ALJDEC decisions subject to certification as final

07F-G0217-ROC-RHG · Registrar of Contractors · 2007-12-11

STATE OF ARIZONA IN THE OFFICE OF ADMINISTRATIVE HEARINGS

REHEARING: December 4, 2007.

APPEARANCES: >The Complainant appeared in his own behalf. >The Respondent failed to appear.

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 on Rehearing are made.

FINDINGS OF FACT

1. The instant rehearing was duly scheduled on advance written notice duly sent to both parties. Although the start of the scheduled hearing was delayed for over thirty minutes to afford added time in which to make an appearance, the Respondent failed to appear either through any authorized member of the LLC entity or through any proper legal representative.

2. Very shortly prior to the date of the scheduled rehearing, counsel for Respondent filed a “Notice of Intent to Surrender License” on behalf of Respondent. Such surrender notice does not operate to halt these ongoing administrative disciplinary proceedings even if the license had already been cancelled by the Registrar nor is Complainant precluded from continuing to pursue his available administrative remedies which are expressly authorized pursuant to A.R.S. §32-1154(C).

3. Complainant’s uncontroverted evidence revealed that Respondent had submitted a proposal for the extensive remodeling of Complainant’s existing home. Such proposal was duly accepted by Complainant, thereby ripening into a contract. The terms of the parties’ contract, contained in a signed document prepared by Respondent, was shown to be a fixed price agreement for the expressly stated total cost amount of $237,000.00. A further contractual provision required that any and all alterations or deviations from the originally contemplated scope of work involving extra costs must be effectuated by written Change Orders. Any such agreed extra work was to be fully paid for at the time of execution of the Change Order.

4. Only one written Change Order relating to shear wall paneling work in the amount of $2,800.00 was subsequently authorized and paid for by Complainant to Respondent. Such additional work and charge resulted in an adjusted overall combined contractual cost price of $239,800.00.

5. At a point in time when the project was well short of completion, Respondent elected to discontinue further work on the jobsite. In point of fact, Respondent had forwarded to Complainant written confirmation of its intention to cease further work purportedly based upon a claim that contractual payments were not being made. However, the undisputed credible evidence tended to show that all progress payments were being timely transmitted either by Complainant’s lending institution or directly by Complainant, and if anything, the aggregate total of payments appeared to be greater in

value than the actual construction performed on the jobsite by or on behalf of Respondent. In any event, the evidence did clearly demonstrate that the reasonable cost to complete the structure in accordance with the original plans and specifications would be and was far greater than the remaining balance under the applicable fixed-price contract, including the mutually agreed single change order.

6. The work by Respondent was not only left substantially incomplete but also reflected numerous items of work that were substandard, unworkmanlike and contrary to the applicable contractual specifications. Examples of such deficiencies included, but were not limited to, the following:

a) Leaks were being experienced from the constructed roof. b) Framing deficiencies were shown to exist on or near certain roof locations. c) Numerous roof shingles were missing at several roof locations. d) Portions of the exterior sidewalk and driveway were damaged and left unrepaired. e) A bathroom tub was damaged in several locations. f) Extensive uncorrected interior drywall texture and damage problems were shown to have existed throughout the home. g) The surface of concrete flooring inside the residence was allowed to become severely damaged during Respondent’s work.

7. Following a jobsite visit by the Registrar’s assigned Inspector, a written Corrective Work Order was issued to Respondent effectively confirming the necessity to appropriately rectify most all of the enumerated items in the filed complaint. These confirmed substandard items of complaint reflected adversely upon Respondent’s workmanship. However, Respondent did not accomplish or even commence the required remedial measures, in violation of the terms of the Inspector’s directive.

Moreover, Respondent was shown not to have even attended any of over five or six separate jobsite inspections except on one occasion involving a complaint filed by Respondent against one of its specialty subcontractors.

8. The evidence at the hearing demonstrated an actual abandonment or refusal to perform on the part of Respondent after having submitted a bid, thereby also constituting a failure by Respondent to completely perform the specified remodeling construction on Complainant’s home for the agreed cost price.

9. The evidence further tended to indicate that Respondent had failed to timely pay several subcontractors and suppliers, resulting in the wrongful exposure of Complainant to claims by such unpaid entities for work or materials furnished on this project and previously paid for by Complainant to Respondent. Additionally several items paid for by Complainant, delivered but not yet installed, had been removed by Respondent from the jobsite, and certain bathroom exhaust fans were never provided and installed.

