ALJDEC decisions subject to certification as final

2019A-00973-RFA-ROC · Registrar of Contractors · 2020-10-05

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Latoria Waters,

COMPLAINANT

Acid Stain Designs LLC,

License No. ROC 257919,

RESPONDENT

No. 2019A-00973-RFA-ROC

ADMINISTRATIVE LAW JUDGE

DECISION

HEARING: July 29 and September 15, 2020

APPEARANCES: Latoria Waters on her own behalf; Sarah A. Asta, Esq. for the Registrar of Contractors; no one appeared for Respondent

ADMINISTRATIVE LAW JUDGE: Thomas Shedden

FINDINGS OF FACT

On June 29, 2020 the Registrar of Contractors (“ROC”) issued a Notice of Hearing on Appealable Agency Action setting the above captioned matter for hearing at the Office of Administrative Hearings at 9:00 a.m. on July 29, 2020.

The issue is under consideration is Complainant/Claimant Latoria Waters’ claim for a payout from the residential contractors’ recovery fund.

The Notice of Hearing’s “Statement of Matters Asserted” provides: “Respondent [Acid Stain Designs LLC] has contested the Registrar’s determination regarding Latoria Waters Recovery Fund Claim. The Registrar’s determination was made pursuant to A.R.S. §§ 32-1132 to 32-1133.01.”

Ms. Waters has also been known as Latoria Davis and she is referred to by that name in some of the exhibits.

On July 29, 2020, no representative for Respondent appeared at the scheduled time and the matter was convened in its absence at about 9:15 a.m. After the matter was convened, ROC and Ms. Davis agreed that the matter should be continued to allow the parties time to submit legal memoranda on which party bears the burden of proof and whether the matter is a contested case or an appealable agency action.

On September 1, 2020, ROC filed a Prehearing Memorandum addressing these two issues. Neither Ms. Waters nor Responded submitted a memorandum.

ROC’s memorandum provided in part:

“A contested case is defined to include any proceeding ... in which the legal rights, duties or privileges of a party are required or permitted by law, [other than Title 41, Chapter 6], to be determined by an agency after an opportunity for an administrative hearing. Ariz. Rev. Stat. § 41-1001(5).”

An appealable agency action is defined as “an action that determines the legal rights, duties or privileges of a party and that is not a contested case.” Ariz. Rev. Stat. § 41-1092(3).

Procedurally, a hearing on a contested case occurs before the agency renders a decision.

No hearing is required in recovery fund matters.

“The Registrar, as administrator of the Recovery Fund, simply reviews the paperwork filed for a Recovery Fund payout, issues an award without a hearing taking place, and notifies the parties of the award. It is only if one or more of the parties to the underlying contested case questions the amount or propriety of the Recovery Fund award, does an appeal arise from the Registrar’s decision through a hearing request. See A.R.S. § 32-1133.01.” (Underscoring and bolding added.)

The only issue on appeal is whether ROC’s decision was reasonable. Notably, the hearing for this review comes after ROC has issued a recovery fund award, thereby fitting squarely in the definition of an appealable agency action; a contested case requires an opportunity for a hearing prior to an agency decision, while a recovery fund matter does not. (Underscoring and bolding added.)

As a general rule, the burden of proof rests on the party bringing the charges or making a claim. On a contested case on revocation or suspension of a license, the burden of proof is on ROC; on an appeal from an appealable agency action such as a license denial or an application for benefits, the burden is generally on the appellant.

This matter is an appealable agency action in which appellant has the burden of proof. This is consistent with Ariz. Admin. Code section R2-19-119(B) that puts the burden on “the party asserting a claim, right, or entitlement.”

ROC’s position is that the Respondent is an appellant in this matter because Respondent requested a hearing contesting ROC’s proposed payout to Ms. Waters.

At the hearing, ROC acknowledged that although Ariz. Rev. Stat. section 32-1133.01 reads that a contractor may request a hearing, that statue should nevertheless be read to show that the contractor is actually filing an appeal.

The further hearing was scheduled to convene at 1:00 p.m. September 15, 2020. No representative for Respondent appeared at the scheduled time and the matter was convened in its absence at about 1:05 p.m.

Respondent holds license number 257919 issued by ROC.

In June 2018, Ms. Waters hired Respondent to perform work including removing tile from a patio and sealing and staining the underlying concrete.

