ALJDEC decisions subject to certification as final

06F-2510-ROC · Registrar of Contractors · 2007-01-11

STATE OF ARIZONA IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: January 4, 2007.

APPEARANCES: >The Complainants appeared in their own behalf. >The Respondent appeared through Kent Vernon Brady, its qualifying party and the managing member of the LLC entity.

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. Respondent formulated and submitted a written proposal for substantial remodeling work on Complainant’s existing residence. The primary scope of work was to encompass the construction of an addition of approximately 660 square feet, a 3-foot extension of the existing garage and a new covered patio. Additionally, a new roof line was to be constructed over both the existing structure and the remodeled addition.

2. The aforesaid proposal was duly accepted by Complainants, thereby ripening into a contract. The stated cost price for the contemplated construction work was

$118,102.00, plus the cost for a building permit from the City of Phoenix. The contract language, authored by Respondent’s qualifying party and principal operating individual, Kent Vernon Brady (herein called “Mr. Brady”), also expressly provided an estimated time line for the design phase, the permit phase and the construction phase. With respect to the last phase, the contract specified that the “Construction will begin in most case (sic) within 5 days of permit issuance…” and further that “Construction will take approximately 3-4 months to complete.”

3. Pursuant to the payment terms of the parties’ agreement, Complainants paid to Respondent an advance deposit amount of $11,810.00, representing 10% of the contract price.[1] Complainants subsequently paid Respondent another $24,192.00 after the permit was issued, representing both 20% of the contract price ($23,620.00) plus the $572.00 cost of the permit.

4. Construction by Respondent did commence on the jobsite in early January, 2006, within a week after permit issuance. Following requests by Respondent as the project moved forward, albeit somewhat sporadically, Complainants transmitted further payments to Respondent. The first such payment in late March, 2006 was in the amount of $20,491.00, which sum specifically included an amount of $7,500.00 to serve as an advance deposit for the kitchen cabinetry. Although the Complainants were extremely unhappy with the Respondent’s ongoing progress on the project and with their experienced difficulty in communicating with Mr. Brady, individually, as Respondent’s principal operating individual, they agreed to and did transmit a further requested payment in the sum of $14,884.00 in April, 2006. Consequently, the total of all payments made under the contract had become the aggregate amount of $71,377.00, leaving an unpaid contract balance (after adding the permit cost to the bid price) of slightly over $47,000.00.

5. Complainants had vacated the jobsite premises in early March, 2006 to allow the removal of the roof and to enable the continued performance by Respondent of the contemplated work without any occupants living in the residence. They did return to their home in mid-May, 2006. At that time, which was over four months after the start of construction, the project was significantly incomplete. No HVAC unit for cooling and heating the addition or the necessary ductwork for such system was installed or even ordered by Respondent, and no kitchen cabinetry had been delivered or installed. In point of fact, Respondent had not submitted a kitchen design plan for approval by the homeowners, nor had Respondent presented any choice of cabinet materials for selection by Complainants. Various other aspects of the contract work were, at best, only partially accomplished, and most importantly, the addition was not made habitable.

6. Several interim inspections by the local municipal building authority both prior to and after the mid-May time period had resulted in the issuance of red tags based upon reported violations requiring either remedial measures or written certifications by appropriate professionals. These identified problems were not promptly cleared or resolved by Respondent, although Complainants subsequently caused the satisfaction of the red tagged items at their own expense through the use of other contractors.

7. With respect to a portion of the identified problems, it was not disputed that the as-built structure did not conform to the plans filed with the municipality. However, the primary changes were with the roof appearance, and Complainants were shown to have been aware or reasonably aware of such discrepancies. It must be held that the evidence presented at the hearing did not sufficiently demonstrate that the plan deviations were without the Complainant’s knowledge, consent or ratification. In any event, appropriate amendments to the filed plans should have been prepared by Respondent and filed with the municipality.

8. In mid-May, 2006, coinciding with the return to the home by Complainants after over two months away from the premises and, as previously stated, over four

months after the start of construction, and following numerous unsuccessful attempts by Complainants to contact and speak with Mr. Brady, individually, one of the co-Complainants admittedly declined to allow four workmen to remain on the premises unless or until she was contacted by Brady to obtain a specific design plan for the kitchen as well as a definitive work schedule leading to the final completion of the remodeling project. When Mr. Brady did attend a meeting with Complainants several days later, the kitchen design plan submitted had erroneously omitted any stove feature. Complainants extended a further opportunity for Respondent to submit an acceptable work completion schedule, advising that they would file a formal complaint with the Registrar unless such schedule was delivered by a stated time deadline. When no timely responsive communication was received, Complainants filed the instant complaint on June 6, 2006.

