ALJDEC decisions subject to certification as final

2013A-5299-ROC · Registrar of Contractors · 2015-11-10

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

RECOVERY FUND PAYOUT HEARING: November 2, 2015, at 8:00 a.m. APPEARANCES: Eric and Georgia Hasslacher (“Complainants”) were represented by Bryan L. Eastin, Esq., Platt and Westby PC; Vrieling Architectural Inc. (“Respondent”) appeared through Jeffrey Mark Vrieling, its qualifying party and officer; the Arizona Registrar of Contractors (“Registrar”) was represented by John R. Tellier, Esq., Assistant Attorney General. ADMINISTRATIVE LAW JUDGE: Diane Mihalsky _____________________________________________________________________

FINDINGS OF FACT Background and Procedure 1. On September 17, 1997, the Registrar issued License No. CR60.127372-D to Respondent. 2. On July 13, 2015, Complainants submitted a claim to the Registrar’s Residential Contractors’ Recovery Fund (“the Fund”). The Registrar offered to make a payout from the Fund in the amount of $6,868.60 to Complainants. 3. Complainants requested a hearing on the Registrar’s calculation of the payout amount. The Registrar referred the matter to the Office of Administrative Hearings, an independent agency, for an evidentiary hearing. 4. A Recovery Fund Payout Hearing was held on November 2, 2015. Complainants submitted seven exhibits, testified, and presented the testimony of Phillip Brady Eaves, the qualifying party and managing member of Red Hot Construction LLC (“Red Hot”).[1] Respondent’s qualifying party and officer, Mr. Vrieling, testified. The Registrar submitted nine exhibits and presented the testimony of James Barbour, the Claims Reviewer/Claims Adjuster in the Registrar’s Recovery Fund Department who was assigned to evaluate Complainants’ claim to the Fund. Hearing Evidence The Registrar’s Investigation of Complainants’ Workmanship Complaint 5. On or about November 12, 2013, Complainants filed a Complaint with the Registrar against Respondent regarding its contract to fabricate and to install custom cabinets at Complainants’ residence at 2838 E. Watford Ct., Queen Creek, Arizona 85142.[2] 6. According to the Complaint, Complainants had moved into their residence on August 1, 2013, and Respondent had last performed work on October 16, 2013. Complainants had paid Respondent $29,200.00 of the contract price of $36,163.00.[3]

7. Complainants attached two punch lists to their Complaint, the first of which contained 38 enumerated items of complaint and the second of which contained 29 enumerated items of complaint. Neither punch list included the drawer in the kitchen for trash bins, the depth of the lower cabinets in the kitchen or bathrooms, or an unfinished cabinet in the master bedroom closet.[4] 8. The Registrar assigned Complainants’ Complaint to its Investigator Beau Cruz for investigation. Investigator Cruz performed a jobsite inspection and on January 15, 2014, issued a Corrective Work Order (“CWO”) to Respondent, requiring it within fifteen calendar days to complete repairs to eight specific items on the punch lists that Complainants attached to their Complaint. The CWO quoted from and specifically referenced the numbers that Complainants’ punch lists had assigned to each item that Respondent was required to repair.[5] 9. Item 30 of Complainants’ first punch list was that “[t]he two lower cabinets are not flush on the right side of the range in the kitchen.”[6] The January 15, 2014 CWO did not require Respondent to correct this item. 10. The January 15, 2014 CWO also required Respondent to correct specified addendum items that were not included on the two punch lists that Complainants had attached to their Complaint. The addendum items included collapsed shelves in the cabinet next to the dishwasher and the linen closet in the master bathroom, but did not include the drawer in the kitchen for trash bins, the depth of the lower cabinets in the kitchen or bathrooms, or an unfinished cabinet in the master bedroom closet.[7] 11. The first item of the addendum provided as follows: Functionality of cabinets not practical: Mirrored door lacking operating hardware (handle) which made it difficult to open and close.[8]

The January 15, 2014 CWO did not otherwise refer to the cabinets’ functionality. 12. The sixteenth item of the addendum reflected a jobsite agreement regarding the proper repair of the item, in relevant part as follows: Slats for cabinet doors in the kitchen, laundry room, master bathroom, powder room, both front bedroom bathrooms, and studio bathroom are loose: Panel slats for all cabinet doors were cut at 3” x 7/16 inch. Plans show that slats were to be 3” x ½”. Respondent and complainant both came to verbal agreement at the jobsite investigation, that respondent would correct by either install a solid ½” filler panel or another option would be solid ½” filler with 3” slat lines scribed onto panels to create the visual illusion of 3” panel slats. Complainant was approving of either . . . .[9]

