ALJDEC decisions subject to certification as final

2010A-308477766-ROC · Registrar of Contractors · 2011-08-30

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: August 16, 2011, at 8:00 a.m. APPEARANCES: Complainants Kevin and Corilee Bishop appeared through Fidelis V. Garcia, Esq.; Respondent Finelli Metal Structures, L.L.C. appeared through Shane D. Buntrock, Esq., Rowley Chapman Barney & Buntrock, Ltd. ADMINISTRATIVE LAW JUDGE: Diane Mihalsky _____________________________________________________________________

FINDINGS OF FACT Background and Procedure In May 2010, the Arizona Registrar of Contractors (“the Registrar”) issued License No. ROC264584, Class A-11 for commercial steel and aluminum erection to Finelli Metal Structures, L.L.C. (“Respondent”). On December 21, 2010, the Registrar received a complaint from attorney Fidelis V. Garcia on behalf of Kevin and Corilee Bishop (collectively “Complainants”) against Respondent regarding its performance of a contract to construct a shed at Complainants’ residence at 1737 South 141st Place in Gilbert, Arizona. The complaint contained detailed facts alleging violations of A.R.S. § 32-1154(A)(1), (2), (4), (5), (6), (7), (16), (17), (3), namely A.A.C. R4-9-108, and (13), namely A.R.S. §§ 32-1158, 32-1151, and 32-1152. As a result of these alleged violations, Mr. Garcia asked the Registrar to require Respondent to refund the full amount of the $8,297.84 deposit that Complainants had paid to Respondent. On December 27, 2010, the Registrar sent a letter to Respondent, informing it that the Registrar had information that Respondent was performing or offering to perform work beyond the scope of its commercial Class A-11 license, in violation of A.R.S. § 32-1154(A)(17). Complainants subsequently requested a hearing on their complaint. On February 10, 2011, the Registrar issued a Citation and Complaint against Respondent, charging violations of the statutes that Mr. Garcia cited in Complainants’ complaint. Respondent’s attorney, Shane Buntrock, on its behalf filed a timely written answer to the Citation and Complaint, admitting the charged violations of A.R.S. § 32-1154(A)(17) and (13), namely A.R.S. § 32-1158, denying the other charged violations, and affirmatively alleging that Complainants knew that Respondent only possessed a commercial license when they entered the contract, that Complainants unilaterally cancelled the contract, and that Complainants’ unclean hands should prevent any refund of their deposit. The Registrar referred the matter to the Office of Administrative Hearings, an independent agency, for an evidentiary hearing. A hearing was held on August 16, 2011. Complainants submitted 20 exhibits and testified at the hearing. Respondent submitted two exhibits and presented the testimony of Robert Gerard Finelli, its qualifying party and member, and Debbie Finelli, his wife. Additional Evidence Complainants and Mr. and Mrs. Finelli reside in the same general area of Gilbert, attend the same church, and formerly were close friends who socialized with each other’s families. For nine years, Complainants have operated Renaissance Community Partners (“Renaissance”), whose business is providing property management services to approximately 17 homeowners’ associations. Mr. Bishop testified that as part of his responsibilities at Renaissance, he hires landscape contractors, who may or may not be licensed, and pest control companies, who must be licensed. During 2009, Mr. Finelli was employed as qualifying party for Caliber Metal Buildings, L.L.C., License No. ROC231184, Class A-11 (“Caliber”). In 2009, Mr. Finelli shared with Complainants that he was thinking about starting his own business and needed potential customers. Mr. Bishop said that he was considering constructing a shed for his boat and his Kawasaki T- Rex, a quad that he used in yard work. Complainant’s house is large, faces west, and is set on a deep lot. The areas adjacent to the house are gravel, including the areas between the house and the perimeter walls on the north and south sides, and around the swimming pool and spa at the back on the east side. East of the pool, the backyard is planted with grass. The driveway is south of the front yard, southwest of the house, and ends at a gate to the backyard, located about half-way down the length of the south side of the house. Mr. Bishop’s primary requirement for the shed was that he be able to get the quad out of the shed into the front or back yard. Therefore, Mr. Bishop thought about building