ALJDEC decisions subject to certification as final

2010A-265188-ROC · Registrar of Contractors · 2010-08-17

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: July 28, 2010 at 8:15 a.m. APPEARANCES: Timothy Youso appeared on Complainants’ behalf; Respondent Harris Brothers, Inc. appeared through its qualifying party and president, Terry Harris. ADMINISTRATIVE LAW JUDGE: Diane Mihalsky _____________________________________________________________________

FINDINGS OF FACT Background and Procedure On May 22, 2003, the Registrar of Contractors (“the Registrar”) issued License No. ROC185466, Class B for residential general contracting to Respondent Harris Brothers, Inc. On November 6, 2006, Respondent contracted to construct a house for Complainants Timothy and Michelle Youso at 2460 Stroke Drive, Lake Havasu City, Arizona. Case No. L08-0432 In mid-2008, Complainant Mr. Youso filed a complaint with the Registrar against Respondent’s electrical subcontractor on the project, Havashock, Inc., License No. ROC164434, Class C-11 (“Havashock”), which alleged that it had abandoned the job. The Registrar designated this complaint as Case No. L08-0432. On April 27, 2009, Case No. L08-0432 proceeded to hearing in the Office of Administrative Hearings (“the OAH”) before Administrative Law Judge (“ALJ”) Mark A. Silver. On May 20, 2009, the Registrar accepted ALJ Silver’s recommended decision in Case No. L08-0432 and dismissed Complainants’ complaint against Havashock. The Registrar concluded that Havashock did not abandon the job at Complainants’ house because Respondent ordered Havashock from the job after Complainants had advised Respondent that they would not make any further payments, and Complainants hired another electrical contractor. Case No. L09-0141 Between November 4, 2008, and December 16, 2008, Complainants filed three complaints with the Registrar against Respondent. Complainants alleged in the three complaints that Respondent’s workmanship had been deficient in certain specific respects and that Respondent had abandoned the job. The Registrar consolidated the three complaints and designated them collectively as Case No. L09-0141. The Registrar’s inspector, Cliff Corlett, conducted three jobsite inspections and issued three Corrective Work Orders (“CWOs”) to Respondent in Case No. L09-0141. On September 30, 2009, Case No. L09-0141 proceeded to hearing in the OAH before ALJ Brian Brendan Tully. On November 10, 2009, the Registrar accepted ALJ Tully’s recommendation in Case No. L09-0141, which concluded that “[t]here is no credible factual basis to support the allegation that Respondent abandoned the subject project” and that “[t]he parties’ monetary dispute should be resolved before a civil court of competent jurisdiction.” The Registrar also accepted ALJ Tully’s conclusion in Case No. L09-0141 that Respondent had violated A.R.S. § 32-1154(A)(23) and (3) with respect to the specific workmanship deficiencies that Inspector Corlett noted on the first three CWOs. As a result, the Registrar revoked Respondent’s license. The Instant Matter On August 13, 2009, while Case No. L09-0141 was pending, Complainants filed a fourth complaint with the Registrar against Respondent, alleging that Respondent’s failure to pay Havashock had caused it to abandon the electrical work at Complainants’ house. On October 2, 2009, Complainants filed a fifth complaint with the Registrar against Respondent to add allegations to the complaints that were addressed in the three CWOs that Inspector Corlett issued in Case No. L09- 0141, as follows: a. Respondent aided and abetted an unlicensed contractor in constructing the cabinet doors, drawers, and panels, which Inspector Corlett’s first CWO had required Respondent to correct;

b. Respondent failed to pay subcontractors to repair the perimeter wall, which Inspector Corlett’s second CWO had required Respondent to correct;

c. Respondent failed to repair roof leaks, stucco staining, and columns on the rear deck, which Inspector Corlett’s third CWO had required Respondent to correct;

d. Respondent failed to pay electrical, trim, painting, and grading subcontractors and had filed an invalid lien on the property;

e. Respondent violated Lake Havasu City building code in the site grading; and

f. Respondent broke an arched glass window in the front entry during installation.

