ALJDEC decisions subject to certification as final
2014A-3142-ROC-RF · Registrar of Contractors · 2017-01-04
IN THE OFFICE OF ADMINISTRATIVE HEARINGS
Jeremy J Pudenz and
Mary Noel Pudenz,
COMPLAINANTS,
-v-
License No. 235622,
Bulldog Design Build LLC
RESPONDENT.
No. 2014A-3142-ROC-rf
ADMINISTRATIVE LAW JUDGE DECISION
HEARING: October 27, 2016 and November 22, 2016 with the record held open until January 3, 2017 to allow the parties to file briefs on the applicability of the handyman exemption.
APPEARANCES: Complainant Jeremy J. Pudenz appeared and represented himself. Bulldog Design Build LLC (“Respondent”) was represented by James Sparks, Esq. The Arizona Registrar of Contractors was represented by Assistant Attorney General Thomas Raine.
ADMINISTRATIVE LAW JUDGE: Suzanne Marwil
_____________________________________________________________________
FINDINGS OF FACT
Background and Procedure
The Arizona Registrar of Contractors (“the Registrar”) issued License No. 235622 to Respondent.
On August 4, 2014, the Registrar received a Complaint against Respondent from Complainants regarding Respondent’s remodel of their kitchen (“the workmanship complaint”). See Exhibit 1. The Complaint alleged that the contract price for the kitchen remodel was $42,000.00 and that Complainant’s had paid Respondent $37,000.00.
On September 10, 2014, after an inspection, Randy Cason, an investigator with the Registrar, issued a Directive directing Respondent to complete the project in accordance with the parties May 16, 2014 contract and identifying seven items of substantiated poor workmanship by Respondent. See Exhibit 2.
As a result of the Complaint, on December 4, 2014, the Registrar issued a Citation against Respondent charging possible violations of A.R.S. § 32-1154(A)(2) A.R.S. § 32-1154(A)(3), namely A.A.C. R4-9-108, A.R.S. § 32-1154(A)(12) and A.R.S. § 32-1154(A)(22). See Exhibit 5.
Respondent filed a timely answer to the Citation. On January 22, 2015, the Respondent entered into a Consent Order whereby Respondent agreed that it committed all the violations in the Citation, had its license suspended for five days, agreed to provide the Registrar with contracts and invoices that complied with A.R.S. § 32-1154(A)(12) and paid the Registrar a $500.00 civil penalty .See Exhibit 3. Respondent failed to pay the civil penalty or provide compliant contracts and invoices, leading the Registrar to issue an Order Imposing Discipline on March 3, 2015. See Exhibit 3.
On August 15, 2016, Complainants filed a claim with the Residential Contractors’ Recovery Fund (“the Fund”) to recover the cost of completing and repairing their kitchen remodel. The claim form indicated that Complainants had already spent $29,720.50 to address these issues and sought an award of $15,245.50 from the Fund. See Exhibit 4.
The Registrar issued a Notice of Claim for Administrative Payout, finding that Complainants’ actual damages were $15,245.50. Respondent requested a hearing, believing the payout was too high. The Registrar referred the matter to the Office of Administrative Hearings (“OAH”) for an evidentiary hearing.
Hearing was held on October 27, 2016, but the time allotted was insufficient to complete the testimony. Hearing was therefore also held on November 22, 2016.
Hearing Evidence
The Directive specified that:
PRIOR TO ANY CORRECTIONS BEING STARTED BY THE RESPONDENT LISTED. IN THIS DIRECTIVE FROM THE ROC, THE RESPONDENT IS REQUIRED TO OBTAIN ANY AND ALL BUILDING PERMITS FROM THE TOWN OF GILBERT'S· BUILDING DEPARTMENT THAT ARE REQUIRED FOR THIS REMODELlNG PROJECT.
The Respondent is to correct/complete the remodeling project per the contract specifications dated 5/16/2014 and comply with all building codes and building codes inspections required by the Town of Gilbert.
Complaint - Four "Bagsters" are overflowing with debris left on the driveway by the [R]espondent
.
Complaint- Old cabinets, doors and door jambs have not been hauled away by the contractor, left on property
.
Complaint - Completed work substandard (cement, drywall uneven and soffit problems)
Kitchen soffit;
Face of soffit is not uniformed throughout; Depth of soffit not correct.
Bow in wall below the soffit;
Bow is located on the northeast corner. Corner has bow in center of the wall and is out of plumb.
New concrete floor installed for the walk-in pantry has a hump in the center causing approx. 3/8" out of level/plane with the existing concrete slab in the house.
New electrical sub-panel that was installed by the respondent was not permit or inspected by the local building authorities.
