ALJDEC

01F-R012009-BFS · Department of Building and Fire Safety · 2002-02-13

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: Convened on November 14, 2001, and reconvened on January 23, 2002, with the record concluded on January 23, 2002. APPEARANCES: Complainant/Appellant Kay Scripter appeared on her own behalf. Respondent Karsten Ltd dba Price-Rite Manufactured Housing appeared through its qualifying party Myron E. Karsten. ADMINISTRATIVE LAW JUDGE: Kay A. Abramsohn _____________________________________________________________________

This matter arises out of Complainant/Appellant Kay Scripter’s agreement with Respondent Price-Rite to re-sell Ms. Scripter’s manufactured home as an adjunct to the purchase, by her children, of another manufactured home. 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 1. In August 2000, Complainant Kay Scripter entered into a written agreement with High Desert Manufactured Housing to sell her used Cavco Model LS-2856A, serial number 954444. This agreement was apparently an adjunct transaction to the purchase of a new Palm Harbor Grand Canyon model, serial #25773X&U by Ms. Scripter’s daughter. The written agreement states that High Desert would make the existing mortgage/financing payments on the home ($294.32) per month until the home was sold. The written agreement states that Ms. Scripter would pay the insurance and the taxes until the home was sold. Finally, the written agreement states that Ms. Scripter would not receive any monies above the payoff if the home sold for more (than the payoff). Complaint, written agreement. 2. The loan payoff for the home was approximately $34,000 plus interest and late charges due to Conseco. Complaint, June 1, 2001 letter.

