ALJDEC

01F-P0185X-ROC · Registrar of Contractors · 2001-08-30

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: August 14, 2001. APPEARANCES: Paul and Mary Wade, Complainants; Todd Johnson, Respondent’s representative; Steve Allen, Respondent’s witness; and Tom Sandoval, Registrar of Contractors Inspector. ADMINISTRATIVE LAW JUDGE: Dorinda M. Lang. _____________________________________________________________________

Paul and Mary Wade filed a complaint against Woodland Homes, LLC, for abandonment of the construction of their new home. The weight of the evidence established, however, that they discharged Woodland Homes either outright or by their refusal to pay any more money on the contract. Other alleged violations of the statutes applicable to licensed contractors were not supported by the evidence either. The Wades did establish that Woodland Homes failed to complete the corrective work on the roof owing to a change in building codes that should be considered warranty work. Due to the circumstances of the case, however, Woodland Homes should be allowed the opportunity to correct the work without a lingering penalty. Should Woodland Homes fail to correct it, a provisional suspension should be imposed.

FINDINGS OF FACT 1. On May 26, 2000, Paul and Mary Wade contracted with Woodland Homes to build a new home. Payments were to be made by a set schedule. When the Wades arrived in Show Low in the summer of 2000, they were upset that the home was not more complete. On September 5, 2000, the parties agreed to an addendum to the contract stating the framing would begin by September 11th, and a payment would be adjusted downward. On September 12, 2000, because the framing had not begun on the 11th, they signed another addendum amending the contract to provide for some changes in construction, an accounting of work performed and material provided, a "pay as you go" payment schedule, and lien waivers from subcontractors. 2. In January 2001, the Wades informed Woodland Homes that their well had cost more to dig than anticipated and they wanted to change the contract to allow them to complete some items. They stated that they were not willing to pay any more money on the contract even though Woodland Homes had completed its next portion of work and was requesting a payment. Woodland Homes agreed to make contract changes to allow the Wades to complete some of the work themselves but wanted to be paid what was due at that time. Woodland Homes did more work, but the Wades still refused to pay any more money. When they were asked for the money, the Wades instructed Woodland Homes not to return to the home. 3. On February 20, 2001, Woodland Homes' attorney sent a letter to the Wades requesting payment of the money due at that time and indicating a willingness to complete or modify the contract. Woodland Homes was unwilling to continue its work under the contract without some assurance of payment. On March 1, 2001, the Wades filed a complaint against Woodland Homes claiming that Woodland Homes had abandoned the project. The complaint and a letter from the Wades' attorney to the Respondent also claimed that Woodland Homes owed them a refund of $20,000 to $22,000. 4. On March 14, 2001, Tom Sandoval, Registrar of Contractors Inspector, conducted a job site inspection and, in a Corrective Work Order dated March 20, 2001, ordered Woodland Homes to complete and comply with the contract and modify the roof to comply with some local building codes. At hearing, he testified that unless both parties agree on the issue, he makes no definitive finding on whether the contractor abandoned the project or not, he just orders that the contractor complete the project. He remembered one of Woodland Homes’ representatives stating at the inspection that they were not allowed on the job anymore. Although the Wades denied it, the weight of the evidence established that they fired Woodland Homes, either outright or by refusing to pay further on the contract. 5. The Wades claimed that the second contract addendum, by adjusting the payment schedule to a pay as you go schedule, changed the contract into a "cost plus" contract, negating the original contract price and entitling them to a refund of anything they paid Woodland Homes that was over and above materials and labor plus a 15% profit that they believed was appropriate. In proposing this theory, the Wades attempted to establish that Woodland Homes owed them a refund and was guilty of wrongdoing in not paying it. In fact, the addendum mentions nothing about adjusting the final price of the contract or any 15% profit. If it were a cost plus contract, it is more likely that it would have mentioned the amount of profit due Woodland Homes. The Wades have not established that the addendum did anything more than adjust the time that payments were made. And they have not established that they made all the payments that were due, even under the addendum. Instead, it appears they refused to pay and terminated the contract. 6. The Wades claimed that Woodland Homes had not provided a lien waiver from one of the subcontractors, Precision Lumber. Precision Lumber, however, has not been paid and is under no duty to provide lien waivers. The Wades argued that the contract provided for a guarantee of lien waivers, so Woodland Homes should have provided one. As previously noted, however, the contract was terminated by the Wades and is no longer in force. Violation of it cannot be the basis of a finding of wrongdoing by the contractor. 