ALJDEC decisions subject to certification as final

2010A-1163529-ROC-rf · Registrar of Contractors · 2012-05-14

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: April 24, 2012 APPEARANCES: Roger Strassburg, Esq. of Roger Stassburg, P.L.L.C. and Joyce Strassburg appeared personally. Scenic Country Homes, L.L.C. did not appear. The Registrar of Contractors was represented by Assistant Attorney General Montgomery Lee. ADMINISTRATIVE LAW JUDGE: Brian Brendan Tully _____________________________________________________________________ Roger and Joyce Strassburg (“Complainants”) appeal the denial of their Residential Contractors’ Recovery Fund (“Fund”) claim by the Registrar of Contractors (“Registrar”). Complainants seek an administrative payout from the Fund in the amount of $25,547.48. Based upon the evidence of record, the Administrative Law Judge makes the following Findings of Fact, Conclusions of Law, and Recommended Order: FINDINGS OF FACT 1. On or about October 8, 2009, Complainants entered into a contract with Scenic Country Homes, L.L.C. (“Respondent”) for the purchase of an unfinished residence located at 2273 Green Cove Drive, Overgaard, Arizona. The contract provided that Respondent, who constructed the residence, would perform specified work to complete the construction of the residence. The original contract price was $279,000.00. 2. Complainants and Respondent approved several addendums totaling $4,122.31 that raised the total contract price to $283,122.31. 3. On January 27, 2010, Complainants filed a written Complaint with the Registrar alleging workmanship deficiencies by Respondent. The Registrar designated the Complaint as Case No. P10-0116. 4. The Registrar’s assigned inspector, Tom Sandoval, issued a Corrective Work Order dated March 2, 2010, that directed Respondent to timely perform specified remedial work in a workmanlike manner. 5. The Registrar issued a Citation and Complaint in Case No. P10-0116, later re-designated as 2010-1163529, that charged Respondent with violating the provisions of A.R.S. § 32-1154(A). Respondent filed a timely answer. 6. On February 14, 2011, a hearing was conducted in Case No. 2010-1163529 before the Office of Administrative Hearings. Respondent failed to appear at that hearing. 7. The Administrative Law Judge Decision issued in Case No. 2010-1163529 contained the following Finding of Fact No. 13: “Undisputed credible testimony and evidence established that the Complainants have been required to pay a total of $40,153.22 to have the Respondent’s construction deficiencies in their new residence corrected to within applicable workmanship and industry standards.” 8. The Registrar revoked Respondent’s License No. B.223730-R in Case No. 2010-1163529. 9. Complainants filed a claim for an administrative payout from the Fund. After processing Complainants’ claim, the Registrar denied the claim as non-reimbursable from the Fund. Complainants then filed an appeal of the Registrar’s denial. 10. The Registrar forwarded Complainants’ appeal to the Office of Administrative Hearings, an independent agency, for an evidentiary hearing. An evidentiary hearing was scheduled for February 15, 2012, at 8:00 a.m. 11. The Registrar issued a Notice of Denial of Recovery Fund Claim (“Notice”) that advised the parties of the time, date, and location of the formal hearing. The Notice was sent to the parties at their addresses of record with the Registrar. 12. On February 8, 2012, Complainants requested a continuance of the scheduled hearing. On February 8, 2012, the Tribunal issued an Order Granting Continuance that advised the parties of the continued hearing date and time. The Order Granting Continuance was sent to the parties at their addresses of record with the Registrar. 13. The commencement of the hearing was delayed 15 minutes to allow for the late arrival of Respondent or an attorney authorized to represent Respondent. After the delay, the Administrative Law Judge conducted the hearing in Respondent’s absence. 14. The Registrar’s Corrective Work Order dated March 2, 2010, ordered Respondent to perform remedial work to an arch and the laminate flooring in Complainants’ residence. 15. In April 2010, Complainants inspected Respondent’s remedial work on the concrete floor slab to correct the laminate flooring issues. At that time, Complainants discovered the interior of their house was completely contaminated with concrete dust covering all surfaces of the house and personal items of Complainants. Complainants then barred Respondent from reentering the residence and from performing any additional work. 16. Complainants tried to remediate the contamination themselves, but eventually submitted a claim to their homeowners’ insurer. The insurer approved that claim for the contamination of the structure only. The insurer did not approve the claim for the contents of the home. Complainants completed the cleanup of their household contents. 17. On June 14, 2010, Jim Seay, a substitute contractor, performed remedial repairs to the arch. Complainants paid Mr. Seay the sum of $300.00 for that work. 18. On June 5, 2010, Complainants accepted a proposal from Sundance Floors to perform the necessary remedial work to the laminate flooring in the game room. The contract price was $4,462.50. On June 10, 2010, Sundance Floors stopped work on the project because patches installed by Respondent were delaminating from the concrete substrate. 