ALJDEC decisions subject to certification as final

2017A-1712-RFA-ROC · Registrar of Contractors · 2018-05-04

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Kernit Alexander Rankin,

PLAINTIFF,

v.

MCI Contractors LLC,

License No: 282064

DEFENDANT.

No. 2017A-1712-RFA-ROC

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: April 16, 2018.

APPEARANCES: Marlee McCormick, ROC Recovery Fund, John Tellier, Esq.,

legal counsel for the Recovery Fund, Kirnet A. Rankin, Plaintiff, Catherine Rankin, Plaintiff’s spouse, Marco Mercado, Defendant.

ADMINISTRATIVE LAW JUDGE: Randolph Wolfson

_____________________________________________________________________

FINDINGS OF FACT

On February 1, 2018, the Registrar of Contractors (“ROC”) issued a Notice of Notice of Claim for Administrative Payout. Thereafter, Plaintiff and Defendant both timely requested a hearing pursuant A.R.S. §32-1154(F) “to determine if an award and payment from the Contractors’ Recovery Fund is justified by the evidence.”

Pursuant to a Notice of Hearing issued March 7, 2018, the matter was set for hearing on April 16, 2018.at the Office of Administrative Hearings in Phoenix, Arizona. A hearing was held in this matter on April 16, 2018.

Plaintiff Kernit Alexander Rankin, [hereinafter “Rankin”] testified that both his wife and he suffer from physical disabilities which require that there be access to a walk-in shower which have made the resolution of the poor workmanship of MCI particularly difficult since two showers in two bathrooms, including the Master Bath’s walk-in shower were not in commission because of flooding from MCI’s poor workmanship. Mr. Rankin testified that Bids were submitted to the Fund on the claim, but the Fund did not approve certain items in the bids for reimbursement. Mr. Rankin asserts the items not approved for reimbursement were caused by the flooding resulting from MCI’s poor workmanship in the Underlying Case and, therefore he asserts, the items should be paid by the Fund. Mr. Rankin seeks to have additional funds approved on this claim.

Mr. Rankin testified that the residence involved in this claim was purchased in 2016 as a newly constructed home. He, referring to the Underlying Case Corrective Work Order [hereinafter the “CWO”], suffered injury and damages from MCI’s violation of A.R.S. §§ 32-1154(A)(3) and A.R.S. § 32-1154(A)(22). He testified that the violations involved poor workmanship in two bathrooms that caused flooding on two occasions from leaks in the showers of two bathrooms, leaks from the tile and grout work performed and a tub. Inspector Gunstra’s Corrective Work Order in the Underlying Case provided, in pertinent parts, the following:

Complaint Item 3: Master shower has leaked through shared wall into the guest bedroom. Investigator’s observation: inspected the bedroom closet that is adjacent to the master bath shower. It has staining of the carpet, tack strip, and baseboard that suggests a water leak. I had Complainant turn on the shower and within 2 min. water came through the wall. The master shower is currently leaking. I could hear a dripping sound in the wall cavity which could mean a pipe leak but that is undetermined at this point. Respondent's work is substandard. Respondent's work shall meet applicable code. Governing Rule: Workmanship Rule: R4-9-108; showers should not leak.

Complaint Item 4: Master Shower has leaked thorough shared wall into the master closet. Investigator's Observation: This is related to the same shower leak noted under Co1nplaint Item #3. The leak has also intruded into the master bedroom closet.

Complaint Item 11: Ceiling fan in 2 rooms are not working correctly. Investigator's Observation: Fans making squeaking noise at certain speeds. Respondent shall assist Complainant with servicing any applicable product warranty.

Complaint Item 12: Carpets in rooms has been stretched but need to again. Investigator's Observation: Respondent shall properly re-stretch carpets in areas that are rippled. Workmanship Rule: Governing Rule: ROC Workmanship Standard for Carpet.

Complaint Item 13: Irregular grout out lines. Investigator's Observation: In the master shower there are several grout lines that are not consistent in width. The worst being at the top of the short wall where the joint is 5/16" wide. In other areas the tiles are offset to 1/16" which creates different grout line widths. The overall appearance of the wall tile is uneven in places where the faces of the tiles are at different planes. 0nly one or two areas have lippage over 1/32" which is considered excessive. Also, the top corner of the short wall has sharp edges where the bullnose tile were not properly cut or fitted. Poor work. Governing Rule: Workmanship Rule: ROC Workmanship Standard for Ceramic Wall Tile #2, 4 and 8.

