ALJDEC decisions subject to certification as final

07F-M2411-ROC · Registrar of Contractors · 2008-04-24

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: April 10, 2008

APPEARANCES: Complainants were represented by their attorney, Lyndon Steimel and Respondent was represented by its attorneys, Terry Straughan and Rina Rai ADMINISTRATIVE LAW JUDGE: Mark A. Silver Evidence and testimony were presented and, based upon the entire record in this matter, the following Findings of Fact, Conclusions of Law, and Recommended Order are made:

FINDINGS OF FACT

1. Pursuant to written contract, all of the above-named Complainants retained Respondent to construct new homes on their respective properties. Complainants contend that Respondent’s failure to proceed with the project in an expeditious manner has ultimately cost them significant sums of money to have a successor contractor construct the homes. Respondent denies that it failed to perform any of its contracted duties. The facts surrounding these claims are discussed in the findings below.

2. All of the captioned Complaints were consolidated for the purpose of hearing, since they all involved similar facts and entailed the use of the same witnesses.

3. The following salient facts were adduced at the hearing and are important to note:

a. All of the Complainants reside in California b. Sherry Petrowitz (“Sherry”) was the Arizona real estate agent that acted on behalf of Complainants, in regard to the construction contracts at issue herein. Sherry appeared at the instant hearing and provided testimony. b. Sherry met with Steve Bowles (“Bowles”) regarding any interest that he had in building on several lots that she had for sale. Bowles also appeared at the hearing and provided testimony. c. Bowles and Sherry were neighbors and friends. Bowles expressed interest in having Respondent build these homes. Bowles contends that he works for Respondent, as well as another contractor. Bowles is related, by marriage, to Respondent’s qualifying party. d. On or about July 29, 2005, Bowles provided Sherry with the construction contracts to be signed by her clients (Complainants), who were all residing in California. Other than the amount of money that was set forth in the various contracts, via stipulation of record, it was agreed that all of the contracts in question contain essentially identical language. e. The contracts were signed by Complainants on or about July 29, 2005. f. Among other provisions, the contracts provided the following language (Complainants are “Owner” and Respondent is “Contractor”):

3. Work To Be Performed By Others: Contractor shall have no responsibility for the following tasks or portions of the Project. These shall be the responsibility of the Owner: (Although there was room to list any duties of Complainants in this section of the contract, the area was left blank).

4. Date of Commencement: Unless the parties agree in writing to a different date, Contractor shall commence construction of the Project upon its receipt of: a. All applicable building and other permits… c. The anticipated date of commencement of work on the Project is as directly agreed upon by the Owner and Contractor following the issuance of building permits and approved lending.

5, Time for Completion of Project: …Time will serve as of the essence and… a. Contractor shall achieve substantial completion of the project not later than: 190 working days after receiving permit.

6. Payments To Contractor: …

a. Contractor shall make application to Owner as applicable for each progress payment… (2) A payment of 10% will be obtained at the acceptance of contract. Upon the acceptance of this initial payment, construction will then begin…(emphasis added).

10. Information and Services from Owner: Owner shall supply the following information and services to Contractor: d. Except for permits and fees which are the responsibility of Owner under this agreement…(emphasis added).

8. Changes to Contract: Changes to the Contract may be made only by Amendment, Modification or Change Order. Each such Amendment, Modification, or Change Order shall be in writing…(emphasis added).

g. Sherry’s testimony showed that she was not only acting as the agent for Complainants but also, at some point in the entire sale transaction, was acting in the role of the seller, due to a specified problem that the original owner of the property had with subdividing the property any further. h. According to Sherry, notwithstanding the terms of the written contract, Bowles indicated to her that he would obtain the permits. She claims that Bowles made such a representation to her several times over the course of the 1 ½ years before Complainants terminated Respondent. i. Only two of the named Complainants appeared at the instant hearing; namely John Smith (“Smith”) and Glens Sekins (“Sekins”). Smith testified that he never came to Arizona after signing the contract and was led to believe by Sherry that Respondent would obtain the permit for his project. He was unaware that no permit had been obtained on his project until approximately one year after he closed escrow on his property. Shortly after receiving this information he, along with the other Complainants, terminated Respondent from the project. He terminated Respondent on or about January 27, 2007. j. Smith claims entitlement to monetary damages for increased interest costs on his construction loan, as well as the higher cost he paid to the successor builder to construct his home. k. Smith never had any direct communication with Bowles. Moreover, there was no showing that at any time during the 1 ½ years he was under contract with Respondent did he personally make any inquiry directly to Respondent regarding the progress of his project or make any written notice to Respondent that construction would need to commence soon or the contract would be terminated. In addition, he never paid Respondent the required 10% down-payment upon acceptance of the contact. l. Sekins testified that he also was led to believe that Bowles was going to obtain the permit for his home. Again, his position was primarily based on the information he received from Sherry. He also was not shown to have made any written demand to Respondent to obtain the permit and commence construction soon or face termination. He also failed to pay Respondent the 10% down-payment required in the contract. m. Bowles testified that there was absolutely no reason for Respondent to delay the construction of these homes, since Respondent would not get any money until the project commenced. However, Respondent had no obligation to commence construction without the building permit and the initial 10% down-payment which was due upon Complainants acceptance of the contract. n. Bowles does not deny that he assisted with the permit process, however he maintains that it was the ultimate responsibility of Complainants to obtain the permits and not Respondent. o. None of Complainants were shown to have ever paid the 10% and none of the Complainants obtained the permits prior to terminating Respondent.

