ALJDEC

00F-G0275-ROC · Registrar of Contractors · 2000-05-01

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: May 1, 2000 APPEARANCES: In No. 00F-G0334-ROC: Complainant Juanito’s Plumbing failed to appear. Respondent Caliente Construction, Inc. appeared through its President and CEO, Tom Bergman. In No. 00F-G0275-ROC: Tom Bergman appeared on behalf of Complainant Caliente Construction. Respondent Juanito’s Plumbing, Inc. failed to appear. ADMINISTRATIVE LAW JUDGE: Daniel G. Martin _____________________________________________________________________ The issue presented by this consolidated matter is whether Caliente Construction, Inc. or Juanito’s Plumbing, Inc. is subject to discipline for acts or omissions in violation of A.R.S. § 32-1154. Based on the entire record, the Administrative Law Judge makes the following Findings of Fact, Conclusions of Law and Recommended Orders: FINDINGS OF FACT Caliente Construction, Inc. (“Caliente”) is the holder of a Class B- license (No. 091625) issued by the Registrar of Contractors (“ROC”). Juanito’s Plumbing, Inc. (“Juanito’s”) is the holder of a class K-37 license (No. 148299) issued by the ROC. In September and October, 1999, Juanito’s contracted with Caliente to perform plumbing work on three commercial jobs in the Phoenix metropolitan area ( two Panda Express restaurants (Deer Valley and Mesa Grand), and a Zany Brainy bookstore (Mesa Spectrum). All three jobs were on “fast track” construction schedules. In connection with these contracts, Juanito’s represented to Caliente not only that it would meet Caliente’s accelerated construction schedules, but that it would use experienced journeymen plumbers on the jobs. Juanito’s did not meet Caliente’s construction schedules, nor did it use experienced journeymen plumbers on the jobs. The uncontradicted evidence presented at the hearing established that on numerous occasions, Juanito’s failed to complete its work in a timely manner and that its crews consisted of inexperienced and, at times, unqualified, workers. The uncontradicted evidence further established that on numerous occasions, Juanito’s failed to provide a qualified foreman to oversee the work being performed. Juanito’s failure to have used experienced journeymen plumbers on Caliente’s jobs is evidenced by the fact that Juanito’s workmanship at each of the three locations fell substantially below minimum workmanship standards. The sheer number of poor workmanship items precludes listing them in their entirety, but, by way of example, the Administrative Law Judge notes the following: a. At the Deer Valley Panda Express, Juanito's (1) failed to properly construct a natural gas line, resulting in both a plumbing code violation and a safety hazard, (2) tied condensate drains with food drains, a health code violation, (3) failed to properly install bathroom fixtures (among other things, the toilets did not comply with requirements of the Americans with Disabilities Act ( “ADA”), (4) cross-connected hot and cold water lines, and failed entirely to install a tempered water line specified in the plans (creating both a health and safety hazard), (5) failed to install a pan drain or pan for the hot water heater, (6) failed to install backflow preventers, and (7) otherwise failed to perform its work in a workmanlike manner (numerous leaks, improper fittings, etc.). On this job, Juanito's consistently arrived late (if it showed up at all), and often failed to bring sufficient supplies to complete its work. b. At the Mesa Grand Panda Express, Juanito's (1) again failed to properly construct a natural gas line (the line failed two pressure tests due to leaks), (2) failed to properly install bathroom fixtures in accordance with ADA requirements, (3) cross-connected hot and cold water lines, and failed to connect the hot water line, (4) failed to properly locate drains, and (5) failed to install proper backflow preventers. There was also evidence that Juanito's attempted to substitute inferior and cheaper materials for those specified in the plans. On this job, Caliente removed Juanito's after Caliente discovered that Juanito's had not only improperly constructed a hot water heater exhaust flu, but had set the flu in such a manner that it was physically resting on combustible material, thus posing a fire danger. c. At the Zany Brainy store, Juanito's did such a poor job on the underground work that approximately one half of it had to be removed and replaced by a separate subcontractor because it did not comply with the Uniform Plumbing Code. Steve Baker, a journeyman plumber with 16 years of experience and an employee of Cholla Plumbing, the company that completed the plumbing work on the Zany Brainy project, testified at the hearing that Juanito's work looked like the work of a “first year probationary apprentice.” On November 8, 1999, Caliente faxed a “Notice of Failure to Perform” to Juanito's [Exhibit 11] in connection with the Deer Valley Panda Express project. Caliente advised Juanito's that Juanito's was in violation of its subcontract, and gave Juanito's 24 hours to properly staff the project. In issuing this notice, Caliente relied on a section of its subcontract with Juanito's entitled “Subcontractor’s Failure to Perform, Notices, Breach of Contract.” This section provides: “in the event of such failure to perform and after forty-eight (48) hours written notice to the Subcontractor specifying the particulars of such failure, served personally, mailed or by facsimile to the Subcontractor, to correct procedures in manpower, scheduling or rejected work. [sic] If the Subcontractor fails or does not respond to written notice, then the General Contractor may charge and deduct from any sums due to the Subcontractor as specified in this contract.

