ALJDEC decisions subject to certification as final

2014A-4288-ROC-rf · Registrar of Contractors · 2015-09-28

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: September 8, 2015 APPEARANCES: Complainants appeared and were represented by Trysta Puntenney. Respondent Murray and Sons Construction, LLC did not appear. The Registrar of Contractors was represented by Assistant Attorney General Michael Raine. ADMINISTRATIVE LAW JUDGE: Tammy L. Eigenheer _____________________________________________________________________ FINDINGS OF FACT 1. On or about October 12, 2011, the Arizona Registrar of Contractors (“the Registrar”) issued License No. CR61.274132- D to Murray and Sons Construction, LLC (“Respondent”). 2. On or about March 8, 2014, the Registrar received a Complaint against Respondent from Kenneth H. Katz and Cindy L. Katz (collectively “Complainants”). The complaint alleged, in relevant part, as follows: [Complainants] contracted with [Respondent] to perform certain landscaping work to be performed at their residence. After six proposals, several miscommunications, and delays, [Respondent] still could not get [Complainants’] requests correct. [Complainants] made several demands for the return of their money to no avail.

Exhibit 1. Attached to the complaint was a demand letter from Complainants’ attorney to Respondent that outlined the history in more detail. The complaint also indicated that Complainants paid a deposit of $7,180.00 on the total contract price of $7,950.00.[1] 3. On or about February 19, 2015, the Registrar issued a Citation and Complaint against Respondent relating to the complaints of Complainants and one other homeowner. While the Citation and Complaint alleged violations of A.R.S. § 32- 1154(A)(3), A.R.S. § 32-1154(A)(7), A.R.S. § 32-1154(A)(12) and A.R.S. § 32-1154(A)(22), the only violations attributed to the complaint filed by Complainants were based on A.R.S. § 32-1154(A)(12), failure to comply with the Registrar’s statutes, namely A.R.S. § 32-1124(B) and A.R.S. § 32-1158(B). 4. The Registrar and Respondent entered into a Consent Order in which Respondent was found to have violated the provisions charged in the Citation and Complaint and Respondent’s license was suspended for one day. 5. On or about June 15, 2015, Complainants filed a claim in the amount of $7,180.00 to the Residential Contractors’ Recovery Fund (“the Fund”) to recover the deposit paid to Respondent.

6. On or about June 22, 2015, the Registrar issued a Notice and Order of Denial of Recovery Fund Claim (“Notice”) finding that Complainants were not eligible for a payout. The Notice provided, in pertinent part, as follows: On or about October 20, 2014, [Complainants] filed a complaint with the ROC alleging a money dispute against [Respondent]. The ROC investigated the complaint and discovered that [Complainants] and [Respondent] could not come to terms with the proposals issued by [Respondent]. In light of this discovery, the ROC did not substantiate that [Respondent] performed any poor work or abandoned its contract with [Complainants]. However the ROC’s investigation did substantiate that [Respondent’s] contract did not include elements required by A.R.S. § 32-1158(B). On February 19, 2015, the ROC issued a citation against [Respondent] for its violation of A.R.S. § 32- 1158(B). On April 21, 2015, the ROC suspended [Respondent’s] license as a direct result of [Complainants’] complaint.

Exhibit 5.

