ALJDEC decisions subject to certification as final

2010A-308471627-ROC-rf · Registrar of Contractors · 2012-03-06

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

RECOVERY FUND ELIGIBILITY HEARING: February 15, 2012, at 1:00 p.m. APPEARANCES: Complainant Richard L. Inderrieden appeared on his own behalf; Respondent W P E Pine Excavation, L.L.C. did not appear; the Arizona Registrar of Contractors appeared through Montgomery Lee, Esq., Assistant Attorney General. ADMINISTRATIVE LAW JUDGE: Diane Mihalsky _____________________________________________________________________

FINDINGS OF FACT Background and Procedure 1. In March 2009, the Arizona Registrar of Contractors (“the Registrar”) issued License No. K-2.253387-D for dual excavating, grading, and oil surfacing to W P E White Pine Excavation, L.L.C. (“Respondent”). Respondent’s address of record is 6235 North 127th Avenue, Litchfield Park, Arizona 85340-9563. 2. According to the Registrar’s public website, on February 10, 2010, the Registrar suspended Respondent’s license as discipline for its failure to comply with the final order in Case No. 09-5673. 3. On March 22, 2010, the Registrar received a complaint against Respondent from Richard L. Inderrieden (“Complainant”) regarding Respondent’s failure to complete a drainage project at Complainant’s property at 10894 East Turquoise Avenue in Scottsdale, Arizona (“the Turquoise property”). The complaint alleged that the date of the parties’ verbal contract was October 29, 2009, that Respondent last performed work on the project in February 2010, and that Complainant paid $20,800.00 to Respondent. To resolve the Complainant, Complainant asked that Respondent be required to “[r]epay the $11,300 that I had to pay R J L Excavating to complete job.” The Registrar designated the complaint as Case No. 2010- [number redacted]. 4. Complainant attached to his complaint copies of five personal checks made payable to Respondent, dated between October 27, 2009, and January 9, 2010, for “Turquoise drainage,” in the total amount of $17,975.00. Complainant also attached to his complaint copies a proposal from R J L Excavating, Inc., License No. C-2.142785-R (“R J L”), dated March 9, 2010, to “Install Culvert Pipes per Plan 108th St. and Turquoise Ave.,” for a total price of $9,000.00. 5. Complainant also attached to his complaint copies of two personal checks to Houston Littlefair dated October 27 and 29, 2009, in the total amount of $8,500.00, a personal check to himself dated November 3, 2009, in the amount of $11,500.00, and a personal check to R.B. Meyers dated December 28, 2009, in the amount of $800.00, all for “Turquoise drainage.”[1] 6. Complainant’s mailing address on the complaint and the printed address on his personal checks was 10154 East Topaz Drive, Scottsdale, Arizona (“the Topaz property”). 7. On July 21, 2010, the Registrar issued a Citation and Complaint against Respondent, charging violations of A.R.S. § 32-1154(A)(1)[2] and (13), namely A.R.S. § 32-1124(B).[3] 8. Respondent failed to file a timely written answer to the Citation and Complaint. On October 18, 2010, 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 revoked Respondent’s license, but allowed Respondent to avoid the revocation if it complied with the requirements of the Decision and Order on or before November 22, 2010. 9. On January 5, 2011, Complainant filed a claim in the amount of $13,439.00 to the Residential Contractors’ Recovery Fund (“the Fund”) to recover the alleged costs to complete the drainage project at the Turquoise property. Complainant provided the address of the Topaz property as his mailing address. 10. On January 12, 2011, the Registrar revoked Respondent’s license as a result of its failure to resolve Complainant’s March 22, 2010 complaint (“the workmanship complaint”). 11. On November 28, 2011, the Registrar issued a Notice to Claimant of Recovery Fund Ineligibility for the following reason: Complainant does not meet definition of a “person injured” as he did not occupy, or intend to occupy, the property at the time of the contract or when the injury accrued as required by § 32- 1131.3.

