ALJDEC decisions subject to certification as final

2019A-02633-RFA-LS-ROC · Registrar of Contractors · 2021-06-14

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Steve C Ness,

COMPLAINANT,

v.

J C White Inc.

License No. ROC 251857,

RESPONDENT.

No. 2019A-02633-RFA-LS-ROC

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: May 27, 2021 at 9:00 AM.

APPEARANCES: Assistant Attorney General Sarah Asta, Esq. appeared on behalf of the Arizona Registrar of Contractors (“Registrar”) with Secura Adabulie. Steve Ness (“Complainant”) appeared on his own behalf with Devin Hollis as a witness.

ADMINISTRATIVE LAW JUDGE: Jenna Clark.

_____________________________________________________________________

After review of the hearing record in this matter, the undersigned Administrative Law Judge makes the following Findings of Fact and Conclusions of Law, and issues this Recommended Order to the Director of the Registrar.

FINDINGS OF FACT

Background and Procedure

According to the Registrar’s public website, on or about January 01, 2009, the Registrar issued License No. 251857, General Dual KB-2 residential and small commercial contracting license, to Respondent. The license was revoked by the Registrar on November 12, 20219. Amber White was also listed as an Officer on the license. Respondent’s address of record on the license was 4102 E. Meadow Creek Way Queen Creek, AZ 85140-3147.

Pursuant to Ariz. Admin. Code R4-9-117, Administrative Notice is taken of Respondent’s prior license record as reflected on the Registrar’s public website. There are no open complaints against the license; however, the license has been disciplined by the Registrar on 3 prior occasions. The license held a $9,000.00 surety bond, issued by Old Republic General Insurance Corporation (“Old Republic”), which was cancelled on August 17, 2019. A balance of $5,000.00 remains available on the bond.

On May 17, 2019, Complainant filed a 20-item complaint against Respondent with the Registrar alleging abandonment of a new residential construction project. Specifically, Complainant alleged that Respondent failed to correct issues per his purchase contract. The Registrar designated Complaint No. 2019-02633 and assigned to Stephen Lawton (“Investigator Lawton”) for investigation.

On June 12, 2019, Complainant provided a copy of his Residential Seller’s Property Disclosure Statement (“SPDS”) and repair punch list for the underlying project.

On June 18, 2019, Complainant provided a copy of his Residential Buyer’s Inspection Notice and Seller’s Response (“BINSR”) to the Registrar.

On June 29, 2019, Complainant provided a copy of his Residential Resale Real Estate Purchase Contract (“Contract”) to the Registrar.

On an unknown date, Complainant provided a copy of a Home Inspection Report for his residence that was performed on September 14, 2017.

On July 15, 2019, Investigator Lawton completed his inspection of Complainant’s project. Respondent was not in attendance. Ultimately, Investigator Lawton consolidated several of Complainant’s complaint items and substantiated 9 of 16 complaint items; specifically determining that the work Respondent had performed fell below the Registrar’s minimum workmanship standards.

On August 06, 2019, a Directive From The Registrar (“Directive”) was issued by the Registrar which instructed Respondent to remediate complaint items 1, 5-6, 8-9, 11, 13, and 15-16, and provide written proof of completion to the Registrar no later than 5:00pm on August 30, 2019, or face discipline pursuant to Ariz. Rev. Stat. §§ 32-1154(A)(22) and 32-1154(E). Respondent was also put on notice that if its license had been revoked it was only permitted to remedy the listed violation(s) by paying a licensed contractor as hired by Complainant or by entering into a financial settlement agreement with Complainant.

Complainant and Respondent did not execute a financial agreement on or by August 30, 2019, to resolve Complaint No. 2019-02633.

On September 19, 2019, a Citation was issued and sent certified and first class mail to Respondent’s address of record charging Respondent with failure to meet minimum construction standards in violation of Ariz. Rev. Stat. § 32-1154(A)(3); Ariz. Admin. Code R4-9-108, and for failing to take corrective action after a written directive was issued by the Registrar in violation of Ariz. Rev. Stat. § 32-1154(A)(22). Respondent was advised to submit a written Answer to the Registrar by October 04, 2019, and that failing to do so would constitute an admission pursuant to Ariz. Rev. Stat. § 32-1155(B).

