ALJDEC decisions subject to certification as final

2016A-37-RFA-ROC · Registrar of Contractors · 2018-09-14

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Claudia Bueno,

COMPLAINANT,

v.

Anthony Salvatore Derasmi dba,

Double D's Consulting And Construction,

License No: 272698

RESPONDENT.

No. 2016A-37-RFA-ROC

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: August 2, 2018, 8:30 A.M.

APPEARANCES: Complainant Claudio Bueno appeared on her own behalf; Respondent Anthony DeRasmi appeared on his own behalf; Assistant Attorney General Thomas C. Raine appeared on behalf of the Arizona Registrar of Contractors

ADMINISTRATIVE LAW JUDGE: Roger A. Geddes

_____________________________________________________________________

FINDINGS OF FACT

Background and Procedure

1. Anthony Salvatore Derasmi, dba Double D's Consulting And Construction (Respondent), is the holder of License Number 272698 issued by the Registrar of Contractors (Registrar).

2. On or about January 4, 2016, Complainant Claudio Bueno filed a complaint with the Registrar against Respondent for poor work in connection with an addition to Complainant’s residence in Chandler, Arizona. (Registrar’s Exhibit 1). According to the complaint, Complainant had entered into a contract with Respondent on December 15, 2014, for the contract amount of $79,705.75.

3. On March 7, 2016, the Registrar issued a Directive to Respondent to correct various deficiencies by March 23, 2016. (Registrar’s Exhibit 2). An Amended Directive was issued on May 26, 2016, adding additional deficiencies to be corrected by June 14, 2016. (Registrar’s Exhibit 4).

4. When Respondent failed to perform any further work, the Registrar issued a Citation and Complaint on August 25, 2017, charging Respondent with a violation of A.R.S. § 32-1154(A)(2), A.R.S. § 32-1154(A)(3), A.R.S. § 32-1154(A)(12), and A.R.S. § 32-1154(A)(22). (Registrar’s Exhibit 6).

5. After a hearing held on January 23, 2017, with the Arizona Office of Administrative Hearings, the Registrar issued a Final Administrative Decision and Order on February 24, 2017, finding that Respondent had violated A.R.S. § 32-1154(A)(2), A.R.S. § 32-1154(A)(3), and A.R.S. § 32-1154(A)(22) as charged in the Complaint. (Registrar’s Exhibit 5). Pursuant to the Order, the Registrar revoked Respondent’s license and required that Respondent pay a civil penalty of $500.00.

6. On or about October 5, 2017 Complainant filed a claim to the Residential Contractors’ Recovery Fund (“Recovery Fund”) with the Registrar. (Registrar’s Exhibit 6). The claim form indicated that that Complainant claimed actual damages in the amount of $39,216.68 due to Respondent’s violations and had spent $1,759.88 in repair.

7. The claim was supported by three bids to correct Respondent’s work from JK Bakosh Construction Co., dated March 23, 2017, and April 24, 2017 (Registrar Ex. 8), Johnson Construction Specialists, dated March 12, 2018 (Registrar Ex. 9), and Swartz Construction Company, undated. (Registrar Ex. 10). The bid amounts were $38,956.80, $44,055.00, and $45,914.00, respectively. The claim was also supported by a bid from Lumber Liquidators, dated April 17, 2018, for the amount of $17,373.54, for the flooring component of the job which was over and above the foregoing three bids. (Respondent’s Exhibit 10).

8. Complainant also indicated that she had received $11,580.91 from Respondent’s bond company. (Registrar’s Exhibit 13). 9. On April 19, 2018, the Registrar issued a Notice of Claim for Administrative Payout. The Registrar determined that Complainant would receive a payout of $30,000.00 from the Recovery Fund. (Registrar’s Exhibit 15).

10. Respondent filed a timely request for hearing on the Registrar’s Notice of Claim for Administrative Payout.

11. The Registrar referred the matter to the Office of Administrative Hearings, an independent state agency, for an evidentiary hearing regarding the amount and/or propriety of the payment from the Recovery Fund. A hearing was held on August 2, 2018, at 8:30 A.M.

