ALJDEC decisions subject to certification as final

2010A-7100628-ROC-rf · Registrar of Contractors · 2013-04-15

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: April 2, 2013, at 8:00 a.m. APPEARANCES: Mareo Torito and Maylis Torito (“Complainants”) did not appear; Shelby Pools LLC (“Respondent”) did not appear; the Arizona Registrar of Contractors (“the Registrar”) was represented by John Tellier, Esq., Assistant Attorney General. ADMINISTRATIVE LAW JUDGE: Diane Mihalsky _____________________________________________________________________

FINDINGS OF FACT The Registrar issued License No. B-5.228361-R to Respondent. On or about October 29, 2012, the Registrar issued a Notice of Denial of Recovery Fund Claim in Case No. 2010-7100628 (formerly RF10-0628) that summarized the history of this matter in relevant part as follows: The Complainant(s) named above filed a claim for payment with the Residential Contractors’ Recovery Fund pursuant to A.R.S. § 32-1154(F). After a review of the claim and all supporting documentation, the Fund has determined that Complainant(s) are denied payment from the Fund for the following reasons:

Pursuant to A.R.S. § 32-1132(A), an award from the Recovery Fund is limited to actual damages suffered by the Complainant(s) as a direct result of the residential contractor’s violation, but shall not exceed an amount necessary to complete or repair a residential structure or appurtenance.

Pursuant to A.R.S. § 32-1134(A)(2)(3) and (5) the Registrar is required to subject all Recovery Fund claim files to examination by an accountant to ensure that all claims paid are appropriate. In order to fulfill this fiduciary responsibility and determine an amount payable (if any), the Registrar must request sufficient documentation to support all payments from the Fund. This includes having conclusive proof of the extent of all claimed damages. Anything less mandates that the Registrar deny the unsubstantiated portion of any claimed loss.

I. Background

On or about August 8, 2008 the Complainants filed a complaint with the Registrar of Contractors against Shelby Pools LLC, license 228361, alleging poor work in the installation of a spa adjacent to an existing pool. The complaint was assigned to inspector Scott Deering who performed an onsite inspection of the work performed. The inspector determined that the crack in bottom of the pool, as well as the cracks in the first and second steps of the pool, were not consistent with the work performed by Respondent. Further, Mr. Deering determined that the cracks in the pool were more likely a pre-existing condition of the eight year-old pool in concluding that no action was required by Respondent. In a letter dated September 25, 2008 the Inspector informed both the Complainants and Respondent of his findings, stating the complaint would be closed in 10 days if a response was not filed. The Complainants objected to the Inspector’s findings and requested a hearing in the matter. A citation was then issued and the Respondent failed to answer, ultimately resulting in the default revocation of Respondent’s license on or about November 18, 2009.

On or about January 29, 2010 Complainants filed a claim with the Registrar of Contractors Recovery Fund seeking payment in the amount of $30,000.00.

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II. Analysis

In order to obtain an award from the Recovery Fund, an applicant must provide proof to establish by a preponderance of evidence that (s)he is eligible pursuant to ARS § 32-1131 et seq. Further, if eligible, an applicant must establish by a preponderance of evidence that damages sought are within the limitations of compensability as set forth in § 32-1132(A). This evidentiary showing requires documentation to support the original contract price, scope of work, payments made toward performance of the contract and documentation to substantiate costs to complete or repair any work required by the underlying disciplinary proceedings. These criteria are set forth below:

A. Eligibility:

Pursuant to ARS § 32-1131(3) a “person injured” is defined as any owner of residential real property which is classified as class 3 under § 42-12003 and which is actually occupied or intended to be occupied by the owner as a residence. These criteria are analyzed at the time of contract execution and the time the injury accrued. See McMurren v. J.M.C. Builders, Inc., 204 Ariz. 345 (App. 2003).

Complainants stated in both the complaint and the claim forms a Colorado mailing address and the Scottsdale jobsite address. In a letter dated May 11, 2011 the Complainants were notified by the Fund that proof of occupancy was required in order to be found eligible to access the Fund. On or about April 9, 2012, the Complainants provided copies of utility bills for the residence. While the utility bills are for the jobsite address and are in the name of Complainants, the mailing address on these bills is shown to be the Complainants’ home in Colorado. This is not adequate proof to substantiate the Complainants actually occupies the home as a second residence. A second request, dated May 31, 2012, was sent to the Complainants, once again requesting specific documentation to support that they occupied the residence during the relevant time frames, including examples such as a driver’s license, vehicle registration and voter registration. On or about August 13, 2012 the Fund received a response from the Complainants attorney, Jeffrey S Kaufman, including copies of a homeowner’s insurance policy. Once again, the mailing address on the documents lists the Complainants[’] Colorado home. Complainants also supplied an affidavit dated May 11, 2012, stating that they own the property in question, but this affidavit is silent concerning occupancy.

