ALJDEC (decisions subject to certification as fin)

02F-2166-ROC · Registrar of Contractors · 2003-01-31

STATE OF ARIZONA IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: January 23, 2003.

APPEARANCES: >The Complainant, Dr. Ian D. Miller, was represented by his attorney, Richard A. Black, Esq. >The Respondent, Building Arizona, appeared through its President and Qualifying Party, Mark Wilson Fiscus.

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

1. Pursuant to a written proposal and contract, concluded in early August, 2001, Respondent commenced work on an extensive remodeling and addition project on Complainant’s existing residence. The contract document, authored by Respondent, is determined to have been a fixed price agreement as distinguished from a “time and materials” or a “cost-plus” arrangement. The stated price for the originally described construction work was set forth as a rough estimated cost range from $43,750.00 to $57,750.00 for the mutually contemplated and specified job scope, such projected and

agreed costs being expressly described by Respondent from his past experience as being realistic. Most certainly, the final cost price was not mutually intended to be and is found not to have been a matter that was left in Respondent’s uncontrolled discretion.

2. Prior to the start of any work under the contract, Complainant had agreed to and did pay Respondent the additional aggregate amount of $4,431.30 for design and blue print work, also transmitting an initial draw amount of $30,000.00 against the contract price at the time that the agreement was signed.

3. Although the progress by Respondent on the original contract was far from expeditious, the parties nevertheless agreed to several subsequent revisions and/or modifications that effectively enlarged the original job scope as well as the contract price. The initial concept of a free- standing patio roof structure, unattached to the main dwelling, was mutually changed and a parapet roof feature was also added. Complainant continued to remit periodic payments to Respondent following draw requests. The credible testimonial and documentary evidence revealed that Complainant has paid Respondent various monetary amounts in a combined total of $112,261.87 up until the last periodic payment on July 8, 2002.

4. No permit for the contemplated work by Respondent was ever applied for or issued. Despite a professed belief by Respondent that the original work may not have required a permit, the subsequent modifications clearly encompassed attachments to the existing structure. Moreover, the express terms of the parties’ contract, authored by Respondent, specifically makes mention of the permit process, and the proposal ostensibly included the costs for obtaining such permit and for Respondent’s future involvement in the permit’s inspection process. Respondent, as a licensed contractor, knew or reasonably should have known of this permit and inspection requirement and was not justified in continuing the construction work without assuring that a permit was in place and that all required inspections by the local building authorities were called for,

performed and passed. Respondent has effectively exposed Complainant to future problems with the municipality as well as with future potential purchasers. Moreover, the evidence at the hearing tended to indicate a strong likelihood that numerous and varied code violations exist with respect to Respondent’s partially completed work, especially with respect to the adequacy and propriety of the necessary rebar and attachments. The cavalier assertions to the contrary by Respondent are found not to be credible.

5. Respondent admittedly had underbid the project for Complainant and consistently remained unresponsive to repeated requests and demands to achieve completion. Neither the original work nor the revised additional work approached completion over a much prolonged time duration. A few examples of the significant contacted work left unperformed are the exterior painting and the stone covering of the patio bases below the poles or posts and on the mailbox post. A formal complaint was ultimately filed with the Registrar of Contractors. [1]

6. Following a jobsite visit by the Registrar’s assigned Inspector, a written directive was issued to Respondent on September 26, 2002 emphasizing the requirement for Respondent to complete the project in accordance with the applicable plans, specifications and contractual terms. Additional items of substandard workmanship were also noted by the Inspector, and Respondent expressly had agreed at the time of the inspection to rectify most all of such designated items. Respondent also agreed to perform all incomplete items or areas of work noted on a walk- through list compiled immediately after the inspection. However, except for one item relating to the front courtyard irrigation that Complainant corrected at his own expense, Respondent failed to timely comply with the Inspector’s directive in any other respect.

7. Notwithstanding some ongoing and repeated assertions by Respondent's President and qualifying party of his intent to finish this project, accompanied by his expressions of remorse and apology, both verbally and in written communications from Respondent throughout the long, unproductive course of dealings between the parties on this remodeling construction spanning almost fourteen months, these statements appear to somewhat strain credibility. Repeated and expressly promised completion date deadlines were given by Respondent on no less than three or four separate prior occasions, one of which had incorporated a daily penalty amount if the promised deadline date was not met. Under all the circumstances, it must be held that Respondent had abandoned, or at the very least, had constructively abandoned this project. In any event, Complainant ultimately terminated the services of Respondent in October, 2002, a belatedly taken action that is further found to have been understandable and fully justified.

