ALJDEC decisions subject to certification as final

2009A-7100283-ROC · Registrar of Contractors · 2011-03-28

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: March 10, 2011, at 1:00 p.m. APPEARANCES: Complainants Sultan Waziri and Ahmad Kasimi appeared through R. David Sobel, Esq., Altfeld, Battaile & Goldman, P.C.; Respondent Mak Homes, L.L.C. did not appear; the Arizona Registrar of Contractors appeared through Keely Lynn Verstegen, Esq., Assistant Attorney General. ADMINISTRATIVE LAW JUDGE: Diane Mihalsky _____________________________________________________________________

FINDINGS OF FACT Background and Procedure 1. In June 2007, the Arizona Registrar of Contractors (“the Registrar”) issued License No. ROC232833, Class B for residential general contracting to Mak Homes, L.L.C. (“Respondent”). Respondent’s address of record is P.O. Box 43531, Tucson, Arizona 85733-3531. José Jesus Kovrig is Respondent’s qualifying party and managing member. 2. On February 27, 2009, the Registrar received a complaint against Respondent from Sultan Waziri and Ahmad Kasimi (“Complainants”) alleging that Respondent contracted to construct a house at 1139 North Norton Avenue in Tucson, Arizona in February 2007, was paid $60,000.00, and abandoned the project. The Registrar designated Complainants’ complaint against Respondent as Case No. T09-0831. 3. Complainants attached to their complaint to the Registrar in Case No. T09-0831 a copy of their verified complaint against Mr. Kovrig and Respondent in Pima County Superior Court Case No. C20086679, containing the following allegations: 1. On July 7, 2006, Mr. Kasimi purchased property at 1135 North Norton Avenue, Tucson, Arizona that included a 1,400 square foot residential structure. Mr. Kasimi executed a Special Power of Attorney in favor of Mr. Waziri, his cousin, to allow Mr. Waziri to handle all business affairs regarding the property at 1135 North Norton Avenue. 2. In February 2007, Mr. Waziri hired Mr. Kovrig and Respondent to split the property at 1135 North Norton Avenue into two parcels: (1) Parcel 1 would have the existing 1,400 square foot house and retain the address of 1135 North Norton Avenue; and (2) Parcel 2 would be an undeveloped piece of residential real estate and would have the address of 1139 North Norton Avenue. 3. Mr. Waziri also hired Respondent to construct a 2,500 square foot “spec home” on Parcel 2. 4. Mr. Kovrig, on Respondent’s behalf, prepared the documents to split the property and to refinance the loan that Mr. Kasimi had obtained to purchase the original parcel. 5. Unbeknownst to Mr. Kasimi or Mr. Waziri, Mr. Kovrig included in the stack of closing documents a warranty deed that conveyed Parcel 2 from Mr. Kasimi to Mr. Kovrig. Without knowing what he was signing, Mr. Waziri signed the warranty deed when he signed the other closing documents to split the property and to refinance Mr. Kasimi’s original loan. 6. Mr. Kovrig and Respondent obtained loans from three different lenders that were secured by a total of $375,000.00 in liens against Parcel 2. In August 2008, one of the lenders foreclosed the lien, and Mr. Kasimi lost any recourse to recover his interest in Parcel 2. 4. Complainants subsequently requested that the Registrar issue a Citation against Respondent in Case No. T09-0831. On September 14, 2009, the Registrar issued a Citation and Complaint against Respondent, charging violations of A.R.S. § 32-1154(A)(1)[1] and (7).[2] 5. After Respondent failed to file a timely written answer to the Citation and Complaint in Case No. T09-0831, the Registrar issued a Decision and Order finding that pursuant to A.R.S. § 32-1155(B) Respondent’s failure to timely answer the Citation and Complaint was deemed an admission of the charges contained therein. As a penalty for Respondent’s admitted statutory violations, the Registrar’s Decision and Order in Case No. T09-0831 revoked Respondent’s license unless it rectified the items in the complaint. 6. The Registrar revoked Respondent’s license as a result of its failure to comply with the Decision and Order in Case No. T09- 0831. 7. On October 22, 2009, the Registrar received Complainants’ claim in the amount of $375,000.00 to the Residential Contractors’ Recovery Fund (“the Fund”) to recover the damages that Mr. Kovrig and Respondent’s fraudulent conversion of Parcel 2 at 1139 North Norton Avenue caused them to incur. The Registrar designated Complainants’ claim as Case No. RF10-0283. 8. The Registrar subsequently redesignated Case No. RF10-0283 as Case No. 2009-7100283. The Registrar issued a Notice to Claimant of Recovery Fund Ineligibility in Case No. 2009- 7100283 because “[p]ursuant to A.R.S. § 32-1131.3 ‘person injured’ means any owner of residential real property … which is actually occupied or intended to be occupied by the owner as a residence” and “[p]roperty owner has admitted to having no intent to occupy the property at issue.” 9. Complainants requested a hearing on the Registrar’s determination that their claim was ineligible. The Registrar referred the matter to the Office of Administrative Hearings, an independent agency, for an evidentiary hearing. 10. On January 11, 2011, the Registrar issued a Notice of Recovery Fund Eligibility/Payout Hearing. The Registrar sent a copy of the Notice of Recovery Fund Eligibility/Payout Hearing to Respondent at its address of record. 11. A recovery fund payout hearing was held on March 10, 2011, at 1:00 p.m. Complainants testified and submitted five exhibits. The Registrar presented the testimony of Doug Ulmer, its Administrative Services Officer for the Fund, and submitted three exhibits. 