ALJDEC decisions subject to certification as final

08F-0426-ROC · Registrar of Contractors · 2008-10-01

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: August 27, 2008, with further hearing on September 23, 2008 APPEARANCES: Logan V. Elia, Esq. appeared for the Complainant. Ryan Skiver, Esq. appeared for the Respondent on August 27, 2008 but withdrew prior to the further hearing. ADMINISTRATIVE LAW JUDGE: Allen Reed _____________________________________________________________________ Findings of Fact 1. The Complainant and the Respondent entered an agreement whereby the Respondent would remodel the Complainant’s home in Phoenix, Arizona. The agreement is based on the Respondent’s quote of $80,000.00 in a “Proposal” attached to an e-mail dated February 16, 2007. 2. The Proposal included specific costs for work to be done on the master bedroom, kitchen, laundry room, guest bath, bedroom, master bath, dining room living room and window replacement.[1] 3. The Proposal began by stating: “The following proposal is based on cost (labor and materials) plus 20%. The following is a list of what is included in the proposal…”.

4. The Respondent urges that the contract is a cost plus contract with the 20% to be added to the amount for labor and materials ($80,000.00) quoted in the Proposal. In essence, the argument is that the Complainant’s unstated cost is $96,000.00. On the second page of the Proposal it states that: “Budget and costs will be reviewed by the customer. Materials are at cost to the customer…. Payment will be billed upon completion of each line item.” 5. A general dictum in the law is that an ambiguous[2] document is to be construed against the party drafting the document. In this case, the Respondent’s Proposal clearly states it is based on the cost of labor and materials plus 20%. This sentence encompasses the listed costs within the terms of the Proposal. The list of what is included in the Proposal amounts to a cost of $80,000.00. Therefore, the $80,000.00 includes the total items encompassed (listed) in the Proposal. This construction is the most reasonable under the facts and under the terms used by the Respondent in its drafted Proposal.[3] 6. The Complainant paid the Respondent $10,000.00 to begin work. According to the record, the Respondent did not obtain a permit before beginning work. The Respondent claimed the Complainant was to obtain the permit. The attempted defense is not accepted. Irrespective of who is responsible for the permit, a contractor is not to commence work on a project which requires a permit until a permit has been obtained. 7. Modifications to the Proposal included the elimination of the cost of a new roof ($6,500.00)[4] but the addition of air conditioning and pool renovation. According to the Complainant, the air conditioning cost was estimated at $4,500.00. It was subsequently invoiced at $6,615.00. According to the Complainant, pool renovation was estimated at $8,000.00. It was subsequently invoiced at $9,750.00. These modifications would bring the Proposal to $85,000.00 before the 20% is added. The amount is $102,000.00 if the 20% is added. 8. By check dated May 7, 2007, the Complainant had paid a total of $83,000.00 to the Complainant and the work was not completed. The Complainant informed the Respondent she could not continue to pay for further work. 9. The Respondent informed the Complainant she owed additional amounts and on August 20, 2007, the Complainant filed her Complaint with the Registrar of Contractors (ROC). 10. By invoice dated August 27, 2007 (Respondent’s Exhibit 2), the Respondent asserted the Complainant owed an additional $31,744.04 for the work completed to that time. If this amount is added to the money already paid to the Respondent, it brings the total cost to the Complainant to $114,774.00 (excluding attorney’s fees and late fees claimed by the Respondent). This is $12,774.00 over the $102,000.00 set forth in paragraph seven above. It is noted that the project was still not complete even though the Respondent is claiming these additional amounts as owing. 11. On October 14, 2007, ROC Inspector Rick Oelke (Oelke) performed a jobsite inspection. 12. On October 22, 2007, Oelke issued a Corrective Work Order (CWO). 13. Oelke performed a prehearing inspection on August 25, 2008. He testified the following items on the CWO were not completed or had not been corrected by the Respondent: Item 3, Exposed wiring, GFCI fixtures not mounted and sealed in junction box; Item 4, No insulation in attic over kitchen and laundry; Item 5, Poor interior paint (uneven sheen); Item 7, Air conditioning flex duct is not properly connected in the attic; Item 9, RG6 cable wiring is not properly trimmed but it is in service; Item 10, Trim on recessed lighting in the master bedroom ceiling has a 1/8 inch gap; Item 11, The master bedroom floor is uneven (slope appears to be due to uneven slab); Item 12, The clothes hanger bar is too close to the back wall; Item 13, There is a gap at the floor transition between the master bedroom and kitchen; Item 15, French door does not close properly; Item 16, Kitchen and dining room floors not level (see item 13); Item 17, Sharp corners at the tile kitchen counter; Item 18, Sharp edges on laundry room shelving; Item 22, Hall bath, shower head leak; Item 26, Hall bath, medicine cabinet door when opened, hits light; Item 30, Living room, mixed electrical wiring, open ground wire, outlets not properly grounded; Item 32, Coach light hanging by wires; Item 33, Dining room closet size too small for hangers; Item, 34, Southwest bedroom closet door guides missing; Item 36: Hall light fixture not secured; Item 37, Northwest bedroom, carpet pulled away from baseboard; Item 38, Northwest bedroom, outlets not grounded; Item 39, Debris and materials left on back porch’/patio; Item 40, Back porch patio interior light switch is not working; Item 52, Hallway door does not fit opening and does not close; Item 54, Northwest bedroom door frame is cracked and beginning to pop out; Item 55, Hall bath, tile has excess lippage; Item 56, Kitchen has significant grout cracks near the walls; Item 58, Baseboards misaligned and unfinished in living room, office, dining room and kitchen; Item 61, Sink drain not centered in kitchen sink; Item 65, Hall bath, hole in drywall to expose plumbing was corrected with mud rather than a piece of drywall (Complainant photographic Exhibit 5)[5]. 