ALJDEC decisions subject to certification as final

2013A-4512-ROC-RF · Registrar of Contractors · 2015-12-23

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: November 6, 2015 APPEARANCES: Complainants Pavel Antseliovich and Oksana Gugis were represented by Neal G. Horenstein. The Registrar of Contractors was represented by Assistant Attorney General Thomas Raine. ADMINISTRATIVE LAW JUDGE: Tammy L. Eigenheer _____________________________________________________________________ FINDINGS OF FACT 1. On or about June 21, 2011, Complainants Pavel Antseliovich and Oksana Gugis had water damage at their home while they were out of the country. 2. On or about July 5, 2011, Dr. Antseliovich signed a letter authorizing Yariv Homes, LLC (Yariv) to act on his behalf with his homeowners insurance for the purpose of correcting, restoring, and bringing the home to its original condition before the water damage. 3. On or about September 9, 2011, Complainants obtained a proposal from Yariv to repair their home including the scope of work to be performed and indicating a total cost of $305,464.07. 4. In total, the homeowners insurance issued four checks payable to Complainants, Yariv, and US Bank as follows: Check #2270483 dated July 16, 2011, for $34,784.84. Check #2328571 dated August 21, 2011, for $12,864.35 Check #2414368 dated December 22, 2011, for $6,810.55 and Check #2415088 dated December 23, 2011, for $37,054.43.

