ALJDEC

99F-122-ROC · Registrar of Contractors · 1999-07-28

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: July 28, 1999 at 9:00 a.m. APPEARANCES: Plaintiff appeared on his own behalf; Defendant did not appear; the Arizona Registrar of Contractors appeared through his attorney, Mary D. Williams, Esq., Assistant Attorney General. ADMINISTRATIVE LAW JUDGE: Diane Mihalsky _____________________________________________________________________

Plaintiff and the Registrar of Contractors’ attorney presented evidence and testimony on the issue of the amount Plaintiff is entitled to recover from the Residential Contractors’ Recovery Fund under A.R.S. § 32- 1131 et seq. At the end of the hearing, Plaintiff agreed to accept the Recovery Fund Manager’s good-faith offer. The undersigned presents this settlement to the Registrar for his approval and adoption, based on the evidence presented at the hearing and the entire record in this matter. FINDINGS OF FACT Background 1. The Registrar of Contractors issued License No. 100449, Class B to Defendant, a corporation, on January 3, 1994. On or about December 29, 1996, Defendant contracted with Plaintiff to construct an approximately 1,900-square-foot residence, at a total price to Plaintiff of $106,501.00. Plaintiff elected to pay a total price of $63.00 per square foot for the residence, which Defendant had called the “Luxury Series” in his advertisements. The “Luxury Series” was an upgrade from the “Silver Series,” which Defendant’s advertisements represented could be built at a cost of $53.00 per square foot. The advertised features of the Silver Series included an “elegant 6x6 ceramic tile entry,” “10 year wear warranty designer carpet with 5 year stain protection,” “sheet vinyl in non-carpeted areas,” “upgraded 7/16 inch pound rebound pad,” a “variety of laminate counter tops” in the kitchen, and “your choice of tile or cultured marble on vanity tops and tub & shower surrounds” in the bathrooms. The advertised upgrades of the “Luxury Series” include a “cultured marble master bathtub,” an additional alleged value of $750.00, a “soft water loop,” an additional alleged value of $250.00, a “GE Profile appliance package,” an additional alleged value of $1,000.00, “Rolex Decor plumbing fixtures,” an additional alleged value of $750.00, “ceramic tile flooring [in] 25% of floor area,” an additional alleged value of $1,000.00, and an “upgraded carpet allowance” of $1.00 per square foot.” The parties’ contract did not set forth costs or allowances for specific items or provide the costs or allowances for any of the features in the “Silver Series.” The Registrar’s inspector John Ratcliff testified that he did not believe a new residence could be built for sale to the public at a cost of $63.00 per square foot. After Defendant commenced construction, Plaintiff became dissatisfied with the progress of construction and the quality of Defendant’s workmanship. On March 31, 1998, Plaintiff made several complaints to the Registrar, which were collectively designated Complaint No. 98-2432. The Registrar’s inspector Robert Dragoon performed a jobsite inspection and, on June 18, 1998, on the Registrar’s behalf, directed Defendant to perform or to arrange for properly licensed personnel to perform eight specific items of corrective work. The Registrar revoked Defendant’s license on July 24, 1998 as a result of three customer complaints that are not related to this matter. Plaintiff’s Claim to the Recovery Fund On August 31, 1998, Plaintiff made a claim to the Residential Contractors’ Recovery Fund. As of the time Plaintiff made his claim to the Recovery Fund, he had paid Defendant a total of $66,409.50 of the contract price, leaving an unpaid balance of $40,091.50. Plaintiff subsequently completed construction of the residence, acting as his own general contractor. Over the next eight months, Plaintiff submitted voluminous documents to the Recovery Fund Manager to substantiate the costs he had incurred in completing the residence, which totaled $66,032.77. The Recovery Fund Manager declined to offer any payout from the Fund, however, because she determined that several contractors whom Plaintiff had paid to complete construction of the residence were unlicensed and that certain work or supplies either were not contemplated under the original contract or were not described or documented sufficiently to support a payout. Only $31,093.96[1] of the costs Plaintiff claimed to complete the residence appeared to be eligible for recovery, which included the low bid of $5,075.00 to paint the residence and a good-faith offer of $3,500.00 to repair the stucco. Because this amount was less that the amount owed on his contract with Defendant, Plaintiff appeared to have incurred no eligible out-of-pocket loss and, in fact, on paper appeared to have realized a $8,997.54 savings in completing the residence himself. Many of the receipts that Plaintiff submitted in support of his Recovery Fund claim were either illegible or lacked any itemization or identification of the supplies purchased. Instead of providing itemized receipts, many of Plaintiff’s claimed expenditures were supported only by copies of canceled checks or credit card receipts. The Settlement 13. Plaintiff agreed at the hearing that, when he completed the residence, he made certain upgrades that were not included in the original contract. Plaintiff, the Registrar’s inspector John Ratcliff, and the Recovery Fund manager also agreed that certain items that Plaintiff had to purchase or have installed in the residence actually were or should have been included under industry practice in Plaintiff’s contract with Defendant. Plaintiff also provided legible documentation to support his claim for certain items that had been disallowed. The additions that Inspector Ratcliff and the Registrar’s attorney deemed acceptable at the hearing in this matter, which are in addition to those accepted in his March 18, 1999 Recovery Fund Inspection Report, are as follows: |Item |Amount |Reason for Change | |Cleanup by Mardi’s |$ 1,025.00 |Although this amount may be | |Cleaning Service (Misc. | |excessive for similar | |expenses Nos. 3 and 4 on | |construction, the unlicensed | |p. 4) | |painting contractor whom Defendant| | | |hired made a mess, which required | | | |hours to clean. | |John Franklin (Unlicensed|$ 1,000.00 |Records show that Mr. Franklin is | |contractor No. 3 on p. 4)| |licensed. | |Permits to Maricopa |$ 614.00 |These fees deemed necessary and | |County for rights of way | |were contemplated by the contract.| |in supplying jobsite with| | | |water (Misc. expenses | | | |Nos. 5, 6, and 7 on p. 4)| | | |Tile (included in |$ 2,500.00 |Contract provided for tile in 25% | |Receipts for Suppliers | |of residence and Plaintiff | |No. 50 to Home Depot on | |provided supporting documentation | |p. 4) | |at hearing. | |Entertainment Center |$ 875.00 |Contract contemplated basic | |(Receipts for work | |system/reasonable price. | |performed No. 17 on p. 2)| | |

