ALJDEC decisions subject to certification as final

2012A-3413-ROC · Registrar of Contractors · 2013-01-23

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: January 3, 2013, at 8:00 a.m. APPEARANCES: Complainant Sage Luxury Homes LLC appeared through Sage Javin Lentz, its qualifying party and member; Respondent Wood Expressions Fine Custom Cabinetry Inc. appeared through Kelly Lynn Potter, its qualifying party and officer. ADMINISTRATIVE LAW JUDGE: Diane Mihalsky _____________________________________________________________________

FINDINGS OF FACT Background and Procedure The Arizona Registrar of Contractors (the Registrar) issued License No. K- 60.207219-D for dual finish carpentry to Wood Expressions Fine Custom Cabinetry Inc. (“Respondent”). The Registrar issued License No. B.233417-R for residential general contracting to Sage Luxury Homes LLC (“Complainant”). Complainant was the general contractor and Respondent was the cabinetry and door subcontractor in the construction of a large custom home for John Dennis Musil at 6627 East Exeter, Scottsdale, Arizona. On or about July 13, 2012, the Registrar received a Complaint from Complainant that alleged that Respondent had failed to complete its contract for the project and that the cabinets in the kitchen had the wrong finish. According to the Complaint, the amount of the subcontract was $312,106.04 and Respondent had been paid $287,259.02. The Registrar issued a Citation and Complaint against Respondent charging possible violations of A.R.S. § 32-1154(A)(1) and A.R.S. § 32-1154(A)(2). Respondent filed a timely written answer to the Citation and Complaint denying any statutory violations. The Registrar referred the matter to the Office of Administrative Hearings, an independent agency, for an evidentiary hearing. A hearing was held on January 3, 2013. Complainant submitted four exhibits and presented the testimony of two witnesses: (1) Sage Lentz, Complainant’s qualifying party and member, and (2) Mr. Musil. Respondent submitted eight exhibits and presented the testimony of Kelly Lynn Potter, its qualifying party and officer. Additional Evidence Complainant presented evidence that in late November 2011, and early December 2011, it became dissatisfied with the timeliness of Respondent’s performance of its subcontract on the Musil project. Respondent presented evidence that Complainant did not timely pay Respondent’s draw requests, especially for change orders that Mr. Musil approved, and that due to Complainant’s delay in making payment, Respondent was not able to order materials and commit crews to the project. Mrs. Potter testified that on January 19, 2012, Respondent delivered all but eleven of the interior doors to the project. On January 23, 2012, an arsonist broke into and set numerous fires at Respondent’s 20,000 square foot automated shop building. The building was a complete loss. Although Respondent filed a claim to its property insurer, as of the date of the hearing, nothing had been paid on the claim. Mrs. Potter testified that when the fire occurred, Respondent had fabricated and finished most of the cabinetry for the Musil project, but some of its work was destroyed in the fire. Respondent continued finishing cabinets for the project in a 200 square foot garage. Mrs. Potter submitted invoices and QuickBooks printouts that showed that although Respondent continued to work on the project, Complainant continued to delay paying Respondent’s invoices. On or about April 15, 2012, Mrs. Potter on behalf of Respondent sent an e- mail to Complainant’s project superintendent, in relevant part as follows: It was important for [Respondent’s officer, Dave Potter,] to meet with you and [Mr. Musil’s interior designer] on Friday before we were able to complete the schedule. We had a few questions that needed to be answered along with discussing with you the [order] in which we needed to complete some items, which wasn’t necessarily in the order you had originally requested. Attached per your request is the schedule, this brings us up to May 11th our guys will be in the field each day.

[Mr. Potter] and I discussed some of the work we had left on our contract and felt that we should issue a credit change order for a few of these items. Due to the complexity or custom nature of these items, we feel it would be best if you contracted another company. I am sorry if that causes an inconvenience, we are just limited in space due to the small facility that we are working out of and due to lack of machinery and tooling. We are doing this out of respect for you and the homeowner knowing you are trying to complete this project in a timely fashion, I would be more than happy to meet with or turn over any drawings that [we] had on these pieces to help facilitate their completion. We also included the credit back for the mirror at the fireplace, and put TBD on the custom mirror from Props. We will be bringing a sample of the decorative antiqued mirror tomorrow from Props, we don’t have his pricing yet but thought I could get this to you for approval.

