ALJDEC decisions subject to certification as final

2014A-4964-ROC-RF · Registrar of Contractors · 2016-06-21

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: March 2, 2016 with the record held upon until June 8, 2016 to obtain supplemental warranty information, permit the parties to attempt to resolve the matter and submit written closing arguments. APPEARANCES: Complainants Sylvia A. and Ronny G. Sprague did not appear. Standard Eco LLC (“Respondent”) was represented by Trysta M. Puntenney, 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 1. The Arizona Registrar of Contractors (“the Registrar”) issued License No. 290548 to Respondent. 2. On December 9, 2014, the Registrar received a Complaint against Respondent from Complainants regarding Respondent’s installation of an air conditioning unit and furnace in their home (“the workmanship complaint”). See Exhibit 1. The Complaint indicated they had paid Respondent $7,410.68 and were left with a multitude of problems stemming from Respondent’s improper installation. 3. On December 31, 2014, Steve Nelsen, an investigator with the Registrar, noted that Complainants had paid Respondent’s invoice in full (Exhibit 2) issued a Directive containing 24 items of substantiated poor workmanship by Respondent. See Exhibit 4. Respondent agreed with all of the workmanship issues that had been substantiated. On January 8, 2015, Nelsen issued an Amended Directive to Respondent adding one more items of substantiated poor workmanship relating to the use of the wrong coils when installing units. See Exhibit 5. 4. At that time, Nelsen spoke to the manufacturer of the air conditioning unit and furnace, Lennox, and was told they could not be warrantied if the coils did not match the units. Nelsen also noted that the invoice between the parties called for smaller units to be installed than were actually installed. He testified at hearing that placing a larger furnace is not as efficient. 5. On January 30, 2015, Nelsen conducted a compliance inspection. Nelsen’s notes from that inspection reflect that Respondent had fixed several items but that several other items had not been addressed such as the plenums/duct work, holes in stucco, burn marks, units leaking Freon, poor welding and soldering and the coils remained mismatched. The notes further state that “[t]he R[espondent] tried to get the C[omplainant] to sign a change order allowing him to change out the [c]oil. THIS WAS NOT AS PER THE DIRECTIVE. The R[espondent] discussed it with the C[omplainant] and she did not agree to the modification because that is not what she paid for.” Exhibit 6 6. As a result of the Complaint, on April 20, 2015, the Registrar issued a Citation against Respondent charging possible violations of A.R.S. § 32-1154(A)(3), namely A.A.C. R4-9-108,[1] A.R.S § 32-1154(A)(12)[2], A.R.S § 32-1154(A)(15)[3] and A.R.S § 32-1154(A)(22)[4]. See Exhibit 8. 7. Respondent filed a timely answer to the Citation. On July 28, 2015, Administrative Law Judge Tammy Eigenheer issued a Decision finding a violation of A.R.S. § 32-1154(A)(3), namely A.A.C. R4-9-108, among other violations not pertinent here. See Exhibit 9. The Decision contained the following pertinent findings: After receiving the Directives from the Registrar, Mr. Jackson contacted Ms. Sprague and offered to replace the 90,000 BTU furnace unit with the 70,000 BTU furnace unit called for in the contract or to install a kit that would make the 90,000 BTU unit function as a 70,000 BTU unit. Mr. Jackson had an ongoing email discussion with Ms. Sprague in which he attempted to explain the different options, to get Ms. Sprague’s decision as to which option she wished to pursue, and to arrange a time to proceed with whichever option she selected. At no time did Ms. Sprague indicate which option she wished to pursue or agree to a time for a last visit to finalize the job. * * *

The undisputed credible testimony established that the issues found by Investigator Nelsen constituted workmanship issues with the installation. Therefore, the Registrar established that Respondent did not complete perform the work in a professional and workmanlike manner in violation of A.R.S. § 32-1154(A)(3), namely A.A.C. R4-9- 108.

The undisputed credible testimony established that Respondent attempted to comply with the Directives from the Registrar, but that all of the work was not completed and/or was not completed properly. However, Ms. Sprague limited Respondent’s access to the jobsite and did not communicate her selected option as to the furnace to Respondent. A contractor must be afforded access and an opportunity to perform corrective work to comply with a Directive from the Registrar before the Registrar disciplines the contractor's license for a violation of A.R.S. § 32-1154(A)(22).2 Because Ms. Sprague limited Respondent’s access to the jobsite when she only allowed Mr. Patterson to perform corrective work and did not allow any other employees of Respondent to inspect the jobsite or finalize the job, the Registrar failed to establish that Respondent violated A.R.S. § 32-1154(A)(22).

