ALJDEC decisions subject to certification as final

2011A-6989-ROC · Registrar of Contractors · 2012-12-05

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: November 19, 2012, at 8:00 a.m. APPEARANCES: David R. Bates (hereinafter “Complainant”) appeared through his attorney, Michael W. Thal, Esq., Lang Baker & Klain PLC. Cactus Roofing LLC (hereinafter “Cactus”) appeared through its attorney, Fidelis V. Garcia, Esq., Fidelis V. Garcia Law Office. ADMINISTRATIVE LAW JUDGE: M. Douglas _____________________________________________________________________

Evidence and testimony were presented and the following Findings of Fact, Conclusions of Law and Recommended Order are made: FINDINGS OF FACT 1. Cactus is the holder of License No. K-42.244602-D issued by the Registrar of Contractors. 2. This is a residential matter wherein Complainant signed a “Subject-to- Agreement” with Cactus for the replacement of his hail-damaged tile roof. Pursuant to the terms of the agreement, Complainant paid a $10,000.00 deposit to Cactus when Complainant received his first insurance check from his insurance company. 3. Complainant intended to provide his own roofing tiles for the construction project. When Cactus refused to delete the cost of roofing tile from its bid for the construction project, Complainant requested that Cactus return his $10,000.00 deposit. 4. Cactus refused to return any money to Complainant based upon the terms of the Subject-to-Agreement. 5. There was no dispute that no written contract other than the Subject-to- Agreement was signed by the parties. 6. When Cactus refused to return his money to him, Complainant filed a formal Complaint against Cactus with the Registrar of Contractors. 7. There was no dispute that Cactus performed no work on Complainant’s roof and that no roofing materials were delivered to Complainant. 8. Cactus furnished the form Subject-to-Agreement utilized in this matter. The Work Specifications and Payment Schedule boxes in the Subject-to- Agreement were not completed when the document was signed by Complainant. 9. The Subject-to-Agreement does not contain Cactus’s Registrar of Contractors-issued license number, does not contain the estimated date of completion, does not provide a description of the work to be performed, does not provide a payment schedule, does not provide the amount of the contract, does not provide the dollar amount of any advance deposit paid or scheduled to be paid, and does not inform the property owner of the right to file a written complaint with the Registrar of Contractors for an alleged violation of A.R.S. § 32-1154(A).[1] 10. On September 30, 2011, Cactus’s employee, Michael Manna (hereinafter “Mr. Manna”), provided Complainant with a copy of Cactus’s August 23, 2011 bid for the roof replacement project. Complainant requested that the bid be broken down into its component parts so that the portion of the bid containing the cost of new roofing tiles could be removed. Mr. Manna emailed Complainant, stating that the bid would not be broken down. Complainant then demanded his money back.[2] 11. Complainant testified that when he signed the written Subject-to- Agreement, Cactus’s employee, Mr. Manna, informed him that the Subject-to- Agreement was not a final document. Complainant stated that he signed the Subject-to-Agreement because Mr. Manna stated that the Subject-to- Agreement had to be signed by Complainant to authorize Cactus to negotiate with Complainant’s insurance company.[3] 12. Complainant testified that the parties had not decided upon the final terms of any proposed construction agreement and that he signed the Subject-to-Agreement solely to enable Cactus’s employee, Mr. Manna, to meet with Complainant’s insurance company.[4] 13. Complainant testified that after meeting with Complainant’s insurance representative, Mr. Manna informed Complainant that he had persuaded the insurance company to replace Complainant’s roof. Complainant stated that Mr. Manna informed Complainant that Cactus would provide Complainant with a more detailed long-form contract setting forth the terms of the parties’ construction agreement, including the provision that Complainant would be providing the new roof tiles.[5] 14. Complainant testified that Mr. Manna’s one contact with his insurance company was Cactus’s only contact with his insurance company and from that point on all contact with the insurance company was through Complainant. Complainant stated that his insurance company gave him an initial check for “around $31,000.00.”[6] 15. .Complainant testified that he paid a $10,000.00 deposit to Cactus. Complainant stated that Mr. Manna informed Complainant that a second employee from Cactus, indentified as “Oscar,” inspected Complainant’s roof to ensure that nothing was missed. Complainant stated that he informed Cactus that he wanted a detailed estimate because the only estimate provided by Cactus included roofing tiles that Complainant was going to provide. Complainant testified that Cactus’s employee stated that he did not understand why Cactus would not take the roofing tiles out of Cactus’s bid for the installation of a new tile roof on Complainant’s residence.[7] 16. Complainant testified that he informed Mr. Manna that he wanted Cactus to revise its bid to replace Complainant’s roof by deleting the roofing tiles. Complainant stated that he believed Cactus was “changing the deal” and that he informed Mr. Manna that he wanted his $10,000.00 deposit back. Complainant testified that he would not have considered entering into a construction agreement with Cactus if he had been informed that Cactus would insist on providing the roofing tiles for his roof.[8] 17. Complainant denied that he had ever stated that he intended to utilize the insurance proceeds intended for his roof for his personal use. Complainant stated that the insurance proceeds, less the $10,000.00 deposit given to Cactus, were in his bank account and that his roof still required repair and that his roof now leaks.[9] 18. Complainant’s testimony is found to be credible. 19. Cactus’s former employee, Oscar Navarro (hereinafter “Mr. Navarro”), testified that he was employed by Cactus when Michael Manna “sold” the job to Complainant. Mr. Navarro stated that Mr. Manna did not inform him that it was a “labor-only job.” Mr. Navarro testified that the Subject- to-Agreement was “basically” an agreement for Cactus to negotiate with Complainant’s insurance company and to replace Complainant’s roof.[10] 20. Mr. Navarro testified that there were no numbers in the Subject-to- Agreement because Complainant’s insurance company had not approved a scope of work for the repair of Complainant’s roof. Mr. Navarro stated that he talked with Complainant’s insurance company and provided it with Cactus’s estimate for the replacement of Complainant’s roof. Mr. Navarro testified that Complainant’s insurance company then increased the scope of the construction project based upon Cactus’s bid.[11] 21. Mr. Navarro testified that his communications with Complainant were through Mr. Manna. Mr. Navarro stated that Mr. Manna asked him to provide an alternative estimate that would reduce the previous cost estimate by $10,000.00. Mr. Navarro testified that he created cost estimates to reduce the price of the entire roof replacement project by $10,000.00. Mr. Navarro stated that it was easier for Cactus to utilize its own suppliers and that was how Cactus “makes its money.”[12] 22. Mr. Navarro testified that Cactus always included materials and labor in its estimates. Mr. Navarro acknowledged that Complainant had paid Cactus $10,000.00. Mr. Navarro reviewed the terms of the Subject-to- Agreement and stated that it requires Complainant to pay 25% of the contract price in the event of a contract cancellation. Mr. Navarro testified that the $10,000.00 deposit was the only security Cactus had to perform the job.[13] 23. Mr. Navarro testified that Cactus performed no construction work on Complainant’s roof. Mr. Navarro stated that Cactus provided its expertise in representing Complainant’s interests with Complainant’s insurance company. Mr. Navarro acknowledged that he is not a licensed insurance adjuster. Mr. Navarro stated that he spoke on the phone and via email with Complainant’s insurance company. Mr. Navarro acknowledged that he negotiated with Complainant’s insurance company but denied that he was acting as an insurance adjuster.[14] 24. Mr. Navarro agreed that Mr. Manna spent no more than one hour on Complainant’s roof and that he spent no more than one hour of time for his contacts with Complainant’s insurance company.[15] 25. Mr. Navarro testified that he was not present when Mr. Manna was negotiating the Subject-to-Agreement with Complainant and was not present when the agreement was signed. Mr. Navarro stated that Mr. Manna was his point of contact with Complainant. Mr. Navarro testified that the Subject-to-Agreement was not submitted to Complainant’s insurance company and was not approved by Complainant’s insurance company. Mr. Navarro acknowledged that the Subject-to-Agreement provides that the agreement does not obligate the homeowner or Cactus in any way unless the agreement is approved by Complainant’s insurance company.[16] 26. Mr. Navarro testified that Cactus did not perform construction work on Complainant’s residence because Complainant canceled the contract. Mr. Navarro stated that Mr. Manna did not tell him that Complainant would be supplying the roofing tiles for Complainant’s roof.[17] 27. Administrative notice is taken of Cactus’s prior license record as reflected on the Registrar of Contractors’ public website on December 4, 2012. Such prior license record reflects that License No. K-42.244602-D of Cactus is current with two open complaints, one complaint that has resulted in Cactus’ license being disciplined after an administrative hearing or default for a violation of state contracting laws, and six complaints that have been closed as a result of having been withdrawn or settled after the issuance of a corrective work order or formal citation.