If, in the opinion of the Contractor or the Owner’s representative or the Architect, the Subcontractor fails to perform his work in accordance with this Agreement, and should such failure continue for twenty four (24) consecutive hours after service of written notice to the Subcontractor. [sic] The notice shall specify the particulars of such failure and shall be served personally, mailed or by facsimile to the Subcontractor. Such failure and continuance thereof shall constitute a breach of the contract by the Subcontractor. Such breach shall entitle the Contractor to [liquidated damages] and/or both to terminate the contract and complete the work himself, or cause the work to be completed by others.”

On November 11, 2000, after Juanito's had failed to comply with Caliente’s demand that it properly staff the project, Caliente issued a written “Notice to Cease Work” to Juanito's [Exhibit 12] in which Caliente instructed Juanito's to cease and desist all further work at the Deer Valley Panda Express. Also on November 11, 2000, Caliente faxed a demand to Juanito's that Juanito's complete its work at the Mesa Spectrum Panda Express. There is no evidence in the record regarding Juanito's response to this demand. Nor is there any evidence in the record as to how Juanito’s poor workmanship at the Mesa Spectrum Panda Express was rectified. There is some evidence in the record that on December 10, 1999, Caliente requested that Juanito's complete its work at the Zany Brainy store. By letter dated that same day [Exhibit 6], Juanito's (through its sales manager, Deb Stevens) responded “[a]s I advised, we are not interested in completing the job since we have yet to be paid on it or many other jobs. Since you have indicated many times in the past that we will probably not be receiving any monies, I see no purpose in completing a job we will not be paid for.” The Administrative Law Judge finds, on the basis of Exhibit 6, that Juanito's abandoned the Zany Brainy project. The Administrative Law Judge further finds, on the evidence of record, that Juanito's monetary dispute with Caliente does not constitute legal excuse for its abandonment of the project. Caliente hired Marlin Mechanical Corporation (“Marlin”) to complete Juanito's scope of work at the Deer Valley Panda Express. Marlin billed Caliente $17,900.00 for that work. Caliente hired Cholla Plumbing Co., Inc. (“Cholla”) to complete Juanito's scope of work at the Zany Brainy store. Cholla billed Caliente $5,001.00 for that work. Caliente also hired Cholla to perform warranty work at the Mesa Grand Panda Express (a sink repair) that Juanito's refused to perform. Cholla billed Caliente $105.99 for that work. On December 13, 1999, Caliente filed a complaint against Juanito’s with the ROC. Caliente alleged “Juanito’s Plumbing did very poor work that needed extensive correction. Juanito's used workmen that were not experienced plumbers. Juanito's did not man the job properly, did not pay suppliers, and did not complete their contract.” On February 14, 2000, the ROC issued a Citation and Complaint charging Juanito’s with violations of A.R.S. § 32-1154(A)(1) (abandonment of a contract or refusal to perform without legal excuse), (A)(7) (wrongful or fraudulent act resulting in substantial injury), (A)(11) (failure to pay monies in excess of $750.00 when due for materials or services rendered) and (A)(3) (violation of any rule adopted by the ROC, in this case, A.A.C. Rule R4-9-108 covering workmanship standards). On February 22, 2000, Juanito’s filed an Answer to the Citation and Complaint in which it denied violating any of the foregoing statutory provisions and in which it accused Caliente of having attempted to defraud it. On January 3, 2000, Juanito’s filed a complaint against Caliente with the ROC. Juanito’s alleged “Caliente Construction failed to pay invoices for plumbing material work done and completed.” On February 14, 2000, the ROC issued a Citation and Complaint charging Caliente with violations of A.R.S. § 32-1154(A)(7) (wrongful or fraudulent act resulting in substantial injury) and (A)(11) (failure to pay monies in excess of $750.00 when due for materials or services rendered). On February 16, 2000, Caliente filed an Answer