ALJDEC decisions subject to certification as final

2019A-04895-RFA-LS-ROC-RH · Registrar of Contractors · 2022-04-18

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Joel Colin English, Debora English ,

COMPLAINANT

Creative Concepts Woodworking and Remodeling Inc

License No. ROC 256431,

RESPONDENT

No. 2019A-04895-RFA-LS-ROC-RH

ADMINISTRATIVE LAW JUDGE

DECISION

HEARING: This matter is a rehearing of docket number 2019A-04895-RFA-LS- ROC that occurred on July 27 and September 9, 2021; the matter was decided based on the existing record from that original hearing and legal memoranda from the parties

ADMINISTRATIVE LAW JUDGE: Thomas Shedden

FINDINGS OF FACT

On January 7, 2022, 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.

Complainants are Joel Colin English and Debora English who filed a claim with ROC’s residential contractors’ recovery fund requesting a payout of $30,000.

Respondent is Creative Concepts Woodworking and Remodeling Inc. that performed construction work that is the subject of Complainant’s recovery fund claim.

Through a Final Administrative Decision and Order dated June 25, 2020, ROC adopted an Administrative Law Judge Decision finding that Respondent had violated Ariz. Rev. Stat. sections 32-1154(A)(2), (A)(3), and (A)(22). Through its Final Administrative Decision, ROC suspended Respondent’s license and imposed against Respondent a civil penalty.

Complainants submitted to ROC a Recovery Fund Claim dated February 2, 2021 in which they verified that the contract amount was $98,700, that they had paid Respondent $63,000, that they had spent $10,121.61 to make repairs, and that they had collected $4250 from Respondent’s bonding company. Complainants submitted two bids for additional work with their claim, one from Bjerk Builders that ROC rejected, and one from Gus Brothers for $54,450.

The original recovery fund hearing was conducted on July 27 and September 9, 2021. All parties had the opportunity to present evidence and then to provide written closing arguments or legal memoranda.

ROC’s Tedi Quezada processed Complainants’ recovery fund claim. Ms. Quezada’s duties as pertinent to this matter include reviewing bids and other documents related to recovery fund claims.

Ms. Quezada acknowledged having no knowledge of construction per se, but explained that qualifications in construction were irrelevant to her job duties.

Ms. Quezada did not analyze the substance of Gus Brothers’ bid, but rather she testified to the effect that she accepted it at face value because she was required to do so. She explained that she was required to rely on Gus Brothers’ bid because Gus Brothers is a licensed contractor that should know what would be required to correct the deficiencies at issue. She testified to the effect that the person who submits the information to ROC is in the best position to say what needs to be done to correct the deficiencies for which Respondent’s license was suspended.

Ms. Quezada concluded that Complainants had proven actual damages of $24,898.85, but she acknowledged errors in her work, including failing to account for a $4250 payment Complainants received from Respondent’s bonding company.

Complainants presented no evidence related to the substance of Gus Brothers’ bid or the receipts they submitted with their claim.

Respondent’s qualifying party, Matt Bayles provided credible testimony that Gus Brothers’ bid and the receipts for repairs that Complainants submitted in support of their recovery fund claim included work that was not part of the parties’ contract and that was not included within the violations for which ROC suspended Respondent’s license.

Respondent also presented the testimony of Nick Bacon, qualifying party for Bacon Family Contracting LLC that holds KB 1 license number 319131. Mr. Bacon had prepared a cost-to-repair estimate that was dated May 20, 2021 and he testified to the same. ROC’s website showed that Bacon’s license was suspended on September 9, 2021. Although Bacon’s license was not suspended when Mr. Bacon prepared his estimate, this estimate and his testimony are given no weight in this rehearing.

Through an Administrative Law Judge Decision dated November 29, 2021, the undersigned concluded that (1) the matter was a contested case as defined in Ariz. Rev. Stat. section 41-1001(6); (2) Complainants had the burden of proof under Ariz. Admin. Code section R2-19-119(B) because they had filed a claim asserting that they were entitled to a payout from the fund; and (3) that Complainants had not suffered actual damages in excess of the $4250 that they received from Respondent’s bonding company and consequently, Complainant’s recovery fund claim should be dismissed.

