ALJDEC decisions subject to certification as final

2012A-2438-ROC · Registrar of Contractors · 2014-11-07

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: October 22, 2014, at 8:00 a.m. APPEARANCES: José M. Becerra and Tiffany A. Becerra (collectively, “Complainants”) were represented by David W. Degnan, Esq., Degnan Law, PLLC; C C B I Inc. doing business as Allied Restoration Contractors (“Respondent”) failed to appear; the Arizona Registrar of Contractors (“the Registrar”) was represented by Seth T. Hargraves, Esq., Assistant Attorney General. ADMINISTRATIVE LAW JUDGE: Diane Mihalsky _____________________________________________________________________

Background and Procedure 1. The Registrar issued License No. B.168912-R to Respondent. Respondent’s current address of record is P.O. Box 7794, Cave Creek, Arizona 85327-7794. 2. Complainants filed a claim with the Residential Contractors’ Recovery Fund (“the Fund”). On or about June 9, 2014, the Registrar issued a Notice and Order of Denial of Recovery Fund Claim, informing Complainants that the Fund had determined to deny their claim because it was incalculable, in relevant part as follows: The Complainants 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 the Complainants are denied payment from the Fund for reasons set forth below:

Background and Procedural History:

The Complainants filed a claim with their insurance company, USAA, for repairs to their roof and drywall damage on or about March 9, 2011. On or about May 26, 2011,[1] Complainants . . . obtained a proposal from [Respondent] for the replacement of their roof and drywall damages in the Arizona room at their residence located at 14822 N. Flamenco Dr., Phoenix, Arizona. This proposal was not executed by either party. This proposal included an original price for the scope of work to be performed that appears to have been in line with the scope of the USAA insurance adjuster’s scope of work in the amount of $15,557.30. The Complainants have paid $13,648.08 to the Respondent leaving an apparent balance due to Respondent of $1,909.22[2] based on the original proposal price of $15,557.30.

The initial insurance adjuster’s scope of work was created on or about March 13, 2011, for the Replacement Cost Value of damages in the amount of $15,557.30. On or about June 5, 2011, the initial estimate from the insurance company was adjusted to reflect that the Replacement Cost Value was $17,167.86.[3] The Complainants stated on their complaint form and their Recovery Fund claim form that the contracted price was $15,557.30, even though after the adjustment for the removal of additional layers of roofing and HVAC work that needed to be performed the USAA estimate had increased. The Respondent also submitted a change order to the Complainants dated June 11, 2011, in the amount of $18,626.03 which was never executed by either party. This change order encompassed all items from the original March 13, 2011, USAA insurance adjuster’s scope of work, but included (1) removal of two additional layers of shingles, (2) removal of three additional layers of modified bitumen, (3) labor to install customer supplied OSB sheathing on roof, (4) labor to re- run electrical cable from the top of the roof through the attic for dryer, appropriate overhead, and applicable profit and taxes. Additionally, a payment receipt from [Respondent] dated August 9, 2011, acknowledges receipt of payments in the amounts of $5,234.49, $5,234.49, and $3,179.10 totaling $13,648.08.

At the bottom in hand written notes it states client to hold $2,000.00 until completion of all work. The figures on this document combined would total $15,648.08. Given these evidentiary inconsistencies and contradictions, the Fund is unable to calculate with mathematical certainty the amount of the contracted price or the scope of work agreed to between the parties. In sum, there appear to be four different possible contract amounts given the available evidence in the records of the Registrar.

On or about May 10, 2012, the Complainants filed a complaint against the Respondent with the Registrar . . . alleging poor workmanship. The complaint was assigned to inspector Jim Dimond. A citation was issued to the Respondent, ultimately resulting in a seven-day finite suspension of the Respondent’s license on May 22, 2013, as a direct result of the complaint. The license was also revoked due to Respondent’s failure to pay an outstanding civil penalty from this complaint.

On or about January 10, 2014, the Complainant filed a Recovery Fund claim with the [Registrar] seeking an award for damages in the amount of $29,768.00.[4] The claim was assigned and reviewed by claims reviewer James Barbour. In his review, he noted that a jobsite inspection needed to be performed on the property for clarity of the alleged poor workmanship issues. Given such, the Complainants were informed that a jobsite inspection was needed to further evaluate the alleged poor workmanship. A jobsite inspection was conducted at 9:00 a.m. on February 25, 2014, by James Barbour of the Recovery Fund and Eric Ulinger, Recovery Fund Supervisor.

