ALJDEC decisions subject to certification as final

2009A-49773090-ROC · Registrar of Contractors · 2011-10-17

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: September 19, 2011

APPEARANCES: Complainants appeared on their own behalf; Keith Hillock, sole Member and Qualifying Party, appeared on behalf of the Respondent LLC; the Residential Contractors’ Recovery Fund did not intervene in this matter and did not appear.

WITNESSES: Nelson Duarte Carol Brinkley-Duarte Keith Hillock

ADMINISTRATIVE LAW JUDGE: Eric A. Bryant _____________________________________________________________________

Respondent challenges a proposed payout by the Residential Contractors’ Recovery Fund (“the Fund”). The Fund has issued notice that it intends to make a payout to Complainants of $8,513.61. Respondent requested a hearing because, according to Respondent, the proposed payout amount is too high and the scope of work in Complainants’ claim to the Fund is too broad. This tribunal entered the Fund claim file received from the Registrar of Contractors into the record, including Exhibits A through AE from Complainants[1] and Exhibits R-1 through R-4 from Respondent. The claim file includes the underlying complaint file, ROC Complaint Number 09-4977, which is the basis for the payout. The parties presented evidence and testified on their own behalf. Based upon the record, the Administrative Law Judge makes the following Findings of Fact, Conclusions of Law, and Recommended Order for payout to Complainants in the amount of $6,718.62. FINDINGS OF FACT 1. Respondent Hillock Builders and Electric, LLC was the holder of license K-61.218407-D, a dual carpentry and limited remodeling contractor license issued by the Registrar of Contractors (ROC). Keith Hillock is Respondent’s sole member and was the Qualifying Party for the license. The license was placed on disciplinary suspension in February 2010 as a result of the underlying complaint (09-4977) filed by Complainants. Furthermore, the license was revoked later for failure to pay the civil penalty imposed in case 09-4977. 2. Respondent was hired to build an addition to Complainants’ home. Complainants filed the underlying complaint against Respondent in March 2009, complaining about many workmanship and disputed payment items. ROC Inspector Mark Alyea inspected the items and issued a Corrective Work Order (“CWO”) in May 2009 that found poor workmanship for six specific items named in the complaint. The CWO then ordered Respondent to correct the items “by appropriate means.” The CWO also noted items that were not ordered to be corrected. One concerned a “4x8 beam” and framing in the attic, and the other stated: “As an ROC inspector, I don’t have authority over the money disputes” between the parties. Thus, six of the complaint items, out of nine specific items in the complaint, were found to violate workmanship standards. The “money disputes” were not ruled upon in the CWO. 3. Thereafter, Complainants requested a hearing. A Citation and Complaint issued, charging Respondent with violation of various ROC statutes. Respondent failed to timely answer the Citation and Complaint; therefore, the ROC issued a Decision and Order finding Respondent in violation of the cited provisions and ordering that Respondent’s license be suspended until Respondent had “appropriately rectified the items involved and detailed in the Complaint and the [CWO].” It also ordered Respondent to pay a $250.00 civil penalty, giving Respondent until January 6, 2010, to do so. When Respondent did not pay the civil penalty, the license was revoked. Respondent performed no corrective work. 4. Complainants filed a claim with the Fund in July 2010 and provided supporting documentation. Because the contractual agreement between the parties was both written and verbal, as stipulated by the parties, many of its terms are unclear and disputed by the parties. As a consequence, the contractual disputes between the parties are difficult to decide. However, by failing to answer, Respondent has admitted the allegations in the complaint, including those based on the contractual relationship. 5. Because the scope of the violations has been raised as an issue by Respondent, it is important to note the specific violations found. Respondent’s default constitutes a finding of each workmanship allegation in the Complainant’s complaint that was verified by inspection. It also constitutes a finding of each monetary-dispute allegation based on the parties’ contract. Based on those findings, the Fund may pay for actual damages suffered by Complainants that are “a direct result” of the violations as listed in the Citation and Complaint.[2] Those violations include failing to follow plans, specifications, or building codes; poor workmanship; wrongful or fraudulent acts by Respondent; contracting beyond the scope of the license; and failure to comply with the CWO.[3] The workmanship violations include poor workmanship and failure to comply with the CWO, while the contractual violations include failure to follow the specifications in the contractual agreement between the parties. The wrongful acts that violated the statute include both workmanship deficiencies and failures to abide by contractual terms. The violation for contracting beyond the scope of the license is based on Respondent’s action in contracting beyond its limited remodeling license that caps Respondent’s per project contracting at $25,000.00. Respondent went well beyond that cap. 6. ROC Inspector Phil Coscia reviewed the claim for the Fund. He determined, based on the documentation that Complainants submitted with the claim, that the contract price total had been $51,210.00 and that Complainants had paid Respondent $46,610.00 of that price.