Ms. Waters filed with ROC a complaint against Respondent alleging poor work on Respondent’s part.

On May 1, 2019, ROC issued a Directive ordering Respondent to correct workmanship deficiencies and to complete the work in conformity with the contract.

On June 19, 2019, ROC issued to Respondent a Citation alleging that Respondent may have violated Ariz. Rev. Stat. sections 32-1154(A)(3) and (A)(22).

Though a Final Administrative Decision and Order dated July 15, 2019, ROC found 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 three days and assessed against it a civil penalty of $250.

On November 8, 2019, Ms. Waters submitted to ROC a Recovery Fund Claim requesting a payout of $5000 to $6000. Ms. Waters’ claim included bids from licensed contractors to perform corrective work.

ROC’s Tedi White evaluated Ms. Waters’ Recovery Fund Claim.

Ms. White provided credible testimony that Ms. Waters met the eligibility requirements for a payout from the fund.

In evaluating Ms. Waters’ claim, Ms. White spoke to ROC investigator Jack Grimm who had inspected Respondent’s work and prepared the Directive ROC issued to Respondent.

Ms. White determined that Ms. Waters had paid to Respondent $4300 for the work at issue and that there was no balance due on the contract.

Ms. White found that a bid of $5900 prepared by AZ Stain Concrete LLC was “in line” with the parties’ contract and the work ROC had ordered Respondent to complete through the Directive it issued to Respondent.

Ms. Waters acknowledged that AZ Stain’s bid included line items that were not called out in Respondent’s contract, but she testified to the effect that Respondent had orally provided more details about its scope of work than were included in its written bid.

On May 20, 2020, ROC issued a Notice of Claim for Administrative Payout providing in part:

Complainant filed a claim for payment with the Residential Contractors’ Recovery Fund pursuant to A.R.S. § 32-1133.01(A). After a review of the claim and all supporting documentation, the Fund determined that Complainant is to be awarded $5,900.00 in the form of a payment issued by the Fund.

REQUEST FOR ADMINISTRATIVE HEARING

In accordance with A.R.S. § 32-1133.01, both Complainant and Respondent have 15 days from the date of mailing of this Notice to file an administrative hearing request to contest the amount or propriety of the payment. A request must be received by the Registrar no later than June 4, 2020. Pursuant to A.R.S. § 32-1133.01(C), the failure of Complainant or Respondent to file a timely written request for a hearing may be deemed a waiver to contest the amount or propriety of the payment awarded.

Notice of Claim for Administrative Award, ROC Ex. 16.

(Bolding and italics in original; underscoring added.)

CONCLUSIONS OF LAW

Applicable Statutes and Rules

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 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).

“Contested case means any proceeding ... in which the legal rights, duties or privileges of a party are required or permitted by law, other than [Title 41, Chapter 6], to be determined by an agency after an opportunity for an administrative hearing.” Ariz. Rev. Stat. § 41-1001(5).

“‘Appealable agency action’ means an action that determines the legal rights, duties or privileges of a party and that is not a contested case.” Ariz. Rev. Stat. § 41-1092(3).

Ariz. Rev. Stat. section 32-1133.01 provides in pertinent part:

A. Notwithstanding any other provision in this chapter, if a contractor license has been revoked or suspended as a result of an order to remedy a violation of this chapter, the registrar may order payment from the residential contractors' recovery fund to remedy the violation.

B. The registrar must serve the contractor with a notice setting forth the amount claimed or to be awarded.

C. If the contractor contests the amount or propriety of the payment, the contractor must ... request[ ] a hearing to determine the amount or propriety of the payment. The contractor's failure to respond in writing within ten days after the date of service may be deemed a waiver by the contractor of the right to contest the amount claimed or to be awarded.

(Underscore and bolding added.)

Ariz. Rev. Stat. section 32-1139(B) provides in part:

If any amount is paid from the fund in settlement of a claim arising from the act, representation, transaction or conduct of a residential contractor, the license of the contractor shall be automatically suspended by operation of law until the amount paid from the fund is repaid in full, plus interest at the rate of ten per cent a year.

(Underscore added.)

Ariz. Rev. Stat. section 32-1132(A) provides that: “The residential contractors' recovery fund is established ... for the benefit of a claimant damaged by an act, representation, transaction or conduct of a residential contractor....” (Underscore and bold added.)

