ALJDEC decisions subject to certification as final

2014A-4449-RFA-ROC · Registrar of Contractors · 2018-05-15

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Dana Rae Schimek,

COMPLAINANT,

v.

J DiGuiseppe Investments, LLC ,

License No: 219115

RESPONDENT.

No. 2014A-4449-RFA-ROC

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: April 25, 2018

APPEARANCES: Complainant Dana Rae Schimek appeared on behalf of herself. Joseph DiGuiseppe appeared on behalf of Respondent J DiGuiseppe Investments, LLC. Assistant Attorney General Thomas Raine appeared on behalf of the Arizona Registrar of Contractors.

ADMINISTRATIVE LAW JUDGE: Velva Moses-Thompson

_____________________________________________________________________

FINDING OF FACTS

1. In 2004, Complainant Dana Rate Schimek and her husband purchased a home located at 8332 East Clarendon Avenue in Scottsdale, Arizona (hereinafter “home”).

2. From 2004 to August of 2013, Ms. Schimek lived with her husband in the home.

3. On or about June 7, 2013, Ms. Schimek entered into a contract with Respondent J DiGuiseppe Investments, LLC (“J DiGuiseppe”) to remodel the home.

4. Under the contract, J DiGuiseppe would start work on or before June 10, 2014. See Exhibit 7. J DiGuiseppe was required to substantially complete the work on or before October 10, 2013. See id. The contract also stated that time was of the essence. The amount of the contract was $125,350.

5. At the time that Ms. Schimek executed the contract with J DiGuiseppe, the home was Ms. Schimek’s primary residence.

6. On or about October 29, 2014, the Registrar received a complaint from Ms. Schimek alleging abandonment on the part of J DiGuiseppe.

7. An investigator for the Registrar conducted an investigation into the facts alleged in the complaint.

8. On January 26, 2015, the Registrar issued a Directive. The January 26, 2015 Directive provides, in relevant part as follows:

Dear [J DiGuiseppe]:

After investigation, the Registrar has substantiated that your work fails to meet minimum workmanship standards (see A.A.C. R4-9-108). You are hereby directive to remedy the following violations by the appropriate means:

Contractor is to complete the following project as agreed to by Complainant and Respondent at the jobsite inspection including the interior gas lines, all at no additional cost to the Complainant.

The following shall be completed per this Written Directive:

1) Framing

2) A/C, plumbing, and electrical rough-ins

3) Have all exterior windows and doors, including the garage overhead door installed. (This does not include the front entry door.)

4) The roof papered and dried in with the asphalt shingles loaded onto the roof.

5) Paper and lath on the exterior walls. (Does not include stucco).

6) All fire sprinkler rough-ins installed.

7) Interior gas lines run to the kitchen range and water heater locations and stubbed to the proper exterior wall of the house. (Does not include exterior gas line run from utility origin).

Contractor is to have all necessary local building department inspections conducted and passed regarding the above mentioned work.

9. On July 7, 2015, the Registrar issued a Citation against

J DiGuiseppe.

10. On December 15, 2015, an administrative hearing was held regarding Ms. Schimek’s complaint.

11. On January 4, 2016, an Administrative Law Judge (ALJ) issued a decision and found that J DiGuiseppe violated Ariz. Rev. Stat. section 32-1154(A)(1) (“Abandonment of a contract or refusal to perform after submitting a bid on work without legal excuse for the abandonment or refusal.”)

12. The ALJ also found that J DiGuiseppe violated Ariz. Rev. Stat. section 32-1154(A)(22) (“Failure to take appropriate corrective action to comply with rules adopted pursuant to this chapter without valid justification within a reasonable period of time after receiving a written directive from the registrar. The written directive shall set forth the time within which the contractor is to complete the remedial action. The time permitted for compliance shall not be less than fifteen days from the date of issuance of the directive.”)

