ALJDEC decisions subject to certification as final

2017A-3676-RFA-ROC · Registrar of Contractors · 2018-07-18

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Timothy Scott Gaffney,

PLAINTIFF,

v.

Webster Tile Installation Company,

License No: 299858

DEFENDANT.

No. 2017A-3676-RFA-ROC

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: June 28, 2018, 1:00 P.M.

APPEARANCES: Complainant Timothy Gafney appeared on his own behalf; Assistant Attorney General John Tellier appeared on behalf of the Arizona Registrar of Contractors. No appearance was made on behalf of Respondent.

ADMINISTRATIVE LAW JUDGE: Roger A. Geddes

_____________________________________________________________________

FINDINGS OF FACT

Background and Procedure

1. Webster Tile Installation Company (Respondent), is the holder of License Number 299858 issued by the Registrar of Contractors (Registrar).

2. On or about July 19, 2017, Timothy Gafney (Complainant) filed a Complaint against Respondent alleging abandonment in connection with a contract she had entered into with Respondent on January 2017 for work to be performed by Respondent at 6463 E. Odessa Street, Mesa, Arizona (“subject property’). (Registrar Exhibit 3).

3. Thereafter, a Citation was issued to Respondent, dated October 6, 2017, for the alleged violations of A.R.S. § 32-1154(A)(3), A.R.S. § 32-1154(A)(12), and A.R.S. § 32-1154(A)(22). (Registrar Exhibit 1). After a hearing on the matter, on January 8, 2018, 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). (Register Exhibit 1).

4. The Registrar issued a Final Administrative Decision and Order on November 8, 2017, finding, among other things, that Respondent had violated A.R.S. § 32-1154(A)(12) and A.R.S. § 32-1154(A)(22) as charged in the Complaint. (Registrar’s Exhibit 1). Pursuant to the Order, Respondent’s License Number 299858 was suspended for three days and a civil penalty of $500.00 was imposed. Register Exhibit 1).

5. On or about March 16, 2018, Complainant filed claim 2017-3676 against license number 299858 with the Residential Contractors’ Recovery Fund (“Recovery Fund”) seeking the amount of $1,920.00 (Registrar’s Exhibit 2).

6. On January 4, 2018, the Registrar issued a Notice and Order of Recovery Fund Ineligibility wherein it stated that Complainant’s claim was denied because it was noted that Complainant did not own the subject property. (Registrar’s Exhibit 3). The Notice and Order of Recovery Fund Ineligigbility was amended on April 18, 2018, to correct a clerical error regarding the identity of the entity that owned the subject property. (Registrar Exhibit 6). The subject property had been owned by 3 G’s Corner Place, L.L.C., since 2012. (Registrar’s Exhibit 5).

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

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 28, 2018, at 1:00 P.M. At the hearing, Complainant Timothy Gafney testified on his own behalf. The Registrar presented the testimony of Marlee McCormick. The Tribunal received and admitted the Registrar’s exhibit numbers 1 - 7 and Complainant’s exhibit number 1.

10. Complainant Timothy Gafney testified that he and his wife, Maile Gafney, purchased the subject property in 2001 and have lived in it as their residence since that time. He further stated that in 2012, upon the advice of his counsel, they transferred the subject property to 3 G’s Corner Place, L.L.C., a limited liability company in which his wife was the manager and the TMG Family Trust was the sole member. (Registrar Exhibit 7). He further presented a tax record to show that the subject property was classified as class 3 property. (Complainant’s Exhibit 1).

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 he 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).

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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.

8. There is no dispute that 3 G’s Corner Place, L.L.C., has owned the subject property since 2012, that Complainant and his family have resided at the subject property since 2001, and that Respondent’s statutory violations occurred in 2017. There is further no dispute that Complainant’s wife is the manager and that TMG Family Trust was the sole member of 3 G’s Corner Place, L.L.C. 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). Here, A.R.S. § 32-1131(3)(a) defining person injured is not unclear. To constitute a person injured under A.R.S. § 32-1131(3)(a), one must be both the owner and the occupant (or intended occupant) of the residential property.

10. Complainant argued in essence that because his wife is the manager of the limited liability company and the TMG Family Trust was the sole member, the substance rather than the form should control in determining the owner and occupant of the subject property. However, there is nothing from a plain reading of A.R.S. § 32-1131(3)(a) that would suggest that an owner and occupant need not be one in the same in determining a person injured. In this case, the owner is a limited liability company and the occupant is Complainant and his family. “A limited liability company is a separate legal entity that may own real property in its own name.” Turner v. City of Flagstaff, 226 Ariz. 341, 343 (App., 2011) (claim under A.R.S. § 12–1134 for property damages denied because limited liability company and not the individual was the “owner” of the property). Thus, because a separate entity owns the subject property and Complainant resides in it, Complainant has failed to satisfy the owner and occupant requirements of A.R.S. § 32-1131(3)(a).

11. The Tribunal acknowledges that a limited liability company is among the definitions of “person” under A.R.S. § 32-1101(A)(6). However, the statute further provides that such a definition applies to Chapter 10 of Title 32 of the Arizona Revised Statutes “unless the context otherwise requires.” The Tribunal finds that the context in which “person” is used under A.R.S. § 32-1131(3)(a) regarding ownership and occupation of a residence would not extend the definition of person to a limited liability company under A.R.S. § 32-1131(3)(a).

12. Complainant further argued that A.R.S. § 32-1131(3)(a) provides alternative definitions for “person injured” and that he qualifies as a person injured solely because the subject property is classified as class 3 property under A.R.S. § 42-12003(A). However, even for such class 3 property, A.R.S. § 32-1151(3)(a) further requires that the property must be actually occupied or intended to be occupied by the owner as a residence. Therefore, the classification as a class 3 property in itself is not determinative as to whether Complainant is a person injured under A.R.S. § 32-1131(3)(a).

13. The Registrar has established that the subject property was not occupied or intended to be occupied by its owner, 3 G’s Corner Place, L.L.C., and consequently Complainant did not meet the definition of a “person injured” for purposes of an award from the Recovery Fund.

14. Accordingly, the Registrar did not err in denying a payout to Complainant from 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 claim to the Residential Contractors’ Recovery Fund be denied with no payment to Complainant from the Recovery Fund.

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 18, 2018.

/s/ Roger Geddes

Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director

Registrar of Contractors