ALJDEC

00F-A0214-ROC · Registrar of Contractors · 2000-06-12

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: June 7, 2000 APPEARANCES: Glenn and Charlotte Utke, Complainants in their own behalf Thomas Walter, President, on behalf of the corporate Respondent ADMINISTRATIVE LAW JUDGE: Allen Reed _____________________________________________________________________

Findings of Fact 1. In December 1998, the Complainants looked at a “Spec Home” built by the Respondent, in Prescott, Arizona. At the time the Complainants spoke with the Respondent’s sales manager, Larry Renken (Renken) and a salesperson, Janice Stearn (Stearn). 2. The land for the subdivision had been developed by Neal Klein Development (NKD), which is affiliated with the Respondent but is a separate corporation. 3. The site of the subdivision is a hillside. The home the Complainants were looking at, was on a lot which had a sloping 20 foot incline before the lot was prepared for construction with engineered cuts. After preparation of the lot by NKD, the incline at the back of the home was approximately 60 degrees for a height of possibly 20 feet. The estimate of the angle of the incline appears excessive from the photographic evidence but no other evidence was presented to refute this. The Complaint sets the height of the back hill at 25 feet with an additional feet of height for the neighbor’s pad. The exact height variation is not certain and the Complainant’s height figures appear slightly overestimated in view of the original topography and photographs. The side of the lot is also inclined but not as sharply or as high as the back. 4. One of the lots (No. 58), behind the Complainant was partially engineered (a cut and fill lot). 5. According to the Complainants, they told Renken and Stearns of their concerns with potential water drainage from these hills and were told that the Respondent would address the issue. There was also some discussion about hydro-seeding the inclines but this was not formalized as part of the contract. 6. The Complainants bought the home in January, 1999. The Respondent placed rocks at the bottom of the hill at the back of the home, cloth mesh was placed on the back incline and some vegetation was planted. No hydro-seeding was done because a landscaper working on the home in May 1999, concluded it was too close to the monsoon season. 7. The monsoon rains in the summer of 1999 were more severe than normal. Water ran off of neighboring property above the Complainant’s home and down the hill forming two significant and some smaller channels and depositing dirt and silt in the Complainant’s backyard. The mesh on the hill was fairly well destroyed during the rainy season, some vegetation was lost and the rock boundary at the bottom of the hill was somewhat displaced by the force of the water running down the hill. 8. The Complainants contacted a representative of NKD, and discussions were held regarding clean up and preventative measures. The discussions did not bear fruit and the Complainants filed their complaint with the Registrar of Contractors (Registrar), on November 22, 1999. 9. Inspector Cliff Frandsen (Frandsen), performed an inspection and concluded that at the time of purchase, the home and property were in compliance with city design approval and drainage requirements. The run off was determined to be coming from private property and possibly the road. In addition, Frandsen also concluded that the Complainants had landscaped the back of their property although there was no evidence presented that this had an impact on the drainage issue. Frandsen required no action of the Respondent although the Respondent agreed to help in the clean up the area and did so. According to the Respondent, the Complainant intimated that once the Respondent had cleaned up, the matter would be put to rest. 10. The Complainants had rock placed on the back hill in order to prevent future erosion and silt deposits. They paid $4,071.83 for the rock, and additional amounts were paid for the landscaping which was destroyed and replacement landscaping. The Complainants seek recovery of the cost of the rock. 11. According to the Respondent, one of the Complainant’s uphill neighbors has concentrated and directed his water flow through the use of down spouts and gutters, resulting in some of the run off onto the Complainant’s land. 12. The Respondent points out that when one lives on the side of a hill, gravity will invariably cause water to flow down an incline. The Respondent further asserted it had no further responsibility on the water issue and that the Complainant is responsible for proper landscaping and directing the water around the sides of the house toward the street. Conclusions of Law The allegations of the Citation and Complaint concern A.R.S. §32- 1154(A)(3) failure to comply with any rule, specifically A.A.C. R4-9-108 and (A)(7) a wrongful or fraudulent act with substantial injury. 1. The Respondent waived any jurisdictional error based on any finding that a violation occurred but was attributable to NKD which is an affiliated but separate entity with a separate license. The evidence shows that the subdivision was developed and engineered by NKD and the Respondent was the builder. 