ALJDEC decisions subject to certification as final

2012A-2167-ROC-rf · Registrar of Contractors · 2015-09-28

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: September 8, 2015 APPEARANCES: Sandra Eastman appeared on behalf of Complainants. Respondent Eurotech Decorative Concrete LLC did not appear. The Registrar of Contractors was represented by Assistant Attorney General Michael Raine. ADMINISTRATIVE LAW JUDGE: Tammy L. Eigenheer _____________________________________________________________________ FINDINGS OF FACT 1. On or about October 20, 2011, Sandra Eastman contracted with Eurotech Decorative Concrete LLC (the Contractor) to complete 1760 square feet of stamped concrete at a residence located at 1527 N. Wickiup Rd., Apache Junction, Arizona.[1] The contract price was $8000.00 and Ms. Eastman paid the contract in full. 2. On or about April 26, 2012, Complainants filed a complaint with the Registrar of Contractors (Registrar) alleging poor work against the Contractor. The Registrar investigated the complaint and substantiated that the Contractor performed poor work at the residence. 3. On or about April 25, 2013, the Registrar issued a citation against the Contractor. On or about February 25, 2014, the Registrar revoked the Contractor’s license as a direct result of the Eastmans’ complaint. 4. On or about May 6, 2015, the Eastmans filed a claim with the Recovery Fund (Fund). The claim was assigned to James Barbour for review. During his initial review, Mr. Barbour determined that Mr. Eastman no longer owned the property. The Pinal County Assessor’s website indicated that the property was sold to Ted and Rhonda Hunt on or about October 30, 2014. On or about May 20, 2015, Ms. Eastman confirmed that the property had been sold. 5. On or about June 8, 2015, the Registrar issued a Notice and Order of Denial of Recovery Fund Claim (“Order of Denial”). In the Order of Denial, the Registrar set forth the four eligibility criteria set forth in A.R.S. § 32-1131 et seq. necessary for a claimant to recover from the Fund. The Registrar concluded that based on the evidence available, Mr. Eastman appeared to meet all eligibility criteria, while Ms. Eastman was not eligible to access the Fund because she did not own the property. 6. As to the actual damages, the Registrar found in the Order of Denial that because the property had been sold “as is” in a short sale before any repairs had been completed, Mr. Eastman did not suffer any actual damages. It was also noted that Mr. Eastman did not suffer any actual damages because Ms. Eastman and her husband, Lawrence Dionne, paid for the entirety of the contract. 7. The Eastmans requested a hearing on the Registrar’s Order of Denial. The Registrar referred the matter to the Office of Administrative Hearings, an independent agency, for an evidentiary hearing. 8. At the hearing, the evidence addressed the eligibility of the Eastmans and the calculation of any compensable damages. As to the Eastmans’ eligibility, the issue was raised that Mr. Eastman was the only title holder of record and the property was not his primary residence. As to the calculation of compensable damages, the question centered on whether any actual damages could be calculated. 9. As to eligibility, the Registrar argued that because Mr. Eastman was on the title but never occupied the residence and because Ms. Eastman occupied the residence but was never on the title, neither of them qualified as a “person injured” under the statute governing the Fund.[2] This issue was not heavily argued during the hearing, but Ms. Eastman acknowledged that she was not on the title. Ms. Eastman testified that Mr. Eastman owned numerous homes throughout the country and would reside in the home when he was in Arizona, but that it was not his primary residence. 10. With respect to the calculation of damages, the Registrar represented that because no repairs had been completed prior to the sale and the property had been sold “as is” in a short sale, any payout from the Fund would constitute a windfall to the Eastmans. The Registrar argued that if any payout were made from the Fund, it should go to the lender who suffered the loss from the short sale, and therefore a payout to the Eastmans was not proper. 11. Ms. Eastman offered no evidence that the property was sold for a reduced price as a result of the poor workmanship of the contractor. Ms. Eastman did not know how much was still owing on the mortgage after the short sale. Ms. Eastman stated that she was attempting to recoup some of Mr. Eastman’s money that she had spent to pay the Contractor. Ms. Eastman testified that all of the money paid to the Contractor was Mr. Eastman’s that he had deposited into her accounts. 12. On August 4, 2015, the Registrar issued a Notice of Recovery Fund Eligibility/Payout Hearing (Notice) setting the hearing in this matter for 1:00 p.m. on September 8, 2015. A copy of the Notice was sent to the Contractor at its address of record. 13. A recovery fund payout hearing was held at 1:00 p.m. on September 8, 2015. Ms. Eastman testified and submitted a statement from Mr. Eastman. The Registrar presented the testimony of James Barbour and submitted 14 exhibits. 14. The Contractor did not request to appear telephonically at the hearing and did not request that the hearing be continued. Although the hearing continued throughout the afternoon, the Contractor did not appear through an authorized member, employee, or attorney. Consequently, the Contractor did not present any evidence. CONCLUSIONS OF LAW This matter lies within the Registrar’s jurisdiction.[3] The Notice mailed to the Contractor at its address of record was reasonable. The Contractor is deemed to have received notice of Recovery Fund Eligibility/Payout Hearing.[4] Complainants bear the burden of proof and must establish eligibility to recover from the Fund by a preponderance of the evidence.[5] “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”[6] A preponderance of the evidence is “[t]he greater weight of the evidence, not necessarily established by the greater number of witnesses testifying to a fact but by evidence that has the most convincing force; superior evidentiary weight that, though not sufficient to free the mind wholly from all reasonable doubt, is still sufficient to incline a fair and impartial mind to one side of the issue rather than the other.”[7] A.R.S. § 32-1131(3) provides as follows: "Person injured" means 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.

