ALJDEC decisions subject to certification as final

07F-2657-ROC · Registrar of Contractors · 2008-09-09

STATE OF ARIZONA IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: September 4, 2008.

APPEARANCES: >The Complainant was represented by her attorney, Jerry Steele, Esq. >The corporate Respondent appeared through its President and qualifying party, Michael Sarvi.

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. Pursuant to a written proposal from Respondent, duly accepted by Complainant and thereby ripening into a contract, Respondent commenced construction work inside Complainant’s home consisting of the installation of selected tile floor covering materials throughout most of the dwelling. The agreed arrangements

were for Complainant to select the tile that Respondent would obtain from his supplier, and Complaint was to pay Respondent in advance for the full cost of all tile materials plus a further sum equal to one-half of the quoted installation costs.

2. The applicable prices on the parties’ initial agreement were $7,110.48 for the selected tile materials and $11,977.75 for installation charges, combining to result in a total cost to Complainant of $19,088.23. Complainant was shown to have transmitted advance payments to Respondent through two separate checks in the respective amounts of $7,110.48 (for the full tile cost) and $6,050.00 (for roughly $120.00 more than one-half of the installation charges), totaling the sum of $13,160.48.

3. Very shortly after the start of the installation work by Respondent, the individual workman performing such installation for Respondent, under perhaps questionable employment arrangements, determined that the delivered tile materials were far too irregular so as to enable a professional and acceptable installation result, and reported this problem to both Respondent and to Complainant. All further work was halted and the tile materials were removed from the premises and returned.

4. The parties thereafter promptly concluded another contractual agreement contemplating the use of more costly travertine materials to be selected by Complainant and obtained by Respondent from another of its suppliers. Another written proposal was formulated by Respondent and accepted by Complainant providing for agreed cost prices of $14,988.95 for the travertine materials plus $13,264.25 for installation, in the combined total amount of $28,253.20. At this time, Complainant was asked to and did make a further advance payment to Respondent that was shown to be equal to the cost difference between the selected travertine and the first tile that was not used. That further payment was shown to have been transmitted to Respondent through Complainant’s Discover Card credit account and was in the total sum of $7,878.47

($14,988.95 less the previously paid $7,110.48). When the credit card payment was added to the total of the prior payments by check, the overall contractual payments from Complainant to Respondent totaled $21,038.95.

5. Although the installation labor costs for the travertine materials was shown to have been $1,286.50 higher than the installation cost for the initially selected and rejected tile materials, and although the original payment terms were that Complainant was to pay one-half of such labor cost in advance, no additional billing was made by Respondent to Complainant for one-half of the difference between the differing installation costs, quite probably to await an adjustment of the final billing amount upon completion of the project. It has been noted above that the advance payment under the first tile agreement by Complainant was somewhat more than one-half of the quoted installation cost so that the necessary amount of advance deposit prior to the travertine installation would have totaled only a little over $500.00.

6. Once again, at the very start of the travertine installation work, the same workman sent by Respondent noticed an extent of irregularity in the materials so as to result in excessively irregular and non-uniform visible seams and joints. Respondent recognized the problem and caused the removal and return of all travertine materials, also making arrangements for Complainant to select another tile from the same supplier for installation in her home.

7. At all times, Respondent had determined the quantity of tile floor covering materials needed for the installation in Complainant’s residence which was credibly shown to be 2,478 square feet in size. Although the first ordered tile appeared to be for 2,679 square feet to allow for some wastage or loss during cutting and placement in the various rooms, it appeared that an ordered quantity of 2,700 square feet would be more appropriate to enable a complete installation in all designated household areas.

8. Complainant was shown to have selected another third tile material that was quoted by Respondent at a lesser overall materials cost than the travertine by approximately $2,300.00, including applicable sales taxes, based upon a 2700 square foot quantity and a 79-cent square footage lesser square footage cost differential between $4.19 and $3.40. Additionally, Respondent had also agreed that the installation costs for this third tile selection would be equal to that of the first tile selection, which would have been approximately $1,300.00 less than for the travertine installation. Although Respondent immediately had commenced jobsite work by installing the third selected tile materials, a written confirming agreement for the third tile was never presented to Complainant or otherwise signed by the parties.

9. A unilaterally prepared and unsigned proposal based upon a delivered tile quantity of 2300 square feet was belatedly communicated to Complainant after the instant administrative complaint had been filed, but that document appeared to be in the nature of an invoice purporting to support the value of the partially completed jobsite work performed by Respondent. Although the document had described the size of the third selected tile material as 20”X20”, reliable testimony tended to reveal that all such tile was 18”x18”, and that there had been a typographical error in the preparation of the invoice document. It is found and determined, based upon the credible testimonial and documentary evidence adduced at the hearing, that the applicable mutually agreed costs for the selected third tile materials and special decorative features, taxes included, for a 2700 square foot quantity would have approximated $12,700.00 plus the installation sum derived from the first tile agreement of almost $12,000.00, or a combined total overall cost price of approximately $24,700.00.

