ALJDEC decisions subject to certification as final

07F-2666-ROC · Registrar of Contractors · 2008-06-25

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: June 16, 2008 APPEARANCES: Complainant Karen Smith-Lovejoy appeared on her own behalf. Veronica Ergazos appeared on behalf of Respondent Desert Dove Contracting, Inc. ADMINISTRATIVE LAW JUDGE: Sondra J. Vanella _____________________________________________________________________ The question presented by this matter is whether Respondent Desert Dove Contracting, Inc. is subject to discipline for acts or omissions in violation of A.R.S. § 32-1154. Based upon the evidence of record, the Administrative Law Judge makes the following Findings of Fact, Conclusions of Law and Recommended Order. FINDINGS OF FACT 1. Desert Dove Contracting, Inc. (“Desert Dove”) is the holder of a Class KB-02 license (No. 220717) issued by the Registrar of Contractors (“ROC”).[1] Veronica Ergazos is Desert Dove’s President and former qualifying party, having resigned on June 20, 2007. 2. On December 29, 2006, Complainant Karen Smith-Lovejoy and her husband entered into a contract with Desert Dove for the remodel of their home located at 37017 North Tree Lined Trail in Carefree, Arizona. The contract price was $67,800.00, and there were three change orders totaling $10,766.00. See Exhibit 1. 3. Desert Dove began work on the project shortly after the execution of the contract. In February 2007, Ms. Smith-Lovejoy terminated the contract with Desert Dove due to poor oversight of the project, resulting in damage to the house, as well as Desert Dove having issued checks to subcontractors that were returned for insufficient funds. 4. On May 9, 2007, Ms. Smith-Lovejoy filed a complaint against Desert Dove with the ROC alleging the following: Contractor misrepresented her credentials and experience level and references. Detailed description of work to be performed never presented. Poor oversight of project resulted in damage to interior/exterior doors/walls during floor tile demolition. Fiduciary obligation not met by Contractor – she wrote in excess of $15,000.00 in bad checks to subs that I had to issue directly to subs. Remodel not complete by contractor.

5. ROC Inspector Scott Deering investigated Ms. Smith-Lovejoy’s complaint. 6. On July 9, 2007, Inspector Deering conducted a jobsite inspection. Ms. Smith-Lovejoy was present for the inspection. Ms. Ergazos and her husband, Doug Olsen, were present, however, Ms. Smith-Lovejoy requested that they not be permitted into the home. Ms. Smith- Lovejoy later testified that she is fearful of Mr. Olsen. 7. On August 9, 2007, following the jobsite inspection, Inspector Deering issued a Corrective Work Order (“CWO”) under which the ROC gave Desert Dove 15 days to take corrective action as follows: Complaint #1 Contractor is (sic) misrepresented her credentials and experience levels and references. Not a workmanship issue. Not addressed at jobsite inspection.

Complaint #2 Detailed description of work to be performed never presented. Signed contract and change orders provided. No action required by contractor.

Complaint #3 Poor oversight of project resulted in damage in (sic) interior/exterior doors and walls during floor tile demolition. Contractor to correct damage at the following locations by appropriate means. #1 – Front door interior and drywall left of door. #2 – Bench at end of hall. #3 – Rear door. #4 – Master bath and closet drywall. #5 – Pitted glass panes in dining room French doors. #6 – Debris in paint over pantry and in dining room. Complaint of cracked glass in entry door inspector cannot verify contractor responsibility. No action required by contractor.

Complaint #4 Fiduciary obligation not met by contractor. She wrote in excess of $15,000 in bad checks to subs that I had to issue directly to subs. Contractor to correct by appropriate means.

Complaint #5 Remodel not complete by contractor. At the time of the jobsite inspection the contractor is not allowed on the project. No action is required by the contractor.

Complaint #6 (Added at jobsite inspection) Electrical circuit was added for new Jacuzzi without permit or inspection. Contractor to obtain permit and provide required inspections on project using properly licensed contractors for any required corrections.

