ALJDEC decisions subject to certification as final

2009A-1283615-ROC · Registrar of Contractors · 2011-09-14

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: August 24, 2011

APPEARANCES: Complainant appeared on his own behalf and was represented by attorney Chris Barski, Barski Drake, PLC; no one appeared on behalf of Respondent; the Residential Contractors’ Recovery Fund intervened in this matter and was represented by Assistant Attorney General Camila Alarcon.

WITNESSES: Glenn Hawkins, Claims Reviewer John Opilowsky

ADMINISTRATIVE LAW JUDGE: Eric A. Bryant _____________________________________________________________________

Complainant requested a hearing to appeal a denial of payout by the Residential Contractors’ Recovery Fund (“the Fund”). The Fund has issued notice that it has concluded that Complainant does not have any awardable damages as defined by statute. Complainant disagrees. As noted, Respondent did not appear and has not participated in the process. This tribunal entered the Fund claim file received from the Registrar of Contractors into the record. The claim file includes the underlying complaint file (ROC Complaint Number 2009-1283615, formerly P09-0128) as well as the filings related to the Fund claim. Complainant appeared and testified, submitting Exhibits C1 through C26, which were admitted into evidence in addition to the claim file. Glenn Hawkins testified for the Fund in support of the Fund’s determination against payout. The Fund offered Exhibits 1 through 7, which were admitted into the record.[1] Based upon the entire record, the Administrative Law Judge makes the following Findings of Fact, Conclusions of Law, and Recommended Order finding no awardable damages as defined by the applicable statute. FINDINGS OF FACT 1. Respondent was the holder of license B.165872-R. The license was revoked in September 2010, as a result of Respondent’s default in the underlying complaint (Case No. 2009-1283615 formerly P09-0128) filed by Complainant. That complaint concerned allegations of failure to pay subcontractors and material suppliers.[2] Upon default, Respondent was found to be in violation of A.R.S. § 32-1154(A)(7)(prohibiting fraudulent actions) and (A)(11)(prohibiting failure to pay subcontractors).[3] 2. Complainant filed a claim with the Fund in December 2010.[4] On the claim form, under the section pertaining to “Amount of Claim,” there are two choices for entry of an amount: either “Cost to repair and/or complete the project” or “Amount of deposit (if no work was done).” Complainant wrote “n/a” for both amounts.[5] Complainant made it clear in his submissions to the Fund and at hearing that he did not pay the subcontractors or suppliers out of his own pocket. After subcontractors began filing liens, the project was not completed and was sold at a short sale.[6] Complainant does not consider the subcontractor liens as the source of his loss.[7] Rather, he seeks recovery of claimed losses that resulted from the failure to complete the project and the subsequent construction loan default that led to the short sale.[8] 3. At hearing, Complainant submitted documentation relating to his losses because of the failure to complete the project, the loan default, and short sale. These exhibits are not found to be relevant and are, therefore, not described herein. The underlying complaint was not an abandonment complaint. 4. The Fund presented evidence in support of its position that Complainant suffered no damages that were a direct result of Respondent’s failure to pay subcontractors or suppliers. 5. The record shows that Respondent was found in violation of subsections (A)(7) and (A)(11) for failure to pay subcontractors or material suppliers. Respondent was not found to have abandoned the project, a violation of A.R.S. § 32-1154(A)(1). CONCLUSIONS OF LAW 1. The burden of proof at an administrative hearing is generally upon the person who brings the action.[9] Further, the standard of proof at hearing is by preponderance of the evidence.[10] The Fund denied payout because it found that Complainant had no actual damages as defined by statute.[11] Here, Complainant bears the burden of showing, by a preponderance of the evidence, that he has actual damages as defined by statute and that the amount he claims is reasonable and proper. Complainant has not met the burden to show actual damages. 2. Complainant is an injured person within the definition in A.R.S. § 32-1131(3) and is, therefore, entitled to recovery from the Fund. 3. Under the facts and circumstances of this case, the Registrar of Contractors is empowered to determine and award, based on actual damages, an appropriate payment to Complainant from the Fund pursuant to A.R.S. §§ 32-1132 and 32-1154(F). 4. The statute authorizing the Fund to payout claims limits awards to “actual damages.”[12] Although it does so awkwardly, the statute defines what “actual damages” are, and how they may be established, in the second, third, and fourth sentences of subsection (A): [Second sentence] 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. [Third sentence] 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. [Fourth sentence] 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. (Emphasis added.)

First, actual damages are defined in the second sentence as being a “direct result” of a violation of the ROC statutes. The “but” clause of the second sentence then further defines actual damages as the amount needed to repair or complete a project by stating that Fund awards are limited to no more than an amount necessary for repair or completion. The fourth sentence defines actual damages in the context of a contractual agreement when there has been a deposit but no work has been performed. The fourth sentence defines actual damages in the same way that the second sentence does, by stating a limitation to Fund awards in the deposit context. Finally, the third sentence prohibits use of certain evidence to establish actual damages. 5. This tribunal concludes that damages that are awardable from the Fund include only those that result directly from the violations found in the underlying complaint. Here, the violations found against Respondent were based on Respondent’s failure to pay subcontractors or material suppliers, as those were the only facts alleged in the complaint and, subsequently, found by default. The record shows that Complainant has no damages that are a direct result of those violations. 6. In addition, only the cost of repair or completion of a project can be awarded by the Fund in Complainant’s case.[13] Complainant does not have that type of damage. 7. This tribunal finds that Complainant does not have damages that are awardable under by the Residential Contractors’ Recovery Fund. RECOMMENDED ORDER In view of the foregoing, IT IS RECOMMENDED that the Registrar of Contractors deny Residential Contractors’ Recovery Fund Claim 2009-1283615, formerly P09-0128.

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 Decision will be 40 days from the date of that certification.

Done this day, September 14, 2011.

/s/ Eric A. Bryant Administrative Law Judge

Transmitted electronically to:

William A. Mundell, Director Registrar of Contractors ----------------------- [1] The Fund’s Exhibits will be designated as Fund-1 through Fund-7. [2] Exhibits C4 and C6. [3] Exhibits C12 and C13. [4] Exhibit Fund-2. [5] Id. [6] Exhibit C23. [7] Id. [8] Id. [9] Utah Construction Company v. Berg et al, 68 Ariz. 285, 205 P.2d 367 (1949); Arizona Administrative Code (A.A.C.), OAH Rule R2-19-119(B). [10] Smith v. Arizona Dept. of Transportation, 146 Ariz. 430, 706 P.2d 756 (App. 1985); A.A.C. R2-19-119(A). [11] Exhibit Fund-1. [12] A.R.S. § 32-1132(A) (second sentence). [13] The amount of a deposit is awardable if the context is one of failure to start the project, which is not the case here.

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