Complainants also attached to their October 2, 2009 complaint a list of approximately 92 specific items of deficient or incomplete workmanship. The Registrar consolidated Complainants’ August 13, 2009 and October 2, 2009 complaints and designated the complaints collectively as Case No. L10- 0026 (presently 2010-265188), which is the case at issue in this matter. On October 14, 2009, Respondent moved to dismiss Complainants’ complaints in this matter because the issue of abandonment had been presented in Case No. L09-0141 and Respondent was within its legal rights under A.R.S. § 32- 1129.04 when it suspended performance of the parties’ contract. Inspector Corlett performed a fourth jobsite inspection to investigate Complainants’ complaints in this matter. On October 19, 2009, Inspector Corlett issued a fourth CWO, which is discussed below, to Respondent to correct by appropriate means certain items at Complainants’ house. Inspector Corlett’s CWO in this matter noted that because at the time Respondent’s license was suspended by operation of law for non-renewal, Respondent could not perform or subcontract to others any of the corrective actions that the CWO required. On April 6, 2010, the Registrar denied Respondent’s motion to dismiss this matter because “[t]he issues underlying the Complaint are best suited to be presented before an administrative tribunal.” The Registrar thereafter issued a Citation and Complaint against Respondent’s license in this matter, charging violations of A.R.S. § 32- 1154(A)(1), (2), (3) (namely A.A.C. R4-9-108), (10), (11), (14), and (23). Respondent filed a timely written answer, denying any statutory violations. The Registrar referred this matter to the OAH for an evidentiary hearing. A hearing was held on July 26, 2010. Inspector Corlett testified. Complainant Timothy Youso testified and submitted eight exhibits. Respondent’s qualifying party, Terry Harris, testified and submitted fifteen exhibits. As of the date of the hearing in this matter, Respondent’s license was still revoked as a result of the Registrar’s order in Case No. L09-0141. Additional Evidence Issues Addressed in Case No. L09-0141 Inspector Corlett’s CWO in this matter did not address Complainants’ specific complaints about the cabinetry, the perimeter wall, painting, the columns on the rear patio, and roof leaks because he had addressed those deficiencies in the three CWOs issued in Case No. L09-0141. Complainants did not present any evidence at hearing to distinguish the complaints made in this case from the complaints made in Case No. L09-0141 about the cabinetry, the perimeter wall, painting, the columns on the rear patio, and roof leaks. Aiding and Abetting Inspector Corlett’s CWO noted that the Registrar had initiated a criminal investigation into Respondent’s alleged aiding and abetting of an unlicensed contractor. The Lake Havasu City Precinct Magistrate convicted Mr. Harris of the crime of aiding and abetting the unlicensed cabinet subcontractor that Respondent had hired for Complainants’ house. Initially, the Magistrate ordered Respondent to pay restitution in the amount of $14,600.00 to Complainants. Mr. Harris appealed the portion of the Magistrate’s judgment awarding restitution to Complainants. On May 10, 2010, the Mohave County Superior Court reversed the Magistrate’s award of restitution because Mr. Harris’ crime did not directly cause Complainants’ loss. Monetary Disputes Mr. Harris testified that the construction lender released loan proceeds to Complainants, not to Respondent. Mr. Harris testified that at some point, Complainants refused to pay Respondent’s invoices, terminated Respondent from the job, and hired other subcontractors to complete the house. Inspector Corlett’s CWO opined that Complainants’ claims for the following alleged violations concerned “the dispute between the parties regarding payments owed versus payments received”: a. Respondent failed to furnish labor or material necessary to complete the house;

b. Respondent failed to perform the work under the contract in a timely manner;

c. Respondent failed to pay subcontractors;

d. Respondent filed an invalid lien; and

e. Respondent violated a local building code in its site grading.

Inspector Corlett’s CWO noted that the parties would need to resolve such monetary disputes in an arbitration hearing or in a civil trial, not in an administrative complaint to the Registrar. The Administrative Law Judge agrees with Inspector Corlett. The parties are free to adjudicate their monetary disputes in an appropriate judicial forum. Workmanship Complaints Inspector Corlett’s CWO opined that all but 27 of the specific items in Complainant’s fifth complaint to the Registrar either had been addressed in Case No. L09-0141 or had been corrected by Complainants prior to the jobsite inspection. Complainants did not present any evidence to dispute Inspector Corlett’s opinion in the CWO that Respondent’s installation of drywall around the fireplace was within applicable industry standards. Inspector Corlett’s CWO required Respondent to install or complete eighteen specific items. Inspector Corlett acknowledged that he did not know who was responsible for completing these items. He included the items on the CWO because he observed them to be incomplete at his jobsite inspection. Mr. Harris testified that Complainants had terminated Respondent from the job before any of the incomplete items were due to be installed or completed. Inspector Corlett’s CWO also required Respondent to correct by appropriate means certain workmanship deficiencies, as follows: a. The grout between the tub and tile in bath #2;

b. The drywall around the light switch and outlet in the laundry room;

c. The nail pop above the laundry room door;

d. Two horizontal drywall cracks at the staircase in the master bedroom;

e. The baseboard trim in the master bedroom closet;

f. The concrete overhang on the garage;

g. The split face block to drywall overhang in the garage bathroom; and

h. The painted trim molding around the door in the garage.

