ALJDEC

01F-R012008-BFS · Department of Building and Fire Safety · 2001-10-18

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: October 1, 2001. APPEARANCES: COMPLAINANT: Susan Fiano. RESPONDENT: did not appear.

ADMINISTRATIVE LAW JUDGE: Anthony Halas. _____________________________________________________________________ Hearing in this matter convened on October 1, 2001, as duly noticed, to consider Complainant’s Consumer Recovery Fund claim pursuant to A.R.S. § 41-2190. On the basis of the testimony and evidence presented, and the entire record, the following Findings of Fact, Conclusions of Law, and Order are made to the Director of the Department: FINDINGS OF FACT 1. On or about March 10, 2000, Complainant Susan Fiano (Fiano) purchased a manufactured home from Respondent Dream Catcher Homes. Therefore, Complainant Fiano is a “consumer” as defined by statute and is entitled to receive payment from the Consumer Recovery Fund for actual or compensatory damages as a result of the Respondent’s acts or omissions. 2. Respondent Dream Catcher Homes is the holder of License No. 7332, Class D-8, issued by the Department of Building and Fire Safety.

3. The manufactured home was delivered and partially installed on or about May 15, 2000. The home was repossessed and removed from her property by the manufacturer on or about November 15, 2000. Complainant Fiano then filed a complaint (Case No. 00-1/182) against dealer Dream Catcher Homes with the Department of Building and Fire Safety (Department). After administrative inspection, the Department’s inspector issued VERIFIED COMPLAINT & SIGN OFF FORM on November 27, 2000, which verified that Complainant had not received any of the installation items listed on her purchase agreement with Respondent dealer, specifically: set-up, septic, water, electric, two-car garage, front porch, concrete, rear patio, and 5- ton A/C unit, with additional verification that the manufactured home had been removed from the site. 4. Pursuant to Order of the Director of the Department of Building and Fire Safety issued on February 12, 2001 closing that case, Respondent failed to comply with the VERIFIED COMPLAINT & SIGN OFF FORM issued by the Department, and License No. 7332, Class D-8, was revoked. 5. Subsequently, on July 3, 2001, Complainant filed a claim seeking payment of a total of $45,809.68 from the Consumer Recovery Fund (Fund) pursuant to A.R.S. § 41-2190. Itemization of the total was provided in an attached letter to Complainant from National Bank of Arizona[1] dated May 16, 2001 (submitted at hearing as Exhibit 13):

1) $27,414.05 principal balance as of 5/16/01. 2) $ 5,971.49 accrued interest, as of 5/16/01. This amount is subject to change daily. 3) $12,424.14 for legal fees/costs as of 4/27/01. This amount is subject to change daily. _________ $45,809.68 Total as of 5/16/01.

6. The Department’s investigator/auditor verified for dealer correction the first item, $27,414.05 as the principal balance, but denied items two ($5,971.49, accrued interest) and three ($12,424.14, legal fees/costs) pursuant to A.R.S. § 41-2188(B). 7. By Notice of Hearing issued on August 20, 2001, the Department duly scheduled hearing on Complainant’s claim for payout from the Fund. 8. At hearing, Complainant Fiano appeared and testified, and offered Exhibits 1 through 18 as demonstrative and documentary evidence in support of her claim. The exhibits were marked and admitted. 9. In her testimony and exhibits 1 through 12, Complainant provided a narrative overview of her (with her husband) purchase agreement with Respondent dealer and the significant events and circumstances of her ultimately unsuccessful attempts to have the dealer perform its responsibilities per the terms of that agreement with her. 10. In addition to her futile efforts to have the dealer properly accomplish delivery and installation of the home, Complainant’s efforts towards dealer performance were also for naught in that Respondent failed to completely pay either for the contracted site work or to the manufacturer from the loan proceeds, of which most of the home’s purchase price had been advanced to the dealer by the lender (see Exhibit 14) (resulting in the home being repossessed by the manufacturer when it was not paid the balance due and owing). 11. It was to itemize those costs associated with Complainant’s repayment of the loan, and related fees and costs, that Ms. Fiano had procured the May 16, 2001 letter (Exhibit 13) from her lender, National Bank of Arizona[2]. These amounts represented the lender’s calculations of Complainant’s balance, after the home manufacturer’s repayment to the lender of approximately $30,000.00 the manufacturer had been paid by the dealer toward the dealer’s purchase price of the home. 12. Complainant Fiano provided additional evidence (Exhibit 16) of $850.00 (not initially included in her claim against the Consumer Recovery Fund) she and her husband had paid as the premium for “Builder’s Risk” insurance, as required by the lender, noting that the premium had not been returned and no payout had been made from the insurance company since repossession was not a covered risk. 13. Complainant also provided evidence (Exhibit 17) of her out-of- pocket expense for $300.00 (not initially included in her claim against the Consumer Recovery Fund) for an appraisal of the land and manufactured home as required by the lender prior to approval of the combined loan.

