ALJDEC decisions subject to certification as final

06F-2375-ROC · Registrar of Contractors · 2007-01-24

STATE OF ARIZONA IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: January 24, 2006 APPEARANCES: Complainant : Troy Nelson, Qualifying Party, appeared for Alluring Homes and Design, L.L.C. In addition to Mr. Nelson, Registrar of Contractors Inspector Bob Davies testified. Respondent : Ben Schern, Qualifying Party, represented Regency Cabinet Company. ADMINISTRATIVE LAW JUDGE: Gary B. Strickland _____________________________________________________________________ A Hearing was convened to determine whether Respondent Regency Cabinet Company violated state law as has been alleged by Complainant Alluring Homes and Design, L.L.C. and as cited by the Arizona Registrar of Contractors (hereinafter also, “the ROC”). Evidence and testimony were presented. Respondent Regency Cabinet Company holds a Class K-60 (Dual Finish Carpentry)[1] license issued by the Registrar of Contractors. Complainant alleges that Respondent performed cabinetry construction and installation on a project whereat Complainant operated as General Contractor, but performed incompletely and in an unworkmanlike manner. Based upon an examination of the entire record,[2] the following Findings of Fact are made, Conclusions of Law rendered, and DECISION AND RECOMMENDED ORDER issued: FINDINGS OF FACT 1. Respondent Regency Cabinet Company’s license (No. 197950, Class C-30 – Residential Finish Carpentry) was initially issued on July 21, 2004, “canceled” on June 12, 2006. Thereafter, on December 4, 2006, the ROC issued Lic. No. 227458 (Class K-60) to Respondent. The C-30 license was in active status at the time that the parties’ contract was created and the work was performed that led to the present Complaint. 2. Benjamin Edward Schern is the Qualifying Party identified on the Regency Cabinet Company (hereinafter also, “the Contractor” or “Regency Cabinet ”) license. 3. Complainant Alluring Homes and Design, L.L.C. (hereinafter also, “Alluring Homes”) is an Arizona Corporation doing business in Maricopa County, Arizona. The company performs General Residential Contracting under ROC Lic. No. 187063. 4. The project at issue involved cabinetry installation on a remodeling job at property situated in Phoenix, Arizona. The work was performed on Arizona property, the verbal contract under which the construction was performed was executed in Arizona, and the Contractor is licensed by the ROC. As such, the acts and omissions alleged in the Alluring Homes Complaint fall within the requirements of Title 32, Chapter 10, Article 3. 5. Complainant Alluring Homes entered into an oral agreement with Regency Cabinet on or about April 6, 2006 by which it was agreed that Regency Cabinet would perform subcontracting carpentry work at the “Wilshire Project” for $5,200.00. 6. Alluring Homes paid $3,000.00 to Regency Cabinet on April 6, 2006 in anticipation of performance.[3] The payment was made as acceptance of Regency Cabinet’s offer to perform on the project. 7. Having become disconcerted over the quality of Regency Cabinet’’s performance on aspects of the cabinet construction and installation, Complainant Alluring Homes filed a Complaint before the Registrar of Contractors on or about May 19, 2006.[4] The Complaint alleged workmanship deficiency, incomplete performance, and unauthorized deviation from specifications. 8. An inspection of the site was conducted by ROC Inspector Bob Davies on June 2, 2006 with Mr. Nelson of Alluring Homes present. Mr. Schern of Regency Cabinet had been provided written notice of the inspection but chose not to attend. 9. Based upon his observations made at the June 2, 2006 inspection and upon his discussions had with Mr. Nelson, Inspector Davies issued a “Corrective Work Order” on June 5, 2006 directing Regency Cabinet to make numerous corrections and repairs to and of the project.[5] 10. Thereafter, because Regency Cabinet refused to perform the corrective work, Alluring Homes requested that a CITATION AND COMPLAINT be issued and that a Hearing be convened. 11. An ROC CITATION AND COMPLAINT was issued on August 11, 2006 citing Regency Cabinet Company for possible violation of A.R.S. § 32- 1154(A)(2), (3), (7), and (23).[6] 12. Regency Cabinet filed an A.R.S. § 32-1155 ANSWER to the CITATION AND COMPLAINT on August 18, 2006 moving to dismiss the Complaint asserting that Alluring Homes had no contractual rights to exercise against it.[7] 13. Thereafter, because Mr. Nelson informed that resolution had not been accomplished, the ROC issued a NOTICE HEARING on December 14, 2006 and the Hearing was conducted pursuant thereto. 