While there may be some question as to Mr. Eastman’s eligibility to access the Fund as a “person injured”, the Administrative Law Judge finds that such a determination must not be made at this time based on the analysis of the actual damages suffered by Complainants. According to A.R.S. § 32-1132(A), an award from the Fund is limited to “actual damages suffered by the complainant as a direct result of the contractor’s violation . . .,” not to exceed the cost of repair or replacement. “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). When the subject property is sold prior to any repairs being completed, the calculation of actual damages evaluates whether there was a diminution of value as a result of the poor workmanship, i.e. whether the property was sold for less than it would have but for the contractor’s violation. Based on the circumstances, Complainants failed to establish they were eligible for a payout from the Fund. Because the property was sold in a short sale, Mr. Eastman owed more on the mortgage than the sale price of the property. Ms. Eastman offered no evidence as to whether that shortage was $1,000.00, $10,000.00, $100,000.00, or more. Even assuming the property sold for significantly less than it would have if the work under the contract had been done properly, it is impossible to measure what payout, if any, would put Complainants back in the position they would have been in without knowing how much was still owing on the mortgage when the property was sold. Because Complainants failed to provide any evidence that they suffered any actual damages as a result of the Contractor’s poor workmanship, they failed to establish that they were eligible for an award from the Fund. RECOMMENDED ORDER Based on the foregoing, it is recommended that on the effective date of the Registrar’s final order, Complainants’ claim be closed as Complainants being deemed ineligible to access the 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, September 28, 2015.

/s/ Tammy L. Eigenheer Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director Registrar of Contractors ----------------------- [1] Sandra Eastman is Kevin Eastman’s mother. Only Kevin Eastman held legal title to the property. [2] A.R.S. § 32-1131(3) provides as follows:

"Person injured" means 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. [3] See 32-1101 et seq. [4] See A.R.S. §§ 41-1092.04; 41-1092.05(D). [5] 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). [6] Morris K. Udall, Arizona Law of Evidence § 5 (1960). [7] Black’s Law Dictionary at page 1220 (8th ed. 1999).

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