ALJDEC decisions subject to certification as final

2009A-53171349-ROC · Registrar of Contractors · 2011-09-19

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

RECOVERY FUND ELIGIBILITY HEARING: August 31, 2011, at 1:00 p.m. APPEARANCES: Complainant Lynn Grant appeared on behalf of himself and his wife, Bonnie; Respondent J.K. Van Ness Investments Corp. dba Quality Built Homes appeared through Jameson Kent Van Ness, its qualifying party and officer; the Arizona Registrar of Contractors appeared through Montgomery Lee, Assistant Attorney General. ADMINISTRATIVE LAW JUDGE: Diane Mihalsky _____________________________________________________________________

FINDINGS OF FACT Background and Procedure In May 2004, the Arizona Registrar of Contractors (“the Registrar”) issued License No. ROC195715, Class B for residential general contracting to J.K. Van Ness Investments Corp. doing business as (“dba”) Quality Built Homes (“Respondent”). On or about April 9, 2009, the Registrar received a complaint from Lynn and Bonnie Grant (“Complainants”) regarding Respondent’s incorrect installation of the roof on a new “spec house” at 8520 E. Via Montoya, Scottsdale, Arizona that Respondent had constructed and then sold to Complainants. According to the complaint, Complainants closed escrow on the purchase of their home on March 4, 2009. The Registrar designated Complainants’ complaint as Case No. 09-5317. Complainants subsequently requested a hearing on their complaint, and the Registrar issued a Citation and Complaint against Respondent in Case No. 09- 5317, charging several violations of A.R.S. § 32-1154(A),[1] including subsections (3), namely A.A.C. R4-9-108,[2] and former (7).[3] Respondent failed to file a timely written answer to the Citation and Complaint in Case No. 09-5317. On December 11, 2009, the Registrar issued a Decision and Order, finding that under A.R.S. § 32-1155(B), Respondent’s failure to file a timely written answer was deemed to have admitted the charges in the Citation and Complaint. Respondent filed a timely petition for rehearing in Case No. 09-5317. The Registrar redesignated Case No. 09-5317 as Case No. 2009-53171349 and on February 8, 2011, denied Respondent’s petition for rehearing. On April 8, 2011, the Registrar revoked Respondent’s license as a result of its failure to remedy the admitted violations in Case No. 2009-53171349 (formerly Case No. 09-5317). On February 4, 2011, Complainants filed a claim to the Residential Contractors’ Recovery Fund (“the Fund”) under A.R.S. §§ 32-1132 in Case No. 2009-53171349 for an award of the damages that Respondent’s statutory violations had caused them to incur. On April 29, 2011, the Registrar issued a Notice to Claimant of Recovery Fund Ineligibility in Case No. 2009-53171349 for the following reason: Respondent’s License was in an Inactive Status, Expired, Cancelled, Revoked, Suspended or Not Issued at the Time of the Contract as Prohibited by A.R.S. § 32-1132. The contract was executed on January 29, 2009. The license was suspended for lack of bond on January 27, 2009 and was never lifted. As such, [Complainants] are ineligible for a Fund payout pursuant to § 32-1132(A).

