ALJDEC decisions subject to certification as final

08F-2731-ROC · Registrar of Contractors · 2009-02-23

STATE OF ARIZONA IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: February 10, 2009 APPEARANCES: Complainants appeared on their own behalf; Respondent was represented by authorized employee Todd Stevens. ADMINISTRATIVE LAW JUDGE: Michael G. Wales _____________________________________________________________________ FINDINGS OF FACT 1. This matter convened for hearing at the time, date and place set forth in the Registrar of Contractors’ Notice of Hearing dated January 8, 2009. 2. Complainants Andrew and Sherry Bateman (“Complainants”) allege that Andrew Bateman, on behalf of both Complainants contracted with Respondent HB Construction, Inc. (“Respondent”) to purchase a newly constructed home (“the home”) at 43222 N. 44th street in Phoenix, Arizona. Complainants canceled the contract prior to close of escrow and never took title to, or possession of, the home. 3. Respondent HB Construction, Inc., formerly known as Hacienda Builders, Inc., is an Arizona corporation which holds Arizona Contractor’s License No. 091169, Class B- (General Residential Contractor) issued by the Registrar of Contractors on September 25, 1991. Todd Andrew Stevens is a principal of the corporation and is the former Qualifying Party. A review of the licensing database maintained by the Registrar of Contractors indicates Respondent’s license was, and remains, suspended for non-renewal on September 1, 2008. Respondent is also suspended for lack of bond and lack of a Qualifying Party. 4. Complainants filed a complaint with the Registrar of Contractors on February 26, 2008, wherein they alleged that Respondent failed to make requested repairs prior to closing causing Complainant Andrew Bateman to cancel the closing which resulted in Respondent wrongfully keeping Complainant Andrew Bateman’s $5,000.00 down payment. 5. On September 18, 2008, the Registrar issued, on behalf of the Complainants, a CITATION AND COMPLAINT in Case No. 08-2731 charging Respondent with possible violations of A.R.S. § 32-1154A (2), (7), (3)(namely, A.A.C. R4-9-108), and (13) (namely A.R.S. § 32-1124(B). 6. Respondent filed an answer on September 26, 2008 denying the allegations. The matter was set for the instant hearing before the Office of Administrative Hearings, an independent state agency. 7. At the hearing, Complainant called witnesses, testified and submitted Exhibits 1 through 5 which were marked, admitted and considered.

8. Respondent also called witnesses. Respondent submitted Exhibits A and B which were marked, admitted and considered. 9. From the evidence elicited at the hearing, the following salient facts are important to note: a. On November 4, 2007, Andrew Bateman entered into a Purchase Contract (Exhibit A) for a newly constructed inventory home at 43222 N. 44th street in Phoenix, Arizona with Respondent’s former corporate entity Hacienda Builders, Inc. Mr. Bateman gave Hacienda Builders, Inc. a deposit of $5,000.00 when he signed the contract. Escrow was scheduled to close on December 5, 2007. b. The contract called for a Pre-Orientation Meeting, also known as the Homebuyer Preview, at which time the buyer and seller would compile a list of existing defects or deficiencies to be addressed, if any (the “punch list”). c. On November 28, 2007, the Pre-Orientation Meeting took place. Mr. Bateman and Eric Morris, a customer service representative for Hacienda Builders, Inc., compiled a written list of nine (9) specific items which Hacienda Builders, Inc. agreed to make every effort to address within five (5) working days. d. The Purchase Contact also stated that within five (5) business days after the Pre-Orientation Meeting, the Seller and Buyer would attend the Pre-Closing Orientation where the Seller will review with the Buyer the features and operation of the residence and review any unfinished items from the Pre-Orientation. The contract goes on to state that one (1) business day after the Pre-Closing Orientation the buyer will attend the loan signing appointment. e. On December 4, 2007, Mr. Bateman’s wife, Sherry, attended the Pre-Closing Orientation. At the meeting, Sherry Bateman expressed her dissatisfaction with the manner in which some of the nine (9) items identified at the Pre-Orientation meeting had been repaired. Specifically, kitchen countertop grout seams had simply been colored in with a sharpie marker; the gash on the linoleum floor had been repaired by the simple, and poorly done, replacement of linoleum square rather than the entire floor having been replaced; and the French doors, having been glued rather than replaced, remained warped and weathered at the top. The Hacienda Builders representative, a man by the name of Dan, was advised to call Mr. Bateman at 8:00 p.m. on the evening of December 4, 2007 to discuss resolution of these deficiencies. Dan did not call Mr. Bateman. f. On the morning of December 5, 2007, at approximately 6:43 a.m., Mr. Bateman faxed a letter to Hacienda Builders advising them that, “due to the many problems associated with the Walk-thru…” he was cancelling the purchase contract. Mr. Bateman also demanded the return of his $5,000.00 deposit. In his cancellation letter, Mr. Bateman also included, as justification for the cancellation, a list of seven (7) unacceptable items, including the items discussed in the paragraph above. Mr. Bateman’s list, however, also included three (3) items that he had not listed in the punch list at the November 28, 2007 Pre-Orientation meeting. The new items in his cancellation letter included: - Main support beam in hallway sticks out and can be seen in hallway; - Atrium window seals in many of the windows have been separating; and - Water leak in garage by service door. g. At hearing, Mr. Bateman admitted that the three new items were not included in the November 28, 2007 punch list and, that by cancelling the contract on December 5, 2007, he did not give Hacienda Builders adequate time to address these new issues or adequate time to address the repairs with which Mrs. Bateman expressed dissatisfaction on December 4, 2007. h. The Purchase Contract contains a clause prohibiting cancellation simply because punch list items are not completed:

