ALJDEC decisions subject to certification as final

21F-AAA2021001-ADH · Arizona State Department of Housing · 2021-06-07

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

BEVERLY F MATTHEWS,

Appellant,

vs.

ARIZONA DEPARTMENT OF HOUSING,

Appellee.

No. 21F-AAA2021001-ADH

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: Assistant Attorney General Kelly Gibson, Esq. appeared on behalf of the Arizona Department of Housing (“Department”) with Esperanza Padilla and Bryan Smith as witnesses. Kerry Griggs, Esq. appeared on behalf of CMH Homes Inc. with Christopher Andersen as a witness. Brian Locker, Esq. appeared on behalf of Beverly Matthews (“Appellant”) with Appellant and Margaret Miller as witnesses. Tara Brunetti, Waleed Hammad, and Brent Barnard observed.

APPEARANCES: April 08, 2021 and May 18, 2021.

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 Department.

FINDINGS OF FACT

Background and Procedure

On June 02, 2020, the Department received an 8-item consumer complaint from Appellant against Karsten Homes and Clayton Homes – Mesa. Appellant attached copies of her Quote, Sales Agreement, Design Plan, receipt, and proof of payment(s). The complaint was numbered Complaint 2020-042 by the Department. Appellant also attached a 4-page typed complaint addendum, which alleged the following, in pertinent part(s):

Appellant desired a custom-made manufactured home; one with wide doorways and hallways to accommodate a wheelchair, master bathroom barn doors, a step-in master shower without doors, master vanity with drawers in between the dual sinks, master bedroom blinds, kitchen island with electrical, a whole home ridge vent, a 14ft exterior awning, and handicapped accessible access through the front and back doors.

Dealer’s plant in Buckeye, Arizona declined Appellant’s request to design a custom manufactured home. However, the Albuquerque, New Mexico plant agreed to design a custom manufactured home for Appellant.

Appellant incurred additional costs outside the scope of her contract, including closings in November of 2018 and November of 2019.

On June 05, 2020, the Department issued a Notice of Complaint to CMH Manufacturing West Inc., doing business as Clayton Buckeye, (“Manufacturer”), CMH Homes Inc., doing business as Clayton Homes, (“Dealer”), and Valley Wide Enterprises Inc., doing business as Gleeson Mobile Home Service, (“Installer”). The licensees were asked to provide the Department with written responses to Appellant’s allegations within ten (10) business days, and include any supporting documentation.

On or about June 09, 2020, Dealer provided the following written response to the Department, in pertinent parts:

Appellant chose her own lender and met with her loan officer several times to work through the details of her loan. Dealer has no information regarding Appellant’s “two closings” as Dealer did not finance Appellant’s mortgage loan. Dealer only received funds after Appellant signed the Borrower’s Letter of Completion.

Appellant’s manufactured home was “built exactly to order.” Appellant reviewed the specification sheet several times and signed-off on the Final Order.

To that end, the Design Plan states, “Single Atrium Door in place of window” which is what the home has.

The local government authority, Maricopa County Planning and Zoning, dictates the height and elevation of manufactured homes in Arizona. The height is set per flood zone regulations and is meant to protect the home from water damage. The project was permitted and passed both State and County inspections.

Appellant was not charged for a “whole home ridge Vent.” The ridge vent was installed to both Manufacturer and State requirements and provides all necessary venting for the house.

Although Appellant requested a 13ft wide awning, the size was modified to 12ft wide to meet the required setbacks mandated by the local governing agency. The awning was installed to code and has passed inspection. Appellant was only charged for the 12ft wide awning. Additionally, Appellant was advised that she could install a “splash block” at the bottom of the down spout such to protect the gravel and landscaping, as such was not included in her contract as it is considered homeowner maintenance.

Appellant’s kitchen island was built with electrical. Dealer never received a complaint that the outlet was not working, but will repair it per Appellant’s service request or as the Department directs.

Appellant was not charged for barn doors. They were a gift from her sales representative (“Salesperson”), who is willing to correct the size after the Department issues its Final Order.

Regarding the exterior lights and the grate, Dealer remediate as directed by the Department, if necessary.

On June 16, 2020, the Department received Installer’s response, whereby Installer denied that any of Appellant’s complaint items pertained to its involvement with her project.

