ALJDEC decisions subject to certification as final

08F-M0198-ROC · Registrar of Contractors · 2008-07-22

STATE OF ARIZONA IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: July 22, 2008 APPEARANCES: Complainants were represented by David Allegrucci, Esq.; No one appeared on behalf of Respondent. ADMINISTRATIVE LAW JUDGE: Michael G. Wales _____________________________________________________________________ Evidence and testimony were presented and, based on the entire record in this matter, the following Findings of Fact, Conclusions of Law and Recommended Order are made:

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 June 13, 2008. 2. Complainants Leonard Baker and Patrica Baker (“Complainants”) are owners and occupants of a residence located at 7750 E. Broadway Road, Unit 16, Mesa, Arizona for which they sought to have a room addition constructed (“the project”). 3. Respondent Envision Custom Development, LLC (“Respondent”) is a limited liability company which holds Arizona Contractor’s License No. 180332, Class B- (General Residential Contractor) issued by the Registrar of Contractors (“ROC”) on November 24, 2002. Richard Michael Phares (aka “Rick Phares”) is a member of the limited liability company and is the qualifying party for the license. 4. Complainants filed a complaint with the ROC on September 24, 2007, wherein they alleged that Respondent abandoned a construction contract with Respondents; failed to return $5,000.00 given to Respondent as a deposit on the contract; and failed to provide construction drawings as agreed or, in the alternative, refund the $525.00 paid to Respondent by Complainants for the construction drawings. 5. On October 3, 2007, Complainants contacted the Registrar of Contractors and requested a formal citation and complaint be issued. 6. On March 26, 2008, the Registrar issued a CITATION AND COMPLAINT in Case No. M08-0198 charging Respondent with possible violations of A.R.S. §32-1154A (1), (7) and (13)(namely, A.R.S. §32-1124 (B)). 7. Respondent filed an answer on April 8, 2008 wherein it asserted that no construction contract was ever formed with Complainants; Complainants’ monies were paid to Rick Phares personally and Rick Phares has filed bankruptcy; and Respondent never intended to defraud the Complainants. Respondent further alleged that, because the qualifying party, Rick Phares, had filed a petition in bankruptcy with the U.S. District Court, Respondent’s attorney had advised Respondent not to return the Complainant’s $5,000.00. 8. The commencement of the instant hearing was delayed 15 minutes to allow for the late arrival of an authorized representative or attorney for Respondent. Respondent failed to appear individually or by proper authorized or legal representative. After the delay, the Administrative Law Judge conducted the hearing in the Respondent’s absence. 9. At the hearing, Complainant Leonard Baker testified and submitted Exhibits 1 through 11 which were marked, admitted and considered.

10. From the evidence elicited at the hearing, the following salient facts are important to note:

The Construction Drawings a. On or about August 7, 2006 the parties entered into a verbal agreement wherein Complainants would pay Respondent $525.00 and Respondent would provide construction drawings for a room addition at the project. b. On August 21, 2006 Complainants paid Respondent, by way of check made out to Envision Custom Development, LLC, the $525.00 for the construction drawings (Exhibit 5). c. On or about June 1, 2007 Respondent provided the construction drawings to Complainants by way of attachments to an e-mail. The attachments were 8½ by 11 inches and could not be reproduced for use in construction. Complainants requested the construction drawings in a standard printed format so that they could reproduce the larger construction drawings and provided the reproductions to the construction trades who would be working on the room addition. Respondent failed to provide any further construction drawings and failed to refund the monies Complainants paid for the construction drawings when so requested.

The $5,000.00 Deposit d. On or about August 18, 2006, Respondent submitted a bid to Complainants, in the amount of $17,235.00 (Exhibit 2) to construct the room addition at the project. The bid was not signed, and not accepted, by Complainants. e. Without a written contract; without any verbal agreement; without any meeting of the minds between the parties so as to form a construction contract; and while the cost of the project was still under discussion between the parties, Complainants paid Respondent, by way of two checks made out to Rick Phares on April 27, 2007 and May 3, 2007, $5,000.00 as a deposit on future construction services (Exhibit 6). f. On June 1, 2007, Respondent submitted a revised bid to Complainants in the amount of $26,881.00 (Exhibit 2) to construct the room addition at the project. Complainants were alarmed at the increase in the estimate. The bid was not signed, and not accepted, by Complainants. g. On June 5, 2007 the parties met to discuss the project. The evidence presented at hearing indicates that no meeting of the minds, and certainly no written or verbal contract, was arrived at between the parties. h. During the following months, the parties exchanged a series of e-mails reiterating their disagreements as to the rights and responsibilities of each party, finally culminating in the filing of the complaint against Respondent by Complainants with the Registrar of Contractors on September 24, 2007. i. As of September 24, 2007, communication between the parties had ceased; the parties had never come to agreement on the terms of any construction contract; and Respondent had not returned the $5,000.00 deposit to Complainants. j. No work was ever performed at the project by Respondent. h. On October 18, 2007 Respondent’s qualify party, Richard Michael Phares filed a Petition for Chapter 7 Bankruptcy in U.S. District Court, under case no. 2:07-bk-05450-CGC seeking the discharge of his personal unsecured debts. The personal debts were discharged by the U.S. District Court on June 20, 2008. There is no record of any filing for bankruptcy protection by Respondent, a separate and distinct legal entity from Mr. Phares.

