ALJDEC decisions subject to certification as final

20F-AAA1920003-ADH · Arizona State Department of Housing · 2020-03-06

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

ANTHONY TONSICH,

Appellant,

vs.

ARIZONA DEPARTMENT OF HOUSING,

Appellee.

No. 20F-AAA1920003-ADH

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: February 20, 2020, at 1:00 p.m.

APPEARANCES: Anthony Tonsich (“Appellant”) appeared on his own behalf; the Arizona Department of Housing (“the Department”) was represented by Valerie Love Marciano, Esq., Assistant Attorney General.

ADMINISTRATIVE LAW JUDGE: Diane Mihalsky

_____________________________________________________________________

FINDINGS OF FACT

Background and Procedure

On or about June 17, 2019, Appellant filed a complaint with the Department against Randy Instine, LLC, to whom the Department has issued a dealer’s license (“Dealer”), complaining that he was “unable to get seller/dealer to complete installation.” Appellant attached to the complaint documents concerning his purchase of a 2019 Champion double-wide manufactured home whose dimensions would be 28’ x 61’ after installation on Appellant’s property at 10470 E. Lizard Ln., Cornville, Arizona 86325.

Randy Instine (“Mr. Instine”) is Dealer’s principal. Mr. Instine is also an officer of Custom Quality Homes Corp. (“Custom Quality Homes” or “CQH”), which is licensed by the Arizona Registrar of Contractors. Dealer contracts to Custom Quality Homes construction work required for the installation of manufactured homes Dealer sells in Arizona.

On June 19, 2019, the Department’s Complaint Program sent a copy of the complaint to Dealer and requested it to respond in writing within ten days. The Department later granted Dealer additional time to respond to the complaint.

On or about July 9, 2019, Dealer filed a written response to Appellant’s complaint. The Department subsequently conducted an investigation, which included requesting additional information and documentation from both Appellant and Dealer.

On or about August 7, 2019, the Department’s Compliance Administrator, Donna Grant, issued a Verified Complaint & Sign-Off Form that verified two of Appellant’s complaints against Dealer, including that it had taken a $9,000.00 draw for “permits, demo and onsite pad,” but had failed to perform these items, and that it had failed to provide properly signed-off Manufacturer’s Statements of Origin (“MSOs”) for the home. The August 7, 2019 Verified Complaint and Sign-Off Form did not verify the other complaint items, including that Dealer had breached its contract by failing to install the manufactured home that Appellant purchased on his land in Cornville.

On or about September 3, 2019, Dealer’s attorney sent a copy of his August 27, 2019 letter to Appellant, attempting to resolve the two items that the Department had verified against Dealer. Dealer’s attorney explained that it could not resolve the complaint because Appellant had refused to supply necessary documents or to cooperate with Dealer to resolve remaining issues.

On or about October 29, 2019, Ms. Grant on behalf of the Department issued an Amended Verification Inspection Report that reached the same conclusions as the August 7, 2019 Verified Complaint and Sign-Off Form, but that had been amended for clarity, in relevant part as follows:

2) _____ On March 21, 2019, Pioneer Title Agency issued a draw of $9,000.00 to Custom Quality Home at the request of Randy Instine (“Instine”). Instine stated that the draw was for permits, demo and onsite pad for flood stem wall. Dealer/contractor did not complete demolition or prepare the onsite pad. As of July 11, 2019, the only work done by Instine was application for a state permit on June 10, 2019 in the amount of $360.00. VERIFIED – DEALER/CONTRACTOR. Dealer/contractor did not facilitate complete demolition or prepare the onsite pad. Instine did pay $360.00 for permit; therefore, $8,640.00 of the $9,000.00 draw was not used for its intended purpose. Failure to use the funds for the intended purpose is a violation of A.R.S. § 41-4040(Q). *Dealer has indicated he is owed $13,050.40 ($7,074.79 for reduced commission, $5,615.61 for taxes, and $360.00 for permit). The Department does not dispute that $13,050.40 appears to be owed to Dealer. Dealer has indicated that he can recover the $9,000.00, that was paid to Custom Quality Home, leaving a balance of $4,050.40 due from [Appellant]. This appears to be an equitable solution to correct this complaint item. If the $9,000.00 is credited toward the balance owed to Dealer, there is no basis for assistance from the Consumer Recovery Fund as it pertains to this complaint.