[4] 7. Inspector Coscia then reviewed the documentation submitted by Complainants. He listed the amounts claimed by Complainants and that he found supported by the documentation according to each item, such as the roof, drywall, gable siding, and other items. He also included deductions and allowances that were claimed in the complaint and to which Respondent has admitted by his default. Inspector Coscia’s report concludes that payout to Complainants should be $10,213.61.[5] 8. At hearing, the parties addressed each item in the CWO and other items in dispute. Complainants explained the basis for their damages and provided documentation in support of their claim. Respondent disputed the scope of work for payout and Complainants’ calculation of the total contract price. Taking each item in turn, the following findings are made. 9. The parties agree that there is both a written contract and verbal agreements between them. The record contains a written statement by Complainants that Respondent verbally agreed that Complainants could bring in at their choice other contractors to perform various portions of the scope of Respondent’s work, and that Respondent would then credit to Complainants an allowance for that portion of the job. Keith Hillock agreed at hearing that this was true.[6] Roofing Work 10. The evidence shows that Respondent did some of the roofing work, but also that Complainants brought in another contractor to do roofing work. The roofing allowance in the paperwork is $2,500.00, but the parties agreed at hearing that the credit to Complainants should be $1,700.00.[7] 11. In addition, Respondent was ordered in CWO item 1 to repair a portion of the roof. Complainants submitted evidence showing that they had that work done by another contractor at a cost of $616.57.[8] However, they upgraded the materials used by the other contractor. Complainants credibly calculated the difference in the cost of the upgraded materials and request payout of $579.89 for that item.[9] The evidence supports that request. 12. Total roofing damages are therefore $2,279.89. Trim Allowance 13. The complaint alleged that Respondent failed to reimburse Complainants for a trim allowance to which they were entitled. By default, Respondent admitted this allegation and, therefore, Complainants have been damaged as a result of this violation. Additionally, CWO item 6 found that the baseboards were not completed by Respondent. At hearing, the parties presented evidence as to the amount of damages for trim work and Complainants admitted that Respondent had done some of the trim work. Therefore, based on the testimony of the parties and Exhibit E (allowance sheet), the evidence shows damages of $450.00 for failure to reimburse for trim work. Shower in Bathroom 14. The complaint alleged that Respondent had not done the framing of the shower pan, shelving, and backer board for the shower area and that this entitled Complainants to reimbursement of $1,500.00 because they had paid Respondent to do it.[10] Because that was admitted by default, Complainants have been damaged $1,500.00 due to that violation. Air Conditioner Hook Up 15. The complaint alleged that Complainants were required to pay another contractor to hook up the air conditioner when Respondent failed to do so. This cost Complainants $95.00.[11] The evidence supports this. Drywall Work 16. CWO item 2 called for repair of drywall work in the master closet. Complainants submitted bids for that work.[12] The lowest is $300.00[13] and Respondent had no evidence to rebut it. Complainants’ damages for the master closet drywall repair are $300.00. 17. CWO item 5 required substantial repair of drywall in the master bathroom built in the new addition. The complaint alleged that Respondent had damaged the cinder block wall of the home when making an opening in this area. Documentation submitted by Complainants shows that they paid a licensed drywall contractor $275.00 and $840.00 to make repairs due to that violation.[14] Based on that evidence, Complainants’ damages for drywall in the master bath are $1,115.00. 18. Total drywall damages are $1,415.00. West doorway 19. CWO item 3 required repair and completion of the west doorway into the new addition. Complainants are asking for damages based on materials only, which they have documented as $210.02.[15] The evidence supports this. Gable siding 20. Respondent installed interior siding rather than exterior siding on the exterior of the addition. CWO item 4 required repair of that condition. Complainants acquired several bids for the work,[16] chose the lowest, and had it done by a licensed contractor for $2,481.60.[17] That amount is found to the Complainants’ damages for this item. Phase II 21. What Complainants refer to as “Phase II” of the project was not completed by Respondent but was within the scope of the original contract.[18] Complainants have submitted documentation showing that it cost them $2,363.00 for demolition/framing work[19] and $1,142.44 for electrical work[20] to have it completed by others. This shows damages of $3,505.44. Summary of Damages Shown 22. The evidence shows the following damages: Roof: $2279.89 Trim $450.00 Shower $1500.00 A/C $95.00 Drywall $1415.00 West Door $210.02 Gables $2481.60 Phase II $3505.44