to the Citation and Complaint in which it denied violating either A.R.S. § 32-1154(A)(7) or (A)(11). At the hearing, Caliente presented a general accounting of the costs it incurred to correct Juanito's work. [Exhibit 14] Caliente also presented evidence of costs it incurred to bond over two liens that Juanito's had, in Caliente’s view, improperly filed against the two Panda Express projects. [Id.] According to Caliente, it expended $13,898.92 over the amount of its contracts with Juanito's. Therefore, Caliente argued that contrary to Juanito's claim, it was Juanito's that owed Caliente, not vice-versa. The Administrative Law Judge notes Caliente’s claims for the record. However, Caliente’s claims in this regard are claims for damages that this tribunal is not empowered to award. Therefore, the Administrative Law Judge does not consider them further. By its failure to appear for the hearing, Juanito's not only failed to prosecute its complaint; it also failed to present any evidence in defense or mitigation of the complaint filed by Caliente. CONCLUSIONS OF LAW In this consolidated matter, the parties bear separate burdens. Caliente, on the one hand, bears the burden to prove, by a preponderance of the evidence, that Juanito’s is subject to discipline for violations of A.R.S. § 32-1154(A)(1), (A)(3), (A)(7) and/or (A)(11) as charged by the ROC in its February 14, 2000 Citation and Complaint. Juanito's, on the other hand, bears the burden to prove, by a preponderance of the evidence, that Caliente is subject to discipline for violations of A.R.S. § 32-1154(A)(7) and/or (A)(11). A preponderance of the evidence is “such proof as convinces the trier of fact that the contention is more probably true than not.” Morris K. Udall, Arizona Law of Evidence § 5 (1960). The Administrative Law Judge first addresses Juanito's complaint against Caliente. Despite having filed an answer to Caliente’s complaint in which it accused Caliente of fraud, and having filed its own complaint against Caliente, Juanito's failed to appear for the hearing, and further failed to advise the Office of Administrative Hearings of any cause for its failure to appear. By virtue of its failure to appear and present evidence, Juanito's failed to sustain its burden to prove that Caliente violated either A.R.S. § 32-1154(A)(7) or (A)(11). Those charges, and the complaint on which they are based, should be dismissed in their entirety. Juanito's failure to appear at the hearing demonstrates a substantial disregard for ROC procedures and is considered an aggravating factor in the imposition of discipline against Juanito's. As to Caliente’s complaint against Juanito's, the Administrative Law Judge concludes that Caliente sustained its burden to prove that Juanito's violated A.R.S. § 32-1154(A)(1), (A)(3) and (A)(7). However, the Administrative Law Judge concludes that Caliente did not sustain its burden to prove a violation of A.R.S. § 32-1154(A)(11). Under A.R.S. § 32-1154(A)(1), a contractor is subject to discipline for “abandonment of a contract or refusal to perform after submitting a bid on work without legal excuse for the abandonment or refusal.” Under A.R.S. § 32-1154(A)(3), a contractor is subject to discipline for “violation of any rule adopted by the registrar.” In this case, the ROC charged Juanito's with a violation of A.A.C. Rule R4-9-108, which, among other things, requires contractors to perform work in a professional and workmanlike manner and in accordance with any applicable building codes and professional industry standards. Under A.R.S. § 32-1154(A)(7), a contractor is subject to discipline for “the doing of a wrongful or fraudulent act . . . as a contractor resulting in another person being substantially injured.” Under A.R.S. § 32-1154(A)(11), a contractor is subject to discipline for “failure . . . to pay monies in excess of seven hundred fifty dollars when due for materials or services rendered . . . .” Juanito's violated A.R.S. § 32-1154(A)(1) when it abandoned the Zany Brainy project without legal excuse, and when it refused to perform the Deer Valley Panda Express project. Regarding the Deer Valley Panda Express project, the Administrative Law Judge concludes that although the subcontract