7. The Corrective Work Order issued by Mr. Sandoval also ordered Woodland Homes to replace some temporary stairs at the deck and put additional supports and ventilation in the roof. Woodland Homes replaced the stairs but did not complete the roof repairs, opting instead to obtain a definitive ruling on the extent of its responsibility from the Registrar. (It objected to being ordered to complete a contract when the homeowners refused to pay.) The roof had originally been built to code but, according to undisputed testimony at hearing, the code changed while the home was being built. Woodland Homes offered that it remains willing to do warranty work, and any other work, if directed by the Registrar, but strongly disagrees with the idea of having to complete a contract for homeowners who have already stated that they will not pay. 8. According to the records of the Registrar of Contractors, license number 116021 (Woodland Homes) was canceled on February 27, 2001 and assumed by license number 162347 (Woodland Homes, LLC). License number 116021 had 8 valid complaints and one dismissed complaint, with one 7-day suspension, per the Registrar’s records. License number 162347 has 3 valid complaints in the Registrar’s records and 9 open complaints, including the instant case. It has had no suspensions or other disciplinary actions against it. CONCLUSIONS OF LAW 1. This matter is within the jurisdiction of the Registrar of Contractors pursuant to A.R.S. §§ 32-1104(A)(4), 32-1154(B) and 32-1156. 2. The Citation and Complaint issued by the Registrar of Contractors in this matter alleged potential violations of A.R.S. § 32-1154(A)(1), (2), (3), (7), (20) and (23) and A.A.C. R4-9-108. 3. The Arizona Revised Statutes at § 32-1154(A)(1) provides grounds for suspension or revocation of a contractor’s license for abandonment of a contract or refusal to perform on an accepted bid without legal excuse. 4. The Arizona Revised Statutes at § 32-1154(A)(2) provides grounds for suspension or revocation of a contractor’s license for departure from or disregard of plans or specifications or building codes without consent of the owner or his or her representative. 5. The Arizona Revised Statutes at § 32-1154(A)(3) provides grounds for suspension or revocation of a contractor’s license for “[v]iolation of any rule adopted by the registrar”. The Arizona Administrative Code requires contractors to meet minimum workmanship standards. A.A.C. R4-9- 108. 6. The Arizona Revised Statutes at § 32-1154(A)(7) provides for suspension or revocation of a contractor’s license for the “doing of a wrongful or fraudulent act by the licensee as a contractor resulting in another person being substantially injured”. 7. The Arizona Revised Statutes at § 32-1154(A)(20) provides for suspension or revocation of a contractor’s license for subsequent discovery of facts which if known at the time of issuance or renewal of a license would have been grounds to deny the issuance or renewal of a license. 8. The Arizona Revised Statutes at § 32-1154(A)(23) provides grounds for suspension or revocation of a contractor’s license for failure to take appropriate corrective action on a Corrective Work Order without valid justification and within a reasonable period of time. 9. The Registrar of Contractors may consider the prior record of a contractor in any disciplinary proceeding provided the records are introduced into evidence. A.A.C. R4-9-117. On standing motion by the Registrar of Contractors, the computer records of the Registrar of Contractors may properly be considered to be evidence in the event the Administrative Law Judge finds a violation of any of the statutory provisions cited in the Citation and Complaint. Notice of this standing motion is given to the parties in the Notice of Hearing. 10. In this case, the Complainants have not established a violation of A.R.S. § 32-1154(A)(1), abandonment of the contract. The weight of the evidence has established instead that they discharged the Respondent because they were unwilling to pay more on the contract. Since the contractor was fired from the job, it is inappropriate in this case to find that it abandoned the project. Complainants also failed to establish that the Respondent departed from or disregarded applicable building codes. The roof construction was not in violation of any codes at the time the roof was built, so this should not be considered a violation of A.R.S. § 32- 1154(A)(2). 11. Regarding A.R.S. § 32-1154(A)(7), the Complainants have not established that Respondent’s actions were wrongful or fraudulent. The Corrective Work Order and the testimony of the Registrar of Contractors Inspector confirmed that the only items needing correction at the time of the job site inspection were the replacement of some temporary stairs on the front deck with permanent stairs and the changes to the roof ventilation (in addition to his general order that the Respondent complete the contract, which is recommended here as being found inappropriate). As stated, the roof issue was a matter of a change in code requirements. The stairs were replaced by the time of the hearing but did not constitute poor workmanship. It is to be expected that a home would have temporary stairs and other unfinished items when a homeowner fires his or her contractor. Therefore, the Complainants have not established a violation of A.R.S. § 32- 1154(A)(7). 12. Regarding A.R.S. § 32-1154(A)(23), failure to take appropriate corrective action without valid justification and within a reasonable period of time, Respondent acknowledged that the roofing codes changed and now require additional supports and more ventilation. As a warranty issue, this should have been corrected even though the Respondent was fired. On the other hand, Respondent did establish that the Corrective Work Order was partially incorrect, and it was justified in seeking a clear ruling before proceeding. Considering the circumstances of the case, the Respondent should be allowed an opportunity to complete this work. RECOMMENDED DECISION In view of the foregoing, it is recommended, commencing on the effective date of the Registrar’s Order, (thirty-five [35] days after the date of mailing by the Registrar of Contractors) that Respondent’s Class B license be temporarily and actively suspended until the Registrar receives proof that Respondent has brought the Complainants’ roof to the current code requirements of additional truss supports and venting. If the Registrar receives notice that the work has been completed before the effective date of the Order, the complaint shall be closed without the imposition of a suspension. Done this day, August 30, 2001. OFFICE OF ADMINISTRATIVE HEARINGS

______________________________________ Dorinda M. Lang Administrative Law Judge

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