ALJDEC decisions subject to certification as final

2012A-5218-ROC · Registrar of Contractors · 2013-10-09

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: October 8, 2013, at 8:00 a.m. APPEARANCES: Complainants Elizabeth C. Fisch and Neil M. Fisch appeared on their own behalf; Respondent Alpha Omega Construction Inc. was represented by Hoyt Shay Neal, Esq., Renaud Cook Drury Mesaros, PA. ADMINISTRATIVE LAW JUDGE: Diane Mihalsky _____________________________________________________________________

FINDINGS OF FACT 1. The Arizona Registrar of Contractors (“the Registrar”) issued License No. B-3.128803-R to Alpha Omega Construction Inc. (“Respondent”). 2. Elizabeth C. Fisch and Neil M. Fisch (“Complainants”) filed a Complaint against Respondent alleging workmanship deficiencies in its performance of a construction contract to remodel Complainants’ residence. Complainants also alleged that Respondent had performed unpermitted electrical and plumbing work. Complainants requested that the Registrar require Respondent to pay them $10,000.00 to “repair damage and shoddy work.” 3. The Registrar assigned the Complaint to Investigator Beau Cruz. Investigator Cruz performed a jobsite inspection and issued a Corrective Work Order (“CWO”) that required Respondent to perform certain repairs, including extensive drywall repairs, within fifteen days. 4. Investigator Cruz stated in the CWO that Respondent’s representative at the jobsite inspection had agreed that it had performed unpermitted plumbing and electrical work and that Inspector Cruz would send appropriate warning letters to the Pinal County Building Inspector. 5. The Registrar’s electronic file contains a letter from the Pinal County Building Safety Department dated December 28, 2012, that stated that a Building Code Complaint case was created for Complainants’ property and was still active. The letter also stated that the property owners were responsible for obtaining required permits, but that no permits had been issued. 6. After Complainants requested a hearing, the Registrar issued a Citation and Complaint charging Respondent with possible violations of A.R.S. §§ 32-1154(A)(1), 32-1154(A)(2), and 32-1154(A)(3), namely A.A.C. R4-9-108, and A.R.S. §§ 32-1154(A)(17) and 32-1154(A)(23). 7. Respondent filed a timely written answer that stated that the parties were involved in a civil action in Pinal County Justice Court and requested that the Registrar dismiss the administrative Complaint due to the pendency of the civil action. 8. After the Registrar denied Respondent’s motion to dismiss, the Registrar referred the Complaint to the Office of Administrative Hearings (“the OAH”), an independent agency, for an evidentiary hearing. 9. A hearing was scheduled on October 8, 2013. Both parties and Inspector Cruz appeared at the hearing. 10. Respondent’s attorney stated that Respondent filed suit against Complainants in justice court for non-payment, that Complainants counterclaimed for poor workmanship, and that after a trial, the court entered a judgment declining to award either party their requested damages. 11. Complainants agreed that the justice court had entered a judgment. Mr. Fisch stated that he had not asked the justice court for any damages caused by Respondent’s drywall work because he wanted to proceed on that claim in the administrative hearing on the Complaint that Complainants had filed against Respondent’s license with the Registrar. 12. Respondent later provided the following three documents to the OAH: (1) Respondent’s civil complaint in Pinal County Justice Courts, State of Arizona, Apache Junction Justice Court Case No. CV2012- 4414 for $9,474.00 based on Complainants’ breach of contract; (2) Complainants’ counterclaim in Case No. CV2012-4414, which alleged among other construction deficiencies Respondent’s repair of the drywall, quoted Investigator Cruz’s CWO, and requested that the court award Complainants $9,921.43 as damages for Respondent’s poor workmanship; and (3) The justice court’s July 12, 2013 judgment in Case No. CV2012- 4414 that found in Complainant’s favor on Respondent’s claim for breach of contract, found in Respondent’s favor on Complainant’s claim for workmanship deficiencies, and did not award any damages to either party. The civil complaint, counterclaim, and judgment are attached to this recommended decision. 13. Respondent’s attorney stated that he had appealed the judgment in Complainants’ favor on Respondent’s breach-of-contract claim. Complainants stated that they had not and did not intend to appeal the judgment in Respondent’s favor on their claim for workmanship deficiencies. 14. Based on the application of the legal doctrine of collateral estoppel, the Administrative Law Judge declined to accept further evidence and informed the parties that she would remand the matter to the Registrar with the recommendation that it close the Complaint. 15. Administrative notice is taken of Respondent’s prior License record as reflected on the Registrar’s public website on October 3, 2013. Such prior License record reflects that Respondent’s License No. B- 3.128803-R is current and that this is apparently the only complaint pending against the license. / / / / / / / / / / / / CONCLUSIONS OF LAW The Registrar has jurisdiction to resolve Complainants’ Complaint.[1] “‘Under the doctrine of res judicata, a judgment on the merits in a prior suit involving the same parties or their privies bars a second suit based on the same cause of action.’”[2] Only the Registrar may penalize a contractor’s license, however, and “[t]he mere commission of a prohibited act is insufficient in and of itself to invalidate [a] license.”[3] Nonetheless, the justice court judgment may have decided the issues Complainants raise here, even though the justice court lacked authority to discipline Respondent’s license.[4] Common-law claims for breach of contract or the tort of contractor malpractice based on alleged poor workmanship and abandonment include the same elements as Complainants’ Complaint to the Registrar for Respondent’s abandonment, unprofessional conduct, and departure from workmanship standards, in violation of A.R.S. § 32-1154(A)(1),[5] (2),[6] (3),[7] and (23).[8] Although Respondent has appealed the justice court judgment, in Arizona “an appeal from a judgment does not suspend the effect of the judgment as res judicata between the parties.”[9] Under this controlling authority, the collateral effect of a justice court judgment at this time prevents OAH from redetermining the merits of Complainants’ complaint. It appears that Complainants raised the drywall deficiencies in their counterclaim. Even if they did not present evidence on or request damages for the drywall deficiencies, a prior judgment "is conclusive . . . on all issues which were or could have been litigated and is not subject to collateral impeachment at a subsequent time."[10] With respect to the charged violation of A.R.S. § 32-1154(A)(17),[11] it appears from the CWO that Respondent admitted that it contracted to perform plumbing and electrical work that was unpermitted and beyond the scope of its B-3 license. It also appears that the appropriate government authority has been notified, that the Pinal County Building Safety Department has taken appropriate action, and that Respondent has been warned in the future to avoid contracting to perform work for which it is not licensed. If in the future, Respondent is found to have violated A.R.S. § 32-1154(A)(17), the warnings that Respondent received in this case should be considered as factors in aggravation of the penalty. RECOMMENDED ORDER Based on the foregoing, it is recommended that on the effective date of the final Order in this matter, Case No. 2012-5218 against Respondent Alpha Omega Construction Inc.’s License No. B-3.128803-R shall be closed. 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, October 15, 2013.

