ALJDEC decisions subject to certification as final

2009A-7090881-ROC · Registrar of Contractors · 2010-07-19

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: July 7, 2010 APPEARANCES: Complainant Jeanne Wiesley appeared on her own behalf. Respondent Mid West Strong, Inc. failed to appear. Assistant Attorney General Montgomery Lee represented the Registrar of Contractors. ADMINISTRATIVE LAW JUDGE: Sondra J. Vanella _____________________________________________________________________ The question presented by this matter is whether Complainant Jeanne Wiesley is entitled to an award and payment from the Residential Contractors’ Recovery Fund pursuant to A.R.S. § 32-1132(A). Based on the evidence of record, the Administrative Law Judge makes the following Findings of Fact, Conclusions of Law, and Recommended Order to the Director of the Registrar of Contractors. FINDINGS OF FACT 1. Respondent Mid West Strong, Inc. (“Mid West”) is the holder of a Class B- license (No. 205734) issued by the Registrar of Contractors (“ROC”). 2. On March 6, 2006, Ms. Wiesley entered into a contract with Mid West for Mid West to construct a room addition to her home. The contract price was $17,500.00. Ms. Wiesley paid Mid West in full. 3. On March 12, 2007, Ms. Wiesley filed a complaint against Mid West with the ROC. Ms. Wiesley alleged deficiencies in the construction of the room addition performed by Mid West. 4. A jobsite inspection was conducted and a Corrective Work Order was subsequently issued to Mid West. 5. The ROC issued a Citation and Complaint in Case No. 07-2043, charging Mid West with violations of A.R.S. § 32-1154(A)(2), (A)(3), (A)(7), (A)(17), and (A)(23). 6. On December 5, 2007, an administrative hearing was scheduled. Prior to the commencement of the hearing, outside the presence of the Administrative Law Judge, the parties concluded a settlement agreement, the terms of which were read upon the record and are set forth below: a. Respondent will pay to Complainant the total sum of $11,450.00 to be paid as follows: i. Respondent will pay the sum of $4,000.00 to Complainant no later than January 30, 2008; ii. Respondent will pay the sum of $7,450.00 to Complainant no later than March 5, 2008; b. Respondent will pay the aforesaid sums in the form of a cashiers check and will deliver the payments via registered mail to the following address: Cheap Thrills 11649 N. Cave Creek Road Suite G Phoenix, AZ 85020

7. On January 15, 2008, the ROC issued an Order of Closing. 8. On October 3, 2008, the ROC issued an Order Reopening Complaint and Setting Compliance Hearing, based upon Ms. Wiesley’s assertion that Mid West had breached the settlement agreement. 9. On February 23, 2009, the compliance hearing in this matter was held. The undersigned Administrative Law Judge found, “that Mid West has failed to comply with the terms and conditions of the settlement agreement entered into by the parties.” The undersigned Administrative Law Judge recommended, “commencing on the effective date of the Order entered in this matter, that Mid West’s Class B- license shall be revoked.” 10. On March 25, 2009, the ROC adopted the Recommended Order with the modification that the Order become effective “immediately”. 11. On March 25, 2009, the ROC revoked Mid West’s contracting license. 12. On April 13, 2009, Ms. Wiesley filed a claim with the ROC seeking payment from the Residential Contractors’ Recovery Fund (the “Fund”) in the amount of $11,450.00, the amount of the settlement agreement. 13. On April 22, 2010, Ms. Wiesley filed an amended request for payment from the Fund based upon the fact that the settlement amount is currently insufficient to cover the cost of repairs for damages she alleged to have incurred as a consequence of Mid West’s poor workmanship and breach of the settlement agreement, and given the length of time that transpired since the execution of the settlement agreement. 14. The ROC investigated Ms. Wiesley’s claim against the Fund and recommended a payout in the amount of $11,450.00. Based upon Ms. Wiesley’s amended request for payout from the Fund, this matter was set for hearing before the Office of Administrative Hearings. 15. ROC Inspector Jeff Fleetham reviewed Ms. Wiesley’s claim. On February 19, 2010, Inspector Fleetham conducted an inspection of the property. Inspector Fleetham recommended a payout in the amount of $11,450.00 as follows in his Recovery Fund Inspection Report: Based on visual inspection and experience, I am recommending a payout of $11,450.00 based on the “Amended Policy for the Administrative Recovery Fund Procedure” dated November 20, 2009. This is the total of the breeched (sic) settlement agreement entered into by the Contractor and Homeowner at the December 5, 2007 initial hearing . . .

