FINACT2017A-2190-ROC.pdf

2017A-2190-ROC · Registrar of Contractors · 2019-03-21

REGISTRAR OF CONTRACTORS OF THE STATE OF ARIZONA

Stacey and Paul Smith, Case No. 2017-2190 COMPLAINANTS, Docket No. 2017A-2190-ROC v. Seven Foot Construction LLC, FINAL ADMINISTRATIVE DECISION License No. ROC 220001, AND ORDER RESPONDENT.

Under A.R.S. § 41-1092.08(B), the Registrar may review and accept, modify, or reject an

administrative law judge’s written decision. If the Registrar modifies or rejects that decision, then the

Registrar must provide written justification setting forth the reasons for the modification or rejection.

REGISTRAR’S ACCEPTANCE

In this case, a hearing was held, and the administrative law judge issued a written decision. See

Administrative Law Judge Decision, attached. The Registrar reviewed that decision and hereby accepts

it.

CONCLUSION

Because the Registrar has accepted the administrative law judge’s decision, that decision is the

final administrative decision in this case and becomes effective on April 24, 2019.

FINAL NOTE

On page 7, line 4 replace “December 4, 2017” with “October 4, 2017”.

of 2 REGISTRAR OF CONTRACTORS 1700 W. Washington St. Suite 105 – Phoenix, AZ 85007-2812 Telephone (602)542-1525 1-877-692-9762 Dated March 15, 2019.

Registrar of Contractors /s/ Joseph Citelli Joseph Citelli Chief Counsel Chief of Legal Department and Recovery Fund Copy mailed via USPS First Class mail March 15, 2019 to: Respondent Seven Foot Construction LLC 7816 N Via De La Sombre Scottsdale, AZ 85258

Respondent’s Attorney Steven R Beeghley, Esq. 4250 N Drinkwater Blvd Fl 4 Scottsdale, AZ 85251 Complainants Stacey and Paul Smith 20343 N Hayden Rd # 105-152 Scottsdale, AZ 85255

Complainant’s Attorney James M. Cool, Esq. 4450 S Rural Rd Ste C220 Tempe, AZ 85282 AND copy electronically mailed this same date to: Respondent at email address on record with the Registrar Respondent’s Attorney at email address of record with Registrar Complainant at email address on record with the Registrar Complainant’s Attorney at email address of record with Registrar

Office of Administrative Hearings Diane Mihalsky, Administrative Law Judge Office of the Attorney General Thomas Raine, Assistant Attorney General

Case No. 2017-2190 / mm

of 2 REGISTRAR OF CONTRACTORS 1700 W. Washington St. Suite 105 – Phoenix, AZ 85007-2812 Telephone (602)542-1525 1-877-692-9762 RECEIVED 2.28.2019 ROC LEGAL

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Stacey and Paul Smith, No. 2017A-2190-ROC

COMPLAINANTS, ADMINISTRATIVE LAW JUDGE DECISION v.

Seven Foot Construction LLC, ROC License: ROC 220001,

RESPONDENT.

HEARING: February 8, 2019, at 9:00 a.m. APPEARANCES: Seven Foot Construction LLC (“Respondent”) was represented by Steve R. Beeghley, Esq., Sacks Tierney P.A.; Stacey and Paul Smith (“Complainants”) were represented by James M. Cool, Esq., Honor Law Group; the Arizona Registrar of Contractors (“the Registrar”) was represented by Thomas Raine, Esq., Assistant Attorney General. ADMINISTRATIVE LAW JUDGE: Diane Mihalsky _____________________________________________________________________

FINDINGS OF FACT BACKGROUND 1. According to the Registrar’s public website, on May 21, 2006, the Registrar issued License No. ROC 220001 for General Residential B-3 General Remodeling and Repair Contracting to Respondent. 2. On November 28, 2018, the Registrar issued a Notice of Claim for Administrative Payout, notifying the parties that “Complainants filed a claim for payment with the Residential Contractors’ Recovery Fund [(“the Fund”)] pursuant to A.R.S. § 32- 1154(G). After a review of the claim and all supporting documentation, the Fund has determined that Complainants are to be awarded $27,273.93 in the form of a payment issued by the Fund.”1 The Registrar’s Exhibit 1. Office of Administrative Hearings 1740 West Adams Street, Lower Level Phoenix, Arizona 85007 (602) 542-9826 RECEIVED 2.28.2019 ROC LEGAL

3. After Respondent requested a hearing on the amount of the payout, the Registrar referred Complainants’ claim to the Office of Administrative Hearings (“OAH”), an independent state agency, for an evidentiary hearing.