“The existence of any such Punch List items shall not entitle Buyer to cancel this Agreement, withhold funds at Closing or delay the Closing.”

i. The Purchase Contact also contains a liquidated damages clause, set forth as follows:

“24. Seller Remedies for Buyer Default. In the event Buyer fails to fully and timely comply with any term or provision of this agreement or Buyer advises Seller in writing or orally that Buyer does not intend to or will not fully perform any provision of this Agreement, Seller shall have the right to: (i) cancel this Agreement and retain all funds paid by Buyer to seller or Escrow Agent as liquidated damages…and that amount of the deposits and payments which Buyer is required herein to make constitute a reasonable estimate of damages…”.

CONCLUSIONS OF LAW 1. The Registrar of Contractors has jurisdiction over this matter pursuant to A.R.S. § 32-1101, et.seq., which authorizes the Registrar to impose disciplinary sanctions against licenses for violations of A.R.S. § 32-1154. 2. To warrant such sanctions by the Registrar, Complainants must demonstrate by a preponderance of the evidence that Respondent violated any one, or more, of the statutory sections cited. Proof by a “preponderance” means that “the evidence 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 (9th Cir. BAP (Ariz.) 1994). See also, Culpepper v. State of Arizona, 187 Ariz. 43, 930 P.2d 508 (App. 1996). 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. The purpose of licensing Arizona contractors is to regulate the conduct of contracting and protect the public from unscrupulous acts. Beazer Homes Ariz., Inc. v. Goldwater, 196 Ariz. 98, 101, 993 P.2d 1062, 1065 (App. 1999); Better Homes Constr. v. Goldwater, 203 Ariz. 295, 300, 53 P.3d 1139 (App. 2002). The statutory purpose is to prevent unscrupulous or financially irresponsible contractors from deceiving and taking advantage of those who engage them to build. Sobel v. Jones, 96 Ariz. 297, 394 P.2d 415 (1964). 4. This tribunal determines and concludes that Complainants have not established by a preponderance of credible, probative and relevant evidence that Respondent violated A.R.S. § 32-1154A(2). No evidence has been presented that Respondent departed from any plans, specifications or building codes. 5. This tribunal determines and concludes that Complainants have not established by a preponderance of credible, probative and relevant evidence that Respondent violated A.R.S. § 32-1154A(3). While punch list items were pending, said items which may or may not have been in violation of minimum workmanship standards, Respondent was not provided an adequate opportunity to address any perceived deficiencies with the home, or an adequate opportunity to address any dissatisfaction with items already repaired. Thus, no violation of A.R.S. § 32-1154A (3)(namely, A.A.C. R4-9- 108) has been established. 6. This tribunal determines and concludes that Complainants have not established by a preponderance of credible, probative and relevant evidence that Respondent violated A.R.S. § 32-1154A(7). No wrongful act was committed by Respondent. Respondent was legally entitled to retain Complainants’ deposit. Complainants breached the Purchase Contract by cancelling the Purchase Contract with Respondent, and Respondent lawfully, and pursuant to the unambiguous terms of the Purchase Contract, retained Complainants’ deposit as liquidated damages. 7. Finally, this tribunal determines and concludes that Complainants have not established by a preponderance of credible, probative and relevant evidence that Respondent violated A.R.S. § 32- 1154A(13) as no evidence was presented as to the allegation of a violation of A.R.S. § 32-1124(B).

RECOMMENDED ORDER In view of the foregoing, it is recommended that this Citation (No. 08-2731), together with the Complaint upon which it is 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 will be 40 days from the date of that certification.

Done this day, February 23, 2009.

Office of Administrative Hearings

__________________________ Michael G. Wales Administrative Law Judge

Original transmitted by mail this ____ day of ____________, 2009, to:

Registrar of Contractors William A. Mundell, Director 3838 N. Central Ave. Phoenix, AZ 85012

By ___________________________ -----------------------

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