ALJDEC decisions subject to certification as final

2017A-6066-ROC · Registrar of Contractors · 2019-03-08

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

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. 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 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. 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 (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 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 -----------------------

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