ALJDEC decisions subject to certification as final

2011A-5655-ROC · Registrar of Contractors · 2012-06-04

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: May 15, 2012, at 8:00 a.m. APPEARANCES: Complainant Gregory A. Hansen was represented by Stephen C. Rich, Esq., Aiken Schenk Hawkins & Ricciardi, P.C.; Desert Radiant Barrier, L.L.C. dba Premier Luxury Homes appeared through Michael Fred Wiebe, member. ADMINISTRATIVE LAW JUDGE: Diane Mihalsky

FINDINGS OF FACT Background and Procedure The Registrar of Contractors (“the Registrar”) issued to Desert Radiant Barrier, L.L.C. doing business as (“dba”) Premier Luxury Homes (“Premier”), License Nos. C37R.224993-R for residential plumbing (“the plumbing license”), B.213755-R for residential general contracting (“the general contracting license”), and C-11.228117-R for residential electrical (“the electrical license”). Michael Fred Wiebe (“Mr. Wiebe”) is the qualifying party and member on the general contracting license and a member on the plumbing and electrical licenses. Mr. Wiebe’s father, Fred Lea Wiebe, is the qualifying party on the plumbing and electrical licenses and a member on the general contracting license. The Registrar received three complaints from Gregory A. Hansen (“Complainant”) against Premier regarding its construction of Complainant’s house at 10033 East Indigo Street, Mesa, Arizona (“the project”), as follows: (i) A complaint against Premier’s plumbing license that alleged eight specific items, designated as Case No. 2011-5651; (ii) A complaint against Premier’s general contracting license that alleged thirty-one specific items, designated as Case No. 2011-5655; and (iii) A complaint against Premier’s electrical license that alleged eleven items, designated as Case No. 2011-5656. Most of Complainant’s complaint items involved Premier’s failure to complete work rather than deficiencies in Premier’s workmanship. Complainant attached to all three complaints copies of the contract dated July 27, 2009, that was signed by Complainant, his wife, and Mr. Wiebe on behalf of Premier. The contract did not show a license number. The Registrar assigned the complaints to its inspector, Geoff Galgan, for investigation. After Inspector Galgan performed a jobsite inspection, he issued three Corrective Work Orders (“CWOs”) to Premier, directing it within fifteen days to complete unfinished items of complaint. The CWOs also required Premier to correct seven items of complaint that Inspector Galgan deemed evidenced deficient, rather than merely unfinished workmanship, as follows: 1. Against the plumbing license: (i) The loose, poorly mounted angle stops for the water shut-off valves at the toilets and sinks, and (ii) The corner of the 5000-gallon water tank that was visible above ground; 2. Against the general contracting license: (i) The holes in the CMU perimeter fence that had been crudely punched to allow drainage, (ii) The cabinet door by the cook top that would not close, and (iii) The visible bubbled area in the patio ceiling drywall; and 3. Against the electrical license: (i) Many outlet boxes/receptacles/switches that were not properly secured, and (ii) Some electrical outlets that had stucco/drywall compound on them. The Registrar issued Citations and Complaints against Premier’s plumbing, general contracting, and electrical licenses. The three Citations and Complaints charged the same four statutes: A.R.S. § 32-1154(A)(1), A.R.S. § 32-1154(A)(2), A.R.S. § 32-1154(A)(3), namely A.A.C. R4-9-108, and A.R.S. § 32-1154(A)(23). Premier filed timely written answers to the Citations and Complaints, denying any statutory violations and affirmatively alleging that Premier’s failure to complete the project or correct deficient workmanship was excused by Complainant’s failure to pay amounts due under the contract. Premier attached to its written answer a spreadsheet that showed allowances, actual costs, and overages in the total amount of $20,031.00. The Registrar referred the matter to the Office of Administrative Hearings, an independent agency, for an evidentiary hearing. A hearing was held on May 15, 2012. Inspector Galgan testified. Complainant submitted seven exhibits and presented the testimony of two witnesses: (1) Himself, and (2) Robin Hansen, his wife. Premier submitted four exhibits and presented the testimony of Mr. Wiebe. Administrative notice is taken of Premier’s prior License records as reflected on the Registrar’s public website. Such prior License records reflect that as of May 30, 2012, License Nos. C37R.224993-R and C-11.228117- R were current and only one complaint was pending against each license. License No. B.213755-R had been suspended as discipline in one case and had been administratively suspended twice for lack of bond and non-renewal. Two complaints had been closed as resolved/settled/withdrawn and one complaint was pending against the general contracting license. Additional Evidence Complainant’s project is in a remote area of Mesa where municipal water and sewer services are not available. Mr. Wiebe drafted the parties’ contract. The contract provided for payments of $436,550.00 and required Premier to construct the project in accordance with certain specifications, including footings and slab to engineered specifications and a concrete tile roof with 5/8” roof sheathing. The contract also provided allowances for