ALJDEC decisions subject to certification as final

07F-G0321-ROC · Registrar of Contractors · 2007-07-18

STATE OF ARIZONA IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: July 18, 2007 APPEARANCES: Complainants : Stephen L. and Carolyn S. Bondhus appeared pro se. Testifying was Jim Dimond, Registrar of Contractors Inspector. Respondent : No representative appeared for Kentec Builders, L.L.C.[1] ADMINISTRATIVE LAW JUDGE: Gary B. Strickland _____________________________________________________________________

A Hearing was convened to determine whether Respondent Kentec Builders, L.L.C. violated state law as has been alleged by Complainants Bondhus and as cited by the Arizona Registrar of Contractors (hereinafter also, “the ROC”). Evidence and testimony were presented. Respondent Kentec Builders, L.L.C. has held a Class KB-02 (Dual residence and Small Commercial) license issued by the Registrar of Contractors. Complainants allege that Respondent has abandoned a project and has performed below industry and workmanship standards on the work that it did perform prior to abandonment. 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 Kentec Builders, L.L.C.’s license (No. 191815) was initially issued on January 5, 2004, was renewed on January 24, 2006 with viability through January 31, 2008. The license was revoked effective January 22, 2007. 2. Kent Vernon Brady is the Qualifying Party identified on the Kentec Builders, L.L.C. (hereinafter also, “the Contractor” or “Kentec Builders”) license. 3. The project at issue involved remodeling construction at a home situated in Cave Creek, Arizona. The work was performed on Arizona soil, the 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 Bondhus Complaint fall within the requirements of Title 32, Chapter 10, Article 3. 4. Complainant Stephen Bondhus entered into a contract with Kentec Builders for significant remodeling On December 13, 2005.[3] 5. The contract price was $103,944.00.[4] Complainants were further caused to assume an additional $2,726.00 in expenditures for City of Cave Creek permitting and exterior painting, items not covered in the contract. 6. Complainants have paid $93,909.00 to Kentec Builders on the contract, (including the $2,726.00 payments).[5] . . . 7. Having become disconcerted over the quality of Kentec Builders’ performance on specific aspects of the construction project, Complainants filed a Complaint before the Registrar of Contractors on or about August 23, 2006.[6] 8. An inspection of the site was conducted by ROC Inspector Jim Dimond on October 11, 2006. Although provided notice of the date, time, and location of the inspection by the Inspector having mailed a letter to Kentec Builders on August 23, 2006 providing that information, no representative from Kentec Builders appeared. 9. Based upon his observations made at the October 11, 2006 inspection and upon his discussions had with the Complainants, Inspector Dimond issued a “Corrective Work Order” (“CWO”) on October 19, 2006 directing Kentec Builders to make numerous corrections and repairs.[7] 10. Thereafter, because no resolution had been accomplished, Complainants requested that a CITATION AND COMPLAINT be issued and that a Hearing be convened. 11. An ROC CITATION AND COMPLAINT was issued on March 1, 2007 citing Kentec Builders for possible violation of A.R.S. § 32-1154(A)(1), (2), (3), (7), (13), and (23).[8] 12. Kentec Builders filed a one line A.R.S. § 32-1155 ANSWER to the CITATION AND COMPLAINT on January 26, 2007 denying that it had violated any contracting laws.[9] 13. Upon request of Complainants, the ROC issued a NOTICE OF HEARING on June 4, 2007 and the Hearing convened pursuant thereto. 14. At the Hearing, ROC Inspector Jim Dimond testified. He related that he had conducted a Prehearing Inspection of the property on July 17, 2007 whereat he observed that Complainants had engaged a third-party licensed Contractor to complete and correct the tasks Kentec Builders had failed to complete and correct. The Inspector is unaware of any excuse whereby the Contractor may be relieved of responsibility for the repairs. The Contractor has not contacted the ROC since the CWO was issued. 15. Although provided notice of the date, time, and location of the Hearing by the ROC having certified mailing of a NOTICE OF HEARING to Kentec Builders’ address of record on June 4, 2007, no representative appeared to defend against the allegations. 16. A “substantial injury” under A.R.S. § 32-1154(A)(7) is reasonably construed as one that is real and identifiable.[10] Complainants have been substantially injured by Kentec Builders’ failures on the project. 17. Kentec Builders’ failure to make the corrections and repairs when directed so to do was wrongful. Kentec Builders did not present evidence of legal excuse in the failure. Moreover, the failure to make the corrections is further evidence of an abandonment of contractual duties. 18. As identified by the Inspector vis-à-vis his “Corrective Work Order” and testimony at the Hearing, Kentec Builders failed workmanship standards in the construction. 19. There has not been substantial evidence offered supporting allegation of fraudulent conduct.[11] 20. Complainants are entitled to a restitutionary award under A.R.S. § 32-1156.01.[12] Mr. Bondhus presented proof that he has paid $36,263.00[13] to complete the work for which he had contracted with Kentec Builders and that had been noted within the “Corrective Work Order” as requiring completion and correction. Therefore, to put Complainants in the position that they would have been had the contract been completed by Kentec Builders required an expenditure of at least $28,467.00 ($36,263.00 paid to have the work completed and corrected - the $7,796.00 owed by Complainants on the contract).[14] . . . . . . APPLICABLE LAW The CITATION AND COMPLAINT issued by the Registrar of Contractors charged Respondent Kentec Builders, L.L.C. with possible violations of A.R.S. § 32-1154(A)(3) (and A.A.C. R4-9-108, the “workmanship rule”), (7), (13), and (23). Those statutory sections require that a holder of a license or a person listed on a license not commit the following:

