ALJDEC decisions subject to certification as final

2010A-976589-ROC · Registrar of Contractors · 2010-08-25

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: August 10, 2010 at 1:00 p.m. APPEARANCES: Complainant Robert Alvarado appeared on his own behalf; Respondent Chosen Kitchen and Bath Remodeling Division, L.L.C. appeared through Shane Quigley, its qualifying party and managing member. ADMINISTRATIVE LAW JUDGE: Diane Mihalsky _____________________________________________________________________

FINDINGS OF FACT Background and Procedure On August 19, 2008, the Registrar of Contractors (“the Registrar”) issued License No. ROC248122, Class B-3 for residential general remodeling and repair contracting to Respondent Chosen Kitchen and Bath Remodeling Division, L.L.C. On February 3, 2010, the Registrar received a complaint from Complainant Robert Alvarado against Respondent, which alleged 24 specific items of complaint about Respondent’s remodeling and addition to Complainant’s house at 5280 Forrest Dr. in Flagstaff, Arizona (“the house”). The Registrar assigned the complaint to its inspector, Mark Schweiger, for investigation. On February 19, 2010, Inspector Schweiger issued a Corrective Work Order (“CWO”) to Respondent. On March 10, 2010, the Registrar received Complainant’s request for hearing, which alleged that Respondent had not resolved any of the issues on the CWO. On May 19, 2010, the Registrar issued a Citation and Complaint against Respondent, charging violations of A.R.S. § 32-1154(A)(1), (2), (3) (namely A.A.C. R4-9-108), and (23). Respondent timely answered the complaint, denying any statutory violations and affirmatively alleging that Complainant’s refusal to pay excused Respondent from any further performance under the contract. The Registrar referred the matter to the Office of Administrative Hearings, an independent agency, to schedule and to conduct a fair hearing. A hearing was held on August 10, 2010. Inspector Schweiger testified. Complainant testified and submitted 37 exhibits. Respondent’s qualifying party and managing member, Shane Quigley, testified and submitted four exhibits. According to the Registrar’s records, Respondent’s license is current and in good standing. The Registrar has closed one complaint against Respondent’s license as resolved/settled/withdrawn. Additional Evidence On April 8, 2009, Complainant accepted Respondent’s bid to perform Phase I to substantially remodel the house for a cost of $191,886.00 plus tax (“the Phase I contract”). On or about May 14, 2009, Complainant accepted Respondent’s bid to perform Phase II to enlarge the house for an additional cost of $119,486.00 plus tax (“the Phase II contract”). The Phase I and Phase II contracts described general kinds of construction, such as insulation, framing, and installation of cabinetry, but did not provide detail. By November 2009, Complainant had paid approximately $286,986.00 for work described on the Phase I and II contracts to Respondent. Between June 30, 2009, and November 14, 2009, Complainant paid approximately $75,158.00 to Respondent for work described on thirteen written change orders. In November 2009, the parties reached an impasse. Respondent refused to perform additional work on the project unless Complainant paid it additional monies. Complainant refused to pay additional monies because he felt he had paid Respondent too much already. Respondent submitted at hearing four additional change orders, in the total amount of $16,853.57. Complainant denied having ever seen or approved those change orders. Mr. Quigley acknowledged that Complainant had not received certain items for which Respondent had been paid. Mr. Quigley testified that Respondent did not comply with the CWO because Complainant owed Respondent more for items that Respondent had constructed, for which Complainant had not paid, than the value of the items that Respondent had not constructed, for which Complainant had paid. Respondent submitted an accounting that showed that, according to Respondent’s calculations, Complainant owed Respondent $86,293.57 for work already performed under the Phase I and Phase II contracts and change orders. Neither Complainant nor Respondent submitted an accounting of contract and change order amounts with corresponding payments. Complainant submitted copies of some, but not all, of the checks that he or his wife had issued to Respondent for work on the project. The amounts of the checks corresponded to some of the individual line item amounts on the Phase I and Phase II contracts and change orders. Inspector Schweiger performed the jobsite inspection on February 18, 2010, at 10:00 a.m. No representative of Respondent attended the jobsite inspection. Inspector Schweiger testified that, after he issued the CWO, he received copies of numerous e-mails and facsimiles documenting the parties’ communications with each other after they reached the impasse. Inspector Schweiger testified that there were “perhaps points on both sides” of the parties’ dispute. CWO ITEMS Inspector Schweiger did not require Respondent to take any action on complaint items that appeared to involve a monetary dispute or contractual disagreement that was beyond his authority to resolve. Inspector Schweiger did not require Respondent to do anything to allay Complainant’s concern “that the entry basement door will allow water to flow into the home” because the complaint appeared to be related to grading, which the parties’ contract excluded. Inspector Schweiger required Respondent to provide Complainant with warranties for the roof, HVAC, and other “warranty items,” as “[t]hese items are considered typical in the industry . . . .” Inspector Schweiger’s CWO directed Respondent to “correct by appropriate means . . . to completion to meet code and Industry Standards” within fifteen days eighteen items of Complainant’s complaint, to wit, Complaint Item Nos. 1 through 5, 7, 9, 10, 12, 13, 15, and 17 through 23. The evidence regarding each item is summarized below. Respondent’s Failure to Provide or Install Doors and Windows (Complaint Item Nos. 1 and 12)

