ALJDEC decisions subject to certification as final
2017A-3346-RFA-ROC · Registrar of Contractors · 2018-07-19
IN THE OFFICE OF ADMINISTRATIVE HEARINGS
Ann De Jong,
PLAINTIFF,
v.
Outdoor X Scapes Inc dba,
Tree Pros Services,
License No: 296570, 253883
DEFENDANTS.
No. 2017A-3346-RFA-ROC
ADMINISTRATIVE LAW JUDGE DECISION
HEARING: June 20, 2018, 8:30 A.M.
APPEARANCES: James Sparks, Esq., appeared on behalf of Complainant. Jill Ormond, Esq., appeared on behalf of Respondent. Assistant Attorney General John Tellier appeared on behalf of the Arizona Registrar of Contractors. .
ADMINISTRATIVE LAW JUDGE: Roger A. Geddes
_____________________________________________________________________
FINDINGS OF FACT
Background and Procedure
1. Outdoor X Scapes, Inc., dba Tree Pros Services (Respondent), is the holder of License Numbers 296570 and 253883 issued by the Registrar of Contractors (Registrar).
2. On or about June 28, 2017, Ann De Jong (Complainant) filed a Complaint against Respondent alleging poor workmanship in connection with a remodeling of a swimming pool in May 2017 by Respondent at the residence located at1132 E. Kent Place, Chandler, Arizona (“subject residence”). (Registrar Exhibit 2).
3. Thereafter, a Citation was issued to Respondent, dated August 10, 2017, for the alleged violations of A.R.S. § 32-1154(A)(3) and A.R.S. § 32-1154(A)(22). (Registrar Exhibit 1). After a hearing on the matter, on November 3, 2017, the Tribunal issued a decision recommending, among other things, the suspension of Respondent’s license for Respondent’s violations of A.R.S. § 32-1154(A)(12) and A.R.S. § 32-1154(A)(22) for one day. (Register Exhibit 1).
4. The Registrar issued a Final Administrative Decision and Order on November 21, 2017, finding, among other things, that Respondent had violated A.R.S. § 32-1154(A)(3) and A.R.S. § 32-1154(A)(22) as charged in the Complaint. (Registrar’s Exhibit 1). Pursuant to the Order, Respondent’s License Numbers 296570 and 253883 were suspended for one day and a civil penalty of $100.00 was imposed. (Register Exhibit 1).
5. On or about January 30, 2018, Complainant filed a claim to the Residential Contractors’ Recovery Fund (“Recovery Fund”) seeking the amount of $30,000.00. (Registrar’s Exhibit 1).
6. On March 22, 2018, the Registrar issued a Notice and Order of Recovery Fund Ineligibility wherein it stated that Complainant’s claim was denied on the basis that Complainant did not own the subject property. (Registrar’s Exhibit 2). The subject residence had been owned by the Wildchild Spendthrift Trust (“Wildchild Trust”) since March 27, 2017. (Registrar’s Exhibit 3).
7. Complainant filed a timely request for hearing on the Registrar’s Notice of Claim for Administrative Payout. (Registrar’s Exhibit 5).
8. 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 or lack thereof from the Recovery Fund.
9. The Registrar issued a Notice of Hearing that set a hearing for June 20, 2018, at 8:30 A.M. At the hearing, Complainant Ann De Jong testified on her own behalf. The Tribunal received and admitted the Registrar’s exhibit numbers 1 - 5 and Complainant’s exhibit number 19. The Tribunal held the hearing open until June 29, 2018, for additional briefing.
10. Complainant Ann De Jong testified that she transferred the subject residence in her individual capacity to the Wildchild Trust in 2016 to protect her assets and presented the Declaration of the Wildchild Spendthrift Trust, dated July 29, 2016 (“Trust Agreement”), into evidence. (Complainant’s Exhibit 19). She further testified that the subject residence has been her primary residence, although she has another residence in Las Vegas, Nevada, and spends less than a week a month at that Las Vegas residence. She further stated took up residence at the subject residence in January 2015 or 2016.
