ALJDEC decisions subject to certification as final

2018A-04635-ROC · Registrar of Contractors · 2019-04-23

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: April 5, 2019 APPEARANCES: Donald A. Kellman, Complainant; Gregory Johndrow, ROC Investigator. ADMINISTRATIVE LAW JUDGE: Randolph D. Wolfson _____________________________________________________________________ PROCEDURAL BACKGROUND AND FINDINGS OF FACT On or about August 21, 2018, Donald A. Kellman [“Kellman”], Complainant, entered into a contact[1] with Desertview Roofing, LLC [“DR”], Respondent, to re-roof the residence located at 6476 W. Lost Canyon Drive, Tucson, AZ 85745.[2] The contract totaled $9,773.00. Half of the total contract price was required as a down payment for materials and a crane operator. Payment in the amount of $4,886.50 was made by Kellman to DR, by check, on August 21, 2018.[3] On or about August 31, 2018, Kellman requested that DR stop work because Kellman learned that DR’s contractor’s license had been suspended. On or about September 10, 2018 Kellman received a refund by check from DR of the full down payment amount of $4,886.50. However, on September 10, 2018, the Kellman’s bank notified him that the DR refund check was returned unpaid for insufficient funds available in the DR account that the check was written on.[4] On October 1, 2018, the Registrar received Kellman’s Complaint against DR alleging abandonment and “Theft of funds”.[5] After an investigation by ROC Investigator Gregory Johndrow, it was determined that DR has performed no work, that DR had received down payment from Kellman in the amount of $4,886.50, that the DR check was returned unpaid and that DR has not returned Kellman’s down payment for the work that DR contracted for but never performed.[6] ROC Investigator Gregory Johndrow recorded his inspection notes as follows:[7]

The contractor agreed to perform re-roofing work on the home. He quoted $9,773, Contractor demanded 50% down payment for materials and crane operator. 50% down payment sent by check on 8/21/18. 0n 8/30/18 owner discovered that contractors license was suspended. On 8/31/18 owner communicated stop work to contractor. 8/31/18 contractor agreed to cancel contract and return down payment.

9/6/18 contractor mails purported refund check to owner. 9/10/18 owner receives contractor's check in the amount of $4,886.50. 9/10/18 owner deposits check in US Bank account. 9/12/18 owner notified contractor's check returned unpaid.

Contractors written estimate is provided, given April, 2018 accepted 8/21/18.

Owners letter accepting contract and enclosing down payment check enclosed copy of contractors refund check w/ deposit slip enclosed.

copy of notification from US Bank that refund check returned enclosed.

copy of email confirmation of contractor's receipt of downpayment enclosed.

9/17/18 Complaint filed w/Pima County Sheriff report # [number redacted] Investigator’s Observation: Substantiated.

I observed no work has been performed at the residence and the respondent has not replied to correspondence to defend the allegations in this complaint.