The Phase I contract required Respondent to provide and to install a 10’ x 6’8” basement door. The Phase I contract also required Respondent to remove existing windows and doors “as required.” The Phase II contract required Respondent to install doors and windows in the addition. A change order, dated June 30, 2009, required Respondent to remove the existing kitchen door and to install a new 36” kitchen door, which Complainant would select. Complainant paid for the basement door. Complainant also paid for the removal of existing doors and windows and the installation of new windows and doors. Respondent did not provide or install the basement door. Respondent also did not complete installation of the doors and windows that it had removed. Mr. Quigley testified that Respondent had not installed the doors and windows because Complainant had not yet picked out the ones he wanted. Respondent did not present any evidence to establish that Complainant had failed to select doors and windows from options that Respondent had presented. Respondent’s Failure to Provide Power to the House (Complaint Item No. 2) A change order, dated August 10, 2009, required Respondent to install a 400 amp service with a 36” trench to the transformer, at a cost of $8,362.00. On October 19, 2009, Respondent issued two change orders for the following additional work: (1) Adding a new 60 amp service panel to the garage and new lines from the main service panel, at a cost of $888.94; and (2) Upgrading the transformer to enable it to handle the new 400 amp service, at a total cost of $4,180.00. Complainant paid for the cost of the new service, the service panel, and the upgrade to the transformer. The house still lacks power. Mr. Quigley testified that the house lacked power because Complainant still owes Respondent between $900.00 and $1,000.00 for fuses for the new service. Respondent’s Failure to Supply or to Install Cabinets in the House and Basement (Complaint Item Nos. 3 and 9)

The Phase I contract required Respondent to order custom cabinets made from alder wood. Complainant paid Respondent $42,080.00 to order the cabinets. The Phase II contract required Respondent to provide and install cabinets for the addition, but did not provide a line item for the cost of the cabinets. Complainant paid $13,642.00 for additional cabinets pursuant to an August 10, 2009 change order. Complainant submitted numerous pages of Respondent’s designs for cabinets in various areas of the house. Complainant submitted an e-mail chain between himself and Mr. Quigley regarding Respondent’s failure to provide or to install the cabinets. On January 15, 2010, Mr. Quigley told Complainant that Respondent had hired “some guys” with a shop to help Respondent fabricate the cabinets and that “[t]he guys that we gave the money to closed up and have our money . . . .” Respondent’s Failure to Secure the Jobsite (Complaint Item No. 17) Inspector Schweiger testified that the project was in “mid-construction” at the jobsite inspection. Because so many doors and windows had not been installed, Inspector Schweiger testified that the house was open and provided ready access to passers-by. Inspector Schweiger also testified that, regardless of pay issues, applicable code and industry practice do not allow a contractor to leave a jobsite in the “wide open” state that he saw at the jobsite inspection. Respondent’s Failure to Install Kitchen Window per Specifications (Complaint Item No. 18)

The Phase I contract required Respondent to install block “as required @ windows and doors,” and to supply and install a picture window in the kitchen. Inspector Schweiger testified that the specifications required Respondent to install the picture window in block, not in the wood that he saw at the jobsite inspection. Respondent’s Failure to Install a Flagstone Cap on the Retaining Wall (Complaint Item No. 23)

Complainant submitted photographs that showed a block cap on a retaining wall that Respondent constructed, which Complainant testified should have been sandstone. Mr. Quigley admitted that the contract required a sandstone cap, but testified that Complainant had agreed to substitute block. No written change order documented Complainant’s alleged agreement. Respondent’s Poor Paint Job on Exterior of Addition (Complaint Item No. 4) The Phase II contract required Respondent to prime and paint the addition. Inspector Schweiger testified that the jobsite inspection disclosed that primer had been applied to the addition “in a sparing manner.” Complainant did not make the final payment for the Phase II contract, which was to “[c]omplete prime and paint.” Respondent’s Failure to Protect Insulation Removed from Existing Walls (Complaint Item No. 7)

The Phase I Contract required Respondent to install insulation in the basement but that “[a]ll remaining insulation if required [was] not included in bid.” Complainant testified that, because Respondent did not secure or protect the insulation that it had removed from the walls, the insulation could not be re-installed. Mr. Quigley testified that the insulation that Respondent removed was contaminated by “massive animal droppings” and could not be reused. Respondent’s Failure to Leave Sheetrock, Insulation, or Paint, Drywall Mud Onsite (Complaint Item Nos. 19, 20, 21, and 22)