16. Inspector Fleetham noted in his Recovery Fund Inspection Report that Ms. Wiesley obtained two bids from licensed contractors, the scopes of which encompassed the “work required to correct the damage caused by Mid West Strong’s deficient work and correct the deficiencies listed in the original corrective work [order].” The two bids were from Kepler Construction Management, L.L.C. in the amount of $34,230.00, and from Arizona’s Best Construction Services in the amount of $34,978.88. 17. Inspector Fleetham testified that the policy referenced in his Recovery Fund Inspection Report is not a published policy. Inspector Fleetham further testified that the damage to Ms. Wiesley’s property has been exacerbated by the passage of time, and that it is not uncommon for further damage to occur to deficient work if such work remains uncorrected. Inspector Fleetham opined that it was unreasonable for Ms. Wiesley not to effectuate the necessary repairs, notwithstanding the pending administrative proceedings. Inspector Fleetham testified that Ms. Wiesley’s failure to mitigate the damage to her home resulted in further damage. 18. Ms. Wiesley testified that in the past three and a half years, she has contacted the ROC numerous times for guidance and direction, was advised that the property would need to be inspected, and that if other contractors repaired the damage, the evidence would be “null and void”. Ms. Wiesley further credibly testified that she did not and currently does not possess the funds to effectuate the necessary repairs. Ms. Wiesley testified that she paid Mid West all of her available funds to perform the work and Mid West failed to do so. 19. Ms. Wiesley testified that she contacted multiple contractors in an effort to obtain additional bids. However, all but two refused to give her a bid when they discovered that she was involved in a Fund case. 20. Lisa Meadows, the ROC’s Legal Department Manager, testified that contrary to Ms. Wiesley’s testimony, if a homeowner hires a contractor to perform corrective work and provides documentation to support out-of-pocket expenses, such documentation would be sufficient evidence. Ms. Meadows acknowledged that Ms. Wiesley may have been advised by ROC personnel at the time she filed the initial complaint not to have corrective work performed prior to the jobsite inspection in order for the inspector to be able to verify the deficient work. 21. The Fund argued that because Ms. Wiesley entered into a settlement agreement with Mid West, a violation of the State’s contracting laws was not established and as such, Ms. Wiesley is limited to a recovery of the settlement amount, as the breach of the settlement agreement is the violation committed by Mid West, and the prior measure of damages is the amount of the settlement. The Fund argued that the additional damages sustained by Ms. Wiesley are not related to the breach of the settlement agreement. 22. A.R.S. § 32-1132(A) requires a violation of Chapter 10 by a contractor in order to justify an award from the Fund. The ROC has acknowledged that Ms. Wiesley is entitled to an award from the Fund based upon Mid West’s breach of the settlement agreement, and the Administrative Law Judge agrees. Mid West’s breach of the settlement agreement constituted grounds for revocation of its license, therefore, Mid West’s breach is sufficient to support an award from the Fund. Based on this determination, the question that must be addressed is how to properly measure the damages that flow from the breach. As set forth above, the ROC asserts that the proper measure is the amount of the settlement. However, such calculation ignores the following pertinent facts: i) Ms. Wiesley entered into the settlement agreement with Mid West in December 2007 in good faith; ii) as evidenced by Mid West’s subsequent actions (non-payment of any amount), Mid West is found not to have entered into the agreement in good faith; iii) based on Mid West’s failure to comply with the terms of the settlement agreement, Ms. Wiesley has been financially unable to have Mid West’s deficient work corrected; iv) the passage of two and a half years since the execution of the settlement agreement has resulted in further deterioration and damage to her home that will now cost much more to correct than the accepted settlement amount at the time of the settlement agreement; v) the two bids that Ms. Wiesley was able to obtain are both from licensed contractors encompassing the scope of work necessary to correct Mid West’s deficient work and resulting damage, and both bids are for an almost identical amount in excess of the maximum allowable payout of $30,000.00; and vi) Mid West’s breach of the settlement agreement in this case is analogous to a contractor breaching an agreement to perform corrective work by a specified date, and failing to do so results in further deterioration and damage to property. Taking these factors into account, the Administrative Law Judge finds that Ms. Wiesley is entitled to receive an award from the Fund in the amount of $30,000.00.

CONCLUSIONS OF LAW Under A.R.S. § 32-1132, the ROC is empowered to determine and award payment to Ms. Wiesley from the Fund. Ms. Wiesley meets all of the requirements of a “person injured” as that term is defined in A.R.S. § 32-1131(3). Pursuant to A.R.S. § 32-1132(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 . . . an amount of not more than thirty thousand dollars for damages sustained by the act, representation, transaction or conduct.” 4. The weight of the credible evidence presented at hearing demonstrated that Ms. Wiesley was injured as a result of Mid West’s breach of the settlement agreement, resulting in further deterioration and damage to her home, and that in order to rectify the damages caused by Mid West’s breach of the settlement agreement, Ms. Wiesley is entitled to a payout from the Fund in the amount of $30,000.00. 5. Based on the foregoing, Ms. Wiesley should be awarded a total payout from the Fund in the amount of $30,000.00, all of which should be charged against Mid West’s Class B- license and/or persons named on such license as set forth in A.R.S. § 32-1139(B).

RECOMMENDED ORDER The Administrative Law Judge makes the following Recommended Order: On the effective date of the Order entered in this matter, the ROC shall commence and finalize payment procedures from the Fund to Jeanne Wiesley in the amount of Thirty Thousand Dollars and Zero Cents ($30,000.00). 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, July 19, 2010.

/s/ Sondra J. Vanella Administrative Law Judge

Transmitted electronically to:

William A. Mundell, Director Registrar of Contractors -----------------------

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