CONCLUSIONS OF LAW 1. The burden of proof at an administrative hearing falls to the party asserting a claim, right, or entitlement and the standard of proof on all issues in these matters is by a preponderance of the evidence. See A.A.C. R2-19-119. 2. A preponderance of the evidence is “such proof as convinces the trier of fact that the contention is more probably true than not.” Morris K. Udall, ARIZONA LAW OF EVIDENCE § 5 (1960). 3. Complainant entered into a construction agreement with Cactus’s representative, Mr. Manna, for the performance of roofing work on Complainant’s residence. Credible testimony established that Complainant and Cactus’s representative, Mr. Manna, agreed that Complainant would provide the new roofing tiles for the construction project and that Cactus would provide labor and all other construction materials. Cactus then provided Complainant with a written estimate for the installation of the new tile roof including new roof tiles. Complainant requested that Cactus delete the cost of the new roofing tiles from the estimate in accordance with his agreement with Cactus’s representative, Mr. Manna. Cactus then refused to perform the agreed-upon construction project unless Cactus was able to utilize its own roofing tiles at Complainant’s expense. Complainant refused to change the terms of the parties’ construction agreement. Cactus then declined to perform the agreed-upon roofing work and refused to return Complainant’s $10,000.00 deposit. This Tribunal concludes that Cactus violated the charged provision of A.R.S. § 32-1154(A)(1).[18] 4. The written Subject-to-Agreement prepared and furnished by Cactus does not contain Cactus’ Registrar of Contractors license number, does not contain the estimated date of completion, does not provide a description of the work to be performed, does not provide a payment schedule, does not provide the amount of the contract, does not provide the dollar amount of any advance deposit paid or scheduled to be paid, and does not inform the property owner of the right to file a written complaint with the Registrar of Contractors for an alleged violation of A.R.S. § 32- 1154(A). This Tribunal concludes that Cactus violated the charged provision of A.R.S. § 32-1154(A)(13), namely, A.R.S. § 32-1158.[19] RECOMMENDed order In view of the foregoing, it is recommended that on the effective date of the Registrar’s Order, License No. K-42.244602-D of Cactus shall be revoked unless the Registrar of Contractors receives and accepts written proof that Cactus has, as restitution under A.R.S. § 32-1156.01[20], returned Complainant’s $10,000.00 deposit to him. It is further recommended that if Cactus accomplishes the above described restitutionary action on or before the effective date of this Order, then the above provided License revocation shall not take place and, instead, License No. K-42.244602-D of Cactus shall be placed on disciplinary probation for a period of one hundred and twenty (120) days. In the event of certification of this 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 the certification. Done this day, December 5, 2012. /s/ M. Douglas Administrative Law Judge

