ALJDEC

98F-119-ROC · Registrar of Contractors · 1998-02-05

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: January 23, 1998

APPEARANCES: Plaintiff Victoria Werba appeared on her own behalf. Attorney George Ferrin represented the Respondent.

ADMINISTRATIVE LAW JUDGE: Casey J. Newcomb _____________________________________________________________________

On January 23, 1998, a hearing was held to determine if the Plaintiff is entitled to an award of damages from the Residential Contractors’ Recovery Fund pursuant to A.R.S. §§ 32-1154(E) & 32-1132(A). Plaintiff Victoria Werba appeared on her own behalf. Attorney George Ferrin represented the Respondent. Evidence and testimony were presented. Upon a review of the entire record, the following Findings of Fact, Conclusions of Law and Recommended Decision are made.

FINDINGS OF FACT

1. On or about December 16, 1995, the Plaintiff and the Defendant entered into a Purchase Contract and Agreement for Sale (the "Contract"). Pursuant to the Contract, the Defendant agreed to sell to the Plaintiff Lot 59, Ancala East commonly known as 12395 N. 120th Place, Scottsdale, Arizona. The Defendant was also required to build a home (the "Home") on the aforementioned lot.

2. At the time that the parties entered into this Contract, the Defendant was an Arizona corporation doing business as GDK Custom Homes and was located at 10752 N. 89th Place, Suite 204, Scottsdale, Arizona. Greg Gadek is the Defendant's owner.

3. The Contract's purchase price was $352,600.00. The Plaintiff was required to pay a $35,000.00 earnest money deposit. The parties stipulated that this amount was paid to the Defendant.

4. At the time that the parties entered into this Contract, the Plaintiff still owned a home in Illinois. The Plaintiff feared that she would not be able to sell this Illinois home prior to escrow closing on the Home.

5. The parties agreed that the Plaintiff would have the option of "pulling out" of the Contract by notifying the Defendant in writing 30 days prior to the completion of the Home. The Defendant could then unilaterally sell the Home. Pursuant to Addendum "B" of the Contract, upon "sale of the property, [the Plaintiff would] receive a refund of all monies paid [to the Defendant] plus 50% of the profits . . ."

6. In April of 1996, the Plaintiff and her husband exercised their option not to purchase the Home. The Plaintiff subsequently received her husband's interest in the $35,000.00 earnest money deposit pursuant to the terms of a divorce decree.

7. The Defendant eventually sold the Home in May of 1997. Before and after the sale of the Home, the Plaintiff asked for the return of her $35,000.00 earnest money deposit. However, the Defendant refused to return the money.

8. Greg Gadek testified that the Home sold for a loss and that Gadek Homes, Inc. and/or GDK Custom Homes "is out of business." Furthermore, Mr. Gadek testified that he simply does not have the money to repay the Plaintiff. The Defendant admitted that he still owed the Plaintiff at least $20,000.00.

9. On May 29, 1997, the Plaintiff filed a civil lawsuit against the Defendant for breach of contract and fraud. The Plaintiff received a $35,000.00 judgment against the Defendant for breach of contract. However, the fraud count was subsequently dismissed. The Plaintiff testified that she simply could not afford an attorney to pursue the fraud case.

10. The Plaintiff also filed a Complaint with the Registrar of Contractors (the "ROC"). A disciplinary hearing was set for October 9, 1997 at the Office of Administrative Hearings. However, the ROC vacated this hearing because the Defendant's license was already revoked in two prior cases.

11. In September of 1997, the Plaintiff filed a request for an award of damages in the amount of $20,000.00 from the Residential Contractors’ Recovery Fund.

12. Pursuant to Paragraph 22 of the Contract, the Plaintiff (and her husband) were "not the legal owners of the lot and house until the time their deed from [the Defendant] is recorded and Closing occurs."

13. Pursuant to paragraph 9 of the Contract, “[p]ossession of the Property shall remain exclusively [with the Defendant] until all amounts due hereunder have been paid and all documents required in connection with the completion of this transaction have been executed and delivered by the [Plaintiff] . . .”

