ALJDEC decisions subject to certification as final

19F-R1919001-ADH · Arizona State Department of Housing · 2019-07-10

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: June 24, 2019, at 8:30 a.m. APPEARANCES: Larry Baker, Mary Hazel Woodhead and Mary Elizabeth Woodhead, Victor Abston, William Townsend, Ron and Janice Wilson, Norman Aguillion, and Terry Hemphill (collectively, “Complainants”) appeared telephonically on their own behalves; the Arizona Department of Housing (“the Department”) was represented by Valerie Marciano, Esq., Assistant Attorney General; Yvette Sarma Reckards dba Yvette’s Home Sales (“Respondent”) failed to appear. ADMINISTRATIVE LAW JUDGE: Diane Mihalsky _____________________________________________________________________

FINDINGS OF FACT Background and Procedure 1. The Department or its predecessor agency issued License No. 8660, Class D-12 to Respondent. On or about February 1, 2019, the Department summarily suspended the license. 2. The Department referred the order of summary suspension to the Office of Administrative Hearings (“OAH”), an independent agency, for an evidentiary hearing. On or about April 8, 2019, a hearing was held before Administrative Law Judge (“ALJ”) Kay A. Abramsohn in OAH Case No. 19F-A1919005-ADH. On or about April 29, 2019, ALJ Abramsohn issued a recommended decision to the Department, finding that it had established that Respondent violated A.R.S. §§ 41-4030(P), 41-4030(A)(3), 41-4030(D), and 41- 4030(D) in its transactions with the named Complainants in this matter. As a result, ALJ Abramsohn upheld the Department’s summary suspension of Respondent’s license and recommended that the license should be revoked.[1] The Department’s director accepted ALJ Abramsohn’s decision and revoked Respondent’s license. 3. Complainants filed claims with the Department’s Consumer Recovery Fund (“the Fund”) pursuant to A.R.S. § 41-4043(A). The Department verified the amounts of the claims pursuant to A.R.S. § 41-4043(B).[2] The Department referred the claims to OAH for an evidentiary hearing pursuant to A.R.S. § 41-4043(C). 4. On or about May 6, 2019, the Department issued a Notice of Hearing Re: Consumer Recovery Fund, setting a hearing on June 24, 2019, at 8:30 a.m. By this time, Respondent had been criminally convicted for the same and similar transactions that ALJ Abramsohn had found violated the Department’s statutes. As a result, Respondent was being held in the Yuma County Jail. The Department sent the Notice of Hearing to Respondent at her address of record, at the Yuma County Jail, and in care of her attorney. The Department also moved for Respondent and the individual Complainants to appear telephonically and made arrangements for them to call a conference line that it had set up. 5. All of the named Complainants testified telephonically on their own behalves. The Department submitted four exhibits and presented the testimony of Donna Grant, its Compliance Manager, Head of its Licensing and Investigations Section, and the investigator assigned to the complaints that consumers had filed against Respondent. 6. By the time of the evidentiary hearing in this matter, Respondent had been transferred from the Yuma County Jail to a state penitentiary. Respondent did not call the conference number or request to appear telephonically from another number. Respondent did not request that the hearing be continued. Although the start of the duly noticed hearing was delayed sixteen minutes to allow Respondent additional time, Respondent did not appear, personally or through an attorney, and did not contact OAH to request that the start of the hearing be further delayed. Consequently, Respondent did not present any evidence to challenge the amounts that the Fund should reimburse the various Complainants. Hearing Evidence 7. All of the Complainants except Norman Aguillon were damaged by Respondent’s failure to pay them the proceeds of her sale of manufactured homes that they sold to buyers that she had located. Mr. Aguillon was damaged by Respondent’s failure to return his $5,000.00 down payment after the seller of a manufactured home rejected his offer. 8. Ms. Grant testified that Respondent charged most of the Complainants 6.5% as a commission for selling their manufactured homes and that their damages did not include any commissions that they had agreed to pay. Ms. Grant testified that because some of the Complainants had not yet transferred title to the manufactured homes to the buyers, a payout from the Fund would have to be contingent on their transfer of the title. 