ALJDEC decisions subject to certification as final

2016A-2994-RFA-ROC · Registrar of Contractors · 2018-01-12

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Irene Emmert,

PLAINTIFF,

Ramos Family Concepts Inc.,

License No. KB-1.299524-D,

DEFENDANT.

No. 2016A-2994-RFA-ROC

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: January 4, 2018, at 8:30 a.m.

APPEARANCES: Irene Emmert (“Plaintiff”) appeared on her own behalf; Ramos Family Concepts Inc. (“Defendant”) was represented by Andrew H. Barbour, Esq., Munger Chadwick PLC; the Arizona Registrar of Contractors (“the Registrar”) was represented by Thomas Raine, Esq., Assistant Attorney General.

ADMINISTRATIVE LAW JUDGE: Diane Mihalsky

_____________________________________________________________________

FINDINGS OF FACT

On September 27, 2017, the Registrar issued a Notice of Claim for Administrative Payout from the Residential Contractors’ Recovery Fund (“the Fund”), notifying the parties that “the Fund determined that [Plaintiff] is to be awarded $5,433.12 in the form of a payment issued by the Fund.”

After both Plaintiff and Defendant requested a hearing on the amount of the payout, the Registrar referred Plaintiff’s claim to the Office of Administrative Hearings (“OAH”), an independent state agency, for an evidentiary hearing.

Defendant did not challenge the Registrar’s determination that Plaintiff was a person who had been injured as defined by A.R.S. § 32-1131(3) who was potentially eligible to receive a payout from the Fund.

A hearing on the merits of was held on January 4, 2018. The Registrar presented the testimony of Marlee McCormick, a Legal Assistant in the Registrar’s Legal Department/Fund who had analyzed Plaintiff’s claim, and Jack Grimm, the Investigator who had been assigned to investigate the underlying workmanship complaint, and submitted thirteen exhibits. Plaintiff testified on her own behalf and submitted one exhibit. Defendant submitted three exhibits and offered one exhibit that the Administrative Law Judge (“ALJ”) declined to consider.

Background: The Underlying Workmanship Complaint

On or about June 22, 2015, the Arizona Registrar of Contractors (“the Registrar”) issued License No. KB-1.299524-D for dual building contracting to Defendant.

On or about August 10, 2016, Plaintiff filed a complaint with the Registrar against Defendant alleging among other things that its workmanship was poor in its performance of its contract to repair the flat roof and to perform other work at Plaintiff’s house at 8627 N. 48th Ln., Glendale, Arizona 85302. According to complaint, Plaintiff had paid Defendant $8,500.00 on its $17,116.23 contract.

The Registrar assigned the complaint to Investigator Grimm. Investigator Grimm performed a jobsite inspection on September 21, 2016, and on September 26, 2016, issued a directive to Defendant to perform certain repairs on or before 5:00 p.m. on October 12, 2016. The September 26, 2016 directive provided in relevant part as follows:

Roof- Have pictures where there was bad worn roof panels on roof. Made several trips to start work/supplies, poured coating over bad. Worn wood panels, coating uneven, last rain saw pools of water and stains due to water. Roof needs to be redone completely, have had other contractors come out and agreeded bad workmanship.

Correct roof sheathing in the agreed upon areas that were marked prior to the inspection. Re-roof and Re-coat in these locations.

2. Front walkway - had to be redone, bad wood and still not acceptable, brought replaced wood, also bad and not painted.

Complete paint on 2x2’s at front entry.

3. 2 gates, contractor broke gates, left side of house, worker George. Gate right side not complete does not close, loose.

Correct loose gate to block post on the west side of the house.

4. Workers dropped some type of rubber dripping from roof [onto] patio, furniture, patio rugs and patio furniture covers.

Clean drip spots from back concrete patio and repaint fascia that have runs in various locations at back patio.

5. Patio ceiling has cracks from nails and roofing coating.

Correct location at back patio where sheathing is uneven.

6. Leaks at ceiling inside.

Touch up ceiling at fireplace in front room and first bedroom.

7. Unpainted sheathing at over hang on east side.

Complete painting at overhang on east side.

On October 21, 2016, the Registrar issued a Citation against Defendant’s license, charging cause to revoke or suspend Defendant’s license under A.R.S. § 32-1154(A)(3), namely A.A.C. R4-9-108, and A.R.S. § 32-1154(A)(22).

A hearing was held on January 20, 2017, before OAH on Plaintiff’s workmanship complaint. Plaintiff testified on her own behalf. Investigator Grimm also testified.

Defendant failed to appear on the January 20, 2017 hearing date.

Plaintiff did not offer any additional evidence on items 2 through 7 on the September 26, 2016 directive, to wit, the front walkway, gates, drip spots on the patio and lawn furniture, nails on the patio ceiling, interior leaks, and unpainted sheathing at the overhang.

Plaintiff submitted a report from Diversified Roofing that stated that the BiTec 40 material that Defendant had used for the roof was not appropriate for a flat roof. Investigator Grimm testified that because the Registrar’s investigators cannot perform destructive testing, he was not able to verify how Defendant had constructed Plaintiff’s roof.

