ALJDEC decisions subject to certification as final

2009A-59447235-ROC · Registrar of Contractors · 2011-11-02

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: October 13, 2011 APPEARANCES: Donald Basile appeared personally. Ostwinkle Development, Inc. was represented by its authorized representative, Robert Ostwinkle II. ADMINISTRATIVE LAW JUDGE: Brian Brendan Tully _____________________________________________________________________ Based upon the evidence of record, the Administrative Law Judge makes the following Findings of Fact, Conclusions of Law, and Recommended Order: FINDINGS OF FACT 1. Ostwinkle Development, Inc. (“Respondent”) is the holder of License No. 111537, a Class B contracting license issued by the Registrar of Contractors (“Registrar”). 2. Donald and Christy Basile (“Complainants”) hired Respondent to construct a custom residence located at 1505 E. Eugie, Phoenix, Arizona. 3. On May 18, 2009, Complainants filed a written Complaint with the Registrar against Respondent, the terms of which are incorporated herein by reference. The Registrar designated the Complaint as Case No. 09-5944. 4. In response to the filed Complaint, the Registrar’s assigned inspector, Jim Dimond, performed a jobsite inspection at the subject residence to view the Complaint items. As a result of that inspection, Inspector Dimond issued a Corrective Work Order dated June 4, 2009, the terms of which are incorporated herein by reference, that required Respondent to timely perform remedial work to specified Complaint items. The Corrective Work Order contained the following advisement: THIS CONTRACTOR’S LICENSE WAS SUSPENDED ON APRIL 17, 2009 FOR LACK OF BOND[1]AND THE CONTRACTOR CANNOT PERFORM OR SUBCONTRACT THE CORRECTIVE ACTION REQUIRED. THE CONTRACTOR IS TO EITHER RESTORE THE LICENSE TO A VALID STATUS AND MAKE THE NECESSARY CORRECTIONS OR RESOLVE THE COMPLAINT IN A FINANCIAL MANNER.

(Emphasis in the original; footnote added).

5. The Registrar issued a Citation and Complaint in Case No. 09-5944 charging Respondent with violating the provisions of A.R.S. § 32- 1154(A) (1), (2), (7),[2] (11), (3), namely A.A.C. R4-9-108, and (13), specifically A.R.S. § 32-1124(B). 6. By letter dated December 9, 2009, the Registrar’s staff advised Complainants that Respondent had filed for bankruptcy protection resulting in an automatic stay of the Registrar’s proceedings. Complainants were advised that they needed to obtain a relief from the automatic stay from the Bankruptcy Court in order to pursue the disciplinary action against Respondent. 7. On July 29, 2010, the United States Bankruptcy Court, District of Arizona, issued an Order Granting Motion For Relief From Automatic Stay that provided as follows: IT IS ORDERED GRANTING stay relief on a limited basis to allow the [Complainants] to further their administrative proceedings before the Arizona Registrar of Contractors and to commence or proceed with any necessary related actions in state court, provided that the [Complainants] proceed with such administrative proceedings and necessary related actions only in furtherance of claims for distribution from the Recovery Fund administered by the Arizona Registrar of Contractors and do not (1) take any action or pursue any remedy directly against the [Respondent] (except as provided herein) or the property of the [Respondent’s] estate, or (2) obtain a judgment that is a personal liability against the [Respondent]. Notwithstanding the foregoing, this Order does not preclude the [Complainants] from filing a proof of claim against the [Respondent’s] bankruptcy estate.