2. There was no competent evidence presented that the Respondent failed to comply with any recognized or established standard with respect to the grading or engineering of the land and subdivision lots. Under the facts of the case and considering the location of the Complainant’s home, the unusual amount of rain resulting in some erosion and silt deposits does not, of itself, establish a violation of the cited statutory provision. Erosion is a natural condition and in light of the severity of the rainfall and the general topography of the subdivision, the evidence in this case does not show such extreme damage that it can be attributed to poor workmanship under the rule. Absent competent evidence that the Respondent failed to meet an identifiable standard or quantifiable standard, or that the damages from alleged poor workmanship are so obvious and severe that a violation is established as a matter of law, there is no violation of A.A.C R4-9-108/ or A.R.S. Å32-1154(A)(3). 3. The remaining issue in this case essentially comes down to the asserted representations by the Respondent’s employees (Renken and Stearn), that the Complainant’s concerns about drainage would be adequately addressed and the fact that those assertions were apparently incorrect in light of the problems experienced by the Complainants. The facts of the case show there was no fraud by the Respondent. Whether the representations and subsequent events were a wrongful act is the question. 4. According to the Respondent, the amount of rain in during the monsoon of 1999 was the most since 1993. Although the amount of rain was unusual, it was not unknown and therefore such rains can be anticipated. In addition, directing rainwater by down spouts and gutters as done by one of the uphill neighbors, potentially resulting in more concentrated water flows than if the water was merely sheeting, is also something which can be anticipated. 5. The Complainants assert that they relied in part on the Respondent’s employees representations in deciding to purchase the home. This reliance could not have been overly weighty, or something in writing should have been prepared. The Respondent’s representations were rather vague in that the Complainants were informed that their concerns about run off and erosion would be addressed. The Respondent then placed rocks at the bottom of the hill and the mesh on the incline. The hydro-seeding was not done but small plants and shrubs were added. And then the rains came. 6. Under the rather unique facts of the case, it is concluded that the Respondent bears some of the responsibility because it gave general assurances about the run off to the Complainants who relied in part, on those assurances when purchasing the home. These assurances were followed up by placement of the rock and mesh, which was not successful in withstanding the run off. The Complainant’s reliance was not the most reasonable because it was never firmly established or recorded how the run off would be addressed, and the specific responsibilities of the respective parties were not set forth regarding the issue. The representations made by the Respondent regarding the run off , when coupled with the Complainant’s reliance in purchasing the home, plus the damage done by the 1999 monsoon, rendering the Respondent’s effort less than successful, constitute a violation of A.R.S. §32-1154(A)(7), wrongful act. 7. Some of the responsibility lies with the Complainants because they never received written assurances regarding exactly how the potential problem would be addressed but simply relied on a rather vague statement that the problem would be addressed. Additionally, the fact that there is a certain assumption of risk in buying hillside property and there is never a guarantee with respect to the forces of nature, the fact that the rains were more severe then anticipated before erosion resistant plant growth could be established and that the Complainant’s took it upon themselves to have the rock placed on the hill without any showing of possibly less costly remedies, mitigate the violation and limit restitution. Recommended Order In view of the foregoing it Is recommended commencing on the effective date of the Order entered in this matter, that the Respondent’s Class B license shall be suspended unless the Registrar of Contractors receives written proof that the Respondent has paid or tendered payment to the Complainants the amount of One Thousand-Five Hundred and 00/100’s ($1,500.00) Dollars as restitution; It is further recommended that if the Respondent pays or tenders payment to the Complainants as required by the Order entered in this matter then the aforementioned suspension shall not take place and the Citation and Complaint upon which it is based shall be closed.

Done this 19th day of June , 2000

______________________________________ Allen Reed Administrative Law Judge

Original transmitted by mail this ____ day of ____________, 2000, to:

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

By ___________________________

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