14. At the Hearing, Inspector Davies further testified from his vantage of having conducted a Prehearing Inspection of the site on January 23, 2006. He related that most of the corrective work has been accomplished by Mr. Nelson. He also related that Mr. Schern had refused to attend the Prehearing Inspection insisting that his company had no contractual relationship with Alluring Homes for the “Wilshire Project.” 15. The parties stipulated that the corrective work directed by the Inspector in his “Corrective Work Order” was necessitated by unworkmanlike performance. They further stipulate that any corrective work done on the project was accomplished by Alluring Homes. 16. The parties stipulate that Regency Cabinet provided Alluring Homes with a $7,284. quote for cabinetry work on the project on March 1, 2006. They further acknowledge that the quote was reduced on April 6, 2006 variously to $5,200.00 (Complainant) and $3,000.00 (Respondent). 17. Mr. Nelson wrote an additional check for the cabinetry on May 9, 2006 in the amount of $2,200.00. The check was made out to “Dane Frandsen.” It is Mr. Nelson’s contention that he cut the check to “Dane Frandsen” at the direction of Mr. Schern who was then working a project in Salt Lake City. On the check[8] memo is noted “Wilshire Cabinets.” On the previous check for cabinetry on the project, written to “Benjamin Schern” on April 6, 2006, is noted “Wilshire Cab” (Bal. $2,200.00).[9] 18. “Dane Frandsen” is a former employee of Regency Cabinet. Mr. Frandsen holds Lic. No. 224949 (Class C-30 issued on October 4, 2006). Evidence was not presented indicative of when Mr. Frandsen’s employment status with Regency Cabinet was terminated. 19. Mr. Nelson testified that, not knowing Frandsen but believing that he had been sent to the project by Schern, he assumed that Frandsen was in the employ of Regency Cabinet when he commenced working the project. Mr. Schern asserts that he had referred Frandsen to Nelson as a third-party Contractor to perform on the project. Mr. Nelson is more credible on the issue; his assumption was reasonable and probably correct. Moreover, considering that Frandsen had not been issued Lic. No. 224949 until October 4, 2006, well after the work commenced in early May 2006, Schern could not have sent Frandsen to the project in any capacity other than as employee of Regency Cabinet. 20. Mr. Nelson testified that he seeks $1,374.96 in restitution for the failure of Regency Cabinet to perform in a workmanlike manner. The damages are broken down to $183. for materials to perform corrective work, 21.5 hours labor (Mr. Nelson himself provided the labor) at $45.00 per hour, and $232.00 for materials to correct and repair Item #8 on page 2 of the “Corrective Work Order.” The correct figure sought is $1,382.50. 21. Mr. Nelson’s testimony regarding his incurred damages was credible and reasonable given the scope of deficiencies. 22. Mr. Schern continues to believe that his company has no legal liability on the project since he did not perform the installation. Mr. Schern is wrong on the issue. 23. The sufficiency and reliability of the evidence persuades that Regency Cabinet bid on the project, the bid eventually reduced to $5,200.00; that $3,000.00 was paid by Alluring Homes on the offer thereby manifesting acceptance of the bid; that Regency Cabinet worked the project by and through its supply of the cabinets and the installation by its agent Frandsen; that the work performed was incomplete and less-than-workmanlike; that Regency Cabinet has refused, and continues to refuse, to fulfill its contractual and licensing obligations under the “Corrective Work Order;” and, that Alluring Homes has incurred reasonable expense through its effort to correct the deficiencies. 24. A “substantial injury” under A.R.S. § 32-1154(A)(7) is reasonably construed as one that is real and identifiable.[10] Alluring Homes has incurred a real and identifiable injury by Regency Cabinet’s acts and omissions on the project. 25. Since Regency Cabinet has obstinately refused to correct deficiencies, a restitutionary remedy is appropriate. The damages sought by Alluring Homes are restitutionary in character.[11] Nelson paid $5,200.00 to Regency Cabinet to have the cabinetry constructed and installed; he did not receive the full benefit of his bargain (incomplete and faulty construction) while Regency Cabinet has been enriched by the payment. Mr. Nelson/Alluring Homes, in turn, has had to assume responsibility for costs resultant from and associated with Regency Cabinet’s failures on the project. Restitution is in order. 26. A restitutionary sum of $1,382.50., while probably not adequate to cover the loss, has been demonstrated.