Respondent did not submit an Answer to the Registrar by October 04, 2019.

On October 10, 2019, the Registrar issued a Final Administrative Decision and Order (“Default Order”) to the parties whereby Respondent was held to be in violation of Ariz. Rev. Stat. §§ 32-1154(A)(3); 32-1154(A)(22), and 32-1155(A). As such, the Registrar suspended Respondent’s licenses under Ariz. Rev. Stat. §§ 32-1154 and 32-1155 for four (4) days and assessed a $250.00 civil penalty.

On September 23, 2020, the Registrar received a claim for payment with the Recovery Fund from Complainant. Complainant did not indicate a specific amount of deposit to be refunded, however, Complainant did specifically request a $41,131.99 payment from the Recovery Fund.

On March 08, 2021, the Registrar issued a Notice and Order of Recovery Fund Claim Denial (“Denial Order”) which held that Complainant was not legally eligible for an administrative awarded from the Fund. Specifically, the Registrar determined that Complainant purchased the underlying property “as is” because, per the terms of Complainant’s contract, the property was “sold in its present physical condition as of the date of contract acceptance” and no subsequently signed document between Complainant, LREP Arizona LLC (“Seller”), or Respondent existed to modify the terms of the original purchase agreement. Because the Registrar determined that Complainant did not have actual damages pursuant to Ariz. Rev. Stat. § 32-1132.01(B)(1) as a result of the underlying project, Complainant was deemed to be ineligible to access the Recovery Fund.

An appeal of the Denial Order was due no later than March 23, 2021.

On March 15, 2021, the Registrar received a timely appeal request from Complainant contesting his Recovery Fund denial.

On April 05, 2021, the Registrar referred the matter to the Office of Administrative Hearings (“OAH”) for an independent evidentiary hearing on May 27, 20201. The sole issue at hearing was to determine if Complainant is eligible to access the Recovery Fund pursuant to Ariz. Rev. Stat. § 32-1131 et seq. as established by the evidence.

Hearing Evidence

At the hearing, the Registrar presented the testimony of Secura Adabulie – Legal Assistant and submitted Exhibits 1-19. Complainant testified on his own behalf and called Devin Hollis – Realtor as a witness. The Notice of Hearing was also admitted into the record as its own exhibit. The substantive facts are as follows:

On August 19, 2017, Complainant entered into a contract agreement to purchase “flipped” residential property located at 19588 E. Country Meadows Lot 22 Queen Creek, AZ 85142 from Seller.

Respondent built the residence.

Complainant’s inspection period began upon the removal of contingency, which is when the escrow period began.

Line 191 of the contract states BUYER AND SELLER AGREE THE PREMESIS ARE BEING SOLD IN ITS PRESENT PHYSICAL CONDITION AS OF THE DATE OF CONTRACT ACCEPTANCE. (Emphasis in original.)

Line 252 contains Complainant’s “due diligence” acknowledgement.

Per Seller’s disclosure, the property was vacant since its purchase by Seller on June 14, 2013, and had previously sustained flood damage in the basement which was addressed without an insurance claim. No one lived in the home prior to Complainant.

Similar parcels in the subdivision sold for more money around the time Complainant purchased the property.

Complainant’s September 14, 2017, Home Inspection Report revealed seven (7) major concerns regarding water and/or water damage: specifically, items #3, #12, #29, #30, #31, #33, and #50.

Complainant originally gave Seller a 16-item punch list, but on October 05, 2017, the parties settled and Seller agreed to address 9 items from the punch list. Seller hired and paid Respondent to remediate said items no later than 5-days prior to the close of escrow..

Investigator Lawton’s jobsite inspection notes highlights deficiencies identified by Complainant’s home inspection report, which correspond with Seller’s disclosure.

On April 30, 2020, Old Republic issued Complainant a denial letter because Complainant’s home was built on or about October 2017, but Respondent’s bond was cancelled effective December 19, 2014.