CONCLUSIONS OF LAW
1. This matter lies within the Registrar’s jurisdiction. See A.R.S. § 32-1101 et seq.
2. In order to obtain an award from the Recovery Fund, an applicant must provide proof to establish by a preponderance of evidence that they are eligible pursuant to A.R.S. § 32-1131, et seq. Further, if eligible, an applicant must establish by a preponderance of evidence that damages sought are within the limitations of compensability as set forth in A.R.S. § 32-1132(A). 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 case established that Respondent did not comply with the Registrar’s Directive and that Complainant potentially was a person who had been injured by Respondent’s violation of A.R.S. § 32-1154(A)(12) and A.R.S. § 32-1154(A)(22). As Complainant has potentially established that she is a person injured by Respondent’s violations, the issue remains whether Complainant has complied with the other criteria to be eligible to access the Recovery Fund.
5. A.R.S. § 32-1132(A) describes the measure of damages that an eligible homeowner is entitled to recover from the Recovery 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. . . .
(emphasis added).
6. A.R.S. § 32-1131(3)(a) reads that a "Person injured":
Means 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.
(emphasis added).
7. A.R.S. § 32-1101(A)(6) provides that in Chapter 10 of Title 32 the Arizona Revised Statutes (A.R.S. § 32-1101 et seq.), unless the context otherwise requires:
‘Person’ means an applicant, an individual, a member of a limited liability company, a qualifying party, any partner of a partnership or limited liability partnership or any officer, director, qualifying party, trustee of a trust, beneficiary of a trust or owner of at least twenty-five per cent of the stock or beneficial interest of a corporation.
(emphasis added).
8. There is no dispute that the Wildchild Trust had owned the subject residence since March 2017, a date occurring before the subject violations of Respondent occurred. There is further no dispute that Complainant is the grantor, trustee, and sole beneficiary of the Wildchild Trust, (Respondent’s Exhibit 19, Recital p. 4, ¶ 1.5), and that the trust is irrevocable and cannot be amended. (Respondent’s Exhibit 19, ¶ 1.9). There was further no evidence presented to refute Complainant’s testimony that she has resided at the subject residence for all but less than one week per month. Thus, at issue is whether under these circumstances, Complainant has satisfied the owner and occupant requirements of A.R.S. § 32-1131(3)(a) to constitute a “person injured.”
9. When interpreting a statute, the court is required to follow and apply its plain language. State ex rel. Romley v. Maricopa County Superior Court, 184 Ariz. 409, 411 (App.1995). Only if the statute is unclear do we consider such other factors as “the statute’s context, subject matter, historical background, effects, consequences, spirit, and purpose.” McMurren v. JMC Buiklders, Inc., 204 Ariz. 345, 350 (App. 2003). The Tribunal does not find the relevant statute to be unclear. To constitute a person injured under A.R.S. § 32-1131(3)(a), among other things, one must be both the owner and the occupant (or intended occupant) of the residential property.
10. The Tribunal finds that Complainant has satisfied the owner and occupant requirements of A.R.S. § 32-1131(3)(a) and is therefore eligible for compensation as a “person injured” thereunder. As a threshold matter, “person” in this context can be a trustee of a trust. A.R.S. § 32-1101(A)(6). While the testimony reflected that Wildchild Trust owned the subject residence at the relevant times in question, the title to the subject residence was in fact taken in Complainant’s name as “Ann De Jong, as Trustee of the Wildchild Spendthrift Trust.” (Exhibit 2 to Complainant’s Brief, dated June 29, 2018). Further, even if title had only been in the name of Wildchild Trust, it is the trustee of a trust that is considered to hold legal title to property and the beneficiary that holds equitable title. Williamson v. Pvorbit, Inc., 228 Ariz. 69, 72 (App. 2011). Therefore, the Tribunal finds that legal title in the name of Complainant as trustee is sufficient to establish her as the owner of the subject residence.