APPLICABLE LAW The CITATION AND COMPLAINT issued by the Registrar of Contractors charged Respondent Regency Cabinet Company with possible violations of A.R.S. § 32-1154(A)(3) (and A.A.C. R4-9-108, the “workmanship rule”), (7), and (23). Those statutory sections require that a holder of a license or a person listed on a license not commit the following:

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.

23. Failure to take appropriate 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 a written directive from the registrar. The written directive shall set forth the time within which the contractor is to complete the remedial action. The time permitted for compliance shall not be less than fifteen days from the date of issuance of the directive. A license shall not be revoked or suspended nor shall any other penalty be imposed for a violation of this paragraph until after a hearing has been held. . . . A.A.C. R4-9-108 is the rule violation charged under A.R.S. § 32- 1154(A)(3). The rule requires that all construction work be done in a professional and workmanlike manner and in accordance with applicable building codes and professional industry standards. CONCLUSIONS OF LAW 1. The Registrar of Contractors has jurisdiction over Complaint No. 06-2375 under the authority of A.R.S. § 32-1101, et seq., a section that enables the Registrar to impose disciplinary sanctions against licensees for the violations noted at A.R.S. § 32-1154(A). Regency Cabinet Company Corp is a licensee. 2. The burden of persuasion generally at an administrative Hearing falls to the party asserting a claim, right or entitlement, or an Agency seeking to impose a penalty.[12] Further, the standard of proof is that of the “preponderance of the evidence.”[13] 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.”[14] The evidence taken as a whole must convince the decision maker that the party who bears the overall burden of persuasion, in this case Alluring Homes and Design, L.L.C., is more probably correct on the issue(s) in dispute. 3. Observing these standards, Complainant Alluring Homes has persuaded, by a preponderance of the evidence, that Respondent Regency Cabinet has violated the cited statutory and regulatory provisions by failing to perform a workmanlike cabinetry construction and installation, according to specifications, and to make corrections when directed so to do by the Registrar’s Inspector. Alluring Homes has further persuaded that the failure was wrongful and caused it substantial injury. 4. By a preponderance of all of the evidence, Complainant has persuaded that, in the cabinetry construction and installation on the “Wilshire Project,” and by its failure to perform correctively when directed so to do by the Registrar’s Inspector, Regency Cabinet Company violated A.R.S. § 32-1154(A)(2), (3), (7), and (23) as charged in the CITATION AND COMPLAINT. 5. An examination of Regency Cabinet Company’s license record reveals that no other Complaints have been filed against the license.”[15] Given the short period of licensure, license history affords neither aggravating nor mitigating factors for assessment. RECOMMENDED ORDER In view of the foregoing, IT IS RECOMMENDED that the Registrar of Contractors suspend Lic. No. 197950 (current active Lic. No. 227458) on the effective date of the Registrar’s Order unless the parties jointly provide written proof before the effective date of that Order that Regency Cabinet Company Corp has paid $1,382.50. to Alluring Homes and Design, L.L.C. In the event of the certification of this Administrative Law Judge Decision by the Director of the Office of Administrative Hearings, the effective date of the Order shall fall forty days from the date of that certification.

Done this 24th day of January 2007.

_____________________________________ Gary B. Strickland Administrative Law Judge

Original transmitted by mail this 25th day of January 2007 to:

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

By ___________________________

----------------------- [1] As will be seen below, Lic. No. 197950 was canceled in October 2006. [2] The record consists of those documents found within the Agency’s case file, the contents of which the Administrative Law Judge has accorded Administrative notice, the exhibits offered by the parties, respectively, and the digital record of the proceedings under A.A.C. R2-19-121. Complainant offered one exhibit, Respondent two exhibits, each received.

