ALJDEC decisions subject to certification as final

2013A-2362-ROC-RF · Registrar of Contractors · 2015-06-16

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: May 27, 2015 APPEARANCES: Complainants were represented by Lisa Bruno, Esq. Respondent Richard Eugene Traub dba Tango Pools & Spas did not appear. The Registrar of Contractors was represented by Assistant Attorney General John Tellier. ADMINISTRATIVE LAW JUDGE: Tammy L. Eigenheer _____________________________________________________________________ FINDINGS OF FACT The Registrar of Contractors (Registrar) issued License No. B-5.273817-R to Richard Eugene Traub dba Tango Pools & Spas (Tango). On or about January 12, 2015, the Registrar issued a Notice and Order of Denial of Recovery Fund Claim in Case No. 2013-2362. Complainants filed a timely request for hearing on the Registrar’s Notice and Order of Denial of Recovery Fund Claim, the Registrar referred the matter to the Office of Administrative Hearings (“the OAH”), an independent agency, for an evidentiary hearing. The Registrar issued Notice of Recovery Fund Eligibility/Payout Hearing, setting an evidentiary hearing in the OAH. At hearing, James L. Barbour testified on behalf of the Registrar. Lesley Marie Porter and Dana Beadle, Aquatic Pools and Landscape LLC (Aquatic), testified on behalf of Complainants. On or about September 15, 2011, Complainants Lesley Marie Porter and Ryan Porter received a proposal from Tango for the installation of a pool at their residence at 3399 Cedar Brook Road, Kingman, Arizona. The proposal indicated that the pool would be 16 feet wide, 32 feet long, 3.5 to 5.5 feet deep with a Pebble Tec finish and a sprayed deck up to 350 square feet with a knockdown finish. The pool was also planned to have a grotto water feature. Complainants were responsible for the property walls and fences. All equipment was to be Pentair. The proposal indicated the total price would be $39,800.00. The proposal was not signed by either party. Complainants alleged that approximately a year after they accepted the proposal, they modified the agreement to include two waterslides, a second lower pool, and other changes. According to Complainants, the changes increased the contract price to $133,000.00. Complainants acknowledged that the changes were not reduced to writing and that there were no written change orders from the initial proposal. Complainants indicated that they paid Tango $122,500.00 in payment of the unwritten change orders and had a remaining balance of $10,500.00 owing on the contract. On or about May 27, 2013, Complainants filed a complaint with the Registrar against Tango alleging abandonment. The complaint was assigned to investigator Cliff Corlett. Following a jobsite inspection, Mr. Corlett issued a Corrective Work Order (CWO) dated July 11, 2013. In the CWO, Mr. Corlett noted, as it relates to the pool, [a]lthough this mostly appears to be a contract money dispute on a work in progress, [Tango’s] pool contract and lack of a written contract on the masonry wall and written change orders are violations of Arizona contracting law and this Investigator agrees with Complainant . . . that [Tango] should properly complete all pool / wall construction.

As it relates to the masonry wall, Mr. Corlett noted, Being that there is no written contract for the masonry perimeter wall it is unknown to this Investigator what the terms of the agreement were. All this Investigator can require [Tango] to do at this point is to properly complete the masonry wall complying with all applicable pool enclosure standards adopted by the city of Kingman, Arizona.

On May 16, 2014, the Registrar revoked Tango’s contractor’s license as a direct result of Complainants’ complaint. On or about July 7, 2014, Complainants filed a claim with the Residential Contractors’ Recovery Fund (the Fund) alleging damages of $88,673.57 to complete the pool and block wall by Aquatic. After review, Mr. Barbour determined that a jobsite inspection was necessary to compare the work that Tango originally contracted to complete and the work actually completed by Aquatic. On September 23, 2014, Mr. Corlett conducted jobsite inspection. Following the jobsite inspection, Mr. Corlett found as follows: The major differences between the original [jobsite inspection] and the [Recovery Fund] inspection were that the [homeowner] by and through other[s] has had the pool and walls completed. The noted differences were: 1. Pools plastered and operating. 2. Concrete deck coating applied to all decking and there is additional decking at upper and lower pool areas. 3. Pool equipment has been added to, Heaters. And there is a completed shed over upper pool equipment and a pool equipment building over lower pumps, heater and filters. 4. The access walk from the bottom of slide to top is completed with handrails and deck coating. Faux rocks have been repaired and completed. 5. Water slides have been covered in tile. The original plan was for an epoxy/acrylic slide surface. 6. All walls are finished and color coated. 7. Required gates are installed. 1 man gate and two double drive gates. 8. The entire area has been nicely landscaped. 9. There is a child playground at the top pool area. 10. There is a built in BBQ at the upper pool area. 11. The original plans submitted to Kingman Building Department show a water feature/slid [sic] at the top pool. That was not there at the original inspection and has grown into a raised spa at the Recovery Fund Inspection.

