ALJDEC

01F-F0211-ROC · Registrar of Contractors · 2001-10-26

STATE OF ARIZONA IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: October 17, 2001 APPEARANCES: Complainants : Ralph Lidster and Anna Lidster appeared pro se. Respondent : Mike Reilly, President, appeared for MR Construction Homebuilders, Inc. Registrar’s Inspector : Mark Schweiger. ADMINISTRATIVE LAW JUDGE: Gary B. Strickland _____________________________________________________________________

A hearing was convened[1] to determine whether Respondent violated state law as has been alleged by Complainants and as cited by the Arizona Registrar of Contractors. Evidence and testimony were presented at the scheduled hearing by both parties. Having heard the testimony of the witnesses and having read and considered the entire record, the undersigned Administrative Law Judge makes Findings of Fact, renders Conclusions of Law, and issues the following Recommended Decision and Order to the Registrar of Contractors.

FINDINGS OF FACT 1. Respondent holds a Class B (General Residential Contracting) license issued by the Registrar of Contractors. Respondent’s license, which was initially issued on February 21, 2000, was in active status when Respondent entered into the contract with Complainants that is at issue. 2. Mike Reilly is the Qualifying Party identified on the MR Construction Homebuilders, Inc. license. 3. Complainants, Ralph and Anna Lidster, reside at 2645 North Valley View, Flagstaff, Arizona. 4. Respondent entered into a written contract with Complainants on August 1, 2000 whereby Respondent agreed to perform home construction tasks in exchange for a consideration of $305,000. Complainants have paid all but $20,000. of the contract. 5. Subsequent to Respondent’s having performed significant construction of the home, Mr. And Mrs. Lidster voiced complaint. The grievance not having been resolved by Respondent, the Lidsters filed a written complaint with the Registrar of Contractors on April 5, 2001 alleging poor workmanship, among other concerns. 6. The Registrar’s Inspector conducted an inspection of the premises on April 12, 2001, meeting with the homeowner/Complainants. Although given advance notice of the date and time of the inspection, the contracting/Respondent failed to appear. As a result of his on-site inspection, the Inspector issued a “Corrective Work Order” on April 25, 2001 wherein he delineated the allegations of deficiency as well as his determination of their merit or lack thereof. 7. The Inspector identified the following items as needing replacement/repair and directed the contractor to make the requisite corrections:

1) Dry wall repairs to the laundry room and the master bedroom. 2) Gapping at the interior trim. 3) Exterior painting not complete. 4) Electric trim plates not flush. 5) Corrections required by the County authority for final approval to be made. 6) The gas supply to the kitchen range not properly capped. 7) Improper grading and appropriate disposal of debris. 8) The fire sprinkler system to be completed. 9) Broken window above entry doors. 10) Caulking at the window sills. 11) The upstairs fan/heater not functioning properly. 12) Water damage to the kitchen ceiling. 13) All doors to the residence deficient. 14) Entry area appearance caps on the doors and sidelights not installed. 15) The entry staircase wood excessively rough. (16) Interior painting incomplete and doors not sealed. [2]

In addition to the aforementioned items requiring correction/repair, there were noted monetary issues that had been raised by the parties. 8. As was determined by the Inspector through a prehearing review conducted by him on October 16, 2001, whereat Mr. Reilly again failed to appear, none of the corrections/replacement/repair has been accomplished to industry standard by the contractor, albeit the homeowners have addressed numbers (3), (7) and (10) themselves. 9. The Lidsters have been caused to expend an additional $8,800. to have the subject staircase[3] replaced. They have further expended $1,158. to have the debris removed from the site.[4] 10. The Fire Marshall has refused to approve the sprinkler system as installed. 11. In addition to his failure to appear for the inspections conducted by the Registrar’s Inspector, Mr. Reilly has also failed to appear for the inspection(s) conducted by Coconino County officials. 12. Coconino County has issued a temporary occupancy permit to the Lidsters on March 22, 2001, thereby enabling Complainants occupancy of the residence. A permanent permit has not been issued by the County. 13. Complainants manifested concerns whether two liens had been placed against the property because of Respondent’s failure to reimburse subcontractor/suppliers. At the hearing, evidence was presented that, although two 20 day notices had been presented to Complainants, Respondent has made the payments to the creditors necessary to have the lien(s) released.[5] 14. The weight and sufficiency of the evidence establishes that Respondent MR Construction Homebuilders, Inc. has failed to make correction and repair to this project, having been given notice of the deficiencies by the Registrar’s Inspector and having been directed to make the requisite repair. Respondent failed to address the items of correction/repair for which it was given notice by the Registrar’s Corrective Work Order of April 25, 2001. 15. Further, the evidence has revealed that this contractor has demonstrated contempt for the Registrar’s authority and the process for resolution of homeowner complaints dictated by and afforded under Title 32. Mr. Reilly’s testimony, as brief as it was, lacked credibility and concern. The demeanor exhibited by this contractor left an unfavorable impression. To this point, Mr. Reilly has presented a posture of nonacquiescence. [6]

