ALJDEC

01F-RF0249-ROC · Registrar of Contractors · 2001-07-12

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: July 3, 2001. APPEARANCES: PLAINTIFF: Howard Fine, on his own behalf. DEFENDANT: by Jeff Franklin, vice-president and authorized representative.

ADMINISTRATIVE LAW JUDGE: Anthony Halas. _____________________________________________________________________

At issue in this administrative proceeding is the amount Plaintiff should recover from the Registrar of Contractors’ Residential Contractors’ Recovery Fund under A.R.S. § 32-1151 et seq. Upon consideration of the testimony and evidence presented, and the entire record, the undersigned makes the following Findings of Fact, Conclusions of Law and Recommended Order:

FINDINGS OF FACT 1. The Registrar of Contractors (Registrar) issued License No. 109734, Class B, to Defendant Mosaic Outdoor Builders, Inc. (MOBI), a corporation, on October 5, 1995. Jeff Franklin (Franklin) is an officer in the corporation and its authorized representative for this proceeding.

2. Based on a "Revised Proposal" dated October 25, 1999, Defendant contracted with Plaintiff Howard Fine (Fine) and his wife on December 4, 1999 (Exhibit 3) to construct outdoor landscaping, including a water feature, at their residence at 5634 East Wilshire Drive, in Scottsdale, Arizona. The proposal and contract were based on architectural drawings provided by Fine, and the original price term of the contract was $36,236.39. 3. After the outdoor landscaping was substantially constructed, but not completed, Plaintiff filed a complaint with the Registrar of Contractors on May 30, 2000, alleging that Defendant had failed to timely complete certain items of construction and that its workmanship on other items was deficient. The Registrar assigned Case No. 00-2808 to this complaint. 4. The Registrar’s inspector Lafond performed a jobsite inspection on June 29, 2000, but prior to issuing any directive to MOBI, determined that the company's license was revoked by the Registrar on July 13, 2000 (in action unrelated to Case No. 00-2808) and so notified Fine, advising that his complaint would be closed as unresolved. 5. On October 13, 2000, Plaintiff Fine made a claim to the Residential Contractors’ Recovery Fund (Recovery Fund), alleging an amount of losses of $24,198.39. He also submitted more than three estimates by licensed contractors to perform corrective action and complete the construction. The least expensive bid was in the amount of $23,500.00 by Aqua Vista Swimming Pool Plastering and Remodeling (Aqua Vista), dated August 31, 2000. 6. Administrative notice is taken that, on behalf of the Recovery Fund, Registrar’s inspector Purchase inspected the outdoor project on January 29, 2001, and then authored several RECOVERY FUND INSPECTION REPORTs as he received additional information and clarification from Fine. In his last REPORT ("Second Re-evaluation", dated April 4, 2001) and based on his inspection findings and in consideration of the balance due Defendant on the original contract and the Aqua Vista bid to correct and complete the project, Inspector Purchase then recommended alternative Recovery Fund payouts in the amount of $17,206.42 or $18,533.36, depending whether reimbursement for certain electrical work by "Dave's Handyman Repair" would be included in the payout. 7. On April 13, 2001, the Registrar issued NOTICE TO CONTRACTOR OF CLAIM FOR ADMINISTRATIVE PAYOUT, which notified Defendant that Plaintiff had submitted a claim to the Recovery Fund payable in the amount of $18,533.36 and that an award might be made without a hearing unless Defendant requested a hearing in writing. Through Franklin, Defendant MOBI timely requested a hearing. 8. At hearing, Plaintiff Fine appeared and testified, and also offered Exhibits 1 through 33. Exhibits 11 and 30, 31, and 32 were deemed duplicative or irrelevant, and therefore excluded by the undersigned; the remaining Exhibits were marked, admitted, and given due consideration. 9. Defendant MOBI appeared through Franklin as its authorized representative, who testified and offered Exhibits A through G, which were marked, admitted, and duly considered. 10. Inspector Purchase also appeared to testify about his role in inspecting the project to consider workmanship and determine extent of completion based on the original contract and subsequent change orders, and in light of the notes of Inspector Lafond relative to his prior inspection. 11. Based on that information, Inspector Purchase then provided his analysis of the actual cost to complete, based on the bid by Aqua Vista, the lowest of the bids submitted by Plaintiff Fine, and how he had calculated the alternative Recovery Fund payouts recommended in his Second Re-evaluation REPORT of April 4, 2001. 12. The inspector also explained that once Defendant Contractor's license was revoked on July 13, 2000), the company could neither be directed by the Registrar nor provided the opportunity on its own to correct deficiencies in its workmanship and complete the project at issue, either prior to or as part of the Recovery Fund claim. 13. In his testimony, and based on the Exhibits he submitted, Plaintiff Fine provided substantial evidence in corroboration of the Recovery Fund analysis by Inspector Purchase, and specifically, credible testimony why the Dave's Handyman Repair electrical work should be included in any Recovery Fund payout, consistent with the higher payout recommended by the inspector in the amount of $18,533.36. 14. In addition, Plaintiff Fine referenced the inspector's calculations and his Exhibit 27 for his assertion that $774.52 in construction fees and tax and insurance (included in two "WORK CHANGE ORDERS" by Defendant, both dated March 10, 2000) should be added to the inspector's recommended $18,533.36, for a total Recovery Fund payout of $19,327.88. 15. Fine's explanation for this additional $774.52 was that although he had not paid those additional costs when he paid the WORK CHANGE ORDERS directly to the plumbing and electrical subcontractors, these fees should be both added to the original contract price (as Inspector Purchase had recommended) and subtracted from the balance due on the contract (contrary to the inspector's calculation). 16. The essential contention and argument presented by Defendant’s representative Franklin, through his own testimony and Exhibits, was that his company had been ready and willing to complete the contract on time and according to workmanship standards but for Plaintiff's endless and frivolous changes, some of which were contrary to the plans and specifications and to local code. 17. Franklin questioned, in general terms and without contravening evidence of substantial probative value, the calculations and analysis leading to Inspector Purchase's Recovery Fund payout recommendation, and why his company had not been provided opportunity to participate in the Recovery Fund inspection and information process. 18. Franklin also questioned whether the bids from other contractors (particularly Aqua Vista) were based on actual site inspections, and whether such bids called for work not included in the scope of his company's contract with Plaintiff, but he provided no evidence sufficient to raise any reasonable inferences to that effect. 19. Franklin further contended that if his company had been given the chance to address any deficiencies in workmanship or completion, either at the time of the original complaint or relative to the Recovery Fund claim, Defendant could have corrected and completed the construction for many thousands of dollars less than the payout recommended by the inspector, such that Plaintiff therefore did not really suffer the extent of actual damages claimed.

