ALJDEC decisions subject to certification as final

2018A-3997-RFA-ROC · Registrar of Contractors · 2019-11-14

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING DATES: October 28, 2019, at 9:00 a.m. and November 5, 2019, at 9:00 a.m. APPEARANCES: Binh V. Nguyen (“Complainant”) appeared on his own behalf on both hearing dates; Solar Energy Resources LLC DBA: Blazing Sky Energy Group (“Respondent”) failed to appear on both hearing dates; the Arizona Registrar of Contractors (“the Registrar”) was represented on both hearing dates by Seth T. Hargraves, Esq., Assistant Attorney General; Vietnamese interpreter Tao Nguyen attended the November 5, 2019 hearing to provide translation for Complainant. ADMINISTRATIVE LAW JUDGE: Diane Mihalsky _____________________________________________________________________

FINDINGS OF FACT Background 1. On August 23, 2019, the Registrar issued a Notice and Order of Denial of Recovery Fund Claim from the Residential Contractors’ Recovery Fund (“the Fund”), notifying the parties that “[a]fter a review of the claim and all supporting documentation, the Fund determined that Complainant(s) [is] denied payment from the Fund” because he had not incurred any compensable actual damages.[1] 2. Complainant’s son, Viet Nguyen, requested a hearing on his father’s behalf on the Registrar’s denial.[2] The Registrar referred Complainant’s appeal to the Office of Administrative Hearings (“OAH”), an independent state agency, for an evidentiary hearing. 3. On or about September 27, 2019, the Registrar issued a Notice of Recovery Fund Hearing, setting a hearing on October 28, 2019, at 9:00 a.m. The Registrar sent a copy of the Notice of Hearing to Respondent at its address of record. 4. A hearing commenced on October 28, 2019. Because Complainant does not speak English, only Vietnamese, the Administrative Law Judge (“ALJ”) set a further hearing to allow OAH to secure the services of a Vietnamese interpreter. On October 28, 2019, the ALJ issued an order setting a further hearing on November 5, 2019, at 9:00 a.m. OAH staff sent a copy of the order to Respondent at its address of record. 5. A hearing on the merits of was held on November 5, 2019, before OAH. A Vietnamese interpreter provided translation for Complainant. Complainant submitted nine exhibits, testified on his own behalf, and presented the testimony of Viet Nguyen. The Registrar submitted nine exhibits and presented the testimony of Shaquira Adebule, a Legal Assistant in the Registrar’s Legal Department/Fund who had analyzed Complainant’s claim. 6. Respondent did not request to appear telephonically at either hearing date and did not request that either hearing be continued. Respondent did not appear, through an authorized member, employee, or attorney. Consequently, Respondent did not present any evidence to contest Complainant’s claimed payout. The Underlying Workmanship Complaint 7. On or about April 14, 2012, the Registrar issued License No. ROC 278219 for General Dual KB-1 Building Contracting to Respondent. On or about January 28, 2015, the Registrar issued License No. ROC 296164 for Specialty Residential R-11 Electrical contracting to Respondent 8. On or about August 27, 2018, Complainant filed a complaint with the Registrar against Respondent alleging that it had abandoned its contract to install solar panels at Complainant’s residence at 7564 W. Quail Ave., Glendale, Arizona 85308. According to the complaint, Complainant had paid Respondent $23,220.60 of the $35,724.00 contract price.[3] 9. Complainant signed the contract and issued a check to Respondent in the amount of $23,220.60 for a deposit that was drawn on Complainant’s personal bank account.[4] 10. The Complaint was assigned to the Registrar’s Investigator Lisa Melton for investigation. On October 11, 2018, Investigator Melton performed a jobsite inspection, which Respondent did not attend, and verified that Respondent had failed to install the solar panels at Complainant’s residence.[5] 11. By October 11, 2018, due to numerous consumer complaints, the Registrar had summarily suspended Respondent’s contractor’s licenses and scheduled a hearing on October 18, 2018, to allow Respondent to present evidence to show why its licenses should not be suspended. On October 11, 2018, the Registrar issued a supplemental notice of five additional complaints, including Complainant’s complaint, to be considered at the October 18, 2018 hearing.[6] 12. On October 18, 2018, an evidentiary hearing was held before Administrative Law Judge (“ALJ”) Jenna Clark of OAH. Respondent failed to appear. ALJ Clark took evidence on all the complaints against Respondent, including Complainant’s complaint, and on October 22, 2018, issued a decision that concluded that Respondent’s licenses should be revoked for violations of A.R.S. §§ 32-1154(A)(1) and 32-1154(A)(3), namely A.A.C. R4-9-103, on Complainant’s project. On November 9, 2018, the Registrar substantially accepted ALJ Clark’s decision and revoked Respondent’s licenses, effective December 19, 2018.[7] Complainants’ Claim to the Fund 13. On or about April 12, 2019, Complainant submitted a claim to the Fund to recover the damages that were allegedly caused by Respondent’s abandonment of the contract, requesting a payout in the amount of $21,934.89.[8] 14. Complainant acknowledged that there was a $12,503.40 balance due under his contract with Respondent. Complainant also acknowledged that he had recovered $1,285.71 from Respondent’s contractor’s bond.[9] 15. Complainant explained that his requested payout from the Fund was based on his payment of the following amounts for material and labor to complete installation of the solar panels on his house:[10] |Payee |Amount |Purpose | |AltEstore.com |$16,888.00 |48 Solar Panel and | | | |Optimizer | |Bailey Store 01 |$ 2,600.00 |2 Solaredge Inverter | | | |SE7600H-US | |City of Glendale |$ 407.38|Permit | |Misc. Suppliers |$ 944.28|Misc. Parts for Solar | | | |Racking and Electrical | |Professional Solar |$ 2,800.00 |Labor for solar panel | |Installation Team | |installation |