9. Following a jobsite visit on July 5, 2006, approximately six months after the start of the remodeling construction, the Registrar’s assigned Inspector issued a written Corrective Work Order to Respondent that essentially confirmed the allegations of the filed complaint with respect to numerous identified areas or aspects of the contracted work that remained incomplete. The issued directive dated July 12, 2006, required Respondent to appropriately complete the project within a stated time frame of 15 days. However, Respondent did not and has not accomplished, or even commenced, performance of the specified remedial work.

10. Even prior to the Inspector’s jobsite visit, about one month after having filed their complaint, the Complainants understandably and prudently had begun to seek out other contractors to complete their remodeling project. Respondent admittedly had not even reached the stage of concluding any acceptance of a bid from a specialty mechanical subcontractor for providing and installing a suitable cooling unit for the incomplete remodeled addition, and the addition’s unfinished condition was shown to be creating a substantial adverse impact upon the efficiency of the previously existing

equipment serving the rest of the dwelling. No interior ductwork to serve any such new unit was ever designed or installed.

11. Arrangements were made by Complainants with a selected specialty mechanical contractor for the installation of air-conditioning for the remodeled addition This course of conduct, aimed at obtaining the full use, enjoyment and habitability of their entire home, as well as by way of satisfying their applicable legal duty of mitigating their ultimate damages, cannot be held to have been unwarranted under all the circumstances. Moreover, this first actual resort to other contractors by Complainants was more than six months after the start of Respondent’s construction efforts and the entire project, which not only appeared from the credible testimonial and photographic evidence to have been not more than 50% finished but also was shown likely to remain short of completion for another one or two months at the very minimum.

12. It also appeared that roof leaks traceable to Respondent’s work on the reconfigured roof over the home were subsequently experienced at three separate household locations, all of which had to be rectified by Complainants on their own.

13. The testimony of the respective parties that was presented at the hearing was sharply conflicting with respect to the events, dates and contents of communications between the parties. It is found and determined from the more credible evidence that, aside from the single admitted instance of turning away workman in an effort to prompt some form of direct communication from Mr. Brady to more fully discuss progress or lack of adequate progress of the remodeling work and to have Respondent commit to a fixed completion schedule, Complainants had not neither effectively denied access to Respondent prior to or after such event nor had they communicated any intention to so deny access. Any assumption on the part of Respondent to the contrary based upon the aforesaid single instance is found to be either unsupportable or disingenuous.

14. Little or no merit is found to Respondent’s contention that it was legally unable to comply with the issued Corrective Work Order due to the imposition on the date of the directive of a license suspension by operation of law for lack of a proper bond that was lifted about two weeks later, almost coinciding with the expiration of the 15-day performance period. The above-described type of suspension is capable of being removed at any time by the unilateral act of the license holder. Respondent made no effort to obtain a reasonable time extension for compliance with the written directive even after that bond suspension was lifted.

15. The parties appear to be presently involved in civil litigation relating to their respective claims and defenses. With respect to liquidating actual or potential monetary damages arising out of the parties’ construction arrangements and performances, the civil tribunal is the more appropriate forum in which to seek and obtain such determinations.

16. A licensed contractor in this State should not be and is not given an endless succession of opportunities or time periods without limits, even in the absence of any express contractual time duration provision, to undertake and to correctly accomplish construction work. Reasonable time limits will apply, but at some point in time, a property owner will become justified in resorting to resort to other contractors for completion work without being held to have waived any administrative remedies or contractual entitlements.

17. The prolonged period of inaction, unresponsive action or unduly slow action on the part of or attributable to Respondent in accomplishing completion or near-completion of the contracted project may properly be and is viewed as at least a constructive abandonment of its obligations to Complainants and also constituted the commission of a wrongful (but not fraudulent) act on the part of Respondent resulting in substantial detriment to Complainant within the meaning of another section of the State’s contracting laws charged herein to have been violated by Respondent.

Additionally, the failure to promptly address and to resolve problems enumerated in red tags by the local building authority is further found to be a deviation from local building code provisions, thereby also reflecting adversely upon Respondent’s workmanship.

