ALJDEC decisions subject to certification as final

08F-G0818-ROC · Registrar of Contractors · 2008-12-01

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: November 12, 2008 APPEARANCES: Complainants Carin and Dwayne Fisher appeared on their own behalf. John Vincent appeared on behalf of Respondent R D C Group, L.L.C. ADMINISTRATIVE LAW JUDGE: Sondra J. Vanella _____________________________________________________________________ The issue presented by this matter is whether Respondent R D C Group, L.L.C. (“RDC”) is subject to discipline for acts or omissions in violation of A.R.S. § 32-1154(A). Based on the evidence of record, the Administrative Law Judge makes the following Findings of Fact, Conclusions of Law and Recommended Order: FINDINGS OF FACT RDC is the holder of a Class KB-02 license (No. 199273) issued by the Registrar of Contractors (“ROC”). John Vincent is RDC’s qualifying party and member. On or about May 4, 2006, Complainants Dwayne and Carin Fisher signed a contract with RDC for RDC to furnish the “labor, material, equipment and services for the construction” of a manufactured “kit house” in New River, Arizona. See Exhibit 3. The house was to be manufactured by Maple Homes. The Fishers’ contract price with RDC was $249,661.00. Id. The contract specifies the following: III. A. 3. PERMITS, PLANS, ENGINEERING & ARCHITECTURAL FEES, UTILITY CONNECTIONS FEES AND SPECIAL TESTING FEES: Client is responsible for retaining architectural services and for all costs associated with the same. This Agreement does include the cost of coordinating or submitting any permits, fees, testing and/or other services, including any services required to assist architect in completion of the plans or obtaining city or county approval of the same. III. E. 4. CHANGES REQUIRED BY PLAN CHECKERS OR FIELD INSPECTORS: Any increase in the Scope of Work set forth in the Contract Documents, which is required, by plan checkers or field inspectors with city or county building/planning departments will be treated as Additional Work to this Agreement for which the Contractor will issue a Change Order.