Governing Rule: 32-1154 A 6 the doing of a fraudulent act by the licensee as a contractor resulting in another person being substantially injured. On November 14, 2018, the Registrar issued DR a Citation for alleged violations of A.R.S. § 32-1154(A)(6) and (17).[8] Because the Registrar did not receive a timely Answer from Respondent, the Registrar imposed discipline in accordance with the Registrar’s December 7, 2018 Final Administrative Decision and Order (Default). A.R.S. § 32- 1155(B).[9] Per the Registrar’s December 7, 2018 Final Administrative Decision and Order, it was ordered suspending DR’s Contractors License for a period of 7 days. [10] It was further ordered, pursuant to A.R.S. § 32-1154(F), that DR pay a civil penalty of $1,000.00 to the Registrar for the violation of A.R.S. § 32-1154(A)(17).[11] For the stated reason that the Registrar’s December 7, 2018 Final Administrative Decision and Order discipline did not mention or impose a requirement that DR pay and return to Kellman his $4,886.50 down payment, Mr. Kellman requested the Registrar return this matter to the Office of Administrative Hearings to conduct re-hearing to address Mr. Kellman’s assertion. The Registrar granted Re-Hearing. The Registrar referred the matter to the Office of Administrative Hearings, an independent state agency, for an evidentiary hearing. Pursuant to the Notice of Hearing issued on February 5, 2019, Re-Hearing was set for April 5, 2019. The Notice of Hearing was mailed to Desertview Roofing LLC at its address of record with the Registrar of 2610 E. Broadway Blvd., Ste. D, Tucson, AZ 85716. The Notice of Hearing informed the parties that “[f]ailure to attend the scheduled hearing is likely to result in an adverse ruling against you.” A hearing before the Office of Administrative Hearings was held on April 5, 2019. DR did not request to appear telephonically for the hearing and did not request that the hearing be continued. Although the start of the hearing was delayed 20 minutes, DR did not appear through an authorized member, employee, or attorney. Consequently, Respondent did not present any evidence to defend its license. CONCLUSIONS OF LAW The copies of the Notice of Hearing that the Registrar mailed to Respondent at its address of record and at the address on its written answer were reasonable and Respondent is deemed to have received notice of the hearing. A.R.S. §§ 41-1092.04 and 41-1092.05(D). DR entered into a contract with Kellman, accepted a down payment from Kellman in the amount of $4,886.50 while DR’s license was suspended. Then, DR failed to return the down payment money that Kellman had given it for work that was never done or even started. By a preponderance of the evidence, DR’s conduct in its violation of A.R.S. § 32-1154(A)(6). Such conduct constitutes “The doing of a fraudulent act by the licensee as a contractor resulting in another person being substantially injured in that while DR’s license was under suspension, DR induced Kellman to pay DR a down payment to DR in the amount of $4,886.50 for work that was never attempted or completed. … … A “substantial injury” under A.R.S. § 32-1154(A) is reasonably construed as one that is real and identifiable.[12] Kellman has incurred a real and identifiable injury by DR’s acts and omissions. Failure or refusal of DR to return payment to Kellman of his down payment resulted in Kellman being substantially injured. By it December 7, 2018 Final Administrative Decision and Order, it was determined that DR violated the provisions of A.R.S. § 32-1154(A) (6) and (17) as charged in the Complaint. The legislature has not empowered either the Office of Administrative Hearings or the Registrar to adjudicate or award money damages.[13] The Registrar may penalize a contractor’s license by ordering payment of restitution if a proven statutory violation cannot be remedied by corrective work.[14] Restitution may be appropriate when the contractor does not immediately respond to a property owner’s complaint and the workmanship deficiency is such that the property owner is justified in hiring another contractor to remedy a health or safety issue or to mitigate his damages.[15] Restitution in a regulatory context is similar to the criminal context, where a defendant may be sentenced to pay his victim restitution consisting of any economic loss caused by the defendant’s conduct.[16] ‘Economic loss’ means any loss incurred by a person as a result of the commission of an offense.... Economic loss does not include ... consequential damages.”[17] Since DR has obstinately refused to repay Kellman his down payment, under the facts of this case, a restitutionary remedy is appropriate. The damages sought by Kellman are restitutionary in character. Kellman paid $4,886.50 to DR as a down payment for a roof replacement that was neither started nor completed. Thus, Kellman did not receive the full benefit of his bargain (roof construction) while DR has been enriched by the payment that it attempted to cover with a bad check. Restitution is in order. A restitutionary sum of $4,886.50 has been demonstrated.

RECOMMENDED ORDER

IT IS RECOMMENDED that the Registrar’s December 7, 2018 Final Administrative Decision and Order in this case be modified to provide that ROC License: ROC 311145 held by Desertview Roofing LLC, be revoked beginning the effective date of the Registrar’s Order unless the Registrar receives written proof that Desertview Roofing LLC has paid Complainant Lost Canyon LLC, the sum of $4,886.50, with certified funds, and the Registrar of Contractors accepts such written proof. IT IS FURTHER RECOMMENDED that if Desertview Roofing LLC provides such written proof on or before the effective date of the Registrar’s Order, the license revocation shall not take place and case 2018A-04635-ROC shall be closed. In the event of the certification of this Administrative Law Judge Decision by the Director of the Office of Administrative Hearings, the effective date of the Order shall fall forty days from the date of that certification. Done this day, April 22, 2019.

