ALJDEC decisions subject to certification as final

2011A-430-ROC · Registrar of Contractors · 2011-08-22

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: August 5, 2011, at 8:15 a.m. APPEARANCES: Complainant Monika Donahue appeared on her own behalf; Respondent Superior Custom Builders, L.L.C. appeared through Victor Padilla, its qualifying party and member. ADMINISTRATIVE LAW JUDGE: Diane Mihalsky _____________________________________________________________________

FINDINGS OF FACT Background and Procedure In August 2010, the Arizona Registrar of Contractors (“the Registrar”) issued License No. ROC265743, Class KB-1 for dual building contracting to Superior Custom Builders, L.L.C. (“Respondent”). On or about January 20, 2011, the Registrar received a complaint from Monika Donahue (“Complainant”) against Respondent, alleging that Respondent had defrauded her and abandoned a contract to perform work at her house at 167 West 4th Avenue in Eagar, Arizona. Complainant requested that the Registrar require Respondent to reimburse Complainant for the $13,907.00 amount of the contract. Complainant requested a hearing. On May 10, 2011, the Registrar issued a Citation and Complaint against Respondent, charging violations of A.R.S. § 32-1154(A)(1) and (7). Respondent filed a timely written answer to the Citation and Complaint, denying any statutory violations and affirmatively alleging that Complainant terminated the contract. The Registrar referred the matter to the Office of Administrative Hearings, an independent agency, for an evidentiary hearing. A telephonic hearing[1] was held on August 5, 2011 from the Registrar’s office in Show Low, Arizona. Complainant submitted seven exhibits and testified on her own behalf. Respondent submitted nine exhibits and presented the testimony of three witnesses: (1) Its qualifying party and member, Victor Padilla, (2) Reanna Hawk, Grants Coordinator/Housing Specialist for Economic Development of Apache County (“EDAC”), the agency that was to pay to rehabilitate Complainant’s house, and (3) Richard “Hank” Rogers, the Director of EDAC. Hearing Evidence The federal United States Department of Housing and Urban Development (“HUD”) awarded Apache County a grant to rehabilitate homes owned by persons who met the qualifications of the program to make the homes more energy-efficient. EDAC administered the grant program. Complainant applied to EDAC to have the program rehabilitate her home. EDAC accepted Complainant, published a Preliminary Spec Sheet for the rehabilitation project at her house, and solicited bids in a competitive sealed bidding process. Ms. Hawk was the EDAC Coordinator/Housing Specialist for the grant project at Complainant’s house. Respondent submitted the low bid for Complainant’s project, in the total amount of $13,907.00. Because Respondent submitted the low bid, EDAC awarded the contract to rehabilitate Complainant’s house to Respondent. The HUD contract did not include prices, but only allowances for the items in the scope of work. Ms. Hawk provided Complainant with a copy of Respondent’s itemized bid. Mr. Padilla did not know that Complainant had a copy of Respondent’s bid. On September 15, 2010, Mr. Padilla went to Complainant’s house with Ms. Hawk, and Complainant on her own behalf and Mr. Padilla on Respondent’s behalf signed the HUD contract in Ms. Hawk’s presence. After Ms. Hawk left, Complainant and Mr. Padilla went into Complainant’s back yard to discuss the project. Complainant showed Mr. Padilla the copy of Respondent’s bid, and stated that Home Depot or Lowe’s could perform many of the line items at a lesser cost than Respondent’s bid. Complainant requested that Respondent agree to perform additional work for the same price or reduce its bid because she thought the line items were excessive. Mr. Padilla told Complainant that he was not comfortable modifying Respondent’s bid without the approval of Ms. Hawk and her boss, Mr. Rogers, and suggested a meeting with EDAC’s representatives. Mr. Padilla then left Complainant’s house and called Ms. Hawk, informing her that he had a “negative discussion” with Complainant. Complainant testified at the hearing that although she wanted Respondent to perform the contract, Mr. Padilla “walked out” on Respondent’s contract. Later, on September 15, 2010, Complainant sent an e-mail to Ms. Hawk, informing her that Mr. Padilla “freaked out” when he saw that she had a copy of Respondent’s bid. Complainant’s e-mail also stated: I don’t think Mr. Padilla is an honest businessman which is why he was so upset that you gave me a copy of his bid (which he took back by the way). Due to this fact, I would rather not be involved with Mr. Padilla and hope you can find me someone more honest. . . .