14. The Plaintiff testified that she never considered herself to be the owner of the lot and/or Home because she "pulled out" of the Contract prior to closing.

15. The undersigned Administrative Law Judge finds that the Plaintiff was never an owner, tenant in common or joint tenant of the Home.

16. The Defendant testified that the Home was completed and sold to a third party. The Plaintiff presented no evidence that the Home now requires any corrective work. The Plaintiff presented no evidence that the Home has not been completed.

17. The undersigned Administrative Law Judge finds that the Home is completed and requires no corrective action.

18. The undersigned Administrative Law Judge finds that the Defendant has violated A.R.S. §32-1154(A)(7) by doing a wrongful act against the Plaintiff causing her substantial injury. The Defendant's breach of the Contract was reprehensible conduct that has substantially injured the Plaintiff financially.

CONCLUSIONS OF LAW

1. The Plaintiff has the burden of proof, and the standard of proof on all issues is by a preponderance of the evidence. Culpepper v. State, 187 Ariz. 431, 930 P.2d 508 (App. 1996). A "preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not." Morris K. Udall, Arizona Law of Evidence, §5 (1960). It "is evidence which is of greater weight or more convincing than the evidence which is offered in opposition to it; that is, evidence which as a whole shows that the fact sought to be proved is more probable than not." Black's Law Dictionary, 1182 (6th ed. 1990).

2. At a minimum, A.R.S. §32-1132(A) requires the following: A. The Defendant's actions must violate Chapter 10 ("Chapter"), Title of the Arizona Revised Statutes (and any rules adopted pursuant to this Chapter). B. The Plaintiff must be an owner, tenant in common or joint tenant of the Home who is damaged by the failure of the Defendant to adequately build or improve the Home. See A.R.S. §32-1131(3). C. The Plaintiff must suffer actual damages not to exceed "an amount necessary to complete or repair” the Home.

3. The undersigned Administrative Law Judge finds that the preponderance of the evidence shows that the Defendant has violated provisions of this Chapter as set forth in Findings of Fact #7, 8, 9 & 18.

4. The undersigned Administrative Law Judge finds that the preponderance of the evidence shows that the Plaintiff was never the owner or tenant of the Home as set forth in Findings of Fact #12 through 15.

5. The undersigned Administrative law Judge finds that the preponderance of the evidence shows that the Plaintiff has suffered actual damages as set forth in Findings of Fact #7 through 9. However, pursuant to A.R.S. §32- 1132(A), these actual damages shall not exceed an amount necessary to complete or repair the Home.

6. The undersigned Administrative Law Judge finds that the preponderance of the evidence shows that no money is required to repair or complete the Home as set forth in Findings of Fact #16 & 17. Therefore, the undersigned Administrative Law Judge finds that the Plaintiff's actual damages (for payment under the Residential Contractors’ Recovery Fund) are statutorily limited to $0.00 pursuant to A.R.S. §32-1132(A).

7. Based upon the foregoing, the undersigned Administrative Law Judge finds that the Plaintiff is not entitled to payment from the Residential Contractors’ Recovery Fund in the amount of $20,000.00. RECOMMENDED DECISION

Based upon the foregoing, the undersigned Administrative Law Judge respectfully recommends that the Plaintiff be denied any payment from the Residential Contractors’ Recovery Fund. The undersigned Administrative Law Judge further recommends that this matter be remanded to the Registrar for dismissal and/or case closure. Done this day, February 5, 1998.

______________________________________ Casey J. Newcomb Administrative Law Judge

Original transmitted by mail this ____ day of ____________, 1998, to:

Mr. Michael P. Goldwater, Director Registrar of Contractors 800 West Washington, 6th Floor Phoenix, AZ 85007

ATTN: Joyce Armijo

By ___________________________ -----------------------

Office of Administrative Hearings 1700 West Washington, Suite 602 Phoenix, Arizona 85007 (602) 542-9826