FINACT2017A-6066-ROC.pdf

2017A-6066-ROC · Registrar of Contractors · 2019-03-21

REGISTRAR OF CONTRACTORS OF THE STATE OF ARIZONA

Jason William Kindler, Case No. 2017-6066 COMPLAINANT, Docket No. 2017A-6066-ROC v. Solution Flooring Services LLC, FINAL ADMINISTRATIVE DECISION License No. ROC 314993, AND ORDER 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. MODIFICATION 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 modifies it. WRITTEN JUSTIFICATION Complainant Jason Kindler filed a claim with the Arizona Residential Contractors’ Recovery Fund. ALJ Dec. 2:8-11. After reviewing the claim, the Registrar issued its Notice of Claim for Administrative Payout, advising the parties that the Registrar had determined an award to Complainant in the amount of $30,000.00. ALJ Dec. 2:12-16. Respondent disputed the amount of the award and requested a hearing. ALJ Dec. 2:17. The Administrative Law Judge Decision States that “Mr. Kindler bears the burden of proof show [sic] that he is an injured person who meets the eligibility requirements for the payout from the recovery fund.” (citing Magness v Ariz. Registrar of Contractors 234 Ariz. 428 (App. 2014); A.A.C. R2-19-119 (burden of proof on a party asserting a claim, right, entitlement, or affirmative defense); and A.R.S. § 41-

of 4 REGISTRAR OF CONTRACTORS 1700 W. Washington St. Suite 105 – Phoenix, AZ 85007-2812 Telephone (602)542-1525 1-877-692-9762 1092.07(G)(2) (agency bears the burden of persuasion on an agency action to suspend a license)). 1 This

conclusion is incorrect as a matter of law and inconsistent with prior Administrative Law Judge Decisions.

Once the Registrar makes a determination on a recovery fund claim and issues a Notice of Claim, the

party challenging that determination bears the burden of proof. A.A.C. R2-19-119(B)(1). This differs from a

hearing on an action by the Registrar to suspend, revoke, terminate or modify the material conditions of a

license. In that case, the agency would bear the ultimate burden of persuasion. A.R.S. § 41-1092.07(G)(2).

But in the case at bar—Respondent’s appeal from the Registrar’s recovery fund determination—Respondent,

as the party asserting a claim, bears the burden of proof, not Complainant.

This interpretation is consistent with previous Administrative Law Judge Decisions. The Registrar

and the Arizona Office Administrative Hearings have both recognized that the party appealing the agency

action bears the burden of proof. For example, the following decisions correctly stated the burden of proof

for a Recovery Fund proceeding:

• “When the Registrar has calculated the amount of a Complainant’s compensable damages

and proposed a payout from the Fund to which he is entitled, the calculation is a prima facie

showing of the amount that the Complainant is entitled to recover as a payout from the

Fund. The burden shifts to Respondent to establish that the Registrar’s calculations were

erroneous or not supported by a preponderance of the evidence.” Smith v. Seven Foot

Construction, 2017A-2190-ROC, 11:2, ALJ Mihalsky (citing A.A.C. R2-19-119(A) and

(B)(1); Vazzano v. Superior Court, 74 Ariz. 369, 372 (1952)).

• “Respondent bears the burden of proof to establish that the Registrar’s calculations on the

proper amount of the payout were erroneous or not supported by a preponderance of the

evidence.” Byrd v. Landscape Images, 2016A-4546-ROC, 8:3, ALJ Mihalsky (citing A.R.S.

§ 41-1092.07(G)(2); A.A.C. R2-19-119(A) and (B)(1); Vazzano v. Superior Court).

1 The Magness case is inapplicable to the case at bar. In Magness, the Registrar objected to a claimant’s application for payment for the recovery fund, and the burden of proof rightly belonged with complainant who was asserting a right to a payout from the recovery fund. Additionally, under A.A.C. R2-19-119(B)(1), Respondent, as the party appealing the agency determination, bears the burden of proof. Finally, A.R.S. § 41-1092.07(G)(2) does not apply to this matter because the hearing is not “on an agency action to suspend, revoke, terminate or modify on its own initiative material conditions of a license or permit.”

of 4 REGISTRAR OF CONTRACTORS 1700 W. Washington St. Suite 105 – Phoenix, AZ 85007-2812 Telephone (602)542-1525 1-877-692-9762 • “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.” McDaniel v. Kieran Brothers, 2017A-3888-ROC, 5:2, ALJ Geddes (citing

A.A.C. R2-19-119(A) and (B)(1); Vazzano v. Superior Court).