Transmitted electronically to:

William A. Mundell, Director Registrar of Contractors

----------------------- [1] See Exhibit C-7 (7/26/11 Subject-to-Agreement). [2] See Exhibit C-9 (Email chain). [3] 11/19/12 Hearing Record (hereinafter “H.R.”) at 18:55-23:26. [4] H.R. at 23:27-28:49. [5] H.R. at 28:50-30:21. [6] H.R. at 30:22-31:41. [7] H.R. at 31:42-36:53. [8] H.R. at 36:54-42:21. [9] H.R. at 51:15-51:53. [10] H.R. at 1:49:30-1:52:22. [11] H.R. at 1:52:23-1:56:22. [12] H.R. at 1:59:50-2:02:53. [13] H.R. at 2:02:54-2:07:46. [14] H.R. at 2:07:47-2:17:11. [15] H.R. at 2:17:12-2:17:48. [16] H.R. at 2:18:11-2:20:36. [17] H.R. at 2:46:30-247:55. [18] A.R.S. § 32-1154(A)(1) includes among the grounds for disciplinary action against a contractor’s license, abandonment of a contract or refusal to perform after submitting a bid on work without legal excuse for the abandonment or refusal. [19] A.R.S. § 32-1158 (B) provides, in pertinent part, as follows: B. From and after December 31, 2007, any contract in an amount of more than one thousand dollars entered into between a contractor and the owner of a property to be improved shall contain in writing at least the following information: 1. The name of the contractor and the contractor's business address and license number. 2. The name and mailing address of the owner and the jobsite address or legal description. 3. The date the parties entered into the contract. 4. The estimated date of completion of all work to be performed under the contract. 5. A description of the work to be performed under the contract. 6. The total dollar amount to be paid to the contractor by the owner for all work to be performed under the contract, including all applicable taxes. 7. The dollar amount of any advance deposit paid or scheduled to be paid to the contractor by the owner. 8. The dollar amount of any progress payment and the stage of construction at which the contractor will be entitled to collect progress payments during the course of construction under the contract. 9. That the property owner has the right to file a written complaint with the registrar for an alleged violation of section 32-1154, subsection A. The contract shall contain the registrar's telephone number and website address and shall state that complaints must be made within the applicable time period as set forth in section 32-1155, subsection A. The information in this paragraph must be prominently displayed in the contract in at least ten point bold type, and the contract shall be signed by the property owner and the contractor or the contractor's designated representative. This paragraph does not apply to a person who is subject to and complies with section 12-1365.

[20] A.R.S. § 32-1156.01 provides, in pertinent part, as follows:

After a hearing pursuant to this article, an administrative law judge may recommend that a licensee provide restitution to any person who is injured or whose property is damaged by an action of the licensee.

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