ALJDEC

02F-0185-ROC · Registrar of Contractors · 2002-01-23

STATE OF ARIZONA IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: January 17, 2002.

APPEARANCES: Complainant, Lynanne Chapman, appeared in her own behalf. Respondent, D M H Contracting, Inc., failed to appear.

ADMINISTRATIVE LAW JUDGE: Robert I. Worth _____________________________________________________________________

Evidence and testimony were presented, and based upon the entire record, the following Findings of Fact, Conclusions of Law and Recommended Order are made.

FINDINGS OF FACT

The instant hearing was duly scheduled on advance written notice sent to both parties. Although the start of the scheduled hearing was delayed for over twenty minutes to afford added time in which to make an appearance, the Respondent, D M H Contracting, Inc., failed to appear either individually or through any proper legal representative. . . . . . .

2. Complainant’s uncontroverted documentary and testimonial evidence tended to establish that the parties had entered into a contractual arrangement, pursuant to which Respondent was to construct an addition to Complainant’s existing residence. Although the payments to be transmitted from Complainant to Respondent were to be on a time and materials basis plus sales taxes, with a 12% increment for profit and overhead, the entire construction arrangement was shown to have been induced by the prior submission by Respondent’s principal officer and qualifying party of a written general breakdown of the separate elements to be included together with a projected monetary line-item cost for each.

It was credibly demonstrated that the Respondent had given express assurances to Complainant that the total cost price estimated by Respondent for the originally contemplated work, including applicable sales taxes, would be no greater than $44,364.24. Respondent’s principal officer had communicated to Complainant that his prior construction experience was extensive and that the submitted cost forecast would be substantially accurate. In point of fact, this same individual gave further assurances that the end costs would very likely be less than the submitted total price estimate, even on a time and materials basis. These representations were shown to have been reasonably relied upon by Complainant at the start of the work.

Several subsequent modifications in the overall contemplated construction work were made by deleting a few substantial high-cost items, such as all interior and exterior painting as well as a spiral staircase to and from the patio deck. The costs for these deleted items, as reflected on the written document in the nature of a proposal, were $4,500.00 and $3,000.00 respectively, or a total of approximately $7,500.00. It was admitted that a few additional cost items were subsequently authorized and accomplished, but the combined costs were relatively small. In any event, the fact that

compensation was to have been based upon time, materials and overhead/profit was never intended to give Respondent uncontrolled discretion as to the amount of charges properly accruing under the parties’ construction arrangements.

Complainant was asked to and did transmit payments to Respondent on a periodic basis, all of which aggregated the sum of $41,000.00. Although numerous requests and demands were communicated to Respondent seeking to have a proper and accurate accounting of all expenses attributable to the ongoing construction, Respondent was either unwilling or unable to produce a satisfactory break-down of the materials and labor charges as they related to the different phases and items of construction.

A money dispute between the parties ensued and escalated. Such dispute related to the propriety and the amounts of certain asserted charges by Respondent in its periodic invoices presented to Complainant.

7. Shortly after the dispute had commenced, Respondent placed a lien against the Complainant’s property and initiated a civil lawsuit, seeking what Respondent claimed was an unpaid balance owing under the parties’ contract arrangements in the amount of $2,500.00.[1] The commencement of such civil suit generated the filing of a counterclaim by Complainant who contended that she had been over-billed and had overpaid Respondent $1,603.35, especially in light of the significant amounts attributable to the deleted items that should have and would have effectively reduced the maximum total costs set forth in the original written general estimate given by Respondent that had induced Complainant to enter into the construction arrangements.

8. It is wholly unnecessary and, indeed, inappropriate for the Registrar, through this tribunal, to undertake an evaluation or adjudication of the money claims asserted by each party, since on November 2, 2001, the civil tribunal heard and decided the matter on the merits, with both sides participating in the presentation of their respective positions. That same date, a final judgment was entered, dismissing the entire claim by Respondent with prejudice and ordering judgment in favor of the Complainant in the sum, including costs, of $1,564.24, which comprises almost the full amount of her counterclaim.

Under applicable concepts of res judicata and collateral estoppel, the above-described judgment must be accorded a binding affect on both parties to this administrative disciplinary action with respect to their respective rights and liabilities. Such impact is found also to extend to the obligation upon Respondent to take proper steps to remove or release the lien previously placed on and recorded against the Complainant’s property, since the validity of any such lien would be wholly dependent upon the successful pursuit of the underlying claim for the same monetary amount set forth in the lien. Consequently, the adverse judgment against Respondent serves to negate the existence and propriety of any valid lien rights.

It was undisputed that Respondent has neither paid any part of the civil judgment to Complainant nor removed the filed and recorded lien. This course of conduct on the part of Respondent is found and determined to constitute a wrongful act to the financial detriment of Complainant within the meaning of one of the contracting law provisions charged as having been violated by Respondent. Additionally, since the final judgment dismissing Respondent’s claim with prejudice and granting Complainant’s counterclaim effectively establishes the existence of an overcharge, also constituting a wrongful act, Respondent must be held not to have completed this project for the agreed price in violation of another statutory subsection charged hereunder.

11. Notwithstanding a further charge of false and misleading advertising by Respondent in this case, the Complainant was unable to sufficiently prove that the contractual arrangements were induced by any improper advertising activity on the part of Respondent.

By way of an additional circumstance in aggravation, Respondent was shown to have concealed his address and whereabouts, declining to retrieve and sign for certified mail containing legitimate and lawful demands following the civil court proceedings, thereby purposely avoiding service of process by Complainant in attempts to collect on her judgment and to have the recorded lien removed or released.

By the failure of Respondent to appear at and participate in the scheduled hearing of this matter, no evidence in defense or in mitigation of the charged violations was presented to the tribunal.

CONCLUSIONS OF LAW

The undisputed evidence of record adequately established that Respondent has violated the provisions of A.R.S. §32-1154(A)(7) and (9). However, no violation by Respondent of A.R.S. §32-1154(A)(16) was sufficiently proven.

RECOMMENDED ORDER

In view of the foregoing, it is recommended that Respondent’s Class B- license be revoked on the effective date of the Registrar’s Order. . . . . . . . . . It is further recommended that if, on or before this Order’s effective date, the Registrar receives proof that Respondent has paid or tendered the civil judgment amount of $1,564.24 to Complainant and also has demonstrated that appropriate action to remove and release its filed and recorded lien against Complainant’s property has been accomplished, then no license revocation shall be imposed, but instead and alternatively, Respondent’s aforesaid license shall be actively suspended for 14 days followed immediately by a period of disciplinary probation for 90 days. This alternative penalty shall commence, if at all, on the effective date of the Registrar’s Order.

Dated: January 24, 2002. OFFICE OF ADMINISTRATIVE HEARINGS

______________________________________ Robert I. Worth Administrative Law Judge

Original transmitted on _____________________

by: _____________________________ , to:

Michael P. Goldwater, Director Registrar of Contractors 800 West Washington Street (6th Floor) Phoenix, AZ 85007

ATTN: Joyce Armijo ----------------------- [1] The actual total claimed by Respondent as an unpaid contract balance was shown to have been $2,681.88, but this amount was reduced to $2,500.00 by Respondent in order to have this matter appropriately fall within the jurisdiction of the Small Claims Division of the Justice Court,

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