ALJDEC

01F-R012001-BFS · Department of Building and Fire Safety · 2001-09-10

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: September 10, 2001 APPEARANCES: Complainant/Appellant Joseph Fiano appeared on his own behalf. Respondent Dream Catcher Homes failed to appear. ADMINISTRATIVE LAW JUDGE: Daniel G. Martin _____________________________________________________________________

This consolidated matter arises out of Complainant/Appellant Joseph Fiano’s purchase of a manufactured home from Respondent Dream Catcher Homes. Based on the evidence of record, the Administrative Law Judge makes the following Findings of Fact, Conclusions of Law and Recommended Order:

FINDINGS OF FACT On March 16, 2000, Complainant/Appellant Joseph Fiano entered into a sales agreement with Dream Catcher Homes (“Dream Catcher”) to purchase a manufactured home. [See Exhibit 3] Dream Catcher is the holder of a Class D-8 license (No. 7332) issued by the Arizona Department of Building and Fire Safety (the “Department”). There is no evidence in the record as to the current status of Dream Catcher’s license. The $113,185.42 purchase price for Mr. Fiano’s home included “all utility hook ups, septic tank install, well, clearing, driveway & tree trimming.” [Exhibit 3] Mr. Fiano’s new home was delivered to his property on April 12, 2000; installation was scheduled to be completed not later than May 30, 2000. For reasons not made clear at the hearing, Dream Catcher failed to complete the installation of Mr. Fiano’s home. However, through August, 2000, Dream Catcher continued to request and receive draws from American Bantrust Mortgage Services Corp. (“American Bantrust”), Mr. Fiano’s construction lender. On September 15, 2000, American Bantrust notified Mr. Fiano that unless his home was completed by October 16, 2000, American Bantrust would commence foreclosure proceedings. American Bantrust subsequently extended this deadline to November 30, 2000. As of early November 2000, Dream Catcher still had failed to complete the installation of Mr. Fiano’s home. Mr. Fiano, facing a foreclosure action by American Bantrust, undertook to complete the work himself as an owner/builder. The scope of work required to complete Mr. Fiano’s home included foundation work, utility connections (including connections for a propane gas tank provided by Mr. Fiano), final drainage and grading work, construction of a front porch, replacement of damaged siding due to use of improper nails, foundation skirting and venting, interior wall finishing and touch up, electrical repairs, and the construction of a heated pumphouse for Mr. Fiano’s well. The Administrative Law Judge finds, from the evidence presented at hearing, that all of the work performed by Mr. Fiano as outlined above fell within the scope of Mr. Fiano’s sales agreement with Dream Catcher. Mr. Fiano expended $23,091.12 in completing the foregoing work. The evidence further demonstrated that prior to taking over the construction of his home, Mr. Fiano expended an additional $8,739.00 ( including a $5,000.00 cash advance that Mr. Fiano made to Dream Catcher in May 2000 which Dream Catcher was supposed to refund to Mr. Fiano after final funding of the American Bantrust loan but did not ( for work and materials that Dream Catcher failed to perform or provide in connection with the sales agreement. Thus, due to Dream Catcher’s failure of performance, Mr. Fiano expended a total of $31,830.12 beyond the original purchase price to complete his home. On April 23, 2001, Mr. Fiano filed a complaint against Dream Catcher with the Office of Manufactured Housing (“OMH”), a division of the Department, alleging that he had been damaged by Dream Catcher’s failure to have performed the sales agreement. By correspondence dated May 7, 2001, the Department notified Mr. Fiano that based upon his complaint allegations, he was eligible to file a claim for reimbursement from the Department’s Consumer Recovery Fund. On June 19, 2001, Mr. Fiano filed a claim with the Department seeking payment from the Consumer Recovery Fund in the amount of $17,843.62. Although Mr. Fiano had, by his own calculation, expended $31,843.62 to complete his home, he had reduced this figure by $14,000.00 when he submitted his recovery fund claim to account for equity in two acres of land that Dream Catcher had transferred to Mr. Fiano (and on which Mr. Fiano had assumed payments).[1] On July 3, 2001, OMH Investigator/Auditor Carla Morin conducted an in- house review of Mr. Fiano’s claim based on documents submitted by Mr. Fiano. Following that review, Ms. Morin issued a “Verified Complaint and Sign-Off Form” in which she verified twelve of the twenty-three expense items claimed by Mr. Fiano. Ms. Morin found the remaining eleven items (nos. 4, 7, 8, 12, 13, 16, 17, 20, 21, 22 and 23) to be “not verified” for the reason that (i) the work had been completed prior to Mr. Fiano’s submission of his recovery fund claim, and therefore was not subject to verification, (ii) the work was not included in Mr. Fiano’s sales agreement with Dream Catcher, or (iii) the work item was subsumed within another work item that Ms. Morin had already deemed “verified” or “not verified.” By correspondence dated July 20, 2001, Mr. Fiano appealed the eleven items found by Ms. Morin to be “not verified.” By Notices dated July 27, 2001 and August 8, 2001, the Department set Mr. Fiano’s appeal and Consumer Recovery Fund claim for consolidated hearing on September 10, 2001. At hearing, Mr. Fiano moved to amend his recovery fund claim to add back into that claim the $14,000.00 in equity that Mr. Fiano had previously deducted. The Administrative Law Judge advised Mr. Fiano that his motion to amend would be taken under advisement. CONCLUSIONS OF LAW Mr. Fiano’s Appeal from OMH’s “Not Verified” Determinations In his appeal from OMH’s “not verified” determinations, Mr. Fiano bears the burden to prove, by a preponderance of the evidence, that these determinations were improper. See Arizona Administrative Code Rule R2-19- 119. A preponderance of the evidence is “such proof as convinces the trier of fact that the contention is more probably true than not.” Morris K. Udall, Arizona Law of Evidence § 5 (1960). The Administrative Law Judge concludes, from the evidence presented at hearing, that Mr. Fiano sustained his burden of proof as to ten of the eleven “not verified” items (specifically, nos. 4, 7, 8, 12, 13, 16, 17, 20, 21 and 23). Mr. Fiano, through a combination of testimony and documentation, established that his expenditures for each of the foregoing items fell within the scope of his sales agreement with Dream Catcher, or were expenditures connected with Dream Catcher’s failure to perform the sales agreement. Based on the foregoing, the Administrative Law Judge concludes that item nos. 4, 7, 8, 12, 13, 16, 17, 20, 21 and 23 should be “verified.” As to item 22 (Mr. Fiano’s claim for $17.00 in “out of pocket expenses”), the Administrative Law Judge concludes that Mr. Fiano’s evidence was insufficient to establish the validity of this claim. Therefore, OMH’s “not verified” determination as to this item should be upheld. Mr. Fiano’s Consumer Recovery Fund Claim Prior to reaching the merits of this claim, the Administrative Law Judge addresses Mr. Fiano’s motion to amend. At hearing, Mr. Fiano urged that he should not have deducted the $14,000.00 from his recovery fund claim, and that he therefore was entitled to receive the full amount of his damages ($31,843.62), because the $14,000.00 deduction does not in fact represent the value of his equity in the two acres of property that Dream Catcher transferred to him. The Administrative Law Judge declines to address this argument because, even if the Administrative Law Judge was to agree with Mr. Fiano on this point (and the Administrative Law Judge draws no conclusion one way or another), principles of due process require that Mr. Fiano’s motion be denied. The July 27, 2001 Notice of Hearing in this matter specified the amount of Mr. Fiano’s claim as $17,843.62. Although Dream Catcher failed to appear for hearing, nonetheless Dream Catcher was entitled to rely on the Notice of Hearing as accurately setting forth the amount of Mr. Fiano’s claim. To allow Mr. Fiano to amend that claim without notice to Dream Catcher would violate Dream Catcher’s right to receive notice of the claim being asserted against it. Therefore, Mr. Fiano’s motion to amend is denied.[2] A.R.S. § 41-2190(B) states: “If any consumer of manufactured homes, mobile homes or factory-built buildings designed for use as residential buildings is damaged by the failure of the principal to perform a sales agreement or to perform repairs under a warranty, the consumer may file a claim with the office for payment from the consumer recovery fund. The claim shall be verified by the office.” Mr. Fiano is a “consumer” as that term is used in A.R.S. § 41- 2190(B). See A.R.S. § 41-2142(7). A.R.S. § 41-2190(D) states: “The board [of manufactured housing] shall pay from the consumer recovery fund whatever sum the administrative law judge finds payable upon the claim. A decision granting a claim shall include an order suspending the license of the licensee upon whose account the claim was filed. Such a license shall remain on suspension until the licensee has repaid in full, plus interest at the rate of ten per cent per year, the amount paid from the consumer recovery fund on the licensee's account.” The evidence of record established that Dream Catcher failed to perform its sales agreement with Mr. Fiano. Based on the findings set forth herein, the Administrative Law Judge concludes that Mr. Fiano has proven damages in the amount of $17,843.62 arising from Dream Catcher’s failure to perform. Thus, the evidence of record supports a payment to Mr. Fiano from the Consumer Recovery Fund in the amount of $17,843.62. By operation of law (A.R.S. § 41-2190(D)), Dream Catcher’s Class D-8 license must be suspended until such time that Dream Catcher has repaid in full, plus interest at ten percent per year, the amount paid to Mr. Fiano from the Consumer Recovery Fund.