APPLICABLE LAW A.R.S. §§ 32-1131 through 32-1140 provide for laws relating to the Residential Contractors’ Recovery Fund. In pertinent part, particular sections of that article state: A.R.S. § 32-1132: A. There is established the residential contractors' recovery fund, to be administered by the registrar, from which any person injured by an act, representation, transaction or conduct of a residential contractor, which is in violation of this chapter or the rules adopted pursuant to this chapter, may be awarded in the county where the violation occurred an amount of not more than twenty thousand dollars for damages sustained by the act, representation, transaction or conduct. An award from the fund is limited to the actual damages suffered by the claimant as a direct result of the contractor's violation but shall not exceed an amount necessary to complete or repair a residential structure or appurtenance within residential property lines, except that an award from the fund shall not be available to persons injured by an act, representation, transaction or conduct of a residential contractor whose license was in an inactive status, expired, canceled, revoked or suspended pursuant to section 32-1154, subsection A at the time of the contract. No more than the maximum individual award from the fund shall be made on any individual residence or to any injured person. Notwithstanding any other provision of law, monies in the contractors' recovery fund shall not be directly awarded for attorneys' fees or costs except in contested cases appealed to the superior court. (Emphasis added).

A.R.S. § 32-1131: In this article, unless the context otherwise requires: 1. "Assessment" means the contribution by a contractor to the residential contractors' recovery fund. 2. "Fund" means the residential contractors' recovery fund. 3. "Person injured" means any owner of residential real property which is classified as class five property under section 42-162, subsection A, paragraph 5 and which is actually occupied or intended to be occupied by the owner as a residence including community property, tenants in common or joint tenants who are damaged by the failure of a residential contractor or a dual licensed contractor to adequately build or improve a residential structure or appurtenance on that real property. Included in this definition are lessees of residential real property who contract directly with a residential contractor or indirectly with a subcontractor of that contractor and homeowners' or unit owners' associations after transfer of control from the builder or developer for damages to the common elements within the complex. 4. "Residential contractor" means a contractor as defined in section 32-1101 who is licensed to perform work on residential property pursuant to this chapter and who engages in residential contracting.

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CONCLUSIONS OF LAW 1. In this administrative proceeding, Plaintiff Fine bears the burden of proof and must establish the amount of actual damages by a preponderance of the evidence. See A.A.C. R2-19-119; see also Culpepper v. State, 187 Ariz. 431, 438, 930 P.2d 508, 515 (App. 1996). “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). A preponderance of the evidence is “evidence which is of greater weight or more convincing than evidence which is offered in opposition to it; that is, evidence which as a whole shows that the fact sought to be proved is more probable than not.” Black’s Law Dictionary at page 1064 (6th ed. 1990). 2. When considered both specifically relative to particular costs to complete and/or repair particular items, and in its entirety, the testimony and evidence of record is found by the undersigned to establish, by a preponderance of the evidence, actual damages suffered by Plaintiff, as a direct result of Defendant’s violation, in the amount of $18,533.36.

3. Plaintiff's assertion that this figure be increased by $774.52 for additional fees and costs is deemed not sufficiently persuasive to prove such increase represents actual damages not otherwise considered, and therefore, such assertion is not supported by a preponderance of the evidence. 4. Franklin's contention for Defendant MOBI, that the company could complete the work arguably necessary for much less than another contractor, presumes a legal impossibility, given that the company's license is revoked and has been since July 13, 2000. The company is therefore barred by law (A.R.S. § 33-1151) from contracting without a license in good standing and thus, from any further work on the project.

5. The Registrar may make an award from the Recovery Fund in “any amount of not more than twenty thousand dollars for damages sustained by the act, representation, transaction of conduct” of a residential contractor that violates statutes governing contractors or the rules the Registrar has adopted pursuant to those statutes. See A.R.S. § 32-1132(A). Since Plaintiff has established that Defendant’s workmanship deficiencies and failure to complete construction of their residential outdoor landscaping resulted in actual damages of $18,533.36, he is entitled to that amount as payout from the Recovery Fund.

RECOMMENDED ORDER In view of the foregoing, it is recommended that, on the effective date of this Order, the Registrar of Contractors shall commence and finalize payment procedures from the Residential Contractors’ Recovery Fund to Plaintiff in the amount of $18,533.36. Done this day, July 12, 2001.

______________________________________ Anthony Halas Administrative Law Judge

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

Registrar of Contractors Michael P. Goldwater ATTN: Joyce Armijo 800 West Washington, 6th Floor Phoenix, AZ 85007

By ___________________________

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