ALJDEC decisions subject to certification as final

2011A-6807-ROC · Registrar of Contractors · 2014-04-29

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: April 10, 2014

APPEARANCES: Complainant appeared on her own behalf; the Residential Contractors’ Recovery Fund intervened in this matter and was represented by Assistant Attorney General John R. Tellier; Respondent did not appear.

WITNESSES: James L. Barbour, Fund Claims Reviewer Kelly Smith

ADMINISTRATIVE LAW JUDGE: Eric A. Bryant _____________________________________________________________________

Complainant seeks payout from the Residential Contractors’ Recovery Fund (“Fund”). The Fund appeared through Assistant Attorney General John Tellier, challenging Complainant’s eligibility for payout from the Fund. The only issue for which the parties were given notice and for which the hearing was held is Complainant’s eligibility for recovery from the Fund. As noted above, Respondent did not appear or participate. This tribunal entered Exhibits 1 through 6 submitted by the Fund. Based upon the entire record, the Administrative Law Judge makes the following Findings of Fact, Conclusions of Law, and Recommended Order finding that Complainant is not eligible for recovery from the Fund. FINDINGS OF FACT 1. Respondent was the holder of License No. B.248668-R.[1] The license was issued in October 2008, was suspended for non-renewal from November 2010 to April 2011, was suspended again in July 2012, and was revoked in August 2012 based on a failure to comply with a disciplinary order that resulted from a complaint made against Respondent by Complainant. Respondent defaulted on that complaint. Respondent’s license was revoked due to that violation.[2] 2. Complainant purchased a home from Apache Real Estate Investments, Inc. (“Apache”) in December 2010. In disclosure documents from the sale of the home, the following statement is made: “Seller has never lived in property. Seller has limited knowledge of property other than the rehab work that had been performed.”[3] In addition, an Addendum to the purchase contract states: “In lieu of roof repairs needed on garage & patio roof per roofing contractor’s inspection & quote, seller agrees to a purchase price reduction of $2,000.00 below appraised value.”[4] 3. When the roof leaked and collapsed later, Complainant filed a complaint against Respondent with the ROC.[5] As noted, Respondent defaulted and its license was later revoked due to Complainant’s complaint. 4. In August 2013, Complainant made a claim to the Fund for damages to correct a “complete re-roofing” and “mold remediation in kitchen.”[6] The Fund denied the claim, finding that Complainant did not meet the statutory definition of “person injured.” 5. The greater weight of the evidence shows that Respondent performed roofing work on the home for Apache before Apache sold the home to Complainant. Apache was the owner of the property at the time of contract for the work, at the time the work was done, and at the time that any claim for poor work accrued. Apache did not occupy or intend to occupy the home during the entire time it owned the property and contracted for the work. Complainant bought the home from Apache in December 2010 and has occupied it since. CONCLUSIONS OF LAW 1. The burden of proof at an administrative hearing is generally upon the person asserting a claim.[7] Further, the standard of proof at hearing is by preponderance of the evidence.[8] Therefore, Complainant bears the burden of showing, by a preponderance of the evidence, that she is eligible for recovery from the Fund.[9] Complainant has not met that burden. 2. Only a “person injured by an act, representation, transaction, or conduct of a residential contractor” is eligible for recovery from the Fund. “Person injured” is defined in A.R.S. § 32-1131(3) as: any owner of residential real property which is classified as class three property under section 42-12003 and which is actually occupied or intended to be occupied by the owner as a residence including community property, tenants in common or joint tenants who are damaged by the failure of a residential contractor or a dual licensed contractor to adequately build or improve a residential structure or appurtenance on that real property. Included in this definition are lessees of residential real property who contract directly with a residential contractor or indirectly with a subcontractor of that contractor and homeowners' or unit owners' associations after transfer of control from the builder or developer for damages to the common elements within the complex.

This provision requires that the person seeking recovery from the Fund be (1) an owner (2) who has been damaged by the contractor’s failure to adequately build or improve a structure that is (3) on real property classified as class three property by the tax assessor and (4) who actually occupies or intends to occupy the residence. 3. The relevant times for determining whether a person is a person injured as defined by statute and is, therefore, eligible for recovery from the Fund are (1) the time the contract is entered into or (2) the time the claim accrues.[10] 4. Complainant does not meet all four statutory requirements listed above that are necessary to be considered a “person injured” under the statute. 5. First, Complainant was not the owner of the property at the relevant times (time of contract or when injury accrued); Apache was the owner. 6. Second, at the time of the contract and accrual of the claim, Apache did not occupy or intend to occupy the home. Therefore, Apache never held the status of a “person injured” to pass on to Complainant, even if that were possible. Neither Apache nor Complainant fit the definition of “person injured.” 7. Complainant has not shown that she is eligible for recovery from the Fund. RECOMMENDED ORDER In view of the foregoing, IT IS RECOMMENDED that the Registrar of Contractors find that Kelly R. Smith is not eligible for recovery from the Fund and close this case.

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, April 29, 2014.

/s/ Eric A. Bryant Administrative Law Judge

Transmitted electronically to:

William A. Mundell, Director Registrar of Contractors ----------------------- [1] Exhibit 3. [2] At hearing, a question was raised as to whether the evidence showed that Respondent performed the work that is the basis for the claim. Because the underlying complaint was against Respondent for the same work that is the subject of the claim against the Fund, and because Respondent defaulted on that complaint, the evidence shows that Respondent performed the work that is the basis for the claim. The disciplinary action against Respondent necessarily includes a finding that Respondent performed the work. [3] Exhibit 2. [4] Id. [5] There is little to no documentation concerning the underlying complaint in the record before this tribunal. However, the parties testified about the underlying case and there were no disputes about that testimony. [6] Exhibit 1. [7] Utah Construction Company v. Berg et al, 68 Ariz. 285, 205 P.2d 367 (1949); A.A.C. R2-19-119(B). [8] Smith v. Arizona Dept. of Transportation, 146 Ariz. 430, 706 P.2d 756 (App. 1985); A.A.C. R2-19-119(A). [9] Culpepper v. State, 187 Ariz. 431, 437, 930 P.2d 508, 514 (Ct. App. 1996). [10] McMurren v. JMC Builders, Inc., 204 Ariz. 345, 351, 63 P.3d 1082, 1089 (App. 2003).

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