ALJDEC

01F-1427-ROC · Registrar of Contractors · 2001-09-17

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: September 4, 2001 at 9:00 a.m. APPEARANCES: Complainant Paul Guidera appeared on his own behalf; Respondent Garry Ray McGuire dba Trav Kor Construction of Arizona appeared on his own behalf. ADMINISTRATIVE LAW JUDGE: Diane Mihalsky _____________________________________________________________________

The parties presented evidence on the issue of whether Respondent Garry Ray McGuire violated A.R.S. § 32-1154.A.1, .2, .7, .23, or .3 when he framed Complainant Paul Guidera’s residence. Based on the entire record, the Administrative Law Judge makes the following Findings of Fact, Conclusions of Law, and Recommended Order to the Arizona Registrar of Contractors. FINDINGS OF FACT The Registrar on September 23, 1987 issued License No. 068723, Class C-07 to Mr. McGuire dba Trav Kor Construction Co. On July 9, 2000, Mr. McGuire contracted to construct the framing on the residence that Dr. Guidera was constructing for his family. The contract, written on an AIA Document A101-1997 form, provided in part as follows: The Contractor shall achieve Substantial Completion of the entire work not later than 85 calendar days from the date of commencement, or [by] August 23rd, 2000. . . . .

The Owner shall pay the Contractor the Contract Sum in current funds for the Contractor’s performance of the Contract. The Contract Sum shall be Forty Six Thousand one hundred four Dollars ($46,104.00), subject to additions and deductions as provided in the Contract Documents.

The Contract Sum is based upon the following alternates, if any, which are described in the Contract Documents and are hereby accepted by the Owner: . . . Furnish of framing material, framing hardware and labor per plans supplied by Harris Design Company. . . . .

Provided that an Application for Payment is received by the Architect not later than Thursday, the Owner shall make payment to the Contractor no later than the Friday of the each week. If Application for Payment is received by the Architect after the application date fixed above, payment shall be made by the Owner not later than seven days after the Architect receives the Application for Payment. . . . .

5.1.6 Subject to other provisions of the Contract Documents, the amount of each progress payment shall be computed as follows:

1. Take that portion of the Contract Sum properly allocable to completed Work as determined by multiplying the percentage completion of each portion of the Work by a share of the Contract Sum allocated to that portion of the Work in the schedule of values, less retainage of Ten percent (10%). Pending final determination of cost to the Owner of changes in the Work, amounts not in dispute shall be included as provided in Subparagraph 7- 3.8 of AIA Document A201-1997. . . . . . .

Other provisions: . . . .

2. Work not substaintually [sic] complete at the date noted in section 3.3, the contractor agrees to forfeit all retainage held to date. . . . .

5. Estimated completion date August 23, 2000. If the contractor is not substantially complete by this date noted above, the contractor shall forfeit to the owner $150.00 per day after this deadline. If the contractor is substantially complete early, the owner shall compensate the contractor in the amount of $100.00 per day early.

The form contract identified Dr. Guidera’s representative as Ward Harris of Harris Design Company. The form contract did not provide for change orders but appeared to have been based on Mr. McGuire’s June 5, 2000 proposal, which provided in relevant part as follows: We hereby propose to furnish the framing material, framing hardware and labor necessary for the completion of, Remodeling of home at 6201 East Fanfol Drive, Scottsdale, Arizona 85253. Per plan. Trav-Kor Construction to supply all framing material, all framing hardware, and labor needed. Trav-Kor Construction to pay all sale’s tax. On material they supply.

All material is guaranteed to be as specified, and the work to be performed in accordance with the drawings and specifications submitted for above work and completed in a substantial workmanlike manner for the sum of {46,104.00} DALLARS [sic]

Any alteration or deviation from above specifications involving extra costs, will be executed only upon written orders, and will become an EXTRA CHARGE of $30.00 per Hour. Over and above the estimate.