. . . .

6) _____ I request that properly signed off [MSOs] be delivered to me. Verified – Dealer. Dealer is to provide the [Appellant] with the properly signed off MSOs, or is to deliver the properly signed off MSOs to Pioneer Title with the instruction that Pioneer Title is to provide the properly signed off MSOs to [Appellant], upon the signing of an agreement between the Dealer and [Appellant] that advises Pioneer Title that the dealer is to be paid the balance of $13,050.40 that is owed to Dealer. . . .

On or about November 13, 2019, Dealer provided evidence to the Department that Dealer had delivered the original MCOs for the manufactured home to Pioneer Title Agency.

On or about November 15, 2019, Appellant sent an email to the Department, notifying it that he intended to appeal the findings in the verified complaint.

The Department referred the matter to the Office of Administrative Hearings, an independent state agency, for an evidentiary hearing.

A hearing was held on February 20, 2020. The Department submitted sixteen exhibits and presented the testimony of three witnesses: (1) Mr. Instine, Dealer’s principal; (2) Esperanza Padilla, the Complaints Manager for the Department’s Office of Manufactured Housing, who established foundation for its exhibits; and (3) Donna Grant, the Department’s Compliance Administrator. Appellant submitted five exhibits and testified on his own behalf.

Hearing Evidence

Mr. Instine testified that in September 2019, he spoke to Appellant about his possible purchase of a manufactured home from Dealer. Mr. Instine explained that, because Dealer primarily serves rural areas of Arizona, he always discusses with customers septic systems, whether the home will be in a flood zone, and the need for an engineer for the stem wall if the manufactured home is to be installed in a flood zone. Mr. Instine testified that these items are the homeowner’s responsibility.

On or about October 30, 2018, Appellant purchased a 3-bedroom manufactured home from Dealer’s salesperson Randall Rubottom for the contract price of $121,834.61, with $115,000.00 to be placed in escrow at Pioneer Title Agency. The purchase contract included a total of $18,250.00 for the following Optional Equipment, Labor and Accessories:

All items subject to bid and management approval

Delivery 2200—

Mobile Crawler to deliver 1500—

Block & Level 4800—

4 ton air conditioner 3700—

Compacted gravel pad under home 2500—

Re-tape & texture & carpet install 1950—

Two County Required Steps/

Landings masonary [sic] if possible 1200—

On October 30, 2018, Appellant signed as Buyer a form on Dealer’s letterhead that provided in relevant part as follows:

As the Buyer/Buyers, I/we are responsible for all necessary improvements to our property. This includes, but is not limited to, locating the contractors to do such improvements as wells, septic systems, excavation, site preparation, foundations and utility improvements and home placement. I/we understand that I/we are responsible for all permits for utility improvements and home placements. I/we also understand that I/we must contact all utility companies to get service to the home and [Dealer] cannot do this for me.

Mr. Instine testified that he visited the site in January 2019, when he walked the road in front of the property. There was a barn and a slab from a home that had been removed that blocked entry to Appellant’s property from the frontage on Lizard Lane. The next road running perpendicular to Lizard Lane is Old Pump House Road, on the other side of one of Appellant’s adjacent neighbors’ land.

Mr. Instine testified that in September 2018, he told Appellant that he would need the written permission of all three neighbors who owned property adjacent to Appellant’s property to trim trees, to take down fences if necessary, and to cross their property to deliver the manufactured home. Mr. Instine testified that Appellant stated that he was a fence contractor in California and that it would be no problem for him to obtain neighboring property owners’ permission.

