ALJDEC decisions subject to certification as final

2011A-5536-ROC · Registrar of Contractors · 2012-03-22

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: March 6, 2012, at 1:00 p.m. APPEARANCES: Complainant Donald Ray Gatts appeared on his own behalf; Respondent San Tan Distributing, Inc. appeared through Richard Frank Vandehei, its officer and qualifying party. ADMINISTRATIVE LAW JUDGE: Diane Mihalsky _____________________________________________________________________

FINDINGS OF FACT Background and Procedure The Arizona Registrar of Contractors (“the Registrar”) issued License No. B.198271-R for residential general contracting to San Tan Distributing, Inc. (“Respondent”). Richard Frank Vandehei is Respondent’s qualifying party and officer. The Registrar received a complaint from Donald Ray Gatts (“Complainant”) against Respondent alleging that Respondent abandoned its contract to build a sunroom on the back of Complainant’s house at 6027 East Des Moines, Mesa, Arizona (“the project”) after Complainant paid Respondent $10,000.00. According to the complaint, a permit had been obtained for the project. The Registrar issued a Citation and Complaint against Respondent, charging a violation of A.R.S. § 32-1154(A)(1). Respondent filed a timely written answer to the Citation and Complaint, denying that it had abandoned the project and affirmatively alleging that the project was completed according to the terms and conditions of the contract. The Registrar referred the matter to the Office of Administrative Hearings, an independent state agency, for an evidentiary hearing. A hearing was held on March 6, 2012. Complainant submitted ten exhibits and presented the testimony of two witnesses: (1) himself; and (2) Don Monti, his friend and neighbor. Mr. Vandehei testified on Respondent’s behalf. Administrative notice is taken of Respondent’s prior License record as reflected on the Registrar’s public website. Such prior License record reflects that on March 22, 2012, Respondent’s license was current and in good standing. Respondent’s relevant disciplinary history was that on March 22, 2012, two complaints were pending against the license, one complaint had been closed as resolved, settled, or withdrawn, and Respondent’s license had been placed on disciplinary probation between February 7, 2007, and August 6, 2007, and between February 7, 2007, and March 9, 2009, as a result of the Registrar’s decision in Case No. 06- 0361.[1] Hearing Evidence In August 2011, Respondent contracted to construct a sunroom addition along most of the back of Complainant’s house, including the concrete slab, demolition of a small roofed porch on the west side of the house, framing, fiberglass insulation, drywall, and four windows and two doors. The total contract price was $16,000.00. Complainant paid Respondent $8,000.00 to begin the project. Shortly thereafter, the parties entered into a change order to require Respondent to pour extra concrete to extend the sunroom along the entire back of Complainant’s house and to obtain a permit to move a shed, for an additional price of $1,160.00, making the total contract price $17,160.00. Complainant paid Respondent $200.00 as a deposit for the change order, for a total payment under the contract of $8,200.00.[2] Mr. Vandehei testified that Respondent paid an architect to prepare plans for the addition, including elevations and a plot plan, obtained engineering, and paid the City of Mesa to obtain a permit. Mr. Vandehei testified that Respondent paid $850.00 for the permit, but did not provide any other dollar amount for the expenses that Respondent incurred on the project. Respondent obtained bids for the concrete on the project. Complainant also obtained a bid from David William Myers doing business as The Concrete Guys, License No. C-9.066811-R for residential concrete (“The Concrete Guys”). Because The Concrete Guys’ bid included installation of reinforcing mesh in the concrete slab, Complainant and Respondent hired The Concrete Guys to pour the slab for the addition. Mr. Vandehei testified that he supervised everything on the project up until the framing stage, when he told Complainant that because Respondent was closing its business, it could no longer continue working on the project. Mr. Vandehei testified that he asked J A K Construction, Inc., License No. B.114475-R to complete the project, but it was unable to do so. Complainant paid The Concrete Guys $3,200.00 for its work. After Respondent left the project, Complainant took over as general contractor. Complainant paid a total of $4,648.14 to unlicensed contractors to complete the sunroom, as follows: 1. $900.00 to Don Matthews to frame the sunroom and roof and to install two doors; 2. $900.04 to Mr. Matthews to purchase framing materials and doors; 3. $852.00 to Mike Poplin for labor to install shingles, rolled roofing, and drip edge over the sunroom; 4. $182.10 to Mr. Poplin for roofing materials; 5. $264.00 to Mr. Poplin for time and materials to install drywall; and 6. $1,550.00 to Mr. Poplin for time and materials to install interior and exterior trim, soffits, and door knobs, and to paint the interior and exterior of the sunroom. Respondent supplied four vinyl windows for the project that had been in its warehouse when it closed its business. The windows were an upgrade of the aluminum windows that the contract specifications required, but were the only materials that Respondent supplied for the project. Complainant requested that Respondent be required to return the $8,200.00 that Complainant paid Respondent for the project. Mr. Vandehei testified that the $8,200.00 that Respondent received from Complainant represented its costs and profit on the project. CONCLUSIONS OF LAW This matter lies within the Registrar’s jurisdiction.[3] Complainant bears the burden of proof to establish Respondent’s statutory violation by a preponderance of the evidence.[4] Respondent bears the burden to establish affirmative defenses by the same evidentiary standard.[5] “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”[6] Complainant established that Respondent abandoned the contract in violation of A.R.S. § 32-1154(A)(1)[7] when it closed its business and did not make arrangements for another licensed contractor to fully perform the contract. Abandonment is a serious offense because even if the property owner manages to complete the project, he loses the benefit of the statutory two- year workmanship warranty that A.R.S. § 32-1155(A) requires licensed contractors to provide for their work. The legislature has not authorized the Registrar to adjudicate or award money damages.[8] The Registrar may resolve contractual disputes if such resolution is ancillary to its regulatory mission and may penalize a contractor’s license by ordering payment of restitution under A.R.S. § 32- 1156.01 if a proven statutory violation can no longer be remedied by corrective work.[9] In this matter, Respondent cannot remedy its abandonment by completing the project because it is already complete. Restitution in a regulatory context is similar to the criminal context, where a defendant may be required to pay restitution to reimburse his victim for any economic loss that the defendant’s conduct caused.[10] “‘Economic loss’ means any loss incurred by a person as a result of the commission of an offense. . . .”[11] The total price of the parties’ contract was $17,160.00. After Complainant paid Respondent $8,200.00, he would have owed Respondent $8,960.00 had Respondent fully performed instead of abandoning the project. Complainant paid the Concrete Guys and unlicensed contractors Mr. Matthews and Mr. Poplin a total of $7,848.14 to complete the project, less than the amount that Complainant would have owed Respondent had it not violated A.R.S. § 32- 1154(A)(1). Because Complainant was able to complete the project for less than the contract price, Complainant has not suffered any economic loss that would support an award of restitution. In addition, “[t]he purpose of the [Registrar] is to protect the public health, safety and welfare by licensing, bonding and regulating contractors engaged in residential construction . . . .”[12] This purpose would not be served by requiring licensed contractors to pay restitution under A.R.S. § 32-1156.01 to reimburse homeowners for hiring unlicensed contractors to perform work that requires a license.[13] RECOMMENDED ORDER It is recommended that as discipline for Respondent’s proven violation of A.R.S. § 32-1154(A)(1), on the effective date of the final order in this matter, the Registrar suspend Respondent San Tan Distributing, Inc.’s License No. B.198271-R for a period of 60 days. It is further recommended that following the disciplinary suspension, the Registrar place Respondent’s License No. B.198271-R on disciplinary probation for a period of twelve months. It is further recommended, in addition to the above penalties, that any continuation or restoration of Respondent’s contracting rights, whether or not probationary, be subject to a condition that Respondent first post an additional surety bond, cash deposit or alternative deposit for a period of twelve months, including future renewal periods, in the amount of $2,500.00, such bond or deposit to be in addition to the required surety bond, cash deposit or recovery fund participation set forth in A.R.S. § 32- 1152. Cash or alternative additional deposits, if utilized, shall be returned only after the expiration of an additional two year period following the above-provided twelve-month period, and only if no claims are then pending. 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, March 22, 2012.

