FINACT2018A-281-ROC.pdf

2018A-281-ROC · Registrar of Contractors · 2019-03-21

REGISTRAR OF CONTRACTORS OF THE STATE OF ARIZONA

Lorrie and Dan Ewer, Case No. 2018-281 COMPLAINANTS, Docket No. 2018A-281-ROC v. Badabo Construction LLC, FINAL ADMINISTRATIVE DECISION DBA: Badabo Construction, AND ORDER License No. ROC 295873 & 296145, 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 has reviewed the Administrative Law Judge Decision and modifies it. WRITTEN JUSTIFICATION Complainants Lorrie and Dan Ewer filed a claim with the Arizona Residential Contractors’ Recovery Fund. ALJ Dec. 2:7-8. After reviewing the claim, the Registrar issued its Notice and Order of Recovery Fund Ineligibility, advising the parties that the Registrar had determined that the Ewers did not meet the eligibility criteria outlined in A.R.S. § 32-1131, et seq. ALJ Dec. 2:9-18. The Ewers filed a request for hearing to appeal the Registrar’s determination. The Administrative Law Judge Decision states that “The Ewers have filed a claim asserting that they meet the requirements to receive a payout from the recovery fund. As such, they bear the burden of proof in this matter.” ALJ Dec. 3:2-5 (citing Ariz. Admin. Code § R2-19-119; Magness v. Ariz.

of 4 REGISTRAR OF CONTRACTORS 1700 W. Washington St. Suite 105 – Phoenix, AZ 85007-2812 Telephone (602)542-1525 1-877-692-9762 Registrar of Contractors, 234 Ariz. 428 (App. 2014)). 1 To the extent that the Administrative Law Judge

Decision concludes that the Ewers bear the burden merely because they are the claimants to the fund,

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

Decisions.

Once the Registrar makes a determination on a recovery fund claim and issues a Notice and Order

of Recovery Fund Ineligibility, 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 has the burden of

persuasion. See A.R.S. § 41-1092.07(G)(2). Here, the Ewers bear the burden of proof because they are

appealing the Registrar’s recovery fund determination of ineligibility, not because they are the

Claimants, as the administrative law judge concluded.

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

1 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 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).

• “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 hereby modifies the Administrative Law Judge Decision by:

• Replacing p. 3, ¶ 2 with “Complainants bear the burden of proof in this appeal because

they are appealing the Registrar’s determination that they did not suffer compensable

damages. Therefore, the Ewers bear the burden to prove that the Registrar’s determination

was either erroneous or that the determination was unsupported by the preponderance of

the evidence. A.R.S. § 41-1092.07(G)(2); A.A.C. R2-19-119(A).”

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 3 replace “May 16, 2018” with “March 16, 2018”.

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 Badabo Construction LLC DBA: Badabo Construction 10200 N Feldman Rd Marana, AZ 85653 Complainants Lorrie and Dan Ewer 10725 W Anthony Dr Tucson, AZ 85743 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 Attorney General Thomas Raine, Assistant Attorney General Case No. 2018-281 / SA

of 4 REGISTRAR OF CONTRACTORS 1700 W. Washington St. Suite 105 – Phoenix, AZ 85007-2812 Telephone (602)542-1525 1-877-692-9762 RECEIVED 03/11/2019 LEGAL

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Lorrie and Dan Ewer, No. 2018A-281-ROC

COMPLAINANT ADMINISTRATIVE LAW JUDGE DECISION v.

Badabo Construction LLC, DBA: Badabo Construction License No. ROC 295873, 296145 RESPONDENT

HEARING: February 27, 2019 APPEARANCES: Lorrie and Dan Ewer on their own behalf; D. Barry Dickey for Respondent; Thomas Raine, Esq. for the Registrar of Contractors ADMINISTRATIVE LAW JUDGE: Thomas Shedden

