ALJDEC decisions subject to certification as final

2018A-1814-RFA-ROC · Registrar of Contractors · 2020-02-25

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Robert Kovacs,

COMPLAINANT

Redmond Construction LLC,

License No. ROC 198045

RESPONDENT

No. 2018A-1814-RFA-ROC

ADMINISTRATIVE LAW JUDGE

DECISION

HEARING: February 10, 2020

APPEARANCES: Robert Kovacs for Complainant; Butch Redmond for Respondent; John Tellier, Esq. for the Registrar of Contractors

ADMINISTRATIVE LAW JUDGE: Thomas Shedden

FINDINGS OF FACT

On January 7, 2020 the Registrar of Contractors (“ROC”) issued a Notice of Hearing setting the above captioned matter for hearing at the Office of Administrative Hearings on February 10, 2020. The issue is whether an award and payout from the residential contractors’ recovery fund is justified by the evidence.

Respondent Redmond Construction LLC holds license number 198045 issued by ROC.

In August 2017, Robert and Erzsebet Kovacs hired Respondent to construct a house in Fort Mohave.

Mr. and Ms. Kovacs filed with ROC a complaint against Respondent alleging poor workmanship.

Though a Final Administrative Decision and Order dated November 21, 2018, ROC adopted an Administrative Law Judge Decision finding that Respondent had violated Ariz. Rev. Stat. sections 32-1154(A)(3) and (A)(22). Based on these proven violations ROC suspended Respondent’s license for two days.

On February 1, 2019, Mr. and Ms. Kovacs submitted to ROC a Recovery Fund Claim that included estimates showing that the lowest bid to repair and complete the project was $30,920.09.

The Kovacses’ Recovery Fund Claim shows that the original contract price was $162,790 and that they had paid Respondent $164,480. The Kovacses’ claim form does not show that there were change orders and it shows that there was no balance owed to Respondent.

ROC’s Vanessa Enriquez evaluated the Kovacses’ Recovery Fund Claim.

Ms. Enriquez determined that the Kovacses had paid to Respondent $162,140 and had an outstanding balance of $650.

Ms. Enriquez determined that the Kovacses had included in their Recovery Fund Claim receipts for work on a fence and flooring that were not part of the parties’ contract. As such, ROC determined that those expenses were non-compensable.

Ms. Enriquez determined that the Kovacses had provided proof that the cost to complete the repairs of the items for which Respondent’s license was suspended was $16,300, which was $10,000 for concrete work, $4800 for painting, and $1500 to remove and rebuild a wall.

To arrive at the Kovacses’ actual damages, Mr. Enriquez deducted the $650 outstanding balance from $16,300, resulting in a total of $15,650.

On November 25, 2019, ROC issued a Notice of Claim for Administrative Payout showing that the Kovacses would be awarded $15,650 in the form of a payout from the Recovery Fund unless either the Kovacses or Respondent requested a hearing contesting the amount or propriety of the payment.

Respondent requested a hearing, which led to this matter being scheduled.

At the hearing, Respondent presented credible evidence showing that the parties had entered into a change order for $3211.35, and that the Kovacses were responsible for $2212 in permit costs, $975 for plans and $4928 for installation of a septic tank, which were not included in the original contract price. These costs total $11,326.35.

Adding the additional costs of $11,326.35 to the original contract price of $162,790, results in a total price of $174,116.35.

Respondent presented credible evidence showing that the Kovacses had made payments of $163,115. Consequently, Respondent initially took the position that the Kovacses had an unpaid balance of $11,001.35.

Respondent subsequently acknowledged that its calculations included $4243.72 in taxes that were not the Kovacses’ responsibility under the terms of the contract. Deducting these taxes from $11,001.35, results in an unpaid balance of $6757.53.

At the hearing, Mr. Kovacs acknowledged that the Kovacses had not actually paid a painter the $4800 claimed in their Recovery Fund Claim, but rather had done the painting themselves (with the help of family members). Consequently, this $4800 is not actual damages suffered by the Kovacses.

At the hearing, the evidence showed that the $1500 the Kovacses claimed for the removal and rebuilding of a wall, was for work that was not included in the deficient work for which ROC suspended Respondent’s license. Consequently, this $1500 is not actual damages suffered by the Kovacses.

Because the $4800 for painting and the $1500 for removal and rebuilding of the wall are not actual damages, these are not compensable from the Fund. Reducing ROC’s proposed payout of $15,650 by $6300, results in a revised amount of $9350.

To determine the Kovacses’ actual damages, their unpaid balance must be deducted from $9350. Respondent showed that the unpaid balance was $6757.53, which when deducted from the revised amount of $9350, results in a balance of $2592.37. But because ROC had already accounted for the $650 it determined was the Kovacses’ unpaid balance, this must be added to $2592.37 to determine the amount of the Kovacses’ actual damages, which are $3242.37.

CONCLUSIONS OF LAW

Unless otherwise provided by law: the party asserting a claim, right, or entitlement has the burden of proof; a party asserting an affirmative defense has the burden of establishing the affirmative defense; and the proponent of a motion shall establish the grounds to support the motion. Ariz. Admin. Code § R2-19-119(B).

The Kovacses filed a claim asserting that they were entitled to a payout from the Recovery Fund pursuant to Ariz. Rev. Stat. section 32-1132. Respondent has a right to a hearing contesting any proposed payment 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).

Consequently, the Kovacses bear the burden of proof show that they are an injured person who meets the requirements for a payout from the recovery fund. Ariz. Admin. Code § R2-19-119(B); see also Harvest v. Craig, 195 Ariz. 521, 524, ¶¶ 14-15 (App. 1999) (the party seeking a right granted by statute generally has the "burden of proving that he comes within the ambit of the statute").

The standard of proof on all issues in this matter is that of a preponderance of the evidence. Ariz. Admin. Code § R2-19-119(A).

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).

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.").

“Statutes shall be liberally construed to effect their objects and to promote justice.” Ariz. Rev. Stat. § 1-211(B).

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).

“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.

“‘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).

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).

“‘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).

The preponderance of the evidence shows that the Kovacses’ Recovery Fund Claim did not include a complete accounting of the work they contracted Respondent to perform because that Claim did not include information regarding a change order and other costs that were the Kovacses’ responsibility to pay for.

The preponderance of the evidence shows that ROC improperly included in its calculation of actual damages $1500 for the removal and rebuilding of a wall because that work was not a direct result of the violations for which ROC suspended Respondent’s license.

The preponderance of the evidence shows that ROC improperly included in its calculation of actual damages $4800 for painting because the Kovacses did not hire a licensed contractor to perform that work, but rather completed it themselves.

The preponderance of the evidence shows that the Kovacses are a person injured within the meaning of the statutes and that they suffered actual damages of $3242.37.

RECOMMENDED ORDER

IT IS ORDERED that on the effective date of the final Order in this matter, the Registrar of Contractors shall order the Fund to make a payout of $3242.37 to Robert and Erzsebet Kovacs.

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.

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-137160-45720000Done this day, February 25, 2020.

/s/ Thomas Shedden

Thomas Shedden

Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director

Registrar of Contractors

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001

-137160-45720000