ALJDEC

00F-A0254-ROC · Registrar of Contractors · 2001-02-12

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: January 25, 2001 (Prescott, Arizona)

APPEARANCES: A. F. Wilson appeared on behalf of Complainants; Respondent was present and represented by his attorney Anna Young.

ADMINISTRATIVE LAW JUDGE: Eric A. Bryant _____________________________________________________________________

Complainants A. F. and Jan Wilson bring this action claiming that Respondent Michael Knittle dba Trojan Builders abandoned a contract to build a house in Prescott, Arizona. The parties presented evidence and testimony at the hearing and, based upon the entire record, the Administrative Law Judge makes the following Findings of Fact, Conclusions of Law, and Recommended Order for dismissal. FINDINGS OF FACT 1. Respondent, a sole proprietorship, is the holder of a class B license (No. 109710) issued by the Registrar of Contractors (“ROC”). That license authorizes Respondent to perform general residential construction of a structure or appurtenance, except for certain specialty contracting such as electrical, plumbing, swimming pools, etc. (See, Arizona Administrative Code (A.A.C.) R4-9-103.) Michael Knittle is Respondent’s owner and Qualifying Party. 2. In June 1999, Complainants and Respondent entered into a contract for the building of a home according to plans specified in the contract. After problems with the area homeowner’s association and the site, Complainants decided to change to a different house plan in about August 1999. Respondent determined that he did not want to build according to the alternate house plans and, according to Mr. Wilson, they “parted company.” 3. At that point, Respondent had cleared the lot and had done excavation for the foundation. He also had obtained a building permit from the city, which had cost $6,164.91. He had done all this with advance payments from Complainants. In September 1999, Respondent obtained a refund from the City of Prescott for 80% of the permit fees, or $4,931.93. (Exhibit 1.) He kept that refund. 4. Complainants filed their complaint in January 2000, claiming that Respondent abandoned the project and that Respondent must return the refunded permit fees to Complainants. CONCLUSIONS OF LAW 1. The burden of proof at an administrative hearing is generally upon a complainant. Utah Construction Company v. Berg et al, 68 Ariz. 285, 205 P.2d 367 (1949). Further, the standard of proof at hearing is by preponderance of the evidence. Smith v. Arizona Dept. of Transportation, 146 Ariz. 430, 706 P.2d 756 (App. 1985). Therefore, Complainants bear the burden of showing, by a preponderance of the evidence, that Respondent has violated the statutes cited in the Citation and Complaint. Culpepper v. State, 187 Ariz. 431, 437, 930 P.2d 508, 514 (Ct. App. 1996). Complainants have not met that burden. 2. The evidence does not show that Respondent has violated A.R.S. § 32-1154(A)(1), abandonment of a contract, as alleged in the Citation and Complaint. The parties had a contract to build a particular house per a particular set of plans. Once Complainants changed the plans, the contract was terminated and Respondent was free to reject any subsequent offer by Complainants. Respondent was not obligated to build the alternate set of plans unless the parties entered into a new contract. That did not happen; therefore, there was no abandonment. 3. The evidence does not show that Respondent has violated A.R.S. § 32-1154(A)(7), commission of a wrongful act that causes substantial harm, by obtaining the permit fees refund and refusing to give it to Complainants. Respondent asserts that he is entitled to the money for the work that he performed on the project, which included lining up subcontractors, reviewing plans, working with the homeowner’s association, and supervising the lot clearing and excavation. (Exhibit B.) This may or may not be true; that question is not necessary to the outcome of this administrative action. Respondent’s testimony shows that there is a good faith dispute between the parties as to who is entitled to that money. 4. Good faith contractual disputes are normally matters more properly litigated before a civil judicial tribunal, particularly when such issues involve legitimate questions as to the amount of money owed and the reasonable value of work performed. If a genuine good faith dispute exists as to money owed between the parties, allegations of licensure violations will be dismissed. Such a dismissal would not be intended to address the contractual merits of either party’s position, but rather to identify this matter as one that should be pursued in a more appropriate forum for a contractual claim, such as Superior Court. 5. This means that a mere contractual dispute will not rise to the level of activity for which Respondent’s license will be disciplined. In a disciplinary action such as the one before this tribunal, Complainant must show that Respondent’s position is completely unreasonable and cannot be held in good faith. If Respondent has taken an unreasonable position, discipline may be imposed. On the other hand, if Respondent has a plausible and reasonable basis for his actions, this tribunal will not recommend any discipline of the license. 6. Complainants have not shown that Respondent’s position is unreasonable. Respondent may indeed be entitled to the money, in an amount that meets or exceeds the refunded amount. That issue is a contractual issue that is properly decided by a judicial branch court that has jurisdiction to adjudicate such contractual matters. Respondent will not be disciplined for taking a contractual position in good faith, even if it is ultimately determined by a court that he is not entitled to the money. Only if Respondent refuses to pay after ordered to pay by a court would disciplinary action be available. 7. A dismissal of this complaint must be without prejudice. Complainants have the right to pursue available civil remedies. Any future failure by Respondent to promptly satisfy a court judgment in favor of Complainant would provide a basis for a new complaint against Respondent, which could lead to disciplinary action. 8. In conclusion, Complainants may have a valid action against Respondent for breach of contract or unjust enrichment. However, those are actions which only the civil courts have jurisdiction over, and they are not to be decided by this administrative tribunal in a disciplinary action. Because Respondent has a good faith defense to Complainants claims, no violation of the ROC statutes has been shown. RECOMMENDED ORDER Based on the foregoing, it is hereby recommended that the Citation and Complaint against Respondent Michael Knittle dba Trojan Builders in case A00-0254 be dismissed without prejudice.

Done this 13th day of February 2001.

OFFICE OF ADMINISTRATIVE HEARINGS

______________________________________ Eric A. Bryant Administrative Law Judge

Original mailed this ___ day of February 2001, to:

Michael P. Goldwater ATTN: Joyce Armijo Registrar of Contractors 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