7. The Notice concluded that the Registrar did not discipline Respondent’s license as a direct result of poor workmanship or abandonment relating to Complainants’ contract with Respondent. The Notice also asserted that because the Registrar did not issue a Corrective Work Order or Written Directive based on Complainants’ complaint, the Registrar had not issued an “order to remedy a violation” and Complainants were not eligible to access the Fund pursuant to A.R.S. § 32- 1154(G). 8. Complainants requested a hearing on the Registrar’s determination that their claim was denied. The Registrar referred the matter to the Office of Administrative Hearings (“the OAH”), an independent agency, for an evidentiary hearing. 9. On August 4, 2015, the Registrar issued a Notice of Recovery Fund Eligibility/Payout Hearing. 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 September 8, 2015, at 10:00 a.m. 11. Respondent did not request to appear telephonically at the hearing and did not request that the hearing be continued. Although the hearing took more than an hour. Respondent did not appear through an authorized member, employee, or attorney. Consequently, Respondent did not present any evidence. 12. The Registrar presented the testimony of James Barbour and submitted seven exhibits. Complainants presented the testimony of Ken Katz. 13. According to Mr. Barbour, he inquired why the initial complaint did not result in a citation for abandonment. Mr. Barbour stated that legal counsel for the Registrar advised that because Respondent had done some work, the Registrar viewed the complaint to be a money dispute rather than abandonment. Mr. Barbour acknowledged that abandonment does not have to happen before any work is performed, but may occur at any point during a project. Mr. Barbour offered no explanation as to why the Registrar did not cite Respondent for abandonment of Complainants’ contract other than that detailed. 14. Mr. Katz testified that Respondent had provided a drawing with the proposal of the work to be done under the contract. While Mr. Katz agreed to hire Respondent to do the work, he asked for changes to be made to the drawing as it was not what Complainants requested or wanted done. After numerous proposals, Complainants decided that Respondent was not the appropriate contractor for the project and decided to rescind the contract. Complainants requested Respondent return the monies paid because no work had been done. Eventually, Respondent offered to return the deposit of $7,180.00 less $1,500.00 for Respondent’s “expenses”. Complainants refused the offer because Respondent had not done any work. Mr. Katz testified that Complainants were injured by Respondent because they paid $7,180.00 and received nothing in exchange. Mr. Katz stated that they did not pursue a judgment against Respondent in civil court because they believed the Registrar would be the most efficient and cost-effective means of resolving the issue. CONCLUSIONS OF LAW This matter lies within the Registrar’s jurisdiction. See 32-1101 et seq. 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 the Notice of Recovery Fund Eligibility/Payout Hearing. See A.R.S. §§ 41-1092.04; 41-1092.05(D). Complainants bear the burden of proof and must establish eligibility to recover from the Fund by a preponderance of the evidence. 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). “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.” Morris K. Udall, Arizona Law of Evidence § 5 (1960). 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.” Black’s Law Dictionary 1220 (8th ed. 1999). A.R.S. § 32-1131(3) defines a “person injured” who is eligible to recover from the Fund as “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 . . . 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.” A.R.S. § 32-1132(A) provides, in pertinent part, as follows: 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. . . . If the claimant has paid a deposit or down payment and no actual work is performed or materials are delivered, the award of actual damages shall not exceed the exact dollar amount of the deposit or down payment plus interest at the rate of ten per cent a year from the date the deposit or down payment is made or not more than thirty thousand dollars, whichever is less.

“In applying a statute, . . . its words are to be given their ordinary meaning unless the legislature has offered its own definition of the words or it appears from the context that a special meaning was intended.” Mid Kansas Federal Savings and Loan Ass’n of Wichita v. Dynamic Development Corp., 167 Ariz. 122, 128, 804 P.2d 1310, 1316 (1991). The Registrar has interpreted A.R.S. § 32-1132(A) to require that the harm to the homeowner must be directly related to the violation found. In this matter, the harm to the homeowner, the loss of $7,180.00, was not directly related to the violations found, the failure to include the required elements of a contract and the letters “ROC” in front of the license number in an email. The Registrar provided no compelling evidence as to why Respondent was not cited for abandonment in the underlying matter given the nature of the complaint filed. The fact that some drawings had been done and that Respondent offered to refund some of the monies paid by Complainants does not mean an abandonment did not occur or that this was merely a money dispute. As Mr. Barbour acknowledged, a contractor can abandon a contract at any point during the project.[2] The complaint that was filed, in its most basic form, alleged that Complainants paid Respondent a sum of money for work to be completed under the contract and that work was not completed by Respondent—in other words, Respondent abandoned the contract. However, because the Registrar’s investigation concluded the complaint was merely “a money dispute”, the Registrar decided not to substantiate the abandonment claim and Complainants had no opportunity to establish through the Registrar that such an abandonment occurred. According to the Registrar’s argument, its refusal to cite Respondent for abandonment and entering into a Consent Order in which Respondent was found to have committed only administrative violations thereby precluded Complainants from receiving a payout from the Fund.[3] By this precedent, the Registrar could minimize future payouts from the Fund by prejudging claims and citing contractors for violations other than poor workmanship and abandonment and forcing homeowners to go through the civil judicial process at potentially great expense to the homeowners. This seems counterintuitive to the purpose of the Fund, to put homeowners back in the position they would have been in if the violation had not occurred. However, a fundamental requirement of the administrative system is due process. Because Respondent was not cited for abandonment in the underlying case, it had no ability or opportunity to defend that claim. Because any payout from the Fund would be attributable to Respondent and could affect its license and other possible licenses in the future, Respondent must be afforded the opportunity to defend Complainants’ claim of abandonment before any award from the Fund is made based on Respondent’s conduct in this matter. Because Respondent was not cited for and found to have committed an abandonment of the contract in Complainants’ case, Complainants did not establish that they were eligible for an award from the Fund at this time. 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 being deemed ineligible to access the Recovery Fund. 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, September 28, 2015.

/s/ Tammy L. Eigenheer Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director Registrar of Contractors ----------------------- [1] The evidence indicated that the overall plan was to include two phases. The deposit was for both phases while the contract price of $7,950.00 was for the first phase. [2] A.R.S. § 32-1132(A) specifically limits the amount of a payout from the Fund when an abandonment occurs after a deposit is paid but before any work is done. This is not to say that an abandonment that occurs after some work is done is not compensable from the Fund. In those situations, the actual damages would be the cost to repair or complete, just as it is in any other case. [3] Complainants are not precluded from seeking a judgment in civil court for damages. However, such a judgment would necessitate attorney fees that are not compensable from the Fund.

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