The January 15, 2014 CWO did not specify the method of repair for any of the other items. 13. The record in this matter does not include a written addendum to the Complaint from Complainants or specifically indicate whether Respondent at the jobsite inspection agreed to repair the other addendum items. 14. After the time that the January 15, 2014 CWO allowed for Respondent to make repairs had passed, Investigator Cruz performed a compliance inspection at Complainants’ residence and determined that Respondent had not repaired any of the items on the CWO. 15. On March 26, 2015, the Registrar issued a Citation and Complaint in Complainants’ complaint, alleging that cause existed to suspend or revoke Respondent’s license under A.R.S. § 32-1154(A)(3),[10] namely, A.A.C. R4-9-108,[11] and A.R.S. § 32-1154(A)(22),[12] among other statutes.[13] 16. On or about May 7, 2015, the Registrar and Respondent entered into a Consent Order, in which Respondent admitted violations of A.R.S. § 32-1154(A)(3), namely, A.A.C. R4-9- 108, and A.R.S. § 32-1154(A)(22) and consented to a one-day suspension of its license.[14] The Registrar’s Calculation of Complainants’ Compensable Damages 17. On July 13, 2015, Complainants filed a claim to the Fund. Complainants indicated that they had recovered $1,000.00 from Respondent’s bond and that they still owed Respondent $6,963.00 for the job.[15] 18. Complainants attached to their claim to the Fund copies of their checks to Respondent in the total amount of $29,200.00 and Respondent’s one-page proposal to Brady Eaves of Red Hot in the amount of $36,163.00, which became the parties’ contract when Mr. Hasslacher signed it.[16] The contract did not provide a detailed scope of work or include plans for the locations or dimensions of all the cabinets. 19. Complainants also attached to their claim to the Fund bids from three contractors to repair the cabinets, as follows: 1. Lee Peterson’s bid to Mr. Eaves at Red Hot on behalf of Creative Look, Inc. dated March 31, 2014, in the amount of $14,831.60, which appeared to be based on the items in the January 15, 2014 CWO, including “drill all shelf peg holes deep enough for pegs to seat.” Creative Look, Inc. also submitted a second proposal dated March 31, 2014, for $1,434.00 that included custom corbels and a furniture style toe kick, which items were not included on the January 15, 2014 CWO. 2. A bid from Glenwood Custom Cabinets dated April 1, 2014, in the amount of $38,566.00 to fabricate new cabinets to replace the ones that Respondent had installed, but not to install the new cabinets. 3. A bid from Cabinet Cures of Arizona LLC dated September 2, 2014, in the amount of $14,500.00 to “reface” Complainants’ cabinets, meaning to “[r]eskin all exterior boxes, replace all crown molding, add light rail, replace all existing base, replace all doors/drawer faces and add new soft close hinges” in the kitchen plus $14,500.00 for add- ons/modifications to cabinets in the rest of the house, for a total bid of $29,435.00.[17] 20. Mr. Barbour incorporated Creative Look, Inc.’s low bid in the amount of $14,831.60 and deducted the $1,000.00 that Complainants had recovered from Respondent’s bond and the $6,963.00 that they still owed under their contract, to calculate Complainants’ compensable damages as $6,868.60.[18] As noted above, Complainants requested a hearing on the amount of the payout. Additional Hearing Evidence 21. A fire damaged Complainants’ residence, which required the residence to be substantially rebuilt. Complainants made to their homeowner’s insurer to finance construction. Complainants’ homeowner’s insurer required repairs to be completed by a date certain. 22. Mr. Hasslacher acted as general contractor on the project. Mr. Hasslacher’s job requires him to travel. Complainants hired Mr. Eaves and Red Hot to act as their onsite superintendent and to oversee contractors on the projects. Mr. Eaves prepared the two punch lists that Complainants attached to their workmanship complaint. The Scope of the January 15, 2014 CWO 23. Mr. Barbour testified that the contract between the contractor and the homeowners and the Registrar’s CWO define the permissible scope of the payout from the Fund. If the Registrar’s investigator does not specifically find an item of workmanship to be deficient, the Fund will not pay to repair the item. 24. Mr. Barbour testified that he compared Creative Look, Inc.’s bid to Respondent’s contract and the January 15, 2014 CWO and that the three documents seemed to correspond. He determined that the Creative Look, Inc.’s bid most closely aligned with the items that Investigator Cruz had directed Respondent to repair. 