ALJDEC decisions subject to certification as final

2016A-1492-ROC · Registrar of Contractors · 2016-10-13

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Kevin Wayne Ramaley,

COMPLAINANT,

v.

Three C's Residential and Commercial Builders LLC dba, Arizona Construction Group,

License No. KB-2.277504-D,

RESPONDENT.

No. 2016A-1492-ROC

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: October 5, 2016, at 1:00 p.m.

APPEARANCES: Kevin Wayne Ramaley (“Complainant”) appeared on his own behalf; Three C’s Residential and Commercial Builders LLC dba, Arizona Construction Group (“Respondent”) was represented by Ernest E. Shaver, Esq.

ADMINISTRATIVE LAW JUDGE: Diane Mihalsky

_____________________________________________________________________

FINDINGS OF FACT

Background and Procedure

On or about March 7, 2012, the Arizona Registrar of Contractors (“the Registrar”) issued License No. KB-2.277504-D for dual residential and small commercial contracting to Respondent.

On or about May 4, 2016, Complainant filed a complaint with the Registrar against Respondent based on Respondent’s involvement in building a 435 square foot addition to Complainant’s house at 426 S. Laveen Drive in Chandler, Arizona 85226 consisting of a fourth bedroom, bathroom, playroom, and enlarged patio.

The complaint alleged that Respondent had failed to provide a contract, had failed to provide a credit for the dumpster fees, had failed to catch mistakes in the architect’s plans, and had underbid the costs of window installation, roofing, HVAC, insulation, and framing, but did not allege any specific workmanship deficiencies. Complainant stated that he had paid Respondent $21,994.14 on a contract price of $33,000.00.

Complainant attached to his complaint an undated list of itemized costs for various trades to perform work on his room addition on Respondent’s letterhead. Complainant also attached a Work Authorization Form dated March 1, 2016, on Respondent’s letterhead to perform the following scope of work for $9,220.00:

Pour and finish 4 inches of 3,000 psi concrete on ABC per detail 4 on sheet d1;

New patio approximately 362 sq. ft. - 3000 psi concrete on ABC, per plans.

Includes 3,000 psi concrete and all labor & material to comply with ACI Standards, demolition, sawcutting rebar, anchor bolts, footing excavation, hold downs, layout & cleanup. Excludes taxes, permits (pre-paid by owner), cracking due to unstable soil, damage to unmarked underground utilities, soil removal from property, stains, sealers, termite pre-treat, copper ground wire.

The March 1, 2016 Work Authorization Form also provided that the payment was an “[i]nitial installment of approximately $33,000 total project price to be paid in full upon payment request from [Respondent].”

Complainant also attached an undated document entitled Quote for Kevin Ramaley Demolition & Room Addition that showed certain amounts for various trades’ work on the addition for a total cost of $39,291.00, with Complainant’s handwritten notes showing reductions to the amounts for eliminating a pocket door, hiring his own painter, purchasing his own tile and ceiling fan, and the notation that the $39,291.00 was “reduced to $33,000.00.”

The undated list of itemized costs, March 1, 2016 Work Authorization Form, and undated Quote for Kevin Ramaley Demolition and Room Addition did not include the estimated date of completion, a signature line for Complainant or Respondent’s representative’s signature, the date the parties entered into the contract, or the total dollar amount of the contract, or the specific scope of work, did not apprise Complainant of his right to file a complaint against Respondent with the Registrar for a violation of A.R.S. § 32-1154(A) within the time allowed by A.R.S. § 32-1155(A), and did not provide the Registrar’s telephone number and website address.

The Registrar assigned the complaint to its Investigator, Randy Cason (“Investigator Cason”), for investigation. On or about May 18, 2016, Investigator Cason on behalf of the Registrar sent Respondent a letter, informing it of A.R.S. § 32-1158(B)’s requirements, in relevant part as follows:

It appears that you may have violated A.R.S. § 32-1158(B). Under that statute, any contract for more than $1,000.00 between a contractor and a property owner must contain nine specific elements. Your contract is missing at least one of the required elements. For your reference, a copy of A.R.S. § 32-1158(B) is included here . . . .

A failure to comply with A.R.S. § 32-1158(B) violates § 32-1154(A)(12), and that violation can constitute grounds to suspend or revoke your license. You need to review A.R.S. § 32-1158(B) and make sure you are complying with its requirements.

At this time, the Registrar will not seek discipline against you for the failure to comply with A.R.S. § 32-1158(B) noted in this letter. However, the Registrar may seek discipline against you if it discovers future violations of A.R.S. § 32-1158(B).

Investigator Cason performed a jobsite inspection on June 7, 2016. On June 24, 2016, Investigator Cason on behalf of the Registrar issued a Directive to Respondent “to complete the Remodeling (Addition) Project [per] the Approved Building Plans dated 3/8/2016 from the City of Chandler and . . . to comply with all building codes and building inspection requirements and the proposed specification for this project” on or before 5:00 p.m. on July 11, 2016.