10. The testimony at the hearing was highly conflicting with respect to the events, conversations and overall dealings between the parties, especially with respect to the time period after a portion of the third tile materials had been installed. With respect to most of such conflicting testimony, little or no valid basis is found to exist for the disbelief of either party’s version.

11. Since Complainant had fully paid in advance for the more costly travertine materials that were never installed but instead returned, Complainant attempted to cause the charge to her Discover Card credit account to be reversed. When Respondent received notice of such provisional reversal and was obliged to return the previously received monies, and when the parties started to exhibit a somewhat puzzling inability to effectively communicate with one another so as to conclude specific monetary arrangements for the third tile installation, Respondent elected to instruct his workman to discontinue all further jobsite work. At the time of such work stoppage, a total of 399 individual tile pieces of an 18”x18” size (shown to allow for almost 900 square feet of installed materials) were on site but not yet installed.

12. Even prior to the parties’ payment disagreements, Respondent had for some reason decided to order only 2,300 square feet of the third tile materials, claiming to have placed the remaining 400 square feet of the same materials on hold with the supplier. Such partial order had been placed prior to any notice to Respondent of Complainant’s attempt to reverse the charged amount for the further advance payment attributable to the returned travertine materials. A reasonable inference would consequently be that, considering the 900 square feet amount of unused third tile materials left on the jobsite and not installed, not more than 1,400 square feet of the delivered 2,300 square feet of the third tile materials had been installed by Respondent in the residence, which is equal to only approximately 52% of the contemplated 2,700 square feet of materials that would have been ultimately needed for a complete installation throughout the home.

13. After the above-described work stoppage, Respondent was shown to have successfully persuaded the Discover Card personnel to honor the prior charge and payment, and Respondent ultimately received the prior payment that had represented the additional advance for the more costly travertine tile. Respondent retained the entire amount paid without promptly transmitting to Complainant the excess

representing the difference between the travertine and the third selected tile, such difference being even greater due to the ordered quantity of 2,300 square feet instead of 2,700 square feet on which the travertine advance payment was calculated. Even before Respondent had finally received the Discover Card payment, the relationship of the parties had further deteriorated to such an extent that no further jobsite work was performed, and Complainant was prompted to try to obtain the balance of the needed materials on her own and to seek out other contractors for the completion of the installation work.

14. Notwithstanding the partially completed installation of slightly over half of the needed third selected tile materials and the possession of uninstalled tile pieces that would have enabled over 85% or possibly full completion of the contemplated work started by Respondent, Complainant subsequently and very surprisingly decided not to use any of the left-over tile pieces, to have all of the partially installed tile removed, and instead to select a new upgraded and more costly tile, arranging to have it installed by another contractor throughout the residence at a total cost of somewhat more that $28,000.00 The needed 400 more square feet of matching or substantially matching tile that had not been released from the supplier, which included some portion of an excess amount customarily ordered to allow for wastage, was not sufficiently shown to have been unavailable, even through Respondent’s same supplier. Nor was it adequately demonstrated that other methods of installation with reasonably close matching material could not have been utilized within the home through the use of designs and borders in one or more relatively small household locations so as to salvage the partial installation and avoid or discourage what is found to have amounted to economic waste.

15. The work stoppage by Respondent is found to have been without adequate justification. No valid basis is found to have existed for any belief by Respondent that Complainant would not or could not make payments at the end of the project in

accordance with the parties’ agreement. The unsuccessful attempt by Complainant to have reversed her charge card payment for the returned travertine materials is not found to have been a breach or even an anticipatory breach of the contractual agreement, and a separate specific agreement for the third selected tile, lower in cost than the fully paid for travertine materials, had not yet been concluded. The obligation on the part of Complainant to transmit an advance deposit for the third selected material was not then past due and owing and would not arise until and unless such a third agreement had been presented and agreed to with respect to the stated overall materials and installation costs for the third selected tile.

16. It is held that Respondent had refused to continue and complete performance of the agreed work without legal or other justification, also resulting in its deviation or departure in a material respect from applicable contractual plans and specifications. Additionally, by leaving unfinished installation work on the jobsite in what was shown to be an unsightly and perhaps even dangerous condition, significantly interfering with the property owner’s use and enjoyment of her property, Respondent is found to have committed a wrongful (but not fraudulent) act resulting in substantial detriment to Complainant within the meaning of another contracting law provision charged hereunder as having been violated by Respondent.

