ALJDEC

02F-G1205-ROC · Registrar of Contractors · 2002-11-25

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: October 15 and November 5, 2002. APPEARANCES: COMPLAINANT: Russell Rowlands. RESPONDENT: Thomas York, sole proprietor and qualifying party, represented by Thomas Tuohy, Jr., Esq., with Bonnie Deams and Juan Polanco. REGISTRAR OF CONTRACTORS: Inspector Bob Mechsner.

ADMINISTRATIVE LAW JUDGE: Anthony Halas. _____________________________________________________________________ Hearing was convened to determine whether Respondent violated state contracting law as alleged by Complainant and as cited by the Registrar of Contractors. Evidence and testimony were presented, and based on the entire record, the following Findings of Fact, Conclusions of Law, and Recommended Decision are made:

FINDINGS OF FACT

PROCEDURAL HISTORY 1. Complainant Russell Rowlands (Rowlands) resides at 737 West Why Worry Lane, in Phoenix, Arizona. His roommate is owner of the residence. 2. Respondent Thomas J. York (York) is a sole proprietor dba Paradise Home Improvement. York holds (and is qualifying party for) Arizona Contractor’s License No. 173283, Class C-61.[1] The license was issued by the Registrar of Contractors (Registrar) on March 21, 2002. 3. On or about April 1, 2001 (before Respondent obtained his contractor's license), Complainant hired Respondent to perform remodeling of his residence. The terms of the contract were defined verbally, and never reduced to writing. The initial price term was approximately $4900.00. 4. On May 15, 2002 (after Respondent became licensed), Complainant filed a complaint with the Registrar alleging that Respondent had abandoned the remodeling project, leaving things unfinished or poorly finished. In an attachment to the complaint, Rowlands specified 11 items needing to be fixed. 5. When the matter was not resolved and Complainant requested hearing, the Registrar issued CITATION AND COMPLAINT in Case No. G02-1205, charging respondent with possible violations of A.R.S. § 32-1154.A.1, 2, 3 (and A.A.C. R4-9-108, the workmanship rule), 7, 17, 20, and 23. 6. On Respondent's timely answer to the CITATION AND COMPLAINT, hearing was scheduled and convened.

EVIDENTIARY FINDINGS 7. A. At hearing, Complainant Rowlands testified, and offered Exhibits A through I, which were marked and admitted. B. Respondent York testified, represented by counsel, and presented the testimony of Bonnie Deems, and also offered Exhibits 1 and 2, which were marked and admitted.[2] C. The Registrar's Inspector Bob Mechsner testified to describe his observations at jobsite inspections on May 30, 2002 and October 10, 2002 relative to the complaint items, and to explain the Corrective Work Order (CWO) directive he authored on May 31, 2002. 8. Administrative notice is taken of Inspector Mechsner's CWO, which provides that: Contractor shall obtain a proper building permit, have the project inspected, and comply with any corrective work required by the city inspector.

# 1) Rear yard security spotlights are not functioning properly. Contractor shall have a properly licensed sub-contractor correct by appropriate means.

# 2) New overhang at master bedroom sliding door has a ¾" gap at facia, a ½" gap where facia is notched, and lacks sheetrock backing. Contractor shall correct by appropriate means.

# 3) One transom window glass above master bedroom slider has a crack or chip at one corner. Contractor shall correct by appropriate means.

# 4) Slider latch was corrected prior to jobsite meeting.

# 5) One corner of patio facia has 5/8" gap at corner miter. Contractor shall correct by appropriate means.

# 6) Patio drywall ceiling has one bow at slider that is approximately ½" in 4'. Contractor shall correct, unless city inspector requires 'greenboard' to be replaced (Item # 7) with exterior sheetrock.

# 7) Patio ceiling was sheetrocked with 'greenboard'. This is not per code. Contractor shall correct to comply with city code.

# 8) Front bedroom has two areas where existing base does not match new base. Contractor shall correct by appropriate means.

# 9) Junction box at entry requires a cover. Contractor shall correct by appropriate means.

#10) Front bedroom has overspray of texture on door casing. Contractor shall correct by appropriate means.

