ALJDEC decisions subject to certification as final

2012A-4959-ROC-rf · Registrar of Contractors · 2014-10-15

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: October 3, 2014, at 8:00 a.m. APPEARANCES: Complainants Sally Rosenbloom and Donald Rosenbloom appeared on their own behalf; Respondent G S D L LLC appeared through Bryan McKay Moody, its qualifying party and managing member; the Arizona Registrar of Contractors was represented by Seth T. Hargraves, Esq., Assistant Attorney General. ADMINISTRATIVE LAW JUDGE: Diane Mihalsky _____________________________________________________________________

FINDINGS OF FACT The Arizona Registrar of Contractors (“the Registrar”) issued License No. B.272072-R to G S D L LLC (“GSDL”) on April 26, 2011.[1] Bryan McKay Moody is GSDL’s qualifying party and managing member. On October 9, 2012, Sally Rosenbloom and Donald Rosenbloom filed a workmanship complaint with the Registrar against GSDL for its poor work and abandonment of a contract to perform landscaping and concrete work and to replace a pool deck at Mr. and Mrs. Rosenbloom’s home at 10230 N. 24th Street, Phoenix, Arizona 85028.[2] According to the workmanship complaint, Mr. and Mrs. Rosenbloom had entered into two contracts with GSDL on March 30, 2012, and April 20, 2012, and Respondent had last performed work on the projects on April 25, 2012. The contracts that Mr. and Mrs. Rosenbloom attached to their complaint showed March 30, 2012, and April 20, 2012, as the dates on which they had been signed.[3] After investigation, the Registrar issued a Citation and Complaint charging GSDL with violations of A.R.S. § 32-1154(A)(1),[4] A.R.S. § 32- 1154(A)(3),[5] namely A.A.C. R4-9-108,[6] and A.R.S. § 32-1154(A)(23).[7] The Registrar subsequently referred Mr. and Mrs. Rosenbloom’s workmanship complaint against GSDL to the Office of Administrative Hearings (“OAH”), an independent state agency, for an evidentiary hearing. On October 13, 2013, Administrative Law Judge (“ALJ”) M. Douglas of OAH conducted a hearing on Mr. and Mrs. Rosenbloom’s workmanship complaint against GSDL. Subsequently, ALJ Douglas determined that Complainants had established that GSDL had violated all of the statutes and regulation charged in the Citation and Complaint and that as a consequence, GSDL’s License No. B.272072-R should be revoked.[8] ALJ Douglas made the following specific finding of fact about GSDL’s license status: Administrative notice is taken of GSDL’s prior license record as reflected on the Registrar of Contractors’ public website on October 23, 2013. Such prior license record reflects that License No. B.272072-R of GSDL was suspended until compliance on January 29, 2013. License No. B.272072-R of GSDL was suspended for a Recovery Fund Credential on September 26, 2013. License No. B.272072-R of GSDL was suspended for non-renewal on May 1, 2013. License No. B.272072-R of GSDL had previously been suspended for lack of bond from March 15, 2013, through April 2, 2013, and had been suspended for lack of bond from February 6, 2012, through July 12, 2012.[9]

On November 26, 2013, the Registrar substantially adopted ALJ Douglas’s decision. Neither Mr. and Mrs. Rosenbloom nor GSDL appealed or requested a rehearing on the Registrar’s final decision. On January 27, 2014, Mr. and Mrs. Rosenbloom filed a claim to the Residential Contractors’ Recovery Fund (“Fund”) with the Registrar.[10] According to Mr. and Mrs. Rosenbloom’s claim, they had entered into two contracts with GSDL on March 30, 2012, and April 20, 2012, and Respondent had last performed work on the project on April 21, 2012. The contracts that Mr. and Mrs. Rosenbloom attached to their claim showed March 30, 2012, and April 20, 2012, as the dates on which they had been signed.[11] The Registrar subsequently requested that Mr. and Mrs. Rosenbloom provide additional documentation to support their claim to the Fund, including the 92-page document establishing the R & R Trust, which held legal title to the property. Previously, Mr. and Mrs. Rosenbloom had provided an abstract of the trust’s terms. On April 7, 2014, the Registrar issued a Notice and Order of Recovery Fund Ineligibility that provided in relevant part as follows: I. Background and Procedural History:

On or about March 30, 2012, Complainants, Sally and Donald Rosenbloom, entered into a contract with G S D L LLC, license 272072, to perform landscape work on their house located at 10230 N 24th St. The contract executed on March 30, 2012, lists the contract amount as $26,257.82. A second contract was executed on April 20, 2012 increasing the total contract in the amount of $4,028.52 for a total of $30,283.34.