12. At hearing, the Registrar presented the testimony of the Claims Reviewer of the Recovery Fund, Jessica Ortiz. Respondent appeared and testified and presented the testimony of Gregory Link, Job Manager for Respondent. Complainant appeared and testified on her own behalf. The Tribunal received and admitted Registrar’s exhibit numbers 1 - 15. The Tribunal subsequently received and admitted Complainant’s Exhibits 1 - 2 and Respondent’s Exhibit 1.

13. Jessica Ortiz testified on behalf of the Registrar that she had personally reviewed Complainant’s claim for payment from the Recovery Fund. Ms. Ortiz said that she determined that Complainant was eligible for payment from the Fund and that the only question was the extent of Complainant’s actual damages. She testified that she had obtained documentation from Complainant reflecting that the original contract amount was $79,705.75 and that Complainant provided proof of payment to Respondent of $81,500.00 in total for the project. She stated that Complainant also provided proof of payment of $5,909.88 for repair costs that she had incurred.

14. Ms. Ortiz further testified that she selected the lowest bid provided by Complainant, JK Bakosh Construction Co., and from that bid deducted $11,000.00 for items in that bid that had since been repaired by Complainant. Thus, she indicated that she calculated Complainant’s proposed and actual expenditures to be the amount of $27,956.80 ($38,956.80 less $11,000.00 (adjusted JK Bakish bid), plus $17,373.54 (Lumber Liquidators bid), plus $5,909.88 (repair costs)). Ms. Ortiz further stated that after deducting Complainant’s recovery on the bond of $11,580.91, she arrived at a calculation of Complainant’s actual damages in the amount of $39,659.31 as follows:

$ 27,956.80 (adjusted JK Bakosh bid ($38,956.80 less $11,000.00))

+ $ 17,373.54 (Lumber Liquidators bid)

+ $ 5,909.88 (repair costs incurred)

$ 51,240.22

- $ 11,580.91 (bond recovery)

$ 39,659.31

(Registrar’s Exhibit 14 (ROC 0073).

15. As a result, Ms. McCormick determined that a proper payout from the Recovery Fund was the statutory limitation of $30,000.00.

16. Gregory Link testified on behalf of Respondent that there were only a few items remaining to be corrected including repair of scratches on the wood floor and that the amount requested by Complainant was vastly overstated. He stated that the wood floor should be repaired rather than replaced.

17. Mr. Link further testified that there had been a mutual release and settlement agreement with Complainant in September 2016 in which, among other things, Respondent paid Complainant $3,000.00. He further stated that although the original contract amount was $79,705.75, changes to the contract increased the contract price to $94,731.07 at one point. (Registrar Exhibit 7 (ROC 0034)). He further stated that additional overages requested by Complainant increased the contract price to an amount over $104,000.00 in the end.

18. Complainant acknowledged that she had received $3,000.00 from Respondent as part of a settlement agreement but stated that Respondent did not comply with the other terms of the settlement agreement to complete or repair the final items. She stated she signed a contract in the amount of $79,705.75, and that she never signed a contract with the contract price of $94,731.07. She stated that there were no signed change orders and that she had asked for change orders from Respondent but never received them.

19. Ms. Bueno further testified that the flooring was scratched and poorly installed and that contractors had told her that it needed to be entirely replaced rather than repaired. Although she acknowledged that flooring was not included in the original contract price of $79,705.75, she stated Respondent agreed to do the flooring as part of a verbal agreement.

20. The Tribunal did not close the hearing at that time in order to allow the parties an opportunity to submit evidence of a signed contract or any other additional evidence reflecting the actual contract price.

21. After the hearing, Complainant submitted a copy of a contract, dated December 15, 2014, signed by Respondent (but not by Complainant) reflecting the original contract amount of $79,705.75. (Complainant’s Exhibit 2). Respondent did not submit a copy of a signed contract. Rather, Respondent submitted an email, dated July 25, 2015, from Complainant in which Complainant appeared to acknowledge a contract amount at that time of $96,085.00. (Respondent’s Exhibit 1). Complainant did not directly contradict the email or present contrary evidence.