Mr. Instine testified that Appellant said one of the properties was vacant. Mr. Instine told Appellant that he still needed the owner’s written permission to cross or alter the adjacent property.

Mr. Instine testified that at the end of Appellant’s property there was a sign that said “Shallow Water Line.” Mr. Instine explained that the sign indicated that Appellant’s property was in a flood zone and that it would be necessary to construct a permitted engineered stem wall to raise the manufactured home higher than expected flood waters. Mr. Instine testified that he referred Appellant to Jeremy Laipple, an engineer at Triple Crown Engineering, because he could do what the state required for a permit.

Mr. Instine testified that he or another of Dealer’s employees normally goes to the site to make sure that Dealer can deliver the manufactured home. Mr. Rubottom had added the cost of the crawler in the Optional Equipment, Labor and Accessories because it would be necessary to maneuver the house in tight spots.

Mr. Instine testified that in February 2019, he contacted Mr. Laipple with Triple Crown Engineering to provide the information needed about the house specifications that would be necessary to design the stem wall. He also contacted Marcos from Guerra Mobile Home Service to determine what needed to be done to move the house to Appellant’s property. Marcos said that Guerra Mobile Home Service would roll the house around the corners, but that fencing would have to be taken down and that permission from the neighbors would be needed. Mr. Instine told Marcos that Appellant was working on getting the neighbors’ written permission.

Mr. Instine testified that in March 2019, he and Gary Fortune, his partner in Custom Quality Homes, went to Appellant’s property to meet with him to see what he had done to facilitate delivery of the home. Mr. Instine testified that Appellant stated that his daughter was an attorney and that it was better to ask for his neighbors’ forgiveness than to ask for their permission to cross their properties. Mr. Instine testified that things went downhill from there.

Mr. Instine testified that Triple Crown Engineering submitted a plan for the stem wall, but that the state did not approve the plan. He told Appellant that Mr. Laipple was working with the state’s engineer to meet the state’s requirements.

Mr. Instine testified that, then, he learned that the Town of Cornville had not permitted that the existing septic system on Appellant’s property.

Mr. Instine testified that Dealer could not deliver the manufactured home to Appellant’s property because (1) He had not obtained written permission from his neighbors to cross their properties; (2) The state had not permitted the stem wall for the home; and (3) The Town of Cornwall had not permitted the septic system.

Mr. Instine testified that between April and June 2019, Appellant pressured Dealer to deliver the manufactured home. Mr. Instine explained that he could not deliver the home without all the necessary permitting and without all three neighbors’ written permission.

Eventually, Appellant provided one handwritten letter purportedly from one of his neighbors that granted permission to Appellant to remove and reinstall a fence post. However, the letter was not signed; instead, it had a stamped name and address:

Mark & Suzanne Ingallina

125 Old Pump House Rd.

Cornville, AZ 86325

Mr. Instine testified that the letter was not acceptable because it was not signed. He requested that Appellant obtain a signed, notarized letters from all three adjacent property owners permitting delivery of the manufactured home across the neighbor’s land.

On or about August 5, 2019, Mr. Instine sent an email to Ms. Grant at the Department, explaining the status of Dealer’s efforts to resolve Appellant’s complaint, in relevant part as follows:

No work has been performed by Custom Quality Homes because there is no permit to do so. I attempted to apply for county permit in late February or early March, but needed the stem wall plans, received a copy in late March. I went to the county and attempted again to get a permit and found that once again could not because [Appellant] did not have a legal septic system. After [Appellant] got his septic approved he received zoning clearance and permit approval. I then attempted to get the state permit but found out that without a state approved stem wall plan number we could not move forward.

It is my understanding that as of 8/19 we have an approved state flood stem wall plan, but I don’t have any way to confirm this or reapply for state permit because I don’t have a copy of the plan number. So at this time there is no state permit, at least not through us.