The inspection revealed that the shingled roof appeared to be to industry standards and intact overall, with the exceptions of minor flashing repair and a small rear south corner area of underlayment missing.[5] The flat roof was missing flashing around the parapet wall and the kitchen chimney was poorly flashed. Complainant Jose Becerra informed Mr. Barbour and Mr. Ulinger that he applied sealant around these areas to prevent additional leaking into the interior of the home. Beneath the flat roofing area are the Arizona room, master bedroom, bathroom and closet. The Arizona room and bedroom appeared to have minimal water damage on the walls and ceiling. Additionally, Mr. Becerra informed Mr. Barbour and Mr. Ulinger that he had an unlicensed friend do the HVAC ductwork on the roof around the same time the Respondent was repairing the roof. Mr. Becerra stated to both Mr. Barbour and Mr. Ulinger that the areas around the ductwork were the cause of much leaking and that he applied sealant on several occasions to prevent additional interior water damage.

Later in the day, after the inspection was conducted, Mr. Barbour received a call from Mr. Becerra. Mr. Becerra informed Mr. Barbour that he had a contractor (“Stell Roofing”), license 277061, come out and inspect his roof. Mr. Becerra stated that Stell Roofing pulled up shingles on both slopes of the shingled roof to determine if the roof was installed correctly. On or about March 19, 2014, Mr. Becerra came to the ROC to speak with Mr. Barbour and brought a notarized affidavit signed by Joel Solorio explaining the repairs performed on the HVAC ductwork on Complainants’ roof and a letter from Stell Roofing that stated that the current roof was installed incorrectly.

During Mr. Becerra’s visit and other occasions, Mr. Barbour informed Mr. Becerra that the contracted amount needed to be reconciled somehow, explaining that the way the information had been presented rendered the claim incalculable.[6] Mr. Barbour explained to Mr. Becerra that in an attempt to try to reconcile a contracted price he should prepare a signed notarized affidavit that specifies the scope of the work that the Respondent was to perform and the contracted price for the work to be performed.[7] Despite these requests and additional extensions of time to comply with these requests, Complainants have failed to reconcile the four different possible contract amounts as of the date of this Notice. Finally, after inspection and review of all available evidence, Mr. Barbour concluded that all of the bids were excessive in comparison to the scope of work that needed to be performed.

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 sufficient 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:

Eligibility:

In order to be eligible to access the Fund, an applicant must meet four eligibility criteria set forth at A.R.S. § 32- 1131 et seq. See also McMurren v. J.M.C. Builder, Inc., 204 Ariz. 345 (App. 2003). An applicant must meet the definition of a “person injured” set forth at § 32-1131(3) which requires first that the applicant must own residential real property. Second, the property must have had a classification of three under § 42-12003. Third, the owner of the property must have occupied, or intended to occupy, the property as a residence that is damaged by a residential or dual licensed contractor. These criteria must be met at either the time the contract was executed or at the time the injury accrued. Fourth, as set forth in § 32-1132(A), an applicant must have contracted with a residential contractor whose license was in good standing at the time of contract execution. This fourth requirement is only applied at the time the contract was executed, not at the time of injury. McMurren v. J.M.C. Builder, Inc., 204 Ariz. 345, 350 (App. 2003). The Complainants appear to meet all the above eligibility criteria.

Actual Damages:

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.

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 review of all documentation submitted, Mr. Barbour noted that the Complainants’ assertion that the contracted price was $15,557.30 is contradicted by other evidence in the record as set forth above. Further, there appear to be distinct differences in the scope of work at issue in documents in the record that render the respective obligations of the parties unclear. None of the documents in the record purporting to be contracts or change orders are executed by the parties. These inconsistencies render this claim incalculable.

It is an applicant’s burden to prove, by a preponderance of the evidence, that they are eligible to access the Fund and that they have sustained actual damages within the limitations of § 32-1132(A) that are compensable from the Fund. While the Complainants appear to meet all the eligibility criteria they have not provided sufficient evidence to establish that they suffered any calculable “actual damages” in a manner that are compensable from the Fund.