After Respondent failed to perform any work to comply with the June 24, 2016 Directive, Investigator Cason referred the matter to the Registrar’s Legal Department. On July 14, 2016, the Registrar issued a Citation against Respondent’s contractor’s license, charging cause to revoke, suspend, or otherwise discipline the license under 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), namely, A.R.S. § 32-1158(B), and A.R.S. § 32-1154(A)(22).

Respondent filed a timely written answer to the Citation, denying that it violated any of the Registrar’s statutes.

An evidentiary hearing was held on October 5, 2016. Complainant submitted eight exhibits and testified on his own behalf. Respondent presented the testimony of Norman Wayne Botkin (“Mr. Botkin”), its qualifying party/member, and Jim Bates (“Mr. Bates”), who negotiated the agreement with Complainant and acted as Respondent’s jobsite superintendent on the project. Investigator Cason also testified.

Hearing Evidence

Mr. Bates testified that he wanted to help Complainant with his addition because he is good friends with Complainant’s aunt. Mr. Bates testified that because Complainant wanted to finance the addition by paying Respondent on credit cards, Complainant requested that Respondent obtain estimates from various trades for different aspects of the construction of the addition. Mr. Bates testified that Complainant did not pay Respondent anything for obtaining the subcontractors’ bids.

Mr. Botkin testified that Respondent added a little to the subcontractors’ charges and only made about $2,000.00 on the job. Mr. Botkin acknowledged that Respondent paid most of the subcontractors and suppliers, with the exception of the roofing subcontractor and the window supplier.

Complainant testified that he was using credit cards with a 0% introductory rate to pay for the job. Complainant testified that if Respondent had told him that he should have a contract for the job, he could have obtained a home equity line of credit to pay for the job. Complainant testified that Respondent’s price of $33,000.00 was too low for the job and that it engaged in “bait and switch” tactics in obtaining the job.

Complainant testified that in November 2015, he met with an architect that Respondent had recommended with one of its employees. Complainant testified that he relied on Respondent’s expertise. Complainant acknowledged that he hired the architect and paid him directly for the plans.

Complainant testified that the architect did not measure the project but instead relied on Google Earth to draw the plans. Subcontractors subsequently identified mistakes in the plans, including the absence of a tie-in to the sewer for the bathroom and a support column for the patio in a location that required the removal and replacement of a block wall, which increased the cost of the project. Complainant opined that it was Respondent’s responsibility to identify mistakes in the plans.

Mr. Botkin and Mr. Bates both testified that they had never told Complainant that they had any experience in architecture or engineering. Mr. Bates testified that as the scope of the project changed, he had to go down to the City of Chandler numerous times to get plan revisions approved.

Complainant testified that the project failed many of the City of Chandler’s building inspections. Mr. Bates testified that the project passed subsequent inspections.

Mr. Bates testified that Complainant expanded the scope of work for the concrete subcontractor by adding a sidewalk and made side agreements with the electrician to add outlets and a larger panel. Mr. Bates testified that he should have let the subcontractors bill Complainant directly.

Mr. Botkin testified that before Investigator Cason issued June 24, 2016 Directive, he asked Complainant how he would like Respondent to proceed, but that Complainant did not respond. Mr. Botkin testified that after the Directive was issued, Complainant said that he did not want Respondent at the property and that he would see Respondent at the Registrar’s hearing.

Complainant testified that he felt that he was entitled to credits for certain work that he paid for directly, including the roofing, the window installation, and hauling away debris. Complainant testified that Respondent did not try to make arrangements to comply with the June 24, 2016 Directive, but acknowledged that he does not want Respondent to complete the project. Complainant testified that he would have allowed Respondent to attempt to perform work to comply with the Directive.

Investigator Cason testified that a proper contract did not exist for the project and that there was an issue about the total cost of the project. Investigator Cason testified that the parties disputed the cost of the project because Complainant understood subcontractors’ proposals to represent the actual cost of the project.

Investigator Cason testified that he performed a jobsite inspection on June 7, 2016, and reviewed the approved plans and the permit from the City of Chandler. At that time, the project was incomplete.

Investigator Cason testified that he performed a prehearing inspection on the morning of October 5, 2016. Complainant had installed asphalt shingles over the addition and patio cover, but no other work had been completed.

In response to Complainant’s questions, Investigator Cason testified that the only workmanship deficiencies that he noticed at the prehearing inspection was that the freeze boards for the siding had been installed backwards, with the wire over the bird holes inside, and some water damage to a wall in the kitchen. Investigator Cason acknowledged that if the plans required the wall to be removed, the damage was moot. Investigator Cason testified that the freeze boards would be inspected before the project was inspected for the lath for the stucco and that correcting the boards would not be a significant correction.