certain items, including a well and a 5000-gallon water storage tank. The contract excluded engineering, plans, and permits. The contract required all change orders to be in writing and signed by both Complainant or Mrs. Hansen and Premier. Inspector Galgan testified that he conducted a prehearing jobsite inspection and that none of the items on the three CWOs had been completed or corrected. Inspector Galgan testified that he believed that Premier abandoned the project and departed from plans and specifications in several areas. However, Inspector Galgan did not specify in what respect Premier had departed from plans and specifications. Complainant and Mrs. Hansen paid a total of $447,550.00, which was $11,000.00 more than the contract amount, to Premier, its subcontractors, or Mr. Wiebe. Although a Certificate of Occupancy has been issued for the project, certain plumbing fixtures, electrical fixtures, interior doors, hardware, shelving, carpeting, trim, and other items have not been installed. No well has been constructed. Mr. Wiebe testified that Premier constructed many upgrades that increased the cost of the project due to Complainant and Mrs. Hansen’s requests or permitting agencies’ requirements, including the following: 1. Before construction started, the county flood control district required the elevation of the project to be raised 6” higher than was shown on the plans before a permit would be issued; 2. The raised elevations required injector pumps for the toilets and a window well in the basement, which were not included on the plans and specifications; 3. Based on the results of percolation tests, Premier was required to install an Eljin septic system that was more expensive than the conventional septic system that was shown on the plans and specifications; 4. Complainant requested an 8’ x 8’ vault beneath the finished floor in the basement that was not shown on the original plans, and Premier was required to install a metal roof over the vault and ventilation through the attic for the vault; 5. Complainant requested a built-in entertainment center that was much more elaborate than what was shown on the plans; 6. Complainant requested extensive electrical upgrades; 7. Complainant requested that the concrete tile roof be upgraded to a Gerard metal roof system (“the Gerard roof”); 8. Complainant requested that Solatube skylights be installed[1]; and 9. Complainant requested that electronic air filters be installed. Premier did not issue any written change orders for the upgrades. Mr. Wiebe testified that he had conversations with Complainant and Mrs. Hansen about the costs of the upgrades and that their relationship was based on trust. Mr. Wiebe testified that Complainant or Mrs. Hansen verbally agreed to pay Premier’s costs for the upgrades. Mr. Wiebe testified that Premier did not comply with the CWOs because he was hoping that Complainant and Mrs. Hansen would agree to pay for the upgrades and that Premier would be able to complete the project. Mr. Wiebe testified that without additional monies, Premier could not complete the project. Mr. Wiebe estimated that the cost of the upgrades was approximately $60,000.00. Complainant testified that he understood that the Gerard roof had a higher cost than the concrete tile roof that the contract specified. Complainant testified that Premier had never installed a Gerard roof before and that he had some experience in the military with metal roofs. Complainant testified that Mr. Wiebe agreed that Premier would install the Gerard roof at no additional cost in exchange for Complainant’s labor, supervision and training of Premier’s crew, and labor on the construction of a Gerard roof for Mr. Wiebe’s father. Mr. Wiebe testified that a Gerard roof cost about three times as much as a concrete tile roof. Mr. Wiebe testified that although he offered to install the Gerard roof at Premier’s cost, he never told Complainant that Premier would install the Gerard roof at no additional cost to Complainant and Mrs. Hansen. Complainant disputed that the cost of the upgrades, including the Gerard roof, exceeded the amounts that Complainant and Mrs. Hansen had paid to Premier, its subcontractors, or Mr. Wiebe. Complainant testified that Premier should have been able to complete the project for the amounts that he and Mrs. Hansen had already paid. At Complainant’s request, before the hearing, a subpoena duces tecum was issued to Premier for all records relating to costs incurred on Complainant’s project. Mrs. Hansen, who is an accountant, analyzed the documents that Premier produced in response to the subpoena. Mrs. Hansen testified that the total documented cost was only $215,741.62 and that documented costs for allowance items did not equal the amounts shown on the spreadsheet that Premier attached to its written answers. Complainant submitted a bid from G B P Contracting, L.L.C., License No. KB-1.254865-D (“G B P”) in the total amount of $62,037.00 to complete the project. The individual line items on G B P’s bid did not correspond exactly to Complainant’s specific complaint items. The bid also did not provide costs for individual line items. Complainant requested that the Registrar require Premier as a condition of avoiding discipline against its licenses to pay the amounts shown on G B P’s bid to complete Complainant’s project, including the numerous upgrades.