On July 07, 2020, the Department supplied Appellant with Manufacturer’s, Dealer’s, and Installer’s responses.

On July 08, 2020, Appellant provided the Department with a 5-page reply; the crux of which, argued that Appellant and Dealer made “several oral agreements” regarding her manufactured home design that were not followed per the notes she maintained. Appellant attached approximately 30-pages of notes consisting of design plans with handwritten notes, loan documents, and photographs.

On September 08, 2020, the Department issued a Verification Inspection Notice to the parties, for an inspection scheduled at 9:00 a.m. on September 18, 2020.

On October 23, 2020, Department Investigator Bryan Smith (“Investigator Smith”) completed a complaint verification that resulted in a Verified Complaint & Sign-Off Form (“Verification”). Verification was based on review of documents that were provided by Appellant and Dealer. Investigator Smith made the following determinations:

Complaint item 1a: Contractually not verified. Unable to assign responsibility. No contract or change order submitted to show home was to be built with handicap accessibility.

Complaint item 1b: Contractually not verified. Unable to assign responsibility. No contract or change order submitted to show master bedroom door supposed to come with blinds. Approved floor plan only shows single atrium door in master bedroom and French doors with blinds in dining room.

Complaint item 1c: Contractually verified. Responsibility assigned to Dealer. Appellant’s contract did not include 2 medicine cabinets in the master bathroom. However, because they were intended to be a gift from Salesperson, Dealer agreed to correct.

Complaint item 1d: Contractually not verified. Unable to assign responsibility. No contract or change order submitted to show built-in drawers were to be provided.

Complaint item 2a: Contractually verified. Responsibility assigned to Dealer. Appellant’s contract did not include shiplap the kitchen island. However, because they were intended to be a gift from Salesperson, Dealer agreed to correct.

Complaint item 2b: Contractually not verified. Unable to assign responsibility. No contract or change order submitted to show that a junction box was to be provided above the kitchen island. The approved floor plan only shows four can lights.

Complaint item 3: Contractually not verified. Unable to assign responsibility. No contract or change order submitted to show that all outside entries were to be built as handicap accessible. Approved floor plan only shows that doorways and hallways were to be widened.

Complaint item 4: Contractually verified. Responsibility assigned to Dealer. Appellant’s contract did not include installation of 4 barn doors, in either the pantry or master bedroom. However, because they were incorrectly installed by Salesperson as a gift, Dealer agreed to correct.

Complaint item 5: Contractually not verified. No contract or change order submitted to show a whole house ridge vent was to be provided. Responsibility assigned to Manufacturer to provide written confirmation to the Department that the total ventilation system was installed as engineered.

Complaint item 6: Not verified. Unable to confirm as customer had corrections made prior to this inspection. Dealer has agreed to reimburse Appellant for the cost differential between the contracted awning (14ft) and the originally installed awning (12ft).

Complaint item 7: No statutory authority. The Department does not license title companies; therefore, we have no statutory authority over title companies or the process it would take to close the loan.

Complaint item 8: Not verified. Unable to confirm because Appellant had corrections made prior to inspection.

Complaint item 9: Verified. Responsibility assigned to Dealer. Outside vent, subcontracted to ROC License No. 200368, must be shaved to fit opening at rear of house.

Complaint item 10: Not verified. Unable to confirm because Appellant had corrections made prior to inspection.

Appellant agreed to waive item at inspection.

Complaint item 11: Contractually not verified. Unable to assign responsibility. No contract or change order submitted to show that hallway light switch in wrong location.

Complaint item 12: Contractually not verified. Unable to assign responsibility. Unable to confirm because Appellant had corrections made prior to inspection.

On November 20, 2020, Appellant submitted a Notice of Appeal to the Department for Verification items 1a, 1b, 1d, 2b, 3a, 3b, 5, 6, 8, 10, 11 and 12.

On November 30, 2020, Dealer returned the Verification to the Department. Dealer noted that Appellant signed-off on complaint items 1c and 2a, but was unavailable to sign off on complaint item 9, and refused to sign off on complaint item 4 until she consulted her attorney.