16. On or about May 13, 2019, Ms. Adebule on behalf of the Fund sent a letter to Complainant to request documentation of the amounts claimed and the contract with and contractor’s license number for the installation team.[11] 17. In response, Complainant sent a sales order from AltE Store in the amount of $16,888.00 for solar equipment that was purchased by and shipped to his son, Viet H. Nguyen, at 7564 W. Quail Ave., Glendale, Arizona 85308, an electronic withdrawal in the amount of $16,888.00 from Viet Nguyen’s bank account, a Baileystore01 invoice in the amount of $2,600.00 to Viet Nguyen, invoices or payments for miscellaneous electrical supplies in the amounts of $12.99, $23.00, $25.00, $33.00, $109.99, $39.57, $207.17, $13.90, $9.95, $35.00, $68.69, $61.12, $9.94, $35.87, $14.74, $167.97, $9.31, $18.66. $21.36, $12.37, and $19.63 to or from Viet Nguyen or his wife, Hang Mai. Complainant also provided copies of money orders in the amounts of $950.00, $900.00, and $950.00 made payable to solar installer Andy Luu.[12] Complainant submitted a letter stating that his friend Lorne Wilson of Wires LLC, License No. ROC 296704, helped him obtain a permit and that after the permit was obtained, Complainant hired other people to install the system. 18. On or about May 15, 2019, Ms. Adebule sent an email to Complainant, requesting the license number for installer Andy Luu. Complainant responded that “Andy Luu is just installing people, so he doesn’t have ROC license number.”[13] 19. The Registrar submitted a Special Warranty Deed dated July 13, 2018, executed by Complainant and his wife conveying the property at 7564 W. Quail Ave., Glendale, Arizona 85308 to Viet Nguyen and Hang Mai “[f]or consideration of Ten Dollars, and other valuable considerations.” The Warranty Deed stated the transaction was “EXEMPT UNDER ARS §11-1134 B 3 (b).”[14] Additional Hearing Evidence 20. Ms. Adebule testified that Complainant’s claim for a payout from the Fund accrued prior to the amendments to the Registrar’s statutes concerning the Fund. Under the prior statute, to be eligible for a payout from the Fund, the homeowner must meet four requirements for eligibility, including that the homeowner suffered actual damages caused by a licensed contractor’s violation of the Registrar’s workmanship statutes. 21. Ms. Adebule testified that the requirement that a homeowner must have incurred actual damages meant that the Registrar had to deduct unpaid monies on the homeowner’s contract with the contractor and monies recovered from other sources, such as a bond, from the payout so that the payout would restore the homeowner to no better position than he would have occupied if the contractor had fully performed the contract. 22. Ms. Adebule testified that the Fund could not reimburse monies paid to unlicensed contractors for work that required a license, such as the money paid to Andy Luu. 23. Ms. Adebule testified that, although Complainant had contracted with Respondent and made the initial payment to him, Complainant’s son Viet Nguyen and his wife Hang Mai had made all the payments to complete the project. In addition, Complainant had conveyed the property to Viet Nguyen and Hang Mai. Ms. Adebule testified that because Viet Nguyen had paid for repairs, Complainant had not incurred any damages, although he met all other requirements for a payout. 24. Ms. Adebule testified that because Complainant had contracted with and paid Respondent to work on the house that Complainant owned at the time, Viet Nguyen was not an “injured person” under the statute and was ineligible to make a claim to the Fund. 25. Viet Nguyen testified that he and his family had come to Arizona in 1996 and that Vietnamese families do not distinguish between individual family members’ assets or debts. He researched the solar system, found Respondent, and contributed to the down payment. Although his father’s name was on the title to the house at the time the contract was entered, Viet Nguyen and his wife were living in the house and considered it their own. 26. Viet Nguyen testified that, because he speaks English, it was easier for him to move the project forward so that the family could get the solar panel project finished in time to claim the 30% tax deduction. Viet Nguyen testified that he did not pay his father anything for the house and that Complainant conveyed title to house to him to better manage the project. Viet Nguyen testified that he is the back up on his father’s bank account. 27. Viet Nguyen testified that he and his wife paid to finish the project to help his family. Complainant still lives in the house at least three days a week, although he also spends time with Complainant’s daughter, Viet Nguyen’s sister. Viet Nguyen testified that he finished the project and took title to the house because it would be hard for his father to speak in court. CONCLUSIONS OF LAW This matter lies within the Registrar’s jurisdiction.[15] Complainant bears the burden to establish that he is eligible to receive a payout from the Fund by a preponderance of the evidence.[16] “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”[17] A preponderance of the evidence is “[t]he 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.”[18] Former A.R.S. § 32-1131(3)(a) defines an “injured person” who is entitled to a payout from the Fund as follows: “Person injured":