10. The demonstrated overall course of actions or inaction on the part of or attributable to Respondent is found to reflect a substantial disregard of its duties as a licensed contractor in this State as well as of the comforts and entitlements of the Complainant/homeowner. It is found and determined, in addition to the workmanship, abandonment and non- compliance with directives violations, Respondent has also committed a wrongful (but not fraudulent) act resulting in financial detriment to Complainant within the meaning of another contracting law provision charged hereunder as having been violated by Respondent.

11. By way of attempting to regain the full use and enjoyment of his home, and also to mitigate his damages, Complainant subsequently concluded arrangements with other contractors, as well as devoting his own time and efforts, so as to achieve a completed remodeling of the dwelling as intended originally. Such action on the part of

Complainant is found to have been appropriate and fully warranted under all the circumstances.

12. Credible evidence at the hearing revealed that Complainant was obliged to expend a significant amount of money to accomplish completion of the project through others and that the combined sum of all legitimate expenses incurred was far in excess of the contract price, including the Change Order, pursuant to the agreement with Respondent.

13. In addition to the sum of $54,000.00 paid directly by Complainant to Respondent, Complainant caused payments to Respondent through his lender of progress draws in the overall amount of $134,540.00. Complainant also transmitted to Respondent full payment of $2,800.00 representing the agreed extra cost charges for the Change Order work. These contractual payments by or on behalf of Complainant were in the combined aggregate amount of $191,340.00, all of which were applicable against the adjusted $239,800.00 contract price, leaving a remaining balance of $48,460.00 payable on Complainant’s contract obligations.

14. Following the inappropriate cessation of jobsite work by Respondent, Complainant was obliged to and did utilize the final two progress draws from his lender, in the total sum of $82,460.00, to accomplish final completion of the remodeling project. Such final draws were added to the construction loan obligations of Complainant which are currently being satisfied by monthly payments. The completion was shown to be primarily without any upgrades and was consistent with the original contemplated scope of work that had been started by Respondent. In point of fact, due to the prospect of incurring significant losses, some portion of the originally specified work was either deleted or reduced to accomplish some extent of savings or minimizing of losses.

15. In addition to the completion phases of the work, Complainant also expended various sums to accomplish corrections of the previously described

workmanship deficiencies or omissions that existed in the Respondent’s partially completed work. The drywall corrections were shown to have cost $5,900.00; the roofing corrections cost $1,400.00 and the bathroom exhaust fans cost approximately $200.00. The total of such expenditures was $7,550.00.

16. The combined total of all payments by Complainant to Respondent as well as to complete and/or correct Respondent’s work was $281,350.00 which exceeds the contract’s fixed price plus the Change Order price of $239,800.00 by the sum of $41,550.00. The expenditures by Complainant do not reflect any cost to rectify those items which still remain uncorrected such as the damaged exterior concrete sidewalk and driveway; the interior damaged concrete flooring; and the chipped bathtub. Under all the circumstances, as revealed by the testimonial and documentary evidence presented at the rehearing, a finding is warranted that the loss or damage to Complainant caused by Respondent’s acts or omissions is in an amount not less than $43,000.00.

17. 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.

17. In this case, the Registrar’s Order should provide for the imposition of discipline against Respondent’s license subject to a payment condition by way of partial restitution in the monetary amount of $43,000.00.

18. Mindful of the Notice of Intent to Surrender its contracting license filed very shortly prior to the hearing date, no useful purpose would be served at this time to suspend such license since there would be no motivation to comply with work or payment conditions to avoid the suspension of an already-surrendered license. Instead, the Registrar must properly consider a provisional revocation when formulating reasonable conditions for possible inclusion in the Order to be entered in this case.

19. By the failure of Respondent to appear at and participate in the scheduled hearing of this matter, no evidence in defense or in mitigation of the charged violations was presented to the tribunal.

CONCLUSIONS OF LAW

1. Complainant’s undisputed evidence of record at the rehearing adequately established that Respondent has violated the provisions of A.R.S.§32-1154(A) (1), (7), (9), (23) and (3); namely, Rule R4-9-108, A.A.C. ……. …….

RECOMMENDED ORDER ON REHEARING

In view of the foregoing, it is recommended on Rehearing that Respondent’s Class B license shall be revoked on the effective date of the Order to be entered by the Registrar of Contractors in this matter.

It is further recommended that if written proof is filed with the Registrar on or before this Order’s effective date that Respondent has paid or tendered to Complainant the sum of $43,000.00, then no license revocation shall be imposed and Respondent’s contracting license shall be deemed to have been surrendered or cancelled while in good standing.

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: December 12, 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) -----------------------

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