On December 03, 2020, this matter was referred to the Office of Administrative Hearings (“OAH”), an independent state agency, for an evidentiary hearing on January 29, 2021. Per the Notice of Hearing, the issue to be determined was whether the Department took appropriate action in issuing its Verification regarding Appellant’s complaint against Manufacturer, Dealer, and Installer.

Hearing Evidence

The Department called Esperanza Padilla, Complaint Manager and Investigator Smith as witnesses, and submitted ten exhibits marked as A-J into the record. Dealer called Christopher Anderson as a witness and submitted two exhibits marked as 2 and 3 into the record. Appellant testified on her own behalf, called Margaret Miller as a witness, and submitted three exhibits marked as 2, 4 and 6 into the record. The Notice of Hearing was also admitted into the record as its own exhibit. The substantive evidence of record is as follows:

Department’s Case-in-Chief

The Department has limited jurisdiction to regulate its licensees and public housing in the State of Arizona. The Department does not have any authority over State or County governmental agencies and therefore does not make determinations regarding zoning, elevation, or grade.

The pertinent timeline of events is as follows:

On October 26, 2018, Appellant signed the Sales Agreement.

On November 07, 2018, Appellant signed the Design Plan confirmation.

On February 01, 2019, Appellant tendered payment on the Sales Agreement.

On January 01, 2019, Appellant’s Design Plan was submitted to the local county building authority.

On February 15, 2019, the Department issued a Manufactured Home Installation permit for the project.

On February 26, 2019, the local county building authority approved Appellant’s Design Plan.

On February 27, 2019, Permit No. B201900089 was issued on the project by the local county building authority.

On September 23, 2019, the installation passed the Department’s inspection.

The signed Sales Agreement and Design Plan executed between Appellant and Dealer are the binding contract documents. They are important so that both parties are aware of their duties, rights, responsibilities, obligations, and expectations. The signed Sales Agreement and Design Plan were the only documents sent to the factory, and were the only documents used and relied upon to complete the build of Appellant’s manufactured house. The facility’s receipt of the build specifications is important because it creates the construction timeline for the project, including the “off-line” date for the manufactured house.

Salesperson called the facility twice to make post-contract modifications: once for the French Doors, and another time for the dining area countertops.

During the inspection on September 18, 2020, Investigator Smith added complaint items 9-12 to Complaint 2020-042 per Appellant’s request.

None of the documentation Appellant submitted to the Department established that any of the verbal discussions Appellant had with Dealer superseded their executed written agreements. There are no initials or signatures by Salesperson or another duly authorized Dealer agent on any of the notes Appellant provided that would tend to suggest their agreement had been modified. Nor is there any additional proof of payment corroborates Appellant’s assertions regarding what her alleged agreement was with Dealer. The house would not have passed the local building authority’s inspection if it would not have been built per their approved design.

Dealer’s Case-in-Chief

On September 07, 2019, Appellant signed the Borrower’s Letter of Completion, which avowed to the lender that the transaction could be funded.

Appellant’s Case-in-Chief

In 2017, Appellant moved to Arizona to begin her retirement. Appellant selected an age-restricted retirement community whose homeowner’s association only permitted manufactured homes. After touring multiple manufactured home models Appellant determined that she wanted a custom manufactured home, in part, because she wanted it to be compliant with the Americans with Disabilities Act in anticipation of hereditary illnesses that she may suffer from in the future, and because of concerns she had as a survivor of a prior house fire. Appellant turned to Dealer, and was assigned to Salesperson for assistance.

Appellant met with Salesperson over one hundred (100) times prior to finalizing her Design Plan and signing her Sales Agreement. Appellant was informed that Dealer’s Buckeye, Arizona location would not make any customizations, but that Dealer’s facility in Albuquerque, New Mexico was willing to make some of the customizations she wanted. During their meetings Appellant took handwritten notes which she typed up at home afterward and kept for her records. Salesperson never signed any of these notes, nor what he ever given a copy of Appellant’s notes. On numerous occasions Appellant would provide Salesperson with photographs of designs she liked, and they would try their best to immolate them on design plans that remained within the confines of what the manufacturer could produce.

After Appellant signed the Sales Agreement, she made several verbal design change requests to Dealer. Only one written Change Order, for French Doors, was executed between Appellant and Dealer. It is the only post-contract modification that Appellant paid for. No other contract addendums were ever executed between Appellant and Dealer. Appellant assumed Salesperson was “doing what he had to do” to make her design change requests happen.