Complainants requested a hearing on the Registrar’s determination of ineligibility in Case No. 2009-53171349. The Registrar referred the matter to the Office of Administrative Hearings, an independent agency, for an evidentiary hearing on the issue of whether Complainants are eligible to recover damages in any amount from the Fund. A hearing was held in Case No. 2009-53171349 on August 31, 2011. Complainant Mr. Grant testified. The Registrar presented the testimony of Glen Hawkins, the Fund’s supervisor, and submitted three exhibits. Although Respondent’s qualifying party and officer, Jameson Van Ness, appeared, he did not testify or submit any exhibits. Hearing Evidence On or about November 17, 2008, the Registrar received a letter from CNA Surety stating the bond that it had previously issued to Respondent would be cancelled and voided as of January 27, 2009, due to “[a] substantial or material change in the risk.” Pursuant to CNA Surety’s letter, on January 27, 2009, Respondent’s license was suspended by operation of law. Mr. Hawkins testified that the Registrar’s electronic record was updated to reflect the suspension on January 27, 2009, and the fact of the suspension would have been available to the public on that date. Mr. Hawkins also testified that Respondent’s bond was never reinstated. Complainants provided a copy of their purchase contract with their claim to the Fund. The contract shows that Complainants submitted their initial proposal to Respondent to purchase the property on January 29, 2009, and made a down payment to Respondent on February 3, 2009, and that escrow on the sale transaction was opened on February 4, 2009. Complainants’ letter appealing the Registrar’s Notice to Claimant of Recovery Fund Ineligibility stated that the home was a “spec house,” that Respondent had constructed the house before its license was suspended, and that Respondent did not disclose the January 27, 2009 suspension at the time it executed the sale contract. Mr. Grant testified that he or his wife looked at the Registrar’s website when they went to an open house to inspect the “spec house,” ten or twelve days before they made an offer to purchase the house from Respondent. At that time, Respondent’s license was current and in good standing. Mr. Hawkins testified that a member of the public who is interested in ascertaining any information that could affect a contractor’s license status can submit a public information request to the Registrar, and that such a request about Respondent would have disclosed CNA Surety’s November 17, 2008 letter. Mr. Hawkins testified that bonding companies are required to provide at least 30 days’ advance notice to the Registrar of any change in a contractor’s bond status. CONCLUSIONS OF LAW 1. This matter lies within the Registrar’s jurisdiction.[4] 2. Complainants bear the burden of proof and must establish their eligibility for a payout from the Fund by a preponderance of the evidence.[5] “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”[6] 3. A.R.S. § 32-1132(A) provides that “[a]n 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.” “In applying a statute, its words are to be given their ordinary meaning unless the legislature has offered its own definition of the words or it appears from the context that a special meaning was intended.”[7] 4. Respondent did not contract with Complainants for the construction of the “spec house,” only for its sale. The only contract that Complainants had with Respondent was to purchase the “spec house” that it had already constructed, and the earliest date of that sale contract was January 29, 2009. Because Respondent’s license was suspended on January 27, 2009, two days before the earliest date of Complainants’ contract with Respondent, Complainants did not establish that they are eligible to recover an award from the Fund. RECOMMENDED ORDER In view of the foregoing, it is recommended that the Registrar of Contractors deny Complainants Lynn and Bonnie Grant’s appeal of the Notice to Claimant of Recovery Fund Ineligibility and close the claim to the Fund in Case No. 2009-53171349 (former Case No. 09-5317) without any payout. 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 will be 40 days from the date of that certification. Done this day, September 19, 2011.

/s/ Diane Mihalsky Administrative Law Judge

Transmitted electronically to:

William A. Mundell, Director Registrar of Contractors ----------------------- [1] The Registrar’s electronic record did not include a copy of the Citation and Complaint, but included the cite recommendations of the inspector assigned to investigate Case No. 09-5317, Scott Deering, that did not include A.R.S. § 32-1154(A)(23). According to the electronic record, on May 21, 2009, Inspector Deering issued a Corrective Work Order (“CWO”) to Respondent to correct the roof, but on May 29, 2009, rescinded the CWO because the house was sold “as is.” Respondent’s representative attempted to submit this evidence at hearing, but the Administrative Law Judge did not admit it because the Registrar referred only the threshold issue of Complainants’ eligibility for a payout in any amount from the Fund. Respondent’s contractual evidence relates solely to the issue of the amount of Complainants’ damages, and if the Registrar determines that Complainants are eligible for a payout from the Fund in any amount, the Registrar may consider Respondent’s evidence. [2] A.R.S. § 32-1154(A)(3) includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license, “[v]iolation of any rule adopted by the registrar.” A.A.C. R4-9-108 requires that “[a]ll work shall be performed in a professional and workmanlike manner” and that “[a]ll work shall be performed in accordance with any applicable building codes and professional industry standards.” [3] A.R.S. § 32-1154(A)(7) formerly included among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license, “[t]he doing of a wrongful or fraudulent act by the licensee as a contractor resulting in another person being substantially injured.” The former version of the statute applied to Complainants’ complaint. [4] See 32-1101 et seq. [5] See A.A.C. R2-19-119; see also Vazanno v. Superior Court, 74 Ariz. 369, 372, 249 P.2d 837 (1952). [6] Morris K. Udall, Arizona Law of Evidence § 5 (1960). [7] Mid Kansas Federal Savings and Loan Ass’n of Wichita v. Dynamic Development Corp., 167 Ariz. 122, 128, 804 P.2d 1310, 1316 (1991).

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