The residence was engineered, which meant that departures from plans in framing must be approved by a structural engineer to pass city inspection. Dr. Guidera acted as his own general contractor. His father was a general contractor and he had put himself through medical school working as a laborer. Dr. Guidera is interested in construction. He acted as general contractor on one other residence, after the general contractor he hired went out of business. Mr. McGuire performed part of the framing and, by September 2000, testified he had been paid $39,650.00 and was owed $6,481.00 on the contract. Mr. McGuire testified that he had performed work pursuant to oral change orders that he felt was worth and for which he charged $7,350.00. Dr. Guidera had attempted to cut the amount to $3,490.00. Mr. McGuire therefore walked off the job. Dr. Guidera testified that the parties were still in negotiation over the cost of the oral change orders when Mr. McGuire walked off the job. Mr. McGuire did not complete performance of the contract according plans, failing to frame a covered patio at the rear of the residence and interior vegas. On November 20, 2000, Amil Fornatora, a Certified Construction Inspector, on behalf of Constructibility Forensic Consultants (“CFC”), wrote a letter to subcontractors, including Mr. McGuire, informing them that his firm was replacing Ward Harris and would oversee construction. The letter also identified numerous alleged construction deficiencies, many of which were Mr. McGuire’s responsibility as the framing subcontractor. Mr. McGuire refused to repair the framing defects alleged in Mr. Fornatora’s November 20, 2000 letter. On November 27, 2000, Dr. Guidera made a complaint to the Registrar against Mr. McGuire’s contractor’s license, attaching a copy of Mr. Fornatora’s letter with the alleged deficiencies that were Mr. McGuire’s responsibility highlighted. On December 14, 2000, on behalf of the Registrar, Inspector Dan Lafond conducted a jobsite inspection with both parties present, as well as Mr. Fornatora and his colleague at CFC, Jim Land. On January 8, 2001, based on his inspection and communications with the parties at that time, Inspector Lafond directed Mr. McGuire within fifteen days to perform the following corrective work: Complaint 1. Header on north facing eastern most popout is not level. Per jobsite agreement, contractor to correct by appropriate means.

Complaint 2. Popout wall north of garage doors is not shear walled. Contractor to correct by appropriate means.

Complaint 3. Double top plate on wall described in complaint item two is not continuous. Per jobsite agreement, contractor to correct by appropriate means.

Complaint 4. Glu-lam beam in the family room south wall is upside down. Per jobsite agreement, contractor to correct by appropriate means.

Complaint 5. No bearing below headers above dinette southwestern window and window in the corner of the northeast corner bedroom. Contractor to correct by appropriate means.

Complaint 6. Corner wall studs are not nailed properly. Contractor to correct by appropriate means.

Complaint 7. Missing connectors on garage king studs to plate. Per jobsite agreement, contractor to correct by appropriate means.

Complaint 8. Blocking is missing between trusses at roofline in all perpendicular truss to exterior wall connections. Per jobsite agreement, contractor to correct by appropriate means.

Complaint 9. Blocks and Simpson H2.5’s missing at all parallel truss to exterior wall connections. Per jobsite agreement, contractor to correct by appropriate means.

Complaint 10. North wall in east hallway is not connected properly to masonry wall. Per jobsite agreement, contractor to correct by appropriate means.

Complaint 11. Four by twelve header was supposed to be installed in the hall by the master bath. Per jobsite agreement, contractor to correct by appropriate means.

Complaint 12. Truss is not spanned to exterior bearing wall on the West Side of the entry. Per jobsite agreement, contractor to correct by appropriate means.

Complaint 13A.Trusses are bowed excessively in the master bath. Per jobsite agreement, contractor to correct by appropriate means.

Complaint 13B.Bottom chords of trusses are bowed in the living room. Contractor states and homeowner’s representative acknowledges that other contractors removed catwalk installed by contractor. No action required.

Complaint 14. Contractor installed single instead of double two by twelve ledgers around the fireplace. Per jobsite agreement, contractor to correct by appropriate means.

Complaint 15. Truss at West End of the east hall doesn’t have adequate bearings. Contractor to correct by appropriate means.