14. The Complainant testified she requested a five ton air conditioning unit for her home but received a four ton unit. The Respondent testified the Complainant’s home had a four ton unit and the Complainant stated she wanted the replacement to be equivalent. Counsel for the Complainant argued the failure to provide the five ton unit should be considered as a violation. However, neither identifiable prejudice nor substantial injury was established.[6] 15. The Respondent has not produced any itemized invoices detailing the cost of labor and materials for the work which was completed[7]. 16. Allen Blaker (Blaker), a home inspection specialist, testified the Complainant’s renovation project is between 85% and 90% completed but that in his opinion much of the work falls below workmanship standards. Blaker is of the opinion that tile throughout the home consists of poor quality “seconds” and much of it was poorly laid[8]. Blaker testified about a number of items in the list of items attached to the CWO, in addition to those found deficient by Oelke.[9] Item 14, The wall connector for the cable wiring in the bedroom is incorrect, no cover plate (Oelke unable to determine contractual responsibility of Respondent); Item 28 and 67, Skylight in hall bath needs safety glass (Oelke unable to determine contractual responsibility of Respondent);; Item 46, Breaker panel, hole in the base of the panel (knock out portion), the evidence is insufficient to make a determination on the issue; Item 47, Faulty GFCI in kitchen, could not be tested properly (Oelke unable to determine contractual responsibility of Respondent); Item 57, Southwest bedroom window does not close or latch properly (Oelke was unable to determine the problem at the time of inspection); Item 62, Dishwasher drain line (no correction required by Oelke who found it within standard); Item 63, Bullnose and surface tile in kitchen (pattern varies). Oelke was unable to determine contractual responsibility of Respondent although the Proposal listed countertops as an item for remodeling; Item 64, Hall bathroom gutted and not restored Oelke unable to determine contractual responsibility of Respondent although the Proposal listed the guest bath as an item to be remodeled; 17. The Respondent’s owner (LLC Member) testified he did not disagree with the testimony of Oelke or Blaker. 18. The Complainant’s mother lives with the Complainant. She testified regarding the Respondent’s work on the floor in the kitchen, dining area, and the Complainant’s bedroom (formerly the den). This testimony relates to Items 13 and 16 of the CWO[10]. She also testified the Respondent cut new window sizes without consulting her[11] and that the Respondent made no effort to timely perform corrective work. 19. The Complainant testified she requested an accounting “receipts” for the work being done by the Respondent but never received any invoices, or costs for subcontractors, material, or time and labor, from the Respondent. She did not receive warranty documentation for a number of appliances including the stove and air conditioner. 20. The Respondent’s initial position was that it was not required to perform any more work (including corrective)[12] because it was not being paid (letter from Respondent’s counsel to the Complainant, dated November 2, 2007). Subsequently, the Complainant determine the Respondent’s work was of such poor quality that she would not have them perform corrective work. 21. The Respondent’s license is currently suspended (since June 2, 2008) for non renewal. Conclusions of Law The Citation and Complaint alleges violation of A.R.S. §32- 1154(A)(2), departure or disregard of plans, specifications or building codes; (A)(3)/A.A.C. R4-9-108, workmanship standards; (A)(7), a wrongful act with substantial injury; (A)(9), failure to complete for the price stated; and (A)(23), failure to take appropriate corrective action. 1. The Complainant has the burden of proof and must establish statutory violations by a preponderance of the evidence, Culpepper v. State, 187 Ariz. 431 (1996 App.)[13], 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). 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). 2. The evidence in an administrative hearing must be “substantial, reliable, and probative” (A.R.S. §41-1092.07(F)(1)). This means the Complainant has the affirmative responsibility to present sufficient competent evidence to meet the preponderance standard. The less demanding evidentiary standard in the administrative hearing does not mean that any type of evidence is entitled to serious consideration or significant weight. 3. “Substantial evidence is evidence possessing something of substance and relevant consequence and which furnishes substantial basis of fact from which issues tendered can be reasonably resolved.” Black’s Law Dictionary, Special Deluxe Fifth Edition, (St. Paul Minn.: West Publishing Co., 1979) p. 1281, citing State v. Green, 218 Kan. 438, 544 P. 2d 356, 362. 4. The Respondent’s defense that the contract was a cost plus contract, is not accepted fro the reasons stated in the Findings of Fact and as pointed out during the hearing there was no accounting by the Respondent for the “draws” for completed work by the Respondent, submitted to the Complainant. 5. The Complainant has clearly met the evidentiary requirements and has proven violations of (A)(2), failure to obtain required permit (building, electrical plumbing); (A)(7), abandonment,[14] failure to complete the project without excuse, failure to provide an accounting to the Complainant; (A)(3)/ A.A.C. R4-9-108 poor workmanship; Failure to complete for the price stated in the contract; and (A)(23); failure to perform corrective work (paragraph 13 of the Findings of Fact). 6. A contingent penalty is unrealistic in light of the Respondent’s non renewal, suspension of the license and the unlikelihood that the Respondent would timely accomplish the necessary and appropriate corrective work[15] or provide an accounting for costs, and/or possible pay restitution[16].