11. The Tribunal further finds that Complainant in her trustee capacity was an owner of the subject residence that additionally occupied the subject residence. Indeed, Complainant in her trustee capacity had the right to reside in the subject residence. (Respondent’s Exhibit 19, ¶ 3.4). Therefore, the Tribunal finds that legal title in the name of Complainant as trustee who also occupied the subject residence is sufficient to satisfy the ownership requirement of A.R.S. § 32-1131(3)(a).
12. The parties presented briefs on the applicability of Pinnamaneni v. Ariz. Registrar of Contractors, 237 Ariz. 147 (App. 2015), to the case at bar. That case held that in a determination of a “person injured” under A.R.S. § 32-1131(3)(a), when the subject property is owned by a revocable trust and the occupant is the trustor, trustee, and beneficiary of the revocable trust, the trustee acting on behalf of the revocable trust satisfied the owner and occupant requirements of A.R.S. § 32-1131(3)(a). Here, the subject property was instead owned by an irrevocable trust, but similarly the occupant is the trustor, trustee, and beneficiary of the trust.
13. The Registrar and Respondent argued that the irrevocability of the Wildchild Trust and Complainant’s lack of complete control over the trust property of the Wildchild Trust precluded an extension of the Pinnamaneni holding to the facts of this case. It is true that under the Trust Agreement, Complainant did not have complete control over the trust property of Wildchild Trust, at least as it related to distributions from the trust. Under the terms of the Trust Agreement, the trustee had the sole authority to manage and invest trust property, but had no authority to make distributions. (Respondent’s Exhibit 19, ¶ 1.3(a)). Conversely, the Trust Agreement created and appointed an “Independent Distribution Adviser,” whose sole authority was to make distributions to or on behalf of beneficiaries, but had no authority to manage or invest the trust property. (Respondent’s Exhibit 19, ¶ 1.3(b)). The Independent Distribution Adviser was Amber Nelson, (Respondent’s Exhibit 19, Recital), who Complainant identified as her friend.
14. The Tribunal does not find that Complainant’s lack of complete control as trustee over the trust property negates a finding that she was a person injured under A.R.S. § 32-1131(3)(a). First, although the court in Pinnamaneni found that the settlor/trustee had complete control over the property in the trust, Pinnamaneni did not in fact hold that complete control was required in reaching its decision. Further, although Complainant as trustee here may not have had complete control over the trust property of the Wildchild Trust, it is apparent from the terms of the Trust Agreement that she as trustee had substantial control over the trust property. Indeed, Complainant as trustee possessed virtually all of the rights of a typical trustee of a trust relating to trust property with the exception of the right to make distributions. (Respondent’s Exhibit 19, ¶ 2.5). Further, Complainant as trustee even had some rights relating to distributions because under the Trust Agreement, she as trustee could prohibit the Independent Distribution Adviser from making distributions that were not in the best interests of the trust. (Respondent’s Exhibit 19, ¶ 2.1(c)). The Independent Distribution Adviser had only one role or function, that of making distributions to the beneficiary (which is Complainant), whether that function would ever be exercised or not. While the Tribunal recognizes that this role or function of beneficiary distributions is typically that of a trustee of a trust, that Complainant as trustee did not have such a role does not negate a finding that she had sufficient control as the trustee to satisfy the owner and occupant requirements of A.R.S. § 32-1131(3)(a).
15. Complainant has established that the subject residence was occupied by its owner, the trustee of Wildchild Trust, and consequently Complainant met the definition of a “person injured” for purposes of an award from the Recovery Fund.
16. Accordingly, the Registrar erred in determining that Complainant was ineligible to make a claim to the Recovery Fund.
RECOMMENDED ORDER
In view of the foregoing, it is recommended that on the effective date of the final order in this matter, that Complainant’s eligibility for claim to the Recovery Fund be upheld and the matter be remanded for further proceedings on the issue of Claimant’s actual damages, if any.
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, July 19, 2018.
/s/ Roger Geddes
Administrative Law Judge
Transmitted electronically to:
Jeffrey Fleetham, Director
Registrar of Contractors