CONCLUSION AND ORDER

The Registrar therefore modifies the Administrative Law Judge Decision by:

• Replacing p. 4, ¶ 2 with “When the Registrar has calculated the amount of a Complainant’s

compensable damages and proposed a payout from the Fund to which he is entitled, the

calculation is a prima facie showing of the amount that the Complainant is entitled to recover

as a payout from the Fund. The burden shifts to Respondent to establish that the Registrar’s

calculations were erroneous or not supported by a preponderance of the evidence.”

The Registrar hereby accepts the remainder of the Administrative Law Judge Decision, which

becomes effective on April 29, 2019.

FINAL NOTE

On page 2, line 9 replace “September 7, 2018” with “September 17, 2018”. On page 3, line 7

replace “$14,876.14” with “$14,876.94”.

On page 6, after line 16 add “It is further recommended that under A.R.S. § 32-1139(B), the

Registrar charge $30,000.00, plus interest at a rate of ten percent a year, to Respondent, Solution

Flooring Services LLC, License Number 314993.”

Dated March 20, 2019. Registrar of Contractors /s/ Joseph Citelli Joseph Citelli Chief Counsel Chief of Legal Department and Recovery Fund /// ///

of 4 REGISTRAR OF CONTRACTORS 1700 W. Washington St. Suite 105 – Phoenix, AZ 85007-2812 Telephone (602)542-1525 1-877-692-9762 Copy mailed via USPS First Class mail March 20, 2019 to: Respondent Solution Flooring Services LLC 111 E 450 N Providence, UT 84332 Complainant Jason William Kindler 20352 E Camina Plata Queen Creek, AZ 85142 AND copy electronically mailed this same date to: Respondent at email address on record with the Registrar Complainant at email address on record with the Registrar Office of Administrative Hearings Thomas Shedden, Administrative Law Judge

Office of the Attorney General Thomas Raine, Assistant Attorney General Case No. 2017-6066 / mm

of 4 REGISTRAR OF CONTRACTORS 1700 W. Washington St. Suite 105 – Phoenix, AZ 85007-2812 Telephone (602)542-1525 1-877-692-9762 RECEIVED 3.11.2019 ROC LEGAL

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Jason William Kindler, No. 2017A-6066-ROC

COMPLAINANT ADMINISTRATIVE LAW JUDGE DECISION v.

Solution Flooring Services LLC, License No. ROC 314993,

RESPONDENT HEARING: February 20, 2019 APPEARANCES: Jason William Kindler on his own behalf; Brad Langford for Respondent; Thomas Raine, Esq. for the Registrar of Contractors ADMINISTRATIVE LAW JUDGE: Thomas Shedden

FINDINGS OF FACT

1. On December 31, 2018 the Registrar of Contractors (“ROC”) issued a NOTICE OF RECOVERY FUND HEARING setting the above captioned matter for hearing at the Office of Administrative Hearings on February 20, 2019. The issue is whether an award and payout from the residential contractors’ recovery fund pursuant to ARIZ. REV. STAT. section 32-1154([G]) is justified by the evidence. 2. Respondent Solution Flooring Services LLC holds license number 314993 issued by ROC. Bradley Allen Langford is Respondent’s qualifying party. 3. Complainant in this matter is Jason William Kindler. 4. Mr. Kindler appeared at the hearing, but presented no evidence. Mr. Langford appeared and testified for Respondent, which also presented the testimony of Brendon Webb. ROC presented the testimony of Marlee McCormick. 5. In October 2017, Mr. Kindler and Respondent entered a contract in which Respondent agreed to install tile at Mr. Kindler’s house. Mr. Kindler paid to Respondent the entire contract amount.

Office of Administrative Hearings 1740 West Adams Street, Lower Level Phoenix, Arizona 85007 (602) 542-9826 RECEIVED 3.11.2019 ROC LEGAL

6. Mr. Kindler filed with ROC a complaint against Respondent alleging abandonment and poor workmanship. 7. Though a FINAL ADMINISTRATIVE DECISION AND ORDER dated June 12, 2018, ROC

adopted an ADMINISTRATIVE LAW JUDGE DECISION finding that Respondent had violated

ARIZ. REV. STAT. sections 32-1154(A)(1), (A)(3), (A)(4), (A)(9), (A)(12), and (A)(22).