Ariz. Rev. Stat. section 32-1135 provides that: “The assessments received by the registrar for deposit in the fund shall be held in trust for carrying out the purposes of the fund....”

Principles of Statutory Construction

The same rules in are used to construe both statutes and rules." Smith v. Arizona Citizens Clean Elections Comm'n, 212 Ariz. 407, 412, ¶ 18, 132 P.3d 1187, 1192 (2006).

If a statute is unambiguous, we apply its terms without resorting to other tools of statutory interpretation, unless doing so leads to impossible or absurd results. Orca Commc'ns Unlimited, LLC v. Noder, 236 Ariz. 180, ¶ 9, 337 P.3d 545 (Ariz. 2014)(citation omitted).

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).

Whether this matter is a contested case or an appealable agency action

By definition, a contested case has three elements: (1) a party’s legal rights, duties or privileges are determined; (2) after the party has an opportunity for a hearing; and (3) provided that the party’s hearing-right arises from a statute outside of Title 41, Chapter 6.

All three elements are present in this matter: Respondent’s legal right and privilege to engage in contracting will be suspended if ROC actually makes a payout from the fund. Ariz. Rev. Stat. § 32-1139(B). Before such a payout could be made, ROC had to provide Respondent with notice of the proposed payout and Respondent had a right to request a hearing to contest the proposed payout (subject to waiver if the request for hearing was not made in a timely manner). Ariz. Rev. Stat. § 32-1133.01(B) and (C). Respondent’s opportunity for a hearing is found at Ariz. Rev. Stat. section 32-1133.01(C). Consequently, the matter is a contested case by definition.

ROC argues that the matter is an appealable agency action, but its argument is not persuasive because (1) its argument is predicated on the erroneous conclusion that it has already issued a recovery fund award; and (2) and it misconstrues the definition of contested case.

Twice in its Prehearing Memorandum, ROC makes assertions to the effect that a recovery fund hearing occurs after a payout has been made. See ROC Prehearing Memo at p. 4 lns. 17 and 18, and lns. 23 and 24. This is incorrect as seen by the fact that if an award or payout had already been made in this case, Respondent’s license would have been automatically suspended by operation of law, which did not happen.

ROC’s position is that because it has made a decision to issue an award to Ms. Waters, which occurred without Respondent having a right to a hearing, the matter is not a contested case. But the operative feature of a contested case is not whether an agency has made a decision on an issue, but rather whether a party has a right to a hearing before its legal rights, duties and privileges are determined. In this case, Respondent’s legal rights, duties and privileges are (or will be) determined only when a payment from the fund is actually made (resulting in automatic suspension of Respondent’s license) and Respondent had a right to a hearing before that could occur. Consequently, ROC has misconstrued the definition of contested case.

ROC argues that Respondent’s request for a hearing should be considered to be an appeal. But this is contrary to principles of construction because Ariz. Rev. Stat. section 32-1133.01 unambiguously uses the term “requesting a hearing” and not filing an appeal.

The Burden of Proof

The matter is unusual in that Ms. Waters is making a claim for a benefit, but ROC’s authority to make a definitive ruling resulting in an actual payout from the recovery fund is conditioned on Respondent’s right to a hearing.

ROC’s statutes do not assign the burden of proof in a hearing on a recovery fund claim, nor do the OAH statutes found at Ariz. Rev. Stat. section 41-1092.07(G). OAH’s rules do show however, that “Unless otherwise provided by law: the party asserting a claim, right, or entitlement has the burden of proof....” Ariz. Admin. Code § R2-19-119.

The recovery fund was established to benefit “claimants” who have been injured by licensed contractors. A sensible reading of the subsection R2-19-119(B) is that Ms. Waters, the party claiming a benefit, has the burden of proof.

This conclusion is also consistent with Ariz. Rev. Stat. section 32-1133.01(C) that shows that the contractor’s request is for “a hearing to determine the amount or propriety of the payment.” (Underscore added.)

Conclusion

The preponderance of the evidence shows that Ms. Waters suffered actual damages of $5900 as a result of Respondent’s violation of ROC’s workmanship standards. Consequently, Ms. Waters should receive a $5900 payout from the Fund.

RECOMMENDED ORDER

IT IS ORDERED the Registrar of Contractors shall order the Fund to make a payout of $5900 to Latoria Waters.

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, October 5, 2020.

/s/ Thomas Shedden

Thomas Shedden

Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director

Registrar of Contractors

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-137160-45720000