to receive the benefit of their contractual bargain with Respondent. ……. ……. …….

CONCLUSIONS OF LAW

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

2. If a consumer of a manufactured home or mobile home designed for residential use is damaged by the failure of a principal of a licensed dealer or broker to perform a sales agreement, the consumer may file a claim with the Department for a payment from the Fund. The filed claim must be verified by or on behalf of the Department. See A.R.S. §41- 2190(B).

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 sales contract with Complainants by failing to assure that the property would be free and clear of all encumbrances after transmitting appropriate payment to the lender for the balance of indebtedness. Consequently, Complainants are entitled to compensation from the Fund in the amount of their actual damages.

5. In this case, the totality of the evidence of record supports a determination by the Administrative Law Judge that Complainants have established that the sum of $21,670.56 constitutes their actual or compensatory damages attributable to the acts or

omissions of Respondent. The Department has verified the originally filed claim, 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-8 license of Integrity Manufactured Home Sales, L.L.C. must be suspended until such time that the award to Complainants has been repaid in full, plus interest at ten percent per year.

ORDER

In view of the foregoing, and pursuant to A.R.S. §41-2190(D), 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 Complainants, payable to them jointly, in the amount of $21,670.56 as damages and chargeable against the account of Respondent.

IT IS FURTHER ORDERED that on and after the date of payment to Complainant from the Fund, Respondent’s Class D-8 License Number 7311 shall be suspended until the sum of $21,670.56 that will be paid from the Fund, plus statutory interest, chargeable against Respondent’s account, is repaid to the Fund by or on behalf of Respondent.

Dated: July 13, 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] Although the former owners may have never received any portion of the monetary consideration to which they are entitled, they probably have no further rights as against Complainants, as good faith purchasers, with respect to the monies that were paid to Respondent over and above the loan balance and sales commissions in light of the absence of any secured interest in the property. Their rights, if any, lie against the seller (Respondent) for the breach of the listing agreement and failure as sales agent to transmit to its principals the proper balance of proceeds as received. The separate successful pursuit of a timely claim by such former owners from the Consumer Recovery Fund is also a realistic possibility.

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