On December 29, 2021, ROC issued its Final Administrative Decision and Order. ROC rejected the ALJ Decision because in ROC’s opinion the ALJ erred by (1) concluding that all recovery fund matters are contested cases; (2) by failing to apply the burden of proof to the correct party; (3) by failing to properly evaluate the recovery fund award; and (4) adopting arbitrary and capricious interpretations of statutes that were contrary to principles of construction 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 whose request for a hearing pursuant to section 32-1133.01 ROC considers to be an appeal.

More specifically, ROC found that:

The hearing was scheduled not because Complainants filed their recovery fund claim asserting that they were entitled to a payout, but rather because Respondent requested a hearing to dispute ROC’s decision to make a payment to Complainants;

ROC has already determined that a payment should be made to Complainants and that the sole issue for hearing was whether ROC’s decision should be affirmed (underscoring added);

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

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 Complainants to meet a burden of proof on a claim that they did not raise is an absurd result.

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

Also pertinent to this matter are minute entries issued in Maricopa County Court case LC2021-00022 (ROC case number 2018-2193), in which the Court rejected ROC’s argument that the Respondent contractor had the burden of proof, finding that the complainant (and ROC) had that burden.

After the matter was remanded, the parties were given the opportunity to submit legal memoranda addressing issues raised in or by ROC’s Final Decision and any other issues they deemed appropriate, including the Superior Court’s rulings.

Complainant and Respondent each filed a memorandum; ROC did not.

Although ROC has no authority to dictate how the ALJ rules on issues of law, and the ALJ does not agree with ROC’s legal positions, resolving these differences of opinion is not necessary to answer the question of whether ROC’s decision to award Complainants $24,898.85 in the form of a payout from the recovery fund should be affirmed, which ROC has determined is the sole issue for hearing.

CONCLUSIONS OF LAW

“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.

ROC has no authority to order the tribunal to adopt ROC’s legal interpretations. See Arizona State Board of Regents v. Arizona State Personnel Board, 195 Ariz. 173, 985 P.2d 1032 (1999)(an agency’s authority is limited to that which is found statute.).

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 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).

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.)

An Administrative Law Judge Decision must be based on evidence that is substantial, reliable and probative. Ariz. Rev. Stat. § 41-1092.07.

“Substantial evidence is evidence which would permit a reasonable person to” conclude that the proposed finding should be substantiated. See Sierra Club – Grand Canyon Chapter v. Ariz. Corp. Comm’n, 237 Ariz. 568, ¶ 22, 354 P.3d 1127 (2015 App.)(citing In re Estate of Pouser, 193 Ariz. 574, 579, ¶ 13, 975 P.2d 704 (1999).

“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 who 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 as a result of Respondent’s violations. 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.” Ariz. Rev. Stat. § 32-1132.01(B)(1).

The preponderance of the evidence shows that ROC’s decision to award to Complainants $24,898.85 in the form of a payout from the recovery fund should not be affirmed. Respondent presented credible evidence showing that the proposed payout includes money for work that was not within the scope of parties’ contract and included money for work that was not included in the violations for which ROC suspended Respondent’s license. Neither ROC, nor Complainants presented evidence showing that Respondent’s evidence was flawed and neither ROC nor Complainants presented any substantive evaluation of the Gus Brothers’ bid or the receipts that Complainants asserted were to correct or finish work for which Respondent’s license was suspended.

Consequently, Complainants’ recovery fund claim should be denied.

RECOMMENDED ORDER

IT IS ORDERED that Joel Colin English and Debora English’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, April 18, 2022.

/s/ Thomas Shedden

Thomas Shedden

Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director

Registrar of Contractors

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-137160-45720000By: Miranda Alvarez

Legal Secretary