Given all available evidence and the Fund’s fiduciary responsibility to administer Fund monies held in trust, the failure of Complainants to provide such critical evidence renders any potential compensable “actual damages” incalculable . Based upon all the foregoing, the Complainants’ claim must therefore be denied.

[Footnotes in original.] 3. Complainants filed a timely request for hearing with the Registrar. The Registrar referred the matter to the Office of Administrative Hearings (“the OAH”), an independent state agency, for an evidentiary hearing. 4. On July 23, 2014, the Registrar issued a Notice of Recovery Fund Eligibility/ Payout Hearing setting a hearing on September 12, 2014, at 8:00 a.m. The Registrar sent a copy of the Notice of Recovery Fund Eligibility/Payout Hearing to Respondent at its address of record. 5. Complainants’ attorney requested that the evidentiary hearing be continued. On September 9, 2014, OAH issued an order setting a continued hearing on October 22, 2014, at 8:00 a.m. Although the order was not sent to Respondent, it did not appear at OAH on September 12, 2014, or otherwise contact OAH. 6. A Recovery Fund Payout Hearing was held on October 22, 2014. Complainants’ attorney submitted eight exhibits and presented the testimony of José Becerra. The Registrar submitted thirteen exhibits and presented the testimony of Mr. Barbour. 7. Although the hearing did not conclude for over four hours, Respondent did not appear through an officer, authorized employee, or attorney. Consequently, Respondent did not present any evidence. Hearing Evidence 8. Mr. Becerra is employed as an automotive technician/mechanic. Complainants purchased the house at 14822 N. Flamenco Drive, Phoenix, Arizona in October 2010, after the historic hailstorm that occurred earlier that month. 9. On or about January 14, 2011, Respondent’s salesperson and Tiffany Becerra signed an Agreement to replace the roof and to repair interior drywall for an unstated sum. The Agreement identified Metlife as Complainants’ mortgage company and USAA as Complainants’ insurance company. The January 14, 2011 Agreement stated in relevant part as follows: This agreement does not obligate [Complainants] or [Respondent] in any way unless it is approved by the insurance company and accepted by [Respondent]. By signing this agreement [Complainants] authorize [] [Respondent] to pursue [Complainants’] best interests for a roof/siding replacement or repair at a “price agreeable” to the insurance co. and [Respondent] with no additional cost to [Complainants] except for the deductable [sic]. When “price agreeable” is determined it shall become the final contract price of the insurance proceeds and [Complainants] authorize [] [Respondent] to obtain labor and material in accordance with the “price agreement” and the specifications set out herein and on the reverse side hereof to accomplish the replacement or repair.[8]

10. Mr. Becerra testified that because Complainants did not own the house when the hailstorm occurred, they did not make a claim to their homeowner’s insurer for damage to the roof. However, as a result of damage to the roof during the hailstorm, leaks developed that resulted in damage to interior drywall after Complainants purchased the house. 11. On or about March 13, 2011, USAA issued a statement of loss for member no. [number redacted] on Mrs. Becerra’s insurance policy for the house at 14822 N. Flamenco Dr. The date of loss was December 29, 2010, and the date of the inspection was March 11, 2011.[9] The statement of loss included the costs to repair drywall and paint in the Arizona room for a total of $1,493.68, and to remove and replace the roof for a total of $12,225.39.[10] With lighting and other incidental costs, the full cost of repair on the March 13, 2011 statement of loss was $15,557.30, with a deduction for depreciation of $1,471.08, which could be included in a supplemental claim, and a deduction of Complainants’ $1,000.00 deductible, for an actual cash value claim in the amount of $13,086.22.[11] 12. On or about April 14, 2014, Complainants both signed a Mortgagor Affidavit form for Metlife Home Loans to “confirm that all insurance claim/settlement funds received from the insurance company will be used for the purpose of completing the required repairs to assure the property is 100% repaired.”[12] Complainants provided the total claim amount of $15,557.30, identified the insurance company as USAA, and stated that the claim number was [number redacted] on the Mortgagor Affidavit. 13. On or about May 26, 2011, Respondent issued a Contractor Agreement to “furnish all of the materials and perform all of the work shown on the Statement of Loss, Claim #[number redacted]- 007 dated March 13, 2011 . . . .”[13] The May 27, 2011 Contractor Agreement was not signed by either party. 14. On or about June 5, 2011, USAA provided an updated statement of loss for claim no. [number redacted] that raised the replacement cost value to $17,167.86, less depreciation of $1,471.08, for a revised actual cost value of $15,696.78 and after subtracting the $1,000.00 deductible and adding recoverable depreciation, a net claim value of $16,167.86.[14] The June 5, 2011 updated statement of loss included $519.78 for “additional labor to detach and reset ductwork for roofing as part of work needed to allow repair/replacement on roofing,” and $301.18 for “additional layer of roofing to be removed on flat area.”[15] 15. USAA’s June 5, 2011 revised statement of claim included the following advisements to Mrs. Becerra: A beneficial portion of your insurance policy is the Loss Settlement provision that provides for covered property losses to be settled at replacement cost without deduction for depreciation. However, the policy will pay for no more than the actual cash value until repair/replacement is complete OR the cost to repair/replace the damage IS BOTH LESS than 5% of the amount of insurance and LESS than $2500. In no event will the policy pay more than the actual cost to repair or replace the damaged property.