APPLICABLE LAW The CITATION AND COMPLAINT issued by the Registrar of Contractors charged Respondent with possible violations of A.R.S. § 32-1154(A)(3) (and A.A.C. R4-9-108, the workmanship rule), (A)(2), (A)(7), (A)(11) and (A)(23). Those statutory sections require that a holder of a license or a person listed on a license shall not commit the following:

2. Departure from or disregard of plans or specifications or any building codes of the 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.

. . .

3. Violation of any rule adopted by the Registrar. . . .

7. The doing of a wrongful or fraudulent act by the licensee as a contractor resulting in another person being substantially injured. . . .

11. Failure by a licensee or agent or official of a licensee to pay monies in excess of seven hundred fifty dollars when due for materials or services rendered in connection with the licensee’s operations as a contractor when the licensee has the capacity to pay or, if the licensee lacks the capacity to pay, when the licensee has received sufficient monies as payment for the particular construction work project or operation for which the services or materials were rendered or purchased. . . .

23. Failure to take 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.

. . .

A.A.C. R4-9-108 is named as the rule violation charged pursuant to A.R.S. § 32-1154.A.3. That rule provides that all work shall be done in a professional and workmanlike manner, and in accordance with any applicable building codes and professional industry standards.

CONCLUSIONS OF LAW 1. The Registrar of Contractors has jurisdiction over this matter, pursuant to A.R.S. § 32-1101, et. seq., which authorizes the Registrar to impose disciplinary sanctions against licensees for violations of A.R.S. § 32-1154. 2. The burden of proof generally at an administrative hearing falls to the party asserting a claim, right or entitlement or seeking to impose a penalty.[7] Further, the standard of proof is that of the “preponderance of the evidence”.[8] Proof by a preponderance means that the evidence is sufficient to persuade the finder of fact that the proposition is “…more likely true than not.”[9] The evidence taken as a whole must convince the decision maker that the party who bears the overall burden of persuasion, in this case the Complainants, is more probably correct on the issue(s) in dispute. Observing these standards, Complainants have satisfied their burden of demonstration, by a preponderance of the evidence, that Respondent has violated statute, regulation or general principle of law by failing to provide Complainants quality workmanship in return for a value received. 3. By a preponderance of all of the evidence, Complainants have established that Respondent contractor violated A.R.S ( 32-1154(A)(3) and (23) as charged in the Citation and Complaint. Respondent failed to address the deficiencies in workmanship of which he had been given notice by the Inspector’s Corrective Work Order. It was and is a reasonable expectation of these homeowners that they be provided construction of their home in a manner and to a degree that accords with applicable standards. The weight of the evidence persuades that the Complainants have not been provided that to which they are entitled given their consideration agreed upon and the requirements of Title 32. 4. Therefore, by a preponderance of the evidence, Complainants have established that Respondent contractor violated A.R.S ( 32-1154(A)(7) as charged in the Citation and Complaint. It has been shown that Respondent has committed a wrongful act resulting in injury[10] to another person. 5. By a preponderance of the evidence, it has not been proven that Respondent has violated A.R.S. ( 32-1154(A)(11). Complainants are not the proper parties to bring the allegation. Further, it appears that the outstanding monies to which Complainants have alluded have been paid by the contractor to the respective creditors. 6. Finally, by a preponderance of the evidence, Complainants have established that Respondent contractor violated A.R.S ( 32-1154(A)(2) as charged in the Citation and Complaint. Respondent’s workmanship has failed the requirements of the Coconino County building code as is manifested by the county’s failure to award a permanent occupancy permit, all to the detriment of the Complainants herein. 7. Respondent’s failure to effect a repair of the subject home as directed by the Registrar’s Inspector, along with his acts and omissions that left these consumers with a structure deficient in workmanship, constitute statutory violations for which a fair and just disciplinary penalty ought to be imposed. This contractor’s license should be revoked unless he agrees to pay a sum to the homeowners that will enable the homeowners to have their home repaired/constructed to their satisfaction, as well as an amount sufficient to reimburse the homeowners for that which they have been caused to expend in an effort to repair the deficiencies that this contractor has heretofore refused to repair or replace.[11]

