ALJDEC

01F-R012019-BFS · Department of Building and Fire Safety · 2001-12-18

STATE OF ARIZONA IN THE OFFICE OF ADMINISTRATIVE HEARINGS

The above-entitled matter came on for hearing on December 12, 2001 at 2:00 p.m. pursuant to advance notice duly sent to all interested parties. The Complainant was represented by his attorney, Mark E. Lasee, Esq. Neither the named Respondent, Radiant Manufactured Homes, nor the Arizona Department of Building and Fire Safety (herein called the “Department”) appeared. 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 approximately twenty minutes in order to afford a reasonable opportunity for Respondent and the Department to appear and to participate. However, no legal representative or other authorized individual appeared for or on behalf of either Respondent or the Department. Brian Blanchard, the son of the 90- year-old Complainant and the holder of his power of attorney, had received permission to and did appear and participate at the hearing by telephone from out-of-state.

2. The parties had concluded a written listing agreement on April 13, 2001 pursuant to which Respondent was given the right to sell Complainant’s manufactured home unit together with certain described interior contents and features. The agreed compensation for Complainant was negotiated and subsequently fixed in the listing agreement at a net receipt to the Complainant/owner of $13,400.00. The finally adjusted monetary figure was the balance remaining from the ultimate sales price to be listed, after allowing for a commission to Respondent of $2,000.00 plus an added allowance to Respondent of $2,500.00 for contemplated additional work on the unit to be performed or caused to be performed by Respondent so as to satisfy specified requirements then being imposed by the Mobile Home Park at which the unit was located. Respondent, as the licensed dealer, listed the unit for sale on behalf of Complainant for a total sales price in the amount of $17,900.00 (combining the net balance payable to Complainant plus all allowances for commissions and repair costs).

The Mobile Home Park was sold to new owners shortly after arrangements between the parties had been concluded. The requirements for added work on the unit were withdrawn, but Respondent never notified Complainant of this event and never amended the listing agreement to reflect the fact that previously required added work was no longer needed. The undisputed evidence at the hearing revealed that Respondent never performed any of the contemplated work for which the $2,500.00 allowance had been provided.

On June 26, 2001, a purchaser who had been shown the unit by the Park’s new manager, visited the offices of Respondent and concluded a purchase, memorialized by a written contract that also served as a bill of sale. The purchaser also tendered a bank check in the amount of $17,000.00, which was duly accepted by

Respondent as payment in full for the listed unit. This sum was apparently never deposited by Respondent into its trust account, and more importantly, no portion of the proceeds was ever delivered to Complainant. Nor did Respondent attempt to seek and obtain Complainant’s advance authorization to conclude a sale at a price lower than the listed price.

5. Complainant was compelled to resort to the services of an attorney for help in collecting the unpaid amounts. The new purchaser, who also testified at the hearing, confirmed that title to the purchased and paid- for unit has not been delivered since Complainant, as the prior owner, has never received payment.

6. The uncontroverted evidence tended to indicate that Respondent, through both its authorized sales personnel and its owner and qualifying party, Michael Madrid, wrongfully and illegally misappropriated all payments made by the purchaser that were in large part to have been remitted to Complainant.

7. Despite several promises and assurances, Respondent has wholly failed to abide by its contractual obligations as well as its duties under applicable statutes and rules. This course of conduct, found to constitute statutory violations on the part of or attributable to Respondent,[1] provides a valid basis for an award to the owner from the Consumer Recovery Fund (herein called the “Fund”)

8. The evidence of record failed to indicate whether or not the within claim for damages, as filed by Complainant, had been duly verified by the Office of Manufactured Housing, a division of the Department. Such verification, which is a statutory requirement for pursuit of any claim for an award of damages from the Fund, would not have included any element of repayment for attorney fees of almost $3,000.00 that had been incurred by Complainant while pursuing collection efforts against Respondent and from the Fund. Under the aggravating circumstances of this case, approaching an outright theft of most all sales proceeds, perhaps also constituting a criminal act, it must be found and determined that the Department should have and would have emphatically verified this claim in its entirety with the exception of that portion of such claim seeking attorneys fees.