3. Mr. Ron Foster, whom Ms. Scripter understood to be the owner of High Desert, told her he would sell the home. Ms. Scripter understood him to have a purchaser in mind for the home. Ms. Scripter understood Mr. Foster was to use a portion of the closing costs (for her daughter’s new home) to fix up the Cavco model for the sale. Testimony, Kay Scripter. 4. The home was moved, by Mr. Foster, to a location in Tonopah, Arizona, and apparently was to be sold, or was available to be sold, to a person in the area. The location of the trailer was on land owned by Jack Graves. Testimony, Kay Scripter. However, the record is not clear as to exactly when the home was moved to that location. 5. Mr. Foster made two payments on the home. No other payments can be shown to have been made by High Desert. Ms. Scripter made additional payment(s) on the home, in efforts to keep it out of foreclosure. Testimony, Kay Scripter. 6. In late January 2001, Ms. Scripter learned that the January payment had not been made, and faxed a note over to High Desert written on the [Conseco] monthly billing. The note states: “Conseco says Jan. payment not made. Maybe we should let them take it back. Feb. payment wanted by Feb 5. I pd the ins.” Respondent’s response to Complaint, mortgage payment bill with handwritten note. 7. In June 2001, Ms. Scripter filed her complaint with the Office of Manufactured Housing (OMH) in this matter, indicating in her letter that it had been next to impossible to get ahold of Mr. Foster, who had closed the High Desert facility and moved to Deer Valley Homes and had sold that interest to Omega Homes. Ms. Scripter’s letter indicated that she had finally contacted Mr. Foster and he had told her he had no money and wouldn’t do anything. Ms. Scripter’s letter also indicated that she had found out that Myron Karsten, license #08897, was the silent money partner at High Desert. Ms. Scripter’s complaint states that she felt “like he stole the mobile home by moving it so far away, not contacting me and by not making payments.” Complainant, letter. 8. In June 2001, Respondent Ron Foster filed his written response to the complaint. Mr. Foster’s June 16, 2001 letter stated that he had not met the Ellsworths [Ms. Scripter’s daughter]. Mr. Foster stated that, because the Ellsworths refused to take delivery on their new home until High Desert agreed to make payments on the old one and sell it for them, and he otherwise would have the (new) $84,000 home “that I never had a clue what I could do with”, “I did sign an agreement to make the payments on this home and try to sell it.” Mr. Foster stated that he had the home taken down and moved to the dealership and then moved it to Tonopah to his customer there. Mr. Foster stated that the home was in terrible shape, missing windows and a door, and with smelly carpet. Mr. Foster stated that his customer “backed out on the sale” after inspecting the home. Mr. Foster stated that Ms. Scripter faxed him that “maybe we should let them take it back”. Respondent’s June 16, 2001 response letter. 9. In July 2001, Ms. Scripter filed a reply to the OMH, indicating that they had dealt mostly with High Desert Manager, Kerry Kerns in these matters. Ms. Scripter indicated that she had recently driven out to the Tonopah location, and it was her opinion that the overall condition of the home was not as bad as she had been told. Ms. Scripter further indicated that Conseco wanted her to sign over the home, but was concerned about them being able to sell it in its current location, and that Conseco would charge her the difference between what they could sell it for and the amount of the mortgage. Ms. Scripter stated that “The down payment on that home was $13,000.00 and we made payments for 4 years. That’s a lot of equity to lose.” Complainant’s July 2001 letter. 10. On July 16, 2001, the OMH’s Inspector, Donna Grant, issued her Verified Complaint & Sign-Off Form (“Verified Complaint”) against Respondent Dealer, Karsten Ltd. dba Price-Rite Manufacture Housing (#6031, D-12). This Verified Complaint indicated that the Dealer was to correct the two items: that Dealer had signed the written agreement to make the payments until the home was sold, but had not done so; and, that Dealer had taken the Cavco to Tonopah and set it up on someone else’s property. 11. The matter was not resolved informally at this point. 12. On August 17, 2001, Ms. Scripter filed her Consumer Recovery Fund (“Fund”) Claim Form (“Claim”), asking for $10,000 from the Fund “so I can keep it out of foreclosure and move it away from Tonopah.” Ms. Scripter attached her August 16, 2001 letter in this regard asking to recover the payments, which were not made by Mr. Foster [$294.32 x 11 = $3,237.52]. Ms. Scripter indicated that Conseco would begin foreclosure proceedings very soon, and she would be charged for the difference between what they could sell it for and the mortgage balance of $36,633.44. Ms. Scripter indicated that it would cost $3,000 or more to move the home back from Tonopah and another $3,000 to $4,000 for new carpet and repairs. With the Claim form, Ms. Scripter provided a copy of the Conseco July 2001 notice of default and all her papers previously sent to the OMH in this regard. 13. On August 24, 2001, the Department of Building and Fire Safety (“Department”) advised Ms. Scripter that the matter was being forwarded to [the Department’s] Legal Section so that it could be set for hearing. The Department further indicated to Ms. Scripter that she should present evidence at the hearing with regard to the matter, and provided a suggested list. 14. The Department issued its Notice of Hearing regarding this matter on August 29, 2001. 15. On September 4, 2001, the OMH Investigator received a fax from Conseco with regard to the upcoming repossession of Ms. Scripter’s loan/home. File, record. 16. On September 7, 2001, the Qualifying party for Respondent [Myron E. Karsten] wrote to the Department and requested a continuance in this matter, for the reason that he was going to be out-of-state. The Department replied that the matter was noticed for hearing, and that Respondent should contact the Office of Administrative Hearings. 17. On September 26, 2001, Respondent filed his letter request for a continuance, but did not state the position of Ms. Scripter. When contacted, Ms. Scripter indicated on October 16, 2001, that she did not object, but requested the matter be set in the late morning or early afternoon. 18. By ORDER dated October 17, 2001, the matter was Continued for hearing to be held on November 14, 2001. 19. On October 21, 2001, Ms. Scripter wrote to this Administrative Law Judge at this Tribunal, and copied Respondent, asking whether she would be able to proceed with the hearing, because she had been unable to make the payments, and Conseco had foreclosed on, and sold, the home. 20. Tribunal Staff was advised to inform Ms. Scripter that the Administrative Law Judge could not advise her on the matter, and that she might want to call the Department with whom she filed the complaint. 21. At the hearing, Complainant Scripter testified on her own behalf, reiterating the information already provided to the process. Complainant Scripter indicated that she had gotten information on the costs to haul the home from Tonopah, and that it was $4,500 for the transportation, permits and to set the home up. Complainant Scripter indicated that she had faxed in this information, but also presented it as Hearing Exhibit No. 1. Complainant Scripter indicated that she was asking for $10,000.00 on the agreement between she and Respondent, and that $3,000 was to be used to refurbish the home. Complainant Scripter indicated that the amount of mortgage payments she had to pay, after the agreement, was $3,237.52. Complainant Scripter indicated that Conseco had advised her that they had sold the home for $18,000.00 of the total owed of $38,000.00 and that she now owed them $20,000.00. 22. Complainant’s witness, Kerry Kern, testified that when the Ellsworths came in, they had agreed to split the closing costs. Mr. Kern further testified that Mr. Foster had agreed, that once the loan on the new home had closed, that High Desert would make the payments on the used home until it was sold. Mr. Kern testified that Respondent had agreed to take $3,000.00 and fix up the home. Mr. Kern testified that Mr. Foster had told him that he had spent some of the $3,000 on the home, but that Mr. Kern had never seen the home and did not believe that the $ had gone into repairs.

