ALJDEC decisions subject to certification as final

08F-M0247-ROC · Registrar of Contractors · 2008-05-28

STATE OF ARIZONA IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: May 8, 2008 APPEARANCES: Complainant: Jarrid Kopras appeared and was represented by counsel, Jim Csontos. Respondent: Larry Gaston, member and qualifying party, appeared, pro per. ADMINISTRATIVE LAW JUDGE: Brian E. Smith _____________________________________________________________________ Evidence and testimony were presented and, based on the entire record[1] 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 April 2, 2008. 2. Complainant Jarrid Kopras (“J. Kopras”) is the owner of a residence located at 11203 N. Crestview Drive, Fountain Hills, Arizona (“premises/project”). 3. Respondent Vitec General Contracting and Design, LLC (“Respondent”) is a limited liability company which holds Arizona Contractor’s License No. 207641, Class B (General Residential) issued by the Registrar of Contractors (“ROC”) on June 8, 2005. Larry Cecil Gaston III (“Gaston”) is a member and the qualifying party for the license. A review of the licensing database maintained by the ROC indicates that Respondent’s license was suspended January 22, 2007 and lifted March 6, 2007 (06-2411), July 1 through August 14, 2007 (non-renewal); August 22, 2007 and lifted November 13, 2007 (07-1444) and October 12 – 29, 2007 (lack of bond). 4. Complainant filed a complaint with the ROC on August 16, 2007 wherein he alleged, inter alia, that he contracted with Respondent September 15, 2005 to construct the project within 550 days and that Respondent performed work on the project while its license was suspended on two occasions. Complainant further alleged, without limitation, that his “primary concern is that [Respondent] built our home without a proper license and without using licensed subcontractors” which violated various provisions of A.R.S. Sec. 32-1154A. 5. Complainant filed a request for hearing on September 24, 2007. 6. On January 9, 2008, the Registrar issued a CITATION AND COMPLAINT in Case No. M08-0247 charging Respondent with possible violations of ARS Sec. 32-1154A 1, 7, 14, 18, 20, 21 and 3 (namely, R4-9-108, the workmanship rule). 7. Respondent filed an answer on January 22, 2008 wherein it asserted a general denial and requested a hearing. 8. At the hearing, Complainant testified and submitted Exhibits C- through C-13 which were marked, admitted and considered. 9. Gaston testified on behalf of Respondent and submitted Exhibits R- through R-4 which were marked, admitted and considered. Exhibits R-5 through R-8 were admitted over objection. 10. On or about September 15, 2005, the parties entered into a Residential Construction Agreement (“Agreement”) whereby Respondent, as the general contractor, was to construct the subject premises for the Contractor’s Guaranteed Maximum Price (“GMP”) calculated as “Construction budget plus ten percent.” (Exhibit C-1) 11. The Agreement provided that “the Cost of the Work and the Contractor’s Fee is guaranteed by the Contractor not to exceed $1,386,880.00…subject to additions and deductions by Change Order….” The Agreement further provided that the fixed Contractor’s Fee would be $200,000.00. (Exhibit C-1) 12. Included within the scope of the Agreement was construction of the “Residence, Garages and Pool.” (Exhibit C-1) 13. The Agreement provided that the “Contractor shall reach Substantial Completion of the Work within 550 calendar days from September 15, 2005.” 14. Construction of the project commenced on or about September 15, 2005. 15. Complainant acknowledged that during the framing stage he agreed to a $109,000.00 change order which added approximately 2400 square feet to the premises above the garage and for which additional days were added to the completion time for the project. 16. Complainant denied he authorized any other change orders on the project although he acknowledged his signature appears on a May 23, 2007 Change Order 39 which referenced stone work for $8,712.00. (Exhibit R-8) 17. On July 2, 2007, a Default Judgment against Gaston and his wife, Dorra Meeli Gaston, individually and as husband and wife, dba Respondent, was entered in the Downtown Justice Court in Case No. CC2007-062252 (TJ2007- 005915) brought by the Registrar of Contractors.[2] 18. Respondent performed and/or caused to be performed by subcontractors work on the project through August 10, 2007. At that time, Complainant served upon Respondent a Notice of Default (Exhibit C-2) wherein were set forth numerous alleged violations of the Agreement including, without limitation, failure to: timely complete the project within 550 calendar days, conform to plans, provide certain information and/or documentation pertaining to subcontractors and comply with the State’s licensing requirements as they pertained to Respondent and its subcontractors. Annexed to the Notice of Default was a list of defects Complainant contended were present as of August 8, 2007 which included, inter alia, a leaking roof. 19. Pursuant to the express terms of section 4.2.9 of the Agreement, Complainant provided Respondent three (3) days to remedy its defaults. (Exhibit C-1) 20. Respondent failed to remedy the alleged defaults within the referenced three day period as a result of which Complainant terminated the Agreement and installed security on the project to prevent theft and vandalism. In light of the Notice of Default and failure to remedy the defaults, Respondent never performed any further work on the project after August 10, 2007. 21. During the course of its performing and/or causing work to be performed on the project between September 15, 2005 and August 10, 2007, the date of the Notice of Default, Respondent’s license was suspended January 22, 2007 through March 16, 2007 and July 1, 2007 through August 14, 2007. 22. Complainant testified that he conferred with several subcontractors which worked on the project and learned that the framers, electrician and roofer were unlicensed. 23. Complainant further testified that subsequent to August 10, 2007, he was required to retain and pay subcontractors to perform substantial work to complete the project which included, without limitation, roofing, paint, framing and grading in a total estimated amount of $37,536.00. (Exhibits C-8 through C012) Complainant also related that he was required to pay directly to a subcontractor the sum of $4,800.00 for cabinets for which he had previously paid Respondent which had not been remitted to the subcontractor by Respondent. (Exhibit C-7) According to Complainant, the foregoing costs are not representative of all completion costs he incurred. 24. Complainant further testified that he introduced several subcontractors to Respondent who then contracted with them to perform work on the project. Complainant asserts he was unaware any of these subcontractors was unlicensed. 25. Gaston testified that Complainant ran the project as an “owner/builder” with Respondent, knowingly brought unlicensed contractors to the project and essentially required Respondent to use them contrary to its professional recommendations. Notwithstanding such assertion, Gaston acknowledged that Respondent had the “ultimate responsibility” for the project as the general contractor. 26. Gaston further testified that he was not actually running the subcontractor crews who were actually being supervised by Complainant who did not want the project shut down. Notwithstanding such contention, Gaston admitted signing the contracts between Respondent and the subcontractors although he also testified that Complainant paid some of the subcontractors directly. 27. According to Gaston, certain of the subcontractors used on the project, e.g., cabinets, painters and tile setters, were not required to be licensed. 28. Gaston testified that the framers on the project independent contractors, not employees of Respondent, who he believes were licensed. 29. Gaston further testified that Respondent’s license was reinstated approximately eight days after receipt of the Notice of Default and that upon reinstatement he sent a notice regarding same to Complainant and advised that Respondent would perform the necessary remedial work. 30. Gaston denied Complainant ever asked Respondent to provide copies of bids submitted by contractors and/or contracts between it and the subcontractors. Gaston acknowledged that Respondent never provided Complainant with any subcontractor bids and/or invoices and asserted that Complainant knew what all Agreement costs were. However, Complainant contends that his February 20, 2007 email to Gaston (Exhibit C-13) evidences at least one such request. 31. Gaston asserted that the pool was not within Respondent’s scope of work under the Agreement and that Respondent was not paid to build it. However, Gaston admitted he signed a contract for the pool to be built, albeit reluctantly, and had paid pool subcontractors approximately $10,000.00 as of the date Respondent was last on the project. 32. Complainant acknowledged that after the Notice of Default he acted as owner/builder on the project and used some of Respondent’s unlicensed subcontractors, e.g., electrical, stucco and painting, to complete the project. .