17. The evidence failed to sufficiently demonstrate that the individual workman and his helpers sent to the jobsite by Respondent did not receive payments for their work. Nor was it proven that Respondent engaged in any false or misleading advertising or performed any of the partially completed installation in an unworkmanlike manner.

18. 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 further corrective or remedial measures on a jobsite by the original contractor is no longer warranted or desired, 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 otherwise appropriate disciplinary penalty.

19. In formulating a reasonable condition in the nature of partial restitution for inclusion in the Registrar’s Order, it is fully appropriate to incorporate any amount found to have represented an overpayment by Complainant to Respondent. The higher cost price for the returned travertine materials, never installed, has been retained by Respondent, and the installation work was not completed. The quantum of restitution must be calculated by considering that the partially installed tile work by Respondent represented not more than 52% of the probable total cost of the third tile installation of approximately $24,700.00, or the sum of about $12,850.00. Complainant has not received the benefits of her contractual bargain with Respondent since she has effectively paid Respondent the aggregate amount of $21,038.95, and therefore it is found and determined that the monetary sum of $8,200.00 represents an appropriate amount for a partial restitution payment condition in the Order to be entered in this case.

20. With respect to the formulated payment condition, it is further determined under all the circumstances that Respondent should be given the opportunity to pick up all of the unused tile pieces and any color- coordinated grout materials left on Complainant’s property after Respondent initiated a work stoppage. By way of a condition precedent to Respondent’s partial restitution payment obligation as part of the Registrar’s Order herein, Respondent must be allowed to gain access to the premises and given permission to take away all of the unused third selected tile materials either for use to some extent as a return credit with its supplier, if possible, or for use on other projects for other potential customers.

21. The above-described condition precedent is not intended to require Complainant to give access to Respondent or its representatives, but if access is denied or the unused tile removal is prevented, the monetary payment condition by way of partial restitution from Respondent to Complainant will not be in effect. As an alternative to granting access to Respondent for the removal of these materials, Complainant may undertake to cause delivery of all of the unused tile and related materials to Respondent’s place of business at her own expense. In all events, Respondent may elect in advance to waive any entitlement to recover the unused tile materials by executing an express written waiver, with a copy sent to Complainant, but if no such waiver is signed and transmitted, the above-provided condition precedent to the partial restitution payment shall remain in effect.

22. Nothing in this decision, including the above-calculated net amount of monetary restitution, is intended to resolve and finalize all conflicting future rights and defenses between these parties. Both parties are specifically left free to seek and obtain either a higher sum or a reduced sum by pursuing available civil remedies, asserting all damage claims, defenses, counterclaims or set-offs before a court of competent jurisdiction.

23. Notice is taken of the Registrar’s license files which reveal that Respondent has compiled an above-average prior record as a contractor in this State. Such mitigating circumstance should prompt the Registrar not to impose any additional disciplinary penalties against Respondent’s license other than a provisional license suspension conditioned upon the full and timely payment by Respondent to Complainant of the amount found to constitute a proper partial restitution sum, subject to the possible limitations set forth above.

CONCLUSIONS OF LAW

1. The evidence of record adequately established that Respondent has violated the provisions of A.R.S.§32-1154(A)(1), (2) and (7). However, no violations by Respondent of the provisions set forth in A.R.S. § 32- 1154(A)(11), (16) or (3); namely, Rule R4-9-108, A.A.C. were adequately proven hereunder.

RECOMMENDED ORDER

In view of the foregoing, it is recommended commencing on the effective date of the Registrar’s Order that Respondent’s Class C-08 and Class C-48 licenses be suspended until written proof is filed with the Registrar confirming that Respondent has paid or tendered to Complainant the amount of $8,200.00.

It is further recommended that if (a) the Registrar receives written proof that Respondent has complied with the above payment condition on or before this Order’s effective date, or (b) provided that Respondent has not expressly in writing, with notice to Complainant, waived any entitlement to receive the unused tile materials still at Complainant’s home, Respondent has either been denied access to Complainant’s property so as to enable removal of such unused tile materials or has not received

delivery of such materials from Complainant, then no license suspension shall be imposed and the entire Citations and Complaints in Cases Numbered 07-2657 and 07-2657W shall be closed.

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: September 10, 2008. OFFICE OF ADMINISTRATIVE HEARINGS

______________________________________ Robert I. Worth Administrative Law Judge

Original transmitted on _____________________

by: _____________________________ , to:

Fidelis V. Garcia, Director Registrar of Contractors 3838 North Central Avenue (Suite 400) Phoenix, AZ 85012 - 1906

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