ALJDEC decisions subject to certification as final

07F-M2278-ROC · Registrar of Contractors · 2008-10-16

STATE OF ARIZONA IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: October 9, 2008.

APPEARANCES: >The Complainant appeared in his own behalf. >The Respondent appeared through its President and qualifying party, Delbert Ralph Olson.

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 Respondent’s written proposal, duly accepted by Complainant and thereby ripening into a contract in mid-April, 2007, Respondent commended construction work for the remodeling of the upstairs master bathroom in Complainant’s residence.

2. The contemplated remodeling work was to conform to informal design plans prepared by Complainant’s wife. Preliminarily, Complainant was to have performed the

necessary demolition work on the previously existing master bathroom and was also to furnish most all of the finish plumbing fixtures, custom vanity feature, tub, toilet fixture and shower tile materials. The stated contract price for Respondent’s installation and finishing work was $12.498.60, payable in several installments.

3. It was not disputed that by late April, 2007, Complainant had transmitted two of the contractually specified payments to Respondent, consisting of $3,750.00 at the time of signing the contract document plus another $3,750.00 when the work started, combining for a total advance payment of $7,500.00. This total payment sum represented 60% of the monetary consideration set forth in the parties’ agreement. No further payments were tended by Complainant nor were any payments due and owing on this project, since the next specified payment would not have become due until completion of all jobsite work by Respondent. In point of fact, the project was left significantly incomplete and far less than 60% of the contemplated work was completed by Respondent.

4. Within a short time after the start of the remodeling work, the individual workman for Respondent who was also acting in a supervisory capacity for the jobsite construction fell through the floor of the upstairs master bathroom area being remodeled, landing on the dining table and several chairs in the downstairs kitchen area, sustaining serious injuries and also substantially damaging the dining table and the chairs, as well as the drywall kitchen ceiling.

5. Although Complainant had received express verbal assurances and also a written acknowledgment from representatives of Respondent’s corporate entity that appropriate reimbursement would be made for the sustained loss of the damaged table and chairs, and also that a proper repair to the kitchen ceiling damage would be undertaken and completed, no reimbursement was tendered and the ceiling damage was never rectified. Complainant was shown to have been able to obtain replacements for the damaged table and chairs for the total sum of $537.92, corresponding to the same specially priced amount previously paid for these items not too long ago.

6. Prior to his injury, Respondent’s supervisory employee had elected to terminate the services of a licensed plumbing subcontractor who had been selected for the performance of a portion of the bathroom remodeling work. The rough plumbing work had continued, both before and after the sustained injury, being performed, together with the necessary rough electrical work, by Respondent’s own employees directly and not through any licensed specialty subcontractors. Since Respondent was shown to be the holder of only a Class B general contracting license, and not any plumbing or electrical licenses, the direct performance of such work by Respondent’s employees would be outside the proper scope of Respondent’s contractor’s license and therefore impermissible.

7. Notwithstanding an originally communicated two to two and one- half week time duration needed for the complete performance of all contemplated remodeling work, a time frame reasonably anticipated by Respondent and relied upon by Complainant, very little significant progress in the remodeling construction work was being made on the jobsite, especially following the accident and injury to a workman. Growing financial problems being experienced by Respondent served to generate a result whereby the prior time expectations were being far exceeded for this project. In any event, the incomplete status of the remodeling at the time of the last work efforts by Respondent was evident, and the area continued to be unusable by the household occupants. Only a very small total amount of materials that were to have been furnished by Respondent were utilized, and the maximum value of the labor provided was far below the amount of advance payments transmitted by Complainant.

8. Complainant filed his formal complaint with the Registrar of Contractors on June 4, 2008. Following a jobsite visit by the Registrar’s assigned Inspector, a written Corrective Work Order was issued to Respondent that included determined requirements for Respondent to obtain a proper building permit, shown to have been needed for the contractual work, to submit proper plans necessary for such permit application process, to

abide by the results of periodic local inspections by the building authority, to fully and appropriately complete all of the remodeling work as per the applicable contract and to accomplish a proper repair of the damaged kitchen ceiling.

9. No portion of the remedial work required under the Inspector’s directive was performed or even commenced within the specified 15-day time period set forth in such directive. Instead, approximately coinciding with the deadline date for achieving compliance with the Corrective Work Order, it was credibly demonstrated that Respondent filed for a Chapter 11 bankruptcy.