Appellant further admitted to not knowing about her local municipality’s set-back restrictions and argued, “I don’t care about county requirements; I want a whole-house ridge vent.”

In closing, the Department argued that its Verification was sound and based on information provided by Appellant. The Department denied that it had acted arbitrarily or capriciously, or had abused its discretion with the issuance of the underlying Verification. The Department further argued that its Verification could not be invalidated due to Appellant’s misunderstanding of her Sales Agreement and Design Plan.

In closing, Dealer argued that signed the four-corners of the Sales Agreement and Design Plan constituted a “meeting of the minds” between the parties. As such, the signed documents must trump 100+ meetings where neither party can recall each conversation with exact specificity, let alone the verbal agreements Appellant insists occurred. Dealer further argued that if it was Appellant’s intention to argue breach of contract, she did so in the wrong place because this Tribunal has no jurisdiction or authority to hear such an argument or provide any kind of decision or remedy.

In closing, Appellant argued that she was entitled to relief because Dealer had overpromised and underperformed on their agreement. She expected specific vanity, shower, awning, ridge vent, and handicap access designs that she did not receive.

CONCLUSIONS OF LAW

This matter lies within the Department’s jurisdiction, and was properly brought before OAH.

The purpose of the Department’s licensing statutes is to protect the public from unscrupulous, unqualified, and financially irresponsible licensees.

The Department does not own or build housing, instead it manages federally funded programs for housing qualified partners who apply for funding. The Department also provides first time home buying assistance, eviction prevention assistance, foreclosure assistance, and homelessness assistance.

Appellant bears the burden of proof to establish that Department’s Verification was issued incorrectly or unlawfully by a preponderance of the evidence. The Department must establish affirmative defenses by the same evidentiary standard.

“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.”

Ariz. Rev. Stat. § 41-4004(A)(9) authorizes the Department to verify written complaints filed within one year of purchase or installation, whichever is later, from consumers alleging violation(s) by any dealer, broker, salesperson, installer, or manufacturer. 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 to the alleged violator identified in the complaint pursuant to Ariz. Rev. Stat. § 41-4004(A)(10).

In the case at bar, the Tribunal is tasked with determining whether the Department’s October 23, 2020 Verification was correctly and lawfully issued. The undersigned Administrative Law Judge concludes that it was.

Here, Appellant has failed to establish by a preponderance of the evidence that Department’s Verification was issued incorrectly or unlawfully.

By all accounts Appellant was of sound mind when she finalized her design plan and entered into the underlying Sales Agreement. Nothing was signed under duress or by mistake. After 100+ design meetings Appellant knew, or should have known, what she was agreeing to. It is unclear how Appellant could have been unclear about what she agreed to pay for and did in fact purchase. The undersigned takes Appellant at her word when vehemently alleges Salesperson told her “We can do that” in response to her inquiries and requests. However, just because she was told several options were possible does not mean that’s what she and Dealer ultimately settled upon. In the end, the documents in this matter speak for themselves. The manufactured home at issue, matches the corresponding design plan, which matches the Sales Agreement, which is supported by Appellant’s proof of payments. Ergo, Appellant got exactly what she paid for, which in this case, is unfortunately not what she expected.

Appellant did not refer to any related statutes, or offer any binding legal authority that, would compel the Tribunal to give greater weight to her notes over the more credible evidence of record and grant her appeal of Verification items 1a, 1b, 1d, 2b, 3a, 3b, 5, 6, 8, 10, 11 and/or 12.

Dealer conceded that all items “gifted” to Appellant by Salesperson, and any necessary repairs thereto, (e.g. complaint items 1c, 2a, 4, and 9) either have been remedied or would be remedied upon the issuance of the Final Order in this matter. Regardless, Appellant did not appeal any of these items. Thusly, those items are moot.

Because Appellant did not sustain her burden of proof in this matter by a preponderance of the evidence, it follows that her appeal must be dismissed.

RECOMMENDED ORDER

IT IS RECOMMENDED that Complaint 2020-042 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, June 07, 2021.

Office of Administrative Hearings

/s/ Jenna Clark

Administrative Law Judge

Transmitted electronically to:

Carol Ditmore, Director

Arizona Department of Housing