25. Mr. Hasslacher testified that because the peg holes in the cabinets were not drilled deep enough, shelves in the cabinets collapsed. Mr. Hasslacher testified that he had been informed that the interior panels where the peg holes had been “blown out” would have to be replaced. 26. Mr. Eaves testified that Creative Look, Inc.’s bid to repair the blown-out peg holes did not guarantee the holes could be repaired. Mr. Eaves testified that because the peg holes were drilled with a machine, any attempt to repair the holes by manually drilling them deeper was problematic. 27. Mr. Hasslacher testified that a cabinet in the master bedroom closet was unfinished because it lacked doors and a granite countertop. Mr. Hasslacher explained that the unfinished cabinet was not on the complaint that Complainants filed with the Registrar or the CWO because Complainants faced a deadline to complete construction of the residence and Respondent was still working on the cabinets. 28. Mr. Hasslacher testified that the lower kitchen cabinets were only 23¼” deep, rather than the standard 24”. Mr. Hasslacher stated that he first became aware of the non-standard dimensions of the cabinets when the subcontractor who installed the granite countertops had to adjust his standard templates. 29. Mr. Hasslacher submitted picture of a drawer with two trash bins in a rubber fitting manufactured by Rubber Maid. Due to the non-standard depth of the cabinets, the trash bin in the rear of the drawer could not be removed without collapsing the rubber fitting. 30. Mr. Hasslacher testified that because the cabinets in the kitchen were less than the standard depth, the kitchen range protruded excessively. 31. Mr. Hasslacher testified that the vanities in the bathrooms were deeper than the standard size. As a result, the countertop in one of the bathrooms intruded into the door frame. 32. Mrs. Hasslacher testified that because Mr. Hasslacher was traveling for business, she and Mr. Eaves attended Investigator Cruz’s jobsite inspection. Mrs. Hasslacher testified that Investigator Cruz’s demeanor at the jobsite inspection was exasperated and frustrated. Mrs. Hasslacher testified that Investigator Cruz said that Complainants lived too far out and that he was bogged down by his case load. 33. Mrs. Hasslacher testified that she told Investigator Cruz about the non-standard sizes of the cabinets. She stated that his only response was to say to her, “Sweetheart, you’re cute and all but I don’t have time.” Mrs. Hasslacher testified that as an educated woman, she was disappointed to be treated with such disrespect. 34. Mr. Eaves testified that Investigator Cruz was irritated and aggressive and that he agreed with Mrs. Hasslacher’s description of the jobsite inspection. 35. Mrs. Hasslacher testified that Investigator Cruz seemed to be working off his own list and did not pay attention when she tried to point out other workmanship deficiencies. Complainants submitted a list of all the deficiencies that the January 15, 2014 CWO did not address.[19] 36. Mr. Hasslacher testified that when he realized that the three bids that Complainants had submitted with their claim to the Fund did not address significant workmanship issues, they obtained an additional bid from Kieran Brothers Kitchen and Bath (“Kieran Brothers”) for a more comprehensive solution. Mr. Hasslacher explained that any other repair would not leave Complainants with the custom cabinets that they had contracted to purchase from Respondent. 37. Complainants submitted two bids from Kieran Brothers. The first bid was for $60,172.91 to replace all the cabinets with standard sized cabinets and to replace the granite countertops on all the cabinets. The second bid was for $42,540.37 to replace only the cabinets. Both bids included the following note: Due to the inconsistent nature of existing cabinets, built off specification of industry standard depths, refacing or the cabinet boxes is not possible. Further, granite countertops that have been templated to the existing size cannot be retained for use, nor guaranteed to be removed in one whole, re-usable piece. For this reason, this quote is made to replace, not repair or reface, the cabinetry and countertops as described below.[20]

