ALJDEC decisions subject to certification as final

2022A-10795-RFA-LS-ROC · Registrar of Contractors · 2025-10-14

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Jacob Malinka,

COMPLAINANT,

M AND D Stewart LLC

License No. ROC 321618,

RESPONDENT.

No. 2022A-10795-RFA-LS-ROC

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: September 23, 2025 at 9:00am

APPEARANCES: Complainant Jacob Malinka on his own behalf. Assistant Attorney General Charles Hover on behalf of the Arizona Registrar of Contractors with witness Gail Mathews. No appearance on behalf of Respondent.

ADMINISTRATIVE LAW JUDGE: Nicole Robinson

EXHIBITS ADMITTED INTO EVIDENCE: Department Exhibits 1 through 8.

FINDINGS OF FACT

Background and Procedure

The Arizona Registrar of Contractors (“Registrar”) issued License No. ROC 321618 to M and D Stewart, LLC (“Respondent”).

On or about November 26, 2022, the Registrar received a Complaint against Respondent from Jacob Malinka (“Complainant”) alleging, among other things, poor work and abandonment with Respondent’s contracted scope of work (“the workmanship complaint”). Respondent had contracted with Complainant for a new concrete floor overlay at their residence located at 3463 E. Huber Circle in Mesa, Arizona.

The property’s special warranty deed is titled as the “Ryan Bowen Smith, as Trustee of the Ryan Smith 2019 Trust, dated February 13, 2019.” The Ryan Smith 2019 Trust (the Trust), an irrevocable trust agreement, was executed on February 13, 2019. The parties to the agreement are Darlene Carol Smith, the Grantor, and Ryan Bowen Smith, trustee. Complainant’s wife, Alexandria Malinka, her mother is Darlene Carol Smith, and her father is Ryan Smith. Complainant lives at the property with Alexandria and their two children. The property sits on one acre of land with the main residence and a separate casita, as part of its features. Alexandria’s parents reside in the casita about one-third of the year, however, their primary residence is located outside of Arizona.

As a result of the workmanship complaint, the Registrar issued a Citation against Respondent charging a possible violation of Ariz. Rev. Stat. § 32-1154(A)(3), namely of Ariz. Admin. Code R4-9-108(A).

Respondent filed a timely answer to the Citation. An administrative hearing was held. In the April 21, 2023 Decision, Administrative Law Judge Eigenheer considered Respondent’s arguments and concluded that Respondent violated the charged provision of this State’s contracting laws and recommended that Respondent’s contracting license be suspended for a period of five (5) days.

On or about June 9, 2023, the Registrar issued a Final Administrative Decision and Order that affirmed the violation.

Complainant then filed a claim with the Residential Contractors’ Recovery Fund (“the Fund”) to recover the cost of performing the corrective work and completing the project.

As part of the claim process, Complainant listed the amount paid to the original contractor as $32,867.00 with a remaining balance due on contract as $13,833.00. The lowest bid to repair and/or complete the contract was listed as $63,635.00 which was a partial quote only.

On July 11, 2025, the Registrar issued a Notice and Order of Recovery Fund Ineligibility, finding that Complainant is ineligible for an award from the Fund. The Notice held in relevant part:

In order for a trust to be eligible for an award from the Fund:

The trust must contract with a licensed residential contractor who was appropriately licensed when the underlying contract was signed, when the first payment was made, or when the underlying work first commenced. Ariz. Rev. Stat. §§ 32-1132(C) & (D);

The trust must be a revocable living trust. Ariz. Rev. Stat. § 32-1132(B)(3)(a);

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. Ariz. Rev. Stat. § 32-1132(B)(3)(b);

All of the trust’s trustors must actually occupy or intend to occupy the residential real property as their primary residence. Ariz. Rev. Stat. § 32-1132(B)(3)(c); and

No trustor of the trust may have received monies from the Fund in the last two years. Ariz. Rev. Stat. § 32-1132(B)(3)(d).

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

On July 11, 2025, the Registrar issued a Notice and Order of Recovery Fund Ineligibility indicating Complainant was not eligible for a payout from the Fund.