(a) Means any owner of residential real property that is either noncommercial historic property as defined in section 42-12101 or classified as class three property under section 42-12003. The property must also be actually occupied or intended to be occupied by the owner as a residence including community property, tenants in common or joint tenants who are damaged by the failure of a residential contractor or a dual licensed contractor to adequately build or improve a residential structure or appurtenance on that real property.

Under this statute, to be eligible for a Fund payout, at the time the contract was made or the injury occurred, the claimant must own the residential property, the property must be classified a Class 3 property, and the claimant must have occupied, or intended to occupy the property as a residence.[19] Complainant meets these three criteria. A.R.S. § 32-1132(A) provides in relevant part as follows: The residential contractors' recovery fund is established, to be administered by the registrar, from which any person injured by an act, representation, transaction or conduct of a residential contractor licensed pursuant to this chapter that is in violation of this chapter or the rules adopted pursuant to this chapter may be awarded in the county where the violation occurred an amount of not more than thirty thousand dollars for damages sustained by the act, representation, transaction or conduct. An award from the fund is limited to the actual damages suffered by the claimant as a direct result of the contractor's violation but shall not exceed an amount necessary to complete or repair a residential structure or appurtenance within residential property lines. . . .

(Emphasis added.) For the purposes of A.R.S. § 32-1132(A), “actual damages” are the actual cost that the eligible person spent to correct the contractor’s defective work and complete the project, minus any portion of the contract price still unpaid to the original contractor.[20] In Arizona, “[p]roof of the fact of damages must be of a higher order than proof of the amount of damages.”[21] The Registrar owes a fiduciary duty to manage the Fund for the benefit of all eligible homeowners who have suffered actual damages caused by a licensed contractor’s statutory violations.[22] Before authorizing a payout, the Registrar must have conclusive proof that the claimant not only is potentially eligible, but that the claimant has incurred actual, compensable damages. Viet Nguyen and his wife lived at the house at all relevant times and were actively involved in managing the project. Complainant and Viet Nguyen credibly testified that families who have recently emigrated from Vietnam to the United States live communally, sharing homes and pooling their assets for the benefit of the family, and that is what happened in this case. Viet Nguyen and Complainant credibly testified that the July 13, 2018 conveyance was made only so that Viet Nguyen, who could speak English, could finish the installation of the solar panels in time to claim a tax write-off and speak in court on behalf of the family. Viet Nguyen did not pay anything for the residence and there was no price reduction due to the unfinished solar panels project.