ALJDEC decisions subject to certification as final

2014A-4355-RFA-ROC · Registrar of Contractors · 2020-06-15

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Roger S. Chambers,

COMPLAINANT,

v.

Modern Wood Concepts LLC,

DBA: Modern Wood Creations,

License No. ROC 283687,

RESPONDENT.

No. 2014A-4355-RFA-ROC

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: May 27, 2020, at 1:00 p.m.

APPEARANCES: Roger S. Chambers (“Complainant”) appeared on his own behalf; Modern Wood Concepts LLC DBA: Modern Wood Creations (“Respondent”) failed to appear; the Arizona Registrar of Contractors (“the Registrar”) was represented by Sarah A. Asta, Esq., Assistant Attorney General.

ADMINISTRATIVE LAW JUDGE: Diane Mihalsky

_____________________________________________________________________

FINDINGS OF FACT

PROCEDURAL BACKGROUND

The Registrar referred to the Office of Administrative Hearings (“OAH”), an independent state agency, Complainant’s appeal of the Registrar’s determination that Complainant was not eligible to receive a payout from the Residential Contractors’ Recovery Fund (“the Fund”) for an evidentiary hearing.

On March 23, 2020, the Registrar issued a Notice of Hearing. The Registrar sent the Notice of Hearing to Respondent at its address of record. The hearing was twice continued. OAH staff sent the orders continuing the hearing to Respondent at its address of record.

On March 31 and May 13, 2020, the Administrative Law Judge issued orders informing the parties that the hearing would be held telephonically to reduce the risk of spreading the COVID-19 virus and requiring the parties to provide to OAH telephone numbers at which they could be contacted for the hearing.

A hearing was held on May 27, 2020. Complainant submitted 10 exhibits and testified on his own behalf. The Registrar submitted 12 exhibits and presented the testimony of Doug Ulmer, a Legal Assistant employed by the Registrar who had analyzed Complainant’s claim to the Fund.

Respondent did not provide a telephone number at which its representative could be contacted and did not request that the hearing be continued a third time. Consequently, Respondent did not present any evidence to defend against Complainant’s claim to the Fund.

ADDITIONAL HEARING EVIDENCE

On February 21, 2013, Respondent filed an application with the Registrar for a contractor’s license, with Mitch Kerkhof as the qualifying party. On February 21, 2013, the Registrar sent a letter to Respondent, acknowledging receipt of the application but cautioning Respondent that “THE PENDING APPLICATION NUMBER IS NOT THE LICENSE NUMBER!” The Registrar’s Information and Salesforce Database indicates that the first possible date of issuance for Respondent’s license was March 3, 2013 According to the printout from the Registrar’s database, the Registrar issued License No. ROC 283687 to Respondent on March 4, 2013.

Complainant subsequently filed a complaint against Respondent for poor workmanship on a project that it contracted to construct for Complainant at his house at 1724 E. Cathedral Rock Drive, Phoenix, Arizona 85048.

On December 2, 2015, the Registrar issued a Final Decision and Order on Complainant’s complaint against Respondent’s contractor’s license, finding that Respondent had violated A.R.S. §§ 32-1154(A)(3) and 32-1154(A)(22) and, as a result, revoking Respondent’s License No. ROC 283687 and requiring Respondent to pay a $500.00 civil penalty.

On October 11, 2019, Complainant filed a claim to the Fund in the amount of $18,818.51 to recover the damages that Respondent’s proven violations of contracting statutes had caused him to incur. According to the claim, the date of the parties’ contract was March 15, 2012. Complainant listed eight payments to Respondent by check, dated between March 27, 2012, and December 14, 2014.

Fund claimants are required to attempt to recover from a contractor’s bond before they file a claim with the Registrar for a Fund payout. Complaint attached to his claim to the Fund a letter dated December 1, 2016, from Respondent’s bond company, denying his claim. One of the reasons for the denial was that “[i]t appears that a portion of your claim occurred prior to the issuance of the bond” on September 11, 2012.

