ALJDEC decisions subject to certification as final

2013A-2581-ROC-rf · Registrar of Contractors · 2015-06-17

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: June 3, 2015, at 8:00 a.m. APPEARANCES: Timothy Joseph Patterson and Marli Bea Patterson (hereinafter “Complainants”) appeared through Marli Bea Patterson (hereinafter “Ms. Patterson”). The Arizona Registrar of Contractors (hereinafter “Registrar”) was represented by Assistant Attorney General Seth T. Hargraves. Gemstone Landscape LLC (hereinafter “Gemstone” or “Respondent”) appeared through its qualifying party and member, Wayne Clifford Jewell (hereinafter “Mr. Jewell”). ADMINISTRATIVE LAW JUDGE: M. Douglas _____________________________________________________________________

FINDINGS OF FACT On or about February 16, 2013, Complainants entered into a contract with Gemstone to landscape their front yard. The contracted amount was $6,083.00, of which Complainants paid $5,500.00, leaving a balance due in the amount of $583.00.[1] On May 18, 2013, Complainants filed a workmanship complaint with the Registrar against Gemstone alleging various workmanship violations. On or about April 10, 2014, a citation was issued charging Gemstone with performing poor work, failing to include the required elements in its contract, and failing to take corrective action after a written directive was issued by the Registrar. Complainants’ workmanship complaint ultimately resulted in a one-day suspension of Gemstone’s license No. 222011 on August 7, 2014, based upon its admissions that it performed poor work in violation of A.R.S. § 32-1154(A)(3),[2] namely A.A.C. R4-9-108,[3] and that its contract form violated A.R.S. § 32-1154(A)(12),[4] namely, A.R.S. § 32-1158(B).[5] On or about August 25, 2014, Complainants filed a claim with the Residential Contractors’ Recovery Fund (hereinafter “Fund”) seeking an award of the costs to repair the deficient work and complete the landscaping at Complainants’ residence. In their claim, Complainants claimed damages in amount of $5,865.69 based upon expended monies to re- work and complete Complainants’ landscaping.[6] On or about January 20, 2015, the Registrar issued a Notice and Order of Denial of Recovery Fund Claim that provided in relevant part as follows: In this case, the Complainants hired an unlicensed contractor, Jimenez Landscaping and Handyman Services LLC, to correct the poor work, with the exception of killing the newly-growing grass. As stated prior, actual damages shall not be established by bids supplied or the value of work performed by a person or entity that is not licensed to perform such work. Other expenditures to purchase additional plants are beyond the scope of the original contract and are therefore not compensable. As such, the only allowable amount that can be potentially compensated is the $300.00 paid to Priority Weed & Pest Control to fully remove the grass as originally contracted. Given that this $300.00 is less than the unpaid balance due on the original contract of $583.00, this mandates denial of Complainants’ claim.

