ALJDEC decisions subject to certification as final

2009A-17029933-ROC · Registrar of Contractors · 2012-03-09

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: February 1, 2012, at 8:00 a.m. Pursuant to the Stipulation of the parties, the matter was held open until March 5, 2012, to allow the parties sufficient time to file their legal memoranda in this matter. APPEARANCES: The Venetian Condominium Association (“Complainant”) appeared through its attorney, Carrie H. Smith, Esq. The Registrar of Contractors’ Contractors Recovery Fund (“the Fund’) appeared through Assistant Attorney General, Elizabeth A. Campbell, Esq. David Eric Patton dba The Fountain Guys (“Respondent”) failed to appear. ADMINISTRATIVE LAW JUDGE: M. Douglas _____________________________________________________________________ The Following Findings of Fact, Conclusions of Law and Recommended Order are made: FINDINGS OF FACT 1. At the onset of the scheduled hearing, the parties stipulated that there was no dispute regarding the facts of the case, and the only matter at issue was an issue of law regarding the amount of payment to be made by the Fund. 2. The parties stipulated to utilize the year 2008 as the date of the injury in this matter. 3. There was no dispute that at the time of the injury the Respondent was the holder of License No. K-5.228564-D, issued by the Registrar of Contractors. 4. There is no dispute that the Complainant is a 264 unit condominium association. 5. There is no dispute that 104 units of the Complainant condominium association are owner-occupied Class Three properties according to the 2008 Maricopa County Assessor information, and that those same assessor records identity 13 units as Class Three properties owned by companies, which are almost exclusively banks and loan companies. The parties agreed that the remaining units could be treated as non owner-occupied properties. 6. There was no dispute that there are also Class Four properties in the Complainant condominium association. 7. There is no dispute that the Complainant made a timely claim to the Fund for damages caused by the improper installation of waterworks at the Complainant’s property by the Respondent. 8. The Complainant and the Registrar of Contractors have stipulated that the amount of the Complainant’s damages equals the amount paid to repair the damage to the common area fountains, which is the sum of $73,163.16. 9. The Complainant asserts that it is entitled to the payment from the Fund for the full amount of its damages in the sum of $73,163.16. 10. The Fund asserts that it is entitled to reduce the amount of the award in a percentage amount equal to the non-owner occupied units in the Association which includes Class 4 properties and company owned Class 3 properties. 11. There was no dispute that the number of owner occupied units constitutes 39.39% of the total number of units in the condominium association. 12. The Fund asserts that the amount which should be paid to the Complainant is the sum of $28,821.84. The Fund asserts that this amount of $28,821.84 is calculated based upon the verified cost to repair the common area fountains of $73,163.16 multiplied by the 39.39% of unit owners within the condominium complex that are eligible as “person injured” pursuant to A.R.S. § 32-1131 (3). 13. The Fund asserts that an award of the full amount of the $73,163.16 to the Complainant would constitute an economic windfall for the owners of the individual units in the Complainant condominium association that do not qualify as a person injured as defined by A.R.S. § 32-1131 (3). 14. The Fund asserts that the legislature established the Fund to provide protection for owners and lessees of real property who contract for the construction or alteration of residential structures and that the purpose of the Fund is not to provide a windfall for ineligible companies who own residential real property. 15. The Fund asserts that the damage award as calculated by the Fund based upon the percentage of owner-occupied class three residential units provides an equitable award based upon the proportion of eligible unit owners versus unit owners who are not eligible. CONCLUSIONS OF LAW 1. The burden of proof at an administrative hearing is generally upon the Complainant. Utah Construction Company v. Berg et al, 68 Ariz. 285, 205 P.2d 367 (1949). 2. 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 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). 3. Under the facts and circumstances of this matter, the Registrar is empowered to determine and award proper payment to the Complainant from the Contractors’ Recovery Fund pursuant to A.R.S. § 32-1154 (F). 4. A.R.S. 32-1131 provides as follows: “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. 5. A.R.S. § 32-1132 (A) 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.

6. A.R.S. § 32-1139 (A) provides as follows: The liability of the fund shall not exceed two hundred thousand dollars for any one residential contractor's license. If claims against the fund on behalf of any one residential contractor's license exceed two hundred thousand dollars, the claims shall be paid based on a pro rata share of the common liability, and the registrar or a court entering an order for payment after the sum of two hundred thousand dollars has been paid from the fund shall modify the order indicating that no further recovery from the fund shall be allowed. 7. No statute provided by the parties allows the Fund to apportion damages between eligible and ineligible owners of multifamily residential real property. 8. Shelby v. Arizona Registrar of Contractors (Shelby), 172 Ariz. 95, 834 P.2d 818 (1992)[1] held that an association could recover the maximum award for each owner qualifying as an injured person who has not sought his or won recovery, up to the total amount of damage to the common elements, subject to the aggregate limit payable per contractor license under A.R.S. § 32-1139 (A), Having held that each unit owner is a person injured, however, it follows that under A.R.S. § 33-1242 (4) the Association can recover on behalf of each unit owner for damage to the common elements. Further, the record demonstrates that the Association was, in fact, acting on behalf of individual unit owners in seeking recovery from the Fund. The trial court initially awarded the Association $35,720 "on behalf of all the owners of residential units in Las Casas Bellas Condominium." Shelby, 169 Ariz. at 138, 817 P.2d at 942. We believe, therefore, that the Association can recover the maximum individual award of $15,000 for each unit owner qualifying as an injured person who does not receive his own recovery, subject to the $75,000 aggregate limit payable per contractor license under A.R.S. § 32- 1139(A). We do not, of course, authorize duplicate recovery of damages. 172 Ariz. at 100. Emphasis added. Shelby, therefore supports an award from the Contractors’ Recovery Fund to the Complainant in the sum of $73,163.16, all of which shall be appropriately chargeable against the Respondent and/or persons on the Respondent’s license as set forth in A.R.S. § 32-1139 (B). RECOMMENDed order In view of the foregoing, it is recommended that the Registrar commence and finalize payment procedures when sufficient funds are available from the Contractors’ Recovery Fund to the Complainant in the total amount of $73,163.16 for its actual damages in this matter. 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, March 9, 2012.

/s/ M. Douglas Administrative Law Judge

Transmitted electronically to:

William A. Mundell, Director Registrar of Contractors

----------------------- [1] Both parties cited Shelby in support of their positions in this matter.

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