FINACT2017A-3346-RFA-ROC.pdf
2017A-3346-RFA-ROC · Registrar of Contractors · 2018-08-22
REGISTRAR OF CONTRACTORS OF THE STATE OF ARIZONA
Ann De Jong, COMPLAINANT, Case No. 2017-3346 v. Docket No. 2017A-3346-RFA-ROC Outdoor X Scapes Inc. FINAL ADMINISTRATIVE DECISION AND DBA: Tree Pros Services ORDER License No. 296570, 253883 RESPONDENT
Under A.R.S. § 41-1092.08(B), the Registrar may review and accept, modify, or reject an
administrative law judge’s written decision. If the Registrar modifies or rejects that decision, then the
Registrar must provide written justification setting forth the reasons for the modification or rejection.
REGISTRAR’S REJECTION
In this case, a hearing was held, and the administrative law judge issued a written decision. See
Administrative Law Judge Decision, attached. The Registrar reviewed that decision and hereby rejects it.
BACKGROUND
After obtaining discipline against Respondent in Case No. 2017-3346, Complainant filed for a
payout from the Residential Contractors’ Recovery Fund. See ALJ Dec. 2:1-13. The Registrar denied
Complainant’s claim on the basis that Complainant’s irrevocable trust, not Complainant, owned the
subject property and Complainant therefore did not meet the statutory definition of “person injured” under
A.R.S. § 32-1131(3). See ALJ Dec. 2:14-18.
After a hearing, the administrative law judge concluded that Complainant was eligible for payout
from the Recovery Fund. See ALJ Dec. 8:21-24. In support of this conclusion, the administrative law
judge found that Complainant held legal title in the subject property in the name of Complainant as
of 5 REGISTRAR OF CONTRACTORS 1700 W. Washington St. Suite 105 – Phoenix, AZ 85007-2812 Telephone (602)542-1525 1-877-692-9762 trustee of an irrevocable trust, and that this was sufficient to establish Complainant as the owner of the
subject residence. See ALJ Dec. 6:13-14. The administrative law judge further found that Complainant’s
“substantial” control as trustee over the irrevocable trust that owned the property satisfied A.R.S. § 32-
1131(3)’s owner and occupant requirement. See ALJ Dec. 8:3-12.
Because the administrative law judge: 1) improperly found that Complainant held legal title in the
subject property and thus was the owner of the residence; and 2) improperly applied existing caselaw, and
determined that Complainant, as trustee of an irrevocable trust that owned the property, satisfied the
owner and occupant requirement of A.R.S. § 32-1131(3)(a), the Registrar rejects the Administrative Law
Judge Decision.
WRITTEN JUSTIFICATION
The Recovery Fund provides a mechanism to compensate any “person injured” by an act,
representation, transaction, or conduct of a licensed residential contractor that violates Title 32, Chapter
10 of the Arizona Revised Statutes. See A.R.S. § 32-1132(A); see also Shelby v. Ariz. Registrar of
Contractors, 172 Ariz. 95, 97-98, 834 P.2d 818, 820-21 (1992). Under A.R.S. § 32-1132(3)(a) “person
injured” is defined as:
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. Therefore, to qualify as a “person injured” the claimant must (1) be an owner of residential real property; (2) actually occupy or intend to occupy the property as a residence; and (3) be damaged by the failure of a residential contractor to adequately build or improve a residential structure. See Pinnamaneni, 237 Ariz. 147, 150, 347 P.3d 593, 596 (App. 2015); McMurren v. JMC Builders, Inc., 204 Ariz. 345, 350, P.3d 1082, 1087 (App. 2003). 1 The Recovery Fund’s eligibility criteria are plainly laid out in A.R.S.
1 As a preliminary matter, the Recovery Fund “is not, and was never intended to serve as a panacea for every ill- advised construction contract.” Ramsey v. Arizona Registrar of Contractors, 241 Ariz. 102 ¶ 15, 384 P.3d 316, 321
of 5 REGISTRAR OF CONTRACTORS 1700 W. Washington St. Suite 105 – Phoenix, AZ 85007-2812 Telephone (602)542-1525 1-877-692-9762 §§ 32-1131 & 32-1132. As an administrative agency, the Registrar is bound to follow the statutes enacted
by the Arizona Legislature and rulings issued by Arizona Courts. If a claimant fails to meet the statutory
requirements, the Registrar is not authorized to issue a payout from the Recovery Fund, and must find the
claimant ineligible.
Here, the administrative law judge incorrectly determined that Complainant, not the trust, owned
the subject property. At the hearing, it was undisputed that the subject property was owned by the
irrevocable trust. ALJ Dec. 5:11-13. But the Administrative Law Judge Decision determined that “title to
the subject residence was in fact taken in Complainant’s name as ‘Ann De Jong, as Trustee of the
[irrevocable trust].’” ALJ Dec. 6:6-9. And ultimately, the administrative law judge found “that legal title
in the name of Complainant as trustee is sufficient to establish her as owner of the subject residence.”
