Opinion
1 CA-CV 22-0011
12-13-2022
CRAVEN CONSTRUCTION, LLC, Appellant, v. ARIZONA REGISTRAR OF CONTRACTORS, Appellee, and NICHOLAS HOLLAND, Appellee.
Law Office of Frederick F. Taylor, P.C., Chandler By Frederick Taylor Counsel for Appellant Elley Law PLC, Gilbert By Richard D. Elley Counsel for Appellee Nicholas Holland
Not for Publication - Rule 111(c), Rules of the Arizona Supreme Court
Appeal from the Superior Court in Maricopa County No. LC2021-000022-001 The Honorable Julie LaFave, Judge Pro Tempore
Law Office of Frederick F. Taylor, P.C., Chandler By Frederick Taylor Counsel for Appellant
Elley Law PLC, Gilbert By Richard D. Elley Counsel for Appellee Nicholas Holland 1
Judge D. Steven Williams delivered the decision of the court, in which Acting Presiding Judge Randall M. Howe and Chief Judge Kent E. Cattani joined.
MEMORANDUM DECISION
WILLIAMS, JUDGE
¶1 Craven Construction, LLC ("Craven") appeals the superior court's affirmation of the Arizona Registrar of Contractors ("ROC") initial decision to award $30,000 from the Residential Contractors' Recovery Fund ("Fund") to Nicholas Holland. For the following reasons, we remand to the ROC Director.
FACTUAL AND PROCEDURAL HISTORY
¶2 Nicholas and Patricia Holland (collectively "the Hollands") purchased a home in 2017. When a home inspection revealed a leaky roof, the sellers agreed to give the Hollands $15,000 from escrow to fix the leak. The Hollands hired Craven for $14,800 to remove and replace the roof, which Craven did.
¶3 Nearly a year later, when the roof continued leaking, Nicholas Holland filed a complaint with the ROC alleging Craven's poor workmanship. An ROC investigator conducted a jobsite inspection, which included coming into the home, as well as observing the roof from ground level outside of the home, but did not include going on the roof. Though Randy Craven, principal of Craven, was also present for the inspection, the Hollands refused him entrance into their home.
¶4 Following the inspection, the ROC wrote to Craven informing it had "substantiated that your work fail[ed] to meet minimum workmanship standards" and directed Craven to remedy nine specific roofing issues. The ROC later cited Craven for failing to (1) meet minimum construction standards and (2) take appropriate corrective action. Craven never responded to the citation and the allegations were deemed admitted. The ROC fined Craven and suspended its license for one day. Because of the license suspension, the Hollands were allowed to submit a claim to the Fund to cover the cost for roof repairs. A.R.S. § 32-1154(E).
¶5 The Hollands obtained three bids from other contractors to remedy the roof's defects. There is some evidence that at least two of the 2 contractors considered whether the roof could be repaired short of a complete roof replacement. One contractor wrote in its bid that the roof was "beyond repair" and "require[d] a full replacement," while another wrote that the "recommendation to fix the issues would be a complete tear off and redo of the panels." It is unclear whether the third contractor considered the viability of a roof repair short of a complete removal and replacement. In any event, the Hollands submitted each bid to the ROC and requested an award from the Fund of $30,000 (the maximum amount allowed) though each bid exceeded that amount.
¶6 The ROC reviewed the Hollands' claim and determined a Fund award of $30,000 was warranted. The ROC notified both Craven and the Hollands of its decision, and informed that either party could request an administrative hearing to challenge the award, but that the "party challenging the amount [would be] required to bear the burden of proof" at the hearing. Craven requested a hearing.
¶7 At the beginning of the hearing, the Administrative Law Judge ("ALJ") stated that "the Hollands bear the burden of proof in this matter because they filed . . . a claim for a payout from the [] Fund." Counsel for the ROC disagreed, contending that "the burden of proof falls on the party who is challenging the . . . payout determination that has been made by the Registrar. In this particular instance, Craven Construction Regardless, the hearing was held over two days (the first day in early July 2020 and the second day in late August 2020).
¶8 Following the hearing, the ALJ concluded that (1) the Hollands had been damaged by Craven's work and were eligible for a Fund award, but that (2) "there [was] insufficient evidence to determine the extent of their actual damages." Consequently, the ALJ "rescinded" the ROC's decision to award the Hollands $30,000 from the Fund and awarded the Hollands nothing. In doing so, the ALJ acknowledged the competing testimonies (on one side) of the ROC investigator, Patricia Holland, and one of the bidders to replace the Hollands' roof, and (on the other side) Randy Craven. The ALJ noted his concerns with, among other things, the ROC investigator's failure to "go on the roof" during his inspection, and at least one bid "not even consider [ing]" repairing the roof rather than replacing it altogether.
¶9 The ROC Director (through ROC's chief counsel) reviewed the ALJ's decision and rejected it, contending the ALJ had improperly placed the burden of proof on the Hollands rather than on Craven. The 3 Director remanded the matter to the ALJ with instructions to "conduct a new hearing applying the correct burden of proof."