8. Judge Eigenheer recommended suspending Respondent’s license for seven days. On September 18, 2015, the Registrar issued its Notice of Acceptance of Administrative Law Judge Decision and suspended Respondent’s license for seven days. See Exhibit 10. 9. On October 28, 2015, Complainants filed a claim with the Residential Contractors’ Recovery Fund (“the Fund”) to recover the cost of replacing the air conditioning unit and furnace with new, matching units and correct the other issues associated with Respondent’s work. The claim form indicated that the lowest bid that Complainant had received to correct these items was a $13,590.00. See Exhibit 11. 10. The Registrar issued a Notice of Claim for Administrative Payout, finding that Complainants’ actual damages were $13,379.08. Respondent requested a hearing, believing the payout was too high and that replacing the air conditioning unit and furnace would result in a windfall to Complainants because the units could be fixed and warrantied by Lennox by simply installing matching coils. The Registrar referred the matter to the Office of Administrative Hearings (“OAH”) for an evidentiary hearing. Hearing Evidence 11. The December 31, 2014 Directive specified that: 1. Complaint # 1- Loose disconnect boxes. 2. Complaint #3- Whips were not shortened or braced. a. NEC 350.30(A) LFMC shall be securely fastened in place by an approved means within 300mm (12 in.) of each box, cabinet, conduit body, or other conduit termination and shall be supported and secured at intervals not to exceed 1.4 m ( 4 1/2 ft). 3. Complaint #5- Both A/C units- Repair stucco where holes left exposed and paint with matching paint. 4. Complaint #6- Repair and repaint wall where torch burned the stucco. 5. Complaint #7- Left A/C unit disconnect box installed over window casing. 6. Compliant# 11- Both A/C units- burned bottom of unit with torch. 7. Compliant #12- Both AIC units- Insulation tubing is poorly or incorrectly installed and chunks are missing at both ends. 8. Complaint# 14- Left A/C unit- Thermostat connection wire burned with exposed wires. 9. Compliant #20- Both A/C units- Check welding to ensure professional workmanship like job. 10. Compliant #21- Left A/C unit- Missing screw on electrical panel. 11. Complaint #22- Should have new collars to new heating supply and return. Old collars are beat up. 12. Compliant #23- Electrical not properly installed, exposed wires next to gas line. a. Install plastic bushings. 13. Complaint #24- Gas line is kinked and overly stretched. 14. Complaint #25- Insulation for refrigerate copper tubing is missing chunks (install new one, as the oldones were used). 15. Complaint #26- PVC drain line not properly installed. 16. Complaint #27- Flue pipe improperly installed. 17. Complaint #30- Numerous pinched crushed ducts. 18. Complaint #34- Copper discharge line is rubbing on gas line. 19. Complaint #35- Panel to furnace not properly installed. 20. Complaint #36- Secondary pan not installed properly overlapping heating unit. 21. Complaint #41- Copper tubing suction line is rubbing flue pipe and is unbraced. 22. Complaint #42- Electrical wiring in wrong hole and wiring exposed. a. Install plastic bushing. 23. Complaint #5 5- Vibration pads need to be installed as per 3 requests. 24. Complaint #57~- Ceiling texture is bowed, not matching texture and color by Standard Eco's handyman.

12. The January 8, 2015 Directive added the following: Complaint #48- Contract states EL1800UH070E36B-Ol- Standard Eco installed EL l 800UH090E48B-O 1. Change was never discussed with owner. a. Further investigation has shown that the installed furnace does not correctly match the condensing unit and evaporator coil that were installed. b. Respondent must install correct matching units and provide the ARRI certificate to the complainant per contract and Lennox warranty requirements.