4. A hearing on the merits was held on February 8, 2019. The Registrar

presented the testimony of Marlee McCormick, the Legal Assistant in the Registrar’s

Legal Department/Fund who had analyzed Complainants’ claim, and submitted twenty-

one exhibits. Respondent presented the testimony of its member/qualifying party,

Klaus Mehrens, and submitted two exhibits. Complainants presented the testimony of

Complainant Paul Smith, Ph.D., D.M.D., and submitted four exhibits.

BACKGROUND: THE UNDERLYING WORKMANSHIP COMPLAINT

5. On or about April 26, 2017, Complainant Stacey M. Smith filed a complaint

with the Registrar against Respondent alleging, among other complaints, the following:

1. Contractor damaged new cabinets ($5,600 repair estimate) refused to compensate for damages. Stopped work. 2. Contractor improperly leveled and improperly installed tile floor throughout home ($5,680 tile cost)2 Complainants stated on the complaint that they had paid Respondent $30,000.00 of the $47,194.00 contract amount. Complainant’s attached to their complaint Respondent’s itemized proposals, as well as texts, emails, and letters between the parties. 6. On or about May 17, 2017, Mr. Mehrens on behalf of Respondent filed an initial response to the complaint, stating in relevant part as follows: 1. Contractor acknowledges damage to cabinets. Contractor offered immediately and repeatedly to repair, or bear the cost of repair. Complainant declined and asked for work stoppage.

2. Contractor acknowledges some floor tile were installed outside of industry tolerance. Contractor offered immediately and repeatedly to make repairs. Complainant declined and asked for work stoppage. Contractor furthermore offered to replace additional

2 See the Registrar’s Exhibit 2 at 0007. RECEIVED 2.28.2019 ROC LEGAL

substantial amounts of floor tile. Complainant declined again and asked for work stoppage.3 7. The Registrar assigned the complaint to its Investigator, Ted Stodder, for investigation. Investigator Stodder performed a jobsite inspection on May 19, 2017.

Complainant Stacey Smith attended the jobsite inspection. Although Mr. Mehrens

attempted to attend the jobsite inspection, Mrs. Smith denied him entry to the

development at the gate. Investigator Stodder’s jobsite inspection notes state in

relevant part as follows:

Complaint Item 1: damage to cabinets when removing countertops Investigator’s Observation: cabinets and niches are damaged. SUBstantiated .... Complaint Item 2: floor not leveled for tile installation Investigator’s Observation: floor is not level. SUBstantiated ... Complaint Item 3: tile has lippage and low grout Investigator’s Observation: some lippage and low grout was observed. SUBstantiated4 8. On May 22, 2017, Investigator Stodder issued a directive to Respondent to perform the following corrective work on or before 5:00 p.m. on June 9, 2017: 1. Cabinet damage needs to be repaired. 2. Floors must be level prior to the installation of tile. 3. Tile lippage cannot exceed 1/16”. 4. Grout lines shall be grouted to the level to the tile. 5. Complete project per contract.5 9. On June 19, 2017, the Registrar issued a Citation6 against Respondent’s license, charging cause to revoke or suspend Respondent’s license under A.R.S. § 32- 1154(A)(3),7 namely A.A.C. R4-9-108,8 and A.R.S. § 32-1154(A)(22).9

See the Registrar’s Exhibit 2 at 0007. The Registrar’s Exhibit 3 at 0042. The Registrar’s Exhibit 5 at 0046. See the Registrar’s Exhibit 6. 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.” RECEIVED 2.28.2019 ROC LEGAL

10. After Respondent filed a written answer to the Citation, the Registrar referred Complainants’ workmanship complaint to OAH for an evidentiary hearing. On September 11, 2017, the Administrative Law Judge (“ALJ”) assigned to the case issued

an ALJ Decision that concluded that Complainant had established that Respondent had

violated the statutes charged in the Citation.10 As a result of the Final Order,

Respondent’s license was suspended for five days.

