ALJDEC decisions subject to certification as final

2013A-5114-ROC-RF · Registrar of Contractors · 2016-03-17

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: March 1, 2016, held open until March 8, 2016 APPEARANCES: Tom Raine, Registrar of Contractors Attorney representing Complainant; Kathleen Ostrem, Complainant; Heather Moore and Joseph Schenk, Respondent’s co-counsel; James D. Stewart, Respondent’s representative; James Barbour and Dee Watling, Complainant’s witnesses; James N. Stewart, Respondent’s witness ADMINISTRATIVE LAW JUDGE: Dorinda M. Lang _____________________________________________________________________

FINDINGS OF FACT 1. Respondent’s contractor’s license (Number CR21.069226-D) was suspended for 14 days pursuant to Arizona Office of Administrative Hearings Case Number 2014A-2833-ROC, in which the Registrar of Contractors brought a complaint on behalf of two different Complainants, one of whom was the Complainant in this matter. 2. On or about November 23, 2015, Complainant submitted a Recovery Fund Claim Form to the Registrar of Contractors.[1] As a result of that submission and the estimates provided by Complainant, the Registrar of Contractors issued a Notice of Claim for Administrative Payout on or about November 30, 2016.[2] It notified the parties that, based on the information provided by Complainant and reviewed by the Registrar of Contractors, the Residential Contractor’s Recovery Fund (“the Fund”) had determined that a payout of $14,625.00 appeared to be appropriate. 3. The scope of work, as noted by the Administrative Law Judge in Case No. 2014A-2833-ROC, was limited to the following excerpt from the contract between Complainant and Respondent: 6) Grading to accomplish desired aesthetics and soil against concrete walks to be tapered 4” for granite retention. Grading will also address current issue with the improper drainage and the new grade will run all water away from the back patio. Grade will also slope towards the southern portion of back yard and continue to the east to properly release the water.[3]