5. Yariv deposited the checks totaling $91,514.17 into its bank account without endorsements from US Bank. 6. On or about August 27, 2012, Yariv began work on the project. After performing minimal work, Yariv did not return to the jobsite. 7. Complainants hired other contractors to complete the job for an additional cost of $165,909.96. 8. On or about September 20, 2013, Complainants filed a complaint against Yariv with the Registrar of Contractors (Registrar) alleging abandonment of the project. The Registrar investigated the complaint and issued a citation to Yariv, which ultimately resulted in the revocation of Yariv’s license on April 14, 2015, as a direct result of Complainants’ complaint. 9. On or about June 8, 2015, Complainants filed a claim with the Recovery Fund (Fund) indicating damages of $91,514.17. The claim was assigned to James Barbour for review. During his initial review, Mr. Barbour determined that Yariv was paid $91,514.17 and Complainants claim indicated they paid other contractors $165,909.96 to complete the job for a total of $257,424.13. As the original contract with Yariv was to perform the work for $305,464.07, it appeared that Complainants had completed the project for $48,037.94 less than the original contracted amount. In that case, Complainants would have no compensable actual damages. 10. On or about September 14, 2015, the Registrar issued a Notice and Order of Denial of Recovery Fund Claim (Order of Denial). In the Order of Denial, the Registrar set forth the four eligibility criteria set forth in A.R.S. § 32-1131 et seq. necessary for a claimant to recover from the Fund. The Registrar concluded that based on the evidence available, Complainants appeared to meet all eligibility criteria. 11. As to the actual damages, the Registrar found in the Order of Denial that this matter could not be considered a deposit refund case because Yariv performed some amount of work before abandoning the project. 12. Reviewing the claim based on the cost to repair or complete, Complainants paid Yariv $91,514.17 toward the total contract price of $305,464.07. This left a balance of $213,949.90 payable on the original contract. Based on documentation provided by Complainants, they completed the project for $152,461.96. Allowing the total amount paid to other contractors, Complainants paid a total of $243,976.13, or $61,487.94 less than the original contract amount. 13. Mr. Barbour concluded after a review of the contracts, payments, and work performed that only $106,131.79 of the $152,461.96 paid to other contractors could be compensable, i.e., matching the original scope of work in the contract with Yariv and performed by a licensed contractor. As such, Complainants paid a total of $197,645.96 of the total contract price of $305,464.07 for the work required in the original contract, or $107,818.11 less than the original contract amount. 14. Under either analysis, Mr. Barbour concluded that Complainants did not suffer any actual damages. 15. Complainants requested a hearing on the Registrar’s Order of Denial. The Registrar referred the matter to the Office of Administrative Hearings, an independent agency, for an evidentiary hearing. 16. At the hearing, the evidence addressed the calculation of any compensable damages. As to this question, Complainants’ argument centered on its position that the September 9, 2011 Contract with Yariv was not reflective of Complainants’ agreement with Yariv. Complainants asserted that the “Contract” was created by Yariv as a starting position in its negotiations with the insurance company to secure the maximum payout possible. Dr. Antseliovich testified that his actual agreement with Yariv was that it would perform the work required for the amount the insurance company ultimately paid for the claim. As the insurance company paid $157,098.27, the Registrar should not have reviewed Complainants’ claim to the Fund using a contract price of $305,464.07. Complainants pointed out that the September 9, 2011 Contract was not signed by either party as evidence that it was not the actual agreement of the parties. It was also noted that because the Registrar reached a settlement with Yariv regarding the underlying complaint, Complainants had no opportunity to present any evidence to establish the actual terms of the contract with Yariv. 17. The Registrar pointed out that on the original complaint, the amended complaint, and the claim to the Fund, Complainants listed the contract price as $305,464.07. Further, Complainants offered no evidence other than Dr. Antseliovich’s self-serving testimony that the contract was for less than that amount. 18. On October 1, 2015, the Registrar issued a Notice of Recovery Fund Eligibility/Payout Hearing (Notice) setting the hearing in this matter for 10:00 a.m. on November 6, 2015. A copy of the Notice was sent to Yariv at its address of record. 19. A recovery fund payout hearing was held at 10:00 a.m. on November 6, 2015. Complainants presented the testimony of Dr. Antseliovich and Jacob Kost and presented three exhibits. The Registrar presented the testimony of James Barbour and submitted five exhibits. 20. Yariv did not request to appear telephonically at the hearing and did not request that the hearing be continued. Yariv did not appear through an authorized member, employee, or attorney. Consequently, Yariv did not present any evidence. CONCLUSIONS OF LAW This matter lies within the Registrar’s jurisdiction.[1] The Notice mailed to Yariv at its address of record was reasonable. Yariv is deemed to have received notice of Recovery Fund Eligibility/Payout Hearing.[2] Complainants bear the burden of proof and must establish eligibility to recover from the Fund by a preponderance of the evidence.[3] “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”[4] 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.”[5] Complainants are injured persons within the definition in A.R.S. § 32- 1131(3)[6] and are, therefore, entitled to recovery from the Fund. According to A.R.S. § 32-1132(A), an award from the Fund is limited to “actual damages suffered by the complainant as a direct result of the contractor’s violation . . .,” not to exceed the cost of repair or replacement. “Actual damages” are those that will put the injured party in the position in which he was before he was injured. United States Fidelity & Guaranty Co. v. Davis, 3 Ariz. App. 259, 263, 413 P.2d 590, 594 (1966). The only documentation memorializing the agreement between Complainants and Yariv was the September 9, 2011 Contract that indicated a total contract price of $305,464.07. Further, at every stage of the proceeding, Complainants indicated the contract with Yariv was for $305,464.07. While it is reasonable that Complainants and Yariv would have reached a different agreement, there was no evidence reflecting such an agreement had been made aside from Dr. Antseliovich’s testimony. Starting with the contract price of $305,464.07, every analysis shows that Complainants paid less than the total contract price to complete the project, even accounting for the $91,514.17 paid to Yariv for its minimal work, and therefore, did not suffer any actual damages. Because Complainants failed to establish by a preponderance of the evidence that they suffered any actual damages as a result of the Contractor’s abandonment, they failed to establish that they were eligible for an award from the Fund. RECOMMENDED ORDER Based on the foregoing, it is recommended that on the effective date of the Registrar’s final order, Complainants’ claim be closed as Complainants did not establish that they were 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 40 days from the date of that certification. Done this day, December 23, 2015.

/s/ Tammy L. Eigenheer Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director Registrar of Contractors ----------------------- [1] See 32-1101 et seq. [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] Black’s Law Dictionary at page 1220 (8th ed. 1999). [6] 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.

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