FINDINGS OF FACT 1. On January 7, 2019, 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 at 9:00 a.m. on February 27, 2019. 2. The issue is whether an award and payout from the Contractors’ Recovery Fund pursuant to ARIZ. REV. STAT. section 32-1154([G]) is justified by the evidence. 3. Respondent Badabo Construction LLC holds license numbers 295873 and 296145, both of which were suspended as of the hearing date in this matter. Barry Dickey is a member of the LLC. 4. Complainants Lorrie and Dan Ewer purchased a house in Tucson, with the close of escrow occurring on September 11, 2017. The seller of that home was Eugene Hildreth. 5. On January 22, 2018, Ms. Ewer filed with ROC a complaint against Mr. Dickey alleging that he was an unlicensed contractor and that he had performed deficient work

Office of Administrative Hearings 1740 West Adams Street, Lower Level Phoenix, Arizona 85007 (602) 542-9826 RECEIVED 03/11/2019 LEGAL

related to tile flooring in the house. Ms. Ewer’s complaint shows that any contract for the work at issue was between Mr. Dickey and the seller Mr. Hildreth. 6. Although Ms. Ewer named Mr. Dickey in her complaint, on May 16, 2018, ROC

issued to Respondent a CITATION alleging violations of ARIZ. REV. STAT. sections 32-

1154(A)(3) and (A)(22). On August 12, 2018, ROC suspended Respondent’s licenses

as a direct result of Ms. Ewer’s complaint.

7. On October 9, 2018, the Ewers filed with ROC a RECOVERY FUND CLAIM

requesting a payout of $7170.

8. On December 27, 2018, ROC issued a NOTICE AND ORDER OF DENIAL OF

RECOVERY FUND CLAIM.

9. ROC denied the Ewers’ claim because it determined that they did not suffer any

compensable “actual damages.”

10. ROC determined that Respondent had completed the work at issue in December

2016, which was before the Ewers purchased the house. The Ewers’ Purchase

Agreement for the house shows that the Ewers agreed that they were purchasing the

house in “its present physical condition as of the date of the contract acceptance.”

Exhibit ROC 10 at page 5. Consequently, ROC determined that the Ewers had not suffered any actual damages, and it denied their claim. 11. The Administrative Law Judge Decision resulting from Ms. Ewer’s underlying complaint, which was adopted by ROC, shows that before the close of escrow the Ewers were aware that there were problems with the flooring, and that the listing agent had apparently had someone take care of those problems. 12. At the hearing, ROC’s Marlee McCormick testified to the effect that because the Ewers were aware of the problems with the floor before the close of escrow and they bought the house “as is” they accepted the poor work and the recovery fund cannot make a payout to the Ewers. CONCLUSIONS OF LAW 1. Unless otherwise provided by law, a party asserting a claim, right, or entitlement bears the burden of proof; a party asserting an affirmative defense has the RECEIVED 03/11/2019 LEGAL

burden of establishing the affirmative defense. The standard of proof on all issues in this matter is that of a preponderance of the evidence. ARIZ. ADMIN. CODE § R2-19-119. 2. The Ewers have filed a claim asserting that they meet the requirements to

receive a payout from the recovery fund. As such, they bear the burden of proof in this

matter. ARIZ. ADMIN. CODE § R2-19-119; Magness v. Ariz. Registrar of Contractors 234

Ariz. 428 (App. 2014).

3. 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). 4. 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."). 5. “Statutes shall be liberally construed to effect their objects and to promote justice.” ARIZ. REV. STAT. § 1-211(B). 6. 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). 7. “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. 8. “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). RECEIVED 03/11/2019 LEGAL

9. 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).

10. “‘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).

11. The Ewers have not shown that they suffered any actual damages as a

direct result of Respondent’s work because they purchased their house with the

knowledge that the flooring issues for which they seek a payout were in existence at

the time of the purchase and they agreed that they were accepting the house in that

condition.

12. Considering the above, the Ewers’ recovery fund claim should be denied.

RECOMMENDED ORDER IT IS ORDERED that on the Registrar of Contractor’s decision to deny Lorrie and Dan Ewer’s recovery fund claim is affirmed and that the Ewers’ appeal is dismissed. 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 11, 2019.

/s/ Thomas Shedden Thomas Shedden Administrative Law Judge

Transmitted electronically to: Jeffrey Fleetham, Director Registrar of Contractors