RECOMMENDED DECISION Based on the foregoing, IT IS RECOMMENDED that the Registrar revoke the Residential Contracting license of Respondent herein. IT IS FURTHER RECOMMENDED that should, however, the contractor pay an amount to enable the Complainant homeowners to accomplish the requisite remaining necessitated repairs and in addition provide a set-off from that amount yet owed on the contract between the parties sufficient to account for that amount expended thus far by the Complainants in an effort to repair those items noted herein, and provide the Registrar with written credible proof thereof from the Complainants herein prior to the effective date of the Registrar’s Order, Respondent’s license should not be revoked. Rather, Respondent’s license should in that event be placed on probation for a period of twelve (12) months.

Done this day, October 26, 2001. OFFICE OF ADMINISTRATIVE HEARINGS

______________________________________ Gary B. Strickland Administrative Law Judge

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

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

By ___________________________ ----------------------- [1] The hearing was conducted at the offices of the Registrar of Contractors in Flagstaff, Arizona for the convenience of the parties. [2] Items numbered herein for convenience. [3] Item (15) above. [4] Complainants have further presented proposals for the necessary painting that has yet to be accomplished. Hearing Exhibit 2. [5] Hearing Exhibit I. [6] Apparently, the Respondent/contractor has filed a lawsuit in Superior Court against these homeowners alleging damages in contract and Mr. Reilly is under the impression that the pending suit somehow relieves him of responsibility before the Registrar. [7] Culpepper v. Arizona Board of Nursing, 187 Ariz. 431, 930 P.2d 508 (App. 1997); See also Ariz. Admin. Code R2-19-119 (B). [8] Smith v. Arizona Department of Transportation, 146 Ariz. 430, 706 P.2d 756 (App. 1985); See also Ariz. Admin. Code R2-19-119 (A). [9] In re Arnold and Baker Farms, 177 B.R. 648, 654 (9th Cir. BAP (Ariz.) 1994). See also, J. Livermore, R. Bartels, & A. Hameroff, LAW OF EVIDENCE ( 301.1(4th ed. 2000) (One party bears the overall burden of persuasion on each fact material to the party’s claims and defenses. Further, the party with the burden of persuasion on a particular fact is required to satisfy the burden of production of enough qualitative evidence sufficient to support a finding of the existence of the fact, following a reasonable person standard.) [10] The term “injury” is not defined in the statute. A reasonable construction of the language used in its context (as required by A.R.S. ( 1- 201(B)) would include at risk considerations as well as economic harm. [11] Complainants further alleged that Respondent had abandoned its contract with them in violation of A.R.S. ( 32-1154(A)(1). Aside from the fact that the Registrar did not cite Respondent for a violation of this statutory provision, it has not been proven that Respondent has violated the provisions of A.R.S. ( 32-1154(A)(1) by failing to complete the work for which it had contracted. “Abandonment” means more than deficient workmanship. Abandonment is not found where there is substantial performance of a contract. Here, this contractor has substantially performed, albeit not very well.

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