Based on these proven violations ROC suspended Respondent’s license for five days.

8. The Administrative Law Judge Decision, as adopted by ROC, shows that the tile

installed by Respondent will need to be removed and replaced.

9. On September 7, 2018, Mr. Kindler submitted to ROC a Recovery Fund Claim

that included estimates showing that the lowest bid to repair and complete the project

was $49,159.67. As such, Mr. Kindler requested the maximum payout from the fund of

$30,000.

10. On December 5, 2018, ROC issued a NOTICE OF CLAIM FOR ADMINISTRATIVE

PAYOUT showing that Mr. Kindler would be awarded $30,000 in the form of a payout

from the recovery fund unless either Mr. Kindler or Respondent requested a hearing

contesting the amount or propriety of the payment.

11. Respondent requested a hearing, which led to this matter being scheduled. 12. ROC’s NOTICE OF CLAIM shows that the party challenging the amount of the proposed award is required to bear the burden of proof at the hearing, but that NOTICE provides no legal authority for that proposition. At the hearing, ROC asserted that Respondent bore the burden of proof because it was challenging the amount of the payout, but it could offer no legal authority in support of its position. 13. Ms. McCormick processed Mr. Kindler’s recovery fund claim. 14. Ms. McCormick found that Mr. Kindler meets the eligibility requirements for a payout from the recovery fund. 15. Ms. McCormick evaluated the bids provided by Mr. Kindler to verify that these bids covered items that were either part of the parties’ contract or were within the scope of the DIRECTIVE ROC had issued to Respondent prior to its issuance of the CITATION that led to Respondent’s license being suspended. Ms. McCormick explained that she RECEIVED 3.11.2019 ROC LEGAL

included items that were within the scope of the DIRECTIVE based on advice from ROC’s chief legal counsel. 16. No single bid provided by Mr. Kindler covered all the work and materials that Ms.

McCormick determined made up Mr. Kindler’s actual damages.

17. Ms. McCormick determined that Mr. Kindler’s actual damages were $46,232.13,

which consists of: $5770.19 to demo the tile installed by Respondent, $4575.00 to

prepare the floor by grinding, $14,876.14 for materials, and $21,010.00 for installation

of the tile.

18. Ms. McCormick disallowed the cost of delivering the tile to Mr. Kindler’s house

because delivery cost was not included in the contract between Mr. Kindler and the

Respondent.

19. Preparing the floor by grinding was not within the contract between Mr. Kindler

and Respondent and, to the contrary, Mr. Kindler declined to pay for grinding prior to

Respondent conducting its installation work despite Mr. Langford’s recommendation

that grinding be performed.

20. Although preparing the floor by grinding was not included in the contract

between Mr. Kindler and Respondent, on the advice of ROC’s in-house legal counsel, Ms. McCormick determined that the cost to perform that work was part of Mr. Kindler’s actual damages because ROC’s DIRECTIVE had included leveling the floor and ROC had determined that Respondent failed to comply with that DIRECTIVE. 21. The bid for tile installation accepted by Ms. McCormick was for a unit price of $8.50 per square foot. Ms. McCormick did not determine whether an $8.50 unit cost was reasonable. 22. Respondent presented credible, unrebutted evidence showing that an $8.50 unit price is grossly in excess of installation rates in the Phoenix market. 23. Mr. Webb testified that a ballpark price for installing tile is $3 to $4 per square foot, but he acknowledged that given the size of Mr. Kindler’s tile, the cost might be in excess of that. Respondent had entered into evidence a bid he received from a third- party contractor showing an installation price of $5 per square foot. RECEIVED 3.11.2019 ROC LEGAL

24. The job entails installing 2400 square feet of tile. If an installation cost of $5 is used the cost would be $12,000, which is $9010 less than the $21,010 Ms. McCormick accepted.

25. Deducting this $9010 from $46,232.13, results in $37,222.13. Because this is

still above the maximum payout of $30,000, standing alone, using the $5 per square

foot installation rate does not affect the proposed payout amount. Moreover, if the

$4575 that ROC allowed for floor grinding is deducted from $37,222.13, the result is

$32,647.13, which is still above the $30,000 maximum payout.

CONCLUSIONS OF LAW

1. Respondent has a right to a hearing contesting any proposed payment

from the recovery fund before ROC may actually order that the payment be made. ARIZ.

REV. STAT. § 32-1154(G); see also ARIZ. REV. STAT. § 41-1001(5)(defining contested

case).

