ALJDEC decisions subject to certification as final

06F-1873W-ROC · Registrar of Contractors · 2006-11-20

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: November 15, 2006 APPEARANCES: Complainants appeared on their own behalf and Respondent was represented by its attorney, William Sawkiw. ADMINISTRATIVE LAW JUDGE: Mark A. Silver _____________________________________________________________________

Evidence and testimony were presented and, based upon the entire record in this matter, the following Findings of Fact, Conclusions of Law, and Recommended Order are made:

FINDINGS OF FACT

1. The above captioned matters were consolidated for hearing, since both involved the similar facts and entailed the use of the same witnesses. Complainants are involved in some type of partnership, in that they referred to themselves as “partners.” They both claim that since their respective contracts to purchase new home construction were never finally consummated that they are entitled to a full refund of their earnest money deposits. The facts surrounding their claims are discussed in the findings below.

2. The following salient facts were adduced at the hearing and are important to note:

a. On or about March 6, 2006 Complainants each signed purchase agreements to obtain new home construction. The homes were to be next door to each other. b. The contracts for the new home construction were entered into evidence and showed that Complainants entered into the applicable contracts with a company known as “Tousa Homes Inc., a Florida corporation, dba Engle Homes” (“Tousa”) c. Among other things, the applicable contracts showed that the homes were to be constructed by one of the Respondents named herein, Engle Homes Residential Construction, LLC (“Residential”). The contract further acknowledged that Residential was an affiliate of Tousa and that Residential was the holder of an Arizona contractor’s license. d. At the instant hearing, Residential acknowledged that it is affiliated with Tousa, but indicated that they are two separate and distinct legal entities. Tousa, itself, does not possess a Registrar of Contractors’ license. e. Complainants each paid $20,000.00 as deposits for their respective new home construction projects. Residential asserted that it had nothing to do with the deposits in question and that all monies were held by Tousa. f. The contracts required Complainants to submit loan application within five (5) days of signing the contracts. The contracts further provided that Complainants would have thirty (30) days from the signing of the contract to make all necessary financing arrangements and to obtain approval for mortgage loans. In this regard, the contract gave Complainants the right to cancel the contracts and receive a refund of their deposits if they were unable to qualify for the necessary financing during the aforementioned thirty (30) day period for obtaining loan approval. The contract further provided that if Complainants did not cancel the agreement within said thirty (30) day window to obtain financing approval, then they will waive any right to cancel or receive a return of their deposit. g. Notwithstanding the above-described five (5) day requirement for submittal of loan application and thirty (30) day financing requirement, Complainants did not even make their loan application until almost two (2) months after signing the contracts. h. Evidence of record demonstrated that although Complainants received preliminary approval for mortgage loans from a lending company affiliated with Tousa after the thirty (30) day period provided in the contract, sometime later their mortgage loan applications were transferred to another company. i. Uncontroverted evidence of record established that numerous months after signing the contracts to purchase new home construction, both Complainants received notice that they failed to qualify for their respective loans. Although the reasons for the ultimate disqualifications are not totally clear from the instant record, sharply conflicting testimony was presented by Residential and Complainants regarding who was failing to cooperate in obtaining the necessary information for loan approval and regarding whose idea it was for Complainants’ loan applications to be ultimately transferred to another lender. The testimony regarding this issue was such that no basis exists for the disbelief of either side’s rendition of the facts. j. Residential asserts that Complainants were merely buying the homes in question in order to “flip” them for a profit during the recent real estate boom in the greater Phoenix area and when the “bottom dropped” out of said real estate boom, they did their best to prevent the contracts from going forward. Complainants deny these allegations. k. Complainants were both shown to be experienced investors in the purchase and sale of numerous properties. l. There was no showing that Engle Homes Arizona Construction Inc. (“Arizona”) had anything to do with the transactions in question and was not named in any of the contract documents.

3. Complainants’ Complaints are found to be with Tousa, not Residential or Arizona. Tousa is not a licensed contractor and the separate entities, known as Residential and Arizona were not shown to have anything to do with the contract dispute between Tousa and Complainants. The record presented herein was inadequate to support any finding that the “corporate veils” of the various entities should be pierced. Complainants failed to sustain the requisite burden of proof necessary to establish that either Residential or Arizona committed any act which would rise to level of wrongful or fraudulent conduct, in violation of the spirit and intent of the State’s Contracting laws.

4. Nothing in the ruling contained herein, regarding the licensed contractors, should serve to prevent Complainants from pursuing their respective claims against Tousa in either a civil court of competent jurisdiction or through arbitration, as provided in the applicable contracts.

CONCLUSIONS OF LAW

1. Complainants have the burden of proof and must establish statutory violations by a preponderance of the evidence. A.A.C. R2-19-119. Proof by “preponderance of the evidence” means that it is sufficient to persuade the finder of fact that the proposition is “more likely true than not.” In re Arnold and Baker Farms, 177 B.R. 648, 654 (9th Cir. BAP (Ariz.) 1994). It “is evidence which is of greater weight or more convincing than the 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 1182 (rev. 6th ed. 1990).

2. Complainants failed to sustain his burden of proof to establish that Respondents violated the applicable charged sections of the State’s Contracting laws. Therefore, the evidence of record did not sufficiently sustain a finding of violations by Respondents of the provision of A.R.S. §32-1154A, as charged in the Citation.

RECOMMENDED ORDER

Based on the foregoing, it is hereby recommended that these Citations (06-1873/ 06-1873W and 06-1874/06-1874W), together with the Complaints upon which they are based, be dismissed. In the event of certification of the Administrative Law Judge Decision by the Director of the Office of Administrative Hearings, the effective date of the Order in this matter will be forty (40) days from the date of that certification.

Done this day, November 20, 2006.

______________________________________ Mark A. Silver Administrative Law Judge

Original transmitted by mail this ____ day of ____________, 2006, to:

Registrar of Contractors Fidelis V. Garcia Legal Department 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