1. Abandonment of a contract or refusal to perform after submitting a bid on work without legal excuse for the abandonment or refusal.

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.

13. Failure in any material respect to comply with this chapter.

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. G07-0321 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). Kentec Builders, L.L.C. 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.[15] Further, the standard of proof is that of the “preponderance of the evidence.”[16] 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.”[17] The evidence taken as a whole must convince the decision maker that the party who bears the overall burden of persuasion, in this case Complainants Bondhus, is more probably correct on the issue(s) in dispute. 3. Observing these standards, Complainants have persuaded, by a preponderance of the evidence, that Respondent Kentec Builders has violated each of the cited statutory and regulatory provisions by failing to correct substandard workmanship and, thereby, failing to complete the project. The failure was wrongful, without legal excuse, and has caused Complainants substantial injury. 4. By a preponderance of all of the evidence, Complainants have persuaded that, in the remodeling construction undertaken, Kentec Builders violated A.R.S. § 32-1154(A(1),(2)(3), (7), (13), and (23), as charged in the CITATION AND COMPLAINT. . . . . . . 5. An examination of Kentec Builders’ license record reveals that twenty-five (25) other Complaints have been filed against the license.”[18] Ten (10) of the Complaints have resulted in the administration of “Discipline;” one has been settled or withdrawn; and, thirteen (13) other Complaints remain “Open.”[19] The disciplinary history of the license presents is atrocious and provides significant basis for an assessment founded in aggravation.

RECOMMENDED ORDER In view of the foregoing, IT IS RECOMMENDED that the Registrar of Contractors revoke Lic. No. 191815 unless and until Kentect Builders, L.L.C. pays $28,467.00 to Complainants Bondhus, providing to the ROC written proof of payment, offer and acceptance. 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 18th day of July 2007.

_____________________________________ Gary B. Strickland Administrative Law Judge

Original transmitted by mail this 18th day of July 2007 to:

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

By ___________________________ ----------------------- [1] The start of the Hearing was delayed to enable a representative from Kentec Builders to make a late appearance in the event that a more timely appearance was inhibited by unforeseen circumstance. [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. Complainants offered three exhibits, marked C-1 through C-3. The exhibits were received.

[3] See “Proposal & Contract” within the Agency Hearing file.

[4] Id.

[5] Id.

[6] Within the Agency Hearing file.

[7] “Corrective Work Order” within the Agency Hearing file.

[8] Within the Agency Hearing file.

[9] ANSWER within the Agency Hearing file.

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

[11] See Echols v. Beauty Built Homes, 132 Ariz. 498, 500; 647 P.2d 629, 631 (Ariz. 1982) (“A showing of fraud requires (1) a representation; (2) its falsity; (3) its materiality; (4) the speaker's knowledge of its falsity or ignorance of its truth; (5) the speaker's intent that it be acted upon by the recipient in the manner reasonably contemplated; (6) the hearer's ignorance of its falsity; (7) the hearer's reliance on its truth; (8) the right to rely on it; (9) his consequent and proximate injury. (citation omitted). Each element must be supported by sufficient evidence. ‘Fraud may never be established by doubtful, vague, speculative, or inconclusive evidence.’ In re McDonnell's Estate, 65 Ariz. 248, 253, 179 P.2d 238, 241 (1947)”).

[12] § 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.)

[13] Assertedly, to employees under direction of a licensed Contractor, a Mr. Zetah of Meritage Custom Homes.

[14] See Exhibit C-1 and C-2. [15] See Ariz. Admin. Code R2-19-119(B).

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

[17] 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.)

[18] 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.

[19] See http://www.azroc.gov/clsc/AZROCLicenseQuery

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