CONCLUSIONS OF LAW 1. The suspended status of Premier’s general contracting license does not deprive Complainant of his right to prosecute his complaints against Premier or prevent the Registrar from determining the merits of Complainant’s complaints.[2] The Registrar has jurisdiction to determine whether Premier violated the charged contracting statutes.[3] 2. Premier’s suspended general contracting license currently prevents it from performing or from hiring others to perform any further corrective work on the complaint items in Case No. 2011-5655.[4] 3. Complainant bears the burden of proof to establish Premier’s statutory violations by a preponderance of the evidence.[5] Premier bears the burden to establish affirmative defenses by the same evidentiary standard.[6] “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”[7] 4. 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.[8] However, the Registrar may not award money damages.[9] Although a contractor should document agreed-upon changes to a contract in written change orders that are signed by the property owner,[10] no contracting statute prevents the contractor from charging a property owner for upgrades that he either verbally authorized or to which he acquiesced. Because Complainant acknowledged that he requested or acquiesced to numerous upgrades to the plans and specifications, including the Gerard roof, restitution is not appropriate. The parties must resolve their financial dispute in a court of competent civil jurisdiction. 5. A property owner’s failure to pay a contractor provides a defense to a charge of abandonment when the contract amount is no longer liquidated due to numerous upgrades. Therefore, Complainant did not establish that Premier violated A.R.S. § 32-1154(A)(1) by failing to complete the unfinished items of complaint. 6. Because the parties’ financial dispute provides a valid justification for Premier’s failure to comply with the directives in the CWOs to complete the unfinished items of complaint, Complainant did not establish that Premier violated A.R.S. § 32-1154(A)(23) by failing to complete the project without payment of additional compensation. 7. Although all of the upgrades constituted technical departures from plans and specifications, Complainant requested or acquiesced to the departures. Because Complainant did not establish any other departures, Complainant did not establish that Premier violated A.R.S. § 32-1154(A)(2). 8. The Registrar requires that if a contractor undertakes construction, it perform such work in a professional and workmanlike manner, regardless of payment. Therefore, Complainant established that Premier violated A.R.S. § 32-1154(A)(3), namely A.A.C. R4-9-108, in its construction of the items that the CWOs deemed deficient, rather than merely unfinished, as summarized at Finding of Fact No. 6. 9. The Registrar does not recognize a homeowner’s failure to pay as a valid justification for a contractor’s failure to repair deficient workmanship to comply with a CWO. Therefore, Complainant established that Premier violated A.R.S. § 32-1154(A)(23) by failing to repair the seven workmanship deficiencies noted at Finding of Fact No. 6. RECOMMENDED ORDERS Case No. 2011A-5651-ROC In view of the foregoing, it is recommended that on the effective date of the Registrar’s final order, the Registrar suspend License No. C37R.224993-R previously issued to Respondent Desert Radiant Barrier, L.L.C. dba Premier Luxury Homes until it has corrected in a professional and workmanlike manner the loose, poorly mounted angle stops for the water shut-off valves at the toilets and sinks and the corner of water tank that is visible above ground. It is further recommended that if on or before the effective date of the Registrar’s final order, Premier provides written proof that is acceptable to the Registrar that it has corrected in a professional and workmanlike manner the loose, poorly mounted angle stops for the water shut- off valves at the toilets and sinks and the corner of water tank that is visible above ground, the Registrar not suspend Premier’s License No. C37R- 224993-R but, instead, close Complainant Gregory A. Hansen’s complaint in Case No. 2011-5651. It is further recommended that the Registrar require Premier 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 Premier 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 revoke Premier’s License No. C37R.224993-R, effective on such deadline date. No future license shall be issued to any entity consisting of persons associated with Premier, as defined in A.R.S. § 32-1101(A)(5), unless Premier tenders payment of any outstanding prior civil penalty. 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. / / / / / / / / Case No. 2011A-5655-ROC In view of the foregoing, it is recommended that on the effective date of the Registrar’s final order, the Registrar revoke License No. B.213755-R previously issued to Respondent Desert Radiant Barrier, L.L.C. dba Premier Luxury Homes. It is further recommended that the Registrar not revoke Premier’s License No. B.213755-R but, instead, close Complainant Gregory A. Hansen’s complaint in Case No. 2011-5655 if on or before the effective date of the Registrar’s final order, Premier provides written proof that is acceptable to the Registrar of one of the following: 1) Premier has reinstated its License No. B.213755-R and has corrected in a professional and workmanlike manner the holes in the CMU perimeter fence that had been crudely punched to allow drainage, the cabinet door by the cook top that would not close, and the visible bubbled area in the patio ceiling drywall; 2) Premier has paid an amount of money to Complainant that is sufficient to allow Complainant to hire an appropriately licensed contractor of his choice to repair the holes in the CMU perimeter fence that had been crudely punched to allow drainage, the cabinet door by the cook top that would not close, and the visible bubbled area in the patio ceiling drywall; or 3) Complainant has refused to identify an appropriately licensed contractor of his choice to perform the work or to provide a bid from an appropriately licensed contractor of his choice to repair the holes in the CMU perimeter fence that had been crudely punched to allow drainage, the cabinet door by the cook top that would not close, and the visible bubbled area in the patio ceiling drywall. It is further recommended that the Registrar require Premier to pay the sum of $500.00 as a civil penalty pursuant to A.R.S. § 32-1154(D). It is further recommended that if Premier 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 revoke Premier’s License No. B.213755-R, effective on such deadline date. No future license shall be issued to any entity consisting of persons associated with Premier, as defined in A.R.S. § 32-1101(A)(5), unless Premier tenders payment of any outstanding prior civil penalty. 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. Case No. 2011A-5656-ROC In view of the foregoing, it is recommended that on the effective date of the Registrar’s final order, the Registrar suspend License No. C- 11.228117-R previously issued to Respondent Desert Radiant Barrier, L.L.C. dba Premier Luxury Homes until it has corrected in a professional and workmanlike manner the outlet boxes/receptacles/ switches that are not properly secured and the electrical outlets that have stucco/ drywall compound on them. It is further recommended that if on or before the effective date of the Registrar’s final order, Premier provides written proof that is acceptable to the Registrar that it has corrected in a professional and workmanlike manner the outlet boxes/receptacles/ switches that are not properly secured and the electrical outlets that have stucco/ drywall compound on them, the Registrar not suspend Premier’s License No. C- 11.228117-R but, instead, close Complainant Gregory A. Hansen’s complaint in Case No. 2011-5656. It is further recommended that the Registrar require Premier 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 Premier 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 revoke Premier’s License No. C-11.228117-R, effective on such deadline date. No future license shall be issued to any entity consisting of persons associated with Premier, as defined in A.R.S. § 32-1101(A)(5), unless Premier tenders payment of any outstanding prior civil penalty. 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, June 5, 2012.