Complaint Item 14: Poorly cut tiles. Investigator's Observation: At the shower soap niche the cut tiles have clips across their edge. It is excessive and not meeting a minimum standard. Properly cut tiles have a clean edge. Poor work. Governing Rule: Workmanship Rule: ROC Workmanship standard for Ceramic Wall Tile #4.

Complaint Item 15: Tiles do not match up. Investigator's Observation: This is related to Complaint Item #13. Governing Rule: N/A:

Complaint Item 16: Crooked tiles. Investigator’s Observation: The overall appearance of the wall tile is uneven in places where the faces of the tiles are at different planes. Only one or two areas have lippage over 1/32" which is considered excessive. Poor work. Governing Rule: Workmanship Rule: ROC Workmanship Standard for Ceramic Wall Tile #4,8.

Complaint Item 18: There was an issue with the tub in the second bathroom that he fixed with the wrong material that obviously is the wrong color and now he says he is not willing to pay to have this project fixed.

Mr. Rankin disclosed that he made a claim against MCI’s license bond for the poor workmanship of MCI in the Underlying Case. The bond company honored the claim and Mr. Rankin said that the bond insurance company had paid him $9,000.00 on his claim.

Marlee McCormick, legal assistant for the Contractor’s Recovery Fund [hereinafter, the “Fund”] testified that she is the Fund official who reviewed the Plaintiff’s Fund claim, Plaintiff’s submitted bids, conferred with the Plaintiffs and conferred with the ROC Inspector Matt Gunstra - who issued the Corrective Work Order to MCI Contractors LLC [hereinafter, “MCI”] - in the underlying ROC Citation in Case No. 2017-1712 [hereinafter, the “Underlying Case”]. The CWO was issued May 12, 2017, nearly a year to the day of this Finding of Facts. There was no compliance with the CWO and a Citation was issued May 21, 2017 alleging violations of A.R.S. §§ 32-1154(A)(3) and A.R.S. § 32-1154(A)(22). MCI failed to Answer the Citation and on June 21, 2017, the Final Administrative Order from the ROC was issued finding MCI to have violated A.R.S. §§ 32-1154(A)(3) and A.R.S. § 32-1154(A)(22), suspending the MCI contractors’ license for two days and assessing a $500.00 civil penalty.

The Rankin Recovery Fund Application [hereinafter, the “Fund Application”] was filed October 23, 2017. The Fund Application claimed actual damages in the amount of $20,575.45. The Fund Application indicated that Rankin anticipated payment from the Fund of $21,546.88. This $21,546.88 amount is the bid for estimate of repair that is an amount which falls in the mid-point between the highest bid submitted of $22,649.02 and the lowest bid submitted of $18,560.91. The Fund Application notes that the middle bid was the bid Rankin utilized for his Fund Claim because the middle bidder was the “...one we trusted the most.”

Ms. McCormick testified that is the standard practice and policy of ROC to use only the lowest bid submitted on Recovery Claims to analyze the Fund’s payout to claimants. Ms. McCormick advised she had conferred with Mr. Rankin who voiced concerns that Ms. McCormick was not considering all of the damages directly caused by MCI’s conduct in her payout determination. Mr. Rankin was advised that the Fund will only consider matters for payout that appear in the CWO as items identified by the Inspector’s inspection as poor workmanship issues. In an abundance of caution and in an effort to provide Mr. Rankin with the most benefit allowed by the Fund statutes, Ms McCormick contacted Investigator Gunstra, the ROC Investigator inquiring whether certain items being claimed, although not expressly listed in the CWO, might fairly be inferred to be included as damage items in the CWO. Mr. Gunstra responded to Ms. McCormick’s inquiry in his January 9, 2018 e-mail in pertinent parts as follows:

Complainants already had their master shower removed and replaced due to the leaks. Was this necessary? Likely yes. Because the shower was unusable and would cause further damage if used. To be without this shower could be argued to be as unreasonable (waiting time to repair).

The bids call for new carpet in the guest bedroom and closets due to water damage from the leaks (carpet has delaminated according to repair contractor). Is this necessary? I thought it was the Master Bedroom that needed the carpet re-stretched? Yes, the water likely damaged the carpets in these rooms.