On or about September 12, 2012 in telephone conversation between Jeff Kaufman and Recovery Fund Administrator Marc D’Amore the Complainants[’] attorney was again informed of the requirements to verify occupancy. To date, the Fund has not heard or received any additional documentation to support Complainants[’] residency of the subject property. Also, it is important to note that two of the three bids supplied to repair the pool lists “Bob” or “Bob Bryan” as the homeowner and one silent concerning the identity of the homeowner.

These omissions and unresolved factual issues raise doubts concerning the Complainants’ occupancy of the subject property especially in light of numerous specific requests by the Fund to substantiate such. Based on all available evidence as of the date of this Notice, the Complainants must be deemed ineligible, as they have failed to carry their burden of proof to establish that they actually occupied the jobsite property at the relevant times.

B. Actual Damages:

Pursuant to ARS § 32-1132(A) an 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 the residential property lines. In order to determine actual damages the Fund must be able to verify, among other things, the actual contract price and all payments made on the contract and, if applicable, any unpaid balance due on the contract.

In the original compliant form the Complainants state, in section 2, that the contract is both written and verbal. A written contract was not provided with the complaint or when the claim was filed. On or about December 22, 2010 the Fund notified the Complainants in writing and requested a copy of the contract. No response was received to this letter. A second request was faxed to the Complainants on or about March 9, 2011. In a telephone conversation on March 31, 2011, between Mr. Torito and, then Recovery Fund reviewer Sylvia Arce, the Complainants stated they could not locate their contract. Mr. Torito stated that he would do his best to explain, in writing, the terms of the contract.

In a sworn affidavit signed in front of a notary on May 11, 2012 the Complainant Mareo Torito, stated the terms of the contract included a promise to pay Respondent the total sum of $12,000.00 for the construction of a spa. The affidavit also sets forth that Mr. Torito paid Respondent two checks totaling $8,107.51 and paid the balance, $3,892.49, in cash. The Fund finds the alleged cash payment to have no corroborative support, as Complainant failed to submit any receipt or other documentation in support of this payment. Importantly, the affidavit is silent concerning any specific scope of work including conditions or terms related to the quality of materials to be used, the size of the spa, down payment or payment schedule, or any exclusions that may have been applicable relevant to the location of the spa. The absence of this critical information renders the Fund incapable of objectively quantifying the original contract price and scope of work. Given the Fund’s fiduciary responsibility to administer Fund monies held in trust, the failure of Complainants to preserve critical evidence renders any potential compensable “actual damages” sustained incalculable.

III. Conclusion

In filing a claim with the Recovery Fund, the Complainants bear the burden of proof to substantiate their claim. Complainants failed to carry their burden to establish eligibility and failed to carry their burden of proof to establish the original price and scope of work for the project, which renders any measure of compensable damages incalculable. Therefore, based upon all available evidence, this claim must be denied.

The Registrar will close this claim with no payment from the Fund. If Complainant(s) disagree(s) with this finding, Complainant(s) may choose to request a hearing. Complainant’s(s’) hearing request must be in writing and must be received no later than 5:00 p.m. on November 13, 2012. If a timely written request for hearing is received, the matter shall be set for an administrative hearing. Complainant(s) may retain legal representation or Complainant(s) may represent himself/herself/themselves at the administrative hearing. At the administrative hearing, Complainant(s) will bear the burden of proof to establish (1) eligibility pursuant to A.R.S. § 32- 1131, et seq., and (2) actual damages pursuant to A.R.S. § 32- 1132(A).

Any and all possible defenses to Complainant’s(s’) eligibility for an award from the Fund, whether or not identified above or later discovered, may be raised and presented at the hearing. Based on the evidence and arguments presented at the hearing, Complainant(s) may be able to obtain an award from the Fund up to the amount noticed to the Respondent, but no greater than the statutory maximum of $30,000.00 per person per property.