On or about October 7, 2014, Mr. Barbour offered Complainants an opportunity to supplement the record and requested additional documentation including all change orders to account for the amended scope of work and the increase in contract price from $39,800.00 to $133,000.00. Mr. Barbour also requested all invoices, payments, and change orders documenting the work performed by Aquatic. After being granted additional time to submit the requested documentation, Complainants did not provide any written change orders setting forth Tango’s amended scope of work or justification for the substantial increase in the contract amount. Complainants submitted a narrative that purported to explain the change in scope. According to the cancelled checks submitted, Complainants paid Aquatic a total of $85,182.87 between June 26, 2013, and December 3, 2013. On or about January 9, 2014, Lesley Porter executed an affidavit in which she asserted that in October 2012, “a number of changes to the proposed pool and water feature were made” that resulted in a contract price increase to a total of $108,000.00 for the pool and a contract for the block wall for $25,000.00. According to Ms. Porter, Tango “never provided us with a copy of the revised contract reflecting these additions.” After reviewing Complainants’ claim and the supporting documentation, Mr. Barbour noted that Complainants “submitted a self-serving affidavit, documents regarding Aquatic’s work on the project, and a set of threadbare plans to explain Tango’s amended scope of work.” It was noted that “[n]one of these documents establish the price and scope of [Complainants’] amended contract with Tango.” In determining Tango’s amended scope of work, Ms. Porter’s affidavit does little to establish what the specific terms of the agreement were. Ms. Porter references “a number of changes” and the cost increase, but does not include anything in detail as to how the plans for the project changed over time to account for the substantial increase in price. The documentation regarding Aquatic’s work on the project also fails to explain Tango’s amended scope of work. Under the initial proposal, Tango was contracted to build a pool 16 feet wide, 32 feet long, 3.5 to 5.5 feet deep with a Pebble Tec finish, a sprayed deck up to 350 square feet with a knockdown finish, and a grotto water feature with Pentair equipment. The water slides were to be completed in an epoxy/acrylic surface. The work completed by Aquatics included a Caribbean Blue Beadcrete finish, 2,365 square feet of stamped overlay concrete, and a spa instead of a grotto water feature with Jandy equipment. The water slides were finished in tile. Complainants presented the testimony of Dana Beadle to explain the difference in Tango’s scope of work and the upgrades Aquatics completed. This assumes that Tango’s scope of work was determinable and that the upgrades completed by Aquatics could be identified as such. Tango did not request to appear telephonically at the hearing and did not request that the hearing be continued. Although the hearing continued throughout the day, Tango did not appear through an authorized member, employee, or attorney. Consequently, the Tango did not present any evidence. CONCLUSIONS OF LAW 1. This matter lies within the Registrar’s jurisdiction.[1] 2. The Minute Entry mailed to Tango at its address of record was reasonable. Tango is deemed to have received notice of Recovery Fund Eligibility/Payout Hearing.[2] 3. Complainants bear the burden of proof to establish their eligibility to recover a payout from the Fund by a preponderance of the evidence.[3] 4. “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”[4] 5. Complainants are injured persons within the definition in A.R.S. § 32- 1131(3)[5] and are, therefore, entitled to recovery from the Fund. 6. Under the facts and circumstances of this case, the Registrar is empowered to determine an award, based on actual damages, and to make an appropriate payment to Complainants from the Fund pursuant to A.R.S. § 32-1132[6] and A.R.S. § 32-1154(G).[7] 7. Complainants’ failure to provide written change orders from the original proposal renders it impossible to determine what was included in Tango’s amended scope of work. It may be assumed that Tango’s amended scope of work falls somewhere on the spectrum from the initial proposal of a basic swimming pool with a grotto water feature and decking to the final product of dual swimming pools, dual water slides, a walkway, extensive decking, and a block wall. However, to determine Complainants’ actual damages, it is necessary to determine exactly where on that spectrum Tango’s amended scope of work falls compared to the work Aquatics performed to complete that scope of work and, ultimately, the cost of Aquatics’ performance. The only evidence presented offered was Complainants’ assertions and Aquatics’ representation as to what upgrades it completed. The absence of contradictory evidence does not render the evidence offered specific enough to determine Complainants’ actual damages. RECOMMENDED ORDER Based on the foregoing, it is recommended that Complainants Lesley Marie Porter and Ryan Porter’s claim to the Residential Contractors’ Recovery Fund in Case 2013-2362 be closed as Complainants did not establish that they are eligible for a payout from the Residential Contractors’ Recovery Fund in any amount. 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 days from the date of that certification. Done this day, June 16, 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. §§ 41-1092.04; 41-1092.05(D). [3] 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). [4] Morris K. Udall, Arizona Law of Evidence § 5 (1960). [5] 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.

[6] A.R.S. § 32-1132 provides, in relevant part, as follows:

A. 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. . . .

[7] A.R.S. § 32-1154(G) provides as follows:

Notwithstanding any other provisions in this chapter, if a contractor's license has been revoked or has been suspended as a result of an order to remedy a violation of this chapter, the registrar may order payment from the residential contractors' recovery fund to remedy the violation. The registrar shall serve the contractor with a notice setting forth the amount claimed or to be awarded. If the contractor contests the amount or propriety of the payment, the contractor shall respond within ten days of the date of service by requesting a hearing to determine the amount or propriety of the payment. Failure by the contractor to respond in writing within ten days of the date of service shall be deemed a waiver by the contractor of the right to contest the amount claimed or to be awarded. Service may be made by personal service to the contractor or by mailing a copy of the notice by registered mail with postage prepaid to the contractor's latest address of record on file in the registrar's office. If service is made by registered mail, it is effective five days after the notice is mailed. Except as provided in section 41-1092.08, subsection H, the contractor or injured person may seek judicial review of the registrar's final award pursuant to title 12, chapter 7, article 6. An applicant to the residential contractors' recovery fund pursuant to this subsection must show that the applicant has proceeded against any existing bond covering the residential contractor and has not collected on the bond in an amount of thirty thousand dollars or more.

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