ALJDEC

00F-F0326-ROC · Registrar of Contractors · 2001-01-19

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: January 9, 2001 APPEARANCES: Complainants were represented by their attorney, Tony Cullum and Respondent was represented by its attorney, Gerald Nabours. ADMINISTRATIVE LAW JUDGE: Mark A. Silver _____________________________________________________________________

Evidence and testimony were presented and, based upon the entire record in this matter, the following Findings of Fact, Conclusions of Law, and Recommended Order are made:

FINDINGS OF FACT

1. Pursuant to written contract, Respondent was retained by Complainants to construct a new custom home. Complainants allege certain deficiencies in the work performed and/or materials provided by Respondent and same are discussed in the findings below.

2. The following salient facts were adduced at the hearing and are important to note:

a. The parties were social friends for many years, prior to entering into the contract at issue herein. b. The written contract for construction of the home was executed by the parties in April 1999. c. Applicable provision of the contract indicates that Respondent will make a “diligent effort to complete the construction…by 120 days after commencement of construction.” It further provided that “in no event will completion exceed two (2) years from the date of this contract.” d. Notwithstanding, the aforementioned written contract provisions, Complainants contend that Respondent advised them that the project would only take approximately ninety (90) days to complete. Respondent does not recall making such a verbal representation. e. The contract further provided for payment of $235,165.00, which was to be paid from the construction loan to Respondent in five (5) equal draws of $47,033.00. f. Although Respondent commenced work on the project on or about May 1999, it was undisputed that in March 2000, the project was still not completed. Complainants understandably were quite upset at this point, with the perceived delay in having the new home construction project completed. g. The bank issuing the construction loan conducted progress inspections in order to determine whether a particular draw on the construction loan was due to be paid. On March 6, 2000 the bank sent its inspector to the jobsite and said inspector determined that the project was approximately 82% complete and as a direct result of said inspection, authorized the full payment of the 4th draw on the construction loan. h. Although the bank had made the first three draw payments, by the time of the 4th draw Complainants had taken control of the draw payments due to their belief that the project was taking too long to complete and their growing lack of confidence in Respondent. i. Notwithstanding the above-described conclusion of the bank’s inspector, referable to the timeliness of Respondent’s request for the 4th draw, Complainants refused to pay the total amount of said draw and only paid Respondent the sum of $28,869.96, thereby paying Respondent, as of said date, a total of $177,023.16 on the contract draw schedule to that point. The contract would have required Respondent to be paid a total of $188,132 at the time of the 4th draw payment. j. Complainants contend that Respondent was over paid for the percentage of work that had been completed as of the aforementioned March 2000 4th draw request and Respondent contends that it was underpaid. k. Based on the dispute over the adequacy of the 4th draw payment, Respondent ceased work on the project, with both sides claiming that the other breached the terms of the contract. l. When the parties could not resolve their differences, Complainants ultimately hired other contractors in order to complete the project to only the point of being able to obtain a certificate of occupancy. Thus, many of the workmanship deficiencies left behind by Respondent were not corrected. m. Complainants filed the instant complaint with the Registrar of Contractors on April 14, 2000.

3. A jobsite inspection by the appointed inspector for the Registrar of Contractors was held on April 26, 2000, pursuant to which that Agency sent Respondent a letter directing it to accomplish specified remedial work within a stated period of time. Notwithstanding the terms of said Agency directive, Respondent continued to refuse to perform any further work on the project.

4. Respondent stipulated at the instant hearing that the items set forth in the aforementioned corrective work order were accurate but did not agree that the work needed to be finished at the time of said jobsite inspection. Respondent contends that much of the work listed on the corrective work order involved “punch list” type work that could have been completed at the completion of the project, if Complainants had not breached the payment terms, thereby causing Respondent to cease work on the project.

5. The assigned inspector for the Registrar of Contractors opined at the instant hearing that despite the fact that a contractor may have justification for terminating work on the project, based on an alleged failure of the owner to make progress payments, any “completed” work left behind by the contractor must be left in a such a state as to represent proper and adequate workmanship.

6. As aforementioned, Complainants have had a significant portion of the items on the corrective work order completed by others. However, they still claim entitlement to have Respondent complete the remaining items set forth on the corrective work order.