13. On January 27, 2016, the Registrar issued a Final Administrative Decision and Order and adopted the ALJ’s findings.

14. On or about June 15, 2017, Ms. Schimek filed a recovery fund claim with the Registrar.

15. Ms. Schimek sold the home in 2015.

16. Ms. Schimek moved out of the home in August of 2013 because the home was uninhabitable. However, Ms. Schimek intended to move back into the home after

J DiGuiseppe finished remodeling the home. Ms. Schimek and her husband desired to continue living in Scottsdale. However, because J DiGuiseppe abandoned the work, Ms. Schimek and her husband sold their home in an unfinished state, and moved out of Scottsdale.

17. On February 8, 2018, the Registrar issued a Notice and Order of Recovery Fund Ineligibility. The Registrar denied Ms. Schimek’s request for a recovery fund payout because the home was not a noncommercial historic property as defined in section Ariz. Rev. Stat. section 41-12101 or classified as a class three property under section Ariz. Rev. Stat. section 42-12003.

18. For the years of 2013, 2014, and 2015, Ms. Schimek’s home was listed as a Class 4 property by the Maricopa County Assessor. During those years, the home was described as “NON-PRIMARY/NOT IN OTHER CLASSES RESID”. See Exhibit 8.

19. In 2016 and 2017, the home was listed as class 3 property by the Maricopa County Assessor.

20. In 2013, the home was valued at full cash value. See Id.

21. Ms. Schimek did not realize the effect of her home being classified as a class 4 property, rather than a class 3.

22. Ms. Schimek filed an appeal to the Notice and Order of Recovery Fund Ineligibility.

23. At hearing, Ms. Schimek testified on her own behalf. The Registrar presented the testimony of Marlee McCormick, a legal assistant in the Registrar’s Legal Department and Recovery Fund. Joseph DiGuiseppe testified on his own behalf. The Registrar submitted exhibits 1, 6,7, 8, and 10.

CONCLUSIONS OF LAW

1. This matter lies within the Registrar’s jurisdiction.

2. Ms. Schimek bears the burden of proof to establish that they are eligible to recover a payout 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. “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.”

5. Legislation must also be given a sensible construction that avoids absurd results. State v. Gonzales, 206 Ariz. 469, 471, ¶12 (App. 2003).

6. Ariz. Rev. Stat. section 32-1131(3) provides:

3. "Person injured":

(a) Means any owner of residential real property that is either noncommercial historic property as defined in section 42-12101 or classified as class three property under section 42-12003. The property must also be 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.

(b) Includes 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.

7. Ariz. Rev. Stat. section 42-12003 provides:

42-12003. Class three property; definition

A. For purposes of taxation, class three is established consisting of:

1. Real and personal property and improvements to the property that are used as the owner's primary residence, that are not otherwise included in class one, two, four, six, seven or eight and that are valued at full cash value.

2. Real and personal property that is occupied by a relative of the owner, as provided by section 42-12053, and used as the relative's primary residence, that is not otherwise included in class one, two, four, six, seven or eight and that is valued at full cash value.

3. Real and personal property that is owned and occupied as the primary residence of the owner who also uses the property for lease or rent to lodgers.

8. Ariz. Rev. Stat. section 42-12004 provides:

42-12004. Class four property; definition

A. For purposes of taxation, class four is established consisting of:

1. Real and personal property and improvements to the property that are used for residential purposes, including residential property that is owned in foreclosure by a financial institution, that is not otherwise included in another classification and that is valued at full cash value. The homesite that is included in class four may include:

(a) Up to ten acres on a single parcel of real property on which the residential improvement is located.

(b) More than ten, but not more than forty, acres on a single parcel of real property on which the residential improvement is located if it is zoned exclusively for residential purposes or contains legal restrictions or physical conditions that prevent the division of the parcel. For the purposes of this subdivision, "physical conditions" means topography, mountains, washes, rivers, roads or any other configuration that limits the residential usable land area.

2. Real and personal property and improvements to the property that are used solely as leased or rented property for residential purposes, that are not included in class one, two, three, six, seven or eight and that are valued at full cash value.

