Ramsey v. Arizona Registrar of Contractors – 11/1/2016

December 6, 2016

Arizona Court of Appeals Division One holds that, for purposes of recovery from the Contractors Recovery Fund, the calculation of a claimant’s “actual damages” deducts the unpaid portion of the original contract price.

The Arizona Registrar of Contractors Recovery Fund provides financial protection for residential homeowners for “actual damages,” capped at $30,000, for violations of Title 32 governing contractors.  A.R.S. § 32-1132.  Purchasers sought recovery from a contractor and the Fund related to allegedly defective work.  ROC intervened and moved to dismiss the case against the Fund, claiming that the purchasers had suffered no “actual damages” because the amount owed to complete the home was less than the amount owed to the contractor.  The trial court directed ROC to pay the purchasers from the Fund.

The Court of Appeals vacated and remanded, agreeing with the ROC’s interpretation of “actual damages” as:  (1) the reasonable cost of completing the contract and repairing the contractor’s defective performance; minus (2) the remaining unpaid contract price.  The Court reasoned that ROC’s interpretation restored claimants against the Fund to the same position they would have been in had the contract been performed by excluding contractor expenses that had never been paid.  The Court of Appeals was not persuaded that excluding such unpaid costs would unduly punish claimants who enter into inflated construction contracts because the fund was not designed to remedy overpayment and, as an administrative agency, the ROC’s warranted deference even if it was not “the most reasonable construction” of the term “actual damages.”  Regarding the procedure employed by the trial court, the Court of Appeals concluded that the statute governing payment from the fund requires only “testimony, documentary evidence, or other proof . . . as to those portions of the application to which the ROC has objected,” rather than a blanket statement of facts pursuant to Arizona Rule of Civil Procedure 56(c)(3).  Moreover, the Court of Appeals held that the trial court was not required to hold a hearing prior to directing payment from the Fund, where the issue was purely legal and had been fully briefed.

Judge Jones delivered the opinion; Judges Howe and Kessler concurred.