Because Complainant did not have a signed, written contract with Respondent that set forth the terms of the parties’ agreement, he was required to submit an Affidavit for Construction Contract with his claim to the Fund. On the affidavit, Complainant attested that he had entered into a contract with Respondent for construction of the cabinets in his residence on March 15, 2012, and that the terms of payment were “50% down payment to start work, 30% when cabinets are ready, balance due after installation.” The affidavit also stated that Respondent had started work on March 27, 2012.

Mr. Ulmer noted that the affidavit that Complainant submitted was not signed or notarized but that the payment terms and invoices corresponded to the checks that Complainant had submitted. Mr. Ulmer testified that it was his impression that Respondent was working on the project during these times. The dates of the checks, between March 27, 2012, and December 14, 2014, signified when work was complete.

On February 12, 2020, the Registrar issued a Notice and Order of Recovery Fund Ineligibility, finding that Complainant was not eligible for a payout from the Fund under A.R.S. § 32-1132(A) because the date of his contract with Respondent was March 15, 2012, but a license was not issued to Respondent until March 4, 2013.

Mr. Ulmer testified that he drafted the notice and that the statute cited was the one in effect before the amendments that became effective on August 27, 2019. Mr. Ulmer stated that the amendments were not retroactive.

Complainant testified that the nature of the parties’ agreement was that he and Mr. Kerkhof discussed the cabinets on a room-by-room basis. After they agreed on the cabinets that would be installed in each room, Respondent issued a final invoice for the room, which became the parties’ contract. Complainant testified that no contract was formed until after a contractor’s license was issued to Respondent. Complainant explained he made a bad mistake on his claim to the Fund when he stated that date of the contract was March 15, 2012, which was only the date that the parties had begun their negotiations.

Complainant testified that his house was gutted and he was on a tight budget. Even after Respondent issued a preliminary invoice for a room, it was subject to negotiation and modification.

As an example of the parties’ negotiations, Complainant submitted an email from Mr. Kerkhof dated April 22, 2013, concerning the linen cabinets in the bath and laundry rooms, in relevant part as follows:

[I] know Dereck & Frank are working on the lighting today. I have put together [an] invoice for all the linen cabinets and other cabinets for the rest of the house. I can start on this right away while we wait for the floor and lighting to get done. Let me know if you want to get together to discuss the progress.

Complainant testified that when he first met Mr. Kerkhof on March 15, 2012, the flooring in the house was torn up and Respondent could not start any work. Complainant testified that Mr. Kerkhof said Respondent was doing work, but that Complainant never saw any work until the linen cabinets were brought to the house on April 13, 2013, after Respondent was licensed.

Complainant testified that the kitchen cabinets were the most extensive project in the house. From July 22, 2013, through December 2, 2013, the parties discussed kitchen cabinets. As late as December 7, 2013, Respondent was still installing cabinets in the bathroom and living room. Complainant testified that the parties did not finalize their contract for the bathrooms, laundry room, kitchen, and living room until Respondent issued the final invoice on December 6, 2013.

Complainant testified that as late as April 6, 2014, Respondent was still proposing terms for project completion. Complainant submitted his response, in relevant part as follows:

We've not made demands on you regarding your timeline but instead have asked you what you feel would be a reasonable timeline to finish these rooms. It has been about six months since the kitchen flooring was completed when you said you'd dedicate your time to working on our project. We're still waiting to have most of the project completed.

Complainant pointed out that after Respondent’s license was issued, the parties continued their discussions and negotiations, through May and June 2014.

Complainant testified that he made a couple of payments early, before the parties had reached an agreement or Respondent had started work, because he was excited about the project and Mr. Kerkhof over dinner had asked for money.

Mr. Ulmer testified that the Final Decision and Order made Complainant potentially eligible to make a claim to the Fund. The date of Final Decision and Order determined the law that would be applicable to any claim to the Fund that Complainant might subsequently file.

Complainant testified that the law that should govern his claim to the Fund was the law that was in effective when he filed the claim because the Registrar is meant to protect consumers. When Complainant prepared the claim he searched the Registrar’s public website and found no reference to earlier statutes.