Douglas Ulmer, claims adjuster for the Fund, testified that he reviewed the Directive that had been issued regarding the issues in Complainants’ matter, the Consent Order, the parties’ original contract, documentation of agreed-upon extra work, payment history, and receipts submitted by Complainants in calculating Complainants’ actual damages. Ulmer determined that Complainant still owed Respondent approximately $15,000.00 on the original contract, which amount should be deducted from any administrative payout. He further declined to reimburse Complainants for amounts paid to unlicensed contractors if the amount paid to the unlicensed contractor exceeded $1,000.00 on a given day. After consulting with the Registrar’s legal Department, Ulmer allowed payments to two unlicensed contractors Juan Santos and Marcelino Vasquez for days their work did not exceed $1,000.00. Specifically, as part of his payout worksheet found in Exhibit 7, Ulmer included $950.00 Complainants’ made to Santos and $560.00 for payments made to Vasquez. The parties agreed however, that the work that Santos and Vasquez individually performed to complete or repair Complainants’ kitchen exceeded $1,000.00 in the aggregate.
Barbour said that the $15,245.50 administrative payout represented the actual damages Complainants suffered after subtracting the amount still owed on the parties’ original contract. Ulmer subsequently agreed with the Respondent that the following amounts should be deducted from the administrative payout: $358.09 paid to Vasquez because it was simply based on Complainant’s estimate of the work done by Vasquez, $250.00 paid to Complainant Jeremy Pudenz as a “supplier” and $2,000.00 to compensate Complainants for what Ulmer mistakenly believed was a lower quality granite than Complainants had contracted for with Respondent. The Registrar therefore advocated for an administrative payout of $12,631.41.
Ulmer declined to make any further deductions to the proposed administrative payout. He noted that he awarded Complainants the cost they expended to purchase new kitchen cabinets ($8,889.00 and $8,550.00) plus an additional $2,000.00 to compensate them for having to settle lower quality cabinets then the Respondent promised them. He disagreed with Respondent that this award represented a windfall to Complainants because the contract did not specify an amount for the cabinets and Complainants had been offered the same type of cabinets at no cost and refused them. Ulmer focused on the fact that the Complainants had contracted for a particular brand of cabinets and then had to pay more to receive a lesser quality cabinet. At the further hearing in this matter, Ulmer noted that even if the parties had agreed to increase the contract price for the cabinets by $800.00, no change to the administrative payout was warranted because the compensation to Complainants for using lesser quality cabinets would likewise increase by $800.00.
Ulmer also included $45.67 for a Lowes’ receipt stemming from the purchase of air-conditioning tin because he understood that the tin was purchased after the air-conditioning vent was extended to compensate for the soffit deficiencies outlined in the Directive. Ulmer similarly included $74.43 from an Amazon supplier because he believed it dealt with the kitchen and a full kitchen remodel was contemplated by the contract. He gave similar reasoning for including $380.00 for a backsplash even though one was not specifically mentioned in the contract and for including an amount for cam lighting trim. Ulmer did not include cam lighting as extra work that expanded the parties’ original contract amount because Respondent did not designate this work as “extra work” as Respondent did with other items.
Ulmer testified that he increased the original contract price by $2,450.00 when he found documentation that extra work had been proposed by Respondent and accepted by Complainants. He understood that the parties disagreed over what was included in the original contract price and what constituted extra work. Ernie Triplett stated Respondent agreed to provide wiring but that Complainants were responsible for procuring all trim and fixtures.
Ernie Triplett testified that he is the owner and qualifying party of Respondent and that Respondent entered into a contract with Complainants to remodel their kitchen for $42,000.00 He maintained that electrical work and other smaller items were not included in the contract and that Complainants were given verbal estimates for extra work, totaling $5,650.00. Triplett noted that Respondent demolished Complainants tile at no charge at considerable cost. He agreed that Complainants selected Bridgeway cabinets and were offered the same cabinets at no additional cost but refused them, leading him to believe that the Complainants should not be compensated at all for replacement cabinets or alternatively should not be compensated in an amount that exceeded Respondent’s own costs for the cabinets.
Respondent’s response to the workmanship complaint filed by Triplett on December 26, 2014 (Exhibit 3) stated the following concerning the cabinets:
My reasoning for not taking corrective action at Mr. Pudenz's residence Involves lack of funds and disagreement of the allegations. I am not comfortable returning to their home for any reason. This all arose from my cabinet contractor completely destroying our relationship with the Pudentz (sic). Our cabinet contractor left us all [i]n the dark on a falling out he had with the manufacturer. Mr. Pudenz knew about this before I even did. In the end we offered him the same cabinet with a different name thot was going to cost us more with no expense to him. He became furious and would not even let us speak or listen to anything we had to say when all we were doing was trying to offer a resolution. Mr. Pudenz became Irrational and we just refunded his cabinet money as he requested. He also locked us out of the [j]obslte a week prior before I even knew what had happened, and he refused payment on work we had completed.
Triplett also indicated that Respondent never discussed providing Complainants a backsplash but later conceded that a four inch backsplash would have been included with the granite if the Complainants so desired and the project had been completed.
Triplett denied abandoning the project and claimed Respondent was locked out by Complainants and so could not comply with the Directive.