The ALJ noted in her decision that “[t]he Registrar’s electronic file . . . contained a September 19, 2016 letter from Daniel Monas at Allstate Insurance Company to Plaintiff on her insurance claim, stating that ‘[i]t was noticed during the inspection that the new roofing material installed was different than that allowed on the estimate. . . .’”

Since Defendant failed to appear and did not offer any contrary evidence or object, the ALJ set a further hearing to allow Investigator Grimm to meet with Diversified Roofing to determine whether Defendant had used appropriate materials to construct Plaintiff’s roof.

A further hearing was held on February 9, 2017. Defendant again failed to appear.

Investigator Grimm testified that he had met with Diversified Roofing and viewed the results of the destructive testing that it had performed to expose the underlayment of the roof. Based on his inspection, Investigator Grimm testified that Plaintiff’s roof was covered by a product that was not the correct material for the application.

Based on Plaintiff’s evidence and Defendant’s failure to offer any controverting evidence, the ALJ found that Plaintiff had established that Defendant violated A.R.S. § 32-1154(A)(3), specifically A.A.C. R4-9-108, because “[Defendant’s] failure to use roofing material that was designed for a flat roof on Plaintiff’s house violated professional industry standards>” The ALJ also found that “[t]he other deficiencies identified in the September 26, 2016 Directive also violated professional industry standards.”

On or about February 14, 2017, the Registrar issued a final order accepting the ALJ Decision and, as a result of the proven violations of A.R.S. §§ 32-1154(A)(3) and A.R.S. § 32-1154(A)(22), suspending Defendant’s contractor’s license for five business days and assessing a $500.00 civil penalty. The effective date of the final order was March 26, 2017.

Defendant failed to appeal or request a rehearing on the Registrar’s final order.

Plaintiff’s Claims to the Fund

On or about February 27, 2017, Plaintiff submitted a claim to the Fund to recover her damages that were allegedly caused by Defendant’s poor work on her roof, requesting a payout in the amount of $9,500.00.

Plaintiff stated on the February 27, 2017 claim that she had received $14,135.60 from her Homeowner’s Insurance.

Plaintiff testified at the hearing that she actually received $17,000.00 from her homeowner’s insurer, Allstate, to pay for hail damage to her roof before she hired Defendant to replace the roof. Plaintiff stated that she still had $8,600.00 in her bank account from the insurance proceeds she had received from Allstate to repair her roof.

Defendant’s attorney argued that Plaintiff’s payout from the Fund should be reduced by the $17,000.00 that she received from her insurance company before Respondent replaced the roof on her house because she included the payout on her February 27, 2017 claim to the Fund.

Ms. McCormick testified that the Registrar does not deduct insurance proceeds from Fund payouts unless the proceeds are made to correct a defendant’s workmanship. Ms. McCormick noted that Plaintiff had received the insurance proceeds before Defendant performed any work on Plaintiff’s roof.

Plaintiff testified that she also received a payment from her homeowner’s insurer in the amount of $1,720.33 to repair damages to interior drywall from roof leaks. Plaintiff testified that she cannot repair the interior damage until the roof is repaired.

Defendant’s attorney argued that the $1,720.33 also should be deducted from any Fund payout to Plaintiff.

Plaintiff attached to her February 27, 2017 claim a copy of Defendant’s contract to tear off the existing roof and to install a torch down roof on her house for a price of $17,116.23.

The contract indicated that there was damage from existing leaks in the interior of her house, specifically, the living room and garage.

Plaintiff submitted with her February 27, 2017 claim a statement for her Chase Bank credit card account to show that she had paid Defendant $8,500.00 on her credit card on August 20, 2016.

Plaintiff also submitted with the February 27, 2017 claim three bids from appropriately licensed contractors to tear off the existing roof and to apply a torch down roof: (1) A bid dated February 13, 2017, from Almeida Roofing, Inc., License No. CR42.215758-D, in the amount of $12,300.00; (2) A bid dated February 23, 2017, from Diversified Roofing, License No. CR42.102585-D, in the amount of $14,445.00; and (3) A bid dated January 31, 2017, from Johnson Roofing, License No. CR42.272325-D, in the amount of $14,049.35.

Plaintiff did not submit with the February 27, 2017 Fund claim any estimates from contractors to repair items 2 through 7 on the September 26, 2016 directive, to wit, the front walkway, gates, drip spots on the patio and lawn furniture, nails on the patio ceiling, interior leaks, and unpainted sheathing at the overhang.

Ms. McCormick testified that the Fund did not process or consider Plaintiff’s February 27, 2017 claim because, on that date, the Registrar’s February 14, 2017 final order in the underlying workmanship complaint was not yet effective and the contractor’s statutory workmanship violation was a threshold requirement for a homeowner to claim a payout from the Fund.

On or about September 11, 2017, Plaintiff’s attorney on her behalf submitted a claim to the Fund to recover the damages caused by Defendant’s poor workmanship on her project, requesting a payout in the amount of $16,380.00.

