ALJDEC decisions subject to certification as final

2010A-14179733-ROC · Registrar of Contractors · 2016-02-24

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: October 13, 2015, and February 4, 2016 APPEARANCES: Complainant Narinder K. Parasher appeared on his own behalf. Respondent Hudson Sound LLC did not appear. The Registrar of Contractors was represented by Assistant Attorney General Seth T. Hargraves. ADMINISTRATIVE LAW JUDGE: Tammy L. Eigenheer _____________________________________________________________________ Complainant challenges a proposed payout by the Residential Contractors’ Recovery Fund (“the Fund”). The Fund has issued notice that it intends to make a payout to Complainant for the amount of $315.59. Complainant requested a hearing, challenging the proposed payout amount as too low. Based upon the record, the Administrative Law Judge makes the following Findings of Fact, Conclusions of Law, and Recommended Order. FINDINGS OF FACT 1. Respondent was the holder of License No. 177500 issued by the Registrar of Contractors (the Registrar). 2. On or about October 19, 2007, Complainant entered into a contract with Respondent to install a home theater and audio system in his home. The total contract price was $71,770.80. 3. Sometime in December 2007, Respondent stopped work on the project.

4. On or about October 14, 2009, Complainant filed a complaint with the Registrar alleging poor work and abandonment by Respondent in the performance of its October 19, 2007 contract. 5. On or about November 17, 2009, following a jobsite inspection, the Registrar issued a Corrective Work Order, in which Respondent was directed to do the following: Contractor to properly complete the contracted work that falls within the scope of the C-12 Low Voltage Communication Systems license. 1. Provide and install all missing audio and video equipment as per the specifications. (TV’s, stereo components, switches, wiring, home theater equipment, surge protectors, etc.) 2. Complete wiring and installation of indoor and outdoor stereo systems. 3. Provide and install all missing controls and switches. 4. Properly complete the intercom system. 5. Properly complete the wiring and installation of the Structural Wiring Panel. 6. Complete the wiring and equipment installation in the Kid’s Game Room. 7. Correct the loose wiring in the Hall cabinet. 8. Properly rack and stack electronic components to achieve proper cooling and ventilation. 9. Properly complete installation of remote control devices. 10. Properly protect electronic components at the BBQ from weather. The following items were included in the contract, but are beyond the scope of the respondent’s C-12 license. The respondent should hire properly licensed contractors to complete the following: 1. Theater Seating 2. Theater Curtains 3. Faux Painting 4. Acoustic Wall Panels. 5. Drywall repairs and painting

Exhibit 3. 6. Respondent did not complete the work required in the Corrective Work Order. 7. On or about February 26, 2010, the Registrar issued a Citation and Complaint to Respondent alleging possible violations of A.R.S. § 32- 1154(A)(1), (2), (3), (17), and (23). 8. On or about September 15, 2010, Respondent’s license was revoked pursuant to Respondent’s failure to respond to the Citation and Complaint and included a finding that Respondent violated those provisions of A.R.S. § 32-1154 as charged. 9. On or about June 25, 2014, Complainant made a claim to the Fund. With the claim, Complainant submitted three bids. Two of the bids were from licensed contractors, but one of the bids did not include the name of the contractor providing the bid. The bid from Components Electronic Systems, LLC, License No. 195809, was not itemized and totaled $19,844.17. The bid from Desert Valley Audio Video, License No. 270289, was itemized and totaled $20,955.05. 10. On or about July 1, 2014, after an initial review of Complainant’s claim, the Registrar requested additional documentation from Complainant. 11. On or about December 29, 2014, Complainant submitted the additional requested documentation including a bid from LMC Home Entertainment Ltd. totaling $53,795.68. Complainant also included an affidavit that the proposal from Respondent for $71,770.80 was accepted as the contract and “[t]here were no other modifications subsequent this contract.” 12. On or about December 30, 2014, the Registrar requested additional information regarding the legal classification of the property during the relevant time period. 13. On or about January 15, 2015, Complainant provided the requested documentation. 14. On or about April 6, 2015, James Barbour, Claims Reviewer for the Registrar, performed a Recovery Fund jobsite inspection. During the inspection, Mr. Barbour identified many issues with the project including missing audio and video equipment. 15. Based on Mr. Barbour’s findings and review of the bids, the Fund determined that Complainant was eligible for payout from the Fund in the amount of $315.59. 16. Mr. Barbour testified that certain elements on the bids were not allowed because they were equipment and not construction elements of the project. Certain items, including televisions were allowed because they were mounted to the wall and, in effect, became a part of the structure; other items, such as receivers and remotes, were connected to the wiring, but were not a part of the structure as they could be removed. Mr. Barbour also indicated that if any monies are owed under the contract, the amounts owed must be deducted from the cost of completing or repairing the work, and if the amount owed exceeds the cost of repair, the claimant has not suffered any compensable damages. Mr. Barbour stated that the proposed payout in this case was calculated as follows: Original Contract $71,770.80 Less the amount paid to Respondent $61,010.76 Amount still owing on the contract $10,760.04

