ALJDEC decisions subject to certification as final

06F-1908-ROC-rhg · Registrar of Contractors · 2007-05-08

STATE OF ARIZONA IN THE OFFICE OF ADMINISTRATIVE HEARINGS

REHEARING: April 17, 2007 and May 1, 2007.

APPEARANCES: >The Complainant was represented by her attorney, David R. Farney, Esq. >The Respondent was represented by its attorneys, Jonathan A. Dessaules, Esq. and Laura Pilar Balza, Esq.

ADMINISTRATIVE LAW JUDGE: Robert I. Worth ________________________________________________________________

Based upon the entire record, the following Findings of Fact, Conclusions of Law and Recommended Order are made.

FINDINGS OF FACT

1. At the outset of the scheduled rehearing, an amendment to the Citation and Complaint was permitted, even on rehearing, to conform to the proof to be presented so as to include an additional charged violation by Respondent of the provisions of A.R.S.§32-1154(A)(9) based upon an alleged failure to complete the project for the agreed price. This charged violation is somewhat related to the already-charged violation of A.R.S. §32-1154(A)(1) based upon an alleged abandonment or refusal to

perform after submitting a bid. However, further amendments consisting of other belatedly requested additionally charged violations by Respondent were not permitted by the tribunal on due process grounds, such as those relating to alleged violations of the State’s safety laws and of the statutorily required minimum elements of construction contracts.

2. Although the testimonial and documentary evidence was somewhat inconclusive and conflicting, it did appear that Respondent had communicated a proposal to Complainant for the providing and installing of two electrified front fences, together with gates utilizing automatic and remote operators, to be placed onto two separate parcels of residential property owned respectively by Complainant and by her mother. Such proposal was duly accepted by Complainant, thereby ripening into a contract.

3. The date and the exact terms of the contractual agreement, whether written or verbal, were the subjects of sharply conflicting testimony at the hearing. However, it was not disputed that Complainant had tendered and paid to Respondent and that Respondent had accepted the sums of $12,000.00 and $5,000.00 respectively, in late December, 2003 and in early March, 2004, aggregating a combined total amount of $17,000.00.

4. It was similarly uncontroverted that no actual installation work for the electrified fencing or the gate operators was performed or even commenced at either of the designated jobsite locations.

5. It further appeared that the specified overall cost price for the contemplated work and materials was to have been between $33,640.72 and approximately $50,000.00. Somewhat surprisingly, the Respondent contended that the lower range price was agreed upon, whereas the Complainant asserted that the communicated

proposal was at the higher range. Due to the fact that no installation work was performed, it is unnecessary to resolve the issue of the exact total price for the contractual work

6. Complainant was credibly shown to have been reasonably relying upon Respondent to obtain or to help obtain all necessary local building permits that were required for the performance of the contemplated fence and gate work. Respondent’s position was that the costs for obtaining the permits would be in addition to the costs for the installed fences and gates. This extra cost aspect would tend to lessen the dollar spread between the high and low ranges of the total contractual costs set forth in Finding of Fact Number 5, above.

7. Additional charges for the efforts on the part of Keith Allen Simpson, Respondent’s qualifying party and its principal operating individual, with respect to the purportedly necessary but unsuccessful attempts to obtain local building permits were never the subjects of any agreement between the parties, whether on an hourly or fixed rate and whether any minimum or maximum limits would be applicable. The propriety and amount of these extra asserted charges is found to be a matter not to have been left within the uncontrolled unilateral discretion of Respondent.

8. In any event, because of an inability to locate a site plan for the property, a local permit was never issued by the municipality so as to enable the lawful performance of the contemplated fence and gate work. Nevertheless, Respondent had elected to proceed with the fabrication and to otherwise obtain all of the fencing, gates and automatic operator materials to be ultimately utilized in performing the contractually specified work. When the permit process seemed not to be moving forward, Respondent at some point in time, very shortly after Complainant’s second and last payment check had been tendered, determined that physical delivery of fencing

materials and gate openers for both residences would be made to Complainant’s home. Such delivery was apparently made in two phases, with the first being the fencing panels and the gates, and the second delivery being the operators, controllers and call boxes.

9. The place to which Respondent made both deliveries was to the home address of Complainant, a jobsite where Respondent knew or reasonably should have known Complainant was no longer occupying the premises due to flooding damage to the residential structure. In point of fact Complainant never resumed her occupancy after having been forced to move out to enable necessary remediation measures to be undertaken and completed. By the time of the administrative hearing and rehearing in this matter, the residence had been sold by Complainant.

10. The materials delivered by Respondent to the jobsite were never received by Complainant who remained unaware for a much prolonged time period of either Respondent’s decision to deliver or the actual delivery of the fencing and gate materials.

11. The above-described delivery by Respondent of certain materials ultimately needed for the contemplated fence and gate construction was never requested, authorized or subsequently ratified by Complainant. Further, Respondent shown not to have appropriately notified Complainant either of its intention to deliver such materials or of its actual delivery of same either before or after the date of the purported delivery. It is found and determined that Respondent’s unilateral and uncommunicated decision to deliver and the actual attempted delivery of the materials to Complainant by leaving same on the uninhabited jobsite was unreasonable under all the circumstances.

12. The fencing materials purportedly delivered as well as the gate operators and the controllers were not shown to have been custom fabricated or specially ordered

for use only by Complainant on the identified properties. On the contrary, the purportedly delivered or prematurely delivered items appear to have been of a nature that would have enabled their use by Respondent on other projects.