On or about October 2, 2012 the Complainants filed a complaint with the Registrar of Contractors alleging that the Respondent abandoned the project and that the work did not meet minimum and professional industry standards. The date the Respondent last performed work was alleged to be April 25, 2012 according to the statement made by Complainants on their complaint form filed with the Registrar. A citation was issued to the Respondent ultimately, revoking the license effective January 8, 2014 as a direct result of the complaint.

On or about January 27, 2014, Complainants filed a claim with the Recovery Fund. In review of the claim the Recovery Fund verified that the Respondent’s license, number 272072, was suspended on February 6, 2012 for the lack of a surety bond. On July 12, 2012 a notice of reinstatement was received by the Registrar reinstating the bond effective July 11, 2012. The suspension was lifted by the Registrar upon receipt of the notice.

II. Analysis - Eligibility:

Pursuant to A.R.S. § 32-1134(A)(2)(3) and (5) the Registrar is required to subject all Recovery Fund claims to examination by an accountant to ensure that all claims 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 eligibility and of the extent of all claimed damages. Anything less mandates the Registrar deny the unsubstantiated portion of any claim loss.

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).

Complainants appear to meet three of the four eligibility criteria. Complainants are not eligible however, due to their failure to meet the fourth element of eligibility criteria. Respondent’s residential license 272072 was suspended at the time of contract execution. See § 32-1132(A); see also McMurren at 350. Based upon all available and controlling law, this claim must be denied as ineligible with no payment from the Fund.

(Footnotes omitted.) Mr. and Mrs. Rosenbloom filed a timely request for hearing on the Registrar’s Notice and Order of Recovery Fund Ineligibility. The Registrar referred the matter back to OAH for an evidentiary hearing on Mr. and Mrs. Rosenbloom’s eligibility for a payout from the Fund. A hearing was held on October 3, 2014. Mr. and Mrs. Rosenbloom testified on their own behalf. Mr. Moody testified on GSDL’s behalf. The Registrar presented the testimony of its Recovery Fund Supervisor, Eric Ulinger, and submitted four exhibits. The Registrar submitted a license screen printout for GSDL’s License No. B.272072-R that showed the following comments: •[REVOKED FAILURE TO PAY CIVIL PENALTY 02/10/2014]•[REVOCATION 01/08/2014]•[SUSPENDED – RF PAYOUT CREDENTIAL 09/26/2013]•[SUSPENDED NON-RENEWAL 05/01/2013]•[SUSPENDED LACK OF BOND 03/15/2013 – 04/02/2013]•[SUSPEND TIL COMPLIANCE 01/29/2013]•[SUSPENDED LACK OF BOND 02/06/2012 – 07/12/2012][12]

Mr. and Mrs. Rosenbloom did not dispute that GSDL’s license was suspended for lack of bond between February 6, 2012, and July 12, 2012, during which time GSDL had entered and performed the March 30, 2012 and April 20, 2012 contracts to improve Mr. and Mrs. Rosenbloom’s backyard. Instead, Mr. Rosenbloom testified that before they signed the March 30, 2012 contract, he had called the Registrar’s office to ascertain GSDL’s license status. Mrs. Rosenbloom was present when Mr. Rosenbloom placed the telephone call to the Registrar’s office. Mr. Rosenbloom testified that the Registrar’s staff informed him that GSDL had a valid license but that its employee was using GSDL’s license illegally. Mr. Rosenbloom testified that he still signed the contract because the illegal use of the license did not reflect upon him.[13] Mr. and Mrs. Rosenbloom both testified that the Registrar’s staff informed them that GSDL had a “valid license” and that if they had not received this assurance, they would not have signed GSDL’s contracts. Mrs. Rosenbloom testified that the Registrar encouraged her and her husband to pursue their complaint for more than a year and a half. With the Registrar’s encouragement, Mr. and Mrs. Rosenbloom obtained three bids to repair and complete GSDL’s projects and hired the low bidder. Mr. Ulinger explained that different departments investigate workmanship complaints and claims to the Fund that are filed with the Registrar. Mr. Ulinger noted that less than three months had passed between the times when Mr. and Mrs. Rosenbloom filed their claim to the Fund and when the Registrar issued the Notice and Order of Recovery Fund Ineligibility. Mr. Ulinger pointed out that the Recovery Fund Claim form provided that “IF THE PROPERTY IS HELD IN TRUST, A COPY OF THE ENTIRE TRUST DOCUMENT MUST BE PROVIDED.”[14] Mr. Ulinger testified that the Registrar must review all documentation that is necessary on a claim for a payout from the Fund before the Registrar makes a decision on eligibility for a payout. CONCLUSIONS OF LAW This matter lies within the Registrar’s jurisdiction.[15] Mr. and Mrs. Rosenbloom bear the burden of proof to establish that they are eligible to recover a payout from the Fund by a preponderance of the evidence.[16] “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”[17]