CONCLUSIONS OF LAW 1. The convening of the hearing in this matter was delayed 20 minutes to allow Respondent, through its authorized representative, to make an appearance, and although the record then remained open for more than an hour after the scheduled start of the hearing, no such appearance was made to dispute Complainant’s verified complaint or her claim to the Consumer Recovery Fund, nor was any information provided to explain the absence of Respondent’s representative, or to request a continuance. 2. Reference to the Notice of Hearing issued by the Department on August 20, 2001, confirms that it was issued by certified mail to : BARBARA HENRY QUALIFYING PARTY DREAM CATCHER HOMES P.O.B. 465 OVERGAARD, AZ 85933

This is the last known address Respondent has provided the Department, and there is no indication that Respondent did not receive the Notice, so it is found and concluded herein that the notice and opportunity to be heard required by the demands of due process have been fully and fairly met. 3. The Office of Administrative Hearings has jurisdiction over the subject matter and the parties hereto pursuant to A.R.S. §41-1092 - 1092.12 (1998). 4. The burden of proof, unless otherwise provided by law, is on the party asserting a claim, right, or entitlement in a contested case or appealable agency action. A.A.C. R2-19-119(B)((1); See also Utah Construction Company v. Berg, 68 Ariz. 285, 205 P.2d 367 (App. 1949). The standard of proof in such matters is that of the preponderance of evidence. A.A.C. R2-19-119(A); See also Shelby School v. Arizona State Board of Education, 192 Ariz. 156, 962 P.2d 230 (App. 1998); Culpepper v. State, 187 Ariz. 431, 930 P.2d 508 (App. 1996). 5. The Department has established a consumer recovery fund from which a party, such as Complainant, can obtain a recovery limited to actual or compensatory damages, exclusive of interest or attorneys fees. A.R.S. § 41-2188(B). 6. If a consumer of a manufactured home is damaged by the failure of a principal of such home to perform a sales agreement, the consumer may file a claim with the Department for a payment from the consumer recovery fund. A.R.S. § 41-2190(B). 7. The Department shall pay from the consumer recovery fund whatever sum the administrative law judge finds payable upon the claim. A.R.S. § 41- 2190(D). However, the administrative law judge does not have unlimited discretion in that regard, since the Consumer Recovery Fund statutes limit any award that can be determined by an Administrative Law Judge to actual or compensatory damages. See A.R.S. § 41-2188(B):

Recovery from the consumer recovery fund is limited to actual or compensatory damages, including costs but excluding interest or attorney fees.

8. Actual or compensatory damages for breach of contract are those which arise naturally from the breach itself or which may reasonably be supposed to have been within the contemplation of the parties at the time they entered into the contract. See Southern Arizona School for Boys, Inc., v. Chery, 119 Ariz. 277, 580 P.2d 738 (App. 1978). In this instance, the undersigned finds and concludes that these would include the principal balance, the builder’s risk insurance premium, and the appraisal fee. 9. Since compensatory damages are those directly flowing from the breach of contract itself, the undersigned therefore determines that based on the material and probative evidence presented at hearing, Complainant Fiano has established a proper and reasonable amount as actual or compensatory damages upon which the claim should be paid from the Consumer Recovery Fund in the sum of: $27,414.05 (principal balance) plus $850.00 (builder’s risk insurance) plus $300.00 (appraisal), for a total of $28,564.05. 10. However, given that the clear statutory language of A.R.S. §41- 2188(B), which specifically excludes interest and attorney fees, the accrued interest of $5,971.49 and the legal fees/costs of $12,424.14 must be excluded from payout from the Fund.

ORDER In view of the foregoing, it is ORDERED that the Department of Building and Fire Safety shall commence and finalize payment procedures from the Consumer Recovery Fund for an award to Complainant Fiano in the amount of $28,564.05. It is further ORDERED that the revoked Class D-8 License No.7332 of Respondent Dream Catcher Homes shall be suspended and remain so until Respondent has repaid in full the amount of the above claim, plus interest, pursuant to A.R.S. § 41-2190(D). Done this day, October 18, 2001.

______________________________________ Anthony Halas 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 ___________________________ ----------------------- [1] National Bank of Arizona was Complainant’s lender on a loan which combined both the manufactured home in question, and the land upon which it was to be installed, although the land had been separately acquired by Complainant and her husband, and then rolled into the combined loan. (Later, after the manufactured home was repossessed, the land loan was carved out of the combined loan). [2] Complainant stated that despite the lender’s indication that accrued interest and legal fees/costs were subject to change daily, and despite her efforts to determine if those costs had increased, the lender had failed, after May 16, 2001 and through the time of hearing, to provide any such updated information.

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