ALJDEC decisions subject to certification as final

07F-M2345-ROC · Registrar of Contractors · 2008-05-13

STATE OF ARIZONA IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: May 8, 2008.

APPEARANCES: >The Complainant appeared through Brian W. Banks and Cecilia V. Gregorio, both being members of the LLC entity. >The Respondent appeared through Gerald A. Maurer, its qualifying party and a member of the LLC entity.

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. At outset of hearing Complainant stated that the sole items of its filed complaint presently remaining in issue between the parties related to (a) the kitchen cabinetry molding, (b) the hall bath toilet water line and caulking, (c) the transition beneath the interior French Doors and (d) the failure to reimburse a previously paid advance monetary deposit, as subsequently agreed. As to all other items or aspects of

the filed complaint, a finding is warranted that all such issues have been appropriately rectified, were not being pursued by Complainant in this administrative action or were otherwise no longer in issue.

2. Pursuant to a written proposal and contract the Respondent agreed to and did perform extensive work on a residential rehabilitation project being undertaken by Complainant for investment and re-sale purposes. The agreed total cost price for the contemplated scope of work was $22,248.50, of which all but the final progress installment of $2,224.85 has been paid by Complainant to Respondent by way of three prior equal draws of $6,674.55, aggregating $20,023.65.

3. The written contractual agreement between the parties, prepared by Respondent and signed on April 9, 2007, expressly specified that the work was to commence on or about April 10, 2007 and was to be completed by Respondent no later than May 18, 2007. The contract further provided for a late penalty payment of $150.00 per day by Respondent if the contemplated construction was not completed by such deadline date.

4. In addition to the scope of work under the parties’ contract, Respondent also agreed to provide and install an air-conditioning unit on the project at a total cost of $4,000.00, with Complainant paying an advance deposit of $3,000.00 on May 10, 2007 to Respondent. A receipt for this payment was signed on behalf of Respondent on May 15, 2007, which receipt expressly set forth a date for completion of the air conditioning installation by May 18, 2007, the very date that the entire project was to have been completed.

5. The testimony at the hearing was highly conflicting with respect to the events, conversations and overall dealings between the parties. No valid basis is found to exist for the disbelief of either party’s version. However, credible testimony did tend to

demonstrate that the project was not fully or even substantially completed by the contractually specified deadline date and also that the additional air-conditioning work was never even started by Respondent. It further appeared that Respondent was generally unresponsive to Complainant’s repeated attempts to make contact about the work’s progress, as well as to its requests and demands to return the advance deposit of $3,000.00 after it became clear that Respondent’s intended specialty subcontractor was not available or was unwilling to perform the additional mechanical work on this project.

6. On June 14, 2007, almost one month after the specified deadline date for completion, Complainant filed its complaint with the Registrar of Contractors, enumerating fourteen separate items of allegedly poor workmanship claimed to be in need of remedial action, also including another item relating to the failure to return the advance deposit for the air-conditioning system that was never provided or installed.

7. Following a jobsite meeting on July 18, 2007, the Registrar’s assigned Inspector confirmed that all fourteen of the workmanship items constituted valid complaints and issued his Corrective Work Order to Respondent on July 20, 2007 directing the undertaking and completing of appropriate remedial action within fifteen days. At the jobsite meeting, the parties also concluded an express agreement, witnessed by the Inspector, pursuant to which all contractual obligations with respect to the air-conditioning system added to the original work scope would be released and that Respondent would reimburse Complainant the amount of the advance deposit previously paid several months earlier.

8. Construction is not a perfect science, and it is not unusual for items to require attention by way of correction, replacement or adjustment – often even more than once. No finding of a contracting law violation is generally supportable unless and until, after notice and a reasonable opportunity is given, a licensed contractor fails to adequately rectify construction deficiencies.

9. Respondent did return to the jobsite on August 21, 2007 and commenced the performance of appropriate repair work on all items identified in the Inspector’s directive. Three of the workmanship items still in issue are discussed below.