23. Myron Karsten, qualifying party for Respondent, then advised the Tribunal that he had only recently found out that Mr. Foster had committed suicide in August, and that this daughter was refusing to allow Mr. Karsten access to the files Mr. Foster had had in his possession. Mr. Karsten asked for a continuance to do whatever it would take to get those files, which he believed might contain information pertinent to the matter. 24. Complainant rebutted that she believed the file would contain nothing other than the information she had already provided to the process, in that Mr. Foster had told her that he only made two payments. 25. The parties were given subpoena information and the hearing in this matter was stopped at that time, to be reconvened at a later date to be set. 26. On November 16, 2001, an ORDER was issued in this matter, setting the hearing to reconvene on January 23, 2002. In the interim, no request for any subpoenas was received from either party. The hearing reconvened on January 23, 2002. 27. At the hearing, Respondent Karsten testified that he was unable to get the other records and that he had only found the Conseco billing statement on which Ms. Scripter had written to let Conseco take the home back. Mr. Karsten argued that this was the way they [Foster and Scripter] both had determined to allow the matter to happen, and that, before, he died, Mr. Foster had told him that Ms. Scripter had said to let the home go back. Mr. Karsten argued that Ms. Scripter was willing to let that happen.

28. Complainant Scripter testified that, although she had made those notations, this was not something that she was considering, and that she thought Mr. Foster was going to sell the home, per their agreement. Complainant Scripter testified that Mr. Foster made only two payments, and the loan/home was in arrears by quite a bit. 29. Complainant Scripter offered no other information with regard to her costs, expenses or Fund claim request. However, Complainant did state that Conseco had received $2,183,50 from the insurance company. 30. Respondent is the holder of a Class Defendant-12 license (No. 6031) issued by the Department. There is no evidence in the record as to the current status of Defendant’s license. 31. This Tribunal is unable to verify the license numbers or names of entities holding any departmental licenses. This Tribunal relies on the OMH and Department to assure that the correct license number and entity is the named Respondent. Therefore, this Tribunal presumes that High Desert Manufactured Housing was, in fact, owned by Karsten Ltd dba Price-Rite Manufactured Housing and operated under Class Defendant-12 License No. 6031. CONCLUSIONS OF LAW 1. Clearly, the evidence of record established that High Desert, as Karsten Ltd dba Price-Rites Manufactured Housing, failed to perform its sales agreement with Ms. Scripter, in that High Desert, as Respondent, failed to sell the home per the agreement and failed to make payments on the home until it was sold, causing the home to be repossessed by Conseco. 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.” 3. Ms. Scripter is a “consumer” as that term is used in A.R.S. § 41- 2190.B. See A.R.S. §41-2142.7. 4. 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.” 5. While the Department shall pay from the Fund whatever sum the Administrative Law Judge finds payable upon the Claim, this Tribunal does not have unfettered discretion in that regard, as any award that can be determined is constrained by law to actual or compensatory damages, including costs, per A.R.S. §41-2188.B. 6. 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. In this particular case, based on the facts and circumstances, the undersigned finds and concludes that these would include, by virtue of Respondent’s failure to make payments (resulting in the home being repossessed), the principal loan balance [which would include the payments which were not made] and any costs actually expended by Complainant with regard to attempted recovery of the home prior to repossession. 7. In this above captioned matter, the damages plead and noticed were $10,000.00, as evidenced by the Notice of Hearing in this matter. The Notice of Hearing in this matter indicates that the “…Complainant seeks payment in the amount of $10,000.00 from the Consumer Recovery Fund…” under A.R.S. §41-2190.A and .B. 8. Compensatory damages are those that flow directly from the breach itself, and based on the hearing record, Complainant Scripter has shown established a reasonable amount as actual or compensatory damages upon which her Claim should be paid from the Fund in the sum of $10,000.00. It must be noted that Complainant’s Claim was filed prior to the actual repossession, and the damages projected at that time were not actual damages from the loss of the home, but were merely the damages thus far [the failure of payments, and the projected cost to move the home from Tonopah]. /// /// ORDER The evidence of record supports a payment to Ms. Scripter from the Consumer Recovery Fund in the amount of $10,000.00. 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 in the amount of $10,000.00. IT IS FURTHER ORDERED, by operation of law, Respondent Karsten Ltd dba Price-Rite Manufactured Housing’s Class D-12 License No. 6031 shall be suspended and remain suspended until such time that Respondent Karsten Ltd dba Price-Rite Manufactured Housing has repaid in full the amount paid to Ms. Scripter from the Consumer Recovery Fund, plus interest at ten percent per year, pursuant to A.R.S. §41-2190.D. ORDERED and DATED this day, February 13, 2002.

______________________________________ Kay A. Abramsohn Administrative Law Judge

Original transmitted by mail this ____ day of February, 2002, to:

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

By ___________________________ -----------------------

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