13. Nelson testified that all of the bids submitted by Complainants contemplated replacement of the air conditioning unit and furnace. He noted that the Complainants’ lack of confidence in the system due to the large number of issues supported replacement of both units. Nelson indicated that the main factor supporting replacement of the units was his understanding that Lennox would not warranty a mismatched unit. 14. James Barbour, claims adjuster for the Fund, testified that he reviewed the Directives that had been issued regarding the issues in Complainants’ matter, the Administrative Law Judge Decision, the parties’ original contract and payment history, and bids submitted by Complainants in calculating Complainants’ actual damages. Barbour noted that he considered the bids provided and did not second guess the bids except to speak to Nelsen and confirm that the units should be replaced rather than repaired. Barbour utilized the Wolff Mechanical bid of $13,590.00 and subtracted the unpaid balance of $210.92 on the parties’ original contract to calculate an administrative payout amount of $13,379.08. 15. Jesse Jackson, President of Respondent, testified that he had attempted to address the issue of the air conditioning unit and furnace by offering to change the coils or perform other fixes but that Complainants failed to get back to Respondent with regard to what option they chose. He said Respondent was waiting to fix some other issues in the Directives until after the choice was made because the particular option chosen could impact the work that needed to be done. During the hearing, Jackson contacted a Lennox representative and was orally told that once the units had matching coils, they could be warranted by Lennox under an extended warranty. 16. The undersigned held the record open to receive that letter from Lennox. Post Hearing Evidence 17. On March 30, 2015, Respondent submitted a letter from Lennox, which stated in full: Pursuant to our discussions, it is our understanding that Standard Eco, LLC intends to purchase new coils for installation in connection with a dispute involving a homeowner’s claim before the Arizona Registrar of Contractors' ("ROC"). If Standard Eco purchases new coils, the extended 10 year warranty would apply to the new coils if they are registered within the time period required and if they meet all other requirements. Because the units and related coils were installed at different times, there may be a technical issue with registering the extended warranty for the coils under the system. Please direct your client to contact me or the Lennox warranty department for additional information on registering the extended warranty for the new coils.

If you have any additional questions, please feel free to contact me.

18. Subsequently, the Registrar requested more time for the Complainants to find a contractor willing to replace the coils and do the remaining corrective work. At the Registrar’s request, the record was held open until June 5, 2016. On June 1, 2016, the Registrar took the position that because Complainants could not find a contractor willing to simply replace the coils and repair the other issues, an administrative payout of $13,378.08 remained appropriate. The Registrar included letters from several contractors who declined to make the repairs. These contractors agreed that replacing the coils and doing the repairs was feasible; their unwillingness to proceed was based on the fact that they would not warranty the repairs and that the units might malfunction. See e.g. letter from Collins Comfort Masters dated April 18, 2016 (“the proposed fix is feasible but in my opinion not recommended”); letter from Parker and Sons dated May 2, 2016 (“Parker and Sons chooses not to perform a partial system replacement nor any repairs at the above address. To provide a quality installation with a warranty that we can uphold and have confidence in, we will replace the complete systems to our standards.”); letter from Wolff Mechanical, Inc. dated April 19, 2016 (disputing that the Lennox warranty would remain valid). 19. Respondent takes the position that it has produced evidence that Respondent can be made whole by simply replacing the coils after which the system will have an extended warranty from Lennox and having the other outstanding items corrective. Respondent is willing to do the work and requests that the matter be remanded back to the Registrar so it can do so. Alternatively, the Respondent argues that Complainants’ administrative payout should be limited to no more that the parties’ original contract price. 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.[5] “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”[6] 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.”[7] After review of all the evidence, the Tribunal concludes that Respondent has proven that Complainants can be made whole via replacement of the coils, provision of an extended warranty and repair of the other outstanding issues. The Tribunal finds that the letters from the contractors indicating their unwillingness to replace the coils was based on their misperception that they would be responsible for a warranty that the evidence demonstrated would be provided by Lennox. The current record does not reflect what it would cost a contractor of Complainants’ choosing to replace the coils in question and complete the corrective work. What is clear, however, is that the proposed award provided by the Fund is not an accurate reflection of Complainants’ actual damages. The award inappropriately provides Complainants a windfall for their refusal to timely choose an option that would have mitigated their damages and made them whole in a timely manner. RECOMMENDED ORDER Based on the foregoing, it is recommended that the matter be remanded Residential Contractors’ Recovery Fund for recalculation of an award that is consistent with this Decision. 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, June 21, 2016.

/s/ Suzanne Marwil Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director Registrar of Contractors

----------------------- [1] 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.” 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.” [2] A.RS. § 32-1154(A)(12) includes among the grounds for suspension, revocation, or other disciplinary action against a contractor's license, "[f]ailure in any material respect to comply with this chapter." [3] A.RS. § 32-1154(A)(15) includes among the grounds for suspenslon, revocation, or other disciplinary action against a contractor's license, "[f]alse, misleading or deceptive advertising whereby any member of the public may be misled and injured." [4] 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." Emphasis added. [5] 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). [6] Morris K. Udall, Arizona Law of Evidence § 5 (1960). [7] Black’s Law Dictionary 1220 (8th ed. 1999).

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