[Appellant] has not obtained permission from adjoining properties which is needed to cross over properties’ corners. He has insisted that we place the home on his property without the permits or permission from the adjoining property owners. I have warned [Appellant] that he has to use state licensed contractors to do his site work and have the proper permits. My understanding is [Appellant] attempted to place his home anyway from what he stated in his complaint letter without permits and licensed contractors, so who did the site prep. Is there a state permit?

The way I arrived at the balance due is: I sell my projects at cost plus 8%. By eliminating all the “Optional Equipment, Labor & Accessories” of $18,250.00 and allowing the credit of $9,000.00, total amount was reduced leaving a balance of $4,050.41.

So [Appellant’s] house is $88,434.94 x .08 = $ 7074.79

Taxes $ 5615.61

Permit fee applied for $ 360.00

Sub total $13050.40

Less monies paid to CQH that I can ($ 9000.00)

Recover from CQH

Balance Due $ 4050.40

Mr. Instine testified that he reduced the price of the home by the work that Dealer was unable to perform due to the impasse created by Appellant’s failures to obtain necessary permits or neighbors’ written permission to cross their land. Mr. Instine testified that Dealer has to pay taxes on the sale and a commission to its salesperson, Mr. Rubottom.

Mr. Instine estimated that it would cost between $3,000.00 and $4,000.00 to deliver the home, between $5,000.00 and $6,000.00, or if the home is already on site, between $4,000.00 and $5,000.00 to set the home

Ms. Grant testified that the Department did not verify Dealer’s failure to deliver the manufactured home without governmental permits being in place or Appellant having obtained his neighbors’ written permission to cross and alter their properties because Mr. Instine’s version differed from Appellant’s. It was a “he said/she said situation” that the Department could not resolve without additional information.

Ms. Grant testified that the Department did not verify Dealer’s failure to accept the purported unsigned permission letter from the one owner of the adjacent property because the installer does not want to face liability if the purported permission later proves to be legally ineffective.

Ms. Grant testified that the Department did not verify Dealer’s failure to advise Appellant that the delivery of the home would be difficult because Appellant’s signature appears on the October 30, 2018 form in which he accepted responsibility for taking steps necessary for home placement.

Ms. Grant testified that the Department’s Consumer Recovery Fund is meant to make consumers whole if licensees do not deliver goods as promised. The Department is the administrator of the Fund. For a consumer to recover a payout from the Fund, the complaint must be verified and the consumer must demonstrate that he has been damaged by the verified complaint. Ms. Grant provided the following calculation to explain why the Department did not require Dealer to return the $9,000.00 draw that it had received from the title company to pay Custom Quality Homes for work that it admittedly had not performed:

Appellant’s deposit to Pioneer Title $115,000.00

Pioneer’s payment to Champion - 88,434.94

Pioneer’s payment to CQH - 9,000.00

Remaining in escrow $ 17,565.06

Buyer owes to Pioneer 450.00

Balance after Pioneer paid $ 17,115.06

Dealer owed $ 7,074.79 commission

5,615.61 sales tax

permit purchased

$13,050.40 TOTAL

- 9,000.00 credit

$ 4,050.40 Balance if $9,000.00 credit

Balance after Pioneer paid $ 17,115.06

To Dealer if $9,000.00 credit - 4,050.00

To Appellant $ 13,064.66

Ms. Grant testified that the amounts due to Appellant from escrow after deduction of the reduced commission, sales tax, and monies for the permit are sufficient for Appellant to pay for remaining work under the parties’ contract. Dealer’s proposed resolution appeared to be fair and reasonable.

Appellant testified that he did not provide his neighbors’ written permission to Dealer because it kept escalating what was required. First, Dealer just asked for permission. Then, Dealer asked for written and signed permission. Finally, Dealer demand signed and notarized permission. Appellant characterized the letter purportedly from the Ingallinas as a “holographic” document and argued that the address stamp sufficed for a signature.