8. Inspector Deering testified that he performed a pre-hearing inspection on June 12, 2008, at which only Ms. Smith-Lovejoy was present, and that no corrective work had been performed. Inspector Deering testified that the damage on the doors is located on the interior in the wood and the glass, as there are small chips in the glass and dents in the wood. Inspector Deering further testified that there are tile particles in the paint at several locations. Inspector Deering opined that the damage to the drywall and doors occurred during the removal of the floor tile, as it is consistent with that type of work, and all of the damage is located within two feet of the floor. Inspector Deering further opined that the dents in the drywall were caused by the corners of the tiles as they are ¼” in width, and the chips in the windows are consistent, as well. 9. The majority of Ms. Smith-Lovejoy’s testimony focused on the payment issues, rather than on the workmanship deficiencies. Ms. Smith-Lovejoy credibly testified that she paid a total of $72,283.00 to Desert Dove prior to termination, and out of those funds, Desert Dove was to pay the various subcontractors. Ms. Smith-Lovejoy further credibly testified that on February 6, 2007, Desert Dove paid painting subcontractor, Quality Painting Associates, doing business as TJ Custom Painting (“TJ”), $2,860.00, however, that check was returned for insufficient funds. TJ contacted Ms. Smith-Lovejoy to explain that Desert Dove’s check was returned for insufficient funds, and Ms. Lovejoy paid TJ directly in the amount of $2,860.00. See Exhibit 3. 10. Ms. Smith-Lovejoy further credibly testified that on February 5, 2007, Desert Dove paid granite installation subcontractor, Interior Stone Expressions (“Interior”), $3,691.00, however, that check was returned for insufficient funds. Interior contacted Ms. Smith- Lovejoy to explain that Desert Dove’s check was returned for insufficient funds, and Ms. Lovejoy paid Interior directly in the amount of $3,691.00. See Exhibit 4. 11. Ms. Smith-Lovejoy also credibly testified that on February 7, 2007, she received notification from the flooring subcontractor that Desert Dove’s check in the amount of $3,142.91, and dated January 3, 2007, was returned for insufficient funds. See Exhibit 5. 12. Ms. Smith-Lovejoy testified that Desert Dove’s check to the carpet installer, Walter Hernandez, in the amount of $471.00, also was returned for insufficient funds, and that she paid Mr. Hernandez directly in that amount on February 14, 2007. See Exhibit 6. 13. Ms. Smith-Lovejoy paid All Type Home Improvement a total of $12,668.00 to complete the project after she terminated Desert Dove. See Exhibit 7. Ms. Smith-Lovejoy also paid Bates Plumbing Company, L.L.C. on February 9, 2007, in the amount of $3,609.26, notwithstanding that plumbing was included in her contract with Desert Dove. See Exhibit 8. 14. Ms. Smith-Lovejoy asserted that she paid $145,000.00 for a project that was supposed to cost $80,000.00, that she paid over $18,000.00 to cover bad checks written by Desert Dove, and by doing so, paid twice for these services. 15. Marcus Bourland, owner of Tile Time Flooring, testified that he was hired by Desert Dove for the Smith-Lovejoy project, and that Desert Dove’s check for payment was returned for insufficient funds. Regarding the damage done to the doors and drywall, Mr. Bourland opined that such damage was caused by a subcontractor utilizing a primitive method to remove the tile, such as with a sledge hammer. 16. Jason Chocron of Scottsdale Floors and Interiors, testified that Desert Dove purchased materials from him, and that Desert Dove’s check in the amount of $3,100.00 was returned for insufficient funds. See also Exhibit 5. 17. Ms. Ergazos testified that this was a very aggressive project in that the entire remodel was to be completed within ten days. Ms. Ergazos further testified that one of her subcontractors stole $8,000.00 in the beginning of the project, causing a financial hardship. Ms. Ergazos blamed the insufficient funds issue on Ms. Smith-Lovejoy’s bank as the bank was holding funds for ten days due to the fact that Ms. Smith-Lovejoy’s account was out of state. Ms. Ergazos blamed Ms. Smith-Lovejoy for continually adding to the scope of the project in the form of change orders, however, Ms. Ergazos acknowledged mismanaging the project, and further acknowledged that she agreed to the changes in scope, despite the strict deadline. Ms. Ergazos contended that Desert Dove was terminated prior to completing the project, and she feels Desert Dove was not given an opportunity to address the workmanship issues, and that other contractors working on the project could have caused the damage. Ms. Ergazos asserted that her business no longer exists because of this project. CONCLUSIONS OF LAW In this proceeding, Ms. Smith-Lovejoy bears the burden to prove, by a preponderance of the evidence, that Desert Dove is subject to discipline for violations of A.R.S. § 32-1154(A)(1), (A)(2), (A)(3), (A)(7), (A)(11), (A)(13), and/or (A)(23) as charged by the ROC in its January 23, 2008 Citation and Complaint. See Arizona Administrative Code (“A.A.C.”) R2-19- 119. A preponderance of the evidence is “such proof as convinces the trier of fact that the contention is more probably true than not.” Morris K. Udall, Arizona Law of Evidence § 5 (1960). The Administrative Law Judge concludes that Ms. Smith-Lovejoy has met her burden of proof as to three of the seven ROC charges. Under A.R.S. § 32-1154(A)(1), a contractor is subject to discipline for “abandonment of a contract or refusal to perform after submitting a bid on work without legal excuse for the abandonment or refusal.” The weight of the credible evidence of record established that Ms. Smith-Lovejoy justifiably terminated her contract with Desert Dove