ALJDEC decisions subject to certification as final

2019A-00676-RFA-LS-ROC · Registrar of Contractors · 2023-05-16

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Mary P. Derby,

COMPLAINANT

Diaz Roofing LLC

License No. ROC 264775,

RESPONDENT

No. 2019A-00676-RFA-LS-ROC

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: April 26, 2023

APPEARANCES: Complainant Mary P. Derby appeared on her own behalf. The Arizona Registrar of Contractors was represented by Assistant Attorney General Seth T. Hargraves. Respondent Diaz Roofing LLC was represented by James N. Hanson.

ADMINISTRATIVE LAW JUDGE: Tammy L. Eigenheer

_____________________________________________________________________

FINDINGS OF FACT

The Arizona Registrar of Contractors (Registrar) issued License No. 264775 to Respondent Diaz Roofing LLC.

In September 2017, Complainant Mary P. Derby purchased a home located at 4420 E. Seneca St., Tucson, AZ 85712. In July 2016, prior to Complainant’s purchase of the home, the previous owner contracted with Respondent for a complete roof replacement.

In August 2017, prior to Complainant’s purchase of the home, issues with the roof were repaired in August 2017.

At the time Complainant purchased the home, she was made aware of issues with the home and agreed to buy the home in “as-is” condition.

In December of 2018, Complainant discovered leaks in her home and filed a complaint on March 8, 2018, with the Registrar.

Respondent made repairs to the home and the complaint was closed on June 29, 2018.

On September 24, 2018, Complainant filed complaint 2018-04520 for issues concerning leaking and poor workmanship related to the roof.

Complainant filed a third complaint against Respondent on February 14, 2019, complaint 2019-00676, due to issues that were not discovered while the issues giving rise to complaint 2018-04520 were being investigated by the Registrar.

The Registrar’s investigators conducted jobsite inspections for both complaints. A directive in each complaint was issued requiring Respondent to make specific repairs. Respondent failed to comply with both directives.

Citations were issued to Respondent in 2018-04520 and 2019-00676. Ultimately, complaint 2018-08520 was dismissed and Respondent’s license was disciplined for events arising out for complaint 2019-00676.

On or about March 23, 2022, Complainant filed a claim with the Residential Contractors’ Recovery Fund (the Fund) to recover the cost of completing or repairing the project.

On or about December 29, 2022, the Registrar issued a Notice of Order of Recovery Fund Claim Denial (Denial). In the Denial, the Registrar concluded that, pursuant to Subsequent Purchasers and the Recovery Fund Substantive Policy Statement 2021-01, a subsequent purchaser may not receive an award if the defect was known at the time of purchase, the purchaser could have discovered the defect at the time of purchase, or the sales contract include an “as-is” clause which included the allegedly defective work.

Complainant requested a hearing, believing she was eligible for a payout from the Fund. The Registrar referred the matter to the Office of Administrative Hearings (OAH) for an evidentiary hearing. A hearing was held on April 26, 2023.

Kyle Nelson, Legal Assistant with the Fund, testified that he reviewed Complainant’s claim to the Fund. Mr. Nelson concluded that the purchase contract for the property included a requirement that “Seller will correct roof issues (per Roofsavers estimate) under warranty with Diaz Roofing” and the following:

In lieu of any and all other repairs:

Seller to credit buyers closing costs and/or prepaids up to $4600 and sales prices shall be $190,000.

Mr. Nelson concluded that, under the Registrar’s policy regarding subsequent purchasers, Complainant both knew of the roof issue and purchased the home “as-is” with a credit for other repairs that may be needed in the future.

Complainant testified that that the roof repair recommended by Roofsavers was a $250.00 repair that did not address the area of concern in the subsequent complaints to the Registrar. Complainant also noted that, to her understanding, all home purchases in Arizona were “as-is” sales. Complainant denied that the credit was for any known roof issues, but was due to the age of the home and the expectation that future repairs would be needed.

CONCLUSIONS OF LAW

This matter lies within the Registrar’s jurisdiction.

The Registrar bears the burden of proof to establish that the Denial of a payout from the Fund was proper by a preponderance of the evidence. See Ariz. Admin. Code R2-19-119(A) and Ariz. Admin. Code R2-19-119(B) (1); see also Vazzano v. Superior Court, 74 Ariz. 369, 372, 249 P.2d 837 (1952).

“A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.” Morris K. Udall, Arizona Law of Evidence § 5 (1960).

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.” Black’s Law Dictionary 1220 (8th ed. 1999).

Ariz. Rev. Stat. § 32-1132 details eligibility for a payout from the Fund, in pertinent part, as follows:

B. Only the following claimants are eligible for an award from the residential contractors' recovery fund:

1. An individual who both:

(a) Owns residential real property that is damaged by the failure of a residential contractor to adequately build or improve a residential structure or appurtenance.

(b) Actually occupies or intends to occupy the residential real property described in subdivision (a) of this paragraph as the individual's primary residence.

The Registrar’s Substantive Policy relating to subsequent purchasers provides, in pertinent part, as follows:

A purchaser of residential property damaged by a licensed residential contractor may not receive a payout if:

(1) The purchaser knew of the defect prior to purchasing the property;

(2) The purchaser could have discovered the defect by reasonable inspection; or

(3) The sales contract included an “as-is” clause which included the claimed

defective work.

Prohibiting awards in these situations is consistent with the purpose of the Fund, which is established “for the benefit of a claimant damaged by an act, representation, transaction or conduct of a residential contractor....” A.R.S. § 32-1132(A) (emphasis added). However, a “person who purchases a damaged residence at a discounted price from an owner who hired a contractor who caused the damage” is not damaged for purposes of the recovery fund because the discounted purchase price reflects the damage to the property. McMurren v. JMC Builders, Inc., 204 Ariz. 345, 351, 63 P.3d 1082, 1088 (App. 2003).

Complainant admitted that she purchased the home in an “as-in” condition. While the $4600.00 credit may not have been expressly attributable to roof issues, it was for future repairs that may be needed.

After review of all the evidence, the Tribunal concludes that the Registrar properly concluded Complainant did not meet the eligibility requirements of the Fund. Accordingly, Complainant was not entitled to a payout from the Fund.

RECOMMENDED ORDER

Based on the foregoing, it is recommended that the Registrar’s Notice of Order of Recovery Fund Claim Denial is affirmed.

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 forty (40) days from the date of that certification.

-54864001

001

-137160-45720000Done this day, May 16, 2023.

/s/ Tammy L. Eigenheer

Administrative Law Judge

Transmitted by either mail, e-mail, or facsimile to:

Martín Quezada, Director

Registrar of Contractors

Mary P. Derby

[email redacted]

Seth T. Hargraves

Office of the Attorney General

[email redacted]

James N. Hanson

LANG & KLAIN P.C.

[email redacted]

By: OAH Staff