CONCLUSIONS OF LAW

1. This matter lies within the Registrar’s jurisdiction. See A.R.S. § 32-1101 et seq.

2. After the Registrar has determined the amount of the payout from the Fund to which Complainant is entitled, Respondent bears the burden of proof to establish that the Registrar’s calculations were erroneous or not supported by a preponderance of the evidence. See Arizona Administrative Code Rule 2-19-119(A) and (B)(1); see also Vazanno v. Superior Court, 74 Ariz. 369, 372 (1952).

3. “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 at p. 1220 (8th ed. 1999).

4. The Registrar’s final decision in the underlying workmanship case established that Respondent did not comply with the Registrar’s workmanship standards and that Complainant was potentially a person who had been injured by Respondent’s violation of A.R.S. § 32-1154(A)(2), A.R.S. § 32-1154(A)(3), namely A.A.C. R4-9-108, and A.R.S. § 32-1154(A)(22). The only issue in the hearing on Complainant’s claim to the Recovery Fund is the measure of her actual damages.

5. 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 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. . . .

6. Respondent contended that the Registrar erred in using Complainant’s three bids for repair because, according to Respondent, there were only a few items to be repaired as outlined in his settlement agreement with Complainant rather than all of the items listed in the Directive. However, Respondent did not offer the settlement agreement into evidence; thus it cannot be determined whether or how that agreement would have had some bearing on the extent of the items to be corrected. Further, Respondent failed to provide any bids or other evidence as to the extent of or the cost to remedy the remaining items to be corrected. Thus, Respondent has failed to refute the amount or scope of the bids submitted by Complainant or the extent of the remaining items to be corrected.

7. Respondent further contended that the Registrar erred because, according to Respondent, the Registrar should have factored into its calculation an amount unpaid by Complainant on the contract. Respondent submitted that the original contract price was not $79,705.75, but was an amount far greater. Actual damages means the reasonable cost of completing the contract or repairing the contractor’s defective performance less the contract price unpaid. Ramsey v. Ariz. Registrar Contractors, 241 Ariz. 102, 106 (2016). As there was no dispute that Complainant paid Respondent $81,500.00 in total for the project, the Registrar’s calculation of actual damages using a contract price of $79,705.75 did not result in any deduction for the contract price unpaid. However, Respondent’s contention of a contract price in excess of $81,500.00, would have resulted in a deduction of the contract price unpaid in calculating Complainant’s actual damages.

8. The evidence presented included a contract between the parties signed by Respondent with a contract price in the amount of $79,705.75. (Complainant’s Exhibit 2). Also presented were cost breakdowns in the amounts of $79,705.75 and $94,731.07. (Registrar Exhibit 7). At issue was whether the contract amount was $79,705.75, $94,731.07, or any other amount.

9. The Tribunal finds that that evidence supports a finding that the contract amount was at least $96,085.00, which was acknowledged by Complainant in her email of July 27, 2015. (Respondent’s Exhibit 1). There does not appear to be any dispute that the original contract amount as of December 15, 2014, was $79,705.75. However, the evidence presented reflected an increase in the original contract amount as a result of changes to the scope of work. Even though Respondent did not present written change orders, the absence of such is not dispositive in determining the contract price or Complainant’s actual damages in this case when the evidence clearly reflects work performed by Respondent not specified in the original contract.

10. A contract amount in excess of $79,705.75 is evidenced by the two cost breakdown spreadsheets submitted by Complainant to the Register. (Register Exhibit 7 (ROC 0034-35)). In the cost breakdown spreadsheet of $79,705.75, there were no amounts allocated to flooring as part of Respondent’s work. Further, in the original signed contract reflecting the $79,705.75 contract amount, it stated that “flooring is Claudia Bueno’s responsibility at this time.” However, in the $94,731.07 cost breakdown, $5,600.00 was allocated to flooring. Therefore, it appears that after the parties entered into the original contract and as was testified to by Respondent, flooring became the responsibility of Respondent and the contract price was increased to account for this increased scope of work. Indeed, the evidence presented showed that Respondent did in fact install flooring, and that Respondent’s deficient work in that regard was part of the Directive. (Registrar’s Exhibit 2 (ROC 0005)). Thus, it is evident that installation of flooring was part of Respondent’s amended scope of work, but was not included in the original contract or contract amount.

