ALJDEC decisions subject to certification as final

2008A-114512511-ROC-rf · Registrar of Contractors · 2012-07-30

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: June 6, 2012, at 8:00 a.m. The record was held open until July 10, 2012, to allow Complainants sufficient time to obtain evidence regarding their claim for payment from the Residential Contractors’ Recovery Fund (hereinafter “the Fund”) in the amount of $4,198.00. On July 6, 2012, the Registrar of Contractors filed a Post-Hearing Memorandum Regarding Supplemental Evidence and Request for Findings of Fact and Conclusions of Law, stating that Complainants had failed to provide any additional evidence to support their claim for payment from the Fund. On July 10, 2012, Complainants filed a response thereto. APPEARANCES: Complainants appeared through their attorney, Elizabeth D. Bushell, Esq., Elizabeth D. Bushell, P.LC. Tyler Built LLC (hereinafter “Tyler”) appeared through its authorized representative, Moses Tyler. The Registrar of Contractors appeared through Montgomery Lee, Esq., Assistant Attorney General. ADMINISTRATIVE LAW JUDGE: M. Douglas _____________________________________________________________________

Evidence and testimony were presented and the following Findings of Fact, Conclusions of Law and Recommended Order are made: FINDINGS OF FACT 1. On October 14, 2010, the Registrar of Contractors issued a Notice of Recovery Fund Ineligibility that provided, in pertinent part, as follows: The Registrar of Contractors has reviewed your file and supporting documents of your administrative claim for payment from the [Fund]. This claim appears to be ineligible for recovery for the following reason(s):

License not [d]isciplined for [w]orkmanship Issues – Research of the underlying complaint (T08-1451) indicates that the contractor’s license was suspended because the contractor failed to provide proper documentation that all workers on the project were either properly licensed subcontractors or proper employees. In order to proceed into the Fund the contractor’s license must be disciplined as a result of failure to correct workmanship issues.

Based upon the above criteria, the Registrar of Contractors has taken the position that this claim be closed with no payment from the Recovery Fund.

2. On or about November 7, 2011, the Registrar of Contractors issued a Notice of Denial of Recovery Fund Claims that provided, in pertinent part, as follows: The Complainant(s) named above filed a claim for payment with the Residential Contractors’ Recovery Fund pursuant to A.R.S. § 32- 1154(F). After a review of the claim and all supporting documentation, the Fund has determined that Complainant(s) are denied payment from the Fund for the reasons set forth below.

Background:

On or about September 29, 2007, the Complainants entered into a contract with the Respondent to construct a new home, with work to commence on or about January 1, 2008. The original contract amount was $100,000.00. The Complainant provided proofs of payment totaling $57,692.00, in the form of cancelled checks written directly to the Respondent and deposit slips showing deposits made directly to the Respondent’s bank account. At the time Complainants terminated the contract, the unpaid balance on the contract was $42,308.00.

On June 20, 2008, complaint number T08-1451 was received by the Registrar of Contractors from the Complainants alleging numerous violations. The case went to a hearing, held on June 17, 2009. By Order of the Registrar dated September 8, 2009, the only violation proven in T08-1451, was a “(3.) …failure to provide documentation when requested of the subcontractor or the employee worker status of the workers on the project.” This Order also specifically stated that “(4.) There is insufficient evidence to find any other violations contained in the Citation and Complaint.” As such, there are final findings precluding any recovery in T08-1451, other than those suffered as a result of the above violations, within the limitations of § 32-1132(A).[1]

After a compliance hearing of July 11, 2011, the Registrar issued an Order dated September 18, 2011, adopting the Administrative Law Judge’s Recommended Order, revoking Respondent’s license.

On June 17, 2009, a second complaint number T09-1117, was also filed by Complainants against the Respondent for abandonment and poor work concerning the same project as addressed in T08-1451. The Respondent did not answer the citation and complaint and on March 18, [2011], the Respondent’s license was revoked as a direct result of the second complaint.

On October 6, 2010, a claim was filed with the Recovery Fund in case number T08-1451. On May 18, 2011, a second claim was filed with the Recovery Fund in case number T09-1117. In each claim, Complainants are requesting $32,675.00, based on the low bid amount for repairs for deficient work related to the same original contract with the Respondent. Since both claims are based on the same nexus of facts and circumstances, the Registrar has consolidated them for disposition.

Analysis:

I. Complainant Anna Carino is Ineligible to Access the Fund Since She Did Not Own the Property at Issue at the Time of Contract or at the Time the Injury Accrued.

