ALJDEC decisions subject to certification as final

2013A-1177-ROC-rf · Registrar of Contractors · 2015-07-20

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: June 26, 2015 APPEARANCES: Complainant Ahmed Abouzeid appeared on behalf of Complainants. Respondent Callahan and Associates, LLC did not appear. The Registrar of Contractors was represented by Assistant Attorney General Seth T. Hargraves. ADMINISTRATIVE LAW JUDGE: Tammy L. Eigenheer _____________________________________________________________________ FINDINGS OF FACT 1. On or about March 17, 2012, the Arizona Registrar of Contractors (Registrar) issued License No. K-8.277497-D to Callahan and Associates, LLC (Respondent). 2. On or about March 11, 2013, Dr. Ahmed Abouzeid filed a complaint with the Registrar alleging poor work by Respondent in the performance of its February 15, 2013 contract to install tile and engineered flooring purchased by Dr. Abouzeid at Dr. Abouzeid’s residence at 15943 N. 77th Avenue, Peoria, Arizona. The contract price was $5,047.00, with a total of $15,290.36 paid to Respondent for the contract and for additional work. 3. Following a jobsite inspection, the Registrar issued a Corrective Work Order in which Respondent was instructed to correct multiple issues with the bathroom tiles, the engineered flooring, and the baseboards. 4. On or about July 1, 2014, after Respondent failed to correct the workmanship issues, the Registrar issued a Citation and Complaint alleging violations of A.R.S. § 32-1154(A)(3); A.R.S. § 32-1154(A)(13); A.R.S. § 32-1154(A)(17); and A.R.S. § 32-1154(A)(23). 5. Respondent failed to file an answer to the Citation and Complaint. As a result, on or about July 28, 2014, the Registrar issued a Default Decision and Order in which Respondent’s license was revoked and Respondent was ordered to pay a civil penalty of $500.00. 6. On or about September 5, 2014, Dr. Abouzeid filed a claim to the Residential Contractors’ Recovery Fund (“the Fund”). Included with the claim was a copy of the property Warranty Deed, recorded on February 6, 2013, indicating Dr. Abouzeid and Marwa Hosney owned the residence as joint tenants with right of survivorship. Dr. Abouzeid also included evidence that Respondent’s bond had paid Dr. Abouzeid $1,000.00. 7. While reviewing the claim, the Fund determined that all of the checks paid to Respondent were written from an account owned by Sunshine Medical Care Corporation (“Sunshine”). 8. The records on the Arizona Corporation Commission’s website show that Dr. Abouzeid is the only director and officer of Sunshine. 9. On or about September 22, 2014, Eric Ulinger, Supervisor with the Fund, contacted Dr. Abouzeid for more information regarding the payments to Respondent. Dr. Abouzeid informed Mr. Ulinger that he used the corporate account to pay for everything and transfers funds from his personal account into the corporate account to cover the transactions. Mr. Ulinger requested documentation showing these transfers occurred and Dr. Abouzeid stated he would submit the requested documents. 10. On or about September 30, 2014, the Registrar received a copy of a Deposit Account Balance Summary for Sunshine. The customer information section lists the owner as Sunshine with Dr. Abouzeid and Ms. Hosney as signers on the account. The document also detailed 34 online transfers of funds from the corporate account totaling $93,180.11 to two other accounts and 13 online transfers of funds into the corporate account totaling $32,500.00. 11. On or about October 8, 2014, Mr. Ulinger attempted to review the documentation with Dr. Abouzeid. Dr. Abouzeid acknowledged that he was unable to establish that he had transferred funds into the corporate accounts. Dr. Abouzeid asserted that he and Ms. Hosney owned the corporation, so the funds in the corporate account were his. 12. On or about March 30, 2015, the Registrar issued a Notice and Order of Denial of Recovery Fund Claim (“Notice”). In the Notice, the Registrar concluded that Complainants appeared to meet the eligibility requirements necessary to receive a payout from the Fund. However, the Registrar denied a payout because “Complainants have not provided evidence that they suffered any ‘actual damages.’” 13. The Registrar found that Sunshine was a separate corporate entity distinct from its owners and Sunshine paid Respondent for the work under the contract. The Registrar concluded that because Complainants could not establish that the funds paid to Respondent by Sunshine originated with Complainants, “Complainants have not demonstrated that they – as opposed to Sunshine – were damaged.” 14. The Registrar did not find that Complainants were not “persons injured” under the applicable statute, but found that the Registrar could not determine any “actual damages.” 15. Complainants requested a hearing on the Registrar’s denial of a payout from the Fund. The Registrar referred the matter to the Office of Administrative Hearings, an independent state agency, for an evidentiary hearing. 16. A hearing was held on June 26, 2015. Dr. Abouzeid testified on behalf of Complainants and submitted six exhibits. The Registrar presented the testimony of Mr. Ulinger and submitted eleven exhibits. 17. Mr. Ulinger testified that payouts from the Fund are limited to the actual damages suffered by the claimant resulting from the contractor’s violation of the Registrar’s standards and are generally calculated as the amount necessary to complete or repair the work. Mr. Ulinger acknowledged there was nothing in the statute or regulation addressing who paid for the work under the contract. Mr. Ulinger also stated that if a claimant secured a great deal, that would not be held against him or her when determining the amount of the payout from the Fund. CONCLUSIONS OF LAW 1. This matter lies within the Registrar’s jurisdiction.[1] 2. Complainants bear the burden of proof to establish their eligibility to recover a payout from the Fund by a preponderance of the evidence.[2] 3. “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”[3] 4. A.R.S. § 32-1131(3) defines a “person injured” who is eligible to recover from the Fund as follows: [A]ny 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 . . . 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.