4. In that matter, the Administrative Law Judge found that Respondent failed to properly grade Complainant’s back yard so that rain would not accumulate on Complainant’s back patio.[4] The Registrar of Contractors adopted that finding.[5] It is not disputed that they only part of Complainant’s contract with Respondent that was in violation was Complainant’s allegation that there was still flooding up to and on her back patio during heavy rain. 5. Complainant submitted three estimates to correct the work, all of which proposed to remove the artificial turf that Respondent installed in Complainant’s back yard and replace it with new artificial turf, among many other things.[6] The Fund logically allowed the estimates based on the general principle that correcting a contractor’s work can sometimes require removal and replacement of items that were improperly installed or that may impede the corrective work. However, additional information came to light at the hearing that supports a finding that the estimates were not reasonable and exceeded the scope of the necessary repair work. 6. Respondent’s representative and witness established that the appropriate remedy for Complainant’s drainage issue is to increase the size of the retention basin that Respondent installed in Complainant’s side yard and that the work proposed by Complainant’s bidder went far beyond the amount of work necessary to correct the violation alone. Respondent’s evidence that it is not necessary to remove and replace the artificial turf was established to be much more reasonable than removing the turf, throwing it away and replacing it with new turf. Respondent’s representative, an experienced licensed contractor working in the field credibly testified that there is no reason to throw away Complainant’s artificial turf because it is common to raise the turf, work on or modify the soil beneath it, and tack it back down. Additionally, he credibly testified that artificial turf is reusable, even by another homeowner, and that second hand turf is often sold online at sites such as E-Bay. The cost of artificial turf in Complainant and Respondent’s contract was unclear.[7] However, the lowest of Complainant’s bids at $14,625.00 estimated the cost of the new turf at $5,513.00.[8] This new evidence begins to reveal that Complainant submitted bids that went far beyond what was necessary to address Respondent’s violation. 7. Respondent offered into evidence the bids and affidavits of four contractors who all agreed that it was not necessary to move the artificial turf, and that the proper corrective work only requires an increase in the size of the retention basin, which is lined with gravel and is not covered in artificial turf.[9] 8. Respondent’s representative testified that Complainant would not allow him or the other contractors onto her property when they made their bids, but he was able to show them the 3D Imaging program that Respondent uses to make its bids, including the bid on Complainant’s own project.[10] He also said he showed them the schematics of the property that he created when he was working on the project, the contract between Complainant and Respondent and the Directive from the Registrar.[11] In all, there was no reason to believe that the bids were unreasonable or that they would have been significantly different if they had seen the property. Further, by refusing access, while it was her legal right to do so, Complainant should bear the risk that the competing bids would not be accurate for her property. To find otherwise would risk depriving Respondent of his due process right to respond to the Fund’s decision. 9. Respondent’s representative acknowledged that two of the bids were incomplete in that they did not estimate the cost of replacing (“redressing”) some gravel that would be removed in the process of digging out more room in the retention basin. However, all of the bids were very close to each other, so there is no reason not to rely on the other two bids. 10. Respondent’s position was bolstered by Respondent’s representative’s testimony regarding a photograph submitted by Complainant in Case No. 2014A-2833-ROC.[12] While it does show that the back yard was flooded with water at some point in time, he pointed out that it also shows that the grading of the back yard was functioning as he designed it to. The water was flowing toward the side yard in the valley that Respondent created for that very purpose. The logic of Respondent’s representative could not be denied. The evidence at hearing clearly established that it is not necessary to change anything on Complainant’s property other than to increase the size of the drainage basin. 11. Respondent’s two estimates that included redressing the gravel were both bid at $1,500.00.[13] The two estimates that failed to include redressing the area were $1,320.00 and $1,580.00.[14] The $1,500.00 bids were the most reasonable bids in evidence at the hearing. It was undisputed that all of the bidding contractors were properly licensed by the Registrar of Contractors. CONCLUSIONS OF LAW 1. Arizona Revised Statute § 32-1132(A) establishes a residential contractor’s recovery fund, which provides as follows: The residential contractors' recovery fund is established, to be administered by the registrar, from which any person injured by an act, representation, transaction or conduct of a residential contractor licensed pursuant to this chapter that is in violation of this chapter or the rules adopted pursuant to this chapter may be awarded in the county where the violation occurred an amount of not more than thirty thousand dollars for damages sustained by the act, representation, transaction or conduct. An award from the fund is limited to the actual damages suffered by the claimant as a direct result of the contractor's violation but shall not exceed an amount necessary to complete or repair a residential structure or appurtenance within residential property lines. Actual damages shall not be established by bids supplied by or the value of work performed by a person or entity that is not licensed pursuant to this chapter and that is required to be licensed pursuant to this chapter. If the claimant has paid a deposit or down payment and no actual work is performed or materials are delivered, the award of actual damages shall not exceed the exact dollar amount of the deposit or down payment plus interest at the rate of ten per cent a year from the date the deposit or down payment is made or not more than thirty thousand dollars, whichever is less. Interest shall not be paid from the fund on any other awards under this chapter unless ordered by a court of competent jurisdiction. An award from the fund shall not be available to persons injured by an act, representation, transaction or conduct of a residential contractor who was not licensed pursuant to this chapter or whose license was in an inactive status, expired, cancelled, revoked, suspended or not issued at the time of the contract. No more than the maximum individual award from the fund shall be made on any individual residence or to any injured person. Notwithstanding any other provision of law, monies in the residential contractors' recovery fund shall not be directly awarded for attorney fees or costs except in contested cases appealed to the superior court.

2. Arizona Revised Statute § 32-1154(E) provides that the Registrar of Contractors “may” order a payout from the recovery fund where a contractor’s license has been revoked or suspended as a result of a violation and the contractor is unwilling or unable to remedy the violation. 3. It was not disputed that Respondent’s license was temporarily suspended as a result of a violation. However, Respondent has established, with information that was not available to the Fund at the time of its original payout decision, that the appropriate payout to Complainant is $1,500.00. Respondent’s estimates were reasonably designed to meet the needs of the corrective work, while Respondent’s evidence at hearing revealed that the estimates provided by Complainant were exceeded by far the scope of work necessary to make appropriate repairs.

RECOMMENDED DECISION Based on the foregoing considerations, the undersigned Administrative Law Judge hereby recommends that the Registrar of Contractors Residential Contractors Recovery Fund modify its payout determination to award Complainant $1,500.00 and no more. Done this day, March 17, 2016.

/s/ Dorinda M. Lang Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director Registrar of Contractors ----------------------- [1] Exhibit 7. [2] Exhibit 13. [3] Exhibit 5. [4] Ibid. [5] Exhibit 6. [6] Exhibit 11. [7] Exhibit 2. [8] Exhibit 11. It also estimated removal of the turf, “old border”, and excess earth at $3,150.00 without offering any credit for the value of the reusable turf. [9] Their bids and affidavits are contained in Exhibits B, C, D, and E. [10] Hearing Record at approximately 52:00 to 53:30. [11] Hearing Record at approximately 51:00 to 51:30. [12] Exhibit F. [13] Exhibits C and D. [14] Exhibits E and B, respectively.

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