10. The testimonial, documentary and photographic evidence presented at the hearing failed to adequately establish that the molding affixed to the top of the kitchen cabinetry remains improper or unacceptable according to prevailing industry standards and tolerances. Complainant’s unhappiness with the manner and the resulting appearance of the cabinet molding following Respondent’s repair effort does not equate to sufficient proof that a substandard condition still exists.

11. Although an unacceptable gap had been left at the transition between the wood flooring and the threshold beneath an interior set of French Doors, Respondent did accomplish appropriate remedial work after the issuance of the Corrective Work Order, and the resulting appearance of this area was not sufficiently shown to have remained unacceptable and substandard. The extent of gapping, if any, after the repair work was not sufficiently shown to have been excessive or otherwise indicative of a deficiency.

12. Due perhaps to a misunderstanding on the part of one of the members of Complainant’s LLC entity, the Registrar’s Inspector was understandably prompted not to make any pre-hearing jobsite visit so as to be able to present any independent opinion on the results of the repair work on the kitchen cabinet molding or the transition area between the wood flooring and the French Door threshold.

13. A hall bathroom toilet that was not properly caulked at the base and the failure to connect a water supply line to that toilet’s bowl were subjects of remedial work by Respondent, including a painting of certain plumbing hardware that was not part of the original work scope. To the extent that a very small spot of rust may have been

missed on a small portion of the original hardware during the repainting attempt, it must be held that such omission was de minimis and not indicative of a present workmanship deficiency.

14. The 15-day deadline date specified in the Inspector’s directive is determined not to have been a time-essence provision, and the remedial work undertaken by Respondent on the fourteen separate items of work- related complaints approximately two weeks after such deadline date is not found to have been unreasonable under all the circumstances, and no finding of non-compliance with the corrective work portions of the directive on the part of Respondent is warranted.

15. A jobsite agreement at the time of the inspection was shown to have been concluded by the parties whereby the parties mutually agreed that the entire understandings with respect to the specified air-conditioning installation work added to their prior arrangements would be terminated and that Respondent was to “reimburse” Complainant for the amount of the advance deposit previously paid. The release by Complainant of Respondent’s duties also effectively would release any claims that Complainant might have for recovery of additional costs incurred to have the system installed by a successor mechanical subcontractor.

16. Respondent presented an invoice to Complainant shortly after the jobsite meeting that had included the making of the reimbursement agreement. Such invoice consisted of items purportedly constituting extras or additional work not encompassed under the original contractual agreement, also setting forth a break-down of costs for all such added work. None of these items were the subject of any written change order and the invoice appeared to have been formulated by Respondent without any communication to or consent by Complainant as to the nature and cost of any identified work. Moreover, the inclusion in the invoice of an amount for sales taxes must be viewed as highly questionable, since the bid and contractual agreement, prepared by

Respondent was silent as to such taxes. Any ambiguity with respect to whether or not the quoted price was inclusive of sales taxes must be resolved against Respondent as the document’s author.

17. Further, Complainant has maintained that it is entitled to receive substantial monetary payments from Respondent based upon the overall delays in completing the contracted work attributable to Respondent’s actions or inaction while the work was being performed, thereby creating a duty for Respondent to pay the daily penalty amounts for a significant time duration. This issue, as well as others, is one of the subjects of civil litigation initiated by Complainant against Respondent that is presently pending.

18. Respondent was shown to have unilaterally determined, after having entered into the jobsite agreement, that the manner of reimbursing Complainant for the $3,000.00 advance deposit would be to utilize a debit/credit application rather than to tender a monetary payment for that amount, effectively applying the sum against the unpaid balance under the contract plus the aggregate total of all claimed extra work costs. No consideration was given to the potentially more than offsetting claimed entitlement by Complainant to receive a substantial sum by way of a daily penalty for late completion.

19. Irrespective of any private uncommunicated intention by Respondent, formulated either at the time of the jobsite meeting or shortly thereafter, to accomplish the agreed reimbursement to Complainant by credit instead of cash, it must be held that the terms of the concluded agreement releasing otherwise applicable duties to furnish and complete the air- conditioning system in return for reimbursement did not give such option to Respondent. Instead, unless “mutually” changed, the entitlement of Complainant, as well as the corresponding duty of Respondent, is determined to have consisted of an actual payment or tender of the $3,000.00 amount to Complainant.