9. In his testimony, Inspector Mechsner explained why he had determined on the basis of his initial jobsite inspection on May 30, 2002 that the project as a whole required permitting, and why items 1 – 3 and 5 – 10 of his Corrective Work Order either failed to meet minimum workmanship standards or failed to meet code requirements, and thus required permitting and appropriate corrective action.[3] He also noted that at the time of his most recent pre-hearing jobsite inspection on October 10, 2002, no action had yet been taken by Respondent to obtain permits or correct the workmanship deficiencies or code violations. 10. Inspector Mechsner further explained why he determined Respondent to be responsible for such permitting and corrective action, since the contract price and scope of work exceeded the handyman exemption, and despite that Respondent became licensed only later, since the lack of licensing could not be used as a subsequent defense to workmanship issues once the contractor became licensed. 11. After opportunity to consider Respondent's written item-by-item response to the CWO (submitted as Respondent's answer to the CITATION AND COMPLAINT) Inspector Mechsner confirmed each of his initial conclusions regarding the itemized construction deficiencies and provided further clarification why he deemed Respondent responsible for correction of those deficiencies he had observed. 12. Although he did not have sufficient information on which to make a decision, Inspector Mechsner noted hypothetically that if Complainant were determined to have been acting as general contractor in hiring Respondent, Respondent would still be liable for working on a project without a permit, if a permit was required. The inspector also explained the general criteria distinguishing a sub-contractor from an employee of a general contractor. 13. The inspector also noted that non-payment by a homeowner (or resident such as Complainant) to a contractor generally was not a defense to correction of workmanship deficiencies, unless such a term was specifically set forth in written contract, which was not the case in this circumstance, as he understood it, since no written contract existed. 14. In his direct testimony, and on extensive cross-examination, Complainant Russell Rowlands described his work as a designer/unlicensed architect, supervising redesign and remodeling projects for homeowners who acted as their own contractors. As a result of his training and experience, he had some degree of expertise in construction-related matters. Rowlands confirmed that neither he nor his company, "Design Coalition", was a licensed contractor, but would be paid a fee by his clients, or 10% commission, on the cost of the work or services done by others. 15. In the course of his work, Rowlands had previously referred/hired Respondent York on several projects he supervised for his clients. At those times, Rowlands was aware York was not a licensed contractor, but did not think it mattered, since York had done good work for each of his clients. For that reason, Rowlands decided, early in the spring of 2001, to hire York for certain remodeling of Rowlands' own residence. During the 3 to 4 week course of York's remodeling, Rowlands also hired a mason and a roofer, and later, a drywaller and a painter. 16. Rowlands stated that the terms of his verbal agreement with York on his own residence were that York would be paid $55.00 per hour for his remodeling work, and would be reimbursed for material purchases he made. Rowlands confirmed that on at least one occasion he went to Home Depot with York and York's assistant (Juan Polanco) and purchased various materials for the project. (See Exhibits D and E). 17. Rowlands denied directing the means or methods of York's work or material selection on his home, although he confirmed his ongoing presence and limited involvement as a "third-hand" to York, since his own office was in the home and he was generally available on-site. He also confirmed that he would occasionally have York and his assistant begin one aspect of the remodeling before they were quite done with another, sometimes to accommodate other work such as roofing. 18. Rowlands stated that the project was going fairly well until York presented him with an $1800.00 bill (for work done and materials) as Rowlands was on his way out the door for an Easter vacation, so he asked York to wait till his return. When he came back, he wanted to talk to York about some concerns he had thought about regarding "finish work" or work not yet completed, but York refused to listen and demanded payment of his bill before doing any more work, and left the job. 19. Not long thereafter, according to Rowlands, York filed suit in justice court and eventually received an $1800.00 judgment. Rowlands posted bond and appealed, and shortly thereafter filed the instant complaint[4] with the Registrar listing the items he did not think were completed properly. (See photographs in Exhibits A, B, and C). After opportunity to consider Respondent's written item-by-item response to the CWO (submitted as Respondent's answer to the CITATION AND COMPLAINT) Rowlands explained why he believed each item on the CWO was York's responsibility to repair or complete. 