11. The ALJ decision made the following findings of fact:

5. Following the issuance of the written directive, Complainant, through her attorney, and Respondent had discussions regarding the work to be done. Complainant asserted that because the parties did not have a written contract, Respondent was unable to “[c]omplete project per contract” and if it would complete items one through four from the written directive, Complainant would withdraw any complaint relating to item five. Respondent asserted that it should be allowed to complete other work required by the verbal contract before or at the same time it completed the other four items in the written directive. Because the parties were discussing the matter and how to go about completing the corrective work, Investigator Stodder extended the deadline for compliance to June 19, 2017.

6. On June 7, 2017, Mr. Mehrens emailed Complainant’s counsel and stated, in relevant part, that “[m]uch detail needs to be discussed before we can complete work,” “I would like to see a comprehensive framework in place that includes payment amounts and schedule BEFORE commencing work,” and “I don’t want to get the runaround trying to get paid after I have completed my responsibilities.”

7. On June 7, 2017, Complainant’s counsel responded that “I trust your message is not an attempt to condition your

8 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.” 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.” 10 See the Registrar’s Exhibit 7. RECEIVED 2.28.2019 ROC LEGAL

performance of the ROC’s directives in any way on my clients paying you additional money.” 8. On June 8, 2017, Mr. Mehrens responded to Complainant’s counsel, in pertinent part, that While the ROC does not specifically address payment to me, work order item #5 clearly implies that after I meet the terms of the contract, your clients are also expected to meet theirs. There will be additional charges to your clients for leveling the subfloor (tile work is on me of course). My corrective work does not depend on your clients’ upfront payments. 9. When Complainant’s counsel inquired why Mr. Mehrens believed there would be an additional charge for leveling the subfloor, Mr. Mehrens responded as follows:

The floor leveling was not included in the estimate because I could not evaluate the scope of the concrete subfloor until after I removed all the existing flooring. Subfloor leveling typically costs hundreds (to fill in low areas like I did), or thousands (when bringing a specialty concrete grinder to remove subfloor material).

10. On June 19, 2017, Complainant’s counsel sent an email to Respondent’s counsel at that time, clarifying an earlier conversation. According to Complainant’s counsel, Complainant “merely sought clarification before moving forward of precisely what work [Respondent] felt ‘completing the contract’ involved since the parties have no signed contract and [Respondent] provided [Complainant] three different unsigned estimates for very different amounts.”

11. Ultimately, the parties were unable to reach an agreement as to the work to be performed. After the deadline expired, Investigator Stodder was notified no corrective work had been performed.11

11 The Registrar’s Exhibit 7 at 2-3. RECEIVED 2.28.2019 ROC LEGAL

12. Based on the above facts, the ALJ made the following conclusion of law: The evidence established that Complainant and Respondent did not have a written contract and were unable to agree on the terms of the scope of work to be completed at the time the written directive was issued. As such, it was not possible for Respondent to complete the contract as directed. Contrary to Respondent’s position, Complainant was not required to allow Respondent to complete what it thought was the agreed upon contract and then face additional charges from Respondent including hundreds or thousands more for leveling the subfloor. While Respondent was unable to complete the project per the contract, Respondent made no effort to complete the other corrective work following the written directive being issued by the Registrar.12

13. On September 19, 2017, the Registrar issued a Final Administrative

Decision and Order, adopting the ALJ Decision.13 Respondent did not appeal the

Registrar’s final order and it became effective on October 29, 2017.