/s/ Diane Mihalsky Administrative Law Judge

Transmitted electronically to:

William A. Mundell, Director Registrar of Contractors ----------------------- [1] See A.R.S. § 32-1154(A). [2] Hawkins v. State of Arizona, Department of Economic Security, 183 Ariz. 100, 103, 900 P.2d 1236, 1239 (App. 1995) (quoting Gilbert v. Board of Medical Examiners, 155 Ariz. 169, 174, 745 P.2d 617, 622 (App. 1987); emphasis added). [3] Hunter Contracting Co. v. Sanner Contracting Co., 16 Ariz. App. 239, 243, 492 P.2d 735 (1972). [4] The Arizona Court of Appeals has held:

The doctrine of “collateral estoppel” is a doctrine of issue preclusion. It bars a party from relitigating an issue identical to one he has previously litigated to a determination on the merits in another action. The elements necessary to invoke collateral estoppel are: the issue is actually litigated in the previous proceeding, there is a full and fair opportunity to litigate the issue, resolution of such issue is essential to the decision, there is a valid and final decision on the merits, and there is a common identity of the parties.

Gilbert, 155 Ariz. at 169, 745 P.2d at 622 (quoted in Hawkins, 183 Ariz. at 103, 900 P.2d at 1239). [5] This statutory subsection 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.” [6] 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.” [7] This statutory subsection includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license “[v]iolation of any rule adopted by the registrar.” The rule charged was A.A.C. R4-9-108, which requires that “[a]ll work shall be performed in a professional and workmanlike manner” and that “[a]ll work shall be performed in accordance with any applicable building codes and professional industry standards.” [8] A.R.S. § 32-1154(A)(23) includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license, “[f]ailure to take appropriate corrective action to comply with this chapter or with rules adopted pursuant to this chapter without valid justification within a reasonable period of time after receiving a written directive from the registrar.” [9] Arizona Downs v. Superior Court, 128 Ariz. 73, 76, 623 P.2d 1229, 1232 (1981) (citations omitted). [10] Dairyland Ins. Co. v. Richards, 108 Ariz. 89, 91, 492 P.2d 1196, 1198 (1972) (emphasis added). [11] A.R.S. § 32-1154(A)(17) includes among the grounds for suspension, revocation, and other disciplinary action against a contractor’s license, “[k]nowingly contracting beyond the scope of the license or licenses of the licensee.”

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