Documentation provided by the Complainants in support of these claims establishes that the job site property at issue is the sole and separate property of Gilbert Maken. Complainant Maken took title to the property by [W]arranty [D]eed dated November 6, 2007. By Disclaimer Deed dated November 6, 2007, Complainant Carino acknowledged she “has no past or present right, title, interest, claim or lien of any kind or nature whatsoever in, to or against said property.” As such, [Anna] Carino is ineligible to access the Fund in both T08-1451 and T09-1117 since she does not meet the definition of a “person injured” as set forth in A.R.S. § 32- 1131.3. See also, McMurren v. J.M.C. Builders, Inc., 204 Ariz. 345 (2003). In the alternative, even if Complainant Carino was eligible, her claims must be denied for reasons set forth below.

II. Complainants Cannot Recover From the Fund in Claim Number T08-1451.

A.R.S. § 32-1132(A) limits an award from the Fund to those “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….” Case number T08-1451 resulted [in] violations of § 32-1154(A)(23) and (3)(specifically R4-9-108), but only involving the failure to provide documentation of the subcontractors and / or employee workers’ status. Complainants failed to establish support how such failure to document the status of the workers resulted in required repairs to the project. The bids submitted in support of this claim do not relate in any way to the violations in T08-1451. As such, Complainants’ claim must be denied in T08-1451.

III. Complainants Cannot Recover From the Fund in Case Number T09-1117.

After an inspection performed by a Registrar Inspector, a corrective work order was issued in Complainants’ second complaint. This corrective work order dated July 9, 2009, addressed the specifics of Complainants’ complaint as follows:

1. Complaint: “Underground water supply line not installed to Pima County code.” Missing tracer wire for PVC water supply line. Contractor to correct by appropriate means.

2. Complaint: “Poor workmanship on all drywall and texture.” – Poor tape joints at corners many visible joints, phone jack covered. (Some corrections of poor joints and outlet and light fixture boxes being covered were corrected by the complainant prior to inspection) Contractor to correct by appropriate means.

3. Complaint: “Electrical for AC had to be redone.” – Corrected by complainant at his expense prior to inspection. No action required.

4. Complaint: “Office room window wrong size not installed per plans.” - Plan calls for a 5’0” x 5’0” – 6’0 x 5’0 installed. Contractor to correct by appropriate means.

5. Complaint: “Doors poor workmanship.” – All exterior doors were in need of adjustment or rehanging. Light was visible between the stops and door edge on the 2 rear doors. Margins were irregular; the entry door was missing a deadbolt strike and the side entry door jamb appeared to be damaged while installing hardware. Contractor to correct by appropriate means.

6. Complaint: “Stucco poor workmanship.” a. “Stucco Cracks” All cracks shown at inspection were within ROC tolerances. Larger cracks were corrected by the complainant prior to inspection. No action required. b. “There were areas where lath was exposed.” Contractor to correct by appropriate means. c. “The front wall of the house deviated ¾” from flat.” Contractor to correct by appropriate means.

7. Complaint: “Weather strip missing from windows.” Glass bead missing from 3 windows. Contractor to correct by appropriate means.

(Underlined portions reflect Inspector’s conclusions).

Complainant failed to submit any documentation concerning monies they already have expended to complete and / or repair portions of the project. Complainants acknowledged to the Fund’s Supervisor, Glenn Hawkins, that they had completed the items listed above, but despite the Fund’s request, Complainant failed to submit any documentation evidencing these actual expenditures.[2] Instead, Complainants submitted three bids to evidence estimated repair and completion costs for the project.

Of the three, the highest bid, from “P & P Builders Inc.”, exceeds the scope of the corrective work required and is not itemized. It cannot, therefore, be used as a proper measure of Complainants’ estimated actual damages. The lowest bid, from “The Contractor Remodeling & Repair,” of $32,675.00 was submitted by the holder of a C-61 license and exceeds the scope of that license.[3] This bid cannot be used to estimate Complainants’ actual damages. The third bid, from “Antonick Drywall Company Inc.” also exceeded the scope of the corrective work required, but was itemized sufficiently to be useful in estimating Complainants’ actual damages. This bid’s allowable items total $37,587.00 + tax, or $39,857.25. The excluded item from this bid is the patio, as that item was specifically addressed in Complainants’ first case T08-1451 and found not to [be] a basis for discipline.

