ALJDEC decisions subject to certification as final

08F-4218-ROC · Registrar of Contractors · 2009-06-16

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

The hearing of this matter convened on April 20, 2009. Trevor Fish, Esq. represented Complainant Nikolaus Enterprises, Inc., doing business as Advanced Framing Systems (“Nikolaus”). Mark Hanson, Esq. represented Respondent Empire Earthworks, L.L.C. (“Empire”). At the commencement of the hearing, Empire made a Motion to Dismiss arguing that Nikolaus’ complaint is barred by the two-year statute of limitations. Nikolaus responded to Empire’ argument, contending that its complaint is not time barred. The Administrative Law Judge requested that the parties brief the issue of whether Nikolaus’ complaint was barred by the applicable statute of limitations. Nikolaus’ Memorandum of Law was received on June 7, 2009, and Empire’s Memorandum of Law was received on June 8, 2009. On May 9, 2008, Randy Nikolaus, on behalf of Nikolaus Enterprises, Inc. filed a complaint against Empire with the Registrar of Contractors. Nikolaus was the general contractor for the construction of the home in which Mr. Nikolaus currently resides and about which the complaint was filed. Mr. Nikolaus initially constructed the home as a “spec home”. Empire was the subcontractor retained by Nikolaus to perform the basement excavation and backfill. Empire completed its work on the project in November 2005. The construction of the home was completed by December 12, 2006. On January 27, 2007, the construction loan was converted to traditional financing. Mr. Nikolaus moved into the home in July 2007. Empire argues that Nikolaus’ complaint is barred by the statute of limitations because it was filed beyond the two year statutorily required timeframe for filing complaints with the ROC pursuant to A.R.S. § 32- 1155(A), which provided on the date the complaint was filed, for “the filing of a written complaint with the registrar charging a licensee with the commission, within two years prior to the date of filing the complaint, of an act which is cause for suspension or revocation of a license . . . The two year period prescribed by this subsection shall commence on the earlier of the close of escrow or actual occupancy for new home or other new building construction and otherwise shall commence on completion of the specific project.” This section, like any statute of limitation, is a statute enacted as a matter of public policy in Arizona to fix a time within which complaints must be filed. On April 25, 1979, the Arizona Attorney General’s Office issued an opinion (Op. Att’y Gen. I79-119) based on the Arizona Court of Appeals’ decision in Lyon v. Great American Insurance Co., 4 Ariz. App. 596, 422 P.2d 724 (1967). In Lyon, the Court of Appeals held that the limitations period ran from the earlier of occupancy or discovery of the defect. The Attorney General’s Opinion went on to state the following: When it is the general contractor in the posture of a complainant against a subcontractor, the question of when the statute of limitations begins to run against the general contractor again involves a determination of when the act upon which the complaint is based occurs. However, in this instance the operative act differs because of the contractual relationship of the parties. The general contractor has entered into contracts with the various subcontractors. The commission of the act in this case occurs when the subcontractor tenders performance and actually completes the work. Therefore, the statute of limitations begins to run against the general contractor at the time the subcontractor finishes the job, which may be substantially sooner than when the homeowner occupies the structure or discovers a defect.

As you can see, the situation may arise in which the homeowner’s complaint either against the general contractor or subcontractor is timely, but in which the general contractor may be barred from filing a complaint against the subcontractor. This result is not inconsistent and was, in fact, recognized by the Court in Lyon, supra. This conclusion obviously places upon the general contractor the duty to monitor the work of the subcontractors that have been engaged. That, however, is consistent with the contractual obligations that the general contractor and the subcontractor have assumed and owe to each other.

Id. (Emphasis added.) In this case, it is undisputed that Empire completed its work in November 2005. The complaint was filed in May 2008, by Mr. Nikolaus on behalf of Nikolaus, the general contractor for the construction of the home. It was incumbent upon Nikolaus, as the general contractor, to oversee and monitor Empire’s work. Nikolaus, as opposed to a typical homeowner, was in the position of being ever present at the jobsite, and possessed the expertise necessary to determine whether deficiencies with Empire’s work existed from the time Empire completed its work. In fact, it was Nikolaus’ duty as the general contractor to identify and address any defects during construction, as Nikolaus is ultimately responsible for all of the construction on the jobsite. Based on the above, IT IS ORDERED VACATING the hearing in the above-captioned matter, and recommending that the matter be DISMISSED, the complaint having been filed beyond the two year statutorily prescribed time frame for the filing of ROC complaints. Done this day, June 16, 2009.

______________________________________ Sondra J. Vanella Administrative Law Judge

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

William A. Mundell, Director Registrar of Contractors c/o Legal Department 3838 North Central Avenue Phoenix, AZ 85012

By ___________________________

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