COMPLAINANTS’ CLAIM TO THE FUND

14. On or about June 4, 2018, Complainants submitted a claim to the Fund to

recover the damages that were allegedly caused by Respondent’s poor work repairing

the cabinets and installing the tile floor at their residence, requesting a payout in the

amount of $30,000.00.14 Complainants also submitted copies of Respondent’s itemized estimates to perform certain work15 and cancelled checks to show that they had paid Respondent a total of $30,000.00.16 15. Complainants submitted with their claim to the Fund three estimates to completely replace all tile and grind the concrete floor to level it in Complainants’ 1,600 sq. ft. residence, as follows: 15.1 Compass Flooring of Arizona’s bid dated October 6, 2017, in the total amount of $27,516.00, including $925.00 to grind the concrete floors as needed,

Id. at 4-5. See the Registrar’s Exhibit 8. See the Registrar’s Exhibit 9. See the Registrar’s Exhibit 10. 16 See the Registrar’s Exhibit 11. RECEIVED 2.28.2019 ROC LEGAL

$18,862.00 for “tile installation and grout with fusion grout by custom products and paint and remove tile and base, includes haul away,” as well as other tile work in the master bathroom and guest bathroom.17

15.2 Eldred Construction Inc.’s (“Eldred’s”) bid dated December 4, 2017, in the

total amount of $30,385.00, including $19,355.00 to remove baseboards, demo 1600

sq. ft. of tile, install approximately 1600 sq. ft. of tile “with fusion grout – owner to supply

tile,” and paint and install new baseboards, with a floor-grinding allowance of $850.00,

as well as other tile work to the master bathroom and guest bathroom.18

15.3 Dream Stone Inc.’s bid dated September 28, 2017, in the amount of

$26,025.00, which was not itemized, to remove the tile, level the concrete floor, and

install tile provided by the owner, as well as performing other tile work in the master

bathroom and guest bathroom.19

16. The Fund sent Document Request Letters to Complainants, asking them to

submit an itemized bid to repair or replace the damaged kitchen cabinets, which was

Item No. 1 on the May 22, 2017 Directive.20

17. Complainants eventually provided the following documents: (1) A receipt

and a copy of a credit card statement showing a $1,705.35 payment for IKEA for kitchen cabinets; and (2) A receipt and a copy of a credit card statement showing a $6,213.63 payment for the purchase of floor tile from Arizona Tile.21 18. Complainants also provided Eldred’s August 30, 2017 revised bid to remove flooring and baseboards, prep floor, and install new tile in 1600 square feet in the amount of $18,505.00 and Complainants’ checks to Eldred dated October 24, 2017, in the amount of $5,000.00 and dated December 5, 2017, in the amount of $18,090.99.22

The Registrar’s Exhibit 12 at 0089. See id. at 0090. See id. at 0093. See the Registrar’s Exhibits 15, 17, and 19. See the Registrar’s Exhibit 18 at 0128, 0129, and 137; the Registrar’s Exhibit 20 at 0143. 22 See the Registrar’s Exhibit 18 at 0131, 0134, and 0135. RECEIVED 2.28.2019 ROC LEGAL

19. Ms. McCormick testified that the Fund had determined that Complainants were statutorily eligible to recover a payout from the Fund. Respondent did not challenge that determination.

20. Ms. McCormick testified that because the Registrar accepted the ALJ’s

decision in the underlying workmanship complaint that the parties did not have an

enforceable contract, although Complainants paid Respondent $30,000.00, the Fund

did not consider the cost of completing the project or deduct any amounts that

Complainants still owed to Respondent in calculating the Fund payout.

21. Mr. Mehrens testified the amounts of the contract was either $47,194.00 or

$56,000.00, based on the itemized estimates, which Respondent had prepared based

on Complaiants’ “wish lists,” that Complainants provided to the Registrar. Mr. Mehrens

testified that Respondent had completed 90% of the work under its agreement with

Complainants.