Upon receipt of an administrative hearing request, the agency will then enter its objection and intervene in this matter and an administrative hearing date will be set. The agency will request that an Assistant Attorney General be assigned to represent it and, as such, the Assistant Attorney General will voice the agency’s objections and defenses at the administrative hearing. Complainant(s) will receive written notification of the time and date of the administrative hearing. [Footnote omitted.]

After Complainants’ attorney, Jeffrey S. Kaufman, Esq., filed a timely request for hearing on the Registrar’s Notice of Denial of Recovery Fund Claim, the Registrar referred the matter to the Office of Administrative Hearings (“the OAH”), an independent agency, for an evidentiary hearing. The Registrar issued Notice of Recovery Fund Eligibility/Payout Hearing, setting an evidentiary hearing in the OAH on February 14, 2013, at 8:00 a.m. Mr. Kaufman, on Complainants’ behalf, subsequently filed motions in the OAH requesting that a prehearing conference be scheduled and that the evidentiary hearing be continued. The Administrative Law Judge (“ALJ”) granted the motions and on February 6, 2013, issued an order scheduling a prehearing conference on February 14, 2013, at 10:00 a.m. and a continued evidentiary hearing on April 2, 2013. OAH staff sent the February 6, 2013 order to Mr. Kaufman and to Respondent at their addresses of record. Mr. Kaufman appeared at the prehearing conference on Complainants’ behalf. Attorney Gary Lee Henman, Jr., Esq. appeared at the prehearing conference on Respondent’s behalf. Assistant Attorney General John Tellier, Esq. appeared on the Registrar’s behalf. The attorneys and the ALJ discussed the issues to be addressed at the evidentiary hearing. On February 14, 2013, the ALJ issued an order that required the attorneys to disclose to their opponents the evidence that they intended to offer into evidence on or before March 26, 2013. The February 14, 2013 order was sent to all three attorneys at their addresses of record. On March 25, 2013, Mr. Tellier, on behalf of the Registrar of Contractors, filed a document in the OAH disclosing the evidence that the Registrar intended to submit at the hearing. According to the docket of the OAH, on March 26, 2013, Mr. Kaufman made a telephone call to the OAH and informed staff “that the matter is tentatively settled, they need to finalize the paperwork.” Mr. Kaufman did not file a written motion in the OAH withdrawing Complainants’ claim to the Recovery Fund pursuant to their settlement or disclosing the evidence that they intended to submit at the hearing. A continued hearing was held on April 2, 2013. Mr. Tellier appeared on behalf of the Registrar. Complainants did not appear, personally or through Mr. Kaufman. Respondent also did not appear, through Mr. Henman or a duly authorized member or employee. Complainants did not present any evidence to establish that they were eligible to recover damages in any amount from the Residential Contractors’ Recovery Fund. / / / / / / / / CONCLUSIONS OF LAW 1. The OAH’s February 6, 2013 Order setting the prehearing conference and continued evidentiary hearing provided reasonable notice to Complainants of the continued hearing date. It appears that Complainants’ attorney actually received notice of the continued hearing because he appeared at the prehearing conference that had been scheduled in the same order.[1] 2. Complainants bear the burden of proof to establish their eligibility to recover a payout from the Residential Contractors’ Recovery Fund and the amount of their compensable damages by a preponderance of the evidence.[2] 3. By failing to appear at the duly noticed continued hearing or to present any evidence in support of their claim, Complainants have failed to establish that their claim is eligible for a payout from the Residential Contractors’ Recovery Fund in any amount. RECOMMENDED ORDER Based on the foregoing, it is recommended that on the effective date of the final Order in this matter, Complainants Mareo and Maylis Torito’s claim to the Residential Contractors’ Recovery Fund in Case No. 2010- 7100628 (formerly RF10-0628) be closed as Complainants did not establish that they are eligible for a payout from the Residential Contractors’ Recovery Fund in any amount. 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 five days from the date of that certification. Done this day, April 15, 2013.

/s/ Diane Mihalsky Administrative Law Judge

Transmitted electronically to:

William A. Mundell, Director Registrar of Contractors ----------------------- [1] See A.R.S. §§ 41-1092.04; 41-1092.05(D). [2] See A.R.S. § 32-1132(A); A.A.C. R2-19-119; see also Vazanno v. Superior Court, 74 Ariz. 369, 372, 249 P.2d 837 (1952).

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