13. No receipts or other records were produced that could tend to establish the quantity or the cost of the materials left on the premises. It is found and determined that, under all the circumstances, Respondent did not effectively shift the risk of loss of or damage to the materials to the intended recipient. More realistically, any such risk of loss remained with the Respondent who had unilaterally elected to prematurely fabricate and obtain all materials, as well as to deliver same, prior to having secured a proper building permit. The value of the materials attempted to be delivered into Complainant’s possession appeared to be not less than $10,000.00 nor more than $15,000.00. In any event, the $17,000.00, representing combined amounts of payments transmitted by Complainant to Respondent, was quite a bit more than the value of the materials.

14. Since no valid permit had been obtained by or on behalf of Complainant to properly enable the contemplated construction, no finding of any abandonment, refusal to perform after submitting a bid or of any failure to complete the project for the agreed price would be supportable. However, the taking of a substantial amount of monies without assuring the receipt by its customer of any tangible benefits is found and determined to constitute a wrongful (but not a fraudulent) act, resulting in financial detriment to Complainant within the meaning of one of the provisions of the State’s contracting laws charged herein as having been violated by Respondent.

15. Although it is not a proper function of either the Office of Administrative Hearings or the Registrar of Contractors to adjudicate and award money damages which must be recovered, if at all, through pursuit of a civil court action, the Registrar is empowered by statute to impose reasonable conditions which may serve to reduce or

eliminate any otherwise appropriate disciplinary penalties for proven violations of the State’s contracting laws. Whenever the performance of corrective or remedial measures on a jobsite is no longer warranted or possible, the inclusion of a condition in the nature of restitution, total or partial, is fully appropriate and equitably justified. Such authorization to provide for restitution from a contractor to a prevailing party in an administrative action has been legally upheld in Sunpower of Arizona v. Arizona State Registrar of Contractors, 166 Ariz. 437, 803 P.2d 430 (1990), and subsequently was expressly confirmed by the statutory enactment of A.R.S. §32-1156.01. In this way, a Complainant in an administrative action who has sustained the burden of proving contracting law violations does not have to await the outcome of protracted civil litigation in order to recover at least a portion of a demonstrated loss and, of equal or perhaps greater significance, a licensed contractor/Respondent is given the means to control, to some extent, the severity of any disciplinary penalty.

16. Complainant in this case has not received the benefit of her contractual bargain to any extent. On the contrary, the evidence of record demonstrated that she has not received any tangible benefits from Respondent for the monies paid. There was no mutually concluded agreement for Complainant to accept the value of ultimately needed materials, even if successfully delivered, to be applied against the total of the advance payments made to Respondent. In this case, the parties’ contract was for the “installation” of fencing and automatic gate, and not for the value of necessary materials.

17. Irrespective of the fact that the materials were of a value less than the $17,000.00 amount paid by Complainant to Respondent, the Complainant never received either the materials or the permit that she was relying upon Respondent to obtain on her behalf. Even if reduced by possible set-offs or counterclaims relating to possibly justifiable delivery charges, to potentially reasonable storage charges and/or to time spent in the ultimately unsuccessful pursuit of obtaining a proper permit, no less

than $15,000.00 should be returned to Complainant by way of partial restitution. The parties are left free to seek and obtain an award of a greater or lesser monetary sum as part of their pending civil litigation.

18. Notice is taken of the Registrar’s license files which reveal that Respondent has compiled a very good prior record as a contractor in this State. This mitigating circumstance should prompt the Registrar to decline to impose any additional disciplinary penalties against Respondent other than a provisional license suspension conditioned upon the payment by Respondent to Complainant of the amount set forth in the preceding Finding of Fact.

CONCLUSIONS OF LAW

1. The evidence of record supports a determination that Respondent has committed a wrongful (but not fraudulent) act resulting in substantial detriment to Complainant in violation of the provisions of A.R.S. §32- 1154(A)(7). However, no violations by Respondent of A.R.S.§32-1154(A)(1) or (9) were sufficiently proven hereunder.

RECOMMENDED ORDER ON REHEARING

In view of the foregoing, it is recommended on rehearing, commencing on the effective date of the Registrar’s Order on Rehearing that Respondent’s Class B-02 license be suspended until the Registrar receives written proof that Respondent has paid or tendered the sum of $15,000.00 to Complainant, as set forth in Finding of Fact Number 17.

It is further recommended that if proof is filed with the Registrar on or before this Order’s effective date that Respondent has paid or tendered to Complainant the above-

specified monetary amount, then no license suspension shall be imposed, but instead that the entire Citation and Complaint in Case Number 06-1908 shall be closed.

The Registrar’s Order on Rehearing shall constitute a final administrative decision reviewable pursuant to the provisions of A.R.S. §12- 901.

In the event of certification of the Administrative Law Judge Decision by the Director of the Office of Administrative Hearings, the effective date of the Order will be forty (40) days from the date of that certification.

Dated: May 9, 2007. OFFICE OF ADMINISTRATIVE HEARINGS

___________________________________ Robert I. Worth Administrative Law Judge

Original transmitted on _____________________

by: _____________________________ , to:

Fidelis V. Garcia, Director Registrar of Contractors Legal Department 800 West Washington Street (6th Floor) Phoenix, AZ 85007

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