8. After terminating Respondent from the project, Complainant secured at least three bids from independent contractors for completing the project in accordance with the contract and its modifications or additions, as well as for correcting several deficiencies in Respondent’s work. Credible sworn testimony at the hearing by the low bidder, corroborated by Complainant, indicated that the overall work called for under the applicable contract, as amended, was not more than 30% completed. The amount of such low bid was over $70,000.00. The omitted exterior painting item, alone, amounted to over $10,000.00 of such low bid.

9. No merit is found to Respondent’s contention that he was still owed monetary sums under the contract. Although the subsequent revisions prepared by Respondent were generally confusing and often duplicated the charges for work already contained within the described prior job scopes, the documentary evidence at the hearing tended to indicate that the maximum contract costs to which Complainant had committed to

pay Respondent for the completed original and additional work, including blueprint preparation, is determined to have been a combined sum not exceeding $90,000.00, and probably somewhat less, even when utilizing the highest range of the rough estimates set forth in the parties’ contract. Consequently, the aggregate total of all payments by Complainant to or on behalf of Respondent (over $112,000.00) generated a substantial overpayment.

10. By way of one additional example of the above-described overpayment discrepancy, Respondent was shown to have substituted a lesser cost Douglas Fir material for the patio posts and for other posts on the rear side of the dwelling instead of the specified peel pole materials that should have been installed. Complainant had paid for that phase of the construction work, and Respondent apparently intended to retain any cost savings for the materials switch so as to offset anticipated losses due to his previous underbidding of this project. However, a contractual entitlement would exist for Complainant to receive the more expensive post materials, and any attempt to secure or retain higher prices or to substitute lower cost materials in order to recoup potential losses to Respondent resulting from such underbidding should be disallowed. Respondent was under a pre-existing duty to deliver a final product, utilizing specified materials, thereby causing any such increase agreements or materials substitution arrangements to lack valid consideration. Complainant has effectively overpaid Respondent for the substituted posts that were furnished.

11. The credible evidence revealed several workmanship deficiencies that remained uncorrected or improperly corrected at the time Respondent ceased his jobsite work. Moreover, the abandonment and contract breaches, as well as the failures to have adhered to repeated promises to finish by several, separately given deadline dates, are found to constitute wrongful acts to the substantial detriment of Complainant within the meaning of another charged code violation.

12. The overall course of conduct and prolonged duration of inaction on the part of Respondent is found to reflect a blatant disregard of his duties as a licensed contractor in this State as well as of the comforts and entitlements of his customer, the Complainant. In point of fact, mitigating circumstances in this case were conspicuous by their absence.

CONCLUSIONS OF LAW

1. The totality of the evidence of record adequately established that, as charged in the issued Citation, Respondent has violated the provisions of A.R.S.§32-1154(A)(1), (7), (23) and (3); namely Rule R4-9- 108, A.A.C.

2. If any disciplinary penalty short of a license revocation were to be imposed in this case, the Registrar of Contractors would be remiss in his obligations to protect the general public from the actions or omissions of contractors such as Respondent who was proven to have been not only a potential, but also an actual, source of financial harm to homeowners such as Complainant. RECOMMENDED ORDER

In view of the foregoing, it is recommended that Respondent’s Class B license shall be revoked on the effective date of the Registrar’s Order entered in this matter.

Dated: February 4, 2003. 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: Jennifer Brown ----------------------- [1] Although not in issue under the complaint filed in this action, it must be observed that the Respondent’s less than effective jobsite precautions during the long time span that construction was allowed to remain incomplete resulted in a substantial roof leak condition that developed at the tie-in of Respondent’s work to the existing structure. This leak caused significant interior damage to the residence and a prolonged disruption of the use and enjoyment of the home by its occupants. Respondent’s insurance carrier had assumed liability for the costs to rectify such damages and to compensate Complainant for the disruption.

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