APPLICABLE LAW 1. The CITATION AND COMPLAINT issued by the Registrar of Contractors in Case No. M08-0198 charged Respondent with possible violations of A.R.S. §32-1154A (1), (7) and (13)(specifically A.R.S. §32- 1124(B)). Those statutory sections require that the holder of a license or person listed on the license shall not commit the following:

1. Abandonment of a contract or refusal to perform after submitting a bid on work without legal excuse for the abandonment or refusal.

…

7. The doing of a wrongful or fraudulent act by the licensee as a contractor resulting in another person being substantially injured. … 13. Failure in any material respect to comply with the provisions of this chapter.

2. A.R.S. §32-1124(B) is named as the statutory violation charged pursuant to A.R.S. §32-1154A (13). That statute provides that every license and/or renewal must be signed by the Registrar or the Registrar’s designated representative and the licensee. It further provides that every license number must be preceded by the acronym “ROC” and be posted in a conspicuous place on premises where any work is being performed, on all written bids submitted by the licensee and on all advertising, letterheads and other documents used by the licensee in the conduct of business.

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 failed to establish by a preponderance of credible, probative and relevant evidence that Respondent violated A.R.S. §32-1154A(1) as it pertains to any construction contract, because no evidence was presented that any written or verbal construction contract was ever formed between the parties. A contract requires a “meeting of the minds” as to material terms of any agreement. Likewise, formation of a contract requires an offer and acceptance thereof. The parties were constantly in negotiations as to the terms, including price, responsibilities for trash dumpsters, obtaining permits, etc. right up until communications stopped. No bid was ever accepted, no contract was formed, and thus no abandonment occurred. 5. This tribunal does determine and conclude, however, that Complainants did establish by a preponderance of credible, probative and relevant evidence that Respondent violated A.R.S. §32-1154A(1) as it pertains to the verbal contract between the parties to provide Complainants with construction drawings in return for $525.00. Implied in such an agreement is the requirement that the construction drawings will be fit for their intended purpose, i.e, for construction trades to perform their respective construction tasks off of the plans. The construction drawings provided to Complainants via attachments to an e-mail were not fit for the intended use of construction drawings. When a reasonable request for the construction drawings in an appropriate printed, or printable, format was made, Respondent failed to fulfill the request. 6. This tribunal further determines and concludes that Complainants did establish by a preponderance of credible, probative and relevant evidence that Respondent violated A.R.S. §32-1154A(7) as it pertains to Respondent's wrongful failure to provide the construction drawings in an acceptable format and, as it pertains to Respondent’s wrongful failure to return Complainants deposit of $5,000.00 when an agreement could not be reached between the parties as to construction services. The fact that Complainants wrote the two checks totaling $5,000.00 to Rick Phares, rather than directly to Respondent, and the fact that Rick Phares filed for bankruptcy and had his personal debts discharged does not excuse Respondent from the wrongful conduct of failing to return the deposit. 7. Finally, it is further determined and concluded that Complainant failed to present any evidence that Respondent violated A.R.S. §32-1154A(13), namely, A.R.S. §32-1124(B). 8. As discussed above, Respondent violated the provisions of A.R.S. § 32-1154A(1) and (7), and the evidence supports a determination that in this case disciplinary action is appropriate and fully warranted. 9. The Registrar of Contractors’ authority in matters such as presented herein, includes the ability to impose restitution, in whole or in part, as a reasonable condition to reduce any possible disciplinary action against contractors. The exercise of such authority is deemed appropriate in the instant case. Therefore, based upon all the evidence, a reasonable condition in this case would consist of the payment by Respondent to Complainant of $5,525.00 as partial or full restitution. Imposing such a condition is preferable to imposing a disciplinary action against Respondent’s license without providing a condition to reduce or eliminate same. 10. The Registrar may order a “restitutionary remedy...as part of the Registrar’s regulatory authority to take appropriate disciplinary action against those who violate the licensing”...laws set forth in A.R.S. § 32-1154A (1) through (24), inclusive. An administrative award of damages is not an unconstitutional exercise of administrative authority where due process procedural rights are protected, where the authority to prohibit conduct has been well defined, as in A.R.S. § 32-1154, and where judicial review is available as provided in A.R.S. § 12-901, et seq. Sunpower of Arizona v. Arizona State Registrar of Contractors, 166 Ariz. 437, 803 P.2nd 430 (App. 1990). 11. In addition to the Sunpower case, A.R.S. § 32-1156.01 provides, in pertinent part, that “after a hearing…an administrative law judge may recommend that a licensee provide restitution to any person who is injured….by an action of the licensee.

RECOMMENDED ORDER In view of the foregoing, it is recommended that Respondent’s Class B- license shall be suspended on the effective date of the Order entered in this matter. It is further recommended that if Respondent pays or tenders $5,525.00 to Complainant, on or before the effective date of the Order entered in this matter, then the above-provided license suspension shall not take place but instead Respondent’s Class B- license shall be placed on active suspension for a period of 14 days followed immediately by a period of disciplinary probation for one year. This alternative penalty shall commence, if at all, on the effective date of the Order entered in this matter.[1]

Done this day, July 22, 2008. Office of Administrative Hearings

____________________________ Michael G. Wales Administrative Law Judge

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

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

By ___________________________ ----------------------- [1] 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

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