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, an independent state agency, for an evidentiary hearing regarding the amount and/or propriety of a payout from the Fund. A hearing was held on June 3, 2015. Ms. Patterson testified on the Complainants’ behalf and presented the testimony of her neighbor, Roy Dawson. The Registrar presented the testimony of Recovery Fund Supervisor, Eric Ulinger (hereinafter “Mr. Ulinger”), and submitted fourteen exhibits. Mr. Ulinger testified that he is a Recovery Fund Supervisor for the Registrar. Mr. Ulinger stated that he had personally reviewed Complainants’ claim for payment from the Fund. Mr. Ulinger opined that Complainants met all criteria and were potentially eligible for a payout from the Fund if they established compensable damages. 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 for a payout. Mr. Ulinger stated that he and the Fund had reviewed the entire file in this matter and determined that Complainants hired an unlicensed contractor, Jimenez Landscaping and Handyman Services LLC, to correct Gemstone’s poor work and that Complainants’ claimed expenditures to purchase additional plants were beyond the scope of the original contract and that these claimed damages were therefore not compensable. Mr. Ulinger said that Complainants also provided a copy of a check for $750.00 to Huerta Garden Services but that no invoice was included to verify the scope of the work performed and that Huerta Garden services was not a licensed contractor. Mr. Ulinger testified that he conducted by an inspection of the Complainants’ residence before Complainants’ actual damages were determined by the Fund and that he observed additional plants in Complainants’ yard that were beyond the scope of Complainants’ contract with Gemstone. Mr. Ulinger testified that the contracted amount for Complainants’ construction project was $6,083.00, of which Complainants paid $5,500.00 to Gemstone, leaving a balance due in the amount of $583.00. Mr. Ulinger stated that the $300.00 paid to Priority Weed and Pest Control would be the only allowable amount in Complainants’ claim for damages. Mr. Ulinger said the $300.00 is less than the unpaid balance due on the original contract of $583.00. Mr. Ulinger’s testimony is found to be credible. Ms. Patterson testified that she wanted to recover the money that Complainants had paid to Gemstone. Ms. Patterson stated that Complainants had to redo everything that Gemstone had done on their front yard. Ms. Patterson said that she was not asking for reimbursement for the money paid to the unlicensed contractors but for restitution for the money that she paid to Gemstone. CONCLUSIONS OF LAW 1. This matter lies within the Registrar’s jurisdiction.[7] 2. Complainants bear the burden of establishing, by a preponderance of the evidence, both (1) eligibility and (2) compensable damages pursuant to A.R.S. § 32-1131, et seq. [8] 3. “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”[9] 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.”[10] 4. 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.[11] 5. Credible testimony and evidence established that the Complainants meet all eligibility criteria and are “persons injured” who are potentially eligible to recover a payout from the Fund.[12] 6. Complainants hired unlicensed contractors to correct Gemstone’s poor work, with the exception of $300.00 for killing the newly-growing grass. Pursuant to A.R.S. § 32-1132(A), 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 to perform construction work. Pursuant to A.R.S. § 32-1132(A), an award from the Fund shall not exceed the amount caused by the contractor’s failure to perform the contract. Complainants’ expenditures to purchase additional plants that were not within the scope of Gemstone’s original contract are not compensable. The only allowable amount that was established by Complainants was the sum of $300.00 that they paid to remove the newly-growing grass. However, the sum of $300.00 is less that the unpaid balance of $583.00 due on Complainants’ contract with Gemstone. This Tribunal concludes that Complainants failed to establish any compensable damages pursuant to A.R.S. § 32-1131, et seq. RECOMMENDED ORDER Based on the foregoing, it is recommended that the Registrar affirm the Order of Denial of Recovery Fund and that Complainants’ claim for payment for damages from the Fund be denied. 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 17, 2015.

/s/ M. Douglas Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director Registrar of Contractors

----------------------- [1] See Exhibit 2 (Underlying Case Documents) [2] 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.” [3] 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.” [4] A.R.S. § 32-1154(A)(12) provides as follows:

The holder of a license or any person listed on a license pursuant to this chapter shall not commit any of the following acts or omissions: . . . .

13. Failure in any material respect to comply with this chapter.

[5] A.R.S. § 32-1158(B) provides as follows:

From and after December 31, 2007, any contract in an amount of more than one thousand dollars entered into between a contractor and the owner of a property to be improved shall contain in writing at least the following information: 1. The name of the contractor and the contractor's business address and license number. 2. The name and mailing address of the owner and the jobsite address or legal description. 3. The date the parties entered into the contract. 4. The estimated date of completion of all work to be performed under the contract. 5. A description of the work to be performed under the contract. 6. The total dollar amount to be paid to the contractor by the owner for all work to be performed under the contract, including all applicable taxes. 7. The dollar amount of any advance deposit paid or scheduled to be paid to the contractor by the owner. 8. The dollar amount of any progress payment and the stage of construction at which the contractor will be entitled to collect progress payments during the course of construction under the contract. 9. That the property owner has the right to file a written complaint with the registrar for an alleged violation of section 32-1154, subsection A. The contract shall contain the registrar's telephone number and website address and shall state that complaints must be made within the applicable time period as set forth in section 32-1155, subsection A. The information in this paragraph must be prominently displayed in the contract in at least ten point bold type, and the contract shall be signed by the property owner and the contractor or the contractor's designated representative. . . .

[6] See Exhibit 5 (Recovery Fund Claim Form with Attachments). [7] See A.R.S. §§ 32-1131 to 32-1140. [8] 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). [9] Morris K. Udall, Arizona Law of Evidence § 5 (1960). [10] Black’s Law Dictionary at 1220 (8th ed. 1999). [11] 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.

[12] A.R.S. § 32-1131(3) 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 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.

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