Recommended Order It is recommended commencing the effective date[17] of the Order in this case that the Respondent’s Class B License No. 223576, be Revoked.

Done this day, October 8, 2008

______________________________________ Allen Reed Administrative Law Judge

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

Armando Contreras , Acting Director Registrar of Contractors 3838 N. Central Ave. Phoenix, AZ 85012

By ___________________________

----------------------- [1] Certain items in the quote (Proposal) were not done upon agreement of the parties. Other items (pool and air conditioning) were added to the Proposal. [2] Subject to more than one interpretation [3] During the further hearing, the Respondent acknowledged the Proposal may not have been as clear as it could have been but that the Complainant was aware of the actual cost. The Complainant denied the Respondent’s assertion. Under the facts of the case and the applicable law, the Complainant cannot be held liable for the Respondent’s error in the Proposal. [4] $7,800.00 if the 20% is added [5] The exhibit also shows other defective areas (recessed valve) in the bathroom. [6] Absent a showing the Complainant was improperly charged for a five ton unit or that a four ton unit was inadequate or otherwise functionally improper, the mere fact that a four ton replacement unit was installed, does not establish an independent violation of (A)(2) or (A)(7). The fact that there is no accounting by the Respondent to show the cost of the installed unit in order to determine its cost appropriateness although the Respondent gave assurances to do so (Exhibit 2), is a separate issue under (A)(7), [7] Respondent’s exhibit 2 clearly does not qualify as a adequate itemized invoice [8] Failure to work from the middle in the shower floor, poorly cut corners and edges on kitchen and bath counters, raised tile edges over a1/16 of an inch on floor tile [9] Oelke did not include a number of items because of the uncertainty of the contract status of those items or because he found not correction necessary. [10] According to the testimony, at one point the floor in the kitchen dining area was “beautiful” but the Respondent mistakenly determined it needed to be redone and ripped it up. [11] The Respondent asserted the Complainant approved the new window sizes.

[12] Whether a contractor is owed money to complete a project, does not relieve the contractor of the obligation to perform corrective work for items which have been paid for but which do not meet workmanship standards.

[13] The Culpepper case applies to an administrative agency. However, since any violation established in this case may result in a sanction by the agency, the ruling in the case applies equally to the Complainant. [14] Although (A)(1) was not charged the abandonment is considered wrongful and substantial injury is self evident. [15] Set forth in paragraphs 13 and 16 of the Findings of Fact. The Respondent testified he did not disagree with the testimony of Oelke and Blaker on these issues. [16] Absent competent evidence of costs related to the project, no restitution can be ordered. [17] Forty (40) days from the date of the Order or from the date of certification if certified by the Director of the Office of Administrative Hearings

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