12. Complainant requested a hearing on the Registrar’s determination that he was ineligible for a payout from the Fund. The Registrar referred the matter to the Office of Administrative Hearings (“the OAH”), an independent state agency, for an evidentiary hearing. 13. On January 5, 2012, the Registrar issued a Notice of Recovery Fund Eligibility/Payout Hearing setting a hearing on February 15, 2012, at 1:00 p.m. The Registrar sent a copy of the Notice of Recovery Fund Eligibility/Payout Hearing to Respondent at its address of record. 14. A recovery fund eligibility hearing was held on February 15, 2012, at 1:00 p.m. Complainant submitted three exhibits and testified on his own behalf. The Registrar submitted two exhibits and presented the testimony of Douglas Ulmer, the Fund’s claims reviewer. 15. Respondent did not request to appear telephonically and did not request that the hearing be continued. Although the hearing did not conclude until after 3:00 p.m., Respondent did not appear through an authorized member, employee, or attorney. Consequently, Respondent did not present any evidence. Hearing Evidence 16. The Registrar submitted a printout from the Maricopa County Assessor’s website that showed on June 11, 2009, Eric and Jennifer Kovalsky recorded title to the Turquoise property in their names. 17. The Registrar also submitted an unofficial copy of a warranty deed from the Maricopa County Recorder’s website that showed on May 23, 2009, Complainant and his wife granted title to the Turquoise property to Eric and Jennifer Kovalsky. 18. Complainant testified that he started construction of the residence at the Turquoise property in early 2009 and that at the time, he intended to live in the residence. 19. Complainant testified that after construction of the residence at the Turquoise property had started, neighboring property owners complained that the residence caused drainage problems on their properties. As a result, the City of Scottsdale (“the City”) required Complainant’s general contractor, Scott E. Alexander, Inc., License No. B.078114-R (“Alexander”), to perform grading and other remedial work to resolve the drainage issue. 20. Complainant submitted a note from Alexander dated April 17, 2009, stating that “the Turquoise project is horrendously over budget,” with a total shortfall of $477,760.00, and that there was no allowance “for the storm drainage issue which may cost between $15,000 and $25,000.” The note further stated that Complainant would need to make at least $109,000.00 in payments within the next two weeks to make up the immediate shortfall. 21. Complainant testified that he found Respondent’s crew in his neighborhood performing work that was very similar to the work that the City had required to address drainage issues at the Turquoise property. Complainant testified that he asked Respondent for a bid, and its principals verbally told him that Respondent could resolve the drainage issue for $12,000.00. Complainant then informed Alexander of Respondent’s offer. 22. Complainant submitted his personal check to Alexander in the amount of $12,000.00, dated May 25, 2009, for “Turquoise shortfall.” Although the check did not refer to drainage or to Respondent, Complainant testified that the check was meant to allow Alexander to hire Respondent to resolve the drainage issue at the Turquoise property. 23. Complainant testified that he had to obtain a second mortgage on the Topaz property to make up the shortfall. However, because his wife was ill and his finances were collapsing, the infusion of cash was not enough, and he told Alexander that he would need to sell the Turquoise property. Complainant testified that during the time he was gone for the summer, Dr. and Mrs. Kovalsky approached Alexander about purchasing the Turquoise property. 24. Complainant testified that after he sold the Turquoise property to Dr. and Mrs. Kovalsky in June 2009, he paid additional monies to Respondent and others to resolve the drainage issue because it was the right thing to do.[4] Complainant did not submit a copy of the sale contract. 25. Complainant submitted a memorandum from Alexander dated September 26, 2009, regarding “Final Construction on Turquoise.” Attached to the September 26, 2009 memorandum was an “[a]ccounting for $12,000.00 Pre-Paid Drainage Monies,” including $2,771.00 for engineering services, $4,150.00 for “Saddle Horn Expenses” (“$830.00 Monthly Average”), and $4,600.00 for “Miscellaneous Budget Overages.” The memorandum also included among the work that still needed to be performed drainage work by R J L at a cost of $22,942.00. 26. Complainant testified that on his workmanship complaint, he mistakenly referred to the expenses that he incurred to resolve the drainage issue at the Turquoise property after he sold it to Dr. and Mrs. Kovalsky. Complainant requested that the Fund reimburse him the $12,000.00 he paid to Alexander in May 2009, while he still owned the property, to retain Respondent to resolve the drainage issue pursuant to its verbal agreement. 27. Complainant testified that he did not make a complaint to the Registrar against Alexander for its failure in May 2009 to retain and pay Respondent to resolve the drainage issue at the Turquoise property because Alexander was bankrupt and no longer in business. CONCLUSIONS OF LAW This matter lies within the Registrar’s jurisdiction.[5] 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 notice of the hearing.[6] Complainant bears the burden of proof to establish his eligibility to recover a payout from the Fund by a preponderance of the evidence.[7] “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”[8] A.R.S. § 32-1132(A) established the Fund to provide a payout to “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 . . . for damages sustained by the act, representation, transaction or conduct.” A.R.S. § 32- 1131(3) defines a “person injured” who is eligible to recover a payout 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 . . . who [is] damaged by the failure of a residential contractor or a dual licensed contractor to adequately build or improve a residential structure . . . .” “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.”[9] Complainant did not establish that before June 2009, when he owned and intended to live at the Turquoise property, Respondent contracted with him or Alexander to perform work at the property or committed any act in violation of A.R.S. § 32-1154(A). Because Respondent did not injure Complainant while he owned and intended to reside at the Turquoise property, Complainant is not eligible for a payout from the Fund under A.R.S. § 32-1132(A). Complainant also did not establish that after October 2009, when he paid monies to Respondent for contracting work, he owned or intended to reside at the Turquoise property. The Registrar established that Complainant transferred the Turquoise property to Dr. and Mrs. Kovalsky on May 23, 2009, five months earlier. Because Complainant did not own or intend to reside at the Turquoise property when Respondent performed contacting work at the property and violated A.R.S. § 32-1154(A), Complainant is not a “person injured” as defined by A.R.S. § 32-1131(3) who is eligible for a payout from the Fund. RECOMMENDED ORDER Based on the foregoing, it is recommended that on the effective date of the Registrar’s final order, Case No. 2010-[number redacted] be closed because Complainant Richard L. Inderrieden has not established that he is eligible for a payout from the Residential Contractors’ Recovery Fund. 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 6, 2012.