12. Respondent did not request to appear telephonically at the hearing and did not request that the hearing be continued. Although the hearing did not conclude for more than an hour, Respondent did not appear through an authorized member, employee, or attorney. Consequently, Respondent did not present any evidence. Hearing Evidence 13. Mr. Waziri and Mr. Kasimi were born and raised in Afghanistan and English is their third language. Both testified consistently with the allegations in the complaint in Pima County Superior Court Case No. C20086679, except for the use of the term “spec home.” Mr. Waziri and Mr. Kasimi both credibly testified that they did not understand the term “spec home” when they signed the complaint verification and that their attorney’s use of the term was a mischaracterization that resulted from a miscommunication with Complainants. 14. Mr. Kasimi testified that he gave Mr. Waziri special power of attorney over the property at 1135 North Norton Avenue because he was living in California at the time of the transactions with Respondent. Mr. Kasimi testified that before Parcel 2 was lost to foreclosure through Respondent’s fraudulent conversion, he intended to move from California to Tucson to reside at 1135 North Norton Avenue and that Mr. Waziri would reside at 1139 North Norton Avenue. 15. Mr. Waziri credibly testified that he planned to live in the house that Respondent would build on Parcel 2 at 1139 North Norton Avenue. 16. Mr. Ulmer testified that the word “spec home” in the complaint in Pima County Superior Court Case No. C20086679 “raised a red flag.” Mr. Ulmer testified that even if Complainants did not plan to build a house at 1139 North Norton Avenue for sale to others, Mr. Kasimi at one time owned, but never intended to occupy, the house at 1139 North Norton Avenue, while Mr. Waziri intended to occupy, but never owned the house at 1139 North Norton Avenue. Mr. Ulmer testified that A.R.S. § 32-1131(3) required a claimant to own and occupy or intend to occupy a residential structure, and that neither Complainant met both of these requirements. 17. Mr. Kasimi credibly testified that the cousins had agreed that if Mr. Waziri built the house at 1139 North Norton Avenue, he would own the land. Mr. Kasimi testified that he had given Mr. Waziri authority to transfer the property at 1139 North Norton Avenue into his own name and that if Respondent had not fraudulently converted the property, Mr. Waziri would own it. 18. Mr. Waziri credibly testified that he did not intend to covey title to Mr. Kovrig and Respondent and if Respondent had not fraudulently converted the property at 1139 North Norton Avenue, his cousin would have transferred title to him under their agreement. Mr. Waziri testified that he paid all Respondent’s bills with the understanding that he would own the property and the house that Respondent would construct on 1139 North Norton Avenue. 19. Mr. Waziri testified that he agreed to pay $90,000.00 to Mr. Kasimi for the land at 1139 North Norton Avenue, but that the agreement was not in writing. Mr. Waziri acknowledged that the property had never been in his name. CONCLUSIONS OF LAW This matter lies within the Registrar’s jurisdiction.[3] The Notice of Recovery Fund Eligibility/Payout Hearing that the Registrar mailed to Respondent at its address of record was reasonable. Respondent is deemed to have received the Notice of Recovery Fund Eligibility/Payout Hearing.[4] Complainants bear the burden of proof and must establish eligibility to recover 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] A preponderance of the evidence is “[t]he greater weight of the evidence, not necessarily established by the greater number of witnesses testifying to a fact but by evidence that has the most convincing force; superior evidentiary weight that, though not sufficient to free the mind wholly from all reasonable doubt, is still sufficient to incline a fair and impartial mind to one side of the issue rather than the other.”[7] A.R.S. § 32-1131(3) defines a “person injured” who is eligible to recover from the Fund as “any owner of residential real property . . . which is actually occupied or intended to be occupied by the owner as a residence . . . .” The Arizona Court of Appeals has determined that the times when the owner of residential property must meet the requirements of A.R.S. § 32- 1131(3) to be eligible to recover a payout from the Fund are: (1) When the owner enters the contract with the contractor for the work to be performed, or (2) When the contractor performs the work or commits the statutory violation that injured the owner.[8] “While statutes should be construed as a whole with the purpose of the statute not being frustrated by a literal application of its terms . . ., we must be guided by the presumption that the legislature did not intend to do a futile act by including a provision which is not operative or that is inert and trivial.”[9] A.R.S. § 32-1131(3) requires that a claimant presently own a residential property and presently occupy or intend in the future to occupy the property when the contractor executed the contract or violated contracting statute. Extending the definition of “owner” to include a person who never possessed equitable or legal title to the property, but who would have taken such title at some future time if the contractor had not committed the statutory violation, expands eligibility for an award from the Fund beyond the limitations that the plain language of A.R.S. § 32-1131(3) imposes. Because Mr. Waziri did not own and Mr. Kasimi did not intend to occupy the property at 1139 North Norton Avenue when Respondent contracted to split the property and build the house or when Respondent fraudulently converted the property, neither Complainant has established that he is eligible for an award from the Fund. RECOMMENDED ORDER Based on the foregoing, it is recommended that on the effective date of the Registrar’s final order, Complainants Sultan Waziri and Ahmad Kasimi’s appeal in Case No. 2009-7100283 be dismissed. 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, March 28, 2011.