The Phase I contract required Respondent to remove existing sheetrock, and to install, tape, and texture new sheetrock in the existing house. The Phase II contract required Respondent to install sheetrock in the addition. Complainant did not pay Respondent the penultimate payment that the Phase II contract required for installation of sheetrock in the addition. Other Complaint Items Complainant submitted a photograph of a retaining wall that Respondent had built next to the exterior wood siding. It did not appear that Respondent had installed a vapor barrier or sealant between the two surfaces (Complaint Item No. 5). Complainant submitted photographs that showed construction trash on the jobsite (Complaint Item No. 10). Inspector Schweiger testified that a concrete stoop in the basement was unfinished (Complaint Item No. 13). The Administrative Law Judge could not locate, and the parties did not call her attention to, any provision in Phase I or II of the contract or any change order that required Respondent to furnish water to the barn (Complaint Item No. 15). CONCLUSIONS OF LAW The matter lies within the Registrar’s jurisdiction.[1] Complainant bears 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] A.R.S. § 32-1129.04(A) allows Respondent to suspend performance of its contract if Complainant fails to make payments according to the contract. No statute allows Respondent to leave incomplete items of construction for which Complainant already has paid under the terms of the contract, even if Respondent performed other work for which Complainant did not pay. Mr. Quigley’s testimony that the house lacked power because Complainant had not paid for fuses was not credible. No contract, change order, or invoice showed a line item for fuses, which supports an inference that the price for the service included the cost of fuses. Therefore, Complainant established that Respondent violated A.R.S. § 32- 1154(A)(1),[6] (3),[7] and (23)[8] with respect to Respondent’s failures to complete, install or provide the doors and windows, power to the house, cabinets in the house and basement, and jobsite cleanup (respectively, Complaint Items Nos. 1, 17, 2, 3, 9, 10, 12, and 13). Because the legislature has not empowered the Registrar to adjudicate or award money damages,[9] the Registrar is not authorized to resolve the issue of whether Complainant owes money to Respondent for work it performed, or whether Respondent owes money to Complainant for work that it did not perform. The parties may resolve their monetary dispute in civil court. Complainant established that Respondent violated A.R.S. § 32- 1154(A)(2),[10] (3), and (23) with respect to Respondent’s failures to protect the exterior wood next to the retaining wall it had built, to install the kitchen window according to specifications, and to install a flagstone cap on the retaining wall (respectively, Complaint Items Nos. 5, 18, and 23). No statute required Respondent as a licensed contractor to provide written warranty materials for items it constructed. Contracting statutes only require Respondent to warranty its own and its subcontractors’ workmanship and material for two years.[11] Therefore, Complainant has not established that Respondent violated any charged statute with respect to its failure to provide written warranty materials. Complainant has not established that Respondent violated any of the charged contracting statutes with respect to any of the other workmanship or other deficiencies alleged, either because Complainant did not establish that the contract required the work or because Respondent established that Complainant did not pay for the work. RECOMMENDED ORDER In view of the foregoing, on the effective date of the Registrar’s final order, it is recommended that the Registrar suspend License No. ROC248122, Class B-3 previously issued to Respondent Chosen Kitchen and Bath Remodeling Division, L.L.C. until Respondent has corrected or completed Complaint Item Nos. 1, 2, 3, 5, 9, 10, 12, 13, 17, 18, and 23.[12] It is further recommended that the Registrar not suspend Respondent’s license and, instead, close Case No. 2010-976589 if, on or before the effective date of the Registrar’s order, Respondent provides satisfactory written proof to the Registrar that it has corrected or completed in a professional and workmanlike manner Complaint Item Nos. 1, 2, 3, 5, 9, 10, 12, 13, 17, 18, and 23. It is further recommended that the Registrar require Respondent to pay the sum of $250.00 as a civil penalty 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, the Registrar suspend Respondent’s license, effective on such deadline date. No future license shall be issued to any entity consisting of persons associated with Respondent, as defined in A.R.S. § 32-1101(A)(5), unless 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 25, 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] 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.” [8] 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.” [9] See J.W. Hancock Enterprises, Inc. v. Arizona State Registrar of Contractors, 142 Ariz. 400, 406, 690 P.2d 119, 125 (Ct. App. 1984). [10] 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.” [11] See A.R.S. § 32-1155(A) [12] These Complaint Items are: (1) Respondent’s failure to provide or install the basement door; (2) Respondent’s failure to provide power to the house; (3) Respondent’s failure to supply cabinets in the house; (5) Respondent’s failure to protect the exterior wood siding next to a retaining wall; (9) Respondent’s failure to install cabinets in the basement addition; (10) Respondent’s failure to remove trash from the jobsite; (12) Respondent’s failure to complete door and window installation; (13) Respondent’s failure to complete concrete work in the basement; (17) Respondent’s failure to secure the jobsite; (18) Respondent’s failure to install the kitchen window per specifications; and (23) Respondent’s failure to install a flagstone cap on the retaining wall.

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