Complaint 16. Treated plates not installed at the bottom of the interior wall in the family room. Contractor to insure that the plates conform with the requirements of the municipality with jurisdiction.

Complaint 17. Warped studs throughout the residence which do not meet minimum standards. Per jobsite agreement, contractor to correct by appropriate means.

Complaint 18. Studs overspanned throughout residence. Per jobsite agreement, contractor to correct by appropriate means.

Complaint 19. Windows are not installed properly causing them to not operate as intended. Window operational problems appear to be a manufacturer’s design flaw at the time of the jobsite inspection. No action required.

Complaint 20. Window in the front have no kraft paper installed between the window and the framing. Kraft paper installation is normally installed by the stucco contractor unless specified in the framer’s contract as incidental to his scope of work. No action required.

Complaint 21. Reveal around windows is not even to rough framing members. Contractor to correct by appropriate means.

Complaint 22. Roof sheathing backing at exterior walls parallel to the trusses were supposed to be two by six but contractor installed two by four. Contractor to correct by appropriate means.

On January 24, 2001, Dr. Guidera requested an administrative hearing because “Trav-Kor was on-site only for a few hours on each of three days during the 15 day period,” “none of the major violations were corrected,” specifically, Complaints Nos. 1, 2, 3, 4, 5, 8, 9, 10, 11, 12, 13A, 14, 15, 16, 17, 18, 21, 22. The Registrar issued a Citation and Complaint, charging violations of A.R.S. § 32-1154.A.1, .2, .7, .23, and .3. Inspector Lafond testified at the hearing that subsection .1 was charged because Mr. McGuire had failed to construct the rear patio or interior vegas. Mr. McGuire timely answered the Citation and Complaint, alleging that he had performed all corrective work ordered and that he had removed himself from the job for nonpayment of the retainage and change orders. A hearing was held on September 4, 2001, at which Dr. Guidera, Mr. Fornatora, Mr. McGuire, and Inspector Lafond testified. Dr. Guidera also had admitted into evidence 48 exhibits. Additional Hearing Evidence Mr. Fornatora testified that he and Mr. Land are listed on License No. 161340, Class KB-01, which the Registrar issued to Conspec Consultants, LLC on January 2, 2001. In addition, Mr. Fornatora formerly was a senior building inspector for the City of Scottsdale. Inspector Lafond testified that he had conducted a prehearing jobsite inspection, which Mr. McGuire, Dr. Guidera and Mr. Fornatora had attended. Most of the work had been covered up. Based on the attendants’ statements at the prehearing jobsite inspection, Inspector Lafond testified that Mr. McGuire had completed item nos. 1, 3, 4, 5, 6, 7, 8, 10, 11, 12 (with a structural change), 13A, and 13B. Inspector Lafond testified that, according to Mr. Fornatora, Mr. McGuire had partially completed item no. 2, but not to plans; Dr. Guidera had accepted as installed item no. 14 with the structural engineer’s approval; item no. 15 had been corrected through a structural redesign; the structural engineer had accepted item no. 22. Inspector Lafond testified that, according to Mr. Fornatora, third parties had been brought in to redo, finish correcting, or correct item nos. 9, 16, 17, and 18. No evidence indicated that Mr. McGuire had constructed the patio on the rear of the residence or the interior vegas. Mr. Fornatora testified that Bold Construction, Inc., License No. 116736, Class B-, was hired to complete or to correct Mr. McGuire’s performance of his subcontract to frame Dr. Guidera’s residence. Mr. Fornatora believes that Mr. McGuire abandoned the project because he significantly underbid it. When Bold Construction, Inc. started repairs, it uncovered framing and discovered numerous other defects in framing that were not included in Dr. Guidera’s complaint to the Registrar. Dr. Guidera had admitted into evidence 41 photographs of these defects, including split roof supports, cut base plates and missing nuts on anchor bolts, overspanned studs, missing base plates, missing roof supports, anchor bolts sheared off, missing structural and seismic H2.5 ties, ceiling backing that was hanging below ceiling line, roof trusses bearing on a single header, exterior shear panels protruding past masonry wall, missing fire blocking, used materials incorporated into framing, and sill wall plates that were not treated. Dr. Guidera testified that he has paid $25,170.00 to Mr. Fornatora and CFC for inspection and consultation on framing issues, $53,552.37 to Bold Construction, Inc. to complete and correct Mr. McGuire’s framing, and $797.78 to Wang Electric for electrical repairs due to framing defects. Dr. Guidera could not allocate what portion of these total costs was incurred in correcting or completing the items described on Inspector Lafond’s directive. Bold Construction, Inc.’s proposal to construct the patio in the rear of the residence and the interior vegas was $15,600.00. Mr. McGuire testified he fully complied with Inspector Lafond’s directive. When Mr. McGuire looked at Dr. Guidera’s photographs, he testified that he was ashamed of the people he had working for him at that time. They did a poor job and no longer work for him. But Mr. McGuire has no money to pay anyone and has decided not to renew his license due to an adverse judgment that he testified was obtained with falsified documents. The Citation and Complaint advised Mr. McGuire that, if he were found in violation of any contracting law, his prior disciplinary record of final Registrar of Contractors’ orders could be considered in mitigation or aggravation. Notice is taken of the Registrar’s records, which reveal that, if the Registrar accepts this recommended decision, it will be the only final order against Mr. McGuire on the current record. However, the record also confirms Mr. McGuire’s hearing testimony that his contractor’s license currently is suspended due to nonrenewal. CONCLUSIONS OF LAW Dr. Guidera, as Complainant, bears the burden of proof and must establish statutory violations by a preponderance of the evidence.