Allowable items on the bid $11,075.63 Less the amount still owing on the contract $10,760.04 Proposed Payout $315.59

17. Complainant objected to the proposed payout. Complainant testified Respondent failed to provide the theater seating included in the contract ($7,750.00) and the acoustic panels ($800.00) that should have been reduced from the contract price. Complainant also asserted that the components that were not included by the Fund were wrongfully excluded because those elements are necessary parts of the home theater and audio system, would become part of the home, and would remain in the home in the event it were ever sold. Complainant testified that without the elements in the contract and estimates, the system cannot work as intended and are integral to the functioning of those elements that were allowed by the Fund, i.e. the televisions and speakers. Complainant stated that the wiring and cabinetry was custom designed to work with the equipment included in the contract. According to Complainant, the payout in this case should have been calculated as follows: Original Contract $71,770.80 Less omitted elements $8,550.00 Less the amount paid to Respondent $61,010.76 Amount still owing on the contract $2,210.04

Cost to complete pursuant to bid $20,955.05 Less the amount still owing on the contract $2,210.04 Payout (Loss to Complainant) $18,745.01

18. Complainant testified that when he stated that the contract was for $71,770.80 and that there were no other modifications, he was referring to the back and forth changes made to the proposals before the operant proposal was accepted and ratified as the contract, but did not intend to exclude the changes that occurred after the contract had been executed based on Respondent’s failure to provide those elements. Complainant provided a receipt showing he had purchased the theater seating himself. 19. Complainant also presented the testimony of Gregory Carpenter, installer with Components, who stated that all the components are part of the complete entertainment system and that the absence of any one component renders the entire system useless. Mr. Carpenter also testified that these high-end elements are “affixed appliances” because they are connected through an “umbilical cord” of wiring through the wall rather than a “plug and play” type of component. Mr. Carpenter acknowledged that a broken component could be removed and replaced with a new piece of equipment. CONCLUSIONS OF LAW 1. The burden of proof at an administrative hearing is generally upon the person who brings the action. Utah Construction Company v. Berg et al., 68 Ariz. 285, 205 P.2d 367 (1949); A.A.C. R2-19- 119(B). Further, the standard of proof at hearing is by preponderance of the evidence. Smith v. Arizona Dept. of Transportation, 146 Ariz. 430, 706 P.2d 756 (App. 1985); A.A.C. R2- 19-119(A). The Notice of Claim for Administrative Payout states that Complainant bears the burden of proof to show entitlement to any amount other than that in the Notice. Therefore, Complainant bears the burden of showing, by a preponderance of the evidence, that the proposed payout amount is not reasonable and proper. 2. Complainant is an injured person within the definition in A.R.S. § 32-1131(3) and is, therefore, entitled to recovery from the Fund. 3. According to A.R.S. § 32-1132(A), an award from the Fund is limited to “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.” “Actual damages” are those that will put the injured party in the position in which he was before he was injured. United States Fidelity & Guaranty Co. v. Davis, 3 Ariz. App. 259, 263, 413 P.2d 590, 594 (1966). 4. “Appurtenance” is defined as “[s]omething that belongs or is attached to something else.” Black’s Law Dictionary 111 (8th ed. 2004). 5. Under the facts and circumstances of this case, the Fund is empowered to determine and award, based on actual damages, an appropriate payment to Complainant pursuant to A.R.S. § 32-1132 and A.R.S. § 32-1154(F). 6. The weight of the evidence established that Respondent failed to provide the theater seating and the acoustic tiles, which reduces the amount owing on the contract from $10,760.04 to $2,210.04. 7. The Fund determined that the home theater and audio equipment should not be included as compensable damages because the components were not part of the residential structure or appurtenance. This conclusion was based largely on the fact that an individual component could be removed from the home. However, the Fund allowed the inclusion of a television that was mounted to the wall even though that television could also be removed from the home. The Fund’s analysis of these individual elements of the contract and the home theater and audio system as a whole are inconsistent. 8. The home theater and audio system components are attached to the home by way of the wiring running throughout the home and are not mere “plug and play” components that are easily replaceable. 9. The weight of the evidence established that the estimate provided by Desert Valley Audio Video represented the cost to complete the work began by Respondent. Therefore, the full amount of the estimate should have been used by the Fund to determine the appropriate payout. 10. The credible evidence of record supports and award to Complainant in the sum of $18,745.01, as set forth in Finding of Fact 17 above, all of which shall be chargeable against Respondent and the persons listed on License No. 177500 of Respondent. RECOMMENDed order In view of the foregoing, it is recommended that the Registrar authorize a payment from the Residential Contractors’ Recovery Fund to Complainant in the amount of $18,745.01. 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, February 24, 2016.

/s/ Tammy L. Eigenheer Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director Registrar of Contractors -----------------------

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