Stated alternatively, the term “to reimburse Complainant,” as expressly used in the admittedly concluded jobsite agreement must be held to have referred to the payment by cash or check of the specified monetary amount under all the surrounding circumstances, and the Complainant could reasonably expect to receive such payment after its funds had been held by Respondent for a much prolonged time period without any work performance after the deadline date mentioned in the receipt.

20. It is found and determined, under the evidence presented at the hearing, that the parties’ agreement with respect to the reimbursement of the advance deposit necessitated the actual tender of a monetary payment by Respondent to Complainant. The terms of the issued Corrective Work Order may properly be viewed and including a directive to abide by any jobsite agreement, in this case for the reimbursement to Complainant of the previously paid advance deposit amount. The Respondent’s failure to do so results in a further determination that Respondent has not complied with the single most important item contained in the Inspector’s issued written directive and therefore has not fully complied with the terms of such directive. The parties are left free to assert all other appropriate claims, counterclaims or set-offs in the civil lawsuit

21. Respondent’s subsequent failure to have monetarily reimbursed Complainant for the amount of the advance deposit, as expressly agreed, and the retaining of such advance deposit for an excessively long time period despite ongoing demands for repayment when the specified air-conditioning work was not being performed or otherwise arranged for is found not only to have resulted in its not fully complying with the terms of an agency directive but also to have constituted a wrongful (but not fraudulent) act to the detriment of Complainant within the meaning of another of the State’s contracting law provisions charged hereunder as being violated by Respondent. ……. …….

CONCLUSIONS OF LAW

1. At these administrative hearings, the complaining party generally has the burden of proof, Vazzano v. Superior Court, 74 Ariz. 369, 249 P.2d 837 (1952) and the standard of proof on all issues is by a preponderance of the evidence. Culpepper v. State, 187 Ariz. 431, 930 P.2d 508 (1996). See also Smith v. Arizona Department of Transportation, 146 Ariz. 430, 706 P.2d 756 (1985); Utah Construction Company v. Berg, 68 Ariz. 285, 205 P. 2d 367, (1949); Rule R2-19-119, A.A.C. 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). It is evidence which is of greater weight or more convincing than the evidence which is offered in opposition to it; that is, evidence which as a whole shows that the fact sought to be proved is more probable than not." Black's Law Dictionary, 1182 (6th ed. 1990)

2. The evidence of record adequately established that Respondent has violated the provisions of the State’s contracting laws relating to commission of a wrongful act and to non-compliance with agency directives as set forth in A.R.S.§32-1154(A)(7) and (23), respectively. However no violations by Respondent of the workmanship provisions contained in A.R.S. § 32-1154(A)(3); namely, Rule R4-9-108, A.A.C., were sufficiently proven hereunder.

RECOMMENDED ORDER

In view of the foregoing, it is recommended commencing on the effective date of the Registrar’s Order that Respondent’s Class B license be suspended until the Registrar receives written proof that Respondent has paid or tender the monetary sum of $3,000.00 to Complainant.

It is further recommended that if written poof is filed with the Registrar on or before this Order’s effective date that the above-described monetary payment has been

timely made by Respondent to Complainant, then the above-provided license suspension shall not be imposed.

It is further recommended, in addition to the above-provided penalties, if any, that Respondent pay the sum of $200.00 to the Registrar of Contractors by way of a civil penalty pursuant to A.R.S. §32-1154(D). The failure by Respondent to pay the entire amount of the aforesaid civil penalty on or before 30 days following the effective date of the Order entered in this matter shall result in the automatic revocation of Respondent’s contractor’s license, effective on such deadline date. No future license shall be issued to any entity consisting of persons associated with Respondent, as defined in A.R.S. §32-1101A(5), unless payment of any outstanding prior civil penalty is tendered.

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: May 14, 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 -----------------------

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