8. On July 22, 2011, the Registrar issued an Order Reopening Complaint in Case No. 2009-59447235, formerly Case No. 09-5944. 9. On August 29, 2011, the Registrar issued a Notice of Hearing in Case No. 2009-59447235 that advised the parties of the time, date, and location of the evidentiary hearing before the Office of Administrative Hearings, an independent agency. 10. Respondent and Complainants entered into the written Ostwinkle Development Custom Home Contract (“Contract”) in late February/early March 2007. The original contract price was $817,280.00. 11. The parties’ Contract did not list Respondent’s contracting license number preceded by the acronym “ROC.” 12. Respondent executed loan documents from Complainants’ lender. At that time, Complainants told Respondent that a permit would be obtained within days. However, the project did not begin until approximately six months later. A major factor for the delay was Complainants’ architect’s problems with the plans. During that period of time, Respondent only took small jobs so that it could be ready to mobilize for Complainants’ project. 13. From the time the parties entered into the Contract to the commencement of work, Respondent’s finances had worsened. 14. Delays were also caused by the bankruptcy of Complainants’ lender. 15. During the course of the project, the contract price increased to $842,140.00 due to changes. Although Respondent did not present change orders to Complainants, Complainants executed a written “Basile Cost Breakdown (Amended)” that listed a description of work, the original amount of the work, and the new amount of the work. 16. According to Respondent, Complainants’ lender would not release any more funding due to the suspension of Respondent’s contracting license for lack of bond. 17. According to Inspector Dimond’s testimony, Respondent completed 75% of the project. Respondent then advised Complainants that it was leaving the project and filing for bankruptcy. 18. The evidence of record supports Inspector Dimond’s findings set forth in the Corrective Work Order. 19. Respondent did not comply with the Corrective Work Order. 20. The evidence of record established that Respondent abandoned Complainants’ project without justification. 22. Respondent deviated from plans and/or specifications as to the improperly installed bathtub and improper valves for the shower in the second floor guest bathroom. 23. Respondent is not responsible for the location of the sewer connection that was not properly located on the plans. 24. Respondent failed to pay some of its subcontractors after receiving funds to do so. For example, Craftsman Const./Rainbow Tile filed a lien on the subject property in the sum of $14,550.00 for nonpayment from Respondent. Other subcontractors are listed as creditors in Respondent’s bankruptcy. 25. In addition to failing to properly list its contracting license on the Contract, Inspector Dimond’s Corrective Work Order noted that Respondent’s signage at the jobsite also failed to contain Respondent’s contracting license number with the prefix “ROC” as required by statute. 26. Respondent’s abandonment of the subject property, its deviation from plans and/or specifications, its failure to comply with the Registrar’s Corrective Work Order, its deficient workmanship, and its failure to pay subcontractors after receiving funds from Complainants’ lender are wrongful acts that resulted in substantial injury to Complainants. 27. A review of the Registrar’s official electronic licensing records reveals that Respondent’s License No. 111537 was voluntarily canceled on January 13, 2010. CONCLUSIONS OF LAW 1. The Registrar has jurisdiction over Respondent and the subject matter in this case. Pursuant to A.R.S. § 32-1154(C), the cancellation of Respondent’s contracting license does not deprive the Registrar of the authority to discipline that license for proven statutory and/or regulatory violations in this matter. 2. Pursuant to A.A.C. R2-19-119(B), Complainants have the burden of proof in this matter. The standard of proof is by a preponderance of the evidence. A.A.C. R2-19-119(A). 3. Respondent violated the provisions of A.R.S. § 32-1154(A) (1), as charged in the Citation and Complaint issued by the Registrar. The evidence of record established that Respondent abandoned Complainants’ project. 4. Respondent violated the provisions of A.R.S. § 32-1154(A) (2), as charged in the Citation and Complaint issued by the Registrar. The evidence of record established that Respondent deviated from plans and/or specifications on the subject project, as described in the above Findings of Fact. 5. Respondent violated the provisions of A.R.S. § 32-1154(A) (11), as charged in the Citation and Complaint issued by the Registrar. The evidence of record established that Respondent failed to pay some subcontractors despite receiving funds from Complainants’ lender. 6. Respondent violated the provisions of A.R.S. § 32-1154(A) (23), as charged in the Citation and Complaint issued by the Registrar. The evidence of record established that Respondent failed to comply with the Registrar’s Corrective Work Order. In light of the Bankruptcy Court’s limited relief from the automatic stay, no civil penalty may be imposed against Respondent in detriment to its creditors. 7. Respondent violated the provisions of A.R.S. § 32-1154(A) (3), namely A.A.C. R4-9-108 as charged in the Citation and Complaint issued by the Registrar. The evidence of record established that Respondent did not remediate its deficient workmanship described in the Registrar’s Corrective Work Order. 8. Respondent violated the provisions of A.R.S. § 32-1154(A) (7), as charged in the Citation and Complaint issued by the Registrar. The evidence of record established that Respondent’s wrongful acts, as described in the above Findings of Fact, resulted in substantial injury to Complainants. RECOMMENDED ORDER Respondent’s License No. 111537 shall be revoked on the effective date of the Order entered in Case No. 2009-59447235, formerly 09-5944. 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, November 2, 2011.

/s/ Brian Brendan Tully Administrative Law Judge

Transmitted electronically to:

William A. Mundell, Director Registrar of Contractors ----------------------- [1] Payment of one of Respondent’s subcontractors, Kachina Roofing, exhausted Respondent’s bond. [2] The charged violation at the time cited read as follows: “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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Office of Administrative Hearings 1400 West Washington, Suite 101 Phoenix, Arizona 85007 (602) 542-9826