19. The laminate flooring in the game room was remediated by White Mountain Spirit, which was paid $5,000.00 for its work by Complainants. 20. The remediation of the cement dust contamination for the house structure was performed by Service Master, which was hired by Complainants’ insurance carrier. 21. Complainants seek an administrative payout from the Fund for the following categories of damages: (i) out-of-pocket expenses for the cleaning of the concrete dust contamination by Complainants; (ii) Complainants’ time for the cleaning of the concrete dust contamination; and (iii) Complainants’ lost wages. 22. Complainants seek reimbursement for their expenses for cleaning materials, grout sealer, mileage, lodging, and meals incurred by Complainants for the cleaning of the concrete dust contamination. 23. Complainants also seek reimbursement for their time repairing their home and the cost of hiring additional labor to assist them. 24. Complainants seek reimbursement for airline tickets for family members who assisted with Complainants’ cleaning of their residence. While Complainants, as homeowners, are exempted from the State’s contracting license requirements, there is no evidence that their family members are either co-owners of the subject property or licensed contractors for the scope of work performed on the project. Therefore, this claim item was properly denied by the Fund. 25. Complainant Roger Strassburg is an attorney who bills his time at a rate of $300.00 per hour. He seeks reimbursement of his lost wages related to Complainants’ lawsuit to collect from Respondent’s contractor’s bond, and other legal work related to Complainants’ case. 26. Complainants recovered $5,605.74 from their homeowners’ insurance policy. 27. Complainants recovered $9,000.00 on Respondent’s contracting bond from Old Republic Surety Company. 28. Complainants recovered an additional $14,605.70 from other collateral sources. 29. At the hearing Mr. Strassburg testified that Complainants’ claim for postal charges and copying charges should be recoverable because those charges were incurred by Complainants to access Respondent’s contractor’s bond and the Fund. 30. Mr. Strassburg also testified that Complainants’ meal and lodging expenses should be recoverable because Complainants were forced to incur those expenses as they could not stay in their residence during the contamination remediation. 31. Mr. Strassburg claims that he is entitled to recover his lost wages as an attorney because he had spent time from his practice due to Respondent’s deficient workmanship. 32. Doug Ulmer, a Fund claims reviewer, testified for the Registrar. He reviews claims made to the Fund. 33. Mr. Ulmer testified that Complainants are “injured persons” as provided by statute and, therefore, eligible for the Fund. However, he said the dispute centers on Complainants’ claim for damages. 34. Complainants’ Exhibit 1, which was admitted into evidence, is entitled “Item Actual Revenue Detail April 29, 2008 through December 31, 2011.” Mr. Ulmer reviewed each itemized entry in Exhibit 1 at the hearing. 35. Mr. Ulmer testified that the following items were not compensable from the Fund because they are not compensable costs to complete or repair the subject project: postage; petty cash charges from Mr. Strassburg’s law firm; mileage expenses; restaurant receipts; airline tickets to fly two family members to Arizona to assist Complainants with the remediation; lodging expenses; filing fee for litigation against Respondent’s bond; medication for Joyce Strassburg’s eyes; medical expenses for an eye doctor; a Safeway receipt; receipt for cleaning a sheepskin rug; meals for workers; cleaning of household contents; a warranty on the residence from American Home Shield; invoice for cleaning leather rugs; contracted labor expenses; invoices for lost wages; and travel expenses. 36. Mr. Ulmer further testified that the following items listed in Exhibit are compensable from the Fund: invoices from Ace Hardware; invoices from Dollar General Store for cleaning supplies; postage from Mr. Strassburg’s law firm for sending a payment to the drywall contractor; payment to White Mountain Drywall; a payment to Mountain Spirit Construction; a payment to Lee’s Flooring to replace carpeting; postage for mailing payment to Service Master; a payment to Lee’s Flooring for labor and materials for carpeting; invoices from Home Depot; an invoice from Family Dollar for replacement light bulbs; an invoice from Wal-Mart for supplies; a payment to Mountain Spirit Construction for repairs to flooring; postage for mailing to a remediation contractor; and an invoice from Lee’s Flooring. 