ALJDEC

01F-1720-ROC · Registrar of Contractors · 2001-10-15

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: October 2, 2001 at 9:00 a.m. APPEARANCES: Complainants Joan and Craig Williams[1] appeared on their own behalf; Respondent Flemming S. Remodeling Specialists dba Remodeling Specialists appeared through Barry L. Flemming, President. ADMINISTRATIVE LAW JUDGE: Diane Mihalsky _____________________________________________________________________

The parties presented evidence and argument on whether Respondent violated any contracting law in failing to install the Wilsonart vanity counter and shower surround that Respondent’s salesman had promised in Complainants’ bathroom. Based on this evidence, the Administrative Law Judge makes the following Findings of Fact, Conclusions of Law, and Recommended Order to the Registrar of Contractors. FINDINGS OF FACT The Registrar issued License No. 131749, Class B- to Respondent, a corporation, on February 2, 1998. The Registrar had previously issued License No. 062103 to Respondent on February 5, 1985. On August 9, 1999, Respondent, through its salesman John Wayne Coleman, contracted to remodel Complainants’ bathroom for a total cost of $22,374.00. The signed contract provided the following:

Ceramic tile / Marble: 1. Install vanity top under a $750.00 allowance. This top is to be selected by homeowner. . . . .

Understoods [sic]: . . . . 6. It is “understood” that “Allowance items” in this agreement are to be identified in the decision list with and [sic] “Allowance” amount per category. An “Allowance” is an approx. dollar value that has been determined as an average cost. This average cost is to cover both the labor and the material. Expenditures beyond the allowance are to be the sole responsibility of the homeowner. Any monies not spent on the allowance monies are to be returned to the client in the form of a credit to the final payment. The total of allowance items in this agreement is $3,800.00.

[Emphasis in original.] The contract did not include any allowance or special description of the shower surround. Complainants had paid Home Depot to install in their other bathroom a Corian countertop. They asked Mr. Coleman if a similar, sandable material could be installed in the bathroom that Respondent was remodeling. Although Complainants knew that, at Home Depot, the Corian countertop had been more expensive than ceramic tile or cultured granite or marble countertops, they thought Respondent’s contractor’s discounts might make similar material more affordable and bring it within the amount of the allowances in the contract. In January 2000, Complainants accompanied Mr. Coleman to The Great Indoors store to select the materials to be used in the bathroom remodel. Rather than selecting a countertop and shower surround from the materials on display at The Great Indoors, Mr. Coleman took Complainants out to his car, where he had samples of Wilsonart countertops. He told Complainants that the Wilsonart was comparable to Corian but much less expensive because it was less established. Complainants picked the Wilsonart “Fawn Mirage” color for their shower surround and vanity countertop, with “almond” sinks.

By January 2000, Respondent had become dissatisfied with Mr. Coleman’s productivity and terminated his status as a regular employee for whom it paid payroll taxes and provided other benefits and to whom it gave leads. When Mr. Coleman met with Complainants at The Great Indoors, therefore, Mr. Coleman was working for Respondent as an independent contractor/consultant whose only compensation was sales commissions. Mr. Coleman assured Complainants that the price of the Wilsonart product was within the contract allowances. Mr. Coleman testified that he found the Wilsonart samples in the cavity at Respondent’s office that contained cultured marble, cultured onyx, and cultured granite samples. He assumed the Wilsonart “Fawn Mirage” sample cost the same as cultured marble, cultured onyx, and cultured granite samples. Real granite was stored on top of the cabinet, but Mr. Coleman knew that real granite was more expensive than cultured or other man-made materials. Mr. Coleman testified he communicated Complainants’ decision on countertop material to Respondent by leaving the Wilsonart sample with a Post-It note with Complainants’ name on it on the desk of Barry Hansen, whom Respondent employed to order materials. Based on the information that Mr. Coleman provided, Respondent’s chief estimator Tom Baker prepared a price list for Complainants’ bathroom remodel, which showed Respondent’s actual material costs and would provide the basis for calculating Mr. Coleman’s commission. The price list showed $430 for “Marble Top,” $480 for a shower pan, and $150 for a “bench seat.” The price list did not show that Wilsonart materials would be used on the job. Complainants’ shower does not have a bench seat. Shortly before Respondent commenced remodeling Complainants’ bathroom, it scheduled a “preconstruction walk-through,” which Complainants, Respondent’s job superintendent Ken Hilton, and Mr. Coleman attended. Based on this meeting, Mr. Coleman prepared the “decision list” to which the contract referred, which provided that “[t]ops are to include an almond colored bowl and the top itself is the sample on Barry H.’s Desk. This is also the choice for the shower surround and pan in the shower.” The “decision list” did not refer to any Wilsonart product or the color “Fawn Mirage.” Mr. Hilton testified without contradiction that no one mentioned the Wilsonart product at the preconstruction walk-through. At the time Mr. Hilton on Respondent’s behalf supervised Complainants’ bathroom remodel, he also was supervising 15-20 other jobs, approximately 35-40% of which were bathroom remodels. He recalls that the sample on Mr. Hansen’s desk was 2” x 2” and had Complainants’ name written on the back. American Marble Industries, Inc. (“AMI”) manufactured the cultured granite vanity countertop and shower surround that were eventually installed in Complainants’ bathroom. Fred Summerfield, a salesman for AMI, testified that it received one of its samples, which are 4” x 6”, from Mr. Hansen, with instructions to manufacture the components that would be installed in Complainants’ bathroom. Based on the sample provided and Mr. Hansen’s instructions, AMI in late February 2000 manufactured and installed a cultured granite vanity countertop, with two contrasting cultured marble bowls, and a cultured granite shower surround, at a total cost to Respondent of $526.00 for the vanity countertop and $2,306.00 for the shower surround. In April 2000, when the window in the bathroom was uncovered, Complainants noticed that the vanity countertop and shower surround did not appear to be the “Fawn Mirage” Wilsonart that they had selected from Mr. Coleman’s trunk. They called Mr. Coleman, who came out and inspected the job. Mr. Coleman later said he had talked to Respondent’s president and qualifying party, Barry Flemming, who allegedly asked Mr. Coleman to assure Complainants that Respondent would “make everything right.” By the time Mr. Coleman communicated Complainants’ dissatisfaction with the materials used in the bathroom remodel to Respondent, he had terminated his employment with Respondent because he found a better job with GDC Contracting. Mr. Coleman worked for GDC contracting for 3-1/2 months and eventually became self-employed, doing business as C 3 Associates, License No. 168264, Class B-03, which the Registrar issued on September 10, 2001.