Appellant attached to the Request for hearing a copy of Dealer’s October 3, 2019 complaint against him in Verde Valley Justice Court Case No. CV2019000796 for breach of contract and breach of the implied covenant of good faith and fair dealing for failing to pay $4,050.39. Appellant also attached his November 15, 2019 written answer to the complaint and counterclaim for breach of contract and breach of the implied covenant of good faith and fair dealing because Dealer failed to deliver the home.

Appellant noted that Dealer’s attorney’s demand letter in the Verde Valley Justice Court action demanded that Appellant remove a decorative windmill. Appellant testified that the windmill did not need to be removed because it was off of a wide road and its location would not impede the progress of a manufactured home.

Appellant testified that he felt that Dealer would just keep adding requirements until he walked away from the sale, leaving the manufactured home with Dealer.

Appellant submitted a Google photograph and a county map that showed the location of his property, the barn, and the foundation of the previous manufactured home.

Appellant testified that he hired Johnson Trucking to deliver the manufactured home. Appellant testified that he obtained permission from two of his neighbors to cross their property because they felt sorry for him, but that the third neighbor refused to grant permission. Johnson Trucking’s first attempt to deliver the home was unsuccessful because it was made off Lizard Lane, but the home was too wide to fit between the fence posts and utility poles. Appellant testified that Johnson Trucking’s employees told him that there was no way to deliver the home off Lizard Lane unless a large hill on his neighbor’s property was excavated.

Appellant testified that, after the first unsuccessful attempt, the home was stored on his neighbor’s vacant property for two months. For the second attempt, Johnson Trucking took the manufactured home down Old Pump House Road and crossed two neighbors’ properties. Appellant testified that the fit was so tight that the crew had to take off a faucet and an electrical box. It took eleven hours to move the home onto his property.

Appellant testified that he obtained all necessary permits to install the manufactured home. The home is now in two pieces on his property. Appellant testified that he cannot find anyone to install the home. He later testified that he had paid Su Casa Mobile Home $4,600.00 to install the home in September 2019, but that it had not installed the home yet.

Appellant testified that when Mr. Instine and Mr. Fortune came to his property in March 2019, they gave him a verbal estimate of $13,500.00 to construct the foundation for the manufactured home and to demolish the existing foundation. He did not record the conversation. When he sent Mr. Instine a text about doing the foundation, however, Mr. Instine responded, “not interested” because this work was not in the parties’ contract.

41. Appellant requested that Dealer be required to return the $9,000.00 draw. Appellant submitted invoices to establish the damages he had incurred or will incur as of the hearing date due to Dealer’s failure to deliver or install the manufactured home, as follows:

41.1 An estimate from Connolly Electrical and Mechanical to install a new main panel dated February 17, 2020, in the amount of $2,395.00;

41.2 A bill from Johnson Transport in the amount of $3,000.00, including $1,000.00 for a crawler and $100.00 for storage, to deliver the manufactured home, marked “paid 6/03/19”; and

41.3 A check in the amount of $700.00 to Johnson Trucking, which Appellant testified he paid because the delivery had been so difficult.

42. Mr. Instine testified that he does not knock on doors to obtain neighbors’ permission to remove fences or access their property to deliver a manufactured home. Dealer relies on the person purchasing the home to obtain his or her neighbors’ permission. Mr. Instine testified that, if Appellant had obtained his neighbors’ permission, Dealer could have “clipped a corner” to have delivered the manufactured home to the desired location on Appellant’s property.

CONCLUSIONS OF LAW

A.R.S. § 41-4004(A)(9) requires the Department to verify written complaints filed within one year of purchase or installation. The Department is reasonably presumed to have certain expertise, experience, and knowledge with respect to those matters the law provides it authority to inspect, because verification upon inspection is a threshold determination by the inspector which then allows the Department to issue an appropriate order pursuant to A.R.S. § 41-4004(A)(10).

Appellant bears the burden to establish that, under applicable statutes, the Department should have required Dealer to pay Appellant the $9,000.00 taken from escrow to pay Custom Quality Homes for work that was not performed by a preponderance of the evidence.

“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.”