/s/ Diane Mihalsky Administrative Law Judge

Transmitted electronically to:

William A. Mundell, Director Registrar of Contractors ----------------------- [1] The public website also shows five administrative suspensions, one for non-renewal, three for lack of bond, and one for the qualifying party’s resignation. Although Mr. Vandehei testified at the hearing that during the time Respondent was performing its contract with Complainant, it closed its business, that closure is not reflected on the Registrar’s public website. [2] Complainant testified that his statement on the complaint that he had paid Respondent $10,000.00 was based on an additional payment of $2,000.00 and was in error. He testified that, in fact, he gave Respondent two $100.00 bills. [3] See A.R.S. § 32-1101 et seq. [4] 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). [5] See A.A.C. R2-19-119(B)(2). [6] Morris K. Udall, Arizona Law of Evidence § 5 (1960). [7] 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.” [8] See J.W. Hancock Enterprises, Inc. v. Arizona State Registrar of Contractors, 142 Ariz. 400, 406, 690 P.2d 119, 125 (Ct. App. 1984). [9] Sunpower of Arizona v. Arizona Registrar of Contractors, 166 Ariz. 437, 441, 803 P.2d 430, 434 (Ct. App. 1990). [10] Cf. A.R.S. §§ 13-603(C) and 13-804(A). [11] A.R.S. § 13-105(16). [12] Laws 1994, Ch. 7, § 3; see also Laws 2004, Ch. 16, § 3. [13] Because the total price of the project, including labor and materials, exceeded $1,000.00, the Registrar’s statutes required the contractors who worked on the project to be licensed. See A.R.S. §§ 32-1101(A)(7) (definition of “residential contractor”); 32-1121(A)(4) (the so-called “handyman’s exception”); 32-1151 (prohibition on contracting without a license).

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