Id. (Emphasis added.) 4. On or about November 21, 2007, the Fishers filed a complaint against RDC with the ROC. The complaint alleges in pertinent part, “John Vincent (RDC Group) proposed a fraudulent building budget to obtain a signed contract . . .” 5. Mr. Fisher testified that he and his wife met with Mr. Vincent in May 2006 to discuss the construction of their home. The Fishers provided Mr. Vincent with a set of plans dated April 12, 2006. Mr. Fisher testified that the parties discussed the plans in detail and that the Fishers provided to Mr. Vincent a list of all interior upgrades that the Fishers wanted in the home, including cabinetry, lighting, and flooring. The Fishers also provided a list of manufacturers, and the costs for both material and labor for these items, based upon their research. The Fishers had approval for a loan in the amount of $400,000.00. This amount was to encompass the purchase of the kit home, as well as the construction of the home. Mr. Fisher testified that Mr. Vincent provided them a Cost Breakdown totaling $249,661.00, upon which the contract price was based. See Exhibit 2. 6. Mr. Fisher testified that Mr. Vincent had indicated that he had constructed many homes in the area, and that he resides in the area, thus he was well versed in rural building issues, such as utilities, septic systems, wells, and grading. Mr. Vincent had visited the site, as well. Mr. Fisher testified that upon the commencement of the site preparation, Mr. Vincent requested that the Fishers pay additional monies that had not been agreed upon. Mr. Fisher testified that Mr. Vincent advised them that utilities would cost $1,500.00, however, once the utilities were completed, the cost was $4,345.00. Mr. Fisher questioned Mr. Vincent about the increase, and Mr. Vincent responded by stating that the cost was more than what was estimated, however, a change order was not executed. Given that the parties’ contract requires change orders to be in writing, it was incumbent upon RDC to submit a written change order to the Fishers for the increased amount.[1] 7. Mr. Fisher further complained to Mr. Vincent about an $1,800.00 charge for a certified soils report that was not in the budget. See Exhibit 5. Mr. Fisher contended at hearing that the county did not require such a report. However, the evidence demonstrated that such a report was in fact required to determine whether the soil at the site could be utilized for backfilling. Based on this evidence, the Administrative Law Judge finds that the cost for the soils report falls within the scope of Section III. E. 4. of the parties’ contract. 8. Of all the issues that arose between the parties, the most significant was the septic system at the property. Mr. Fisher complained that Mr. Vincent told him that a standard septic system could be installed, and that the cost for such system was $4,500.00. However, once the work commenced for the septic system, Mr. Vincent advised the Fishers that it would cost an additional $900.00 for a “hard dig”, and further that the county required the installation of an alternative septic system. Mr. Vincent advised the Fishers that the cost for such system would range between $12,000.00 and $30,000.00, an amount significantly greater than the amount budgeted for a standard system. At that point, the Fishers realized they were already $20,000.00 over budget, and requested a meeting with Mr. Vincent. Mr. Vincent advised them at the meeting that in order to stay within the Fishers’ budget, the Fishers would have to compromise on items such as cabinetry and flooring. At this point, the Fishers realized that RDC could not construct the home as agreed upon. According to Mr. Vincent, the Fishers went into “panic mode”, and “there was nothing else [he] could do except cancel the contract”. 9. The Administrative Law Judge finds, based on the evidence presented, that the additional cost for the alternative septic system is a cost contemplated by Section III. E. 4. of the parties’ contract, and, accordingly, that the Fishers were responsible for that cost. 10. While the Administrative Law Judge is not unsympathetic to the Fishers’ situation, RDC’s cancellation of the contract was not a wrongful act. It is true that the cost of the septic system significantly exceeded the budgeted cost; however, the contract contemplated the possibility of such an occurrence, and RDC cannot now be held responsible for the fact that as a result of that occurrence the Fishers were no longer able to stay within their budget. CONCLUSIONS OF LAW In this proceeding, the Fishers bear the burden to prove, by a preponderance of the evidence, that RDC is subject to discipline for violations of A.R.S. § 32-1154(A)(7), (A)(9), (A)(13), and/or (A)(16) as charged by the ROC in its June 3, 2008 Citation and Complaint. See Arizona Administrative Code (“A.A.C.”) R2-19-119. 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). The Administrative Law Judge concludes that the Fishers met their burden of proof as to one of the ROC’s charges. Under A.R.S. § 32-1154(A)(9), a contractor is subject to discipline for “failure in a material respect . . . to complete a construction project or operation for the price stated in the contract, or in any modification of the contract.” The Administrative Law Judge concludes, based upon the credible evidence of record, that the Fishers failed to establish that RDC failed to complete the construction for the price stated in the contract. Notwithstanding the fact that the contract was a fixed price contract, it also specified that the Fishers were “responsible for retaining architectural services and for all costs associated with the same” and “any increase in the Scope of Work set forth in the Contract Documents, which is required, by plan checkers or field inspectors with city or county building/planning departments”. The credible evidence of record established that a soils report was required by the county, and that the county required an alternative septic system, and that pursuant to the terms of the parties’ contract, all of these costs were to be borne by the Fishers. Furthermore, construction of the home had not even begun, and as such, it cannot be said that RDC failed to complete the construction for the price stated in the contract. Therefore, the Administrative Law Judge concludes that RDC did not violate A.R.S. § 32-1154(A)(9). Under A.R.S. § 32-1154(A)(13), specifically, A.R.S. § 32-1124(B), a contractor is required to include their contracting license numbers, preceded by the letters “ROC,” on all documents utilized while engaged in construction-related activities. This requirement is applicable to business cards, sales literature, contract documents, invoices, and other forms utilized by a contractor. The Fishers did not address this alleged violation, however, a copy of the parties’ contract was submitted into evidence (Exhibit 3), and that document does not contain RDC’s license number, nor does it contain the letters “ROC”. Therefore, the Administrative Law Judge concludes that RDC is in violation of A.R.S. § 32- 1154(A)(13). Under A.R.S. § 32-1154(A)(16), a contractor is subject to discipline for “false, misleading or deceptive advertising whereby any member of the public may be misled and injured.” The Administrative Law Judge concludes, based upon the credible evidence of record, that the Fishers failed to establish that RDC advertised in a false, misleading, or deceptive manner. Therefore, the Administrative Law Judge concludes that RDC did not violate A.R.S. § 32-1154(A)(16). Under A.R.S. § 32-1154(A)(7), a contractor is subject to discipline for “the doing of a wrongful or fraudulent act . . . as a contractor resulting in another person being substantially injured.” The Administrative Law Judge concludes, based on the weight of the credible evidence presented at hearing, that the Fishers failed to establish that RDC committed wrongful acts that substantially injured them. Therefore, the Administrative Law Judge concludes that RDC did not violate A.R.S. § 32- 1154(A)(7). Based upon the above violation of the provisions of A.R.S. § 32- 1154(A), grounds exist to impose discipline against RDC’s license. Upon consideration of all of the facts and circumstances presented by this case, the Administrative Law Judge concludes that RDC’s Class KB-02 license should be suspended for a period of one day. RECOMMENDED ORDER The Administrative Law Judge makes the following Recommended Order: RDC’s Class KB-02 license (No. 199273) shall be suspended on the effective date of the Order entered in this matter for a period of one (1) day. 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, December 1, 2008.

______________________________________ Sondra J. Vanella Administrative Law Judge

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

Armando Contreras, Director Registrar of Contractors 3838 North Central Avenue Phoenix, AZ 85012

By ___________________________

----------------------- [1] That being said, RDC’s failure to prepare the change order was not necessarily a breach of the parties’ contract. In view of the cancellation of the contract, it cannot be said that RDC would ultimately have exceeded the contract price.

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