9. On or about May 17, 2019, Respondent pled guilty to theft, a class two felony, attempted fraudulent schemes and artifices, a class three felony, and attempted theft, a class three felony. Respondent agreed to be sentenced to a term of incarceration, which the plea agreement left to the court’s discretion, and following her release, to serve a combined total of fourteen years’ probation. Respondent also agreed that she would not be eligible for early release from probation until she had paid full restitution to sixteen named victims of her crimes, including the seven individual Complainants in this matter. Respondent agreed to pay the following amounts in restitution to the named Complainants: 9.1 $60,012.50 to Victor Abston; 9.2 $5,039.72 to Norman Aguillon; 9.3 $63,000.00 to Ron and Janice Wilson; 9.4 $34,819.75 to Mary Hazel Woodhead; 9.5 $51,700.00 to Terry Hemphill; 9.6 $22,518.90 to Judith and William Townsend; and 9.7 $38,120.00 to Larry Baker. Respondent also agreed that during the term of her probation, she would not gamble, place bets, play lotteries, or engage in any wager for sport or entertainment and that she would not enter or be on the premises of any casino, gambling facility, or gambling website.[3] 10. Ms. Grant prepared a spreadsheet of Complainants’ compensable losses from the Fund, with an explanation of each calculation.[4] Victor Abston 11. Respondent sold a manufactured home that Mr. Abston owned to the Wheelons for $64,000.00. The commission that Respondent was to receive under the listing agreement was 6.5%. 12. To effect the sale, Mr. Abston sent Respondent a copy of his Oregon driver’s license and title to the home. 13. Respondent sent Mr. Abston a check in the amount of $60,012.50, representing the proceeds of the sale less her commission. When Mr. Abston attempted to deposit the check into his bank account, it was returned for insufficient funds. His bank charged his account $4.00 as a return deposit charge. 14. According to Ms. Grant’s spreadsheet, Mr. Abston’s compensable damages are $60,016.50.[5] Norman Aguillon 15. Mr. Aguillon gave Respondent a $5,000.00 check for a down payment on a manufactured home that was for sale at Rancho Rialto, Space 227. Respondent promised not to deposit the check unless the seller accepted Mr. Aguillon’s offer and he had time to move funds from another account. 16. The seller of the manufactured home rejected Mr. Aguillon’s offer. Nonetheless, Respondent deposited Mr. Aguillon’s $5,000.00 check into her account. 17. Mr. Aguillon’s bank honored the check, but charged his account a $20.00 overdraft fee.[6] Mr. Aguillon requested that Respondent refund his $5,000.00, but Respondent did not return any of his down payment. 18. According to Ms. Grant’s spreadsheet, Mr. Aguillon’s compensable damages are $5,020.00.[7] Ron and Janice Wilson 19. Respondent sold a manufactured home that Mr. and Mrs. Wilson owned to the Dunns for $63,000.00. The listing agreement provided that Respondent would receive a 6% commission for the sale. 20. Mr. and Mrs. Wilson transferred title to the Dunns. Respondent did not give any of the sale proceeds to Mr. and Mrs. Wilson. 21. Ms. Grant calculated Respondent’s commission as $3,780.00 and, after deducting the commission, Mr. and Mrs. Wilson’s share of the sale proceeds as $59,220.00.[8] 22. Mr. and Mrs. Wilson agreed to Ms. Grant’s calculation of their compensable loss. Mrs. Wilson testified that she and her husband are senior citizens who reside in a gated community in the Yuma area. Mrs. Wilson testified that Respondent’s theft of their share of the proceeds from the sale of their manufactured home caused them humiliation. Mary Hazel Woodhead and Mary Elizabeth Woodhead 23. Mary Hazel Woodhead (“Ms. Hazel”) and her daughter, Mary Elizabeth Woodhead (“Ms. Elizabeth”), each owned manufactured homes, one in space 17 and the other in space 28. Respondent sold both homes to Lenox Johnson for $35,000.00. Respondent did not give any of the proceeds of the sale to Ms. Hazel or Ms. Elizabeth. 24. Ms. Grant calculated Ms. Hazel and Ms. Elizabeth’s loss based on Respondent being entitled to keep a 6.5% commission on the sale of each home, for a total commission of 13%, or $4,550.00, rather than a 6.5% commission on both homes if they were sold to a single buyer in a single transaction. Ms. Grant calculated Ms. Hazel and Ms. Elizabeth’s compensable loss as $30,450.00.[9] 25. Deborah Morsette, Ms. Elizabeth’s sister, testified that Respondent orally informed Ms. Hazel and Ms. Elizabeth that if she sold the two homes to one buyer in a single transaction, she would cut the commission to 6.5% for both houses because she was selling the houses for so much less to a single buyer than she could have gotten from two unrelated buyers. Ms. Hazel and Ms. Elizabeth confirmed that Ms. Morsette’s account accurately set forth their understanding of their agreement with Respondent. 26. The Department submitted Respondent’s Personal Property Purchase and Sales Agreement with Ms. Hazel and Ms. Elizabeth (“Sales Agreement”). The sale price for both houses was a combined total of $35,000.00. Ms. Hazel, Ms. Elizabeth, and Respondent signed the Sales Agreement. The Sales Agreement did not provide for a commission.[10] 27. The Department also submitted a separate Manufactured Home Exclusive Listing Aggreement (“Listing Agreement”) for each home. The Listing Agreement for the 2 bedroom/2 bathroom 1998 Cavco home was for a listing price of $39,200.00 and a 6.5% Commission, with a minimum commission of $1,500.00. The Listing Agreement for the 1 bedroom/1 bathroom 1999 Cavco home was for a listing price of $19,500.00 and a 6.5% commission, with a minimum commission of $1,500.00. The seller on both listing agreements was “Mary Woodhead.” Although Respondent signed both Listing Agreements, neither Ms. Hazel nor Ms. Elizabeth did.