Plaintiff’s attorney attached to the September 11, 2017 claim copies of Defendant’s contract and her $8,500.00 credit card payment to Defendant. Plaintiff’s attorney acknowledged on the September 11, 2017 claim form that she still owed Respondent $8,616.23 under the contract.

Plaintiff’s attorney did not state that she had received anything from her Homeowner’s Insurance on the September 11, 2017 claim.

Plaintiff’s attorney also submitted with the September 11, 2017 Fund claim three bids from appropriately licensed contractors to tear off the existing roof and to apply a torch down roof to her house: (1) A bid dated April 20, 2017, from All Pro Roofing and Contracting LLC, License No. CR.42.271017-D, in the amount of $16,380.00; (2) The bid from Diversified Roofing, described above, in the amount of $14,445.00; and (3) The bid from Johnson Roofing, described above, in the amount of $14,049.35.

Plaintiff’s attorney did not submit with the September 11, 2017 Fund claim any estimates from contractors to repair items 2 through 7 on the September 26, 2016 directive. Plaintiff’s attorney also did not submit the February 13, 2017 bid from Almeida Roofing, Inc.

On or about September 25, 2017, Ms. McCormick sent an email to Investigator Grimm to confirm that Plaintiff’s roof would need to be replaced because Defendant had used the wrong materials. Investigator Grimm confirmed that the entire roof would need to be replaced.

Ms. McCormick prepared an Excel spreadsheet, calculating Plaintiff’s compensable damages to be $5,433.12 based on Johnson Roofing’s low bid of $14,049.35, less the $8,616.23 that Plaintiff still owed Defendant under the contract.

Defendant’s attorney argued that the Registrar should calculate Plaintiff’s payout from the Fund based on Almeida Roofing Inc.’s low bid in the amount of $12,300.00, which Complainant had submitted with her February 27, 2017 claim to the Fund but had not submitted with her September 11, 2017 claim.

Plaintiff argued that she should be reimbursed the $8,500.00 that she paid to Defendant because she did not receive any value for his work. Plaintiff argued that she should also receive more than the amount of the low bid because the cost of materials and labor has increased since the bid was prepared.

CONCLUSIONS OF LAW

This matter lies within the Registrar’s jurisdiction.

After the Registrar calculated the amount of a Plaintiff’s compensable damages and proposed a payout from the Fund to which she was entitled, Defendant bears the burden of proof to establish that the Registrar’s calculations were erroneous or not supported by a preponderance of the evidence. Plaintiff bears the burden to establish that she should recover a larger payout by the same standard of proof.

“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.”

A.R.S. § 32-1132(A) describes the measure of damages that an eligible homeowner is entitled to recover from the Fund, in relevant 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 . . . 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. . . .

(Emphasis added.) For the purposes of A.R.S. § 32-1132(A), “actual damages” are the reasonable cost of repairing the contractor’s defective work and completing the project, minus any portion of the contract price still unpaid to the original contractor.

Respondent did not establish that the Registrar should deduct from the amount of the Fund payout the $17,000.00 that Plaintiff received from her homeowner’s insurer to pay Defendant or another contractor to replace her hail-damaged roof. These monies were provided to Plaintiff before Defendant performed any work and were not meant to reimburse Plaintiff for Respondent’s poor workmanship.

Respondent also did not establish that the $1,720.33 that Plaintiff received from her homeowner’s insurer for interior drywall repairs of damage caused by the roof leaks. Although the leaks might have resulted from Defendant’s poor workmanship, Plaintiff did not claim and the Registrar did not include in the proposed payout from the Fund any amounts to repair drywall damage.

Plaintiff did not establish that the Registrar should reimburse her for the $8,500.00 that she paid to Defendant in the payout from the Fund because A.R.S. § 32-1132(A) only allows the Registrar to make a payout for the amount of a deposit “[i]f no actual work is performed . . . .”

Complainant also has not established that the Registrar should include in the amount of the payout from the Fund any premium based on the amount of time that has passed since the contractors prepared the bids because A.R.S. § 32-1132(A) does not provide for such a premium or require the Registrar to consider current construction costs when it calculates the amount of a Fund payout.

Defendant established that the amount of the low bid should be $12,300.00 based on Almeida Roofing, Inc.’s low bid that Plaintiff submitted with her February 27, 2017 claim to the Fund. Almeida Roofing, Inc.’s bid was dated February 13, 2017, more than three weeks after the next low bid from Johnson Roofing dated January 31, 2017. Based on the plain language of A.R.S. § 32-1132(A) and the evidence offered at the hearing on Plaintiff’s claim to the Fund, the proper amount of her payout is $3,683.77.

RECOMMENDED ORDER

In view of the foregoing, it is recommended that on the effective date of the final order in this matter, the Residential Contractors’ Recovery Fund shall pay $3,683.77 to Plaintiff Irene Emmert.

It is further recommended that under A.R.S. § 32-1139(B), the Registrar shall charge $3,683.77, plus interest at a rate of ten percent a year, to Defendant Ramos Family Concepts Inc.’s License No. KB-1.299524-D.

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, January 12, 2018.

/s/ Diane Mihalsky

Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director

Registrar of Contractors