20. Rowlands stated that after York left the job, the contractor did not call or make any attempt to resolve the situation until the initial jobsite inspection by the Registrar's inspector on May 30, 2002, and that York then made no attempt to comply with the CWO issued on May 31, 2002, such that through the time of the inspector's pre-hearing inspection on October 10, 2002, the workmanship deficiencies remained uncorrected. Rowlands stated that until the time of the pre-hearing inspection, he had never denied York access to comply with the CWO. Since then, Rowlands had hired another licensed contractor to complete the items on the Corrective Work Order (which was accomplished by or about November 5, 2002, the date of the further hearing in this matter). 21. In his direct testimony, and on extensive cross-examination, Respondent Thomas York described his experience in construction over time as an unlicensed "handyman", and the eventual circumstances, based on Rowlands' initial complaint, that caused him to become licensed, effective March 21, 2002. 22. York explained his acquaintanceship and eventual working relationship with Rowlands on remodeling projects Rowlands would organize for his clients. On those jobs, York would generally charge by the hour and invoice Rowlands' company, and the client would usually pay Rowlands, including his commission, who would then pay York. York specifically described various aspects of his work for Rowlands' clients Schneider and Deems, and the manner in which Rowlands directed the scope of York's work, as well as the means and methods. 23. With regard to his remodeling work on Rowlands' residence, York stated that the working arrangement was agreed to verbally, and was the same as it had been when he worked for Rowlands' clients. He stated that he had billed Rowlands' company Design Coalition at the end of each work week for hours worked and material. (See Exhibit 2). 24. York described various circumstances and events on Rowlands' project which he believed demonstrated Rowlands' control of the means and methods of his work, including the manner in which Rowlands selected certain of the materials to be used, how the project kept expanding, and how Rowlands was almost always on-site directing York and his assistant from one job to another leaving many aspects of the remodeling incomplete. York thought this was all consistent with the additional expertise in construction Rowlands had as an interior designer and architect. 25. York presumed that eventually Rowlands would have him complete all the items left incomplete, but instead, after Rowlands had refused to pay him for work done and York had gained a judgment in justice court, many of those incomplete items ended up as workmanship deficiencies on the Registrar's CWO. 26. In addition, after reviewing his previous written item-by-item response to the CWO, York testified in accord with his response to assert that he was either not responsible for a particular workmanship deficiency because he didn't do the work in question[5], or because Rowlands had chosen the material or verbally OK'ed the result[6], or because he would have addressed the problem in due course if he had been paid and given the opportunity.[7] 27. York explained his recollection of the circumstances which took place when he presented his bill to Rowlands' just before Rowlands left for Easter vacation, and then on Rowlands' return, when he refused to pay. York questioned why Rowlands suddenly came up with many so concerns over the quality and completeness of the work, and required an itemized invoice, when no mention of any such concerns had been made before – particularly when it had been Rowlands' direction that had prevented York from completing portions of the work. 28. York confirmed that although Rowlands had not explicitly prevented his access to the project, he had chosen not to resume work, or take corrective action despite the Registrar's CWO, because Rowlands had not paid him for work already done. He also confirmed that he had taken no action to communicate with Rowlands, despite Rowlands' letter of May 3, 2001 (Exhibit 1) listing certain problems and advising that Rowlands intended to correct them at York's expense. 29. On the basis of his prior working experience with Rowlands, and the nature of Rowlands' business, York asserted that Rowlands should be considered his employer based on Rowlands' control of the project and the method in which he paid York by the hour. He also asserted that Rowlands should be considered the general contractor on his project and therefore responsible to have obtained permits and to meet code requirements. 30. Bonnie Deams testified for Respondent York to describe her working relationship with him, and her appreciation of the quality of his work. She explained that York had originally done remodeling work in her condominium at the recommendation and referral of Rowlands and his Design Coalition company, whom she had hired to design and coordinate remodeling of her condominium. She stated that Rowlands had arranged for all the contractors involved in her project, and had charged a 10% mark-up fee over and above each contractor's cost. (See Exhibit I). She stated that later she had hired York directly for additional work, and after Rowlands found out about it, he had again billed her 10% for that work.

