ALJDEC decisions subject to certification as final

2011A-591-ROC · Registrar of Contractors · 2011-08-22

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: August 3, 2011, at 8:00 a.m. APPEARANCES: Complainants Preston and Jeanne Smith appeared on their own behalf; Respondent Enterprise Floors, L.L.C. appeared through Kevin Bumstead, Esq. ADMINISTRATIVE LAW JUDGE: Diane Mihalsky _____________________________________________________________________

FINDINGS OF FACT Background and Procedure In November 2002, the Arizona Registrar of Contractors (“the Registrar”) issued License No. ROC179638, Class K-8 for dual floor covering to Enterprise Floors, L.L.C. (“Respondent”). On or about January 31, 2011, the Registrar received a complaint from Preston and Jeanne Smith (“Complainants”) against Respondent, alleging that after Complainants paid $7,200.00 to Respondent based on its false advertising, it failed to place Complainants’ order for wood flooring and hired unlicensed subcontractors to install wood flooring that they had not ordered. Complainants requested a hearing. On May 6, 2011, the Registrar issued a Citation and Complaint against Respondent, charging violations of A.R.S. § 32-1154(A)(1) and (2). Respondent filed a timely written answer to the Citation and Complaint, denying any statutory violations and affirmative alleging that after Respondent placed an order for the flooring that Complainants had selected, Complainant Mrs. Smith changed her mind and cancelled the contract. The Registrar referred the matter to the Office of Administrative Hearings, an independent agency, for an evidentiary hearing. A hearing was held on August 3, 2011. Complainants testified, presented the testimony of their daughter, Stephanie Diaz, and submitted four exhibits. Respondent presented the testimony of its member, Michael Rafi, and submitted seven exhibits. Hearing Evidence In December 2010, Respondent advertised 18” x 18” travertine tile for $4.99/square foot installed, and engineered hardwood floors for $4.99/square foot installed. At the time, Complainants were remodeling a house they owned at 15131 East Desert Vista Trail in Scottsdale, Arizona and wanted to replace the carpeting with hardwood floors. On December 17, 2010, Complainants and Ms. Diaz travelled from their home in Fountain Hills, Arizona to Respondent’s show room on North 35th Avenue in west Phoenix. Mr. Rafi showed Complainants and Ms. Diaz the hardwood flooring that Respondent had on sale. Mrs. Smith thought the flooring was “too red”; she wanted a “darker, more chocolate-y” shade for the remodel. Mr. Rafi showed Complainants another sample, and Complainants asked to take the sample to the house in Scottsdale to see if it would match the other colors and materials that Complainants were using in the remodel. Complainants and Ms. Diaz testified that the sample they wanted was manufactured by Shaw. Mr. Rafi testified that the second sample that he showed Complainants and Ms. Diaz was manufactured by Mohawk. Complainants and Mr. Rafi made an appointment on the next day for Mr. Rafi to measure the house in Scottsdale. Complainants put a $200.00 deposit on their Visa credit card. Complainant Mr. Smith signed Respondent’s form contract, agreeing that “I have read and agree to the terms and conditions of the sale on the reverse side of this contract.” The reverse side of Respondent’s form contract provided in relevant part as follows: 1. Return Policy A. Special orders, We do not allow any refunds, Exchanges of any material ordered. . . . . E. There will be a $100.00 non refundable estimate fee in house.

2. Order/Deposit: A. For sales of special order and stock merchandise, orders are not processed until: 1) Receipt by Enterprise Floors of the minimum deposit, Which is (50%) of the total price or any other way that [Enterprise Floors] approved. 2) Any balance due must be paid before installation by certified check or any other way approved by Enterprise Floors. . . . .