You will soon receive a payment for the actual cash value of your claim.

This payment was determined buy subtracting depreciation in the amount of $1,471.08 and your deductible from the replacement cost claim of $17,167.86 The maximum amount of depreciation that is recoverable is $1,471.08

Your mortgagee must be included as a payee on the check, and they will have to endorse the check before it can be cashed. Enclosed is a copy of the adjuster’s estimate.

When the repair and/or replacement is completed, please send us copies of the contract, invoice, repair bill, and/or receipt in the envelope provided. These documents should: - itemize the work done and/or describe the item(s) replaced, - indicate the cost, and - include the completion date for the work done and/or replacement date for the item(s) replaced.

We will consider a supplemental claim for the depreciation withheld provided the repair/replacement is completed within a reasonable amount of time after the loss. . . .[16]

16. Mr. Becerra testified that since he and his friend detached and reset the ductwork, $519.78 should be deducted from the net claim value on the updated statement of loss, for a total of $15,648.08. 17. On or about June 11, 2011, Respondent prepared Estimate # 3284 for Mrs. Becerra in the total amount of $18,626.03.[17] Estimate # 3284 included approximately $2,411.50 plus profit and overhead for purported change orders to remove two extra layers of roofing, to install customer-supplied OSB sheathing on the roof, and to re-run the electrical cable from the top of the roof through the attic for the dryer. Mr. Becerra testified that Complainants did not sign or agree to Estimate # 3284. 18. On June 16, 2011, and June 28, 2011, Metlife Home Loans issued two joint checks to Respondent and Mrs. Becerra for “payment of restricted escrow” that were each in the amount of $5,234.49.[18] On August 29, 2011, Complainants issued a check to Respondent dram on their personal account in the amount of $3,179.10 for “repairs.”[19] 19. On or about August 29, 2011, Respondent issued a Payment Receipt for final checks in the amounts of $3,179.10, $5,234.49, and $5,234.49 for “Loan Number [number redacted].”[20] Respondent’s payment receipt included the notation, “Client to hold $2,000.00 until completion of all work.”[21] Mr. Becerra testified that although Respondent was paid a little over $13,000.00, he did not think that Complainants owed Respondent an additional $2,000.00. 20. Complainants did not submit any evidence that they made any additional payments to Respondent, including their $1,000.00 deductible or the $1,471.08 deduction for depreciation. Complainants did not submit any evidence on whether or not they ever made a supplemental claim to USAA for the depreciation deduction. 21. On May 10, 2012, Complainants filed a workmanship complaint against Respondent with the Registrar. According to the complaint, the date of Complainant’s contract with Respondent was May 26, 2011, the amount of the contract was $15,557.30, Complainants had paid Respondent $13,648.08, and Complainants still owed Respondent $2,000.00.[22] 22. Investigator Jim Dimond performed a jobsite inspection on Complainants’ complaint and on June 19, 2012, issued a Corrective Work Order that directed Respondent to repair all fourteen items of Complainants’ complaint, including repairs to the roof to stop leaks, to repair water damage to the living room area walls and ceiling and bedroom areas, and to replace carpet and hardwood flooring in those areas.[23] 23. After Complainants requested a hearing, the Registrar issued a Citation and Complaint against Respondent’s license,[24] charging possible violations of A.R.S. § 32-1154(A)(2),[25] A.R.S. § 32-1154(A)(3), namely A.A.C. R4-9-108,[26] A.R.S. § 32-1154(A)(17),[27] and A.R.S. § 32-1154(A)(23).[28] As noted in the Registrar’s Notice and Order of Denial of Recovery Fund Claim, after Respondent failed to file a timely written answer to the Citation and Complaint, the Registrar deemed Respondent to have admitted the charged misconduct. The Registrar eventually revoked Respondent’s license after it failed to pay a civil penalty that the Registrar’s Default Decision and Order assessed. 