RECOMMENDED ORDERS Based on the foregoing, the Administrative Law Judge makes the following recommended Orders: Item nos. 4, 7, 8, 12, 13, 16, 17, 20, 21 and 23 of Mr. Fiano’s June 19, 2001 claim are “verified.” Item no. 22 of Mr. Fiano’s June 19, 2001 claim is “not verified.” On the effective date of the Order entered in this matter, the Board of Manufactured Housing shall pay to Mr. Fiano from the Consumer Recovery Fund the amount of $17,843.62. On the effective date of the Order entered in this matter, Dream Catcher’s Class D-8 license shall be suspended until Dream Catcher has repaid in full, plus interest at ten percent per year, the $17,843.62 paid to Mr. Fiano from the Consumer Recovery Fund.

Done this day, October ___, 2001.

______________________________________ Daniel G. Martin Administrative Law Judge

Original transmitted by mail this ____ day of ____________, 2001, to:

N. Eric Borg, Director Department of Building and Fire Safety ATTN: Shawna Blank East Virginia, Suite 100 Phoenix, AZ 85004

By ___________________________ ----------------------- [1] Mr. Fiano’s calculation of his total expenditures to complete his home ($31,843.62) differs slightly from the Administrative Law Judge’s finding, set forth in Finding of Fact No. 9, that Mr. Fiano expended a total of $31,830.12. The difference in these two figures is explained by a slight mathematical error made by Mr. Fiano in the summing of his expenditures when he submitted his recovery fund claim, and the fact that the Administrative Law Judge has disallowed, for failure of sufficient proof, a claim by Mr. Fiano for $17.00 in “out of pocket” expenses (see Conclusion of Law No. 5). [2] The Administrative Law Judge’s determination should not be read as expressing any conclusion as to whether Mr. Fiano is entitled to file a supplemental claim with the Consumer Recovery Fund seeking the balance of the funds he alleges to be due and owing.

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