As of the date of the hearing, Complainant had not spent any monies to complete repairs of items identified in the Registrar’s Directive.

In closing, Complainant argued that he purchased the property at issue with the understanding that Respondent would address the 9-item punch list Seller agreed to remediate, not in an “as is” condition. Complainant opined that because Respondent had begun to make repairs and abruptly stopped, he was entitled to access the Recovery Fund and receive a payout award.

In closing, the Registrar argued that Complainant knew or should known that he purchased flood damaged property “as is” due to the fact that similar lots in the area cost much more than his sold for, the language used in his contract, and warnings in his home inspection report. The Registrar opined that Complainant’s breach-of-contract arguments were misplaced before the Tribunal, who has no jurisdiction to hear such arguments, and argued that Respondent’s failure to complete punch list items from the underlying homeowner complaint does not automatically grant Complainant access to the Recovery Fund.

CONCLUSIONS OF LAW

This matter lies within the Registrar’s jurisdiction and was properly brought before OAH for adjudication.

Complainant bears the burden of establishing by a preponderance of the evidence that the Fund’s payout amount was incorrect.

“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.”

Pursuant to Ariz. Rev. Stat. § 32-1131 et seq., in order to be eligible to access the Recovery Fund an applicant must meet specific eligibility criteria. An individual is eligible for an award from the residential contractors’ recovery fund if they both: (1) own residential real property that is damaged by the failure of a residential contractor to adequately build or improve a residential structure or appurtenance, and (2) actually occupy or intend to occupy the residential real property as the individual’s primary residence. Additionally, the applicant must have contracted with a residential contractor who was appropriately licensed either at the time of contract execution, when the first payment on the project was made, or when the work on the project first began.

Ariz. Rev. Stat § 32-1132(B) provides, in pertinent part, that only “individuals who are owners of residential property damaged by the failure of a contractor to adequately build or improve a residential structure, who reside at the property as their primary residence” are eligible for an award from the Recovery Fund.

Ariz. Rev. Stat § 32-1132.01 provides, in pertinent part, that an award from the Recovery Fund “[m]ay not exceed the actual damages suffered” and also “[m]ay not exceed an amount necessary to complete or repair a residential structure.” “Actual damages” means the reasonable cost of completing the contract and repairing the contractor’s defective performance, minus the part of the contract price still unpaid. The maximum individual award from the Recovery Fund is $30,000.00.

Ariz. Rev. Stat. § 32-1154(F) provides that “if a contractor’s 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.”

In interpreting a statute, “[w]e first consider the language of the statute and, if it is unclear, turn to other factors, including ‘the statute’s context, subject matter, historical background, effects, consequences, spirit, and purpose.” “In applying a statute its words are to be given their ordinary meaning unless the legislature has offered its own definition of the words or it appears from the context that a special meaning was intended.”

Based on the credible and available evidence of record, the Tribunal concludes that the Registrar soundly established Complainant’s ineligibility to access the Recovery Fund because Complainant suffered no actual damage(s).

Here, Complainant did not establish by a preponderance of the evidence that he was lawfully eligible to access the Recovery Fund as justified and supported by the record in adherence with Ariz. Rev. Stat. § 32-1131 et seq. Complainant’s arguments, while valid, were irrelevant to these proceedings. The undersigned has no legal authority to determine whether a breach of contract took place. The Tribunal may only accept and weigh evidence related to the issue(s) noticed for hearing. To that end, Complainant did not provide evidence sufficient to overcome that presented by the Registrar to establish that he was erroneously found ineligible to access the Registrar’s Recovery Fund. Because Complainant did not sustain his burden of proof in this matter his appeal must be denied.

RECOMMENDED ORDER

Based on the foregoing,

IT IS RECOMMENDED that the Registrar affirm the March 08, 2021, Denial Order.

IT IS FURTHER RECOMMENDED that the Registrar deny Complainant’s request for an administrative payout from the Recovery 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.

Done this day, June 14, 2021.

Office of Administrative Hearings

/s/ Jenna Clark

Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director

Registrar of Contractors