A.R.S. § 41-4004 requires the Department to perform certain acts, including the following:

9. Verify written complaints filed with the office by purchasers within one year after the date of purchase or installation of units. Complaints shall be accepted from consumers that allege violations by any dealer, broker, salesperson, installer or manufacturer of this chapter or the rules adopted pursuant to this chapter.

10. On verification of a complaint pursuant to paragraph 9 of this subsection, serve notice to the dealer, broker, salesperson, installer or manufacturer that such verified complaint shall be satisfied as specified by the office.

The Department verified Appellant’s complaint that Dealer had withdrawn $9,000.00 from escrow for work that it had not performed. The Department also served notice to Dealer that the verified complaint was to be satisfied as specified. Appellant disputes the Department’s specific remedy; he feels that the Department should have required Dealer to pay him $9,000.00, notwithstanding any amounts that he owed Dealer under the parties’ contract.

A.R.S. § 41-4030 requires a dealer to open an escrow account into which it will deposit the proceeds from sales of manufactured homes. The statute provides in relevant part as follows:

N. All earnest money deposited in the trust or escrow account shall be held in such account until one of the following is completed:

1. The consummation of sale.

. . . .

Q. The deposits referred to in this section shall not be used for any purpose other than the transaction for which they were provided.

Dealer placed the proceeds from Appellant’s purchase of the manufactured home in escrow.

A.R.S. § 41-4001(11) defines “consummation of sale” as follows:

"Consummation of sale" means that a purchaser has received all goods and services that the dealer or broker agreed to provide at the time the contract was entered into, the transfer of title or the filing of an affidavit of affixture, if applicable, to the sale. Consummation of sale does not include warranties.

Dealer’s requirement of signed, written permission from neighbors to avoid potential civil and criminal liability for trespass was reasonable. The Administrative Law Judge has found no legal authority that an address stamp meets the legal requirement of a signature. Dealer did not request notarized permission until Appellant presented a dubious signature. Appellant did not produce any written permission from his other two neighbors. Because Appellant did not provide written permission from his neighbors or obtain permits for his stem wall and septic system until after the parties had reached an impasse in their dealings with one another, Dealer cannot deliver the manufactured home to Appellant’s property or consummate the sale.

A.R.S. § 41-4043(A) allows a consumer to recover from the Consumer Recovery Fund damages caused by a dealer’s action that led the Department to verify a complaint against the dealer, in relevant part as follows:

If any consumer who is buying or selling the consumer's home uses the services of a licensed dealer of manufactured homes, mobile homes or factory-built buildings designed for use as residential buildings and is damaged as a result of an act or omission by a licensed dealer of manufactured homes, mobile homes or factory-built buildings designed for use as residential buildings that constitutes a violation of section 41-4030, or rules adopted pursuant to that section, and the sale is subject to section 41-4030, subsection D, that consumer may file a claim with the department for payment from the consumer recovery fund. The claim shall be verified by the department.

(Emphasis added.) Damages are not presumed from a verified complaint. In this case, although Dealer owes $9,000.00 to Appellant due to its inability to deliver and install the manufactured home, Appellant owes $13,050.40 to Dealer under the parties’ contract for a reduced commission, sales tax, and a permit. It would be unjust to require Dealer to pay Appellant $9,000.00 under these circumstances.

The Department’s proposed resolution of the parties’ dispute was fair and reasonable. Since Appellant did not accept the proposed resolution, however, the parties should be left to resolve their dispute in the pending civil action in Verde Valley Justice Court Case No. CV2019000796.

RECOMMENDED ORDER

Based upon the foregoing, IT IS ORDERED that, on the effective date of the final order in this matter, Appellant Anthony Tonsich’s complaint against Dealer Randy Instine, LLC and the Arizona Department of Housing shall be dismissed.

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 five days from the date of that certification.

Done this day, March 9, 2020.

/s/ Diane Mihalsky

Administrative Law Judge

Transmitted electronically to:

Carol Ditmore, Director

Arizona Department of Housing