37. Although Mr. Ulmer initially testified that Complainants’ invoices for their time cleaning on the project were not compensable, he later testified that they would be compensable because of the homeowners exemption from licensing pursuant to A.R.S. § 32-1121. However, it is unknown how Complainants valued their time and if such valuations were reasonable. Mr. Ulmer testified that the Fund would have considered bids from licensed contractors to determine the value of Complainants’ work. 38. After calculating Complainants’ compensable expenses, including their claim for their time for cleaning, and offsetting the funds recovered by Complainants, Mr. Ulmer opined that Complainants still had a net gain of approximately $1,000.00. Therefore, Complainants suffered no loss and are not entitled to an administrative payout from the Fund for damages “necessary to complete or repair” their residence. CONCLUSIONS OF LAW 1. The Registrar has jurisdiction over the subject matter in this case, pursuant to A.R.S. § 32-1154(F). That statute provides that if a licensed contractor refuses or is unable to comply with a Registrar’s order to remedy a violation, then “the registrar may order payment from the [Fund] to remedy the violation.” The Registrar’s authority to order payment is permissive, not mandatory.[1] 2. The burden of proof at an administrative hearing falls to the party asserting a claim, right, or entitlement, and the standard of proof on all issues in this matter is by a preponderance of the evidence. See A.A.C. R2-19-119. 3. Pursuant to A.R.S. § 32-1132(A), the Registrar is the administrator of the Fund. 4. Complainants are injured persons, as defined in A.R.S. § 32-1131(3). 5. A.R.S. § 32-1132(A) provides that “[a]n 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.” The statute limits compensable damages reimbursable from the Fund to “an amount necessary to complete or repair a residential structure.” However, the statute does not provide for reimbursement from the Fund for all damages incurred by an injured homeowner caused by an act or omission by a licensed residential contractor. 6. When determining whether to exercise its permissive authority to order payment from the Fund to an injured person, the Registrar determines if a claim item is necessary to complete or repair a licensed contractor’s deficient workmanship and thus, compensable pursuant to A.R.S. § 32-1132(A). 7. Pursuant to A.R.S. § 32-1121(A)(5), the Complainants, as homeowners of the subject property, were exempted from the State’s licensing requirements for performing cleaning work on their residence caused by Respondent’s deficient workmanship, However, Complainants failed to credibly establish the reasonable value of their labor expended to clean the damage caused by Respondent. Therefore, Complainants failed to sustain their burden of establishing an entitlement for reimbursement from the Fund for Complainants’ claim for their labor to clean their residence. 8. Complainants agree that the Fund is entitled to an offset from Complainants’ total claim in the amount of $14,605.70, which amount Complainants recovered from collateral sources 9. Complainants’ claim for reimbursement for their expenses for mileage, lodging, meals, airline tickets for family members, and postage, as noted in the above Findings of Fact, are not expenses “necessary to complete or repair” their residence. Therefore, the Fund properly denied those claim items pursuant to A.R.S. § 32-1132(A). 10. A.R.S § 32-1132(A) provides that “[n]otwithstanding any other provision of law, monies in the residential contractors’ recovery fund shall not be directly awarded for attorney fees or costs except in contested cases appealed to the superior court.” The Administrative Law Judge concludes that Complainants’ claim for payment from the Fund for Mr. Strassburg’s legal work performed to collect the bond from Respondent’s bond carrier does not satisfy the exception to the restriction that attorney fees are not recoverable from the Fund. In addition, the evidence of record supports the conclusion that such attorney fees and Complainants’ claim for Mr. Strassburg’s lost wages for time spent on this matter are not expenses “necessary to complete or repair” Complainants’ residence pursuant to A.R.S. § 32-1132(A). However, those costs may be recoverable by Complainants against Respondent in a civil action. 11. The evidence of record established that Complainants have not suffered an economic loss “necessary to complete or repair” their residence, as required by A.R.S. § 32-1132(A). There is credible evidence that Complainants realized a gain of approximately $1,000.00 to complete and repair their home as a result of Respondent’s deficient workmanship. Therefore, the evidence of record supports the Registrar’s denial of Complainants’ claim for an administrative payout from the Fund for damages. 12. The proper forum for Complainants’ claim for damages in excess of the costs “necessary to complete or repair” their residence is a civil court of competent jurisdiction. RECOMMENDED ORDER IT IS ORDERED that the Registrar’s denial of Complainants’ Fund claim in Case No. 2010-1163529 be upheld and affirmed on the effective date of the Order entered in this matter. 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 the certification. Done this day, May 14, 2012.

/s/ Brian Brendan Tully Administrative Law Judge

Transmitted electronically to:

William A. Mundell, Director Registrar of Contractors ----------------------- [1] Pursuant to A.R.S. § 32-1136, a party may also file a judicial action for a judgment seeking a payout from the Fund for damages.

-----------------------

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