ALJDEC decisions subject to certification as final

2019A-04389-RFA-LS-ROCRHG · Registrar of Contractors · 2022-01-06

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

LC Views Arizona LLC LC Views Arizona

LLC,

COMPLAINANT

Wm A Clark Construction Inc

License No. ROC 080678,

RESPONDENT

No. 2019A-04389-RFA-LS-ROCRHG

ADMINISTRATIVE LAW JUDGE

DECISION

HEARING: This matter is a rehearing to apply ROC’s interpretation of the law to a matter in which the original hearing occurred on July 13 and August 6, 2021; the matter was decided based on the existing record from that original hearing

ADMINISTRATIVE LAW JUDGE: Thomas Shedden

FINDINGS OF FACT

On December 2, 2021, the Registrar of Contractors (“ROC”) issued a Notice of Hearing on Appealable Agency Action setting the above captioned matter for a rehearing of docket number 2019A-04389-RFA-LS-ROC.

Complainant is LC Views Arizona LLC that filed a claim with ROC’s residential contractors’ recovery fund requesting a payout of $30,000. Respondent is Wm A Clark Construction Inc. that performed the construction work that is the subject of Complainant’s recovery fund claim.

In its Notice of [Re-] Hearing, as to the matters asserted, ROC provided that “Respondent has appealed the Registrar’s determination regarding LC Views Arizona LLC’s Recovery Fund Claim. The Registrar’s determination was made pursuant to A.R.S. §§ 32-1132 to 32-1133.01.” (Underscore added.)

ROC issued its Notice of Hearing for the original recovery-fund hearing on June 7, 2021. As to the matter asserted, ROC provided “Respondent has contested the Registrar’s determination regarding LC Views Arizona LLC’s Recovery Fund Claim. The Registrar’s determination was made pursuant to A.R.S. §§ 32-1132 to 32-1133.01.” (Underscore added.)

The original recovery-fund hearing was conducted on July 13 and August 6, 2021.

Frank Bell Jr. appeared and testified for Complainant, William Clark appeared and testified for Respondent, and ROC presented the testimony of Eric Ulinger, legal assistant II.

Complainant and Respondent entered a contract that called for Respondent to construct a house for Complainant. Before the work was complete, Complainant and Respondent terminated that contract in a Termination of Construction Agreement executed on July 30, 2019.

On August 29, 2019, Complainant filed with ROC a complaint against Respondent alleging that Respondent had billed for work not completed. Complainant subsequently amended its complaint.

ROC issued to Respondent a citation and an administrative hearing was conducted to address Complainant’s allegations.

On July 17, 2020, ROC issued a Final Administrative Decision and Order through which it adopted an Administrative Law Judge Decision dated June 23, 2020. The ALJ in that matter concluded that Respondent’s work on trusses, a slab, and concrete footings was deficient in violation of ROC’s workmanship standards. Through its Final Order ROC suspended Respondent’s license for fourteen days.

Complainant filed with Respondent’s bonding company a claim that was denied.

On or about February 16, 2021, Complainant filed its recovery fund claim.

ROC evaluated Complainant’s recovery fund claim and on April 27, 2021, ROC issued a Notice of Claim for Administrative Award that shows that Complainant “is to be awarded $30,000” in the form of a payment issued by the Recovery Fund.

Respondent exercised its right to contest the matter and requested a hearing to determine the amount or propriety of the amount claimed or to be awarded.

As of the dates of the original recovery-fund hearing, no payout from the recovery fund had been made to Complainant. Before any payment can be made, ROC must issue a Final Order directing the fund to make the payout. Any such Final Order will not be effective until forty days after it is issued.

If ROC actually does issue a payout from the fund, Respondent’s license will be automatically suspended by operation of law.

ROC exhibit 11 is a warranty deed showing that LC Views Arizona LLC owns the property at issue.

ROC exhibit 12 is LC Views Arizona LLC’s Articles of Incorporation showing that Mr. Bell is the LLC’s managing member, the Frank Bell Jr. Living Trust is the only owner with more than a 20% interest in the LLC, and Mr. Bell is that Trust’s Trustee.