On August 8, 2025, the Registrar referred the matter to the Office of Administrative Hearings, an independent agency, for an evidentiary hearing.

A hearing was held on September 23, 2025 at 9:00am.

Hearing Evidence

Gail Mathews, Legal Assistant and Claims Reviewer for the Fund, testified that she reviewed the Complaint, the Written Directive, the Administrative Law Judge Decision regarding the underlying Complaint, the parties’ contract, the payments made by Complainant to Respondent, the deed to the property, and bids/costs and payments submitted by Complainant for repair/completion of the project, in determining that Complainant was not eligible to file a claim with the Fund.

Ms. Mathews testified that upon her review of the trust agreement, that Complainant had not satisfied the eligibility requirements for a payment from the Fund primarily because the trust was an irrevocable trust.

Complainant did not deny the type of trust that was established for his residence. Complainant testified that Mr. Smith established the trust, however, he and his wife pay for all of the utilities and everything else that goes along with maintaining a home. Complainant argued that the intent of the recovery fund was to protect customers and that these laws regarding a trust were “contradictory to the fundamental purpose” of the Fund. Complainant further argued that “precedent” in Pinnamaneni v. Ariz. Registrar of Contractors, should determine that he was eligible for the Fund.

CONCLUSIONS OF LAW

This matter lies within the Registrar’s jurisdiction.

Ariz. Rev. Stat. § 32-1132(A) provides as follows:

The residential contractors’ recovery fund is established to be administered by the Registrar for the benefit of claimants that are damaged by an act, representation, transaction or conduct of a residential contractor that is licensed pursuant to this chapter and that is in violation of this chapter or the rules adopted pursuant to this chapter.

Ariz. Rev. Stat. § 32-1132(B)(1) provides as follows:

Only the following claimants are eligible for an award from the residential contractors’ recover fund: (1) An individual who both:

Owns residential real property that is damaged by the failure of a residential contractor to adequately build or improve a residential structure or appurtenance.

Actually occupies or intends to occupy the residential real property described in subdivision (a) of this paragraph as the individual’s primary residence.

Complainant bears the burden of proof because he is asserting a claim, right, or entitlement by a preponderance of the evidence.

A preponderance of the evidence means “proof which leads the [trier of fact] to find that the existence of the contested fact is more probable than its nonexistence.”

In this case, Complainant pointed to the Pinnamaneni case which determined whether a trust that owns residential property damaged by a contractor’s faulty work may qualify as a “person injured” eligible for recovery from the Fund. In Pinnamaneni, the Arizona Court of Appeals held in the Complainant’s favor in that she could recover from the Fund. In Pinnamaneni, the residential property was owned by the trust which was a revocable trust and Pinnamaneni was the trustee and a beneficiary. To distinguish the current case, the property is owned by the Trust which was irrevocable and Complainant was neither the trustee, nor a beneficiary.

Furthermore, Pinnamaneni was decided before the current version of the statute was put into effect. If the legislature wished to have the same eligibility requirements as those set forth in Pinnamaneni, it could have included those provisions in the statute when it was amended.

After review of all the evidence, the Tribunal concludes that the Registrar properly found Complainant ineligible per Ariz. Rev. Stat. § 32-1132(B)(3)(a). Accordingly, Complainant is not entitled to a payout from the Fund.

RECOMMENDED ORDER

Based on the foregoing,

It is Recommended that on the effective date of the Registrar’s Final Order in this matter, the Registrar close Complainant’s recovery fund request in Case No. 2022-10795.

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, October 14, 2025.

/s/ Nicole Robinson

Administrative Law Judge

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

Tom Cole, Director

Registrar of Contractors

M AND D Stewart LLC

3143 S Wildrose Cir

Mesa, AZ 85212

[email redacted]

Jacob Malinka

3463 E. Huber Circle

Mesa, AZ 85213

[email redacted]

Charles S. Hover, III

Office of the Attorney General

2005 N Central Ave

Phoenix, AZ 85004-1592

[email redacted]

By: OAH Staff