ALJDEC

01F-RF0421-ROC · Registrar of Contractors · 2001-09-20

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: September 10, 2001. APPEARANCES: Jan and Ed Kanemoto, Plaintiffs; Victoria Martin, Assistant Attorney General representing the Registrar of Contractors; and Bob Mechsner, Registrar of Contractors Inspector. ADMINISTRATIVE LAW JUDGE: Dorinda M. Lang. _____________________________________________________________________ Jan and Ed Kanemoto were financially injured when Home Makeover Specialists took their money and abandoned their remodeling project. They completed the project as their own general contractors and, because Home Makeover Specialists’ license was revoked, filed a claim with the Registrar of Contractors’ Recovery Fund. The Kanemotos have established that they suffered damages as a direct result of statutory violations by Home Makeover Specialists but should not be reimbursed for payments made to unlicensed subcontractors. Therefore, the Kanemotos’ claim should be paid in the amount of $2134.86. FINDINGS OF FACT 1. Jan and Ed Kanemoto hired Home Makeover Specialists, Inc. to remodel their home. Before the job was completed, Home Makeover Specialists abandoned the job, and the contract was terminated. Jan and Ed Kanemoto became their own general contractors and completed the job using the subcontractors that were already hired for the job. 2. After Home Makeover Specialists' license was revoked, the Kanemotos filed a claim with the Residential Contractors’ Recovery Fund asking $9530.38. A Registrar of Contractors Inspector reviewed the claim and recommended pay-out of $2134.86. He arrived at this amount by subtracting the amount due on the contract and the amount paid to unlicensed subcontractors from the cost of completing the project. 3. The Kanemotos requested a hearing at the Office of Administrative Hearings where they testified that they only used the subcontractors already working on the job or already accepted as subcontractors. They never suspected or were made aware that two of the subcontractors were not licensed. They argued that they should be reimbursed for the payments to the unlicensed contractors to avoid an injustice to them. The Registrar of Contractors representative argued in response that, while the situation was indeed unfortunate, it is not appropriate to pay unlicensed contractors from a fund maintained only by licensed contractors and designed only to address problem arising on their projects. 4. The Kanemotos argued that the Recovery Fund is there for the protection of homeowners and should be used to remedy injustices such as this. They also argued that they should simply be reimbursed all the money that was paid to Home Makeover Specialists because it absconded with their money and abandoned the project. CONCLUSIONS OF LAW 1. Arizona Revised Statute § 32-1132(A) provides for a residential contractors’ recovery fund “from which any person injured by an act, representation, transaction or conduct of a residential contractor . . .” may be awarded an amount of not more than $20,000. Arizona Revised Statute § 32-1154(E) provides that the Registrar of Contractors may order a pay-out from the recovery fund where a contractor’s license has been revoked or suspended as a result of a violation and the contractor is unwilling or unable to remedy the violation. 2. In this case, the Kanemotos have established that they are entitled to a pay-out from the Recovery Fund, but not for payments made to unlicensed subcontractors. Although the statute governing pay-outs from the fund does not specify that no payments can be made to reimburse unlicensed contractors, it is a violation of A.R.S. § 32-1154(A)(10) for a contractor to aid or abet an unlicensed contractor in evading the provisions of the attendant chapter of law. Further, A.R.S. § 32-1151 states that it is a violation of this chapter to engage in contracting without a license. Reimbursement for such illegal activity is not appropriate for a state agency, defeats the purpose of the Registrar of Contractors in its regulation of licensed contractors, and misuses funds supplied solely by licensed contractors to be paid out on behalf of licensed contractors. It allows contractors who are in violation of the statutes to benefit from their illegal activities. Clearly, the Registrar of Contractors’ policy against making pay-outs to unlicensed contractors is amply justified. Unfortunately for the Complainants, this may result, at times, in leaving homeowners without reimbursement for some of the harm that was done to them. 3. Pay-outs must be based on the actual damages that are a direct result of the conduct of the contractor. They cannot be based on alternate legal theories, though they may have merit. The Kanemotos’ argument that they should simply be reimbursed the full amount of money that they paid to a wrongdoer may be appropriate in another forum, but is not allowed as a basis for a Recovery Fund pay-out. Therefore, the appropriate pay-out to the Kanemotos in this case is $2134.86. RECOMMENDED DECISION Based upon the foregoing considerations, it is recommended that the Registrar of Contractors order the Residential Contractors’ Recovery Fund to issue a pay-out to Jan and Ed Kanemoto in the amount of $2134.86.

Done this day, September 20, 2001.

OFFICE OF ADMINISTRATIVE HEARINGS

______________________________________ Dorinda M. Lang 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