When the above total is added to the $31,093.96 that previously was found to be eligible for compensation, the Plaintiff’s eligible claim is $45,102.58. After deduction of the $40,091.50 that Plaintiff would have owed under the contract had Defendant completely performed it, Plaintiff’s net loss is $5,011.08. Based on the foregoing analysis, the Recovery Fund manager approved a good-faith offer of $5,011.08 to Plaintiff, which he accepted at the end of the hearing. CONCLUSIONS OF LAW In this administrative proceeding, Complainant bears the burden of proof to establish both that Defendant violated applicable statutes and the amount of the damages he incurred as a result of such violations by a preponderance of the evidence. See A.A.C. R2-19-119; see also Culpepper v. State, 187 Ariz. 431, 438, 930 P.2d 508, 515 (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). A preponderance of the evidence is “evidence which is of greater weight or more convincing than 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 at page 1064 (6th ed. 1990). The evidence showed that Plaintiff suffered some damage as a result of Defendant’s failure to perform satisfactorily the construction contract. However, Plaintiff may recover from the Recovery Fund only “the actual damages suffered . . . as a direct result of the residential contractor’s violation but shall not exceed an amount necessary to complete or repair a residential structure . . . .” A.R.S. § 32-1132(A). Here, the lack of a clear and unambiguous contract rendered it nearly impossible to determine the construction necessary to complete the residence as required by the parties’ contract. The absence of itemized receipts made it nearly impossible to determine the construction that had actually been performed.

Public policy favors settlement of disputes and adverse parties should be free to adjust their differences by entry into agreements or stipulations. In view of Plaintiff’s apparent loss, the good-faith offer served the legislative purpose behind the creation of the Recovery Fund of protecting members of the public who contract with licensed contractors. In view of the uncertainties of Plaintiff’s evidence and the difficulties he faced in liquidating his damages, which were explained to him at the hearing, his acceptance of the good-faith offer was voluntary, informed, and reasonable. A.R.S. § 32-1154(E) authorizes the Registrar to determine and award proper payment from the Residential Contractors’ Recovery Fund. If the Registrar accepts this recommended decision, all persons listed on Defendant’s license should be charged for $5,011.08 under A.R.S. § 32-1139(B). Because the revised and modified total amount is less than the sum that was originally stated in the Notice of Claim, to which Defendant has failed to respond in writing or personally at the hearing, it is unnecessary to issue and serve a new Notice to Defendant reflecting the lower claim to the Recovery Fund. RECOMMENDED ORDER In view of the foregoing, it is recommended that the Registrar order a payout from the Residential Contractors’ Recovery Fund to Plaintiff in the amount of $5,011.08.[3] Done this day, July 30, 1999.

______________________________________ Diane Mihalsky Administrative Law Judge

Original transmitted by mail this ____ day of July, 1999, to:

Registrar of Contractors Mr. Michael P. Goldwater ATTN: Joyce Armijo 800 West Washington, 6th Floor Phoenix, AZ 85007

By ___________________________

----------------------- [1] The totals included in this recommended decision are based on Inspector Ratcliff’s February 25, 1999 Recovery Fund Inspection Report, which was included in the file that the Registrar provided to the Office of Administrative Hearings and which was, as discussed supra, the basis of the settlement negotiations.

[2] This amount is added to balance the figures for settlement, which was based on Inspector Ratcliff’s and the Registrar’s attorney’s calculations.

[3] Plaintiff requested at the hearing that the Registrar be informed that Plaintiff has moved into the residence and that his address presently is: Thomas A. Gregory, 5940 E. Dixileta Drive, Cave Creek, AZ 85331.

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Office of Administrative Hearings 1400 West Washington, Suite 101 Phoenix, Arizona 85007 (602) 542-9826