11. However, even though flooring was not part of the original contract or not included in the original contract amount of $79,705.75, Complainant has sought the cost to replace the flooring by submitting a bid in that regard for the amount of $17,373.54 from Lumber Liquidators, (Respondent’s Exhibit 10), an amount which was used in the Registrar’s calculation of actual damages. (Registrar’s Exhibit 4 (ROC 0073). Complainant’s testimony that Respondent verbally agreed that flooring was part of the original contract is inconsistent with the cost breakdown spreadsheet, (Registrar’s Exhibit 7 (ROC 0035), and her email acknowledging a contract price greater than the original contract price. Therefore, including the cost to redo flooring in calculating actual damages based on an original contract price of $79,705.75 would result in a windfall to Complainant because flooring was not within the scope of the original contract and not included in the original contract amount.

12. As further evidence that the contract amount was an amount greater than $79,705.75, the cost breakdown spreadsheet of $79,705.95 did not include any allocation for installation of an outdoor fireplace. (Registrar’s Exhibit 7 (ROC 0035)). However, the $94,731.07 cost breakdown included an allocation of $2,500.00 for the installation of a fireplace. (Registrar’s Exhibit 7 (ROC 0034)). The Directive indicated that Respondent failed to install a fireplace per the contract. (Registrar’s Exhibit 2 (ROC 0013)). However, as in the case of flooring, even though a fireplace was not part of the original contract or not included in the original contract amount, Complainant had sought the costs to install a fireplace by submitting bids that include the costs for such installation. (Registrar’s Exhibit 8 (ROC 0051-52)); (Registrar’s Exhibit 9 (ROC 0054)); (Registrar’s Exhibit 10 (ROC 0059)). Again, it is evident that installation of the fireplace was part of Respondent’s revised scope of work but was not included in the original contract amount. Therefore, including the cost for fireplace installation in calculating actual damages based on the original contract price of $79,705.95 would result in a windfall to Complainant because such an item was not within the scope of the original contract and not included in the original contract amount.

13. It is apparent from the evidence that the scope of Respondent’s work and the contract price were revised by the parties. The contract itself even reflected that the cost breakdown “numbers could fluctuate up or down....” (Registrar’s Exhibit 7). Complainant testified that there were in fact other cost breakdown spreadsheets and Respondent testified that there was another cost breakdown spreadsheet reflecting a contract price in excess of $104,000.00. However, no other cost breakdown spreadsheets were produced other than the two referenced herein, and therefore such other spreadsheets do not bear on the contract price. Specifically, as to Respondent’s argument that the revised contract amount was in excess of $104,000.00, there was no documentation provided to support such a contention.

14. As the Tribunal finds that the additional documentation presented by the parties supports a finding by the preponderance of the evidence that the actual contract price was at least $96,085.00 rather than the amount of $79,705.75 used by the Register in calculating Complainant’s actual damages, the Tribunal finds that actual damages should be adjusted to account for the contract price unpaid. As Complainant provided evidence of payment to Respondent in the amount of $81,500.00, (Registrar Exhibit 7), the contract amount unpaid on the $96,085.00 contract price was therefore $14,585.00. Thus, the Registrar’s calculation of actual damages should be adjusted as follows:

$ 39,659.31 (initial calculation of actual damages (finding no. 14 above))

- $ 3,000.00 (settlement payment from Respondent to Complainant)

- $ 14,585.00 (contract amount unpaid)

$ 22,074.31

15. Accordingly, Respondent established through additional evidence submitted that the Registrar’s initial calculation of Complainant’s actual damages in the amount of $39,659.31 should be decreased by the $3,000.00 payment from Respondent to Complainant and the $14,585.00 contract amount unpaid. Thus, the payout in the amount of $22,074.31 should be made from the Recovery Fund to compensate Complainant for her actual damages caused by Respondent’s violations.

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 $22,074.31 to Complainant Claudio Bueno.

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, September 27, 2018.

/s/ Roger Geddes

Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director

Registrar of Contractors