Ms. Hawk testified that EDAC guidelines recognize the homeowner’s right to change the contractor and go to the next low bidder on a project. After Ms. Hawk received Complainant’s e-mail, she requested an e-mail from Mr. Padilla stating that the parties were unable to work together so that she could terminate the contract. On September 22, 2010, Mr. Padilla sent an e-mail to Ms. Hawk, stating that it was unfortunate that he and Complainant got off to a bad start. Ms. Hawk testified that she then terminated Respondent’s contract to rehabilitate Complainant’s home. Ms. Hawk offered Complainant an opportunity to go with the next low bidder, True Built Construction, L.L.C., License No. ROC253807, Class B (“True Built”). Ms. Hawk testified that Complainant declined the offer due to True Built’s inexperience. Complainant testified at the hearing that True Built’s bid was $400.00 more than Respondent’s bid. If she sells her house within 10 years following rehabilitation, EDAC requires her to reimburse a portion of the cost. Complainant testified that she did not feel comfortable accepting an inflated bid, even though EDAC would pay the initial cost of rehabilitation. EDAC again requested bids on Complainant’s project by publishing notices in newspapers in the White Mountains and sending notices by e-mail to contractors in the Phoenix area who had expressed an interest in the program. EDAC must run notices for at least two weeks and must allow potential bidders at least a week to prepare their bids. EDAC’s guidelines require contractors to be present at EDAC’s office at 8:00 a.m. on the published date to qualify to bid on a project. On the published date, November 18, 2010, Complainant, Ms. Hawk, Mr. Rogers, and EDAC’s attorney, Bryce Hamblin, met to await bid submissions. After fifteen minutes, no contractor appeared to submit a bid for Complainant’s project. Mr. Hamblin informed Complainant that because no contractors were willing to bid the project, EDAC was unable to assist her further. Mr. Rogers testified that EDAC did not pay any contractor to rehabilitate Complainant’s house. As of the date of the hearing, to his knowledge, none of the items on the spec sheet for Complainant’s house had been performed. Mr. Padilla testified that he would like Respondent to be awarded and to perform the contract to rehabilitate Complainant’s house, but he did not submit a second bid because Complainant had told Ms. Hawk that she preferred not to deal with him. Respondent was not paid anything for Complainant’s project. Complainant submitted lesser bids from other contractors for certain line items on Respondent’s bid and receipts from Lowe’s for appliances. Complainant acknowledged that these other contractors did not submit bids to EDAC and were not at the bid meeting, and that the appliances were not the energy-efficient models that the spec sheet required. Complainant acknowledged at the hearing that she blames Respondent that she did not receive the energy-efficiency refrigerator and water heater for which the grant would have paid. Complainant testified that in this economy, she does not believe that there were no contractors willing to work on her house. Complainant testified that she believes EDAC, Mr. Rogers, Ms. Hawk, and Respondent have engaged in a plan to defraud the taxpayers, and that she has reported the fraud to the police, the FBI, HUD, the Housing Department, and the Eagar Town Manager, as well as to the Registrar. CONCLUSIONS OF LAW This matter lies within the Registrar’s jurisdiction.[2] Complainant bears 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] The evidence of record established that Ms. Hawk terminated the contract under EDAC guidelines after Complainant said that she preferred not to deal with Mr. Padilla. Therefore, Complainant did not establish that Respondent abandoned the contract in violation of A.R.S. § 32-1154(A)(1).[6] Respondent submitted the low bid after a competitive sealed bid process. Complainant did not submit any evidence of HUD’s or EDAC’s qualifications for contractors to bid on projects. The mere fact that other contractors who did not submit bids to EDAC for the project may have been willing to perform certain line items for lesser amounts than Respondent’s bid does not establish fraud. Therefore, Complainant did not establish that Respondent committed a fraudulent act in violation of A.R.S. § 32- 1154(A)(7).[7] RECOMMENDED ORDER In view of the foregoing, it is recommended that on the effective date of the Registrar’s final order, the Registrar dismiss Complainant Monika Donahue’s complaint in Case No. 2011-430 against Respondent Superior Custom Builders, L.L.C.’s License No. ROC265743. 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 22, 2011. /s/ Diane Mihalsky Administrative Law Judge

Transmitted electronically to:

William A. Mundell, Director Registrar of Contractors ----------------------- [1] On the date of the hearing, the videoconference equipment was not operational. [2] See 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] A.R.S. § 32-1154(A)(1) 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] A.R.S. § 32-1154(A)(7) includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license, “[t]he doing of a 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