24. Complainants filed a claim to the Fund on October 1, 2013, stating the same date and amount of their contract with Respondent and the same amounts paid and owed as they had claimed on their workmanship complaint. Complainants stated “N/A” in response to the question whether they had recovered anything from Respondent’s bond.[29] Complainants attached to their claim to the Fund many of the same documents that they submitted at the hearing, as well as three estimates from licensed contractors to remove and replace the roof and to perform various interior repairs in the family room, bedroom, closet, and rear elevation that ranged from $29,768.00 to $38,978.48. 25. On October 15, 2013, the Registrar sent a letter informing Complainants that A.R.S. § 32-1154(F) had been amended to require all Fund claimants to show that they had filed a claim against the contractor’s bond.[30] On January 10, 2014, Complainants amended their claim to the Fund to state that on September 30, 2013, they had filed a claim against Respondent’s bond and that on November 13, 2013, Respondent’s surety company had sent them a check in the amount of $5,000.00.[31] 26. The Fund sent several requests for additional documentation or information to Complainants. In addition to the proof of payment that Complainants submitted at the hearing, on January 23, 2014, Complainants provided a copy of a check dated March 29, 2011, in the amount of $2,617.24 from Metlife Home Loans for “payment of restricted escrow” made payable only to Complainants.[32] 27. On February 28, 2014, Mr. Barbour requested that Complainants provide information on the company or persons who performed air conditioning work during the timeframe that the roof was installed.[33] On or about March 19, 2014, the Fund received a statement from Joel Solorio that he is a close friend of and had helped Mr. Becerra replace HVAC ductwork and that Mr. Becerra had paid him $1,000.00.[34] There is no evidence that Mr. Becerra or Mr. Solario is a licensed contractor. 28. On April 3, 2014, Mr. Barbour sent a letter to Mr. Becerra, summarizing a conversation in which Mr. Becerra had stated that water damage occurred before he converted a door to a window and that Mr. Becerra had refused to allow a water test to be performed to further determine the cause of leakage into the interior of the home. Mr. Barbour requested an additional affidavit from Mr. Becerra regarding his refusal to allow a water test.[35] Mr. Becerra acknowledged that he had not provided all the documents that the Registrar requested. CONCLUSIONS OF LAW This matter lies within the Registrar’s jurisdiction.[36] 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 Recovery Fund Payout Hearing.[37] It appears that Complainants are injured persons who are potentially able to recover a payout from the Fund under A.R.S. § 32-1131(3).[38] The only issue is whether they have suffered damages and if so, calculation of the amount of their damages. Complainants bear the burden of proof to establish the amount, if any, that they are entitled to recover from the Fund under A.R.S. § 32-1132(A) by a preponderance of the evidence.[39] “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”[40] 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.”[41] A.R.S. § 32-1132(A) provides in relevant part as follows: The residential contractors' recovery fund is established, to be administered by the registrar, from which 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 may be awarded in the county where the violation occurred an amount of not more than thirty thousand dollars for damages sustained by the act, representation, transaction or conduct. 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 residential property lines. Actual damages shall not be established by bids supplied by or the value of work performed by a person or entity that is not licensed pursuant to this chapter and that is required to be licensed pursuant to this chapter. . . .