[1] “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”[2] A preponderance of the evidence is “evidence which is of greater weight or more convincing than evidence which is offered in opposition to it; that is, evidence which as a whole shows that the fact sought to be proved is more probable than not.”[3] The evidence shows that Mr. McGuire mostly but did not fully comply with Inspector Lafond’s directive.[4] Mr. McGuire also completely failed to construct the patio and interior vegas. Dr. Guidera therefore established that Mr. McGuire violated A.R.S. § 32-1154.A.1,[5] .2,[6] .7,[7] .23,[8] and .3[9] in his framing of Dr. Guidera’s residence and failure to repair fully the items noted on Inspector Lafond’s directive. A homeowner’s alleged failure to pay a contractor is not a valid defense to a claim based on the contractor’s failure to correct construction to comply with the Registrar’s directive. Once a contractor undertakes to perform construction work, he must perform it in a professional and workmanlike manner. A homeowner’s alleged withholding of monies owed a contractor is not a valid defense to a claim alleging abandonment of the contract unless the homeowner failed to make progress payments specifically required in the contract. In this case, no contract term allowed Mr. McGuire to abandon the contract based on Dr. Guidera’s alleged failure to pay retention or Mr. McGuire’s calculation of the cost of oral change orders. The construction deficiencies shown in Dr. Guidera’s photographs of items not included in his original complaint to the Registrar and not inspected by Inspector Lafond may provide grounds for a new complaint to the Registrar or a claim to the Residential Contractor’s Recovery Fund.[10] Because Mr. McGuire did not receive notice of these deficiencies and was not afforded an opportunity to correct them, these additional alleged deficiencies cannot provide additional grounds in this complaint for discipline against Mr. McGuire’s contractor’s license in this case. Because Bold Construction, Inc. finished framing Dr. Guidera’s residence, it is no longer possible for Mr. McGuire to do so. Although the legislature has not empowered either the Office of Administrative Hearings or the Registrar to adjudicate or award money damages, which must be recovered, if at all, through civil court action, the Registrar may impose reasonable conditions on a licensee if performance of corrective or remedial measures on a jobsite is no longer possible.[11] Restitution is appropriate in this case because Mr. McGuire refused to complete his contract. Any amounts paid in satisfaction of a condition in the nature of restitution affecting licensing should be credited against any civil judgment ultimately obtained in favor of either party. Dr. Guidera did not adequately itemize the amount he paid Bold Construction, Inc. to correct items on Inspector Lafond’s directive to support an award of restitution for this work. With additional proof, Dr. Guidera may be able to recover these costs through a civil claim or a claim to the Residential Contractor’s Recovery Fund. Dr. Guidera presented adequate proof on the cost of constructing the patio and interior vegas, which the evidence shows $15,600.00.[12] The amount that Dr. Guidera owed Mr. McGuire, $6,481.00,[13] should be deducted from this amount. Restitution in the regulatory context is similar to the criminal context, where a defendant may be sentenced to pay his victim restitution consisting of any economic loss caused by the defendant’s conduct.[14] “‘Economic loss’ means any loss incurred by a person as a result of the commission of an offense. . . . Economic loss does not include . . . consequential damages.”[15] The additional cost that Dr. Guidera incurred to pay Mr. Fornatora to supervise Mr. McGuire or Bold Construction, Inc. cannot be separated from the general costs of supervision, which costs Dr. Guidera undertook to incur when he decided to act has his own general contractor. Therefore, Dr. Guidera’s payments to CFC are more in the nature of consequential damages, which are not proper restitution, rather than costs that are a foreseeable economic loss directly caused by Mr. McGuire’s contracting law violations. Therefore, although Complainant may seek and recover supervisory fees as consequential damages in a breach-of-contract claim made in a court of general civil jurisdiction, these fees do not constitute restitution that may be awarded in this administrative regulatory proceeding. RECOMMENDED ORDER Based on the foregoing, it is recommended that the Registrar revoke License No. 068723, Class C-07 of Garry Ray McGuire dba Trav Kor Construction of Arizona on the effective date of his order, thirty-five days after service. It is further recommended that no revocation take place if, prior to the effective date of the order, Mr. McGuire provides proof to the Registrar in writing that it has paid Dr. Guidera $9,119.00 in restitution. If Mr. McGuire provides such written proof, the Registrar may close Complaint No. 01-1427. Done this day, September 17, 2001.