3. Delivery/Installation: . . . . B. Failure to not acceptance [sic] of delivery of material signed for; Is [sic] subject to loss of deposit made. C. Installation of material may take between 1 to 15 days from the promised date depending on job type. . . . . Respondent’s form contract does not include any provision for a restocking fee. On December 18, 2010, Mr. Rafi met Complainants and Ms. Diaz at Complainants’ house in Scottsdale to measure the areas where they wanted hardwood flooring installed. While he was measuring the areas for hardwood flooring, Complainants told Mr. Rafi that they also would like to have 18” x 18” travertine tile that matched the master bathroom floor installed in two closets to replace the carpet. On December 18, 2010, Complainant Mrs. Smith approved one of the hardwood flooring samples that Respondent had provided. Complainants and Ms. Diaz testified Mrs. Smith approved a Shaw sample. Mr. Rafi testified that Mrs. Smith approved a sample manufactured by Mohawk. Mr. Rafi prepared a contract on Respondent’s form to install “brushed wood” in the master bedroom, living room, dining room, and third bedroom at Complainants’ Scottsdale house, to install 18” x 18” travertine tile in two closets, and to take up and haul away the old carpet, for a total price of $14,000.00, with a $7,000.00 deposit. Complainant Mr. Smith signed the contract. The written contract did not provide any itemized prices, the specific manufacturer, color, or style of the hardwood flooring, the kind of travertine flooring, or square footage of material to be installed. The contract also did not provide a completion date. Complainants testified that the area where the hardwood floor would be installed was approximately 1800 square feet, and the area where travertine tile would be installed was approximately 220 square feet. Because Complainants did not have their checkbook at the Scottsdale house, Ms. Diaz gave Respondent her personal check in the amount of $7,000.00. Because Ms. Diaz did not have sufficient funds to cover the check in her account, Complainants asked Respondent to hold the check until the next business day to give them an opportunity to transfer funds into Ms. Diaz’ account. Respondent attempted to deposit Ms. Diaz’ check, but it was returned for insufficient funds. Complainants testified that shortly thereafter, they gave Respondent a cashier’s check in the amount of $7,000.00 and that Mr. Rafi promised to have the hardwood flooring installed before January 1, 2011. Complainants testified that they called Mr. Rafi numerous times during the last week of December 2010, but he either did not answer their calls or said the wood flooring was back-ordered. Mr. Rafi denied that he promised Complainants that the hardwood flooring would be installed before January 1, 2011, since it would take 7-15 days for the flooring to be delivered once it was ordered from the manufacturer, and Complainants had not paid the 50% deposit. Mr. Rafi testified that Complainants did not give Respondent the $7,000.00 cashier’s check until January 4, 2011. Respondent submitted a copy of a receipt for a $7,000.00 deposit dated January 5, 2011. Respondent does not identify customers or provide addresses on its orders to manufacturers for flooring. In early January 2011, Complainants started calling Shaw’s sales manager in Arizona, Carly Nochta, and Shaw’s Regional Sales Manager in California, Mickey Haglund. Mrs. Smith testified that she spoke to Ms. Nochta between and 20 times, that Ms. Nochta and Mr. Haglund told Complainants that Respondent had ordered approximately 1800 square feet of Shaw hardwood flooring in December 2010, and that the price of the flooring had been substantially discounted because Respondent said that the flooring was for display in its show room. Mr. Smith testified that after he told Ms. Nochta and Mr. Haglund that the floor in fact was for their house in Scottsdale, Mr. Haglund said that Respondent had “duped” both of them and cancelled the order. According to the printout of an e-mail allegedly from Mr. Haglund that Complainants submitted, Respondent placed a second order for approximately 1800 square feet of Shaw hardwood flooring in January 2011, and Mr. Haglund cancelled the second order. Mr. Rafi testified that Respondent was remodeling its show room and planned to put the Shaw hardwood floor in the remodeled show room. Mr. Rafi testified that Respondent cannot order flooring until it receives the customer’s 50% down payment because manufacturers require payment to place orders, and that on or about January 5, 2011, Respondent ordered Complainants’ flooring materials from Mohawk. In the meantime, Respondent’s employees or subcontractors removed the carpet from the areas of Complainants’ house in Scottsdale where hardwood flooring would be installed. On January 26, 2011, Complainants went to their house in Scottsdale and met Respondent’s installer, who told them that he had been sent to install wood flooring in the master bedroom. Complainants testified that the installer told them that he did not bring all the flooring that Complainants ordered because there was insufficient room in the house to store the flooring. Mr. Rafi testified that Complainants contacted him at the end of January 2011, to have the