Mr. Coleman worked approximately 2-1/2 years as an employee or independent contractor for Respondent. He testified that Respondent did not pay its salespersons well and that one would have to be a mathematician to understand the formulas that it used to calculate commissions. When the plastic was removed from the sinks, Complainants testified that they noticed a small white chip in one of them. For the first time, they knew that Wilsonart material had not been used on the remodel. Although AMI repaired the chip, Complainants testified that they called various manufacturers, distributors, and installers of countertop and shower materials and learned that the cultured granite that had been installed in their bathroom was inferior to the Wilsonart they had selected. Over the next several months, the parties discussed the matter. Complainants testified that Respondent at various points agreed to tear out the cultured granite and replace it with Wilsonart or a similar material, which they understood would be at no additional cost to them. Mr. Flemming more credibly testified that Respondent offered to tear out the vanity top and shower surround and replace them with a material similar to Wilsonart or Corian, if Complainants would pay for materials and labor, which would be at least $8,000. Complainants declined to pay any additional monies for removal of the cultured granite and installation of the Wilsonart. Respondent had admitted into evidence a bid from Lee’s Quality Countertops, which showed that the cost of countertops, installed, would be $1,800.00 and that the cost of a shower surround, installed, would be $11,435.00 with a formed pan and $9,465.00 with a tile floor. These amounts include Lee’s Quality Countertops’ profit and overhead. Respondent’s profit and overhead on remodeling jobs typically was between 35% and 50%. Mr. Coleman and Mr. Flemming both testified that, if Respondent had known that Complainants wanted Wilsonart material in their bathroom and its cost exceeded contract allowances, Respondent would have required Complainants to execute a change order in which they agreed to pay an increased contract price. Both Mr. Coleman’s commission and Respondent’s profits would have been increased. Respondent had no reason to install inferior, less expensive materials or to refuse to install more expensive materials in the remodel. On January 9, 2001, Complainants made a complaint to the Registrar against Respondent’s license, alleging that it had “installed incorrect material for the countertop and shower surround.” The complaint was assigned to Inspector Les “Bud” Combs for investigation. On January 23, 2001, Inspector Combs performed a jobsite inspection. Inspector Combs studied the written contract and found no indication that the parties had agreed that a certain color or a Wilsonart product would be installed. Based on his inspection, Inspector Combs concluded that Respondent’s workmanship in remodeling the bathroom was good. Because Inspector Combs found no evidence of breach of contract or poor workmanship, he advised the parties that he would close the complaint unless a hearing were requested. Complainants timely requested a hearing. On May 17, 2001, the Registrar issued a Citation and Complaint against Respondent’s license, charging violations of A.R.S. § 32-1154.A.2, .7, and .3. Respondent timely answered the Citation and Complainant and the Registrar scheduled a hearing in due course. A hearing was held on October 2, 2001 at 9:00 a.m. Complainants testified on their own behalf and presented the testimony of Mr. Coleman. Mr. Flemming appeared and testified on Respondent’s behalf, presented the testimony of Mr. Hilton and Mr. Summerfield, and had admitted into evidence three exhibits. Inspector Combs also testified. Mr. Summerfield testified that the AMI cultured granite product is a sandable product. To bring out the granite pattern, the cultured material is finished with a clear coat, which must be reapplied if the product is sanded. In contrast, Corian and Wilsonart have matte finishes and may be sanded without reapplication of any protective or decorative finish. But, if either a cultured product or a Corian or Wilsonart product is sanded in any discernible amount, hollowed-out areas will result in the surface, which must be repaired. Mr. Flemming testified that he was diagnosed with prostate cancer in 2001. Because stress may compromise the body’s defenses against cancer, at his wife’s request, Mr. Flemming has assigned Respondent’s open jobs to other contractors and has closed Respondent’s business. The Registrar’s records reveal that he suspended Respondent’s license for lack of bond on May 18, 2001 and that the license was canceled on July 13, 2001. Mr. Flemming desires to terminate Respondent’s license in good standing. CONCLUSIONS OF LAW Complainants bear the burden of proof and must establish statutory violations by a preponderance of the evidence.[2] “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”[3] 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.”[4] The evidence establishes that Respondent held Mr. Coleman out to Complainants as its agent and that Mr. Coleman promised Complainants that Wilsonart would be installed as the vanity countertop and shower surround for the contract price. The evidence does not establish that Mr. Coleman ever unambiguously and unequivocally communicated Complainants’ choice of Wilsonart to Respondent or that Respondent ever authorized Mr. Coleman to promise Wilsonart to Complainants at contract price or for the $750 countertop allowance. The evidence does not establish that, after Respondent learned of Complainants’ desire for Wilsonart, it ever ratified Mr. Coleman’s promise. The evidence does not establish that Complainants ever took steps to modify the written contract to require Wilsonart or Corian to be installed, rather than the “ceramic tile/marble” specified.[5] The Registrar may resolve a contractual dispute and may order payment of restitution for proven violations of contracting statutes if such resolution is ancillary to the Registrar’s regulatory mission.[6] Where the primary focus of an administrative claim involves common-law contract issues and resolution of these issues is incidental to the claimed contracting law violations, however, the claims must be resolved in a judicial forum.[7] Complainants may be able to establish common-law breach-of-contract claims in an appropriate judicial forum based on Mr. Coleman’s apparent authority as Respondent’s agent to make binding oral promises to Complainants regarding installation of Wilsonart products in their bathroom remodel.[8] But this administrative forum is not the appropriate forum to resolve these claims, especially in the absence of any writing requiring or confirming installation of Wilsonart products and in the presence of issues concerning the extent of Mr. Coleman’s apparent authority. Complainants therefore have not established that Respondent violated A.R.S. § 32-1154.A.2,[9] .7,[10] or .3[11] in its installation of cultured granite vanity countertop or shower surround, rather than a Wilsonart product, in its bathroom remodel. RECOMMENDED ORDER Based on the foregoing, it is recommended that the Registrar dismiss Case No. 01-1720 against License No. 131749, Class B of Flemming S Remodeling Specialists dba Remodeling Specialists. Done this day, October 15, 2001.

