ALJDEC decisions subject to certification as final

2019A-01512-RFA-LS-ROCRES · Registrar of Contractors · 2023-05-17

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Brian Thomas Flanigan,

COMPLAINANT,

R & C Development, LLC

License No. ROC 296418,

RESPONDENT.

No. 2019A-01512-RFA-LS-ROCRES

ADMINISTRATIVE LAW JUDGE

DECISION

HEARING: April 28, 2023

APPEARANCES: Assistant Attorney General Seth Hargraves represented the Arizona Registrar of Contractors. Dan Kloberdanz, Esq. represented Complainant Brian Thomas Flanigan, who was present. James Hanson, Esq. represented Respondent R & C Development, LLC. Doug Ulmer was present.

ADMINISTRATIVE LAW JUDGE: Sondra J. Vanella

FINDINGS OF FACT

Background and Procedure

According to the Arizona Registrar of Contractors’ (“Registrar”) public website, on March 17, 2015, the Registrar issued License No. 296418, General Dual KB-2 Dual Residential and Small Commercial Contractor contracting license to R & C Development, LLC (“Respondent”).

On or about March 26, 2019, the Registrar received a Complaint filed by Brian Thomas Flanigan (“Complainant”) against Respondent alleging abandonment and poor work with respect to the remodeling project performed by Respondent. The Registrar investigated the Complaint and substantiated the allegations of poor work.

On or about July 2, 2019, the Registrar issued a Citation against Respondent. Respondent did not file a written Answer to the Citation, as required by Ariz. Rev. Stat. § 32-1155(A).

On or about July 25, 2019, the Registrar issued a Final Administrative Decision and Order suspending Respondent’s license for a period of two days effective July 25, 2019, as a result of Complainant’s filed Complaint.

On or about October 21, 2019, Complainant filed a claim for payment from the Residential Contractors’ Recovery Fund (“Fund”).

The Registrar assigned the claim to be reviewed by Doug Ulmer. During the course of the review, Mr. Ulmer discovered that according to the records of the Maricopa County Assessor, the subject property, located at 5625 South 23rd Avenue, Phoenix, Arizona 85041, was legally classified as a class 4.2, Residential Rental property for the years 2018 and 2019, and that for the year 2020, the property was legally classified as 4.1, Non-Primary/Not in Other Classes Residential.

Based upon Mr. Ulmer’s review, utilizing the statutes that were in effect on July 25, 2019, the date Respondent’s license was disciplined by the Registrar, the Registrar denied Complainant’s claim to the Fund due to not meeting the eligibility requirements, specifically, the property was not classified as noncommercial historic as defined in Ariz. Rev. Stat. § 41-12101 or class three as defined in Ariz. Rev. Stat. § 42-12003.

Complainant requested an administrative hearing contesting the Registrar’s ineligibility determination.

On May 11, 2020, an administrative hearing was held before the Office of Administrative Hearings.

On or about May 31, 2020, the Office of Administrative Hearings transmitted the Administrative Law Judge Decision to the Registrar which recommended that the Registrar affirm and uphold its determination of Complainant’s ineligibility and deny Complainant’s appeal.

On or about June 30, 2020, the Administrative Law Judge Decision was accepted with a modification by the Registrar, with an effective date of August 9, 2020.

Complainant sought judicial review of the Registrar’s Final Decision, asserting that the claim should be reviewed under the statutes in effect at the time of the filing of the claim to the Fund, rather than those in effect at the time Respondent’s license was disciplined, arguing that the August 27, 2019 statutory amendments should apply to his claim.

In its ruling, the Superior Court noted that “[t]he parties agree the only issue for review is which version of [the statutes] applies to this case.”

In addressing that issue, the Court held that the Registrar properly denied the claim because Complainant’s “rights under any recovery statute vested on July 25, 2019 when the ROC’s Final Decision was entered against the contractor.” The Court affirmed the Registrar’s Final Decision.

Complainant appealed the Superior Court’s order.

In a Memorandum Decision reversing the Superior Court, the Court of Appeals concluded that “the 2019 amendment applies prospectively to all § 32-1133.01(F) claims submitted after its effective date, regardless of when the contractor’s license was suspended or revoked.” The Court “reverse[d] the superior court’s order and remand[ed] for further proceedings consistent herewith.”

On remand to the Superior Court, the parties entered a Stipulated Proposed Form of Remand Order, which provided that “[p]ursuant to the Memorandum Decision, the ROC should not determine that Flanigan is ineligible to receive payment from the Recovery Fund because of the tax classification of the subject property pursuant to the pre-August 27, 2019 version of Ariz. Rev. Stat. § 32-1131.” The Superior Court approved the Stipulated Order of Remand on November 8, 2022.

In accordance with the Court of Appeals’ Memorandum Decision and the Superior Court’s Order of Remand, the Registrar reviewed Complainant’s claim to the Fund pursuant to the statutes which became effective August 27, 2019, and were in effect at the time of the filing of the claim.

On February 24, 2023, the Registrar issued a Notice and Order of Recovery Fund Ineligibility.

Complainant appealed the Registrar’s Recovery Fund claim denial and the matter was referred to the Office of Administrative Hearings for an independent evidentiary hearing.

Hearing Evidence

At hearing, the parties stipulated that the underlying facts of this case are not in dispute and further stipulated to the admission of all exhibits. The parties presented legal argument and Complainant testified.

To obtain an award from the Fund, an applicant must provide proof to establish by a preponderance of evidence that he or she is eligible pursuant to Ariz. Rev. Stat. § 32-1131 et seq.