All the bids call for new ceiling fans at around $700. I was not going to allow this item, but I want to know your thoughts. No the fans are not a workmanship issue so I would not pay this.

Complainants had the water closet demoed and now have a bid that includes new floor tile (and new flooring around the vanity), paint, etc. Is this necessary? Likely yes, the floor tile was damaged by the contractor when he attempted repairs the first time. Some demo to the water closet may have been required due to the water damage as well.

One of the bids includes tearing out drywall and lifting carpet in the closets. These items were not in the directive, but if an additional leak occurred after the Jobsite Inspection, would this be an appropriate repair? Yes, an appropriate repair. The water lead did affect the closet carpet and drywall.

Painting baseboards in walk-in closet. master closet. Is this necessary due to carpet needing to be replaced? Yes, baseboards and paint were affected by shower leaks. It is not from the carpet replacement.

According to the information recorded by Ms. McCormick in her Claimant Spreadsheet, [hereinafter the “Spreadsheet”], Rankin is the owner of the property which is the subject matter of the Fund claim, Rankin occupies the residence in question, the residence was determined by Ms. McCormick to be a Class 3 property as defined in A.R.S. § 32-1131(3). Ms. McCormick, applying the lowest bid submitted as her starting point for determining actual damages [as is the Fund policy and standard of practice], the amount of the actual damages is stated as the amount of Bid #1 [Resolution Fire and Flood] was 13, 803.49. Notes to the Spreadsheet supply the following allowable items and their amounts from the low bidder:

Allowable Items:

Shower- $8,119.06 [CWO #3 and 4)

Water Closet- $823.57 (CWO #3 and 4 water damage)

Water Closet Disallowed: Replacing and buffing tile $2,929.31 (per JSI Notes #17, lack of evidence)

Vanity is disallowed: buffing tile $67.47 (per JSI Notes #17, Lack of evidence)

Walk-In Closet: Replacing carpet due to water damage $868.26 (CWO #3 and 4)

Master: Replacing carpet $1.,435.99 (CWO #12)

Master Disallowed: Painting baseboards, repairing nail pops, prepping for paint, painting walls $910.31 (not part of original complaint, not alleged that master had water damage)

Closet: Replacing carpet $316.29 (CWO #3 and 4 water damage)

Closet Disallowed: Drywall patch $72.66 (not in original complaint)

Misc.: Residential supervision, hauling debris, cleaning $1,513.20

Hall bath: refinish bathtub $727.12 (CWO #18)

Ceiling fans Disallowed: replacement $777 .67 (per CWO #11, Respondent was to only assist with servicing any product warranty. Jobsite notes state unsubstantiated);

Repair/Warranty from Resolution Fire & Flood cost for work to

repair water allowed for $1,177.19

Total Allowable: $13,803.49 + $1,777.19 = $15,580.68

Total Disallowed: $4,757.42.

Taking the value of the lowest bid at $18,560.91 and then subtracting the total disallowed amount of $4,757.42, the result is $13,803.49. Add back the allowed amount for Resolution Fire & Flood cost for work to repair water of $1,177.19, the total allowable amount is $15,580.68.

Ms. McCormick’s analysis points to $15,580.68 as the calculated allowed amount payable by the Fund on this claim. Deducted from that allowable amount to reach the Fund’s net payout on the claim is the $9,000.00 paid to Mr. Rankin from his claim against the MCI licensee bond.

The net payout calculated as allowable by Ms. McCormick is $6,580.68.

CONCLUSIONS OF LAW

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

The burden of proof at an administrative hearing falls to the party asserting a claim, right or entitlement and the standard of proof on all issues in this matter is by a preponderance of the evidence. Pursuant to A.A.C. R2-19-119(B), Plaintiff Kernit Alexander Rankin has the burden of proof in this matter.

In this administrative proceeding, Plaintiffs bear the burden of proof and must establish both that Defendant committed a statutory violation and that the violation caused them to suffer a loss by a preponderance of the evidence.

The standard of proof is by a preponderance of the evidence. See A.A.C. R2-19-119(A). “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.” Evans v. Creative Finishing Services, No. 2016A-1138-ROC (ALJ Decision 7:1–7) quoting 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 1220, (8th ed. 1999).

Pursuant to A.R.S. § 32-1132(A), the Registrar is the administrator of the Fund that may award actual damages up to $30,000.00 to any person injured by the acts or omissions of a licensed residential contractor.