However, the subject property is in fact owned by the irrevocable trust, not the trustee. See Quitclaim
Deed, attached as Exhibit 1; see also Maricopa County Assessor webpage printout, attached as Exhibit 2
(listing the irrevocable trust under the “Owner Information” box). As noted by the Maricopa County
Assessor, the owner of the subject property is the irrevocable trust, and it is merely “in care of”
Complainant, as a trustee. Therefore, the administrative law judge erred in determining that the
Complainant owned the subject property.
The administrative law judge also improperly interpreted and applied the holding in Pinnamaneni
to find Complainant eligible for an award from the Recovery Fund. In Pinnamaneni, the Arizona Court of
Appeals issued a narrow and specific holding, finding that A.R.S. § 32-1131(3)’s owner and occupant
requirements are satisfied when the property is owned by a revocable trust but occupied by the trustor,
trustee, and beneficiary. The Pinnamaneni court explicitly limited the reach of this holding and stated that
“under these circumstances—where the property is owned by a revocable trust and the occupant is the
trustor, trustee, and beneficiary of that revocable trust—the trustee acting on behalf of the trust satisfies
(App. 2016). Thus, there will necessarily be certain types of injuries, and certain claimants, who are not eligible for a payout from the Recovery Fund.
of 5 REGISTRAR OF CONTRACTORS 1700 W. Washington St. Suite 105 – Phoenix, AZ 85007-2812 Telephone (602)542-1525 1-877-692-9762 the owner and occupant requirements of § 32-1131(3).” Pinnamaneni, 237 Ariz. at ¶ 13, 347 P.3d at 596.
(emphasis added).
But here, the administrative law judge attempted to extend Pinnamaneni’s holding to cover
Complainant’s irrevocable trust. In improperly extending this holding, the administrative law judge
asserted that “substantial” control over the subject property by a trustee of an irrevocable trust is sufficient
to satisfy the owner and occupant requirements of A.R.S. § 32-1131(3). See ALJ Dec. 8:3-12. However,
in arriving at its holding, the Pinnamaneni court stated that “[a]s both trustor and trustee of a revocable
trust, Pinnamaneni had complete control over the property in the Trust.” Pinnamaneni, 237 Ariz. at ¶ 13,
347 P.3d at 596 (emphasis added). And here, the administrative law judge specifically found that “under
the Trust Agreement, Complainant did not have complete control over the trust property.” ALJ Dec. 7:6-
7.
In sum, Complainant does not own the subject property as a trustor, trustee, and beneficiary of a
revocable living trust, as was the case in Pinnamaneni; instead, Complainant owns the subject property as
trustee of an irrevocable trust. By finding Complainant eligible for an award from the Recovery Fund, the
administrative law judge improperly extended the holding in Pinnamaneni and determined that the
Registrar is authorized to issue a payout to the trustee of an irrevocable trust despite that the trustee lacks
complete control over the property in the trust. The Registrar rejects the Administrative Law Judge
Decision to the extent that it finds Complainant eligible for an award from the Recovery Fund.
CONCLUSION AND ORDER
For the foregoing reasons, the Registrar rejects the Administrative Law Judge’s Decision and finds
Complainant ineligible for an award from the Recovery Fund. This decision is the final administrative
decision in this case and becomes effective on September 26, 2018.
FINAL NOTE
Replace all instances of “A.R.S. § 32-1154 (A)(12)” with “A.R.S. § 32-1154(A)(3)”.
of 5 REGISTRAR OF CONTRACTORS 1700 W. Washington St. Suite 105 – Phoenix, AZ 85007-2812 Telephone (602)542-1525 1-877-692-9762 Dated this 17th day of August 2018.
Registrar of Contractors /s/ Nicole Sornsin ----------------------------------------------------------- Nicole Sornsin Assistant Director, Legal and Recovery Fund Copy mailed via USPS First Class mail this 17th day of August 2018 to: Respondent Outdoor X Scapes Inc. DBA: Tree Pros Services 2149 W Mountain View Rd Phoenix, AZ 85021-1807 Respondent’s Attorney Jill J. Ormond, Esq. Lewis Roca Rothberger Christie LLP 201 E Washington St Ste 1200 Phoenix, AZ 85004-2595 Complainant Ann De Jong 1132 E Kent Pl Chandler, AZ 85225-8622 Complainant’s Attorney James D. Sparks, Esq. SPARKS LAW GROUP PLLC N 1st St Ste 795 Phoenix, AZ 85004-2357 Copy sent electronically this same date to: Respondent at email address on record with the Registrar Respondent’s counsel at email address on record with the Registrar Complainant at email address on record with the Registrar Complainant’s counsel at email address on record with the Registrar
Copy sent electronically this same date to:
Office of Administrative Hearings Roger A. Geddes, Administrative Law Judge Office of the Attorney General John Tellier, Assistant Attorney General
Case No. 2017-3346/mm
of 5 REGISTRAR OF CONTRACTORS 1700 W. Washington St. Suite 105 – Phoenix, AZ 85007-2812 Telephone (602)542-1525 1-877-692-9762