[23] Due to the communal nature of ownership among families who have recently emigrated from Vietnam, application the technical legal distinctions upon which the Registrar relies to deny any payout is inappropriate. Both Complainant and Viet Nguyen are injured persons who are eligible to recover a payout in the amount of their actual, compensable damages. Complainant and Viet Nguyen are not entitled to recover from the Fund the $2,800.00 that they paid to unlicensed contractor Andy Luu. The $12,503.40 that Complainant owes to Respondent under the contract and the $1,285.71 that Complainant recovered from Respondent’s bond also must be deducted. The Administrative Law Judge (“ALJ”) has not checked Complainant’s and Viet Nguyen’s addition of the receipts provided to the Registrar. Subject to such technical correction, the ALJ calculates Complainant and Viet Nguyen’s payout from the Fund as follows: / / / / / / / / AltEstore.com + $ 16,888.00 BaileyStore01 + 2,600.00 City of Glendale Permit + 407.38 Misc. Suppliers + 944.28 Amount owed - 12,503.40 Bond payment - 1,285.71

Payout $ 7,050.55

RECOMMENDED ORDER In view of the foregoing, IT IS ORDERED that on the effective date of the final order in this matter, the Registrar shall pay the sum of $7,050.55 to Complainant Binh V. Nguyen and his son, Viet Nguyen, and their wives from the Residential Contractors’ Recover Fund. IT IS FURTHER ORDERED that, pursuant to A.R.S. § 32-1139(B), $7,050.55 shall be charged against Respondent Solar Energy Resources LLC DBA: Blazing Sky Energy Group’s License Nos. ROC 296164 and ROC 278219 and the persons listed on this licenses. 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 five days from the date of that certification. Done this day, November 14, 2019.

/s/ Diane Mihalsky Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director Registrar of Contractors ----------------------- [1] See the Registrar’s Exhibit 1. [2] See the Registrar’s Exhibit 9. [3] See the Registrar’s Exhibit 2. [4] See id. at 15, 21. [5] See the Registrar’s Exhibit 3 at 23. [6] See id. at 24-29. [7] See the Registrar’s Exhibit 3 at 30-31. [8] See the Registrar’s Exhibit 4 at 1. [9] See id. at 5-8. [10] See id. at 3. [11] See the Registrar’s Exhibit 4. [12] See the Registrar’s Exhibit 5. [13] The Registrar’s Exhibit 6 at 85. [14] The Registrar’s Exhibit 7. [15] See 32-1101 et seq. [16] See A.A.C. R2-19-119(A) and (B)(1); see also Vazanno v. Superior Court, 74 Ariz. 369, 372, 249 P.2d 837 (1952). [17] Morris K. Udall, Arizona Law of Evidence § 5 (1960). [18] Black’s Law Dictionary at page 1220 (8th ed. 1999). [19] See McMurren v. J.M.C. Builder, Inc., 204 Ariz. 345 (App. 2003). The fourth criteria is that the residential contractor’s license must have been in good standing when the contract was executed. [20] See Ramsey v. Arizona Registrar of Contractors, 241 Ariz. 102, 106, 384 P.3d 316, 320 (App. 2016). [21] Coury Bros. Ranches, Inc. v. Ellsworth, 103 Ariz. 515, 521 (1968) (citations omitted). [22] A.R.S. § 32-1134(A) provides in relevant part as follows: A. The registrar shall: . . . . 2. Cause an examination of the fund to be made every three years by an independent certified public accountant. 3. File with the department of insurance an annual statement of the condition of the fund. . . . . 5. Employ or contract with individuals and procure equipment and operational support, to be paid from or purchased with monies in the fund, but not to exceed in any fiscal year fourteen per cent of the total amount deposited in the fund in the prior fiscal year as may be necessary to monitor, process or oppose claims filed by injured persons which may result in collection from the recovery fund. [23] See A.R.S. § 11-1134(B)(3)(b) (an affidavit fee is not required for a transfer of title when the transfer has only nominal actual consideration for the transfer of residential property between parent and child).

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