Complainant testified that he contracted with Respondent for a full kitchen remodel and that he would not have contracted with Respondent if the items specified by Respondent (light switches, sconces) were not included. Regarding the cabinets, Pudenz indicated that after Respondent failed to furnish the Bridgewood cabinets specified in the contract, he contacted Envision Cabinetry and received a quote of $18,107.54 for the same cabinets plus an additional $1,200.00 for installation. Due to financial constraints he went with lower quality cabinets that cost $17,431.50 installed but lacked a custom glaze. He maintained that Complainants had no choice but to do so given their situation and denied that $2,000.00 for the cabinet differential was a windfall to Complainants.
Pudenz recalled that between July 16, 2014 and August 10, 2014, the parties’ relationship had soured and that Triplett began try to get as much money as he could out of Complainants by changing for things he had previously agreed to include for free.
The Registrar took the position that Respondent as the contractor had the responsibility to put everything in writing and that its failure to do so should result in the verbal components of the agreement being construed in favor of Complainants. It took the position that Complainants were entitled to their cost to complete the kitchen remodel left unfinished by Respondent.
Respondent argued that it owed Complainant nothing because the value of Respondent’s work for Complainants exceeded the amount paid by Complainants. Respondent stated that Complainants lacked support for many of the items they claimed represented the cost to complete the kitchen remodel.
Following hearing, the Registrar indicated that the question of the application of the handyman exception is looked on a case-by-case basis with a primary focus on whether the contracts entered into are for discrete projects or are part of a larger operation. The Registrar included in the Fund payout those discrete projects that the unlicensed contractors performed in Complainant’s kitchen which were less than $1,000.00 and disallowed the work by unlicensed contractors on those projects that, standing alone, exceeded $1,000.00.
Respondent maintained that the handyman exemption was inapplicable to any aspect of the kitchen remodel project because it exceeded $1,000.00.
CONCLUSIONS OF LAW
This matter lies within the Registrar’s jurisdiction.
A.R.S. § 32-1132(A) provides that “[a]n 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. . . .” Respondent bears the burden of proof to establish that the proposed payout from the Fund is incorrect by a preponderance of the evidence.
“A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.” 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.”
A.R.S. § 32-1121(A)(14) provides as follows:
Any person other than a licensed contractor engaging in any work or operation on one undertaking or project by one or more contracts, for which the aggregate contract price, including labor materials and all other items, but excluding any electrical fixture or appliance that was designed by the manufacturer, that is unaltered, unchanged or unmodified by any person, that can be plugged into a common household electrical outlet utilizing a two pronged or three pronged electrical connector and that does not use any other form of energy, including natural gas, propane or other petroleum or gaseous fuel, to operate or is attached by a nail, screw or other fastening device to the frame or foundation of any residential structure, is less than one thousand dollars. The work or operations that are exempt under this paragraph shall be of a casual or minor nature. This exemption does not apply:
(a) In any case in which the performance of the work requires a local building permit.
(b) In any case in which the work or construction is only a part of a larger or major operation, whether undertaken by the same or a different contractor, or in which a division of the operation is made in contracts of amounts less than one thousand dollars, excluding any electrical fixture or appliance that was designed by the manufacturer, that is unaltered, unchanged or unmodified by any person, that can be plugged into a common household electrical outlet utilizing a two pronged or three pronged electrical connector and that does not use any other form of energy, including natural gas, propane or other petroleum or gaseous fuel, to operate or is attached by a nail, screw or other fastening device to the frame or foundation of any residential structure, for the purpose of evasion of this chapter or otherwise.
(c) To a person who utilizes any form of advertising to the public in which the person's unlicensed status is not disclosed by including the words "not a licensed contractor" in the advertisement.
The Tribunal finds that it is appropriate to include the work that unlicensed contractors did on Complainants’ kitchen where the work done did not exceed $1,000.00. While it appears that these unlicensed contractors were called out to Complainants’ home on more than one occasion to perform discrete tasks, the work of these unlicensed individuals does not seem part of some larger operation directed by these contractors. Indeed, there was no suggestion made that these unlicensed individuals were ultimately responsible for overseeing this kitchen remodel or some substantial portion thereof. The cost of the original kitchen remodel is not relevant.
After review of all the evidence, the Tribunal concludes that the award provided by the Fund as amended is an accurate reflection of Complainants’ actual damages. The award appears to properly remedy the workmanship violations for which Respondent was responsible. The notion that Respondent should not have to pay Complainants anything is explicitly rejected as the statute defines actual damages as the cost to complete or repair, not in terms of the value of the work Respondent provided Complainants. The record clearly established that Respondent did not provide Complainants what was contracted for, lending ample support for the amended administrative payout of $12,631.41.
RECOMMENDED ORDER
Based on the foregoing, it is recommended that on the effective date of the Registrar’s final order, Complainants receive a payout from the Residential Contractors’ Recovery Fund in the amount of $12,631.41.
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 4, 2017.
/s/ Suzanne Marwil
Administrative Law Judge
Copy mailed/e-mailed/faxed January 4, 2017 to:
Jeffrey Fleetham, Director
Registrar of Contractors
c/o Legal Department
1700 W. Washington Street, Suite 105
Phoenix, AZ 85007
By