ALJDEC decisions subject to certification as final

2017A-1456-RFA-ROC · Registrar of Contractors · 2018-03-28

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Nicholas J Kossob,

PLAINTIFF,

v.

Luke's Painting Service LLC,

DBA: Desert Rock Building & Remodeling,

License No: 272425

DEFENDANT.

No. 2017A-1456-RFA-ROC

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: March 27, 2018, 9:00 A.M.

APPEARANCES: Complainants Nicholas and Deborah Kossob appeared on their 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

1. Luke's Painting Service, LLC, DBA: Desert Rock Building & Remodeling (Respondent), is the holder of License Number 272425 issued by the Registrar of Contractors (Registrar).

2. On or about March 16, 2017, Complainants Nicholas and Deborah Kossob (Complainants) filed a complaint with the Registrar against Respondent for poor work with regard to swimming pool and hardscaping work at Complainant’s residence in Fountain Hills, Arizona. (Registrar’s Exhibit 1).

3. On April 11, 2017, the Registrar issued a Directive to Respondent to correct various deficiencies with the work. (Registrar’s Exhibit 3).

4. When Respondent did not fully comply with the Directive, the Registrar issued a Citation and Complaint on July 13, 2017, charging Respondent with a violation of 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 4).

5. Based on a stipulation in which Respondent entered into a surrender of its license, an Order Imposing Discipline was issued revoking Respondent’s License No. 272425. (Registrar’s Exhibit 5).

6. On or about October 5, 2017 Complainants filed a claim to the Residential Contractors’ Recovery Fund (“Recovery Fund”) with the Registrar. (Registrar’s Exhibit 6). The claim form indicated that that they sought recovery from the fund in the amount of $7,000.00. Complainants indicated they expended $17,601.77 for remedial work. (Registrar’s Exhibit 10). Complainants also indicated they had received $9,000.00 from Respondent’s bond company. (Registrar’s Exhibit 11). 7. On November 24, 2017, the Registrar issued a Notice and Order of Denial of Recovery Fund Claim for Administrative Payout. The Registrar determined that Complainants had not suffered any actual damages. (Registrar’s Exhibit 12).

8. Complainants filed a timely request for hearing on the Registrar’s Notice of Claim for Administrative Payout. (Registrar’s Exhibit 13).

9. 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 March 8, 2018, at 9:00 A.M.

10. At hearing, the Registrar presented the testimony of the Claims Reviewer of the Recovery Fund, Marlee McCormick, and submitted 13 exhibits that were admitted. Complainants Nicholas and Deborah Kossob testified on their own behalf.

11. Marlee McCormick testified on behalf of the Registrar that she had personally reviewed Complainant’s claim for payment from the Recovery Fund. Ms. McCormick said that she determined that Complainants initially were not eligible for payment from the Fund because the original contract amount was $32,000.00 of which Complainants paid $16,000.00. In that Complainants paid $17,601.77 for remedial work, in deducting the $16,000.00 amount unpaid on the contract, Complainants actual damages would calculate to be $1,601.77 before recovery on the bond. After recovery of $9,000.00 on Respondent’s bond, Complainants would derive a net gain of $7,398.23. (Registrar’s Exhibit 12).

12. The parties indicated that they had discussed the denial of the claim for payment from the Recovery Fund before the hearing and reached something in the nature of a resolution as to Complainants’ actual damages. Deborah Kossob testified that Complainants’ contract with Respondent had two components: one for work to the interior of the home and one for work to the exterior to the home (such as the pool and yard). She indicated Respondent performed no work on the interior at all. Thus, she stated that the $17,601.77 that Complainants paid for remedial work would more properly apply only to Respondent’s deficient work to the exterior components of the home, not to the interior.

13. Ms. McCormick testified that the $32,000.00 contract was sufficiently itemized such that it could be separated or bifurcated between an interior component ($17,500.00) and an exterior component ($14,500.00). (Registrar’s Exhibit 7). Therefore, she testified further that applying the cost of the exterior remedial work paid by Complainants in the amount of $17,601.77 only to the exterior component of the contract with a $9,000.00 recovery on Respondent’s bond would result in a calculation of actual damages in the amount of $8,601.77 ($17,601.77 less $9,000.00).

14. Ms. McCormick testified that Complainants had met their burden in establishing $8,601.77 in actual damages due to Respondent’s violations.

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 Complainants are 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’s work did not comply with the Registrar’s workmanship standards and that Complainants potentially were persons who had been injured by Respondent’s violation of A.R.S. § 32-1154(A)(3), namely A.A.C. R4-9-108. The only issue in the hearing on Complainants’ claim to the Fund is the measure of their 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. . . . 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.

6. Complainants have satisfied all requirements to be eligible for a payment from the Recovery Fund.

7. The Tribunal finds that Complainants met their burden to establish their actual damages in the amount of $8,601.77. 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). The purpose of deducting the contract price unpaid in calculating actual damages is to avoid a windfall to the homeowner. However, here there would be no windfall to Complainants in not deducting the contract price unpaid.

8. The Tribunal finds that it was appropriate in this case for the Registrar to separate the contract into two components for the purpose of calculating damages because the components and the amounts attributable to each are clearly identifiable. Complainants’ payment of $17,601.77 was not an amount necessary to complete or repair the entire project. It was an amount necessary to repair only a clearly identifiable portion of the project relating to the exterior. Therefore, the amount to repair the exterior portion of the job (less bond recovery) was the appropriate measure of damages without regard to the contract amount unpaid on the interior component of the job.

9. Accordingly, Complainants met their burden to establish a payout in the amount of $8,601.77 from the Fund to compensate Complainants for the 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 $8,601.77 to Complainants Nicholas and Deborah Kossob.

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, March 28, 2018.

/s/ Roger Geddes

Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director

Registrar of Contractor