¶ 10 Craven then appealed the ROC Director's decision to the superior court. The court found that the ALJ had correctly placed the burden of proof on the Hollands and the ROC, but that the record contained sufficient evidence to support the ROCs initial decision to award $30,000 from the Fund to the Hollands. The court reversed the ROC Director's decision.
¶ 11 Craven timely appealed the superior court's decision to this court. We have jurisdiction under Article 6, Section 9, of the Arizona Constitution and A.R.S. § 12-2101(A)(1).
DISCUSSION
¶12 "On appeal from a superior court's review of an administrative action, we directly review the Director's Decision and are not bound by the superior court's judgment because we examine the same record." Phillip B. v. Arizona Dep't of Child Safety, 253 Ariz. 295, 298, ¶ 8 (App. 2022) (citation omitted). We will uphold the ROC Director's decision unless it is "contrary to law, is not supported by substantial evidence, is arbitrary and capricious or is an abuse of discretion." See A.R.S. § 12-910(F) ; Gaveck v. Ariz. State Bd. Of Podiatry Exam'rs, 222 Ariz. 433, 436, ¶¶ 11-12 (App. 2009). We do not independently weigh the evidence but instead determine whether substantial evidence supported the agency's decision. Phillip B. at 298, ¶ 8. We review questions of law de novo. Carlson v. Ariz. State Pers. Bd., 214 Ariz. 426, 430, ¶ 13 (App. 2007).
A.R.S. § 12-910(F) was amended after this case began, and now provides that "the court shall decide all questions of fact without deference to any previous determination that may have been made on the question by the agency." Regardless, here the superior court made no new findings of fact.
¶ 13 The Arizona legislature established the Fund "'to provide improved protection for owners and lessees of property who contract for the construction or alteration of residential structures.'" McMurren v. JMC Builders, Inc., 204 Ariz. 345, 349, ¶ 9 (App. 2003) (quoting 1981 Ariz. Sess. Laws, ch. 221, § 1). A claimant's process for seeking an award of monies from the Fund begins by filing a complaint with the ROC. A.R.S. § 32-1155(A). After an investigation, the ROC may cite a contractor for any violation it finds and require the contractor to remedy the violation(s). A.R.S. §§ 32-1154(A), (A)(22), -1155(A). A contractor may contest a 4 complaint and/or citation, A.R.S. § 32-1155(A), but if the contractor fails to remedy any violation, the ROC may revoke or suspend the contractor's license and order payment from the Fund. A.R.S §§ 32-1133.01 (A), -1154(B)(3), -1155(A).
¶ 14 A contractor may contest a Fund award by requesting a hearing "to determine the amount or propriety of the payment." A.R.S. § 32-1133.01(C). A Fund payment "may not exceed the actual damages suffered by the claimant as a direct result of a contractor's violation" and is capped at $30,000. A.R.S. § 32-1132.01(B)(1), (D). "Actual damages" consist of "the reasonable cost of completing the contract and repairing the contractor's defective performance, minus the part of the contract price still unpaid." § 32-1132.01(H).
¶ 15 The Hollands made a claim for a Fund award through the ROC. When the ROC informed Craven of its decision to award Fund monies to the Hollands, Craven timely requested an administrative hearing before the ALJ. The ALJ conducted a hearing, made findings of fact and issued conclusions of law. The ROC Director had the discretion to "accept, reject or modify" the ALJ's decision, including any "finding of fact or conclusion of law" the ALJ decided. A.R.S. § 41-1092.08(B). But the Director could not reject the ALJ's decision for a reason "contrary to law." A.R.S. § 12-910(F).
¶ 16 Here, the ROC Director rejected the ALJ's decision because the Director felt that the ALJ erred by assigning the burden of proof to the Hollands and ROC, rather than to Craven. We disagree.
¶ 17 A party asserting a claim always bears the ultimate burden of persuasion. See A.A.C. R2-19-119(B)(1); see also Ariz. R. Evid. 301. Here, it was the Hollands who made a claim for a Fund award, and it was the Hollands and the ROC (as the agency that determined a Fund award for the Hollands was appropriate) who sought to confirm that award when Craven, at its first opportunity to challenge the award, requested a hearing. See A.R.S. § 41-1092.07(G)(3) ("At a hearing on . . . any agency compliance order, the agency has the burden of persuasion). As a matter of law, the ALJ appropriately placed the burden of proof on the Hollands (and on the ROC) to establish damages, presumably including an explanation for damage costs greater than the amount Craven was paid for the original repair. Thus, the ROC Director's basis for rejecting the ALJ's decision altogether was for a reason contrary to law. Consequently, we remand the matter to the ROC Director to determine whether to accept, reject, or modify the ALJ's decision. 5
CONCLUSION
¶ 18 For the foregoing reasons, we vacate the superior court's $30,000 Fund award to Nicholas Holland and remand to the ROC Director to accept, reject, or modify the ALJ's decision. Each party shall bear its own costs on appeal. 6