ROC exhibits 4 and 13 also show that Mr. Bell is the LLC’s managing member.

ROC exhibit 8 shows that Mr. Bell and his wife Jennifer Bell are principals in the LLC and ROC exhibit 14 shows that they are owners of the LLC.

ROC exhibit 14 includes checks to Respondent showing the account holder as LC Views Arizona LLC, Frank Bell Jr. and Hui-Fen Hsu Bell.

ROC exhibit 9, Complainant’s recovery fund claim, shows LC Views Arizona LLC as the owner, with Mr. Bell signing as the homeowner.

Mr. Clark testified to the effect that he is trying to save his license and livelihood and that this project ruined him financially. He expressed his remorse as to how things worked out.

After the evidence was taken in the original recovery-fund hearing, ROC and Complainant filed written closing arguments.

In its written closing argument, ROC asserted that the matter was an appealable agency action because Respondent did not have an opportunity for a hearing before ROC issued its Notice of Claim for Administrative Award, and that the only issue for hearing was whether ROC’s decision to issue an award should be affirmed.

In its written closing argument, regarding the burden of proof ROC asserted:

.... The Recovery Fund award, a “benefit” for a claimant, is reviewable as an appealable agency action so the appellant has the burden of proof. Th[is] analysis ... is consistent with [Ariz. Admin Code section R2-19-119(B)] that specifically says “[u]nless otherwise provided by law .... the party asserting a claim, right, or entitlement has the burden of proof.” Respondent here has the burden of proof after making a claim to challenge the award amount.

(Underscore added; footnote omitted.)

On October 7, 2021, the undersigned administrative law judge issued an Administrative Law Judge Decision concluding that (1) the matter was a contested case as defined in Ariz. Rev. Stat. section 41-1001(6); (2) Complainant had the burden of proof under Ariz. Admin. Code section R2-19-119(B) because it had filed a claim asserting that it was entitled to a payout from the fund; and (3) that Complainant had suffered actual damages in excess of the statutory maximum of $30,000, but Complainant’s recovery fund claim should be denied because there was no evidence in the record showing that Complainant met the eligibility requirements of Ariz. Rev. Stat. sub-sections 32-1132(B)(2), (B)(3)(c) and (B)(3)(d).

On December 12, 2021, ROC issued a Final Administrative Decision and Order rejecting the undersigned’s ALJ Decision from the original recovery-fund hearing because in ROC’s opinion the ALJ erred by (1) concluding that all recovery fund matters are contested cases (rather than appealable agency actions as ROC believes) and (2) by failing to apply the burden of proof to the correct party. ROC further opined that the ALJ Decision was contrary to applicable law and established precedent.

Regarding the burden of proof, ROC found that “the burden of proof lies with the party appealing the Registrar’s recovery fund decision,” (i.e., the Respondent contractor that appealed ROC’s decision when Respondent requested a hearing pursuant to Ariz. Rev. Stat section 32-1133.01).

More specifically, ROC found that:

ROC had already determined that a payment should be made to Complainant;

Respondent had a right to request a hearing “to determine the amount or propriety of the payment;”

The hearing was scheduled not because Complainant filed its recovery fund claim, but rather because Respondent requested a hearing to dispute ROC’s decision to make a payment to Complainant;

Respondent has appealed ROC’s decision to order payment and is therefore the moving party;

The purpose of the hearing is to allow the moving party (Respondent) to prove its claim that ROC’s decision was in error;

Read together, subsections R2-19-119(B)(1) and (B)(2) show that the party making an argument bears the burden of proving that argument; and

Requiring Complainant to meet a burden of proof on a claim that it did not raise is an absurd result.

ROC ordered that the matter be remanded to the Office of Administrative Hearings for proceedings consistent with ROC’s Final Order and it issued it Notice of [Re-] Hearing.