a shed on the gravel near the southeast corner of the house, across from the gate to the driveway. Mrs. Bishop’s primary requirement for the shed was that she did not want to be able to see it when she looked out her kitchen window at the back of the house, in the middle of the east side. Mr. Finelli did not ever plan to apply for a residential license because most metal buildings are commercial. Mr. and Mrs. Finelli both credibly testified that Mr. Finelli disclosed to Complainants that although Respondent physically was able to construct the shed, legally it could not do so on Complainants’ residential property because its license was commercial, not residential. Mrs. Finelli credibly testified that after Mr. Finelli stated that if Respondent undertook construction of the shed, Complainants could cause trouble for Respondent at the Registrar, “everyone had a good laugh” because they were such good friends and a complaint was so unlikely. In May or June 2010, Mr. Bishop and Mr. Finelli went into the backyard, on the gravel portion at the southeast corner of the house. Mr. Finelli scuffed the gravel with his boot to show where he said Respondent could build an L-shaped shed where Mr. Bishop could get the quad from the shed into the front or rear yards, and Mrs. Bishop would not see the shed from the kitchen window. The distance from the proposed location to the south perimeter wall was approximately 5’. At one point, Mr. Finelli took Mr. Bishop to see a metal shed that Caliber had constructed while Mr. Finelli was its qualifying party for one of Mr. Bishop’s neighbors. The neighbor expressed great satisfaction with the shed that Caliber had constructed at his residence. In July 2010, Mr. Finelli presented Respondent’s proposal to Complainants for the detached storage shed. The proposal included two options: (1) Construction with standard metal panels, for a total price of $18,297.84, and initial deposit of $5,616.71; and (2) Construction with stucco-look panels, for a total price of $28,209.54, and initial deposit of $7,023.02. Both Complainants testified that they were “shocked” when Mr. Finelli presented Respondent’s proposal because they thought that Mr. Finelli would help Mr. Bishop build the shed without a formal contract, like an old- fashioned “barn-raising.” Nonetheless, on or about July 13, 2010, Mr. Bishop signed the proposal for the first option, and Respondent’s proposal to construct a shed with standard metal panels became the parties’ written contract. Mr. Bishop signed the proposal on behalf of Renaissance. Mr. Bishop testified at the hearing that he thought that he might convert the shed into a welding shop after his daughter got older and moved out of the house. Because Mr. Bishop wished to make a final payment to Respondent in the amount of exactly $10,000.00, he modified the proposal to show an initial deposit in the amount of $8,297.84 for the first option. Complainants paid Respondent $8,297.84.[1] The parties’ contract did not include Respondent’s license number, the estimated date of completion, or the Registrar’s telephone number or website, did not provide for progress payments, and did not advise Complainants of their right to file a complaint to the Registrar. Respondent submitted a revised form contract that Mr. Finelli testified Respondent currently uses. The form contract is in larger type, includes Respondent’s license number, preceded by the acronym “ROC,” provides an estimated completion date, progress payments at specific stages of construction, and the Registrar’s telephone number and website address, and advises property owners of their right to file a complaint to the Registrar. The parties’ contract required Respondent to submit “initial/working Plans/Drawings within 2 to 2 ½ weeks” after signing, but excluded permits and permit fees. The total prices for the two options included “State, County & City Sales Tax.” Complainants submitted copies of various material suppliers’ invoices to Respondent for various construction materials that they had obtained pursuant to Complainants’ subpoena duces tecum. Some of the invoices did not show sales tax. The contract provided that “[i]f [Respondent] provides structural drawings and architectural drawings, and owner decides not to move ahead with project, the deposit amount is non refundable.” Respondent paid architectural firm Cooper Architecture and Design $400.00 and paid structural engineering firm TLCP Structural, Inc. $1,075.00 to prepare plans for Complainants’ shed. After