2. Mr. Kindler bears the burden of proof show that he is an injured person who meets the eligibility requirements for a payout from the recovery fund. See Magness v. Ariz. Registrar of Contractors 234 Ariz. 428 (App. 2014); see also ARIZ. ADMIN. CODE § R2-19-119 (burden of proof on a party asserting a claim, right, entitlement, or affirmative defense); cf. ARIZ. REV. STAT. § 41-1092.07(G)(2) (agency bears the burden of persuasion on an agency action to suspend a license). 3. The standard of proof on all issues in this matter is that of a preponderance of the evidence. ARIZ. ADMIN. CODE § R2-19-119. 4. A preponderance of the evidence is: The 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 1373 (10th ed. 2014). 5. Statutes should be interpreted to provide a fair and sensible result. Gutierrez v. Industrial Commission of Arizona, 226 Ariz. 395, 249 P.3d 1095 RECEIVED 3.11.2019 ROC LEGAL

(2011)(citation omitted); State v. McFall, 103 Ariz. 234, 238, 439 P.2d 805, 809 (1968) ("Courts will not place an absurd and unreasonable construction on statutes."). 6. “Statutes shall be liberally construed to effect their objects and to promote

justice.” ARIZ. REV. STAT. § 1-211(B).

7. The purpose of the recovery fund is to provide improved protection for

owners and lessees of property who contract for the construction or alteration of

residential structures. McMurren v. JMC Builders, 204 Ariz. 345 (App. 2003).

8. If ROC orders that a payout be made from the recovery fund in this matter,

Respondent’s license will be suspended. ARIZ. REV. STAT. § 32-1139(B).

9. “The assessments received by the registrar for deposit in the fund shall be

held in trust for carrying out the purposes of the fund.” ARIZ. REV. STAT. § 32-1135.

10. “‘Person injured’ means “any owner of residential real property which is

classified as class three property under [a section of the tax code] and which is actually

occupied or intended to be occupied by the owner as a residence . . . who [is] damaged

by the failure of a residential contractor . . . to adequately build or improve a residential

structure or appurtenance on that real property.” McMurren at ¶ 8; see also ARIZ. REV.

STAT. § 32-1131(3). 11. Any “person injured” by a licensed residential contractor’s violation of ROC’s statutes or rules may be awarded up to $30,000 from the residential recovery fund. But an “award from the fund is limited to the actual damages suffered by the claimant as a direct result of the contractor's violation ….” ARIZ. REV. STAT. § 32- 1132(A). 12. “‘Actual damages’ … mean[s] the reasonable cost of completing the contract and repairing the contractor's defective performance ‘less the part of the contract price still unpaid.’” Ramsey v. Ariz. Registrar of Contractors, 241 Ariz. 102, ¶ 8 (App. 2016)(adopting ROC’s definition of actual damages). 13. The preponderance of the evidence shows that Mr. Kindler is a person injured within the meaning of the statutes and is eligible for a payout from the fund. 14. ROC determined that Mr. Kindler’s actual damages are $46,232.13. But the preponderance of the evidence shows that the $8.50 per square foot cost to install RECEIVED 3.11.2019 ROC LEGAL

the replacement tile used by ROC was not reasonable. Under the facts of this matter, the $5 per square foot price put forth by Respondent is found to be reasonable. As such, Mr. Kindler’s actual damages related to the installation cost of the replacement

tile are $12,000, not $21,010 as originally found by ROC.

15. The preponderance of the evidence also shows that ROC improperly

included in its calculation of actual damages $4575 for floor grinding that was not part

of Mr. Kindler’s contract with Respondent (i.e., the grinding is not necessary to

complete the project as defined in the parties’ contract, nor is the need for grinding a

“direct result” of the violations for which ROC suspended Respondent’s license). As

such, this $4575 cannot be included as part of Mr. Kindler’s actual damages.

16. The preponderance of the evidence shows that Mr. Kindler’s actual

damages are $32,647.13. Consequently, Mr. Kindler should be awarded a payout of

$30,000, which is the maximum allowable.

RECOMMENDED ORDER

IT IS ORDERED that on the effective date of the final ORDER in this matter, ROC shall order the Fund to make a payout of $30,000 to Jason William Kindler. 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, March 8, 2019.

/s/ Thomas Shedden Thomas Shedden Administrative Law Judge

Transmitted electronically to: Jeffrey Fleetham, Director Registrar of Contractors