ALJDEC decisions subject to certification as final

2012A-5825-ROC · Registrar of Contractors · 2014-01-27

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: January 6, 2014 APPEARANCES: William S. Perlman appeared on behalf of Complainants. The Registrar of Contractors was represented by Assistant Attorney General Michael Raine. ADMINISTRATIVE LAW JUDGE: Tammy L. Eigenheer _____________________________________________________________________ FINDINGS OF FACT Background and Procedure 1. The Arizona Registrar of Contractors (“the Registrar”) issued License No. B-3.269987 to Ingenious LLC dba Ingenious Remodeling (“Respondent”). Respondent’s current address of record is 4910 East Elliot Road, Suite 100, Phoenix, Arizona. 2. The Registrar received a Complaint against Respondent from William S Perlman acting as the conservator for his mother, Barbara J Perlman (“Complainants”) regarding a bathroom remodeling project (“Complaint”). 3. In response to the Complaint, the Registrar issued a Citation and Complaint against Respondent charging a possible violation of A.R.S. § 32-1154(A)(1).[1] 4. Respondent did not submit a response to the Citation and Complaint within the allotted time frame. As a result, the Registrar entered a Default Decision and Order finding that Respondent violated the statute charged in the Citation and Complaint. 5. Based upon Respondent’s proven statutory violation, the Registrar revoked Respondent’s license. 6. On or about June 24, 2013, Complainants filed a claim in the amount of $16,186.30 to the Residential Contractors’ Recovery Fund (“the Fund”) to recover the deposit paid. 7. On or about September 23, 2013, the Registrar issued a Notice of Claim for Administrative Payout, stating that Complainants were to be awarded $13,123.55 in the form of a payment issued by the Fund. 8. Complainants requested a hearing on the Registrar’s determination that they were entitled to a payout from the Fund of only $13,123.55 rather than the entire $16,186.30 deposit they paid. The Registrar referred the matter to the Office of Administrative Hearings for an evidentiary hearing. 9. On November 26, 2013, the Registrar issued a Notice of Recovery Fund Eligibility/Payout Hearing setting a hearing on January 6, 2013, 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. 10. A recovery fund payout hearing was held on January 6, 2013, at 8:00 a.m. Complainants submitted two exhibits and presented the testimony of Mr. Perlman and Eric Ulinger, the Fund’s Supervisor. The Registrar submitted ten exhibits and presented the testimony of James Barbour, Claims Adjuster for the Fund. The Registrar stipulated that Complainants met all eligibility requirements for a payout from the Fund and the only issue to be resolved at the hearing was the amount of the payout. 11. Respondent did not request to appear telephonically and did not request that the hearing be continued. Although the hearing did not conclude until after 10:30 a.m., Respondent did not appear personally or through an attorney. Consequently, Respondent did not present any evidence. Hearing Evidence 12. Mr. Perlman testified that after entering into a contract with Respondent for a bathroom remodel, he paid Respondent an initial deposit of $11,186.30. 13. Mr. Perlman acknowledged that Respondent provided some plans and drawings for the project and spent at least four hours one day shopping for materials for the project. Mr. Perlman did question the usefulness of the plans as he believed they would not be accepted by a permitting agency. 14. Mr. Perlman stated that after several months of stalling, lies, and excuses, Respondent requested an additional $5,000.00 deposit to begin work, which Complainants paid. Respondent then delivered materials to the jobsite. Complainant maintained that at the time the materials were delivered, Respondent’s license was suspended. 15. With their claim to the Fund, Complainants included correspondence between Mr. Perlman and Respondent in which Mr. Perlman provided an accounting of the materials delivered to the jobsite. In the accounting, Mr. Perlman identified a window, tile, RAM board, waterproofing kits, and multiset valued at $3,062.75 under the contract that were delivered. While the accounting also included other items, those items were ultimately deducted and were not included in the total calculation. Mr. Perlman testified that Respondent supplied the incorrect materials for the job and subsequent contractors asked to bid on the project stated they would be unable to use all the materials. 16. Mr. Perlman testified that the method used by Respondent to calculate its 30 percent margin was incorrect (dividing the wholesale cost by .7 rather than multiplying it by 1.3) which inflated Respondent’s margin to more than 42 percent. However, Mr. Perlman acknowledged that Respondent explained the calculation at the time of the contract and Mr. Perlman understood that to be part of the contract. 17. Mr. Perlman argued that because Respondent’s license was suspended at the time the materials were delivered, it was not allowed to perform any work under the Registrar’s statutes and regulations, therefore, Respondent should not be allowed to benefit from work it was not authorized to perform. 18. Based on the information received, the Registrar determined that Complainants were entitled to a Fund payout of $13,123.55. The payout was calculated by deducting the $3,062.75 in materials delivered to Complainants from the $16,186.30 deposit paid. Mr. Barbour testified that the Registrar relied on the numbers provided by Mr. Perlman and did not make any further reductions to take into account the additional services Respondent maintained it provided to Complainants. CONCLUSIONS OF LAW This matter lies within the Registrar’s jurisdiction.[2] 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.[3] Complainants are injured persons within the definition in A.R.S. § 32- 1131(3)[4] and are, therefore, entitled to recovery from the Fund. A.R.S. § 32-1132(A) provides that “[a]n award from the fund is limited to the actual damages suffered by the claimant as a direct result of the contractor's violation . . . .” 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.[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] Complainants established that they paid a total of $16,186.30 to Respondent as a deposit on a contract for a bathroom remodel. The evidence established that Respondent delivered useable materials to the jobsite with a value of approximately $3,062.75 as determined by the contract.[8] In addition, Respondent performed preliminary services related to the contract including shopping for materials and plans and drawings. Complainants’ argument that the products were not suitable for the project was without merit in that the specific items Mr. Perlman testified were not useable were those that were later deducted from his accounting. Furthermore, Mr. Perlman provided no evidence as to how or why the items that remained on his list were not useable. Complainants’ additional argument that Respondent should not be unjustly enriched because the materials were delivered when its license was suspended and it was unable to legally perform any work was also without merit. The status of Respondent’s license at the time of the delivery of the materials does not justify Complainants receiving the materials at no cost, but goes to any disciplinary action the Registrar may decide to take against Respondent. The weight of the evidence established that the proposed payout from the Fund of $13,123.55 was reasonable and proper. RECOMMENDED ORDER Based on the foregoing, it is recommended that on the effective date of the Registrar’s final order, Complainants Barbara J Perlman and William S Perlman receive a payout from the Residential Contractors’ Recovery Fund in the amount of $13,123.55. 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, January 27, 2014.

/s/ Tammy L. Eigenheer Administrative Law Judge

Transmitted electronically to:

William A. Mundell, Director Registrar of Contractors ----------------------- [1] 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.” [2] See A.R.S. §§ 32-1131 to 32-1140. [3] See A.R.S. § 41-1092.04; A.R.S. § 41-1092.05(D). [4] 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.

[5] 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). [6] Morris K. Udall, Arizona Law of Evidence § 5 (1960). [7] Black’s Law Dictionary at 1220 (8th ed. 1999). [8] Despite Mr. Perlman’s assertion that Respondent would be unjustly enriched by using the margin calculated by Respondent rather than the actual margin of 30 percent, that was the agreement Mr. Perlman entered into under the contract.

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Office of Administrative Hearings 1400 West Washington, Suite 101 Phoenix, Arizona 85007 (602) 542-9826