the plans were prepared, Mrs. Finelli dropped them off for Complainants at Renaissance’s commercial office. Both Complainants testified that it took Respondent more than two weeks to have the plans prepared. The record does not contain exactly how long it took Respondent to have the plans prepared. After he got the plans, Mr. Bishop looked the plans over for three days. He testified that he was distressed because the plans showed a 10’ setback from the south perimeter wall. Mr. Bishop testified that because a 10’ setback would still leave a 5’11” space between the shed and the house for the 5’-wide quad to pass through into the front yard, he dropped the plans off at the Town of Gilbert and applied for a permit. After ten days, the Town of Gilbert returned the plans to Mr. Bishop, with several different areas “red-lined” to require changes. Mr. Bishop met with a Town of Gilbert official, and testified that the most concerning red-line was the requirement of an 11’ setback between the shed and perimeter wall, because such a large setback would not allow him to drive the quad from the shed into the front yard. Complainants both testified that it was not an option to move the shed further back in the backyard, off the gravel area, because it would interfere with the irrigation system and Mrs. Bishop would be able to see the shed from the kitchen window. Mr. Bishop testified that he did not know whether it was possible to obtain a variance for a lesser setback or if lowering the height of the shed would allow Respondent to build the shed near the original proposed location. Complainants both testified that in late August, after the Town of Gilbert red-lined the plans that Respondent had prepared, they decided to cancel the contract because Respondent had not timely prepared the plans and the Town of Gilbert did not approve the plans. Mr. Bishop testified that when he demanded that Respondent return the deposit, Mr. Finelli said that he had already spent the money. Complainants both testified that they did not think that Respondent could construct the shed because it had spent the deposit. The total amount of the invoices that Respondent produced pursuant to Complainants’ subpoena duces tecum exceeded the amount of their deposit. According to the Registrar’s electronic record, Respondent’s license is current and in good standing. This appears to be the only complaint pending against the license. CONCLUSIONS OF LAW This matter lies within the Registrar’s jurisdiction.[2] Complainants bear the burden of proof to establish Respondent’s statutory violations by a preponderance of the evidence.[3] Respondent bears the burden to establish affirmative defenses by the same evidentiary standard.[4] “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”[5] 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.”[6] Because Complainants cancelled the contract, Respondent did not perform any construction. Because the architect and structural engineer were responsible for the plans, and Complainants were unwilling to work with the architect, structural engineer, or the Town of Gilbert to modify the plans to have the structure built, Respondent could not perform any construction. Therefore, Complainants did not establish that Respondent abandoned the contract, in violation of A.R.S. § 32-1154(A)(1), departed from plans, in violation of A.R.S. § 32-1154(A)(2), or failed to construct the project in a professional and workmanlike manner, in violation of A.R.S. § 32- 1154(A)(3), namely A.A.C. R4-9-108. Respondent established that Complainants knew it was not properly licensed to build the shed when they solicited its bid and Mr. Bishop signed the contract. Complainants therefore did not establish that Respondent committed a fraudulent act to their substantial injury, in violation of A.R.S. § 32-1154(A)(7). Respondent acknowledged that it contracted beyond the scope of its commercial license when it undertook to construct a storage shed on Complainants’ residential property, in violation of A.R.S. § 32- 1154(A)(17). Complainants did not establish that Respondent misrepresented any material fact on its license application, in violation of A.R.S. § 32-1154(A)(6). Although Caliber apparently contracted beyond the scope of its commercial A- license in violation of A.R.S. § 32-1154(A)(17) when it constructed the shed that Mr. Finelli showed Mr. Bishop, Complainant’s complaint did not allege subsequent discovery of facts that would have been grounds to deny issuance of Respondent’s license, and the Registrar’s Citation and Complaint did not charge a violation of A.R.S. § 32-1154(A)(20). The evidence that Complainants’ proposed shed was not Mr. Finelli’s first violation of A.R.S. § 32-1154(A)(17) as a licensed contractor is considered as a factor in aggravation of the penalty imposed for Respondent’s admitted violation of that statute in this matter. Respondent also acknowledged that the proposal that it submitted to Complainants did not include all the terms required by A.R.S. § 32-1158(B), in violation of A.R.S. § 32-1154(A)(13).