22. Ms. McCormick prepared a spreadsheet that showed the amounts that the

Fund used to calculate Complainants’ payout, including $1,705.30 for the IKEA

cabinets and $6,213.63 for the cost of the tile.23

23. Ms. McCormick testified that she confirmed that the tile that Complainants purchased as the same tile that Respondent used in the original installation. She also noted that the cost of the IKEA cabinets did not include the cost of installation. 24. Respondent did not challenge the cost of the cabinets or the cost of the tile, although Mr. Mehrens questioned whether all the tile was needed to repair Respondent’s poor workmanship. 25. With respect to the cost of removing and replacing the tile, Ms. McCormick disallowed $11,030.00 from Eldred’s total bid amount of $30,385.00 because no deficiencies had been found in Respondent’s work in the master bathroom and guest bathroom in the underlying workmanship complaint. This disallowance resulted in Eldred submitting the low bid of $19,355.00 for removing the tile, leveling the concrete, and replacing the tile floor over 1,600 square feet.24. The total of the three amounts for See the Registrar’s Exhibit 21 at 148. 24 See id. at 149. RECEIVED 2.28.2019 ROC LEGAL

cabinets, tile, and labor and incidentals for removing and replacing the tile resulted in the payout amount of $27,273.93. 26. Ms. McCormick acknowledged that the Registrar’s investigator who issued

the Directive in the underlying workmanship complaint, Ted Stodder, had left the

Registrar’s employment and that she did not contact former Investigator Stodder or his

supervisor. Ms. McCormick noted that, at one point, Respondent had offered to

replace the entire floor if Complainants would agree to pay more for levelling the

concrete and that Investigator Stodder’s jobsite inspection notes had substantiated

Complainants’ complaint that Respondent “had improperly leveled and improperly

installed tile floor throughout home . . . .”25

27. Ms. McCormick acknowledged that Complainants had the work done before

they submitted their claim to the Fund and that they had paid Eldred $23,090.99, which

was more than the bid for replacing the tile floor. Ms. McCormick testified that

Complainants’ possible payment to Eldred for other work was irrelevant to her

calculation of the Fund payout for repairing the cabinets and tile floor.

28. Dr. Smith testified that Complainants had paid Eldred $36,000 to repair

Respondent’s work and to complete the project. Dr. Smith testified that Complainants had additional complaints about Respondent’s work, including electrical, that were not addressed in the directive. 29. Mr. Mehrens testified that Respondent levelled the subfloor quite a bit before it installed the tile. Respondent could not include the cost of levelling in its estimate before it removed the old floor. It had used eight bags of levelling compound, at a cost of $300 to $400. 30. Mr. Mehrens testified that the floor plan of Complainants’ condominium contained transitions. Although the tile was large, 16” x 32”, the floor could have been repaired by replacing only the area that was still not level. Mr. Mehrens testified that the only area of the floor that was still not level, which was also the only area where there was excess lippage and grout issues, was an area in the living room/dining room,

25 The Registrar’s Exhibit 2 at 0007 (workmanship complaint). RECEIVED 2.28.2019 ROC LEGAL

which he marked on his exhibit.26 Mr. Mehrens testified that the entire floor did not need to be replaced. 31. Mr. Mehrens pointed out that only two photographs in the Registrar’s file

showed tile issues27 and only three photographs that Complainants’ submitted showed

tile issues.28 Mr. Mehrens testified that one of Complainants’ photographs showed

missing tile at a threshold,29 which would not require tile removal to correct. Mr.

Mehrens testified that these photographs had been taken in the area in the living

room/dining room that he acknowledged had issues. Mr. Mehrens testified that he went

through the whole house after the tile was laid and, although he did not have an

opportunity to put a level everywhere, the only area where he saw issues was in the

living room/dining room..

32. Mr. Mehrens estimated that the area that required replacement was 10’ x

10’ or 10’ x 12’, which could be repaired by replacing 10 – 12 tiles. Mr. Mehrens

testified that the $800 to $900 dollar allowance to grind the concrete on the bids that

Complainants submitted was about right to level that area and that levelling 1600 sq. ft.

would cost eight times as much, or thousands of dollars.