4. The contract language is clear, wherein it provides that Complainants had the responsibility for obtaining the permits and construction would not commence until the permits were issued and Respondent received the 10% down-payment. The contract is further clear that any attempt to change the terms of the contract must be through a written document. There were no written changes to the contract, the permits were not obtained, and Complainants never paid Respondent the required 10% down-payment.

5. Regarding Complainants’ contention that since there were no duties of “Owner” listed in paragraph no. 3 of the contract, that somehow negates all of the other provisions of the contract regarding the duties of the “Owner,” it is determined and held that this section of the contract fails to negate all of the other sections of the contract regarding the duties of the “Owner” (Complainants), including Complainants’ duty to secure the permit as set forth in paragraph no. 10(d) of the contract.

6. Considering the role of Sherry in these transactions, it is difficult, at best, to assess a very significant degree of credibility to her testimony. Sherry, a licensed real estate agent, was acting as the representative for Complainants on these construction projects. They relied, to their detriment, on her representations of what was going on with the projects, as opposed to following the clear written terms of the contract and taking their own personal proactive role in the process.

7. The record presented herein supports a finding that there was no communication between Complainants and Respondent. Notwithstanding the clear terms of the contracts, Complainants were erroneously under the belief that Respondent would obtain the required permits. This mistaken belief on the part of Complainants is not sufficient to negate the terms of the written contract, which required Complainants, not Respondent, to obtain the permits so that construction could commence.

8. Complainants terminated Respondent. Respondent could not have commenced work on the project without the permits or the contract required 10% down-payment, which were both shown to be conditions precedent to the start of construction. Thus, Respondent was shown to have legal cause for not having commenced construction work at the time of its termination from the project. The evidence presented was inadequate to support a finding that Respondent violated the spirit and intent of either charged section of the State’s Contracting laws which are set forth in the instant Citation. Complainants failed to sustain the requisite burden of proof on the issues presented herein.

CONCLUSIONS OF LAW

1. The parol evidence presented at the instant hearing by Complainants cannot be used to alter the terms of the written contract, which was found not to be ambiguous, regarding the duties of the parties referable to obtaining the permit. Parol evidence may not be used to add to subtract from, vary or contradict the terms of a complete and unambiguous contract. Richards Development Company v. Sligh, 89 Ariz. 100, 358 P.2d 329 (Ariz. 1961).

2. Complainants have the burden of proof and must establish statutory violations by a preponderance of the evidence. A.A.C. R2-19-119. Proof by “preponderance of the evidence” means that it is sufficient to persuade the finder of fact that the proposition is “more likely true than not.” In re Arnold and Baker Farms, 177 B.R. 648, 654 (9th Cir. BAP (Ariz.) 1994). 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 (rev. 6th ed. 1990).

3. Complainants failed to sustain their burden of proof to establish that Respondent violated the spirit and intent of the applicable charged sections of the State’s Contracting laws. Therefore, the evidence of record did not sufficiently sustain a finding of violations by Respondent of the provisions of A.R.S. §32-1154A, as charged in the Citation.

RECOMMENDED ORDER

Based on the foregoing, it is hereby recommended that these Citations (M07-1762, M07-2413, M07-2412, M07-2411, M07-2409), together with the Complaints upon which they are based, be dismissed. 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 in this matter will be forty (40) days from the date of that certification.

Done this day, April 24, 2008.

______________________________________ Mark A. Silver Administrative Law Judge

Original transmitted by mail this ____ day of ____________, 2008, to:

Registrar of Contractors Fidelis V. Garcia 3838 N. Central Ave., Ste. 400 Phoenix, AZ 85012-1906

By ___________________________

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