APPLICABLE LAW

The CITATION AND COMPLAINT issued by the Registrar of Contractors charged Respondent with possible violations of A.R.S. §§ 32-1154.A.1, 2, 3 (and A.A.C. R4-9-108, the workmanship rule), 7, 17, 20, and 23. Those statutory sections require that a holder of a license or a person listed on a license shall not commit the following: 1. Abandonment of a contract or refusal to perform after submitting a bid on work without legal excuse for the abandonment or refusal.

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. … 17. Knowingly contracting beyond the scope of the license or licenses of the licensee. … 20. Subsequent discovery of facts which if known at the time of issuance of a license or the renewal of a license would have been grounds to deny the issuance or renewal of a license. … 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 licenses for violations of A.R.S. § 32-1154. 2. To warrant such sanctions by the Registrar, Complainant must demonstrate by a preponderance of the evidence that Respondent violated any one, or more, of the statutory sections cited. Culpepper v. State of Arizona, 187 Ariz. 431, 930 P.2d 508 (App. 1996). 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.” In re: Arnold and Baker Farms, 177 B.R. 648 (9th Cir. BAP (Ariz.) 1994). It is “evidence which is of greater weight or more convincing than the 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.” Black’s Law Dictionary 1182 (Rev. 6th ed. 1990). 3. Consideration of the extensive testimony and evidence presented by both Complainant Rowlands and Respondent York makes it readily apparent to the undersigned – and even the parties concur – that the deficiencies Respondent was directed to correct by the Registrar's Corrective Work Order are relatively minor in substance, whether weighed individually or in total. 4. For that reason, it is difficult for this tribunal to discern why the parties have so vociferously contested this matter, when necessary resolution could have been accomplished with fairly minimal access and remedial action. 5. Be that as it may, there is considerable irony in Complainant Rowlands' efforts to have Respondent York's license disciplined for work performed prior to licensure, and without opportunity for such discipline to be contingent on correction (since remediation has by now been accomplished by others). This is so, because the essence of Complainant's own business – and his willing use of unlicensed contractors to further that business, and then to remodel his own residence, until problems arose - appears to contravene the spirit, intent, and rationale of the laws of this state requiring contractors to be licensed. 6. Notwithstanding that irony - since the subject matter of this disciplinary proceeding is to determine whether Respondent has violated those contracting laws – Respondent's own intransigence is perplexing, in light of his refusal to even consider taking the minimal action necessary to address the clear directive of the Registrar, given the possibility of significant discipline for proven violations of the contracting laws. 7. The undersigned concludes that on the evidence presented, there is reason to question the motivations and credibility of both Complainant Rowlands and Respondent York. Nevertheless, a preponderance of the evidence does demonstrate certain violations of some but not all of the contracting laws cited. 8. Because a bona fide dispute exists (and is not yet final in the court of appropriate jurisdiction) whether Complainant has breached the verbal contract between the parties, the evidence is insufficient in this proceeding for any determination that Respondent abandoned the contract or refused to perform without legal excuse. Therefore, no violation of A.R.S. § 32-1154.A.1 has been proven. 9. Pursuant to the compelling testimony of the Registrar's inspector, the scope of the remodeling work under construction at Complainant's residence required a permit, which had not been procured, and certain aspects of the work done did not meet city of Phoenix code. While Respondent contends Complainant should be liable for the lack of a permit, and the failure to meet code, such assertion is not persuasive in the absence of explicit contract terms defining those responsibilities. A licensed contractor is required to act in the manner necessary to meet the applicable permitting and code requirements, and can't casually delegate such responsibility and then attempt to rely on a retrospective interpretation of a non-specific verbal contract. Therefore, a violation of A.R.S. § 32-1154.A.2 by Respondent has been proven. 10. The workmanship rule, A.A.C. R4-9-108, is the rule violation charged pursuant to A.R.S. § 32-1154.A.3. Again based on the compelling testimony of the Registrar's inspector, it is concluded that work done by a licensed contractor must meet minimal workmanship standards, but specified items of the work done of Respondent did not. While Respondent again contends that his work was directed or approved by Complainant, this assertion is not persuasive in the absence of contract terms or explicit waiver. Therefore, a violation of A.R.S. § 32-1154.A.3, and A.A.C. R4-9- 108, has been proven. 11. Respondent refused to take corrective action despite the Registrar's directive to do so. He contends the refusal was because Complainant refused to pay for work already done, thereby breaching the verbal contract. However, it is concluded that non-payment is not a defense to a directive by the Registrar to correct workmanship deficiencies, even if it may be determined that such non-payment constitutes a breach of contract. Therefore, because Respondent's act of refusal is deemed to be wrongful, and resulted in substantial injury to Complainant for his time and cost to arrange for correction by another, a violation of A.R.S. § 32- 1154.A.7 has been proven. Because the basis for Respondent's failure to comply with the Registrar's directive is deemed to be without valid justification, a violation of A.R.S. § 32-1154.A.23 has also been proven. 12. Respondent has been charged with knowingly contracting beyond the scope of his license for limited remodeling and repair. A preponderance of the evidence does not sustain this charge. Therefore, no violation of A.R.S. § 32-1154.A.17 has been proven. 13. Consistent with the opinion of the Registrar's inspector, the undersigned concludes that on the evidence presented herein, there is no doubt that the work done by Respondent on Complainant's project did not meet the handyman exemption, and therefore required a license. If that work had become known only after Respondent subsequently gained his license, such discovery might constitute grounds to deny the license and demonstrate a violation of A.R.S. § 32-1154.A.20. However, it is also apparent on this record that Respondent's unlicensed work on Complainant's residence was the subject matter of an investigation initiated by Complainant's first complaint to the Registrar prior to the issuance of the license in question, and therefore was known at the time the license was issued. For that reason, no violation of A.R.S. § 32-1154.A.20 has been proven.