hardwood flooring installed and that Respondent did not deliver all the flooring because Complainants had not complied with the contract by paying the full contract price. Mr. Rafi testified that after Complainants told him that they did not have the rest of the money, he agreed to install hardwood flooring in one room. Complainant Mrs. Smith testified that the flooring that Respondent sent out on January 26, 2011, was the same red wood that Complainants had rejected at Respondent’s show room. Mrs. Smith testified that she ordered the installer to take the wood flooring and leave the residence. Respondent submitted an invoice to Mrs. Smith dated December 22, 2010, in the total amount of $3,551.67 for 275 square feet of travertine tile at $6.99/square foot, plus $3.50/sqare foot for installation, 75 linear feet of wall base at $4.99/foot, grout, thin-set, and sales tax. Mr. Rafi testified that the advertised travertine was not filled or honed, and that the travertine tile in Complainants’ master bathroom was premium tile. Respondent also submitted an invoice to Mrs. Smith dated January 26, 2011, in the amount of $1,567.35 to “[r]estock 2000 sq ft Engineered Hardwood Floor at 15% of total charged material.” Complainants testified that they first saw the invoices in April 2011. Mrs. Smith testified that Mr. Rafi never discussed a restocking fee with Complainants. Before the hearing, Complainants paid another contractor to install Paramont Java Maple hardwood flooring in their Scottsdale house, at a cost of $4.29/square foot, for a total price of $9,473.97. Mr. Rafi testified that Complainants have a $1,881.08 credit at Respondent. Mr. Rafi pointed out that Respondent’s form contract does not require Respondent to pay cash refunds to Complainants. CONCLUSIONS OF LAW This matter lies within the Registrar’s jurisdiction.[1] Complainants bear the burden of proof to 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] The Registrar’s Citation and Complaint did not charge Respondent with failing to pay taxes on employees under A.R.S. § 32-1154(A)(4), aiding and abetting unlicensed contractors under A.R.S. § 32-1154(A)(10), publishing false or misleading advertising under A.R.S. § 32-1154(A)(16), or failing to comply with a provision of Title 32 under A.R.S. § 32-1154(A)(13), specifically, A.R.S. § 32-1158, requiring contractor’s contracts with property owners to include certain minimum elements, including an estimated completion date. Complainants did not ask the Registrar to amend the Citation and Complaint to include these additional statutory violations, and Respondent’s right to due process prevents the Administrative Law Judge from making any findings with respect to Respondent’s possible violations of uncharged statutes. Mr. Haglund and Ms. Nochta did not testify at the hearing. Therefore, Mr. Haglund and Ms. Nochta’s alleged statements to Mr. and Mrs. Smith in telephone conversations and Mr. Haglund’s alleged e-mail are hearsay.[5] Although hearsay may be admitted in an administrative hearing,[6] it should not be relied upon if it is not the kind of evidence that reasonable persons would rely upon in serious matters.[7] The alleged statements and e- mail are not the kind of evidence upon which reasonable persons would rely to penalize a contractor’s license and jeopardize its livelihood. The parties’ December 18, 2010 written contract does not specify the hardwood flooring that Respondent would install. Although the contract did not provide for a restocking fee, the contract provided that deposits would be subject to loss if the customer did not accept the material that Respondent delivered. Because Complainants did not establish that the contract required Respondent to install flooring that was different from the flooring it delivered on January 26, 2011, Complainants have not established that Respondent violated A.R.S. § 32-1154(A)(2).[8] Complainants acknowledged that Respondent was willing to install hardwood flooring, but Complainants would not allow Respondent to complete its contract by installing the hardwood flooring that it delivered. Therefore, Complainants have not established that Respondent violated A.R.S. § 32- 1154(A)(1).[9] RECOMMENDED ORDER In view of the foregoing, it is recommended that on the effective date of the Registrar’s final order, the Registrar dismiss Complainants Preston and Jeanne Smith’s complaint in Case No. 2011-591 against Respondent Enterprise Floors, L.L.C.’s License No. ROC179638. 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] 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] See Ariz. R. Evid. 801(c) (“‘Hearsay’ is a statement, other than one made by the declarant while testifying at the trial or hearing, offered in evidence to prove the truth of the matter asserted.”). [6] See A.R.S. § 41-1092.07(F)(1). [7] See Plowman v. Arizona State Liquor Board, 152 Ariz. 331, 337, 732 P.2d 222, 228 (App. 1986) (citing Begay v. Arizona Department of Economic Security, 128 Ariz. 407, 626 P.2d 137 (App. 1981)). [8] A.R.S. § 32-1154(A)(2) 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.” [9] 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.”

-----------------------

Office of Administrative Hearings 1400 West Washington, Suite 101 Phoenix, Arizona 85007 (602) 542-9826