[7] As a factor in mitigation, Respondent established that it has revised its form contract to comply with the requirements of A.R.S. § 32-1158(B). Because Respondent had a license, albeit not the correct license, when it undertook to construct Complainant’s shed, Complainants did not establish that Respondent engaged in contracting without a license under A.R.S. § 32- 1151, in violation of A.R.S. § 32-1154(A)(13). The suppliers whose names are shown on the invoices that Complainants submitted are responsible for paying sales taxes on the invoiced amounts, not Respondent. Therefore, Complainants did not establish that Respondent failed to comply with statutes or rules governing social security, workers’ compensation, or unemployment insurance, in violation of A.R.S. § 32- 1154(A)(4), or that Respondent failed to pay income taxes, withholding taxes, or any other taxes, in violation of A.R.S. § 32-1154(A)(5). When Mr. Finelli showed Mr. Bishop the metal shed that Caliber had build for Mr. Bishop’s neighbor, Mr. Bishop knew that Respondent was not properly licensed to build a shed on residential property. Therefore, Complainants did not establish that Respondent engaged in false, misleading, or deceptive advertising that could mislead or injure a member of the public, in violation of A.R.S. § 32-1154(A)(16). Respondent was properly bonded as a commercial contractor and as a commercial contractor, was not required to obtain a bond for residential work. Complainants did not establish that Respondent was not properly bonded under A.R.S. § 32-1152, in violation of A.R.S. § 32-1154(A)(13). Complainants chose to deal with a contractor that they knew was not properly licensed, and the project was not built because they cancelled the contract, not because of licensing or workmanship issues. Complainants have not established any right to restitution in any amount under A.R.S. § 32-1156.01. RECOMMENDED ORDER Based on the foregoing, it is recommended that on the effective date of the Registrar’s order in this matter, the Registrar suspend Respondent Finelli Metal Structures, L.L.C.’s License No. 264584, Class A-11 until Respondent provides proof that it has remedied its admitted violations of A.R.S. § 32-1154(A)(17) and (13), specifically, A.R.S. § 32-1158(B). It is further recommended that the Registrar not suspend Respondent’s license but, instead, close Case No. 2010-[number redacted] if on or before the effective date of the Registrar’s order, Respondent provides written proof that is satisfactory to the Registrar of both of the following: 1) Respondent has instituted and is using in its contracting business a form contract that complies with the requirements of A.R.S. § 32-1158(B); and 2) Respondent has obtained a residential license or has taken specific steps to avoid future violations of A.R.S. § 32- 1154(A)(17). It is further recommended that in addition to any license suspension that may result from this matter, Respondent’s Class A-11 license be placed on disciplinary probation for a period of one year, commencing on the effective date of the Registrar’s order or the date on which Respondent files notice of compliance, whichever is later. 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, August 30, 2011.

/s/ Diane Mihalsky Administrative Law Judge

Transmitted electronically to:

William A. Mundell, Director Registrar of Contractors ----------------------- [1] The record does not show the form of payment or whether it was on a check drawn on Renaissance’s business account. [2] See A.R.S. § 32-1101 et seq. [3] 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). [4] See A.A.C. R2-19-119(B)(2). [5] Morris K. Udall, Arizona Law of Evidence § 5 (1960). [6] Black’s Law Dictionary at page 1220 (8th ed. 1999). [7] A.R.S. § 32-1154(A)(13) includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license, “[f]ailure in any material respect to comply with this chapter.”

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