The License Status of the Contractors who Submitted Bids 38. Mr. Eaves testified that because Creative Look, Inc. has worked as Red Hot’s subcontractor in the past and did good work, he asked Creative Look to submit a bid to repair the cabinets. Mr. Eaves explained that Creative Look is based in Utah and that Lee Peterson, the person who submitted the bid, lives in Arizona and is Jeffrey Peterson’s brother. 39. Complainants submitted a printout from the Registrar’s public website for Creative Look Fine Woodwork, Inc., License No. CR60.172498-D for finish carpentry. The address for the licensee is 1889 W. 3025 S, Ogden, Utah 84401-4505, the telephone number is 801-399-3457, and Jeffrey D. Peterson is the qualifying party, officer, and only person listed on the license.[21] 40. License No. CR60.172498-D was suspended for lack of bond on August 8, 2010, and expired on March 1, 2011. 41. Complainants also submitted a printout from the Registrar’s public website for Creative Look Fine Woodwork, Inc., License No. CR60.294349-D for finish carpentry. The licensee has the same name, address, telephone number, and persons listed on the license as License No. CR60.172498-D. 42. Complainants argued that because on March 31, 2014, the date of the bid that Complainants attached to their July 13, 2014 claim to the Fund, Creative Look Fine Woodwork, Inc.’s License No. CR60.172498-D had expired, the Registrar could not rely on the bid to calculate Complainants’ damages. 43. Mr. Barbour testified that the only significant date when a contractor must be licensed to perform repairs is the date that the claim is submitted to the Fund. Because Creative Look Fine Woodwork, Inc.’s License No. CR60.294349-D was current and in good standing on July 13, 2014, he relied on the bid to calculate Complainants’ damages. 44. Administrative notice is taken of the Registrar’s public website. Kieran Brothers holds License Nos. CR60.242325-D and CR61.265083-D. Cabinet Cures of Arizona LLC holds License No. CR60.289961-D. Glenwood Custom Cabinets is unlicensed. CONCLUSIONS OF LAW This matter lies within the Registrar’s jurisdiction.[22] Complainants bear the burden of proof to establish the amount that they are entitled to recover from the Fund under A.R.S. § 32-1132(A) by a preponderance of the evidence.[23] “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”[24] A preponderance of the evidence is “[t]he greater weight of the evidence, not necessarily established by the greater number of witnesses testifying to a fact but by evidence that has the most convincing force; superior evidentiary weight that, though not sufficient to free the mind wholly from all reasonable doubt, is still sufficient to incline a fair and impartial mind to one side of the issue rather than the other.”[25] A.R.S. § 32-1154(B) requires the Registrar to investigate written complaints of property owners who have contracts with licensed contractors to determine whether the written complaints establish grounds to revoke or suspend the contractor’s license under A.R.S. § 32-1154(A).[26] Investigator Cruz performed a jobsite inspection to investigate Complainant’s written complaint. The January 15, 2014 CWO specifically refers to the items of the written complaint. Because applicable statutes require a written complaint with specific items and do not authorize the Registrar to provide a warranty that a job complies with all standards or that contemplated repairs will be adequate, the Registrar does not independently identify workmanship deficiencies or specify the means by which an identified deficiency should be repaired. Apparently, Mr. Vrieling agreed at the jobsite inspection that Respondent would repair sixteen additional items, which the CWO set forth in the addendum, and the parties agreed to the means by which Respondent would repair one of the additional items. Complainants did not amend their November 12, 2013 written complaint in writing. Mrs. Hasslacher’s self-serving testimony about Investigator Cruz’s statements at the jobsite inspection does not suffice to establish that Complainants amended their complaint. There is no evidence that Mr. Vrieling agreed at the jobsite inspection that Respondent would repair the kitchen for trash bins, the depth of the lower cabinets in the kitchen or bathrooms, or the unfinished cabinet in the master bedroom closet. Although Complainants are “persons injured” who are potentially eligible to recover a payout from the Fund,[27] the non-standard sized cabinets, the unfinished cabinet in the master bedroom closet, and the drawer in the kitchen with the trash bins are beyond the scope of Complainants’ complaint and were not among the items of deficient workmanship that resulted in the one-day suspension of Respondent’s license under the Consent Order. A.R.S. § 32-1132(A) requires a predicate for an award from the fund a prior finding that a contractor has violated the Registrar’s statutes, in relevant part as follows: The residential contractors' recovery fund is established, . . . 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 . . . an amount of not more than thirty thousand dollars for damages sustained by the act, representation, transaction or conduct. . . .