Inspector Corlett’s CWO did not include the broken glass window in the entry of Complainant’s house through an oversight. Inspector Corlett testified that he observed that the window was broken at the jobsite inspection and that he meant to require Respondent to correct the window by appropriate means. Mr. Harris testified that Complainants had ordered the door and window for the entry way and that the window had been broken during shipping. Respondent submitted a packing slip for the entry window from San Marcos Iron Doors to “Youso Construction, Inc.,” which showed “crate doors & broken glass.” Based on this evidence, the Administrative Law Judge finds that Respondent is not responsible for the broken window in Complainants’ entry way. CONCLUSIONS OF LAW The matter lies within the Registrar’s jurisdiction.[1] Complainants bear the burden of proof and must establish Respondent’s statutory violations by a preponderance of the evidence.[2] Respondent bears the burden to establish affirmative defenses by the same evidentiary standard.[3] “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”[4] A preponderance of the evidence is “[t]he greater weight of the evidence, not necessarily established by the greater number of witnesses testifying to a fact but by evidence that has the most convincing force; superior evidentiary weight that, though not sufficient to free the mind wholly from all reasonable doubt, is still sufficient to incline a fair and impartial mind to one side of the issue rather than the other.”[5] The Registrar’s conclusion in Case No. L09-0141 that Respondent did not abandon the job precludes any conclusion in this matter that Respondent violated A.R.S. § 32-1154(A)(1).[6] The parties’ claims against each other for money are for damages, which the legislature has not authorized the Registrar to award in an administrative complaint against a contractor’s license.[7] Because Complainants did not present any evidence to establish Respondent violated any building code or departed from plans, Complainants did not establish that Respondent violated A.R.S. § 32-1154(A)(2).[8] Because Complainants did not present any evidence to establish that Respondent failed to pay subcontractors more than $750.00 for services rendered or for materials supplied for Complainants’ house, Complainants did not establish that Respondent violated A.R.S. § 32-1154(A)(11).[9] Mr. Harris admitted that he had been convicted of the crime of aiding and abetting the unlicensed cabinet subcontractor that Respondent hired for Complainants’ house. Therefore, Respondent violated A.R.S. § 32- 1154(A)(10)[10] and (14).[11] A.R.S. § 32-1129.04(A) allows a contractor to suspend performance and refuse to complete a project after the property owner fails to make timely payments as required by the contract. Respondent is not responsible for completing the project after Complainants stopped making payments. No statute allows a contractor to refuse to repair deficiencies in work already performed, even if he has not been paid for the work. Therefore, Complainants have established that Respondent violated A.R.S. § 32- 1154(A)(3)[12] and (23)[13] with respect to the deficiencies noted on the CWO, set forth at Finding of Fact No. 34. RECOMMENDED ORDER In view of the foregoing, on the effective date of the Registrar’s final order, it is recommended that the Registrar revoke License No. ROC185466, Class B previously issued to Respondent Harris Brothers, Inc. It is further recommended that the Registrar require Respondent to pay the sum of $500.00 as a civil penalty for the statutory violations established in this case pursuant to A.R.S. § 32-1154(D). It is further recommended that if Respondent fails to pay the entire amount of the civil penalty on or before thirty days following the effective date of the Registrar’s final order, no future license be issued to any entity consisting of persons associated with Respondent, as defined in A.R.S. § 32-1101(A)(5), until Respondent tenders payment of any outstanding prior civil penalty. If the Director of the Office of Administrative Hearings certifies this Administrative Law Judge Decision, the effective date of the order will be forty days from the date of certification. Done this day, August 17, 2010.

/s/ Diane Mihalsky Administrative Law Judge

Transmitted electronically to:

William A. Mundell, Director Registrar of Contractors ----------------------- [1] See A.R.S. § 32-1101 et seq. [2] See A.R.S. § 41-1092.07(G)(2); A.A.C. R2-19-119(A) and (B)(1); see also Vazanno v. Superior Court, 74 Ariz. 369, 372, 249 P.2d 837 (1952). [3] See A.A.C. R2-19-119(B)(2). [4] Morris K. Udall, Arizona Law of Evidence § 5 (1960). [5] Black’s Law Dictionary at page 1220 (8th ed. 1999). [6] This statutory subsection includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license, “[a]bandonment of a contract or refusal to perform after submitting a bid on work without legal excuse for the abandonment or refusal.” [7] See J.W. Hancock Enterprises, Inc. v. Arizona State Registrar of Contractors, 142 Ariz. 400, 406, 690 P.2d 119, 125 (Ct. App. 1984). [8] This statutory subsection includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license, “[d]eparture from or disregard of plans or specifications or any building codes of any 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.” [9] This statutory subsection includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license, “[f]ailure by a licensee . . . to pay monies in excess of seven hundred fifty dollars when due for materials or services rendered in connection with the licensee’s operations as a contractor . . . .” [10] This statutory subsection includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license, “[a]iding or abetting a licensed or unlicensed person to evade this chapter, knowingly combining or conspiring with a licensed or unlicensed person, allowing one’s license to be used by a licensed or unlicensed person with intent to evade this chapter.” [11] This statutory subsection includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license, “[k]nowingly 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.” [12] This statutory subsection includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license, “[v]iolation of any rule adopted by the registrar.” The rule cited was A.A.C. R4-9-108, which requires that “[a]ll work shall be performed in a professional and workmanlike manner” and that “[a]ll work shall be performed in accordance with any applicable building codes and professional industry standards.” [13] This statutory subsection includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license, “[f]ailure to take appropriate corrective action to comply with this chapter or with rules adopted pursuant to this chapter without valid justification within a reasonable period of time after receiving a written directive from the registrar.”

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