______________________________________ Diane Mihalsky Administrative Law Judge

Original transmitted by mail this ____ day of September, 2001, to:

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

By ___________________________

----------------------- [1] See A.A.C. R2-19-119; see also Culpepper v. State, 187 Ariz. 431, 438, 930 P.2d 508, 515 (App. 1996).

[2] Morris K. Udall, Arizona Law of Evidence § 5 (1960).

[3] Black’s Law Dictionary at page 1064 (6th ed. 1990).

[4] See Finding of Fact No. 19, infra. [5] This statutory subsection includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license “[a]bandonment of a contract or refusal to perform after submitting a bid on work without legal excuse for the abandonment or refusal.”

[6] This statutory subsection includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license “[d]eparture from or disregard of plans or specifications or any building codes of any state or any political subdivision of the state in any material respect which is prejudicial to another without consent of the owner or the owner’s duly authorized representative and without the consent of the person entitled to have the particular construction project or operation completed in accordance with such plans and specifications and code.”

[7] This statutory subsection includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license “[t]he doing of a wrongful or fraudulent act by the licensee as a contractor resulting in another person being substantially injured.”

[8] This statutory subsection includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license “[f]ailure to take appropriate corrective action to comply with this chapter or with rules adopted pursuant to this chapter without valid justification within a reasonable period of time after receiving written directive from the registrar.”

[9] This statutory subsection includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license “[v]iolation of any rule adopted by the registrar.” The rule violated here was A.A.C. R4-9-108, which requires that “[a]ll work shall be performed in a professional and workmanlike manner” and that “[a]ll work shall be performed in accordance with any applicable building codes and professional industry standards.”

[10] See A.R.S. § 32-1132.A.

[11] See Sunpower of Arizona v. Arizona State Registrar of Contractors, 166 Ariz. 437, 440-41, 803 P.2d 430, 433-34 (App. 1990).

[12] See Finding of Fact No. 24, infra.

[13] See Finding of Fact No. 5, infra.

[14] Cf. A.R.S. § 13-603.C and 13-804.A. [15] A.R.S. § 13-105.11.

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