The Registrar argued that if the amendments to A.R.S. § 32-1132 governed Complainant’s claim, it was time-barred.

CONCLUSIONS OF LAW

This matter lies within the Registrar’s jurisdiction.

The Notice of Hearing and the orders continuing the hearing that the Registrar and OAH mailed to Respondent at its address of record were reasonable and it is deemed to have received notice of the hearing.

Complainant bears the burden to establish that he is eligible to receive a payout from the Fund by a preponderance of the evidence.

“A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.” 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.”

Former A.R.S. § 32-1132(A) sets forth the requirements to receive a payout from the Fund, in relevant part as follows:

The [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 . . . not more than thirty thousand dollars . . . . An award from the fund shall not be available to a person injured by an act, representation, transaction or conduct of a residential contractor who was not licensed pursuant to this chapter . . . or not issued at the time of the contract. . . .

(Emphasis added.) Under this statute, to be eligible for a Fund payout, the contractor must have held a valid license at the time the contract was made, not at the time of injury.

The parties never signed a formal document that set forth the complete scope of work and terms of payment. Complainant acknowledged at the hearing that on March 15, 2012, the parties agreed that Respondent would install cabinets at Complainant’s house and that Complainant would pay Respondent according to a formula that would be applied to the details of work that the parties would later agree would be performed. A contract is “an agreement between two persons which creates obligation to do or not to do a particular thing and comprises promises by both parties to perform certain obligations.” A contract is “[a] promissory agreement between two or more persons that creates, modifies, or destroys a legal relation” or “[a]n agreement, upon sufficient consideration, to do or not to do a particular thing.” Complainant and Respondent made their contract on March 15, 2012, before Respondent was issued a license. Under former A.R.S. § 32-1132(A), Complainant is not eligible to recover a payout from the Fund.

The effective date of the amendments to A.R.S. §§ 32-1131 and 32-1132 was August 27, 2019. The Arizona Legislature did not expressly provide that the amendments were retroactive. In Arizona, “[n]o statute is retroactive unless expressly declared therein.” Because former A.R.S. § 32-1132(A) was effective when the Registrar revoked Respondent’s license on December 2, 2015, as a result of Complainant’s workmanship complaint, it governs Complainant’s claim for a payout from the Fund.

The amendment to A.R.S. § 32-1132 expands the time during which the contractor must be licensed to allow a claimant to recover a payout from the Fund, in relevant part as follows:

C. In order for a claimant to be eligible for an award from the residential contractors' recovery fund, the contractor whose actions damaged the claimant must have been appropriately licensed at one of the following times:

1. The date that the underlying contract was signed.

2. The date that the first payment was made.

3. The date that the underlying work first commenced.

A.R.S. § 32-1131.01(G) was also included among the amendments to the Fund statutes, however, and provides that “[a] claim for payment from the residential contractor's recovery fund must be submitted within two years after all proceedings, reviews and appeals connected with the registrar's final order terminate.” Even if the amendments can be retroactively applied, Complainant’s claim to the Fund is time-barred because it was filed more than two years after the Registrar’s December 2, 2015 Final Decision and Order.

The Registrar owes a fiduciary duty to manage the Fund for the benefit of all eligible homeowners who have suffered actual damages caused by a licensed contractor’s statutory violations as defined by the statutes in effect when the injury accrued. Before authorizing a payout, the Registrar must determine whether a claimant is eligible under the statutes that govern his claim. Complainant is ineligible to receive a payout from the Fund either because Respondent was not licensed at the time of the March 15, 2012 contract or because Complainant did not make his claim to the Fund until more than two years after the Registrar’s final Decision and Order on the underlying workmanship complaint.

RECOMMENDED ORDER

In view of the foregoing, it is recommended that on the effective date of the final order in this matter, the Registrar’s denial of Complainant Roger S. Chambers’ claim to the Fund shall be affirmed and Complainant’s appeal of the Registrar’s denial shall be dismissed.

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 15, 2020.

/s/ Diane Mihalsky

Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director

Registrar of Contractors