Information that is necessary to calculate the net cost to a homeowner to complete or repair a contractor’s construction project include the amount of the contract, the scope of work under the contract, amounts paid to the contractor, and amounts that a homeowner recovered from other sources, such as the contractor’s bond or insurance payments. Complainants established that Respondent performed some work at their residence and that they, their mortgage company, or their insurer paid Respondent some money. In some cases, a party’s inability to fully liquidate his or her damages does not completely bar recovery of any damages.[42] The doctrine of part performance may also make an unsigned contract enforceable if the part performance is unequivocally referable to the contract.[43] The record does not reveal the amount of Complainants’ contract with Respondent. As the Registrar pointed out, the amount of USAA’s original statement of cost was $15,557.30, the amount of the revised statement of cost was $17,167.86, and the amount of Respondent’s June 11, 2011 Estimate and change order was $18,626.03. The record also does not reveal any unequivocal evidence of the total amount of Complainants’, their insurer’s, or their mortgage company’s payments to Respondent. According to Respondent’s August 29, 2011 Payment Receipt, Complainants or their mortgage company paid Respondent a total of $13,648.08, with $2,000.00 still owing. This payment amount does not match any of the contract amounts, even if the $1,000.00 deductible and/or $1,471.08 depreciation is subtracted. The record does not explain why Complainants issued a personal check to Respondent in the amount of $3,179.10, despite the terms of the January 14, 2011 Agreement under which Respondent stated that Complainants would not have to pay any more than their $1,000.00 deductible. The record also does not explain why on March 29, 2011, Metlife Home Loans issued a check to Complainants in the amount of $2,617.24 or whether they paid any of the proceeds of this check to Respondent. The net amount of Complainants’ loss is rendered more problematic by their failure to initially disclose that they had filed a claim with Respondent’s bond company and that their insurer had issued a $2,617.24 check made payable to them. Complainants also never explained why they did pay the $1,000.00 deductible or make an application to USAA for reimbursement of the depreciation deduction, despite Respondent’s substantial completion of the scope of work on the cost estimates and USAA’s instructions to do so. The scope of work and the damages caused by the statutory violations that Respondent admitted in the workmanship complaint also are problematic. Neither USAA’s statements of cost nor Respondent’s estimates contemplate any repairs to the interior of the living room, family room, bedroom, closet, or any other interior space other than the Arizona room, although Complainants’ workmanship complaint and claim to the Fund include claimed damages to these rooms. It also appears that the repairs that Mr. Becerra performed may have resulted in leaks and that the estimates that Complainants submitted may be excessive because they include repairs to work that Respondent did not perform and because the roof that Respondent constructed does not need to be torn off and replaced. The Registrar has a fiduciary duty to preserve the Fund’s assets and to ensure that no payouts are made except as authorized by statute.[44] Although in some cases it may be appropriate to give a claimant to the Fund the benefit of the doubt by taking the highest possible contract amount and then deducting the highest possible unpaid amounts under the contract from any Fund payout, in this case, too many uncertainties about the scope of work, payments to Respondent, and Complainants’ recovery from other sources preclude any determination that Complainants were damaged even in any minimum amount. Complainants therefore have not borne their burden to establish that Respondent’s statutory violations damaged them in any definite amount. RECOMMENDED ORDER Based on the foregoing, it is recommended that, on the effective date of the final Order, the Registrar affirm its decision to deny Complainants José M. Becerra and Tiffany A. Becerra’s claim 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, November 7, 2014.

/s/ Diane Mihalsky Administrative Law Judge

Transmitted electronically to:

