ALJDEC

00F-M0326-ROC · Registrar of Contractors · 2000-02-09

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: February 9, 2000 APPEARANCES: Terry Griffith appeared on behalf of Complainant. Respondent appeared through its president and qualifying party, William Kay, Jr. ADMINISTRATIVE LAW JUDGE: Daniel G. Martin _____________________________________________________________________ The issue presented by this matter is whether Respondent Kay Construction, Inc. is subject to discipline for acts or omissions in violation of A.R.S. § 32-1154. Based on the entire record, the following Findings of Fact, Conclusions of Law and Recommended Order are made: FINDINGS OF FACT Respondent Kay Construction, Inc. (“Kay”) is the holder of a Class B license (No. 122205) issued by the Registrar of Contractors (“ROC”). William Kay, Jr. is Kay’s qualifying party. On November 17, 1998, Kay entered into a written contract with Richard Best Construction, Inc. (“Best”) to frame a custom home in Tempe, Arizona. The wall framing proceeded without significant incident. However, Kay encountered difficulties with the installation of incorrectly sized trusses that had been provided by the owner. Kay claims to have lost time and money when the truss problem forced it to pull a crane and crew off the job pending the fabrication and delivery of new trusses. Kay further claims to have lost money when, upon notification that the new trusses had been delivered, it did not have a crew available due to other obligations yet was forced to bring a crane to the site to unload the new trusses. Kay ultimately installed the new trusses. However, according to Best, Kay left numerous other items uncompleted. The matter came to a head when, on August 20, 1999, after Best had unsuccessfully attempted to get Kay to return to the job site, Best faxed to Kay a punch list containing 66 items and demanded that Kay respond within 48 hours. Kay did not respond. By fax correspondence dated August 25, 1999, Best demanded that Kay respond to its previous demand. Best attached to its correspondence a draft ROC complaint and informed Kay that unless Kay achieved “immediate resolution,” Best would file the complaint with the ROC. Kay again failed to respond. On September 1, 1999, Best filed its complaint against Kay with the ROC. Best alleged “[Kay] has not completed work after several notifications, and is holding up and delaying city framing approval.” The ROC assigned Inspector Ron Lamp to investigate Best’s complaint. By letter dated September 7, 1999, the ROC, through Inspector Lamp, notified Kay “it is the opinion of this office from the facts now before us that unless the matter is resolved within ten (10) days after receipt of this letter, we may request that a citation be issued against your license so that this matter may be resolved by administrative hearing.” In the meantime, by letter dated September 3, 1999, Best made a “final demand” that Kay complete the punch list. Kay again failed to respond. By fax correspondence dated September 15, 1999, Best advised Kay that due to Kay’s failures to respond to Best’s demands, Best would be completing the work itself and looking to Kay for reimbursement. At this point, Kay sent a crew in and completed a number of the items on the punch list. However, Kay refused to complete other of the items, claiming it was not obligated to do so. By fax correspondence dated September 29, 1999, Best provided Kay with a final punch list, and gave Kay 24 hours within which to complete the work. Kay failed to respond. In October 1999, and again in January 2000, Best hired separate contractors to complete Kay’s work and paid them $1,048.50. On October 25, 1999, the ROC issued a Citation and Complaint against Kay, charging Kay with violations of A.R.S. § 32-1154(A)(1) (abandonment of a contract or refusal to perform without legal excuse), (A)(7) (wrongful act resulting in substantial injury), (A)(12) (failure to comply with safety or labor laws), (A)(23) (failure to take appropriate corrective action) 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 November 3, 1999, Kay filed a written answer to the Citation and Complaint. Kay denied liability, claiming it had completed all of the work required of it under its contract with the exception of one item for which Kay claimed Best had not provided a drawing. At the hearing, Bill Kay asserted he had “bent over backwards” for Best, that Kay did not comply with Best’s demands for work in August because August is Kay’s busiest month of the year and Kay needed time to schedule a crew, that Kay eventually sent a crew to the site in mid- September, that Kay completed the majority of the work on the punch list, and that any monies expended by Best on other contractors for framing work not completed by Kay were a “wash” when measured against the extra costs Kay incurred on the contract. Upon consideration of all the evidence, the Administrative Law Judge finds that Kay failed to complete numerous items for which it was responsible, that Kay failed to respond in a timely manner to Best’s demands that Kay complete its work (and that Kay sent a crew to the site only after Best had filed its complaint with the ROC), that Best was justified in hiring separate contractors to complete Kay’s unfinished work, and that Best incurred $1,048.50 in costs that are properly attributable to Kay’s failure to have met its obligations to Best. CONCLUSIONS OF LAW In this proceeding, Best bears the burden to prove, by a preponderance of the evidence, that Kay is subject to discipline for violations of A.R.S. § 32-1154(A)(1), (A)(3), (A)(7), (A)(12) and/or (A)(23) as charged by the ROC in its October 25, 1999 Citation and Complaint. 