APPLICABLE LAW The CITATION AND COMPLAINT issued by the Registrar of Contractors in Case No. M08-0247 charged Respondent with possible violations of A.R.S. §32- 1154A 1, 7, 14, 18, 20, 21 and 3 (namely R4-9-108). 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. …

14. Knowingly entering into a contract with a contractor for work to be performed for which a license is required with a person not duly licensed in the required classification. …

18. Contracting or offering to contract or submitting a bid while the license is under suspension or while the license is on inactive status. … 20. Subsequent discovery of facts which if known at the time of issuance of a license or the renewal of a license would have been grounds to deny the issuance or renewal of a license.

21. Having a person listed on the license who is listed on any other license which is under suspension or revocation. … 3. Violation of any rule adopted by the Registrar. A.C.C. R4-9-108 is named as the rule violation charged pursuant to A.R.S. §32-1154A (3). Rule R4-9-108 provides that all work shall be done in a professional and workmanlike manner and in accordance with any applicable building codes and professional industry standards. … … 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, Complainant 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. It is determined and concluded that Complainant established by a preponderance of credible, probative and relevant evidence that Respondent violated ARS Section 32-1154A (1) when it abandoned and/or refused to perform its obligations under the parties’ Agreement. In this instance, Respondent failed and/or refused to comply with the demands set forth in Complainant’s Notice of Default as is expressly provided for in Section 4.2.9 of the Agreement. Such refusal was without legal excuse and, therefore, constitutes a violation of ARS Sec. 32-1154A (1). 5. It is further determined and concluded that Complainant established by a preponderance of credible, probative and relevant evidence that Respondent violated ARS Sec. 32-1154A (14) when it knowingly entered into contracts with unlicensed subcontractors to perform work on the subject project. Although such subcontractors were not specifically named, the weight of the evidence established that at least the electrician and framers providing work on the project for Respondent were unlicensed. 6. This tribunal further determines and concludes that Complainant established by a preponderance of credible, probative and relevant evidence that Respondent performed and/or caused to be performed contracting work on the project while its license was suspended during the periods January 22, 2007 through March 16, 2007 and July 1, 2007 through August 14, 2007 in violation of A.R.S. §32-1154A (18). 7. This tribunal further concludes that the violations set forth in Conclusions of Law 4, 5 and 6 were wrongful and, together with Complainant’s having to incur significant expense to complete the project, resulted in the substantial injury to Complainant. Therefore, violations of A.R.S. §32-1154A (7) have been proven as charged in the instant Citation. 8. It is further determined and concluded that Complainant failed to establish by a preponderance of credible, probative and relevant evidence that Respondent violated A.R.S. §32-1154A (20), (21) and (3). 9. This tribunal further determines and concludes that the prior suspensions of Respondent’s license in Case Nos. 06-2411 and 07-1444 shall serve as factors in aggravation in this matter.

RECOMMENDED ORDER On the basis of the foregoing, IT IS RECOMMENDED that Respondent’s Class B License No. 207641 be revoked.[3] Done this day, May 28, 2008.

______________________ Brian E. Smith Administrative Law Judge

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

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

By ______________________ ----------------------- [1] The record consists of those documents found within the Registrar of Contractors’ file, the content of which the Administrative Law Judge took Administrative notice, the exhibits offered by the parties and admitted into evidence and the digital record of the proceedings under A.A.C. R2-19- 121. [2] The nature and substance of the complaint in this matter is not set forth in the Default Judgment nor was it otherwise addressed by Complainant. [3] 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