10. The aforesaid bankruptcy filing by Respondent was confirmed as part of the Respondent’s formal answer to the issued Citation. Complainant was able to subsequently obtain an Order from the Bankruptcy Court that granted relief from the otherwise applicable automatic stay provisions of the Federal Bankruptcy Laws for the express sole purpose of enabling Complainant to pursue and obtain a judgment and to collect against the Residential Contractors Recovery Fund (herein called “The Fund”). Since administrative access to the Fund, provided for in A.R.S.§32-1154(F), effectively requires that the contractor’s license must have been previously revoked or suspended, the manifest intention of the Bankruptcy Court’s Relief from the Stay Order must necessarily be deemed to have envisioned and authorized the conduct of these underlying disciplinary proceedings against Respondent based upon Complainant’s filed complaint.

11. It was uncontroverted that the contract balance of approximately $4,997.00 that would have been payable if the contractually agreed remodeling had been properly completed by Respondent has not been paid by Complainant to Respondent. However, considering that Complainant was to and did perform all of the initial demolition work in the bathroom area, it was clear that Complainant has not received, even to some minor extent, the benefits of his contractual bargain under the agreement with Respondent.

12. Complainant’s evidence tended to indicate that he has received bids for properly completing the originally proposed bathroom remodeling work from other licensed contractors. Each of the obtained bids had determined that the partial work performed by Respondent, primarily out-of- scope, had virtually no salvage value, could not be allowed to remain in place so as to be encompassed within any future warranties, and at the minimum, would entail a total cost of not less than $20,000.00, thereby generating a realistic loss to Complainant of at least $15,000.00 (after subtracting the unpaid contract balance). This total loss did not include the cost of repairing the kitchen ceiling and the expenses incurred to replace the kitchen table and chairs.

13. The demonstrated ongoing course of action or inaction on the part of or attributable to Respondent is found and determined to constitute an abandonment or at the very minimum, a constructive abandonment, of its contractual obligations with respect to the within remodeling project.

14. By failing to obtain a building permit for this project or to otherwise assure that a necessary permit had been issued so as to enable performance of the contemplated construction work, Respondent has effectively violated applicable local building code provisions

15. The manner in which the partially completed work was being performed, with what was shown to have been poor or inadequate supervision, including the failure to exercise reasonable care so as to have avoided the accident to a workman, is further found to reflect adversely upon Respondent’s workmanship

16. The extremely slow or lack of significant progress of the contemplated remodeling work, taking far longer than expressly represented is determined to reflect a disregard by Respondent of the comforts and entitlements of homeowner/occupants as well as of its duties as a licensee under the State’s contracting laws. Moreover,

Respondent’s prolonged inability to assure that the contractual work was appropriately performed to completion after having received a majority of the monetary consideration is further found to have constituted a wrongful act to the substantial detriment of the property owner within the meaning of another contracting law provision charged herein to have been violated by Respondent.

17. Respondent was shown to have performed plumbing work and electrical work directly through its own employees and not through any appropriately licensed specialty subcontractors, as required, and consequently is found to have performed such work outside the proper scope of its Class B general contracting license.

18. Respondent failed to timely and properly comply with the terms of a written directive issued by the Registrar’s assigned Inspector.

19. The evidence of record failed to sufficiently demonstrate that Respondent had violated any of the State’s worker’s compensation laws. Additionally, insufficient evidence was presented that would tend to indicate that Respondent had contracted with an individual or entity that was not properly licensed. Although Respondent’s employees were not separately licensed in their own right, there was no construction contract or subcontract with such persons other than the normal employment arrangements. None of those employees were acting as independent contractors on this project.

CONCLUSIONS OF LAW

1. The testimonial and documentary evidence of record adequately established that Respondent has violated the provisions of A.R.S.§32- 1154(A)(1), (2), (7), (17), (23) and (3); namely, Rule R4-9-108, A.A.C. However, no violations by Respondent of A.R.S. § 32-1154(A)(4) or (14) were sufficiently proven hereunder.

2. No corrective work or restitution conditions as part of the Registrar’s Order would be appropriate for inclusion as a condition hereunder in view of the bankruptcy filing by Respondent. In point of fact any such work or payment condition would necessarily be a cost expense to Respondent and also have a monetary value to Complainant. Such expenditure and corresponding benefit would serve to generate and constitute an impermissible preference of creditors under all the circumstances. It is noted that the Recovery Fund and potential future awards therefrom are not treated as assets of any bankrupt person or entity.

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 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 forty (40) days from the date of that certification.

Dated: October 17, 2008. OFFICE OF ADMINISTRATIVE HEARINGS

______________________________________ Robert I. Worth Administrative Law Judge

Original transmitted on _____________________

by: _____________________________ , to:

Armando Contreras, Director Registrar of Contractors 3838 North Central Avenue (Suite 400) Phoenix, AZ 85012 - 1906 -----------------------

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