18. The ongoing course of conduct on the part of or attributable to Respondent, especially its continuing unresponsiveness to reasonable requests by Complainants for definitive schedules, design plans, more realistic progress, and prompt completion actions, considered in combination, are found and determined to reflect a disregard of the comforts and entitlements of its customer/homeowners as well as of its duties and obligations as a licensed contractor in this State.

19. It must be held that Complainants in this case have not received the benefit of their contractual bargain with Respondent. On the contrary, a credible showing was made that the cost for Complainants to complete certain work left unfinished by Respondent has already equaled or significantly exceeded the unpaid balance remaining on the parties’ contractual agreement. The absence of any receipt of benefit is most certainly demonstrated with respect to the Respondent’s failure to provide and install any kitchen cabinetry, one of the specific items of complaint, despite having asked for and obtained a substantial advance deposit payment long before the Corrective Work Order had been issued. Even with some adjustment for possibly upgraded construction elections by Complainants or for the inclusion of items that might not properly have fallen within the contractual scope of Respondent’s proposal, the nature and amount of the still-unfinished work on the jobsite will likely result in the incurring of more expenses above and beyond the total amount of the originally contracted work.

20. 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.

21. Under the facts and circumstances of this case, it is determined that a reasonable condition to be included in the Registrar’s disciplinary Order to be entered in this matter should consist of the making of partial restitution of $22,384.00, consisting of a sum equal to the $14,884.00 paid by Complainants to Respondent as and for their last transmitted payment plus the amount of $7,500.00 paid as part of the preceding payment representing an advance deposit for kitchen cabinetry that was never delivered to and installed on the jobsite. Both parties are left free to seek and obtain an upward or downward adjustment of the aforesaid monetary condition as part of their pending civil litigation.

22. Notice is taken of the Registrar’s license records which reveal that Respondent’s Class KB-02 license once again has been and still remains suspended by operation of law for lack of a proper bond since September 22, 2006. The presently suspended license status of Respondent does not preclude the conducting of these

disciplinary proceedings on behalf of the Registrar of Contractors nor the pursuit by Complainants of their administrative remedies. Moreover, such suspended status of the license must be considered when formulating an appropriate Order in this action. Since little or no motivation would exist for any contractor to undertake and complete any remedial measures or to pay any monies so as to avoid the imposition of a suspension of an already- suspended license, the non-compliance by Respondent with any condition deemed proper for inclusion in the Order to be entered hereunder should result in the revocation of Respondent’s license.

CONCLUSIONS OF LAW

1. The totality of the evidence of record adequately established that Respondent has violated the provisions of A.R.S.§32-1154(A)(1), (2), (7), (23) and (3); namely, Rule R4-9-108, A.A.C., as charged in the within Citation.

2. Pursuant to its authority to impose discipline against the license of a contractor for proven violations of the State’s contracting laws, the Registrar may properly include reasonable conditions that, if complied with, would serve to lessen or eliminate any otherwise appropriate disciplinary penalties. In this case, the inclusion of a condition in the nature of partial restitution in the total amount of $22,384.00 is determined to be appropriate and fully warranted under all the circumstances.

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 Order entered by the Registrar in this matter.

It is further recommended if written proof is filed with the Registrar on or before this Order’s effective date that Respondent has paid or tendered the amount of

$22,384.00 to Complainants, as set forth in Finding of Fact Number 21 and Conclusion of Law Number 2, then and in that event, no license revocation shall be imposed.

It is further recommended by way of an alternative penalty in lieu of revocation, in the event that the above-provided payment condition is timely and fully complied with by Respondent, that Respondent’s Class KB-02 license shall be placed on disciplinary probation for a period of 45 days. This alternative penalty shall commence, if at all, on the effective date of the Registrar’s Order.

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: January 12, 2007. OFFICE OF ADMINISTRATIVE HEARINGS

____________________________________ Robert I. Worth Administrative Law Judge

Original transmitted on _____________________

by: _____________________________ , to:

Fidelis V. Garcia, Acting Director Registrar of Contractors Legal Department 800 West Washington Street (6th Floor) Phoenix, AZ 85007 ----------------------- [1] Some documents in the case file indicated that the initial down payment was $10.00 less, or $11,800.00, but the sworn testimony at the hearing tended to support the correctness of the slightly higher amount.

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