Based on all available evidence, the Complainants have not shown that they suffered any compensable actual damages, as the unpaid balance due on the original contract exceeds the allowable items from the bid estimating the costs to complete and repair the structure.

‘Actual Damages’ Calculation Summary:

Original Contract Price: $ 100,000.00 Less Payment on Contract: - ($ 57,692.00) Unpaid balance due on contract: $ 43,308.00 Expenditures to complete/repair project: $ 0.00 Estimated completion/repair costs from bid: ($ 39,857.25)

Amount expended over original contract price: ($ 2,450.75) Compensable “actual damages”: $ 0.00

Conclusion:

Based on the above, the agency will close this claim with no payment from the Fund. If you disagree with this finding, you may choose to request a hearing. Your hearing request must be in writing and must be received in this office no later than fifteen (15) days from the date of mailing of this Notice or until November 22, 2011. If a timely written request for hearing is received, the matter shall be set for an administrative hearing. You may retain legal representation or you may represent yourself at the administrative hearing. At the administrative hearing, you will bear the burden of proof to establish (1) eligibility pursuant to A.R.S. § 32-1131, et seq., and (2) actual damages pursuant to A.R.S. § 32-1132(A).

Any and all possible defenses to your eligibility for an award from the Fund, whether or not identified above or later discovered, may be raised and presented at the hearing. Based on the evidence and arguments presented at the hearing, you may be able to obtain an award from the Fund up to the amount noticed to the contractor, but no greater than the statutory maximum of $30,000.00 per person per property.

Upon receipt of an administrative hearing request, the agency will then enter its objection and intervene in this matter and an administrative hearing date will be set. The agency will request that an Assistant Attorney General be assigned to represent it and, as such, the Assistant Attorney General will voice the agency’s objections and defenses at the administrative hearing. You will receive written notification of the time and date of the administrative hearing.[4]

