ALJDEC decisions subject to certification as final

09F-A0212-ROC · Registrar of Contractors · 2009-10-06

STATE OF ARIZONA IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: September 17, 2009 APPEARANCES: Complainant: Kelly Keller appeared, pro per. Respondent: Respondent failed to appear either through authorized representative or counsel. ADMINISTRATIVE LAW JUDGE: Brian E. Smith _____________________________________________________________________ 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 via videoconference at the time, date and place set forth in the Notice of Hearing issued by the Registrar of Contractors (“ROC/ Registrar”) on July 27, 2009. 2. Complainant Kelly Keller (“Complainant”) is the owner of a residence located at 3015 Hozoni Road, Prescott, Arizona (“premises/project”). 3. Respondent J E Landis Construction, Inc. (“Respondent”) is a corporation which holds Arizona Contractor’s License No. 204973, Class B- (General Residential) issued by the ROC on February 27, 2005. James Edmund Landis is a corporate officer and the qualifying party for the license. A review of the licensing database maintained by the Registrar indicates that this license was suspended for one day, March 1, 2007, for non-renewal and on October 29, 2008, until it complies with a Registrar’s Order issued in Case No. A08-0056. This license was also revoked October 29, 2008, for failure to pay a $250.00 civil penalty in Case No. A08-0056. 4. Complainant filed a Complaint with the ROC on November 24, 2008, wherein he requested the “termination of contractor” regarding a room addition/remodel. 5. Complainant filed a request for hearing with the ROC on December 8, 2008. 6. On April 13, 2009, the Registrar issued a Citation and Complaint in Case No. A08-0212 charging Respondent with possible violations of A.R.S. § 32-1154 (A) (1), (2), (7) and (13) (namely, A.R.S. § 32-1152). 7. Respondent filed an Answer on April 27, 2009, wherein it asserted a general denial of all allegations and affirmatively asserted that there were “no workmanship issues, or delays on the project.” 8. At the hearing, Complainant credibly testified and submitted Exhibits C-1 through C-10 which were marked, admitted and considered. 9. Respondent failed to appear either through any authorized representative or counsel. 10. In April 2008, Complainant contracted with Respondent to perform a total remodel of the premises and construct an addition thereto for a total contract price of $327,000.00.[1] 11. Complainant terminated Respondent from the project on November 18, 2008, for breach of contract. (Exhibit C-5) 12. Respondent failed to complete certain items on the project and/or performed them in an unworkmanlike manner which required corrective work to meet applicable Yavapai County building codes. (Exhibits C-3 and C- 10) 13. Complainant incurred costs to complete and/or correct certain work on the project including, without limitation, numerous items of framing ($7,659.50) and tile ($1,025.00) which was performed by All About Remodeling, Inc. and Greg Goligoski Custom Tile, respectively. (Exhibit C- 3) 14. It was uncontroverted that Respondent failed to follow applicable plans and install two beams in the front entry and living room and two posts in the living room. (Exhibit C-3) 15. Respondent failed to request an inspection of the project’s block wall which thereafter required Complainant to have the wall x-rayed to verify its compliance with code at a cost of $800.00. (Exhibit C-7) 16. Complainant contended that Respondent failed to advise him that the upgraded dual pane bedroom windows which were installed were not required by applicable fire and building codes and, as a result, Complainant would not have incurred a cost of $2,500.00 to replace them had he known this. 17. Complainant also asserted that Respondent unjustly charged $1,500.00 over and above the bid/contract price for the installation of hard-wired smoke detectors which Complainant later learned, upon discussion with the electrical subcontractor which installed them, only charged Respondent $250.00. Complainant further argued that such smoke detectors were required by Yavapai County building and fire codes only upon installation of the above-referenced dual pane windows. 18. Complainant further contended that Respondent failed to advise Complainant that the remodel/addition would require a new septic system and include that item in the bid/contract. As a result, Complainant paid Respondent $15,341.78 over and above the bid/contract price to have the new septic system installed. (Exhibit C-9) 19. Complainant also asserted that he paid Respondent $19,233.00 over and above the bid/contract price for unspecified and undocumented materials. (Exhibit C-8) Complainant acknowledged that he did not know how or whether Respondent applied these funds to the project. 20. Although no documentary evidence of same was produced by Complainant, it was uncontroverted that Complainant paid Respondent approximately $135,600.00 of the $327,000.00 bid/contract amount, the $191,400.00 difference of which Complainant paid other contractors to finish the project. 21. At the time of Respondent’s termination, a substantial amount of construction items were incomplete and/or in an unacceptable condition which required remedial work. These items had been left uncorrected and/or incomplete by Respondent and constitute a constructive abandonment of the project. 22. The above-described prior license revocation does not preclude the Complainant from pursuing his administrative remedies or prevents the Registrar from conducting these administrative disciplinary proceedings which are expressly authorized by statute.[2] However, the present posture of the Respondent’s cited license does not enable the restoration of such license even if any otherwise appropriate remedial or payment conditions in the nature of restitution were to be provided and complied with by Respondent. Consequently, no such conditions need be or should be formulated for inclusion in the Registrar’s Order in this matter. Instead, Respondent’s cited license should be revoked in this case.