[3] Exhibit B.

[4] Within the Agency Hearing file.

[5] Within the Agency Hearing file.

[6] Within the Agency Hearing file.

[7] Within the Agency Hearing file.

[8] Exhibit B.

[9] Exhibit B.

[10] Meaning, a material injury, one that is not illusory. See ”substantial”: WEBSTER’S THIRD NEW INTERNATIONAL DICTIONARY 2280 (2002).

[11] § 32-1156.01. Restitution

After a hearing pursuant to this article, an administrative law judge may recommend that a licensee provide restitution to any person who is injured or whose property is damaged by an action of the licensee.

See Bentivegna v. Powers Steel & Wire Prods., Inc., 206 Ariz. 581, 585; 81 P.3d 1040, 1044 App. 2004) (“[T]he sole issue in a proceeding before the ROC is whether a license should be suspended or revoked, and, if so, what conditions must be fulfilled before it is reinstated. See A.R.S. §§ 32- 1154, 1155. Although the ROC may order restitution as a condition of license reinstatement, it cannot issue an enforceable order or judgment for money damages against a contractor. See Sunpower of Ariz. v. Ariz. State Registrar of Contractors, 166 Ariz. 437, 441, 803 P.2d 430, 434 (App. 1990) (ROC may order payment of restitution as condition of license reinstatement); J.W. Hancock Enters. v. Arizona State Registrar of Contractors, 142 Ariz. 400, 406, 690 P.2d 119, 125 (App. 1984) (finding that ‘the Registrar's power is limited to suspending or revoking a contractor's license, or attaching conditions to the license. Money damages may not be awarded.’). If a contractor subject to an ROC restitution order were to choose not to have his license reinstated, the restitution order would be ineffective. To fully protect a plaintiff's rights, he must be allowed to seek money damages in the courts in addition to any remedies available through the ROC complaint procedure.”)

“Restitution” is an ambiguous term. But, the concept generally refers to a compensation for injury done. See JOHN D. CALAMARI & JOSEPH M. PERILLO, THE LAW OF CONTRACTS § 9-23, at 376 (3d ed. 1987).

See also Murdock-Bryant Constr. v. Pearson, 146 Ariz. 48, 52; 703 P.2d 1197, 1201 (1985) (“Restitution began as an ancient remedy to enforce contractual rights which could not be enforced in common law courts due to lack of formality of the contract. D. Dobbs, Remedies § 4.2 at 233 (1973). Various forms of action evolved to permit recovery of goods or money on contracts implied in fact -- that is, those which the law implied from the conduct of the party rather than from any explicit words. Id. at 234.”)

See further, Restatement of the Law, Restitution § 1 cmt a. (1937):

a. A person is enriched if he has received a benefit (see Comment b). A person is unjustly enriched if the retention of the benefit would be unjust (see Comment c). A person obtains restitution when he is restored to the position he formerly occupied either by the return of something which he formerly had or by the receipt of its equivalent in money. Ordinarily, the measure of restitution is the amount of enrichment received (see Comment d), but as stated in Comment e, if the loss suffered differs from the amount of benefit received, the measure of restitution may be more or less than the loss suffered or more or less than the enrichment. (Emphasis added.)

[12] See Ariz. Admin. Code R2-19-119(B).

[13] Culpepper v. Arizona Board of Nursing, 187 Ariz. 431, 930 P.2d 508 (App. 1997); See also Ariz. Admin. Code R2-19-119(A).

[14] In re Arnold and Baker Farms, 177 B.R. 648, 654 (9th Cir. BAP (Ariz.) 1994). See also J. LIVERMORE, R. BARTELS, & A. HAMEROFF, LAW OF EVIDENCE ( 301.1(4th ed. 2000) (One party bears the overall burden of persuasion on each fact material to the party’s claims and defenses. Further, the party with the burden of persuasion on a particular fact is required to satisfy the burden of production of enough qualitative evidence sufficient to support a finding of the existence of the fact, following a reasonable person standard.)

[15] See A.A.C. R4-9-117. Prior Record

In any disciplinary proceeding conducted by the Registrar, the licensee's entire license file including the record of prior citations and decisions may be considered by the Registrar in making a decision and order in the case.

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