[11] 28. Ms. Grant pointed out that the Listing Agreements both provided for a 6.5% commission and did not include a contingency for a lesser commission if the homes were sold together to a single buyer. Ms. Grant testified that she first heard about Ms. Hazel’s and Ms. Elizabeth’s conversation with Respondent at the hearing. 29. Ms. Grant’s spreadsheet noted that although title to the home in space 17 had been transferred to Mr. Johnson, title to the home in space 28 was still in the one of the Woodheads’ name.[12] Ms. Grant testified that title to the second home had since been transferred to Mr. Johnson. Terry Hemphill 30. Respondent sold a manufactured home that Mr. Hemphill owned to Jim Sircin for $55,000.00. Respondent did not give any of the sales proceeds to Mr. Hemphill. 31. After deducting a 6% commission for Respondent, Ms. Grant calculated Mr. Hemphill’s compensable damages as $51,700.00.[13] 32. Mr. Hemphill acknowledged that he had not transferred title to the home to Mr. Sircin. Mr. Hemphill explained that he had to get a duplicate title from ADOT. Mr. Hemphill testified that the buyer was living in the home paying rent and the lot fee. 33. Ms. Grant’s spread sheet stated and she testified that any payout from the Fund to Mr. Hemphill must be contingent on him providing evidence that he had conveyed title to the home to Mr. Sircin.[14] / / / / William Townsend 34. Respondent sold a manufactured home that Mr. Hemphill owned to the Reimers for $36,500.00. According to Ms. Grant’s spreadsheet, under the sales and listing agreements, Mr. Townsend was to receive sale proceeds in the amount of $33,538.90.[15] 35. The record does not include the listing agreement or any evidence of the specific commission that Mr. Townsend agreed to pay Respondent. Deducting Mr. Townsend’s share of the sales proceeds from the sale amount results in a commission of $2,461.10, or 6.836% of the sale amount. 36. Title to the home has been transferred to the Reimers. 37. Respondent paid Mr. Townsend $11,020.00. Mr. Townsend testified that he had not received any more sales proceeds. 38. According to Ms. Grant’s spreadsheet, the payment left a compensable balance of $22,518.90.[16] Mr. Townsend agreed with Ms. Grant’s calculation. Larry Baker 39. Respondent sold a manufactured home that Mr. Baker owned to Raymond and Maria Calladine for $52,000.00. 40. Mr. Baker did not have a copy of the listing agreement, but told Ms. Grant that he believed that Respondent’s commission was 6% of the selling price, or $3,120.00. Respondent did not give Mr. Baker the remaining $48,880.00 in proceeds from the sale. 41. Mr. Baker testified that he received some money after he went to Yuma and confronted Respondent. According to Ms. Grant’s spreadsheet, Respondent gave Mr. Baker $10,500.00.[17] 42. According to the spreadsheet, the home was still titled to Mr. Baker, but the Calladines received properly signed off titles on May 20, 2019.[18] Ms. Grant testified the title to Mr. Baker’s manufactured home was transferred to the buyer. 43. According to the spreadsheet, Mr. Baker’s compensable damages are $38,380.00.[19] Mr. Baker agreed with this amount. CONCLUSIONS OF LAW 1. The Department has subject-matter jurisdiction in this matter pursuant to A.R.S. §§ 41-4041, 41-4042, and 41-4043. 2. The Notice of Hearing that the Department mailed to Respondent at her address of record, to the Yuma County Jail, and to Respondent’s attorney was reasonable and Respondent is deemed to have received notice of the hearing.[20] 3. Complainants bear the burden to establish the amounts of the payouts that they are entitled to recover from the Fund by a preponderance of the evidence.[21] “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”[22] A preponderance of the evidence is “[t]he greater weight of the evidence, not necessarily established by the greater number of witnesses testifying to a fact but by evidence that has the most convincing force; superior evidentiary weight that, though not sufficient to free the mind wholly from all reasonable doubt, is still sufficient to incline a fair and impartial mind to one side of the issue rather than the other.”[23] 4. A.R.S. § 41-4043 provides in relevant part as follows: A. If any consumer who is buying or selling the consumer's home uses the services of a licensed dealer of manufactured homes, mobile homes or factory-built buildings designed for use as residential buildings and is damaged as a result of an act or omission by a licensed dealer of manufactured homes, mobile homes or factory-built buildings designed for use as residential buildings that constitutes a violation of section 41-4030, or rules adopted pursuant to that section, and the sale is subject to section 41-4030, subsection D, that consumer may file a claim with the department for payment from the consumer recovery fund. The claim shall be verified by the department. . . . .