______________________________________ Diane Mihalsky Administrative Law Judge

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

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

By ___________________________

----------------------- [1] At Complainants’ request and without objection from Respondent, the Administrative Law Judge amended the caption to include as Co-Complainants both husband and wife, who jointly own the residence where Respondent performed the contracting work at issue.

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

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

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

[5] Respondent was required by applicable statute to reduce the contract to writing and to include in the written contract “[a] description of the work to be performed.” A.R.S. § 32-1158.A.8. The fact that Wilsonart was not specified in the written contract is not a defense to a common-law breach- of-contract claim, however. See A.R.S. § 32-1158.C.

[6] See Sunpower of Arizona v. Registrar of Contractors, 166 Ariz. 437, 441, 803 P.2d 430, 434 (App. 1990); J.W. Hancock Enterprises, Inc. v. Registrar of Contractors, 142 Ariz. 400, 406-07, 690 P.2d 119, 125-26 (App. 1984).

[7] Cf. Cactus Wren Partners v. Arizona Department of Building and Fire Safety, 177 Ariz. 559, 564, 869 P.2d 1212, 1217 (App. 1993) (Administrative adjudication of “claims in which recovery of damages was the primary focus, as opposed to an ‘incidental aspect of the regulatory scheme’” may violate state constitutional right to jury trial).

[8] Compare The Southern Casualty Co. v. Hughes, 37 Ariz. 334, 343, 294 P. 285 (1930) (Principal not bound by agent’s oral promises to third party where principal neither authorized nor ratified promises) with The Hartford v. Industrial Commission, 178 Ariz. 106, 110, 870 P.2d 1202, 1206 (App. 1994) (Principal may be bound by agent’s unauthorized promises where they are in writing under common-law contract principles).

[9] 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.” [10] 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.”

[11] 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.”

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