Total $11,936.95

Thus, the evidence shows total damages to be $11,936.95. Total Contract Price 23. In order to determine the amount of damages actually suffered by Complainants, the amount paid by Complainants to Respondent must be determined as well as the total contract price. This is necessary because if Complainants have not paid more than the total contract price to get the work repaired or completed, they have not suffered actual damages. 24. The parties have not disputed the amount paid by Complainants to Respondent. At hearing, Complainants showed that they have paid Respondent $47,210.00 for Respondent’s work.[21] 25. The parties agree that the base contract price was $51,210.00. The parties do not agree, however, on the total contract price. Respondent asserts that verbal change orders were given by Complainants for additional work, which raised the contract price. Respondent presented this additional work in Exhibit R-1 at hearing and each item was reviewed as follows. 26. Complainants admitted to responsibility for the items circled on Exhibit R-1, which amounts to $1,040.00. 27. As to the disputed additional items, the evidence shows that Respondent agreed not to charge Complainants for the sprinkler system wiring and reframing of the porch.[22] So, those charges in Exhibit R-1 are not supported. 28. In addition, the evidence as to the additional joists, which the parties went over in great detail at hearing, shows an additional price of $288.33, not what is charged in Exhibit R-1. 29. Rubbish removal was specifically excluded from the written contract, and so was outside the scope of Respondent’s work.[23] Respondent attempts to charge for rubbish removal in Exhibit R-1, but has shown no contractual agreement for such removal. Based on the testimony of the parties, this tribunal finds Complainants’ denial of any verbal contract for rubbish removal to be persuasive. 30. Exhibit R-1 contains a charge for extra square footage on the porch. Complainants testified that they asked for the extra square footage, but a price was not determined when the work was done. Complainants attempted to establish a price with Respondent afterward, but were unsuccessful. After extensive testimony from both parties at hearing, this tribunal finds that $75.00 per square foot is a reasonable price for the work. Since there were 27 extra square feet of porch added, the price for the extra portion of the porch is $2,025.00. 31. Finally, the parties agree that Complainants are entitled to credits of $1,700.00 and $435.00 as stated in Exhibit R-1. 32. Starting at the base contract price of $51,210.00, adding verbal additions of $3,353.33 ($1040.00 + $288.33 + $2025.00), and subtracting credits of $2,135.00 ($1700 + $435), the total contract price is found to be $52,428.33. Calculation of Actual Damages 33. Actual damages are money paid over the total contract price for repair or completion of the project as a direct result of Respondent’s violations. Here, the contract price is $52,428.33. Complainants have paid Respondent $47,210.00, leaving a balance owed of $5,218.33. Complainants have paid a total of $11,936.95 to have the work corrected. 34. Complainants actual damages are $6,718.62. CONCLUSIONS OF LAW 1. The burden of proof at an administrative hearing is generally upon the person who brings the action.[24] Further, the standard of proof at hearing is by preponderance of the evidence.[25] The Notice of Claim for Administrative Payout states that Complainants bear the burden of proof to show entitlement to the amount in the Notice. Therefore, Complainants bear the burden of showing, by a preponderance of the evidence, that the proposed payout amount is reasonable and proper. Complainants have not met that burden with regard to the payout amount in the notice, but have shown the amount stated above in Finding of Fact 34. 2. Complainants are injured persons within the definition in A.R.S. § 32-1131(3) and are, therefore, entitled to recovery from the Fund. 3. Under the facts and circumstances of this case, the Registrar of Contractors is empowered to determine and award, based on actual damages, an appropriate payment to Complainants from the Fund pursuant to A.R.S. §§ 32-1132 and 32-1154(F). 4. The evidence of record supports an award to Complainants in the amount of $6,718.62, all of which shall be chargeable against Respondent and persons on the license as set forth in A.R.S. § 32-1139(B). RECOMMENDED ORDER In view of the foregoing, IT IS RECOMMENDED that the Registrar of Contractors make payment from the Residential Contractors’ Recovery Fund to Complainants in the amount of $6,718.62.

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 Decision will be 40 days from the date of that certification.

Done this day, October 17, 2011.

/s/ Eric A. Bryant Administrative Law Judge

Transmitted electronically to:

William A. Mundell, Director Registrar of Contractors ----------------------- [1] For reasons not explained at hearing, there is no Exhibit D. [2] A.R.S. § 32-1132(A) (“An award from the fund is limited to the actual damages suffered by the claimant as a direct result of the contractor's violation but shall not exceed an amount necessary to complete or repair a residential structure or appurtenance within residential property lines.”) [3] Violations of A.R.S. § 32-1154(A)(2), (3), (7), (17), and (23). [4] See Recovery Fund Inspection Report dated “10/11/2011” (the date is clearly an error—jobsite inspection occurred 6/10/2011) but probably meant to be 6/11/2011. [5] There is no explanation in the record as to the difference between Inspector Coscia’s recommendation of $10,213.61 and that of the Notice of Claim for Administrative Payout at $8,513.61. The Inspector did not testify at the hearing. [6] See unmarked exhibit (part of the claim file) entitled Oral Contract. [7] Inspector Coscia used the $2,500.00 figure from the documentation. [8] Exhibit A. [9] Exhibit B. [10] Exhibit E. [11] Exhibit K. [12] Exhibits Y, Z, and AA. [13] Exhibit AA. [14] Exhibits G and H. [15] Exhibit L. [16] Exhibits T, U, V, and W. [17] Exhibit X. [18] This was alleged in the complaint and admitted by Respondent’s default. [19] Exhibit M. [20] Exhibit N. [21] Exhibit C [22] Exhibit AE. [23] Exhibit C. [24] Utah Construction Company v. Berg et al, 68 Ariz. 285, 205 P.2d 367 (1949); Arizona Administrative Code (A.A.C.), OAH Rule R2-19-119(B). [25] Smith v. Arizona Dept. of Transportation, 146 Ariz. 430, 706 P.2d 756 (App. 1985); A.A.C. R2-19-119(A).

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