C. On verification of the claim for payment, the director shall provide for a hearing pursuant to chapter 6, article 10 of this title.

D. The director shall pay from the consumer recovery fund whatever sum the administrative law judge finds payable on the claim. A decision granting a claim shall include an order suspending the license of the licensee on whose account the claim was filed. Such a license shall remain suspended until the licensee has repaid in full, plus interest at the rate of ten percent per year, the amount paid from the consumer recovery fund on the licensee's account. . . . .

G. The consumer recovery fund has a claim against the licensee on whose account a claim was granted or any other person who caused or contributed to a claim paid by the consumer recovery fund for the amount paid plus costs, necessary expenses and reasonable attorney fees.

H. The director is subrogated to the claim of the consumer recovery fund against the bond and other assets of the licensee. The director shall deposit any amount recovered into the consumer recovery fund.

5. The amounts of restitution that Respondent was ordered to pay Complainants as part of the sentence pursuant to her plea agreement for the crimes of theft, attempted fraudulent schemes and artifices, and attempted theft do not determine the amounts that they are entitled to recover from the Fund. The criminal statutes that Respondent admitted violating are different than the statutes that give injured consumers a right to recover from the Fund the damages that they incur due to a licensed dealer’s violation of the Department’s statutes. The record does not include the factors that the criminal court considered in her calculation of the restitution amounts. Respondent may not pay the restitution that she was ordered to pay to any of the Complainants. In the event that she eventually does pay any restitution to any of the Complainants, the Department should notify the criminal court that, because the Department has substantially satisfied Complainants’ claims against Respondent, under A.R.S. § 41-4043(G) and (H), the restitution that Respondent was ordered to pay Complainants is properly payable to the Department. 6. Most of the Complainants accepted the Department’s calculations and were willing to accept the verified amount of the payouts from the Fund that the Department proposed. Therefore, a preponderance of the evidence supports payouts from the Fund to these Complainants in the following amounts: 6.1 To Victor Abston, $60,016.50; 6.2 To Norman Aguillon, $5,020.00; 6.3 To Ron and Janice Wilson, $59,220.00; 6.4 To William Townsend, $22,518.90;[24] and 6.5 To Larry Baker, $38,380.00. 7. With respect to Ms. Hazel Woodhead and Ms. Elizabeth Woodhead’s claim, the record does not establish that they agreed to pay a 6.5% commission on the sale of both manufactured homes to a single buyer in a single transaction because they did not sign the Listing Agreements. On this record, Respondent appears to have charged varying commissions of between 6% and 6.8% per transaction. The Listing Agreements both stated that, under some circumstances, Respondent would be willing to accept a commission as low as $1,500.00. The record does not contain a record of what, if anything, Ms. Hazel and Ms. Elizabeth told Ms. Grant about their understanding of the commission that Respondent would charge for the sale of the two homes. It is possible that Ms. Grant calculated their damages based on her understanding of their agreement with Respondent about the commission without confirming that Ms. Hazel and Ms. Elizabeth shared her understanding. Based on the values contained in the Listing Agreements, it appears that Respondent sold the two manufactured homes to Lenox Johnson at a substantial discount and that Respondent may have been motivated to reduce her commission to make the quick sale. Ms. Hazel’s, Ms. Elizabeth’s, and Mrs. Morsette’s testimony that Respondent agreed to accept a 6.5% commission on the sale of both houses in exchange for a lower sale price was consistent and credible. Therefore, Ms. Hazel Woodhead and Ms. Elizabeth Woodhead established by a preponderance of the evidence that they are entitled to the sale price of $35,000.00 for both houses less a single 6.5% commission of $2,275.00, for a Fund payout in the amount of $32,725.00.