Pursuant to A.A.C. R4-9-117, administrative notice is taken of Respondent’s prior disciplinary history on the Registrar’s public website. On this date, Respondent’s license was current and in good standing. Although the license was administratively suspended for non-renewal between April 1, 2014, and May 29, 2014, the Registrar has never before imposed discipline on the license.

CONCLUSIONS OF LAW

This matter lies within the Registrar’s jurisdiction.

Complainant bears the burden of proof to establish cause to discipline Respondent’s license by a preponderance of the evidence. Respondent bears the burden to establish affirmative defenses by the same evidentiary standard.

“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.”

Because Complainant hired and paid the architect directly, Respondent is not responsible for any mistakes in the plans. Respondent established that the project eventually passed all of the City of Chandler’s inspections. Because Complainant did not establish that Respondent failed to follow the plans or departed from the City of Chandler’s building code, Complainant did not establish cause to suspend or revoke Respondent’s contractor’s license under A.R.S. § 32-1154(A)(2).

Although Respondent’s subcontractor installed the freeze boards backwards, this item was not alleged in the Complaint or the Directive. Respondent established that the mistake was di minimis and easily corrected by whoever completes the project before the City of Chandler’s lath inspection. Because Respondent has the right to receive notice of specific workmanship deficiencies before its license may be disciplined as a result of those deficiencies, Complainant did not establish cause to discipline Respondent’s contractor’s license under A.R.S. § 32-1154(A)(3), namely A.A.C. R4-9-108.

Investigator Cason accurately characterized the nature of the dispute between Complainant and Respondent as a financial dispute caused by Complainant’s understanding that the total of various subcontractors’ estimates that Respondent provided constituted a firm contract price, even though neither party had signed a written contract that unequivocally set forth their agreement and the scope of work. Complainant established that Respondent never provided a written contract, thereby establishing cause to suspend or revoke Respondent’s contractor’s license under A.R.S. § 32-1154(A)(12), namely, A.R.S. § 32-1158(B).

Respondent’s attorney argued that Investigator Cason’s May 18, 2016 letter should estop the Registrar from disciplining its contractor’s license for violating A.R.S. § 32-1154(A)(12). Everyone is presumed to know the law. “As a matter of public policy, all persons are charged with knowledge of law pertaining to their transactions . . . .” Because everyone is presumed to know the law’s requirements, a mistake as to such requirements does not excuse failure to meet them. “[E]stoppel may apply against the state only when the public interest will not be unduly damaged and when its application will not substantially and adversely affect the exercise of government powers.” Estoppel should not apply if its application “would frustrate the purpose of . . . licensing requirements, which is to promote uniform standards of quality.” Respondent acknowledged at the hearing this dispute would not have arisen if Respondent had provided a written contract that complied with the requirements of A.R.S. § 32-1158(B) before beginning Complainant’s addition.

Respondent could not comply with the Directive because the parties did not agree about the compensation that would be due to Respondent and Complainant insisted on the return of certain monies as part of Complainant’s understanding of what the parties’ agreement required. The legislature has not empowered either the Office of Administrative Hearings or the Registrar to adjudicate or award money damages, which must be recovered in a court having competent civil jurisdiction. Although the parties’ financial dispute prevented Respondent from complying with the Directive, as noted above, Respondent’s inability to comply with the Directive was a direct result of its failure to comply with A.R.S. § 32-1158(B). Because Respondent’s inability does not constitute a legal excuse, Complainant established cause to discipline Respondent’s contractor’s license under A.R.S. § 32-1154(A)(22).

RECOMMENDED ORDER

Based on the foregoing, it is recommended that on the effective date of the final order in this matter, Respondent Three C's Residential and Commercial Builders LLC dba, Arizona Construction Group’s License No. KB-2.277504-D shall be suspended for five business days.

It is further recommended that Respondent shall be required to pay the sum of $500.00 as a civil penalty pursuant to A.R.S. § 32-1154(E).

It is further recommended that if Respondent fails to pay the entire amount of the civil penalty on or before thirty days following the effective date of the Registrar’s Order, the Registrar revoke Respondent’s license, effective on such deadline date. No future license shall be issued to any entity consisting of persons associated with Respondent, as defined in A.R.S. § 32-1101(A)(5), unless Respondent tenders payment of any outstanding prior civil penalty.

It is further recommended that Respondent shall be required to provide written proof to the Registrar that it has modified its form contracts, invoices, business cards, and other documents used in its contracting business to comply with the requirements of A.R.S. § 32-1158(B). If Respondent fails to provide such written proof that is satisfactory to the Registrar on or before thirty calendar days after the effective date of the final order in this matter, Respondent’s license shall be suspended until it provides such proof.

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, October 13, 2016.

/s/ Diane Mihalsky

Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director

Registrar of Contractors