Because the Registrar found in Case No. 2017-1712 that Defendant., while a licensed residential contractor, committed statutory violations in constructing the master bath shower and second bathroom in Plaintiffs’ residence resulting in at least two floods of the home that the investigator for the ROC recorded had resulted in damage to the bathrooms, flooring, baseboards and carpets, Plaintiffs potentially are “injured persons” entitled to an award from the Fund.

The preponderance of the evidence established that:

Defendant, at the time services were provided to Plaintiff, a “[r]esidential contractor” on the subject project, as defined by A.R.S. § 32-1131(4).

The residence was determined by the Fund to be a Class 3 property as defined in A.R.S. § 32-1131(3) as either noncommercial historic property as defined in §42-12101 or classified as class three property under §42-12003.

Plaintiff is a “[p]erson[s] injured” as defined by A.R.S. § 32-1131(3).

Plaintiff was injured by Defendant’s violations of A.R.S. §§ 32-1154(A)(3) and A.R.S. § 32-1154(A)(22).

Rankin is the owner of the property which is the subject matter of the Fund claim;

Rankin occupies the residence in question.

The goals and objectives of the registrar of contractors are to protect the public health, safety and welfare by licensing, bonding and regulating contractors engaged in residential construction and to administer the contractors’ recovery fund.”

“A cardinal rule of statutory interpretation is to give full effect to each statutory word or phrase so that no part is rendered void, superfluous, contradictory or insignificant.” Under the plain language of the statutes, the maximum $30,000.00 award is measured per “injured person” and per residence, not per claim or per contractor. The statutes’ plain language also requires that monies recovered from any “source other than the fund,” including other contractors or their insurers, be offset against any award that otherwise might be made from the Fund.

Plaintiff Rankin bears the burden to show, by a preponderance of the evidence, not only the fact and amount of loss, but also that no other sources of recovery exist and that the claim has subtracted from it funds recovered from any other source for any portion of the loss.

It is uncontested that on or about February 8, 2018, the Plaintiffs were paid the total sum of $9,000.00 from Defendant’s Bond Company Hudson Insurance Company on a claim based on loss suffered by Defendant’s conduct in the underlying case.

By a preponderance of the evidence, Plaintiff’s net actual damages attributable to MCI’s violations in the Underlying Case of A.R.S. §§ 32-1154(A)(3) and A.R.S. § 32-1154(A)(22), after deduction of payment to the Plaintiff by MCI’s licensee bond insurance company, is $6,580.68.

The Plaintiffs have not sustained their burden of establishing their entitlement to an administrative payout from the Fund in in excess of the actual damages of $6,580.68 calculated by the Fund and noticed to the Plaintiff in the Fund’s Notice of Claim for Administrative Payout pursuant to A.R.S. § 32-1154(F).

The limitations on Plaintiffs’ remedies against Defendant in Case Number 2017-1712 in this administrative forum would not have existed in a judicial forum. Nothing prevented Plaintiffs from taking the Registrar’s final findings of a statutory violation and consequential substantial injury in Case Number Case 2017-1712 to a court of competent jurisdiction to obtain a personal judgment against Defendant. But Plaintiffs chose to make a claim to the Residential Contractors’ Recovery Fund. Had Plaintiffs sued Defendant in a judicial forum for damages, their evidence probably would have established that the losses they incurred were within the reasonable contemplation of the parties at the time of contracting and, thus, compensable in a common-law breach-of-contract action.

But, Plaintiffs did not seek a civil judgment against Defendant under the common law of contracts for their consequential damages. Plaintiffs are making an administrative claim to be awarded their statutorily defined damages from the Residential Contractors’ Recovery Fund. The legislature imposed limitations on such awards. A.R.S. § 32-1132(A) directs that such an “...award from the fund is limited to the actual damages suffered by the claimant as a direct result of the contractor’s violation.”

By a preponderance of the evidence, the Fund accurately and correctly concluded the Plaintiff is entitled to a total net Fund payout $6,580.68, all of which shall be appropriately chargeable against Defendant and/or persons named on the license as set forth in A.R.S. § 32-1139(B).

RECOMMENDED ORDER

Based on the foregoing, it is recommended that on the effective date of the Order, the Registrar shall dismiss the complaint filed by Kernit Alexander Rankin.

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 4, 2018

/s/ Randolph D. Wolfson

Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director

Registrar of Contractors

By: ______________