/s/ Diane Mihalsky Administrative Law Judge

Transmitted electronically to:

William A. Mundell, Director Registrar of Contractors ----------------------- [1] This statutory subsection includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license, “[a]bandonment of a contract or refusal to perform after submitting a bid on work without legal excuse for the abandonment or refusal.” [2] This statutory subsection 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.” [3] See 32-1101 et seq. [4] See A.R.S. §§ 41-1092.04; 41-1092.05(D). [5] See A.R.S. § 41-1092.07(G)(2); A.A.C. R2-19-119(A) and (B)(1); 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] Black’s Law Dictionary at page 1220 (8th ed. 1999). [8] See McMurren v. JMC Builders, Inc., 204 Ariz. 345, 350, 63 P.3d 1082, 1087 (App. 2003) (citing A.R.S. § 32-1132(A)). In that case, after the residence in which the homeowner had been living at least part-time was damaged by fire, the homeowner hired the contractor to perform repairs. Because the dwelling was uninhabitable after the fire, the homeowner lived temporarily in a motor home parked in the driveway. The residence subsequently was turned into a group home. The court held that the homeowner had established that he was eligible for a payout from the Fund because he had lived in the residence when he entered the contract for the contractor to repair the damages and while the contractor performed the repairs. See id. at 351, 63 P.3d at 1088. [9] Campbell v. Superior Court, 105 Ariz. 252, 255, 462 P.2d 801, 804 (1969) (citation omitted).

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