Further, if eligible, an applicant must establish by a preponderance of evidence that damages sought are within the limitations of compensability as set forth in Ariz. Rev. Stat. § 32-1132.01. This evidentiary showing requires documentation to support the original contract price, scope of work, payments made toward performance of the contract and documentation to substantiate costs to complete or repair any work required by the underlying disciplinary proceedings.

Pursuant to Ariz. Rev. Stat. § 32-1132(B)(3), for a trust to be eligible for an award from the Fund:

(a) The trust must be a revocable living trust;

(b) The trust must own the residential real property that is damaged by the failure of a residential contractor to adequately build or improve a residential structure or appurtenance; and

(c) All of the trust’s trustors must actually occupy or intend to occupy the residential real property as their primary residence.

If any of the conditions listed above are not met, a claimant is statutorily ineligible for an award from the Fund.

In the instant matter, at the time of contract, the property was owned by the Flanigan Family Trust, which acquired title to the property after foreclosing on a defaulted loan.

Per the Second Amendment of Trust Declaration that was submitted to the Fund on January 14, 2020, William J. Flanigan is the Trustor/Trustee of the trust, and Complainant Brian Thomas Flanigan is a Successor Trustee. The trust is a revocable living trust.

William J. Flanigan passed away on January 15, 2016.

At hearing, Complainant presented two legal arguments:

The Registrar should be precluded from raising a new issue in its newly issued Notice of Ineligibility because it is bound by its June 30, 2020 Final Decision regarding Complainant’s ineligibility due to the property’s county tax designation, the Registrar did not appeal with respect to the Final Decision, and therefore, is bound by that Decision and cannot now add a new legal defense to Complainant’s claim; and

The Registrar’s interpretation of Ariz. Rev. Stat. § 32-1132(B)(3)(c) is erroneous as it cannot apply to deceased trustors and argued that this is not the legislative intent of the statute.

Brian Flanigan testified that the trust was in the business of “promissory notes and land speculation” and that the property was an asset of the trust as there was a loan on the property, the loan was defaulted upon, and the trust foreclosed on the property in July 2018. Mr. Flanigan contracted with Respondent in November 2018. Mr. Flanigan testified that he decided to move to the property after repairs were made and intended to occupy the home.

Mr. Flanigan testified that his father passed away on January 15, 2016, and he was elected successor trustee of the trust by his siblings.

Mr. Flanigan testified that the trust “never had the intent to rent the property.”

Mr. Flanigan testified that the property was sold because the “costs went beyond what he could afford to purchase the home from the trust.”

Mr. Flanigan did not provide any documentation that he was ever the trustor of the trust or that his father, who was the trustor of the trust, intended to reside at the property.

The Registrar argued at hearing that at the time of Complainant’s claim in October 2019, it applied the provisions of the statutes that were in place at that time which had a requirement that the property meet certain property classifications. The Court of Appeals remanded the matter to the Registrar for the new statute to be applied. The new statute contains the provisions regarding property held in trust. The Registrar could not have applied a provision that did not exist at the time of its initial review and determination. The Registrar applied the statute as it existed at the time of remand, which includes the provisions for properties held in trust.

The Registrar further argued that the statute is clear and unambiguous and that the legislature “did not open it up to trustees.” In this case, Complainant was never a trustor of the trust. Complainant is a successor trustee, and the statute does not contemplate eligibility for a successor trustee.

CONCLUSIONS OF LAW

This matter lies within the Registrar’s jurisdiction. The matter was properly brought before the Office of Administrative Hearings.

The Registrar bears the burden of establishing by a preponderance of the evidence that the Fund properly denied Complainant’s claim.

“A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.” 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.”

Ariz. Rev. Stat. § 32-1133.01(A) provides that “if a contractor license has been revoked or has been 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.”

Pursuant to Ariz. Rev. Stat. § 32-1132(B):

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

. . . .

3. A trust to which all of the following apply:

(a) The trust is a revocable living trust.

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

(c) All of the trust's trustors actually occupy or intend to occupy the residential real property described in subdivision (b) of this paragraph as their primary residence.

The tribunal is required to give a statute’s words their ordinary meaning; when a statute is unambiguous, its terms should be applied without resort to secondary principles of construction. If the statutory language is clear and unambiguous, there is no need to look at legislative intent.

In this case, the evidence established that the Flanigan Family Trust is a revocable living trust. The evidence further established that the Flanigan Family Trust owned the residential property that was found to have been damaged by Respondent, resulting in the discipline of Respondent’s license.

However, the evidence failed to establish that William J. Flanigan, the Trustor of the Flanigan Family Trust, occupied or intended to occupy the residential real property as his primary residence. While the Tribunal is cognizant that the trustor has passed away, and therefore, cannot now occupy or intend to occupy the property, the plain language of the statute requires that all of the trust's trustors actually occupy or intend to occupy the residential real property as their primary residence. Accordingly, Complainant Brian Thomas Flanigan is ineligible for an award from the Fund pursuant to the plain language of Ariz. Rev. Stat. § 32- 1132(B)(3)(c).

Therefore, the undersigned Administrative Law Judge concludes that the Registrar properly denied Complainant’s claim to the Fund. However, nothing in this order would prevent Complainant from seeking a monetary award against Respondent from a civil court of competent jurisdiction.

RECOMMENDED ORDER

Based on the foregoing,

it is recommended that Complainant’s appeal be denied.

IT IS FURTHER RECOMMENDED that the Registrar affirm the denial of Complainant’s claim to the Fund.

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 17, 2023.

/s/ Sondra J. Vanella

Administrative Law Judge

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

Martín Quezada, Director

Registrar of Contractors

By: OAH Staff