9. The actions or, more properly the inaction, of Respondent in improperly retaining the paid proceeds of this sales transaction constitute violations 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 the net balance of $13,400.00 specified in the listing agreement plus the sum of $2,500.00 allowed for extra work which never had to be performed and, in fact, was never performed on the part of Respondent. To the extent that any realized purchase price was less than the contemplated listing price, such lesser amount is found and determined to constitute a proper reduction in the commission sums otherwise payable to Respondent that were most certainly not earned by Respondent in this case.

Respondent failed to seek or obtain consent or approval by or on behalf of Complainant to consummate the sale at a lower price, a well-recognized basic duty of

any listing agent. (Such authorization perhaps did not matter to Respondent who may never have intended to transmit any part of the proceeds received for the sale). To the extent that the sale was for less than the listed and authorized price, any diminution should more properly be applied as a reduction against commissions otherwise payable to Respondent. In point of fact, Respondent’s entitlement to any commission amount at all remains highly questionable since its overall conduct and breaches of the listing agreement should tend to generate a treatment whereby no commissions at all should be deemed to have been legally or otherwise appropriately earned in this case. [2]

11. The evidence of record supports the granting of a monetary award from the Consumer Recovery Fund to Complainant in the amount of $15,900.00, such sum representing the total sum needed to fully compensate Respondent for the sale of his unit and enable delivery of the title to the purchaser. These amounts were wrongfully never paid to Complainant, thereby depriving him of the benefit of his contractual bargain with Respondent under the parties’ listing agreement.

CONCLUSIONS OF LAW

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

2. If a consumer of a manufactured home is damaged by the failure of a licensed dealer to perform a sales agreement, the consumer may file a claim with the Department for a payment from the Fund. See A.R.S.§41- 2190(B). The filed claim must be verified by or on behalf of the Department or, alternatively, must be proven to be a claim that reasonably should have been verified by the Department.

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 several separate subsections contained in A.R.S.§41-2180 by failing to properly perform its obligations under the sales contract with Complainant. Consequently, Complainant is entitled to compensation from the Fund in the amount of his actual damages.

5. In this case, the totality of the evidence of record supports a determination that Complainant has established that the sum of $15,900.00 constitutes his actual or compensatory damages attributable to the acts or omissions of Respondent. The facts and circumstances of this case serve to generate a compelling and valid basis for the verification of the Complainant’s claim by the Department apart from that portion of the claim seeking recovery of attorney fees that are specifically excluded by the applicable statutory provisions. Consequently the spirit and intent of the statute relating to Department verification has been effectively satisfied hereunder.

6. By operation of law, as set forth in A.R.S.§41-2190(D), the Class D-8B license of Radiant Manufactured Homes must be suspended until such time that the award to Complainants has been repaid in full, plus interest at ten percent per year.

ORDER AND AWARD

In view of the foregoing, 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 Complainant, Erle H. Blanchard, in the amount of $15,900.00, as damages that are properly chargeable against the account of Respondent.

IT IS FURTHER ORDERED that Respondent’s Class D-8B license shall be suspended until the sum of $15,900.00, that will be paid from the Fund, plus statutory interest, chargeable against Respondent’s account, is repaid or replenished to the Fund by or on behalf of Respondent.

Dated: December 20, 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] The specific statutes that could and would have been charged and proven to have been violated, thereby subjecting the licensee to disciplinary penalties, would encompass the failing to segregate funds in a proper trust account, failing to advise Complainant of changes in Park requirements that eliminated any necessity to perform extra work which, in turn, would generate a duty to initiate and finalize an appropriate amendment to the listing agreement, and most egregious, the willful misappropriation or quasi-theft of the sales proceeds due and owing to Complainant that were wrongfully retained by Respondent.

[2] Notwithstanding the potential rights of Complainant to successfully pursue remedies leading to a civil judgment against Respondent that would encompass the balance of sales commissions that may be shown to have been unearned and undeserved, the actual or compensatory damages that may be recovered from the Fund do not appear to include this possibly enforceable right or element of consequential loss.

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