ALJDEC decisions subject to certification as final

2010A-17389043-ROC · Registrar of Contractors · 2010-06-21

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: May 25, 2010 at 8:00 a.m. The matter was held open until June 11, 2010 to allow the parties sufficient time to prepare and submit legal memorandums. APPEARANCES: The Complainant appeared through its attorney, Jesse R. Callahan. The Respondent appeared through its attorney, Mark A. Hanson. ADMINISTRATIVE LAW JUDGE: M. Douglas

Evidence and testimony were presented and the following Findings of Fact, Conclusions of Law and Recommended Order are made:

FINDINGS OF FACT

1. The Respondent is the holder of License KB-1, 234116-D issued by the Registrar of Contractors. 2. This is a residential matter where on October 23, 2007, the Respondent entered into a written construction agreement with the Complainant wherein the Respondent agreed to renovate, restore and construct an addition to a historic residence located at 1410 W. Polk Street, Phoenix, Arizona. 3. There was no dispute that the historic residence was destroyed by fire on August 9, 2009. 4. Credible testimony and evidence established that the residence was destroyed by unknown arsonists and that the real property at issue has now been repossessed by the lending institution which owned the historic property at issue. 5. Credible testimony and evidence established that the Respondent failed to maintain adequate builder’s risk and fire insurance on the historic structure at issue. 6. There was no dispute that the Respondent had originally subcontracted the construction project to another licensed general contractor and that the subcontracted general contractor failed to perform its construction work in a professional and workmanlike manner. 7. Credible testimony and evidence established that the subcontracted general contractor’s failure to perform work in a professional and workmanlike manner and the subcontracted general contractor’s departure from approved plans and specifications caused a substantial delay in the construction project. 8. Credible testimony and evidence established that the Respondent terminated the subcontracted general contractor from the construction project and was on the construction project and in the process of correcting and completing the construction work on the historic residence when it was destroyed by fire. 9. The Respondent is found to be fully responsible for the workmanship errors and omissions of its selected general contractor subcontractor. 10. Credible testimony and evidence established that the subcontracted general contractor failed to pay a material supplier and that the material supplier then placed a lien on the real property at issue. 11. Credible testimony and evidence established that the Respondent then paid the materials supplier. 12. The parties’ written construction agreement provides, in pertinent part, as follows: 36. INSURANCE A. Before commencing work and during the continuance of the work under this Contract, the Contractor and each subcontractor shall furnish the Owner with certificates of insurance showing the following insurance is in force and will insure all operations under the Contract: 2. Maintain adequate builder’s all-risk, fire and general liability insurance in amounts sufficient to ensure the completion of the improvements and protect themselves, the City of Phoenix and Owner against all risks of damage or injury (including death) to property or persons wherever located, resulting from any action or operation under this Contract or in connection with the work. 13. Credible testimony and evidence established that the Respondent failed to maintain adequate fire insurance on the property at issue and that the Complainant’s separate fire insurance policy was inadequate to cover all of the damages suffered by the Complainant as a result of the arson caused fire. 14. The credible evidence of record established that the Complainant did not agree to any modification of the parties’ written agreement regarding the requirement that the Respondent maintain adequate all risk, fire and general liability insurance for the construction project. 15. The Respondent’s failure to maintain adequate all risk, fire and general liability insurance for the construction project is found to constitute a departure from the parties’ written agreement add to constitute a violation of the charged provisions of A.R.S. § 32-1154A (2). 16. Credible testimony and evidence established the historic residence was over ninety percent (90%) completed when the historic residence was destroyed by fire. No further corrective or completion work is possible on the residence at issue. 17. There was no credible evidence that the Respondent would have failed to complete the construction project had the residence not been destroyed by arson. 18. The credible evidence of record is inadequate and fails to support a finding that the Respondent failed to pay monies when due. 19. The credible evidence of record is inadequate and fails to support a finding that the Respondent abandoned or refused to perform construction work on the construction project. 20. The credible evidence or record is inadequate and fails to support a finding that the Respondent committed a fraudulent act. 21. Notice is taken of the Respondent’s prior good license record with the Registrar of Contractors. CONCLUSIONS OF LAW

1. The credible evidence of record established violations by the Respondent of the provisions of A.R.S. § 32-1154A(2) (Departure from or disregard of plans and specifications).

RECOMMENDed order

In view of the foregoing, it is recommended commencing on the effective date of the Registrar’s Order that the Respondent’s License No. KB-1,234116 shall be suspended for a period of thirty (30) days. In the event of certification of this 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 the certification.

Done this day, June 21, 2010.

/s/ M. Douglas Administrative Law Judge

Transmitted electronically to:

William A. Mundell, Director Registrar of Contractors -----------------------

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