/s/ Diane Mihalsky Administrative Law Judge

Transmitted electronically to:

William A. Mundell, Director Registrar of Contractors ----------------------- [1] One of Complainant’s complaint items against the general contracting license was that the Solatubes terminated in the attic because Premier had not made roof penetrations and installed lenses for the Solatubes. [2] See A.R.S. § 32-1154(C). That statute provides that “[t]he expiration, cancellation, suspension or revocation of a license . . . shall not deprive the registrar of jurisdiction to proceed with any investigation of or action or disciplinary proceeding against such license, or to render a decision suspending or revoking such a license . . . .” [3] See A.R.S. § 32-1101 et seq. [4] It is unlawful for anyone without a contractor’s license in good standing to engage in contracting. See A.R.S. § 32-1151. “Contractor” is defined as anyone who “does himself or by or through others” performs construction. A.R.S. § 32-1101(A)(3) (emphasis added). [5] See A.R.S. § 41-1092.07(G)(2); A.A.C. R2-19-119(A) and A.A.C. R2-19- 119(B)(1); see also Vazanno v. Superior Court, 74 Ariz. 369, 372, 249 P.2d 837 (1952). [6] See A.A.C. R2-19-119(B)(2). [7] Morris K. Udall, Arizona Law of Evidence § 5 (1960). [8] Sunpower of Arizona v. Arizona Registrar of Contractors, 166 Ariz. 437, 441, 803 P.2d 430, 434 (App. 1990). [9] See J.W. Hancock Enterprises, Inc. v. Arizona State Registrar of Contractors, 142 Ariz. 400, 406, 690 P.2d 119, 125 (App. 1984). [10] See A.R.S. § 32-1158 (requiring contracts of more than $1,000.00 between contractors and homeowners to be in writing).

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