3. Complainants disagreed with the Registrar of Contractors’ determination to deny their claims for payment from the Fund and requested an administrative hearing.[5] 4. Joseph Antunez (hereinafter “Mr. Antunez”) testified that he is the owner and qualifying party for The Contractor Remodeling & Repair (ROC License No. C-61.229780-R). Mr. Antunez stated that he would charge $1,400.00 to remove and replace three of Complainants’ doors and door jambs. Mr. Antunez acknowledged that the Corrective Work Order did not require the removal and replacement of the doors. Mr. Antunez stated that in his opinion the doors were warped and “sun beaten” and required removal and replacement rather than adjustment. Mr. Antunez testified that he could not warranty the doors if they were simply adjusted.[6] 5. Anna Carino (hereinafter “Ms. Carino”) testified that she is married to Gilbert Maken (hereinafter “Mr. Maken”) and that they have been married for twenty years. Ms. Carino stated that she and Mr. Maken were married when their residence was constructed. Ms. Carino testified that her name was not on the title of their residence because the construction loan was based solely upon Mr. Maken’s income and that Complainants were able to obtain a construction loan for the residence based upon Mr. Maken’s income and better credit rating. Ms. Carino testified that her name was placed on the deed for Complainants’ residence.[7] Ms. Carino’s undisputed testimony regarding her marital status is found to be credible. 6. Ms. Carino testified that when Respondent abandoned the construction project, Complainants completed the construction project utilizing licensed subcontractors. Ms. Carino testified that the lending institution that funded the construction loan required written proof that all subcontractors were properly licensed.[8] 7. Richard Ulinger (hereinafter “Mr. Ulinger”) testified that he prepared the Recovery Fund Report.[9] Mr. Ulinger stated that based upon additional receipts provided by Complainants during the administrative hearing, the Registrar of Contractors, as confirmed by Assistant Attorney General Montgomery Lee, now agreed that Complainants’ actual damages in this matter total $14,323.96. 8. The Registrar of Contractors and Complainants did not agree on Complainants’ claims for an additional $3,800.00 for monies allegedly paid to All Temp H&C and for an additional $398.00 for the correction of the doors on Complainants’ residence. 9. There was no agreement in the parties’ dispute regarding Complainants’ eligibility for payment from the Fund. 10. Moses Tyler testified that he opposed any payout from the Fund and stated that Complainants went “far over” the original budget in completing their residence.[10] 11. The record in this matter was held open until July 10, 2012, to allow Complainants sufficient time to obtain and to submit documentation in support of their claim for $3,800.00 allegedly paid to All Temp H&C and $398.00 in additional money for the correction of Complainants’ doors. 12. No new information was presented to either the Registrar of Contractors or this Tribunal and the record closed on July 10, 2012. CONCLUSIONS OF LAW 1. The burden of proof at an administrative hearing falls to the party asserting a claim, right, or entitlement and the standard of proof on all issues in these matters is by a preponderance of the evidence. See A.A.C. R2-19-119. 2. 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). 3. A.R.S. §32-1131 provides, in pertinent part, as follows: 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 three property under section 42-12003 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. 4. Mr. Maken and Ms. Carino have been married for twenty years. Ms. Carino’s name was not on the deed for the residence because Mr. Maken and Ms. Carino utilized Mr. Maken’s income and credit rating to qualify for the construction loan for their residence. This Tribunal concludes that Complainants are an “injured person” as defined by statute and that they are eligible to receive payment from the Fund for the actual damages that they sustained as a result of Respondent’s acts or omissions in this matter. 5. A.R.S. § 32-1132 provides, in pertinent part, as follows: A. The residential contractors' recovery fund is established, to be administered by the registrar, from which any person injured by an act, representation, transaction or conduct of a residential contractor licensed pursuant to this chapter that 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 thirty 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. Actual damages shall not be established by bids supplied by or the value of work performed by a person or entity that is not licensed pursuant to this chapter and that is required to be licensed pursuant to this chapter. If the claimant has paid a deposit or down payment and no actual work is performed or materials are delivered, the award of actual damages shall not exceed the exact dollar amount of the deposit or down payment plus interest at the rate of ten per cent a year from the date the deposit or down payment is made or not more than thirty thousand dollars, whichever is less. Interest shall not be paid from the fund on any other awards under this chapter unless ordered by a court of competent jurisdiction. An award from the fund shall not be available to persons injured by an act, representation, transaction or conduct of a residential contractor who was not licensed pursuant to this chapter or whose license was in an inactive status, expired, cancelled, revoked, suspended or not issued 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 residential contractors' recovery fund shall not be directly awarded for attorney fees or costs except in contested cases appealed to the superior court. 6. The credible evidence of record supports an award from the Fund to Complainants for their actual damages in the total amount of $14,323.96, all of which shall be appropriately chargeable against Tyler and/or persons on Tyler’s License as set forth in A.R.S. § 32-1139(B). 7. A.R.S. § 32-1139(B), provides, in pertinent part, as follows: If any amount is paid from the fund in settlement of a claim arising from the act, representation, transaction or conduct of a residential contractor, the license of the contractor shall be automatically suspended by operation of law until the amount paid from the fund is repaid in full, plus interest at the rate of ten per cent a year. Any person who is or was, at the time of the act or omission, named on a license that has been suspended because of a payment from the recovery fund is not eligible to receive a new license or retain another existing license that also shall be suspended by operation of law, nor shall any suspended license be reactivated, until the amount paid from the fund is repaid as provided in this subsection.

RECOMMENDed order In view of the foregoing, it is recommended that when sufficient funds are available in the Fund, the Registrar of Contractors shall commence and finalize payment procedures from the Fund to Complainants in the total amount of $14,323.96 for Complainants’ actual damages. In the event of certification of this Administrative Law Judge Decision by the Director of the Office of Administrative Hearings, the effective date of the Order will be 40 days from the date of the certification. Done this day, July 30, 2012.

/s/ M. Douglas Administrative Law Judge

Transmitted electronically to:

William A. Mundell, Director Registrar of Contractors

----------------------- [1] See Findings of Fact #5 and #7 in ALJ’s June 29, 2009 Order, adopted by Order of the Registrar dated July 30, 2009. [2] Complainants’ refusal to submit their actual repair costs is troubling, given that the Fund looks to actual expenses as the best evidence of the costs to complete or repair. Bids are only utilized in the absence of actual expenditures. Complainants’ motivation in refusing to submit such evidence of their actual expenses casts doubt on Complainants’ credibility and truthfulness in their claim as a whole. [3] A Class C-61 license can only contract for jobs valued at $25,000.00 or less. See A.A.C. R4-9-102. [4] See Exhibit No. R -10 (Notice of Denial of Recovery Fund Claims). [5] See 11/15/11 Request for Administrative Hearing. [6] 6/6/12 Hearing Record (hereinafter “H.R.”) at 29:50-33:10. [7] H.R. at 53:33-54:58. [8] H.R. at 57:56-1:00.43. [9] See Exhibit No. R-11 (Recovery Fund Report). [10] H.R. at 3:08:00-3:11:24.

-----------------------

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