If you noticed the schedule doesn’t include any interior doors, we had our guys working on this weekend to try to push up the schedule and encountered a few issues. We will update you on this in a few days on where we stand.

Mrs. Potter attached to the e-mail a proposed schedule and an invoice that included a credit for $13,130.05 for the items discussed in the e-mail. Mr. Lentz testified that he understood Mrs. Potter’s e-mail to terminate Respondent’s subcontract and to direct Complainant and Mr. Musil to hire another finish carpentry subcontractor. On April 19, 2012, Respondent issued another credit in the amount of $4,572.00 for the additional items that it would not be able to complete. Mrs. Potter testified that because Complainant was not paying Respondent, it was unable to pay its lead finisher and he quit. Mrs. Potter testified that the credit included all of the interior doors on the project, even though most of the doors had been delivered to the jobsite before the fire.

On May 1, 2012, Respondent sent its last invoice to Complainant that showed $279,893.35 in previous payments and $12,378.84 due for completed work, as well as the previously issued credits. Mrs. Potter testified that Complainant has not paid any of the remaining amounts due. On or about May 8, 2012, Mr. Musil sent an e-mail to Mr. and Mrs. Potter informing them that due to Respondent’s delays and because he thought that instead of working with Complainant to complete his home, their e-mails “gave the appearance of a passive aggressive stance,” he had “chosen to go in another direction with a woodcrafter.” Mr. Lentz testified that Complainant was forced to hire three subcontractors to complete Respondent’s subcontract at a total cost of $86,884.00. Complainant did not submit any invoices or accounting to substantiate the amount that it requested that Respondent be required to pay in restitution. Complainant did not submit any evidence to establish that Respondent applied the wrong finish to the doors and cabinetry on the Musil project. CONCLUSIONS OF LAW This matter lies within the Registrar’s jurisdiction.[1] Complainant bears 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] Mrs. Potter’s April 15, 2012 e-mail stated that Respondent intended to continue working on the project. Mr. Musil’s May 8, 2012 e-mail terminated Respondent’s subcontract. Before Complainant filed the Complaint with the Registrar, it hired other subcontractors to finish Respondent’s subcontract. Commercial exigency does not justify a general contractor’s failure to allow the Registrar or a subcontractor an opportunity to investigate a complaint.[5] Complainant did not establish that Respondent abandoned the project in violation of A.R.S. § 32-1154(A)(1)[6] or that Respondent failed to comply with contract specifications on the Musil project in violation of A.R.S. § 32-1154(A)(2).[7] RECOMMENDED ORDER Based on the foregoing, it is recommended that on the effective date of the Registrar’s Order, the Registrar dismiss Complainant Sage Luxury Homes LLC’s Complaint in Case No. 2012-3413 against Respondent Wood Expressions Fine Custom Cabinetry Inc.’s License No. K-60.207219-D. 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, January 23, 2013.

/s/ Diane Mihalsky Administrative Law Judge

Transmitted electronically to:

William A. Mundell, Director Registrar of Contractors ----------------------- [1] See A.R.S. §§ 32-1151 to 32-1169. [2] 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). [3] See A.A.C. R2-19-119(B)(2). [4] Morris K. Udall, Arizona Law of Evidence § 5 (1960). [5] See A.R.S. § 32-1155(C). This statute provides as follows: The registrar shall not issue a citation for failure to perform work in a professional and workmanlike manner or in accordance with any applicable building codes and professional industry standards if either: 1. The contractor is not provided an opportunity to inspect the work within fifteen days after receiving a written notice from the registrar. 2. The contractor's work has been subject to neglect, modification or abnormal use. [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)(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.”

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