3. Child care facilities that are licensed under title 36, chapter 7.1 and that are valued at full cash value.

4. Real and personal property and improvements to property that are used to operate nonprofit residential housing facilities that are structured to house or care for persons with disabilities or who are sixty-two years of age or older and that are valued at full cash value.

5. Real and personal property and improvements that are used to operate licensed residential care institutions or licensed nursing care institutions that provide medical services, nursing services or health related services and that are structured to house or care for persons with disabilities or who are sixty-two years of age or older and that are valued at full cash value.

6. Real and personal property consisting of no more than eight rooms of residential property that are leased or rented to transient lodgers, together with furnishing no more than a breakfast meal, by the owner who resides on the property and that is valued at full cash value.

7. Real and personal property consisting of residential dwellings that are maintained for occupancy by agricultural employees as a condition of employment or as a convenience to the employer, that is not included in class three and that is valued at full cash value. The land associated with these dwellings shall be valued as agricultural land pursuant to chapter 13, article 3 of this title.

8. Real property and improvements to property constituting common areas that are valued pursuant to chapter 13, article 9 of this title.

9. Real and personal property that is defined as timeshare property by section 32-2197 and valued pursuant to chapter 13, article 10 of this title, except for any property used for commercial, industrial or transient occupancy purposes and included in class one to the extent of that use.

10. Real and personal property and improvements that are used for residential purposes, that are leased or rented to lodgers, except for:

(a) Property occupied by the owner of the property as the owner's primary residence and included in class three.

(b) Property used for commercial purposes and included in class one.

B. Subsection A, paragraphs 4 and 5 of this section shall not be construed to limit eligibility for exemption from taxation under chapter 11, article 3 of this title.

9. To be eligible for a payout from the recovery fund, a homeowner must have occupied or intended to occupy the property as a residence that is damaged by a contractor, during at least two relevant time periods: the time of contract execution or the time that the injury occurred. See McMurren v. J.M.C. Builders, Inc., 204 Ariz. 345, 349 (2003).

10. The Registrar did not dispute that the home was Ms. Schimek’s primary residence at the time that the contract was executed. The Registrar contended that Ms. Schimek was not eligible for a payout from the recovery fund because the home was classified as a Class 4 property at the time that the contract was executed and at the time that the injury occurred. The Registrar also argued that even though the home was a Class 3 property at the time that the recovery fund claim was filed, Ms. Schimek no longer occupied or intended to occupy the home.

11. In Ariz. Rev. Stat. section 42-12003 (A)(3)(1), the legislature’s intent is apparent regarding the circumstances in which a class 3 property designation is established. “For purposes of taxation, class three is established consisting of real and personal property and improvements to the property that are used as the owner's primary residence, that are not otherwise included in class one, two, four, six, seven or eight and that are valued at full cash value. “

12. The weight of the evidence presented at the hearing showed that the home met the class 3 classification at the time that the contract was executed, because the home was Ms. Schimek’s primary residence. Ms. Schimek provided credible testimony that she and her husband had lived in the home since 2004, and had always used the home as their primary residence. There was no evidence offered to rebut Ms. Schimek’s testimony. Given the evidence presented at hearing, there was no other explanation for the home being classified as class 4 other than clerical error.

13. Denying Ms. Schimek’s request for a recovery fund payout because the home was listed as a Class 3 property in 2013, even though the home was Ms. Schimek’s primary residence, would lead to a result that does not effectuate legislative intent.

14. Ms. Schimek established by a preponderance of the evidence shows that her home qualified for classification of class 3 at the time that the construction contract was executed.

15. Ms. Schimek established by a preponderance of the evidence that she is a person injured pursuant to Ariz. Rev. Stat. 32-1131(3).

RECOMMENDED ORDER

In view of the foregoing, it is recommended that the Registrar of Contractors reverse its decision to deny Ms. Schimek’s claim to the Residential Contractors’ Recovery Fund in case No. 2014-4449.

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, May 15, 2018.

/s/ Velva Moses-Thompson

Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director

Registrar of Contractors