Although ROC has no authority to dictate how the ALJ rules on issues of law, whether the matter is a contested case or an appealable agency action has no legal significance and which party bears the burden of proof is not dispositive in this matter.

Consequently, and because ROC’s request could be accomplished on the existing record, the ALJ issued an Order concluding the matter as of December 17, 2021 without taking additional evidence or argument.

CONCLUSIONS OF LAW

Unless otherwise provided by law, the party asserting a claim, right, or entitlement has the burden of proof and a party asserting an affirmative defense has the burden of proving that defense. 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).

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).

“The purpose of the office of administrative hearings is to ensure that the public receives fair and independent administrative hearings.” Laws 1995, Ch. 251 section 16. (Underscore added.)

ROC has authority to review and then accept, reject or modify an administrative law judge decision, or to decline to review the decision, in which case the decision becomes final. Ariz. Rev. Stat. § 41-1092.08.

Any agency’s authority is limited to that which is found statute. See Arizona State Board of Regents v. Arizona State Personnel Board, 195 Ariz. 173, 985 P.2d 1032 (1999).

The tribunal should not give deference to an agency’s prior determinations or interpretations of statute or rule. See Carter Oil Company, Inc. v. Arizona Department of Revenue, 248 Ariz. 339, 460 P.3d 808 (App. 2020).

“‘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).

“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(6).

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 41-1092.03(B) provides that

A party may obtain a hearing on an appealable agency action or contested case by filing a notice of appeal or request for a hearing with the agency within thirty days after receiving the notice prescribed in subsection A of this section. The notice of appeal or request for a hearing may be filed by a party whose legal rights, duties or privileges were determined by the appealable agency action or contested case.

When the legislature uses words in one statute but does not include them in another statute, the tribunal may not read those words into the statute where the legislature did not include them. See City of Phx. v. Orbitz Worldwide Inc., 247 Ariz. 234, 448 P.3d 275 (2019).

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.

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

Payments from the fund to claimants that do not meet the statutory requirements are improper because these payments come at the expense of the contractors that have paid the required biennial assessment into the fund. See Ramsey v. Ariz. Registrar of Contractors, 241 Ariz. 102, 384 P.3d 316 (App. 2016).

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 bolding added.)

Payouts from the recovery fund are limited to the actual damages suffered by a claimant. Actual damages “may not exceed an amount necessary to complete or repair a residential structure or appurtenance within residential property lines.” Ariz. Rev. Stat. § 32-1132.01(B)(1).

An individual claimant may not receive more than $30,000 from the fund. Ariz. Rev. Stat. § 32-1132.01(D).

“Monies in the residential contractors' recovery fund may not be awarded for attorney fees or costs, except in contested cases appealed to the superior court.” Ariz. Rev. Stat. § 32-1132.01(E).

Ariz. Rev. Stat. section 32-1132(B) provides in part:

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

***

2. A limited liability company to which all of the following apply:

(a) The limited liability company 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.

(b) All of the limited liability company's members actually occupy or intend to occupy the residential real property as described in subdivision (a) of this paragraph as their primary residence.

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.

(d) A trustor has not received monies from the fund in the last two years.

The preponderance of the evidence shows that LC Views Arizona LLC has been damaged by Respondent, with actual damages of more than the $30,000 maximum payout.

LC Views Arizona LLC is a not claimant that meets the requirements of Ariz. Rev. Stat. section 32-1132(B)(2).

The Frank Bell Jr. Living Trust is a not claimant that meets the requirements of Ariz. Rev. Stat. section 32-1132(B)(3).

Complainant is not a claimant that meets the requirements of Ariz. Rev. Stat. sections 32-1132(B)(1), (B)(4) or (B)(5).

Consequently, LC Views Arizona LLC’s recovery fund claim should be denied.

RECOMMENDED ORDER

IT IS ORDERED that LC Views Arizona LLC’s recovery fund claim is denied.

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, January 6, 2022.

/s/ Thomas Shedden

Thomas Shedden

Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director

Registrar of Contractors

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-137160-45720000