ALJDEC

02F-RF0222-ROC · Registrar of Contractors · 2002-05-24

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: May 13, 2002 APPEARANCES: Plaintiff Barbara Smallwood was represented by counsel, Mark Fredenburg. Defendant C S C Construction Services Corporation appeared through its qualifying party, Bob Watt. ADMINISTRATIVE LAW JUDGE: Sondra J. Vanella _____________________________________________________________________ The question presented by this matter is whether Plaintiff Barbara Smallwood is entitled to an award and payment from the Residential Contractors’ Recovery Fund pursuant to A.R.S. § 32-1132(A). Based on the evidence of record, the Administrative Law Judge makes the following Findings of Fact, Conclusions of Law and Recommended Order:

FINDINGS OF FACT On May 17, 2001, Plaintiff Barbara Smallwood filed a complaint against Defendant C S C Construction Services Corporation (“CSC”) with the Registrar of Contractors (“ROC”). Ms. Smallwood alleged that CSC was responsible for a number of construction-related deficiencies in her home in Phoenix, Arizona. ROC Inspector Jack McKim investigated Ms. Smallwood’s complaint. On June 5, 2001, Inspector McKim issued a Corrective Work Order (“CWO”) under which the ROC gave CSC fifteen days to complete corrective work at Ms. Smallwood’s home. Among other things, the CWO directed CSC to correct the following deficiencies: (i) settlement and drainage problems with back yard; (ii) back yard block fence cracking; (iii) concrete patio slab in back yard sinking and pulling away from house; (iv) concrete slab at back yard master bedroom sliding glass door sinking and pulling away from house; (v) electrical box cover missing; (vi) insecure low voltage lighting wire; and (vii) ineffective sprinkler drip system in front yard. On or about June 22, 2001, Ms. Smallwood requested an administrative hearing due to the fact that CSC had made no attempt at corrective work. On July 18, 2001, the ROC issued a Citation and Complaint in Case No. G01- 1046, charging CSC with violations of A.R.S. § 32-1154(A)(7), (A)(23) and (A)(3), namely Rule R4-9-108. On August 23, 2001, the ROC issued the Notice of Hearing in Case No. G01- 1046, advising the parties that the administrative hearing was scheduled for November 16, 2001. On September 10, 2001, the ROC issued an Order of Closing in Case No. G01- 1046, due to the July 30, 2001 revocation of CSC’s license in ROC Case No. G01-0872. Consequently, the hearing scheduled for November 16, 2001, was vacated. The ROC’s Order of Closing advised Ms. Smallwood that she may be eligible to file a claim against CSC with the Residential Contractors’ Recovery Fund (the “Fund”). On or about September 26, 2001, Ms. Smallwood filed a claim with the ROC seeking payment from the Fund in the amount of $20,000.00 for damages she alleged to have incurred as a consequence of the construction deficiencies in her home attributable to CSC. ROC Inspector Lee Deem investigated Ms. Smallwood’s claim against the Fund. Upon the conclusion of his investigation, Inspector Deem determined that Ms. Smallwood had incurred damages in the amount of $9,650.00 that were attributable to construction deficiencies in her home for which CSC was responsible, and which were therefore payable from the Fund. On February 2, 2002, ROC Inspectors Dick North and Bob Mechsner conducted a second Recovery Fund inspection due to Ms. Smallwood’s dissatisfaction with the first inspection. Ms. Smallwood asserted that Inspector Deem did not review all of the areas in her home that demonstrate structural movement within the home. Ms. Smallwood provided Inspectors North and Mechsner with an engineering report from Thomas Engineering. Inspector North’s Addendum to Recovery Fund Claim, a copy of which is contained in the administrative case file, the contents of which administrative notice was taken, indicates: There is definite movement in the interior floor, a long visible crack under the kitchen vinyl, and the outside concrete slabs are continuing to move toward the west fence which separates the homeowner’s property from a multiple tiered wash bank. There are extensive fissures visible across the vacant lot to the south and through a concrete masonry unit footing. Other concrete masonry unit fence movement is very obvious and visible at various locations of the perimeter view fence on the west side. The engineering reports both reflect extensive repair methods that are needed to repair existing damage and also to prevent further damage to the home. The homeowner has submitted three (3) bids for the corrective work. All three (3) bids exceed the maximum allowable by law for payout from the recovery fund. It is my opinion at this time that unless further evidence is presented by the contractor that the maximum allowable by law be paid to the claimant.

13. Ms. Smallwood presented credible evidence at hearing in the form of expert testimony by Mr. Tom W. Thomas, P.E., that the cost of correcting the deficiencies in the construction of her home would be in excess of $20,000.00. [See also Exhibit 14, Mr. Thomas’ January 25, 2002 inspection report.] 14. At hearing, CSC asserted that it was not responsible for any damage to the structure of Ms. Smallwood’s home because the problems in Ms. Smallwood’s home were caused by an improper subsurface and not by deficiencies in the actual construction of the home. As to the subsurface, CSC blames the developer of the subdivision for this problem.[1] 15. The Administrative Law Judge finds that by proceeding to build on Ms. Smallwood’s lot, CSC effectively accepted the underlying soil conditions as being adequate to support its work. CSC’s culpability is further demonstrated by the fact that CSC decided to build without following the recommendations contained in the May 20, 1998 soil investigation report generated by Construction Inspection & Testing Co. [See Exhibit 15] Regardless of CSC’s claim that it is not responsible for the structural damage caused by the condition of the soil, it is clear that upon contracting to build a home, and in conjunction therewith to guarantee its workmanship, a contractor accepts the surface as being adequate to support its work. As a direct result thereof, CSC is now estopped to assert that it has no liability for the deficiencies in Ms. Smallwood’s home due to the subsurface of the soil, or CSC’s or Whitehawke Development’s lack of correction of the soil. 16. The Administrative Law Judge finds, upon consideration of all of the evidence, that CSC is responsible for the existence of the structural damage resulting from the construction of Ms. Smallwood’s home while on notice of the potential for problems. 17. Upon consideration of all of the evidence, the Administrative Law Judge finds that Ms. Smallwood established damages in excess of $20,000.00 that are attributable to conduct by CSC in violation of A.R.S. § 32-1154. Therefore, Ms. Smallwood is entitled to the maximum award from the Fund in the amount of $20,000.00.

CONCLUSIONS OF LAW Under A.R.S. § 32-1132, the ROC is empowered to determine and award payment to Ms. Smallwood from the Fund. Ms. Smallwood meets all of the requirements of a “person injured” as that term is defined in A.R.S. § 32-1131(3). The weight of the evidence presented at hearing demonstrated that Ms. Smallwood is entitled to a payout from the Fund in the amount of $20,000.00. Based on the foregoing, Ms. Smallwood should be awarded a total payout from the Fund in the amount of $20,000.00, all of which should be charged against CSC and/or persons named on CSC’s Class B license as set forth in A.R.S. § 32-1139(B). RECOMMENDED ORDER The Administrative Law Judge makes the following Recommended Order: On the effective date of the Order entered in this matter, the ROC shall commence and finalize payment procedures from the Fund to Barbara Smallwood in the amount of Twenty Thousand Dollars and No Cents ($20,000.00).

Done this day, May 24, 2002.

______________________________________ Sondra J. Vanella Administrative Law Judge

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

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

By ___________________________

----------------------- [1] The Administrative Law Judge notes that Bob Watt, qualifying party for CSC, also has an ownership interest in Whitehawke Development, the developer of the subdivision, and the entity to which CSC has attempted to shift responsibility in this matter.

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