33. Mr. Mehrens testified that Eldred charged $10 – $12 per sq. ft. to install the tile, although Respondent charges only $4 -$5 per square foot. If the tile in the entire 12’ x 24’ living room/dining room needed to be replaced, the cost of repairs would be about one-fourth the amount of the itemized Eldred bid that the Fund used to calculate the payout. 34. Dr. Smith testified he paid Eldred $2,000, including the $850 allowance, to level the floor in the entire condominium. Dr. Smith is a physicist and electrical engineer. He testified that he conducted an experiment rolling children’s beads and a golf ball, but excessive lippage stopped the beads and golf ball from rolling over the tile. Dr. Smith testified that when he tried the experiment with an inflated ball like children use to play dodge-ball, the ball jumped over the lippage into the next room. See Respondent’s Exhibit 2. See the Registrar’s Exhibit 1 at 54 – 55. See Complainants’ Exhibit C1, second to last page. 29 See id. at last page. RECEIVED 2.28.2019 ROC LEGAL

Dr. Smith testified that if the ball started rolling at the door to the garage, it rolled clear out the front door. Dr. Smith testified that he asked Mr. Mehrens to observe the experiment, but that Mr. Mehrens declined unless Complainants agreed to pay more

money. Dr. Smith did not make a video of the experiment.

35. Mr. Mehrens testified that all the bids that Complainants submitted to the

Fund included Fusion grout, which was an upgrade from the grout that Respondent had

used. Mr. Mehrens testified that Fusion grout is more expensive and labor intensive to

apply than the grout that Respondent used. Mr. Mehrens testified that the use of

Fusion grout increased the cost of repair $1,100 - $1,300.

36. Dr. Smith testified that his wife had asked Respondent to use Fusion grout.

CONCLUSIONS OF LAW

1. This matter lies within the Registrar’s jurisdiction.30

2. When the Registrar has calculated the amount of a Complainant’s

compensable damages and proposed a payout from the Fund to which he is entitled, the calculation is a prima facie showing of the amount that the Complainant is entitled to recover as a payout from the Fund. The burden shifts to Respondent to establish that the Registrar’s calculations were erroneous or not supported by a preponderance of the evidence.31 3. “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”32 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.”33 4. A.R.S. § 32-1154(G) provides in relevant part as follows:

See 32-1101 et seq. See A.A.C. R2-19-119(A) and (B)(1); see also Vazanno v. Superior Court, 74 Ariz. 369, 372, 249 P.2d 837 (1952). MORRIS K. UDALL, ARIZONA LAW OF EVIDENCE § 5 (1960). 33 BLACK’S LAW DICTIONARY at page 1220 (8th ed. 1999). RECEIVED 2.28.2019 ROC LEGAL

Notwithstanding 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. The registrar shall serve the contractor with a notice setting forth the amount claimed or to be awarded. If the contractor contests the amount or propriety of the payment, the contractor shall respond within ten days of the date of service by requesting a hearing to determine the amount or propriety of the payment. . . .

A.R.S. § 32-1132(A) describes the measure of damages that an eligible homeowner is

entitled to recover from the Fund, in relevant part 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 . . . 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. . . .

(Emphasis added.) For the purposes of A.R.S. § 32-1132(A), “actual damages” are the reasonable cost of repairing the contractor’s defective work and completing the project, minus any portion of the contract price still unpaid to the original contractor.34 5. Respondent did not appeal the Registrar’s conclusion in the underlying workmanship complaint that the parties did not have an enforceable written contract or verbal agreement setting forth the scope of work or the amount that such work would cost. Therefore, the Fund’s decisions not to include in the Fund payout the cost of completing the work or to deduct amounts that Complainants still owed under the contract were appropriate.

34 See Ramsey v. Arizona Registrar of Contractors, 241 Ariz. 102, 106, 384 P.3d 316, 320 (App. 2016). RECEIVED 2.28.2019 ROC LEGAL

6. Respondent’s attorney argued that Complaints’ payment to other contractors to complete repairs before they filed their claim to the Fund prevented Respondent from being able to obtain evidence on the scope of necessary repairs and constituted

spoliation of evidence. “Spoliation is defined as ‘“[t]he intentional destruction of

evidence….”’”35 Although the Arizona Supreme Court has declined to recognize a

separate cause of action for spoliation, it has relied “on the principle that one who has

caused . . . harm to another has a duty to exercise reasonable care to prevent further

harm” to find that evidence of providing false information may establish a new or further

injury.36 The Arizona Court of Appeals has cited a New Mexico Supreme Court case

that recognizes the claim of spoliation, but requires a plaintiff to allege and prove six

elements, including “[a] causal relationship between the act of spoliation and the

inability to prove the lawsuit . . . .”37

7. The Registrar’s final decision concluded that Respondent did not attempt to

comply with the directive and did not avail itself of the access that Complainants were

required to provide at that time to inspect the jobsite because it insisted that

Complainants pay additional monies for the corrective work, which was a condition that

