ALJDEC

01F-R012005-BFS · Department of Building and Fire Safety · 2001-10-02

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: September 26, 2001. APPEARANCES: Richard and Alice Cross, Complainants, and LaVon Kraemer, witness. ADMINISTRATIVE LAW JUDGE: Dorinda M. Lang. _____________________________________________________________________ Richard and Alice Cross contracted with Radiant Manufactured Homes to sell their home. During and after the sale, Radiant Manufactured Homes violated several statutes governing licensed manufactured home dealers and brokers. The evidence established that it is appropriate to award the Crosses a pay-out of $8,500 from the Consumer Recovery Fund. FINDINGS OF FACT 1. Richard and Alice Cross contracted with Radiant Manufactured Homes (“Radiant”) on February 24, 2001. The contract stated that Radiant would have the right to sell the Crosses’ manufactured home for them for a commission of at least $2,000 or any amount received in the sale over $8,500. A buyer responded to an earlier advertisement by the Crosses but they referred the buyer to Radiant. The buyer offered $12,500 for the home but, according to Radiant, rescinded the offer when he discovered that repairs were needed.

2. Radiant represented to the Crosses that the home needed $2,000 in repairs before it could be sold. On that representation, the parties renegotiated the contract for a commission of at least $2,000 or any amount received over $6,500. The buyer did purchase the home but the Crosses were never informed of the amount of purchase. 3. A Radiant representative went to the Crosses after the sale and stated that he would pay them $4,500 for the sale. He stated that this represented the contract amount, less the $2,000 in repairs. He had them sign an agreement nullifying the previous contracts “due to the contract being honored” and accepting this amount as the final amount due. He gave them a check but when they tried to deposit it, a stop-payment order had been made. 4. Despite many promises by the two salesmen there, Radiant never paid the Crosses on the sale of the home. When the Crosses’ daughter filed a complaint with the Attorney General’s office, Mr. Madrid, one of the salesmen and the Respondent’s qualifying party, told her that he and his partner had decided not to issue them the check at all due to her attitude. Radiant never provided any proof of the purchase price or invoices from the repairs that were allegedly done. The Crosses have requested $4,500 from the Recovery Fund. 5. Radiant was not represented at hearing. The record shows that Notice of Hearing was sent to the appropriate address of record by certified mail. CONCLUSIONS OF LAW 1. This administrative hearing was held under authority of and pursuant to A.R.S. §§ 41-1092 and 41-2190(C). 2. Subject-matter jurisdiction vests in the Department of Building and Fire Safety Office of Manufactured Housing under authority of A.R.S. § 41-2190. 3. Pursuant to A.R.S. § 41-2190(A), a seller of a manufactured home may file a claim with the Consumer Recovery Fund for damage incurred due to a dealer’s violation of A.R.S. § 41-2180 or the rules adopted pursuant to that section. 4. The fund shall pay for the damages in accordance with the amount found owing by the Administrative Law Judge, and the decision shall include an order suspending the license of the account against whom the claim was filed. A.R.S. § 41-2190(D). 5. Arizona law at A.R.S. § 41-2180(I) and (J) provides that dealers or brokers are to maintain all earnest money in a trust account which is to be released to the appropriate party, i.e. the seller in this case, upon completion or termination of the transaction. The rules further provide that “the seller’s broker shall provide the seller with a closing statement that includes an accounting of all expenses charges to the seller, all pro rations, and all credits” upon consummation of the transaction. The evidence at hearing established that none of the above acts was taken by the Respondent. Arguably, there may have been no earnest money given in this transaction. Still, the failure to provide the seller with a closing statement is a violation of the rule that was adopted pursuant to the statute and qualifies to make the Complainants eligible for the fund. 6. A consumer may also file a claim with the fund when damaged by the failure of a principal to perform a sales agreement. A.R.S. § 41-2190(B). Generally, the principal would be considered to be the buyer. However, the Respondent apparently took the money from the buyer directly as a bailor without the express authority of the statutes governing its license. As such, when Respondent literally stole the proceeds of the sale, it should be considered to stand in the place of the principal in violating the terms of the sales agreement. 7. The Complainants offered substantial, consistent and believable evidence to establish that the Respondent not only misrepresented the need for a change in terms of the contract but also intentionally withheld the suspiciously small sum it admitted was payable on the contract. The damages they incurred were established by the weight of the evidence to be in excess of the amount of their claim. It is believed that, in the absence of Respondent’s misrepresentations and wrongdoing, Complainant would have received $8,500, even after reduction of the supposed $2,000 spent on repairs and another $2,000 in commissions. There is no reason to believe that the buyers who offered $12,500 prior to discovering the need for repairs did not give that amount after the repairs were completed. Even if this was not the final purchase price, the original and second contracts between the parties specifies that if the home is purchased by a purchaser provided by the seller, as in this case, the commission is to be only 10% of the sale price. Consequently, an award of $8,500 may even be less than the actual damages in this matter. However, the evidence available at the time of hearing was sufficient to justify an award of only $8,500. 8. Although they were entitled to do so under A.R.S. § 41-2186, the Complainants did not file a complaint with the assistant director regarding other possible violations of the applicable statutes by the Respondents in this case. If a hearing on such a complaint should establish the same facts as were established in this case, discipline of the Respondent’s license may be necessary to protect the public. Complainants should be informed of their right to file such a complaint. RECOMMENDED DECISION Based upon the foregoing considerations, it is recommended that the Department of Building and Fire Safety order a pay-out to the Complainants in the amount of $8,500 payable from the Consumer Recovery Fund and order the Respondent’s license suspended until that amount, plus ten per cent per year, is repaid in full to the fund on its account. Done this day, October 2, 2001. OFFICE OF ADMINISTRATIVE HEARINGS

______________________________________ Dorinda M. Lang Administrative Law Judge

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

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

By ___________________________

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