language on which Caliente relied to demand Juanito's performance is somewhat unclear (see Finding of Fact No. 7), nonetheless there is sufficient objective expression of intent in the subcontract to conclude that Juanito's had a contractual obligation to render performance after demand from Caliente, and that it failed to do so. The record contains substantial, reliable and probative evidence that Juanito's committed numerous violations of A.R.S. § 32-1154(A)(3). As set forth in Finding of Fact No. 6, above, Juanito's failed to meet minimum workmanship standards at each of Caliente’s three projects, thereby violating A.A.C. Rule R4-9-108 on each of those jobs. The Administrative Law Judge finds these violations to be particularly egregious when considered in light of the health and safety hazards that they posed. In addition to the foregoing, the Administrative Law Judge concludes that Juanito's violated A.R.S. § 32-1154(A)(7) by abandoning the Zany Brainy project, by refusing to perform the Deer Valley Panda Express project, and by engaging in poor workmanship that required substantial corrective work by Caliente. In each case, the Administrative Law Judge concludes that Juanito's committed a wrongful act that caused substantial injury to Caliente. Although Caliente sustained its burden to prove that Juanito's violated A.R.S. § 32-1154(A)(1), (A)(3) and (A)(7), Caliente did not sustain its burden to prove that Juanito's violated A.R.S. § 32- 1154(A)(11). A.R.S. § 32-1154(A)(11) contemplates the situation wherein a contractor fails to pay for materials or services rendered. In this case, Caliente did not render materials or services to Juanito's; therefore, Caliente cannot sustain a claim that Juanito's failed to pay for such materials or services. The ROC’s February 14, 2000 Citation and Complaint advised Juanito's that in the event of a finding of a violation against it, Juanito's prior disciplinary record of final Registrar of Contractors’ orders could be considered in mitigation or aggravation. Accordingly, subsequent to the conclusion of the instant hearing, the Administrative Law Judge took notice of prior final disciplinary orders against Juanito's in the ROC’s official records. Those records revealed that the instant complaint was the only complaint against Juanito's in the ROC’s current record. Therefore, Juanito's prior record is deemed to be excellent. The Administrative Law Judge considered this mitigating factor when determining appropriate recommended discipline for this matter, and weighed it against the significant aggravating factors that are present in this case, including Juanito's failure to appear for the hearing. RECOMMENDED ORDERS With regard to Docket Number 00F-G0334-ROC, it is recommended that no discipline be imposed against Caliente’s license, and that the entire Citation and Complaint issued in Case Number G00-0334 be dismissed. With regard to Docket Number 00F-G0275-ROC, it is recommended, commencing on the effective date of the Order entered in this matter, that the Class K-37 license of Juanito’s Plumbing be suspended for a period of twenty-one (21) days. It is further recommended that upon the expiration of the foregoing suspension, the Class K-37 license of Juanito’s Plumbing be placed on disciplinary probation for a period of three hundred and sixty- five (365) days. It is further recommended, in addition to the above provided penalties, that any continuation or restoration of Respondent’s contracting rights, whether or not probationary, shall be subject to a condition that Respondent first post an additional surety bond, cash deposit or alternative deposit for a period of twenty-four (24) months, including future renewal periods, in the amount of $2,500.00, such bond or deposit to be in addition to the required surety bond or cash deposit set forth in A.R.S. § 32-1152(D). Cash or alternative additional deposits, if utilized, shall be returned only after the expiration of an additional two year period following the above-provided twenty-four (24) month period and only if no claims are then pending.

Done this day, May 19, 2000.

______________________________________ Daniel G. Martin 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