APPLICABLE LAW The Citation and Complaint issued by the Registrar charged Respondent with possible violations of A.R.S. § 32-1154 (A) (1), (2), (7) and (13) (namely, A.R.S. § 32-1152). Those statutory sections required that a holder of a license or a person listed on a 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.

2. Departure from or disregard of plans or specifications or any building codes of the state or any political subdivision of the state in any material respect which is prejudicial to another without consent of the owner or the owner’s duly authorized representative and without the consent of the person entitled to have the particular construction project or operation completed in accordance with such plans and specifications and code.

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7. The doing of a wrongful or fraudulent act by the licensee as a contractor resulting in another person being substantially injured.

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13. Failure in any material respect to comply with the provisions of this chapter.

A.R.S. § 32-1152 is the statute named as the rule violation charged pursuant to A.R.S. § 32-1154 (A) (13). That statute pertains to bonds and provides, in pertinent part, that “[n]o contractor’s license may be renewed unless the applicant’s surety bond or case deposit is in full force and effect.”

CONCLUSIONS OF LAW 1. The Registrar 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 A.R.S. § 32-1154 (A) (1) by failing to fully complete and/or performing in an unworkmanlike manner those items present at the time Complainant terminated the parties’ bid/contract on November 18, 2008, including, without limitation, framing and tile work as set forth in Findings of Fact 12 and 13, thereby constructively abandoning the project. 5. It is further determined and concluded that Complainant established by a preponderance of credible, probative and relevant evidence that Respondent violated A.R.S. § 32-1154 (A) (2) by failing to follow applicable plans and specifications pertaining to two beams in the front entry and living room and two posts in the living room as set forth in Finding of Fact 14. 6. It is further determined and concluded that Complainant established by a preponderance of credible, probative and relevant evidence the right to restitution in the amount of $9,484.50, the charges incurred by Complainant for retention of third party contractors to perform corrective work on the framing ($7,659.50), tile ($1,025.00) and block wall x-ray ($800.00) as set forth in Findings of Fact 13 and 16.[3] 7. This tribunal further determines and concludes that, based on the violations set forth in Conclusions of Law 4, 5 and 6 above, Complainant established by a preponderance of credible, probative and relevant evidence that Respondent violated A.R.S. § 32-1154 (A) (7) as charged in the issued Citation. 8. It is further determined that Complainant failed to establish by a preponderance of credible, probative and relevant evidence that Respondent violated A.R.S. § 32-1154 (A) (13) and (A.R.S. § 32-1152). 9. This tribunal further determines and concludes that the weight of credible, probative and relevant evidence established that Respondent failed to act in good faith during the construction of the project. Such absence of good faith is further manifested by Respondent’s failure to appear at the instant hearing without legal or reasonable excuses. 10. It is further determined and concluded that Respondent prior revocation in Case No. A08-0056 shall serve as a factor in aggravation in this matter.

RECOMMENDED ORDER On the basis of the foregoing, IT IS RECOMMENDED that, commencing on the effective date of the Registrar’s Order entered in this matter, the Class B- license of Respondent be revoked.[4] Done this day, October 6, 2009.

________________________ Brian E. Smith Administrative Law Judge

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

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

By ___________________________ ----------------------- [1] The instant Complaint set forth the contract amount at $295,426.14. Complainant did not introduce a copy of the bid/contract into evidence to verify the exact amount thereof. [2] See A.R.S. § 32-1154 (C). [3] Although further pecuniary losses were asserted by Complainant, e.g., $19,232.70 for undocumented materials (Finding of Fact 19), the evidence was inconclusive with respect to whether such funds were actually expended by Respondent on items installed in the premises. No valid evidence was presented to establish that the exact amount or even an approximate quantum of such funds were not utilized by Respondent on the project and, therefore, no violation of A.R.S. § 32-1154 (A) (7) could be found regarding these funds. Similarly, no violation of subsection (A) (7) could be found regarding the $1,500.00 charged by Respondent for the hard-wired smoke detectors. While Complainant contends he was overcharged for such items, he apparently agreed to pay such sum at the time billed and did not contest the same until subsequently speaking to the electrical subcontractor who performed the work. Though the fairness of Respondent’s contract price for the smoke detectors is subject to debate, businesses are free to charge whatever they want for their goods and services and customers are free to shop around for the best price. In this instance, the mere fact Respondent charged significantly more than its subcontractor, without more, does not equate with any violation of the State’s contracting laws. Lastly, Complainant’s argument that he should be reimbursed for the cost of installing a new septic system is without merit. Although it would be a better business practice and more prudent of Respondent to advise Complainant of the need for and cost of a new septic system given the scope of the work to be performed under the subject bid/contract, the fact remains that such system was apparently required by code and Complainant would have had to pay someone to install it. This is not an instance where Respondent realized a windfall at Complainant’s expense as the latter received the system for the amount paid. Thus, Complainant is not entitled to restitution for the $15,341.78 septic system cost. [4] 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