ALJDEC decisions subject to certification as final

2010A-308472105-ROC-rf · Registrar of Contractors · 2012-11-15

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: October 9, 2012

APPEARANCES: Complainants appeared on their own behalf; Respondent appeared on his own behalf; the Residential Contractors’ Recovery Fund intervened in this matter and was represented by Assistant Attorney General Seth Hargraves.

WITNESSES: Eric Ulinger, Recovery Fund Supervisor Soraya Bellon Michael Bellon

ADMINISTRATIVE LAW JUDGE: Eric A. Bryant _____________________________________________________________________

Complainants seek a payout from the Residential Contractors’ Recovery Fund (“Fund”) for damages caused by Respondent’s abandonment of a project, poor workmanship, and failure to comply with a Corrective Work Order (“CWO”). The Fund appeared through Assistant Attorney General Seth Hargraves, challenging Complainants’ eligibility for payout from the Fund. Respondent appeared at the hearing to challenge Complainants’ eligibility, but did not submit his own evidence or argument. Respondent supports the Fund’s position. The only issue for which the parties were given notice and for which the hearing was held is Complainants’ eligibility. After the hearing was held on October 9, 2012, Complainants submitted more documentation to the Office of Administrative Hearings. The Fund objected to this submission on October 22, 2012. Based on the arguments of the parties, the additional submission is rejected for the reasons that two of the documents submitted (two warranty deeds) are already part of the evidence, and the last two pages of the submission are not relevant. This tribunal entered the claim file received from the Registrar of Contractors into the record, along with Exhibits 1 through 7. Based upon the entire record, the Administrative Law Judge makes the following Findings of Fact, Conclusions of Law, and Recommended Order finding that Complainants are not eligible for recovery from the Fund. FINDINGS OF FACT 1. Respondent was the holder of License No: K-36.204409-D. After an evidentiary hearing held on February 4, 2011, Respondent was found to have abandoned a project without legal excuse, to have built with poor workmanship, and to have failed to comply with a CWO. The project at issue was stucco work at Complainants’ house. Respondent’s license was revoked. 2. The parties agree that the date Complainants and Respondent entered into the contract at issue is January 24, 2008. 3. A review of the underlying complaint file shows that no findings were made as to the date of abandonment. Mr. Ulinger testified at the hearing that the injuries to Complainants likely occurred in June 2008 because he saw no evidence of work done after that date. Complainants alleged in the underlying complaint form that the last work was performed in March 2010. In their claims to the Fund, Complainants allege that the abandonment occurred in May 2010. Mrs. Bellon testified at the hearing that after the CWO was issued on April 26, 2010, Respondent did some incomplete work at the house and then abandoned the rest of the work. This is consistent with the documentation and is not inconsistent with the findings of fact that were made in the underlying complaint hearing. Therefore, the Administrative Law Judge finds the testimony to be credible and finds that the abandonment, poor workmanship, and failure to comply with the CWO occurred in May 2010. 4. Complainants made claims to the Fund in April 2012 for recovery of damages caused by Respondent’s violations.[1] The Fund conducted a preliminary check of the claim and determined that the owner of the property during the relevant time periods was K3 Associates LLC (“K3”). The Fund notified Complainants that they are ineligible for recovery because they were not the owners of the property at the time of the contract or injuries and were, therefore, not “persons injured” as defined in statute.[2] Because of this, the Fund found that Complainants are not eligible for recovery from the Fund. Complainants requested a hearing.[3] 5. The record shows that on October 25, 2006, the property was conveyed by warranty deed to K3.[4] On March 30, 2007, the property was conveyed by warranty deed from K3 to Complainants, and also that same day by separate warranty deed the property was conveyed by Complainants to K3.[5] Next, on August 6, 2009, the property was conveyed by warranty deed from K3 to Complainants.[6] Finally, on February 11, 2010, the property was conveyed by warranty deed from Complainants to Wurley, LLC (“Wurley”).[7] 6. The evidence shows that on the date of contract, January 24, 2008, the property was owned by K3. It also shows that in May 2010, the property was owned by Wurley. The evidence also shows that Complainants occupied the home during those time periods. 7. Mrs. Bellon testified that Complainants were the sole members of K3 and of Wurley. There is no documentation in the record to substantiate that claim, but the Fund did not dispute it. CONCLUSIONS OF LAW 1. The burden of proof at an administrative hearing is generally upon the person asserting a claim.[8] Further, the standard of proof at hearing is by preponderance of the evidence.[9] Therefore, Complainants bear the burden of showing, by a preponderance of the evidence, that they are eligible for recovery from the Fund.[10] Complainants have not met that burden. 2. Only “owners” of “residential real property . . . actually occupied or intended to be occupied by the owner as a residence . . .” are eligible for recovery from the Fund as “injured persons.”[11] That statutory requirement entails actual occupancy (or intent to occupy) by the owner. That provision is mandatory and not ambiguous. 3. The relevant times for determining whether a person is a person injured as defined by statute and, therefore, eligible for recovery from the Fund are (1) the time the contract is entered into or (2) the time the claim accrues.[12] The Administrative Law Judge hereby determines that, in this instance, the claim accrued at the time of the injuries of abandonment and failure to comply with the CWO, which would have cured any poor workmanship. 4. Complainants were not the legal owners of the real property at the time of the contract or the time of the injuries. 5. Complainants argue that they should be treated as the owners of the property because they are the sole members of K3 and Wurley. That argument is not persuasive because it eviscerates the legal distinction between a limited liability company and the members of the limited liability company in their personal capacity. An LLC is a separate legal entity from the members of the LLC. Complainants also argue that they should be treated as the owners of the property because the property was classified at the relevant times as class 3 “owner occupied” property by the county assessor. Their reasoning is that because they occupied the home at the relevant times, and because the tax classification was “owner occupied” at those times, they are the owners by virtue of being the occupiers. This argument is not persuasive because it asks the Administrative Law Judge to find the tax classification as more persuasive as to the ownership of the property than the recorded deeds. The recorded deeds show that the ownership of the property was held by K3 and Wurley and not Complainants. That evidence is more persuasive than the tax classification, which is not intended to determine who the owner property is, but rather how it is used. 6. Complainants are not eligible for recovery from the Fund. Complainants are not eligible because they were not the owners of the property. RECOMMENDED ORDER In view of the foregoing, IT IS RECOMMENDED that the Registrar of Contractors find that the claims filed by Soraya and Michael Bellon are not eligible for recovery from the 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 Decision will be 40 days from the date of that certification.

Done this day, November 15, 2012.

/s/ Eric A. Bryant Administrative Law Judge

Transmitted electronically to:

William A. Mundell, Director Registrar of Contractors ----------------------- [1] Exhibits 1 and 2. [2] Exhibit 6. [3] Exhibit 7. [4] Exhibit 5. [5] Id. [6] Id. [7] Exhibit 2. [8] Utah Construction Company v. Berg et al, 68 Ariz. 285, 205 P.2d 367 (1949); A.A.C. R2-19-119(B). [9] Smith v. Arizona Dept. of Transportation, 146 Ariz. 430, 706 P.2d 756 (App. 1985); A.A.C. R2-19-119(A). [10] Culpepper v. State, 187 Ariz. 431, 437, 930 P.2d 508, 514 (Ct. App. 1996). [11] A.R.S. § 32-1131(3). [12] McMurren v. JMC Builders, Inc., 204 Ariz. 345, 351, 63 P.3d 1082, 1089 (App. 2003).

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

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