William A. Mundell, Director Registrar of Contractors ----------------------- [1] The actual contract reflects May 26, 2010, but appears to be in line with the insurance scope of work dated March 13, 2011. This may be a typo. [2] The Recovery Fund is currently unable to determine the actual contracted price as the scope of work changed from the original USAA insurance adjuster’s scope of work. [3] The increase of repair cost on the June 5, 2011, insurance scope was the addition of removing one additional layer of shingles, removing one additional layer of modified bitumen on flat roof, labor for an HVAC technician to detach and reset the ductwork to the roof which was needed to repair the roof, appropriate overhead, and applicable profit and taxes. [4] $29,768.00 was the lowest of three submitted bids to have the roof replaced. The second lowest bid for repairs was in the amount of $32,690.62 and the third bid was in the amount of $38,978.48. [5] The interior area covered by the shingled roof did not show any signs of interior water damage. [6] Mr. Barbour continued to explain what appeared to be the different amounts that had been submitted, informing Mr. Becerra that the work to be performed and the cost of the work to be performed was not exactly clear. [7] This information was relayed by telephone conversations, face-to-face visits and document request letters. [8] Complainants’ Exhibit B at 1. Although Mr. Becerra initially testified that this page was the first page of an unsigned Contractor Agreement between Complainants and Respondent, he clarified in his rebuttal testimony that the contract that Mrs. Becerra signed was a solicitation by Respondent that later resulted in the Contractor Agreement. [9] See Complainants’ Exhibit F at 1. [10] See id. at 8-12. [11] See id. at 4. [12] Complainants’ Exhibit A. [13] Complainants’ Exhibit B at 2. The parties agreed that the date on the agreement, “the 26th day of May, 2010,” should have been in the year 2011. [14] See Complainants’ Exhibit G. [15] Id. at 9. [16] Id. at 3. [17] See Complainants’ Exhibit D. [18] See Complainants’ Exhibit C at 1. [19] See id. at 2. The record contains no explanation for “Loan No. [number redacted].” [20] See Complainants’ Exhibit E. [21] Id. [22] See the Registrar’s Exhibit 1 at 1. [23] See id. at 14-16. [24] See id. at 17-20. [25] A.R.S. § 32-1154(A)(2) includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license, “[d]eparture from or disregard of plans or specifications or any building codes of any state or any political subdivision of the state in any material respect which is prejudicial to another without consent of the owner or the owner’s duly authorized representative and without the consent of the person entitled to have the particular construction project or operation completed in accordance with such plans and specifications and code.” [26] A.R.S. § 32-1154(A)(3) includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license, “[v]iolation of any rule adopted by the registrar.” A.A.C. R4-9-108 requires that “[a]ll work shall be performed in a professional and workmanlike manner” and that “[a]ll work shall be performed in accordance with any applicable building codes and professional industry standards.” [27] Former A.R.S. § 32-1154(A)(17) includes among the grounds for suspension, revocation, and other disciplinary action against a contractor’s license, “[k]nowingly contracting beyond the scope of the license or licenses of the licensee.” The statute has been renumbered as A.R.S. § 32-1154(A)(16). [28] Former A.R.S. § 32-1154(A)(23) includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license, “[f]ailure to take appropriate corrective action to comply with this chapter or with rules adopted pursuant to this chapter without valid justification within a reasonable period of time after receiving a written directive from the registrar.” The statute has been renumbered as A.R.S. § 32-1154(A)(22). [29] See the Registrar’s Exhibit 2 at 1. [30] See the Registrar’s Exhibit 3. [31] See the Registrar’s Exhibit 4. [32] See the Registrar’s Exhibit 8 at 2.1. [33] See the Registrar’s Exhibit 9. [34] See the Registrar’s Exhibit 10 at 2. [35] See the Registrar’s Exhibit 11. [36] See A.R.S. §§ 32-1131 to 32-1140. [37] See A.R.S. § 41-1092.04; A.R.S. § 41-1092.05(D). [38] A.R.S. § 32-1131(D) defines “person injured” in relevant part 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 . . . 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. . . . [39] See A.A.C. R2-19-119(A) and A.A.C. R2-19-119(B)(1); see also Vazanno v. Superior Court, 74 Ariz. 369, 372, 249 P.2d 837 (1952). [40] Morris K. Udall, Arizona Law of Evidence § 5 (1960). [41] Black’s Law Dictionary at 1220 (8th ed. 1999). [42] See John C. Lincoln Hospital & Health Corp. v. Maricopa County, 208 Ariz. 532, 544, ¶ 40, 96 P.3d 530, 542 (App. 1004) (quoting Charles T. McCormick, Handbook on the Law of Damages § 54 at 216 (1935)). [43] See Long v. City of Glendale, 208 Ariz. 319, 330, ¶ 47, 93 P.3d 519, 530 (App. 2004) (citations omitted). [44] A.R.S. § 32-1134(A) requires the Registrar to take the following actions to preserve the Fund and to ensure that payouts for damages that are authorized by law are made from the Fund: 1. Establish assessments and maintain the fund balance at a level sufficient to pay operating costs and anticipated claims using the cash basis of accounting. 2. Cause an examination of the fund to be made every three years by an independent certified public accountant. 3. File with the department of insurance an annual statement of the condition of the fund. 4. Employ accountants and attorneys from monies in the fund, but not to exceed ten thousand dollars in any fiscal year, that are necessary for the performance of the duties prescribed in this section. 5. Employ or contract with individuals and procure equipment and operational support, to be paid from or purchased with monies in the fund, but not to exceed in any fiscal year fourteen per cent of the total amount deposited in the fund in the prior fiscal year as may be necessary to monitor, process or oppose claims filed by injured persons which may result in collection from the recovery fund.

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