[25] 8. Mr. Hemphill did not disagree with the proposed payout amount but acknowledged that he had not yet transferred title to the manufactured home to the buyer, Jim Sircin. Therefore, contingent on Mr. Hemphill providing documentary proof that he has transferred title to the manufactured home, a preponderance of the evidence supports a payout from the Fund to Mr. Hemphill in the amount of $51,700.00. ORDER Based upon the foregoing, IT IS ORDERED that on the effective date of the final Order in this matter, the Department shall pay the following Complainants the following amounts from the Consumer Recovery Fund: To Victor Abston, $60,016.50; To Norman Aguillon, $5,020.00; To Ron and Janice Wilson, $59,220.00; To William Townsend (and, if the manufactured home was community property, Judith Townsend), $22,518.90; To Larry Baker, $38,380.00; and To Mary Hazel Woodhead and Mary Elizabeth Woodhead, $32,725.00. IT IS FURTHER ORDERED that if, on or before 30 days after the effective date of the final Order, Terry Hemphill provides documentary proof that he has transferred title to the manufactured home to its purchaser, Jim Sircin, that is satisfactory to the Department, it shall pay Mr. Hemphill $51,700.00 from the Consumer Recovery Fund. IT IS FURTHER ORDERED that Respondent Yvette Sarma Reckards dba Yvette’s Homes Sales License No. 8660, Class D-12 shall remain revoked until the she reimburses a total of $217,880.40 or, if Mr. Hemphill provides satisfactory proof that he has transferred title to the manufactured home to the buyer, $269.580.40, with 10% interest per year to the Consumer Recovery Fund. Respondent is hereby notified that the Department’s Consumer Recovery Fund also has a claim against her for the Department’s costs, necessary expenses, and reasonable attorney’s fees incurred as a result of this matter. 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 shall be five (5) days after the date of certification. Done this day, July 10, 2019.

/s/ Diane Mihalsky Administrative Law Judge

Transmitted electronically to:

Carol Ditmore, Director Arizona Department of Housing ----------------------- [1] See Exhibit A to the Notice of Hearing and Exhibit A submitted at the hearing. [2] See Exhibit B to the Notice of Hearing and Exhibit B submitted at the hearing (Spreadsheet). [3] See the Department’s Exhibit D. [4] See the Department’s Exhibit B. [5] See the Department’s Exhibit B at 3. [6] See the Department’s Exhibit B at 4. [7] See the Department’s Exhibit B at 4. [8] See the Department’s Exhibit D at 3. [9] See the Department’s Exhibit B at 2. [10] See the Department’s Exhibit C at 1. [11] See id. at 2, 3. [12] See the Department’s Exhibit B at 2. [13] See the Department’s Exhibit B at 5. [14] See the Department’s Exhibit B at 5. [15] See the Department’s Exhibit B at 3. [16] See id. [17] See the Department’s Exhibit B at 1. [18] See id. [19] See the Department’s Exhibit B at 1. [20] See A.R.S. §§ 41-1092.04; 41-1092.05(D). [21] See A.R.S. § 41-1092.07(G)(2); A.A.C. R2-19-119; see also Vazanno v. Superior Court, 74 Ariz. 369, 372, 249 P.2d 837 (1952). [22] Morris K. Udall, Arizona Law of Evidence § 5 (1960). [23] Black’s Law Dictionary at page 1220 (8th ed. 1999).

[24] The criminal court ordered Respondent to pay restitution to Judith and William Townsend. The Department should determine whether the manufactured home was owned as community property and, if so, issue payment to both Judith and William Townsend. [25] This amount is less than the $34,819.75 that the criminal court ordered Respondent to pay to Mary Hazel Woodhead as restitution. The record in this matter does not contain the basis of the court’s calculation.

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Office of Administrative Hearings 1740 West Adams Street, Lower Level Phoenix, Arizona 85007 (602) 542-9826