ALJDEC decisions subject to certification as final

07F-G1997-ROC · Registrar of Contractors · 2008-07-31

STATE OF ARIZONA IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: July 24, 2008 at 1:30 P.M.

APPEARANCES: >The Complainants appeared in their 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 are made.

FINDINGS OF FACT

1. The instant hearing was duly scheduled on advance written notice duly sent to both parties. Although the start of the scheduled hearing was delayed for over twenty-five minutes to afford added time in which to make an appearance, the Respondent to appear either through any authorized corporate employee or through and proper legal representative.

2. Complainants’ uncontroverted evidence demonstrated that they had entered into a written agreement to purchase a residence that was to be newly constructed by Respondent as the project’s general contractor.

3. During the course of construction, which was taking far longer than originally anticipated, Complainants, as the intended ultimate occupants, were allowed to and did conclude arrangements for various upgrades to the household features, transmitting monetary payments for such upgrades either to the selected licensed specialty contractors or to Respondent, directly.

4. It was shown by credible testimonial and documentary evidence that the six upgraded items of construction arranged for by Complainants with the selected specialty contractors consisted of (a) kitchen cabinetry, (b) a custom configured bathroom shower with a seat, (c) ceramic tile flooring throughout most of the home, (d) special wiring for surround sound and high speed internet and (e) upgraded plumbing faucets. Additionally, another upgrade consisting of (f) bay windows in the master bedroom was arranged for directly through Respondent and fully paid for in advance.

5. Most all of the above-identified upgraded features were physically installed in the home constructed by Respondent. The upgraded faucets purchased and obtained by Complainants were delivered to Respondent’s qualifying party and owner, evidenced by a written and signed receipt, but only one such delivered faucet was installed in the kitchen. The remaining specially purchased faucet materials were never returned to Complainants and were likely utilized on other projects.

6. The installed upgrades consisting of the kitchen cabinets, the custom bathroom shower and the bedroom bay windows were paid for in full by Complainants in the respective amounts of $4,199.35; $2,235.49; and $5,650.00. The wiring phase for the special sound and internet upgrade was performed and fully paid for in the sum

of $1,500.00, which sum did not include the contemplated finishing phase of work on the systems. Complainants were shown to have also paid an advance deposit of $4,000.00 for the tile floor covering plus a further sum of $1,298.00 for all of the faucet fixtures delivered to Respondent. The combined aggregate total of monies expended by Complainants for all six upgrades was in the amount of $18,882.84.

7. Very shortly prior to the time at which the Complainants were anticipating that the constructed residence would be fully completed and title transferred, a formal complaint was filed by Complainants with the Registrar of Contractors in late June, 2007 alleging numerous problems with the home’s ongoing construction. Notwithstanding an attempt by Respondent to schedule a walk-through inspection prior to a final closing, Complainants understandably and prudently rejected any effort to have a walk-through meeting since electrical service had not yet been provided to the premises making it impossible to verify the operational capability of the household systems, one of Respondent’s expressly communicated reasons for conducting such walk-through inspection.

8. Within several days after the date of filing the within complaint, Respondent sent a written notice to Complainants that it was canceling the contract. Credible undisputed testimony tended to indicate that no express explanations were given by Respondent for any cancellation action either in the notice itself or in any subsequent response to repeated requests and demands from Complainants and from their realtor. Significantly, no contractually specified 3-day opportunity was afforded for Complainants to cure any purported deficiency on their part.

9. Although a $1,000.00 earnest money deposit was ultimately returned by the Title Company to Complainants, Respondent did not pay for any portion of the costs for the upgraded features placed in the home and paid for by Complainants despite numerous and repeated requests and demands. It is found that the furnishing and

installing of paid-for upgrades in the home generated an increase in the overall value of the property above and beyond the contractually stated cost price for the home to be constructed. Even in a real estate market of declining values, the presence of the upgrades provided by Complainants would serve to lessen the extent of any potential fall in the property’s value.

10. The credible and undisputed evidence demonstrated that Respondent retained the financial benefits of the upgraded construction features without compensating Complainants for the costs incurred for such property improvements, inappropriately treating the aggregate total amount of advance expenditures by Complainant as a forfeiture. It is found and determined that Respondent’s retention of the upgraded benefits while refusing to reimburse Complainants not only has resulted in an unjust enrichment for Respondent but also to have constituted the commission of a wrongful act to the financial detriment of Complainants within the meaning and intent of one of the contracting law provisions charged hereunder as being violated by Respondent.

11. Additionally, Respondent’s demonstrated failure or refusal to pay for the upgrades provided by Complainants within the home it constructed is determined to fall within the purview of another charged code provision since Complainants effectively furnished upgraded features by transmitting payments for labor and materials far in excess of $750.00 to licensed specialty subcontractors that ultimately benefited the Respondent’s ongoing contracting activities in its construction of a dwelling having greater value.

12. 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.

13. Notice is taken of the Registrar’s license files which reveal that, while this administrative disciplinary action was still pending, Respondent’s Class B license, held by a corporate entity, was allowed to be canceled on April 1, 2008 after having been previously suspended by operation of law for lack of a proper bond since February 23, 2008. Neither the cancellation nor the suspension prevents Complainants from pursuing these administrative remedies or prevents the Registrar from conducting these administrative disciplinary proceedings which are expressly authorized by statute.[1] Moreover, since little or no motivation would exist for any entity to undertake and accomplish remedial actions, whether of a construction or restitutionary nature, to avoid the imposition of a suspension of an already-canceled or an already-suspended license, the Registrar must necessarily and properly consider a provisional revocation when formulating reasonable conditions for possible inclusion in the Order to be entered in this case.

14. 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.

15. Under all the facts and circumstances of this case, as presented at the scheduled administrative hearing, it is determined that the inclusion of a payment condition in the Registrar’s provisional revocation Order in the nature of restitution equal to the amount expended by Complainants for the various upgrades in the home, specifically the sum of $18,882.84, is fully appropriate and equitably warranted hereunder.

CONCLUSIONS OF LAW

1. The undisputed evidence of record as presented at the scheduled hearing adequately established that Respondent has violated the provisions of A.R.S.§32-1154(A)(7) and (11), as charged in the issued Citation.

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 Registrar’s Order entered in this matter.

It is further recommended that if written proof is filed with the Registrar on or before this Order’s effective date confirming that Respondent has paid or tendered the monetary amount of $18,882.84 to Complainants, then the above-provided license revocation penalty shall not be imposed, but instead Respondent’s contracting license shall be deemed to have terminated in good standing.

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: August 1, 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 ----------------------- [1] See A.R.S.§32-1154(C).

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