/s/ Randolph D. Wolfson Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director Registrar of Contractors

----------------------- [1] See, Agency Record, “Estimate,” Pages 47, 48 and 49. [2] Administrative Judicial Notice is taken of the entire physical and electronic record of the Agency in this matter, including the Registrar’s Public Access Website. [3] Agency Record, Page 44. [4] See, Agency RecordI, page 46. [5] Agency Record, Page 41. [6] See, Agency Record, “ Gregory Johndrow’s October 24, 2018 “Job Site Inspection Notes,” pages [7] Ibid. At the re-hearing Gregory Johndrow testified consistently with his Job Site Inspection Notes. [8] A.R.S. § 32-1154(A: Grounds for suspension or revocation of license; continuing jurisdiction; civil penalty; recovery fund award; summary suspension. A. The holder of a license or any person listed on a license pursuant to this chapter shall not commit any of the following acts or omissions…

6. The doing of a fraudulent act by the licensee as a contractor resulting in another person being substantially injured….

17. Contracting or offering to contract or submitting a bid while the license is under suspension or while the license is on inactive status…. [9] Agency Record, pages 83 and 84. [10] Ibid. [11] Ibid. [12] Meaning, a material injury, one that is not illusory. See, “substantial”: WEBSTER’S THIRD NEW INTERNATIONAL DICTIONARY 2280 (2002). [13] See J.W. Hancock Enterprises, Inc. v. Arizona State Registrar of Contractors, 142 Ariz. 400, 406, 690 P.2d 119, 125 (Ct. App. 1984).

[14] See A.R.S. § 32-1156.01; See also, A.R.S. § 32-1156.01. Restitution. After a hearing pursuant to this article, an administrative law judge may recommend that a licensee provide restitution to any person who is injured or whose property is damaged by an action of the licensee. The re-hearing in this case fulfills the requirments of A.R.S. § 32-1156.01. See Also, Sunpower of Arizona v. Arizona Registrar of Contractors, 166 Ariz. 437, 441, 803 P.2d 430, 434 (Ct. App. 1990); Bentivegna v. Powers Steel & Wire Prods., Inc., 206 Ariz. 581, 585; 81 P.3d 1040, 1044 App. 2004) (“[T]he sole issue in a proceeding before the ROC is whether a license should be suspended or revoked, and, if so, what conditions must be fulfilled before it is reinstated. See A.R.S. §§ 32-1154, 1155. Although the ROC may order restitution as a condition of license reinstatement, it cannot issue an enforceable order or judgment for money damages against a contractor. Sunpower of Ariz. v. Ariz. State Registrar of Contractors, 166 Ariz. 437, 441, 803 P.2d 430, 434 (App. 1990) (ROC may order payment of restitution as condition of license reinstatement); J.W. Hancock Enters. v. Arizona State Registrar of Contractors, 142 Ariz. 400, 406, 690 P.2d 119, 125 (App. 1984) (finding that ‘the Registrar's power is limited to suspending or revoking a contractor's license, or attaching conditions to the license. Money damages may not be awarded.’). If a contractor subject to an ROC restitution order were to choose not to have his license reinstated, the restitution order would be ineffective. To fully protect a plaintiff's rights, he must be allowed to seek money damages in the courts in addition to any remedies available through the ROC complaint procedure.”)

“Restitution” is an ambiguous term. But, the concept generally refers to a compensation for injury done. See JOHN D. CALAMARI & JOSEPH M. PERILLO, THE LAW OF CONTRACTS § 9-23, at 376 (3d ed. 1987). See also Murdock-Bryant Constr. v. Pearson, 146 Ariz. 48, 52; 703 P.2d 1197, 1201 (1985) (“Restitution began as an ancient remedy to enforce contractual rights which could not be enforced in common law courts due to lack of formality of the contract. D. Dobbs, Remedies § 4.2 at 233 (1973). See further, Restatement of the Law, Restitution § 1 cmt a. (1937): a. A person is enriched if he has received a benefit (see Comment b). A person is unjustly enriched if the retention of the benefit would be unjust (see Comment c). A person obtains restitution when he is restored to the position he formerly occupied either by the return of something which he formerly had or by the receipt of its equivalent in money. Ordinarily, the measure of restitution is the amount of enrichment received (see Comment d), but as stated in Comment e, if the loss suffered differs from the amount of benefit received, the measure of restitution may be more or less than the loss suffered or more or less than the enrichment. (Emphasis added.)

[15] In Sunpower, the Arizona Court of Appeals upheld the Registrar’s power to order a contractor to return to a property owner the cost of a solar heater where, although the contractor had made several attempts to repair the heater, he could not make it provide a habitable degree of heat. See id.

[16] Cf. A.R.S. § 13-603(C) and 13-804(A).

[17] A.R.S. § 13-105(11)

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