/s/ Diane Mihalsky Administrative Law Judge

Transmitted electronically to:

William A. Mundell, Director Registrar of Contractors ----------------------- [1] The Registrar’s public website does not show any licenses having been issued to Houston Littlefair or R.B. Meyers. [2] A.R.S. § 32-1154(A)(1) 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.” [3] A.R.S. § 32-1154(A)(13) includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license, “[f]ailure in any material respect to comply with this chapter.” A.R.S. § 32-1124(B) requires that licensed contractors include their license number “preceded by the acronym ‘ROC’” on “all written bids submitted by the licensee and . . . on all advertising, loan forms, lending institution forms, letterheads and other documents used by the licensee in the conduct of business regulated by this chapter.” [4] People usually do not pay for repairs to properties that they no longer own based on a moral as opposed to a legal obligation. The evidence of Complainant’s payments to and obligations undertaken by various subcontractors at different times during construction at the Turquoise property was inconsistent and confusing. The Administrative Law Judge does not address the inconsistencies because she has concluded that even if Complainant’s testimony and documentary evidence are taken at face value, he is not eligible for a payout from the Fund. [5] See 32-1101 et seq. [6] See A.R.S. §§ 41-1092.04; 41-1092.05(D). [7] 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). [8] Morris K. Udall, Arizona Law of Evidence § 5 (1960). [9] 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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