RECOMMENDED DECISION

On the basis of the foregoing, IT IS RECOMMENDED that Respondent’s License No. 173283, Class C-61, be suspended for a period of 20 days, to begin on the effective date of the Registrar’s Order in this matter. IT IS FURTHER RECOMMENDED that Respondent’s License No. 173283, Class C-61, be placed on probation for two years, to begin on the effective date of the Registrar’s Order. IT IS FURTHER RECOMMENDED that, as an express condition for the next two renewals of Respondent’s License No. 173283, Class C-61, and notwithstanding the existence or absence of any uniform assessment by the Registrar then in effect, Respondent shall be required to pay an additional $200.00 into the Contractors’ Recovery Fund, as authorized by A.R.S. § 32- 1132.B. Failure to pay such an additional deposit into the fund shall result in the rejection of any renewal application and a suspension of Respondent’s license until payment is made and the renewal issued. Done this day, November 25, 2002.

______________________________________ Anthony Halas Administrative Law Judge

Original transmitted by mail this ____ day of ____________, 2002, to:

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

By ___________________________

----------------------- [1] The scope of the license is for limited remodeling and repair (not to exceed $25,000.00 per project per dwelling). [2] At the outset of hearing, Respondent moved to dismiss the complaint before the Registrar, contending that a justice court judgment of $1800.00 in favor of Respondent against Complainant for breach of contract arising out of the same project constituted a res judicata determination such that Complainant's subsequent complaint before the Registrar and any further proceedings should be dismissed. Complainant has appealed the justice court judgment, and it is not yet final. Complainant opposed Respondent's motion. Because the justice court judgment is not final, and because the Registrar maintains authority to discipline its licensees for violations of the Arizona contracting laws, Respondent's motion was denied on the record.

[3] Item 4 had already been corrected by the time of the initial jobsite inspection, and Rowlands' complaint item 11 was not referenced in the CWO because it was a duplicate of CWO item 2. [4] Previously, Rowlands had filed another complaint, which had resulted in the Registrar's investigation of York for unlicensed contracting. Rowlands stated that he was advised by Registrar of Contractors' staff to wait until Respondent was licensed to file a new complaint. [5] Including; CWO Item # 1, (the rear yard security lights), and CWO Item # 3 (the chipped transom window glass), and CWO Item # 10 (texture overspray on door casing). [6] Including CWO Item # 6 (bow in patio drywall ceiling), CWO Item # 7 (greenboard on patio ceiling), and CWO Item # 8 (mismatched baseboard). [7] Including CWO Item # 2 (overhang at master bedroom sliding glass door), CWO Item # 5 (patio facia corner miter gap), and CWO Item # 9 (missing junction box cover).

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