(Emphasis added.) A.R.S. § 32-1154(F) provides that “[n]otwithstanding any other provisions in this chapter, if a contractor's license has been revoked or has been suspended as a result of an order to remedy a violation of this chapter, the registrar may order payment from the residential contractors' recovery fund to remedy the violation.” (Emphasis added.) These statutes make clear that a claim to recover a payout from the Fund is a vehicle for determining damages, not for determining underlying statutory violations or workmanship deficiencies. A.R.S. § 32-1132(A) also provides as follows: 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. . . . 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. . . .

(Emphasis added.) Because Respondent was licensed when it contracted to and actually performed the work, Complainants are eligible to recover a payout from the Fund. The Registrar’s statutes require any contractor who repairs Respondent’s workmanship deficiencies to provide a two-year warranty for its work that commences when it completes the repairs.[28] Therefore, the relevant time period for licensure of contractors who have submitted bids to repair poor workmanship is when the claim is submitted, after which the contractor may perform repairs, not the time the contractor submitted the bid. The Registrar has a fiduciary duty to preserve the Fund’s assets and to ensure that no payouts are made except as authorized by statute.[29] Under the circumstances of this case, Complainants have not established that any statute authorizes the Registrar to make a payout that is any greater than the $6,868.60 amount of the Registrar’s initial offer. RECOMMENDED ORDER Based on the foregoing, it is recommended that, on the effective date of the final Order, the Fund pay Complainants Eric and Georgia Hasslacher the sum of $6,868.60. 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 five days from the date of that certification. Done this day, November 10, 2015.

/s/ Diane Mihalsky Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director Registrar of Contractors ----------------------- [1] According to the Registrar’s public website, Red Hot has been issued License Nos. B.237038-R for residential general contracting and KB-1.200488- D for dual building contracting. [2] See the Registrar’s Exhibit 1. [3] See id. [4] See id. [5] See the Registrar’s Exhibit 3. [6] The Registrar’s Exhibit 1 at 3. [7] See id. [8] The Registrar’s Exhibit 3 at 2. [9] The Registrar’s Exhibit 3 at 3. [10] A.R.S. § 32-1154(A)(3) 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.” [11] A.A.C. R4-9-108 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.” [12] A.R.S. § 32-1154(A)(22) 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.” [13] See the Registrar’s Exhibit 4. [14] See the Registrar’s Exhibit 5. [15] See the Registrar’s Exhibit 6; see also the Registrar’s Exhibit 7 (bond payment). [16] See the Registrar’s Exhibit 2. [17] See the Registrar’s Exhibit 8. [18] See the Registrar’s Exhibit 9. [19] See Complainants’ Exhibit G. [20] Complainants’ Exhibits C and D at 1. [21] See Complainants’ Exhibit A. [22] See A.R.S. §§ 32-1131 to 32-1140. [23] See 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). [24] Morris K. Udall, Arizona Law of Evidence § 5 (1960). [25] Black’s Law Dictionary at 1220 (8th ed. 1999). [26] A.R.S. § 32-1154(B) provides in relevant part as follows: The registrar may on the registrar's own motion, and shall on the written complaint of any owner or contractor that is a party to a construction contract or a person who suffers a material loss or injury as a result of a contractor's failure to perform work in a professional and workmanlike manner or in accordance with any applicable building codes and professional industry standards, investigate the acts of any contractor within this state and may temporarily suspend, with or without imposition of specific conditions in addition to increased surety bond or cash deposit requirements, or permanently revoke any or all licenses issued under this chapter if the holder of the license issued pursuant to this chapter is guilty of or commits any of the acts or omissions set forth in subsection A of this section. [27] A.R.S. § 32-1131(3) defines “person injured” in relevant part as follows: [A]ny owner of residential real property which is classified as class three property under section 42-12003 and which is actually occupied or intended to be occupied by the owner as a residence including community property, tenants in common or joint tenants who are damaged by the failure of a residential contractor or a dual licensed contractor to adequately build or improve a residential structure or appurtenance on that real property. . . . [28] See A.R.S. § 32-1155(A). [29] A.R.S. § 32-1134(A) requires the Registrar to take the following actions to preserve the Fund and to ensure that payouts for damages that are authorized by law are made from the Fund: 1. Establish assessments and maintain the fund balance at a level sufficient to pay operating costs and anticipated claims using the cash basis of accounting. 2. Cause an examination of the fund to be made every three years by an independent certified public accountant. 3. File with the department of insurance an annual statement of the condition of the fund. 4. Employ accountants and attorneys from monies in the fund, but not to exceed ten thousand dollars in any fiscal year, that are necessary for the performance of the duties prescribed in this section. 5. Employ or contract with individuals and procure equipment and operational support, to be paid from or purchased with monies in the fund, but not to exceed in any fiscal year fourteen per cent of the total amount deposited in the fund in the prior fiscal year as may be necessary to monitor, process or oppose claims filed by injured persons which may result in collection from the recovery fund.

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