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). 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 Kay with violating Rule R4-9-108, which, among other things, requires contractors to perform work in a professional and workmanlike manner and in accordance with 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)(12), a contractor is subject to discipline for “failure . . . to comply with any safety or labor laws or codes of the federal government, state or political subdivisions of the state.” Under A.R.S. § 32-1154(A)(23), a contractor is subject to discipline for “failure to take appropriate corrective action . . . without valid justification within a reasonable period of time after receiving written directive from the registrar.” Preliminarily, the charges against Kay arising under A.R.S. § 32- 1154(A)(23) must be dismissed because the ROC did not issue any written directives to Kay requiring corrective work. Further, the charges against Kay arising under A.R.S. § 32-1154(A)(12) must be dismissed because there is no evidence in the record that Kay failed to comply with any safety or labor laws. Further, the Administrative Law Judge concludes that Best failed to sustain its burden to prove that Kay’s workmanship was deficient, and therefore that Best failed to prove that Kay violated A.R.S. § 32- 1154(A)(3). On the other hand, the Administrative Law Judge concludes that Best sustained its burden to prove that Kay violated A.R.S. § 32-1154(A)(1) by refusing, without legal excuse, to perform its obligations to Best despite numerous demands by Best that it do so. The Administrative Law Judge further concludes that Best sustained its burden to prove that Kay committed a wrongful act under A.R.S. § 32- 1154(A)(7). Kay’s defense ultimately rests on the premise that it should be excused from performance because it incurred extra costs in performing the contract for which it was not paid. Even if Kay did incur such costs, that fact is not a valid defense to its refusal to perform. Best requested restitution of the $1,048.50 in costs that it incurred to complete Kay’s work as a disciplinary penalty. The ROC has authority to impose restitution as part of its regulatory authority to take appropriate disciplinary action against contractors who violate the State’s licensing laws. However, the imposition of restitution is a remedy to be used only sparingly. The Administrative Law Judge concludes that this case presents one of the rare instances in which restitution as a disciplinary penalty is appropriate. The work at issue has been completed. Best provided ample notice to Kay that it would move forward with the work and seek reimbursement from Kay in the event Kay failed to honor its obligations. Thus, Kay failed to complete performance at its peril. On these facts, the Administrative Law Judge concludes that a reasonable disciplinary penalty in this case is the payment by Kay to Best of $1,048.50 as restitution for the costs that Best incurred to complete Kay’s unfinished work. The October 25, 1999 Citation and Complaint issued by the ROC advised Kay that in the event of a finding of a violation against it, Kay’s prior disciplinary record of final ROC orders could be considered in mitigation or aggravation. Accordingly, subsequent to conclusion of the instant hearing, the Administrative Law Judge took administrative notice of official ROC records regarding any prior final disciplinary orders against Kay. Those records revealed that the instant complaint was the only complaint on the ROC’s current record regarding Kay. Therefore, Kay’s prior record is deemed to be excellent and is viewed as a matter in mitigation for any disciplinary penalties to be imposed as a direct result of this case. RECOMMENDED ORDER In view of the foregoing, it is recommended, commencing on the effective date of the Order entered in this matter (the “Effective Date”), that the Class B license of Kay Construction Inc. be suspended for a period of thirty (30) days. It is further recommended that if the Registrar of Contractors receives written proof that Kay Construction Inc. has paid restitution to Richard Best Construction, Inc. in the amount of $1,048.50 on or before the Effective Date, then no license suspension shall be imposed and the entire Citation and Complaint in Case Number M00-0326 shall be closed.

Done this day, February 29, 2000.

______________________________________ Daniel G. Martin Administrative Law Judge

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

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

By ___________________________ -----------------------

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