based upon its failure to pay its subcontractors with the funds paid to it for that purpose. Such termination is not, however, the equivalent of abandonment or refusal to perform, and the evidence does not otherwise support such a conclusion. Therefore, the Administrative Law Judge concludes that Desert Dove did not violate A.R.S. § 32-1154(A)(1). Under A.R.S. § 32-1154(A)(2), a contractor is subject to discipline for “departure from or disregard of plans or specifications or any building codes. . .” Other than the electrical circuit issue that was added to the CWO, Ms. Smith-Lovejoy did not present any evidence at hearing regarding this alleged violation. Therefore, the Administrative Law Judge concludes that Desert Dove did not violate A.R.S. § 32-1154(A)(2). Under A.R.S. § 32-1154(A)(3), a contractor is subject to discipline for “violation of any rule adopted by the registrar.” In this case, the ROC charged Desert Dove with a violation of A.A.C. R4-9-108, which, among other things, requires contractors to perform work in a professional and workmanlike manner and in accordance with applicable building codes and professional industry standards. The credible evidence of record established that Desert Dove failed to properly remove the floor tile, causing damage to the drywall, doors, and windows. As such, the Administrative Law Judge concludes that Desert Dove violated A.R.S. § 32- 1154(A)(3). Under A.R.S. § 32-1154(A)(11), a contractor is subject to discipline for “failure. . . to pay monies in excess of seven hundred fifty dollars when due for materials or services rendered . . .” The Administrative Law Judge concludes, based upon the credible, probative, and substantial evidence of record, that Desert Dove failed to pay numerous subcontractors and suppliers for services rendered and materials supplied, notwithstanding that Desert Dove received sufficient funds to do so from Ms. Smith-Lovejoy. Therefore, the Administrative Law Judge concludes that Desert Dove violated A.R.S. § 32-1154(A)(11). Under A.R.S. § 32-1154(A)(13), specifically, A.R.S. § 32-1124(B), a contractor is required to include their contracting license numbers, preceded by the letters “ROC,” on all documents utilized while engaged in construction-related activities. This requirement would be applicable to business cards, sales literature, contract documents, invoices, and other forms utilized by a contractor. Ms. Smith-Lovejoy did not address this alleged violation. However, a copy of the parties’ contract documents and invoices were submitted into evidence (Exhibits 1 and 2). Those documents contain the letters “ROC” preceding Desert Dove’s license number. In view of the foregoing, the Administrative Law Judge concludes that Desert Dove did not violate A.R.S. § 32-1154(A)(13). Under A.R.S. § 32-1154(A)(23), a contractor is subject to discipline for “failure to take appropriate corrective action . . . without valid justification within a reasonable period of time after receiving a written directive from the registrar.” The evidence demonstrated that a jobsite inspection by the appointed inspector for the ROC was held, pursuant to which the ROC issued Desert Dove a CWO directing it to accomplish specified remedial work within a stated period of time. The credible evidence of record established that Ms. Smith-Lovejoy would not allow Desert Dove access to perform any corrective work. Therefore, the Administrative Law Judge concludes that Desert Dove did not violate A.R.S. § 32-1154(A)(23). Under A.R.S. § 32-1154(A)(7), a contractor is subject to discipline for “the doing of a wrongful or fraudulent act . . . as a contractor resulting in another person being substantially injured.” The Administrative Law Judge concludes, from the evidence presented, that Desert Dove committed several wrongful acts resulting in substantial injury to Ms. Smith-Lovejoy. Those acts included: 1) writing checks with insufficient funds to cover them as payment to subcontractors and suppliers, compelling Ms. Smith-Lovejoy to pay those subcontractors and suppliers directly, resulting in a double payment by Ms. Smith-Lovejoy for those services and supplies; and 2) improperly removing the floor tile, resulting in damage to the drywall, doors, and windows. Based on the above, the Administrative Law Judge concludes that Desert Dove violated A.R.S. § 32-1154(A)(7). Based on the foregoing, it is appropriate for the ROC to impose discipline against Desert Dove’s license. Upon consideration of all of the facts and circumstances presented by this case, including Desert Dove’s revoked license status, the Administrative Law Judge concludes that the ROC should revoke Desert Dove’s Class KB-02 license.[2]

RECOMMENDED ORDER In view of the foregoing, it is recommended that Desert Dove’s Class KB-02 license shall be revoked on the effective date of the Order entered in this matter. 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 40 days from the date of that certification. Done this day, June 25, 2008.

______________________________________ Sondra J. Vanella Administrative Law Judge

Original transmitted by mail this ____ day of June, 2008, to:

Fidelis V. Garcia, Director Registrar of Contractors 3838 North Central Avenue Phoenix, AZ 85012

By ___________________________

----------------------- [1] A review of the ROC’s official records revealed that Desert Dove’s contracting license was revoked on January 22, 2008 in Case No. 07-2141 and revoked on March 12, 2008 in Case No. 07-2142. Such revoked license status does not preclude this tribunal from conducting these administrative proceedings. A.R.S. § 32-1154(C).

[2] Nothing herein, however, should be read as precluding Ms. Smith-Lovejoy from seeking additional relief in a different forum should she choose to do so.

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