Respondent did not have the legal right to require in a workmanship complaint that a homeowner files with the Registrar.38 Respondent did not appeal this conclusion or the facts upon which it was based. If Respondent had attempted repairs, it could have requested a compliance inspection. Respondent did not establish that Complainants’ failure to provide another opportunity to Respondent to examine or repair its poor

Lips v. Scottsdale Healthcare Corp., 222 Ariz. 346, 348 ¶ 9, 214 P.3d 434, 436 (App. 2009) (quoting Smyser v. City of Peoria, 215 Ariz. 428, 438 n. 11, ¶ 32, 160 P.3d 1186, 1196 n. 11 (App. 2007) (quoting BLACK’S LAW DICTIONARY 1257 (6TH ed. 1990))). Id. at 349 ¶ 11, 214 P.3d at 437 (quoting La Raia v. Superior Court, 150 Ariz. 118, 122, 722 P.2d 286, 290 (1986)). Id. at 349 ¶ 14, 214 P.3d at 437 (quoting Coleman v. Eddy Potash, Inc., 120 N.M. 645, 905 P.2d 185, 189 (1995), overruled in part on other grounds by Delgado v. Phelps Dodge Chino, Inc., 131 N.M. 272, 34 P.3d 1148 (2001)). Not only does the Registrar lack any statutory authority to require homeowners to pay contractors, but the legislature has not empowered either the Office of Administrative Hearings or the Registrar to adjudicate or award money damages. See J.W. Hancock Enterprises, Inc. v. Arizona State Registrar of Contractors, 142 Ariz. 400, 406, 690 P.2d 119, 125 (App. 1984). Generally, if a contractor performs work, he must comply with the Registrar’s standards, regardless of whether he has been paid, although he may later seek payment from the homeowner in court of civil jurisdiction. RECEIVED 2.28.2019 ROC LEGAL

workmanship in Complainants’ claim to the Fund impermissibly damaged Respondent’s rights. 8. All three of the bids that Complainants submitted to establish their damages

caused by Respondent’s poor work in laying the tile floor included the cost of replacing

1600 sq. ft. of tile floor. Complainants alleged in their complaint and Investigator

Stodder substantiated that Respondent “improperly leveled and improperly installed tile

floor throughout home.” At one time, Respondent offered to remove and reinstall tile in

a substantial portion of Complainants’ 1600 sq. ft. condominium. Therefore,

Respondent did not establish that Eldred’s bid of $19,355.00 to remove and replace all

the tile, after leveling the floors was excessive or an improper measure of the cost to

repair Respondent’s poor workmanship on the tile floors.

9. Respondent established that Complainant’s contractors’ bids to use Fusion

grout is an upgrade from Respondent’s agreement and that the cost of this upgrade

was $1,100.00. Respondent therefore established that the proper measure of the

payout that Complainant should recover from the Fund is $26,173.93.39

RECOMMENDED ORDER In view of the foregoing, it is recommended that on the effective date of the final order in this matter, the Residential Contractors’ Recovery Fund shall pay $26,173.93 to Complainants Stacey and Paul Smith. It is further recommended that under A.R.S. § 32-1139(B), the Registrar shall charge $26,173.93, plus interest at a rate of ten percent a year, to Respondent Seven Foot Construction LLC’s License No. ROC 220001. 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, February 28, 2019. /s/ Diane Mihalsky Administrative Law Judge

39 $27,273.93 - $1,100.00 = $26,173.93. RECEIVED 2.28.2019 ROC LEGAL

Transmitted electronically to:

Jeffrey Fleetham, Director Registrar of Contractors