7. Evidence of record demonstrated that the following workmanship deficiencies remain on the project and are attributable to “completed” aspects of the project accomplished by Respondent at the time it ceased working on the construction of the home:

a. Garage area: A specified hole exists in the stem wall. Gaps are present in the threshold for garage house door. There are dents in the garage door. Garage center column is excessively twisted. b. House rear door: The door jamb has dings and dents. c. First Floor bathroom: Excessive bulge in north wall, ceiling out of level, and sloppy texture splatters on wall. d. Entry closet: A piece of wood is embedded in the drywall. e. Front door: Drywall residue is on the door and there are dents in the door molding. f. Dining room: There is an excessive flat spot in the rounded entry arch. g. Upper floor bedroom to the right of the bathroom: Closet shelves are cut short, revealing an excessive gap at the ends. h. Upper level bathroom between bedrooms: Door jamb is dented. i. Upper floor bedroom to the left of the bathroom: Door jamb too narrow for the frame opening. j. Outside of House: Siding reveals chips, dings and crush marks. In addition the siding is not adequately attached to the house. Roofing is prematurely worn from foot traffic. Specified duct furring is inconsistent. There is an excessive sag in the first story eve. The outside corner of the garage eve is excessively out of level. The stem wall was not textured and painted to finish grade level.

8. This Tribunal concurs with the above referenced statement of the Registrar’s inspector, that a contractor is responsible to assure that any completed work which it leaves behind on a project must be capable of meeting appropriate industry standards for good and proper workmanship, regardless of whether Respondent ceased work on the project due to a failure of an owner to make required progress payments. Thus, Respondent should have corrected the work set forth in the above-described workmanship deficiencies and it is therefore, determined and held that Respondent violated the applicable charged section of the State’s Contracting laws regarding the failure to comply with an Agency directive.

9. The above-described construction deficiencies are sufficient to support a finding of violations of the State’s Contracting laws regarding good and proper workmanship. Nevertheless, it is important to emphasize that Respondent did not complete the project. Construction work, such as that at issue herein, is not a perfect science and it is not uncommon in the industry to have corrections, repairs, or replacements of resultant poor workmanship prior or subsequent to completion of a specified project, in order to bring the final work product up to appropriate industry standards.

10. The record presented at the hearing failed to adequately establish that if Respondent had been allowed to complete the project in question, its final finished work would not meet appropriate minimum standards for proper workmanship. Thus, the fact that Respondent ceased work on the project, for what it believed was good cause, is deemed to be a matter in mitigation when considering whether any appropriate discipline is warranted for the state of the work at the time Respondent ceased working on the project.

11. A money dispute continues to exist between the parties regarding the issue of whether Respondent is entitled to further monies for its work performed on the project or whether Complainants are entitled to monetary damages. Although the money dispute between the parties may properly be adjudicated in a civil court of competent jurisdiction, the Registrar of Contractors, acting through an administrative license disciplinary forum, is not the proper forum to resolve a money dispute, such as the one presented in the instant case.

12. As set forth in the Citation and Complaint issued by the Registrar of Contractors, Respondent was advised that in the event of a finding of a violation against Respondent, Respondent’s prior disciplinary record of final Registrar of Contractors’ orders may be considered in mitigation or aggravation. Accordingly, subsequent to conclusion of the instant hearing, notice was taken of official records of the Registrar of Contractors regarding any prior final disciplinary orders against Respondent and said notice revealed the absence of any prior disciplinary sanction on the Registrar of Contractors’ current record regarding Respondent. Therefore, Respondent’s prior record is properly deemed to be good and thus, is viewed as a matter in mitigation for any disciplinary penalties to be imposed as a direct result of this case.

CONCLUSIONS OF LAW

1. Respondent violated the provisions of A.R.S. § 32-1154A (23), (7), and (3); namely Rule R 4-9-108.

RECOMMENDED ORDER

In view of the foregoing it is recommended, commencing on the effective date of the Order entered in this matter, that the Class B license of Respondent shall be suspended until the Registrar of Contractors receives written proof that Respondent has accomplished appropriate and effective remedial work on the items set forth in Findings of Fact 7(a) through 7(j). It is further recommended that if Respondent accomplishes the above- described corrective work on or before the effective date of the Order entered in this matter, then the aforementioned license suspension shall not take place and in that event this Citation, together with the Complaint upon which it is based, shall be closed.

Done this day, January 19, 2001

______________________________________ Mark A. Silver Administrative Law Judge

Original transmitted by mail this ____ day of ____________, 2001, 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