The evidence established that Complainants own the residence, contracted with Respondent, filed a Complaint with the Registrar, and reside in the residence. There was no dispute that under the statute, Complainants meet the definition of persons injured. 5. A.R.S. § 32-1132(A) provides, in relevant part, as follows: 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.

6. Notably, nothing in A.R.S. § 32-1132 references the amount paid by the claimant as a factor in determining the amount of actual damages in cases involving workmanship violations.[4] Rather, the damages are limited to the cost to complete or repair the damage. 7. By requiring that the claimant establish he or she paid the funds to the contractor under the contract, the Registrar is including an additional criteria to eligibility that is not found in the statute or in any regulation. 8. If the goal of the Fund is to return the homeowner to the position he or she would have been in had the violation not occurred, the source of payment has no impact on that determination. 9. In the instant case, Complainants entered into a contract for the installation of new flooring and tiles for an agreed upon price. Respondent was paid for the work but the work was not performed in accordance with the Registrar’s standards. As it stands now, Respondent received payment for the work, but Complainants did not receive the flooring and tile that they bargained for regardless of where the funds to pay Respondent originated. To return Complainants to the position they would have been in had Respondent performed the work in accordance with the Registrar’s standards, Complainants will have to have corrective work done by another contractor. The cost to repair Respondent’s work constitutes Complainants’ actual damages. 10. Because Complainants are persons injured under the statute and have suffered actual damages, the Fund should review Complainants’ claim to the Fund to determine the specific amount of actual damages as detailed above. RECOMMENDED ORDER Based on the foregoing, it is recommended that this matter be remanded to the Fund for further review to determine the amount of Complainants’ actual damages. 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, July 20, 2015.

/s/ Tammy L. Eigenheer Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director Registrar of Contractors ----------------------- [1] See A.R.S. §§ 32-1101 to 32-1169. [2] 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). [3] Morris K. Udall, Arizona Law of Evidence § 5 (1960). [4] Actual damages are limited to the amount paid by a claimant when the contractor abandons the contract.

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