“In applying a statute, . . . its words are to be given their ordinary meaning unless the legislature has offered its own definition of the words or it appears from the context that a special meaning was intended.”[18] Under the plain language of A.R.S. § 32-1132(A), residential property owners may not recover damages caused by contractors “whose license was in an inactive status, expired, canceled, revoked or suspended at the time of the contract.” Mr. and Mrs. Rosenbloom did not dispute that GSDL’s license was suspended for lack of bond when it entered and performed the contracts. Instead, Mr. and Mrs. Rosenbloom argued that the Registrar should be estopped[19] from denying their claim because the Registrar’s staff did not tell them that GSDL’s license was suspended for lack of bond when Mr. Rosenbloom called to enquire about the license status before he sign the March 30, 2012 contract. “To assert equitable estoppel against the State, a party first must show that the State performed an affirmative act, inconsistent with a claim later relied upon, with ‘some considerable degree of formalism under the circumstances. . . . It is rare that satisfactory evidence of an absolute, unequivocal, and formal state action will be found unless it is in writing.’”[20] The Registrar owes a fiduciary duty to preserve the assets of the Fund and to ensure that payouts are not made to claimants who do not meet all statutory requirements for eligibility, even if they otherwise meet the definition of an injured person under A.R.S. § 32-1131(3).[21] Under well- established case law, the Registrar’s unnamed staff member’s oral statement to Mr. Rosenbloom that GSDL had a valid license does not estop the Registrar from finding that Mr. and Mrs. Rosenbloom are ineligible for a Fund payout or overcome the plain language of A.R.S. § 32-1132(A) that requires the contractor’s license to have been in good standing at the times it entered and performed the contracts. RECOMMENDED ORDER In view of the foregoing, it is recommended that the Registrar of Contractors affirm its decision to deny Mr. and Mrs. Rosenbloom’s claim to the Residential Contractors’ Recovery Fund against GSDL’s License No. B.272072-R in Case No. 2012-4959. 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 (5) days from the date of that certification. Done this day, October 15, 2014.

/s/ Diane Mihalsky Administrative Law Judge

Transmitted electronically to:

William A. Mundell, Director Registrar of Contractors ----------------------- [1] See the Registrar’s Exhibit 3. [2] See the Registrar’s Exhibit 2. [3] See the Registrar’s Exhibit 3 at 4-5. [4] A.R.S. § 32-1154(A)(1) includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license, “[a]bandonment of a contract or refusal to perform after submitting a bid on work without legal excuse for the abandonment or refusal.” [5] 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.” [6] 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.” [7] 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.” A.R.S. § 32-1154(A)(23) has since been renumbered as A.R.S. § 32-1154(A)(22). [8] See the Registrar’s Exhibit 3 at 9-15. [9] The Registrar’s Exhibit 3 at 13 Finding of Fact 23 (footnote and emphasis added). [10] See the Registrar’s Exhibit 1. [11] See the Registrar’s Exhibit 1 at 6-7. [12] The Registrar’s Exhibit 3 (footnote and emphasis added). [13] As noted above, ALJ Douglas found and the Registrar adopted the finding that GSDL was responsible for Mr. and Mrs. Rosenbloom’s construction projects. [14] The Registrar’s Exhibit 1 at 3. [15] See A.R.S. §§ 32-1131 through 32-1140. [16] See A.A.C. R2-19-119; see also Vazanno v. Superior Court, 74 Ariz. 369, 372, 249 P.2d 837 (1952). [17] Morris K. Udall, Arizona Law of Evidence § 5 (1960). [18] Mid Kansas Federal Savings and Loan Ass’n of Wichita v. Dynamic Development Corp., 167 Ariz. 122, 128, 804 P.2d 1310, 1316 (1991). [19] “‘Estoppel’ means that party is prevented by his own acts from claiming a right to detriment of other party who was entitled to rely on such conduct and has acted accordingly.” Black’s Law Dictionary, supra, at 551 (citing Graham v. Asbury, 112 Ariz. 184, 186, 540 P.2d 656, 658 (1975)). [20] Open Primary Elections Now v. Bayless, 193 Ariz. 43, 47, 969 P.2d 649, 653 (1998) (quoting Valencia Energy Co. v. Arizona Dept. of Revenue, 191 Ariz. 565, 577, 959 P.2d 1256, 1268 (1998)). [21] See A.R.S. § 32-1134(A)(2) and (4) (The Registrar shall employ auditors, accountants, and attorneys to examine payouts made from the Fund).

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