ALJDEC decisions subject to certification as final

2017A-3346-ROC · Registrar of Contractors · 2020-08-03

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Ann De Jong,

COMPLAINANT

Outdoor X Scapes Inc.,

DBA Tre Pros Services

License No. ROC 296570, 253883,

RESPONDENT

No. 2017A-3346-ROC

ADMINISTRATIVE LAW JUDGE

DECISION

HEARING: July 14, 2020

APPEARANCES: James Sparks, Esq. for Complainant; Jill J Ormond Esq. for Respondent; John R. Tellier, Esq. for the Registrar of Contractors

ADMINISTRATIVE LAW JUDGE: Thomas Shedden

FINDINGS OF FACT

On January 21, 2020 the Registrar of Contractors (“ROC”) issued a Notice of Hearing setting the above captioned matter for hearing on February 25, 2020 at the Office of Administrative Hearings. The matter was continued and the hearing was conducted on July 14, 2020.

Respondent Outdoor X Scapes Inc. holds license numbers 296570 and 253883 issued by ROC. Complainant is Dr. Ann De Jong.

The issue is whether an award and payout from the residential contractors’ recovery fund is justified by the evidence.

This is in essence a rehearing; Dr. De Jong has previously been found to be eligible for a payout and the only issue for resolution is the appropriate amount of any payout. ROC has determined that Complainant should receive a payout of $357.91, which amount Complainant disputes.

ROC presented the testimony of its legal assistant Shaquira Adebule, and its assistant chief of investigations, Steve Nelsen. Complainant presented the testimony of G. Alan Shelton, a licensed general contractor and home inspector, and her own testimony. Respondent presented the testimony of Roland Martinez its owner.

In May 2017, Dr. Ann De Jong entered a contract in which Respondent was to perform demolition and installation work on an existing pool and patio at a house in Chandler. The contract price was $34,369.70. Complainant paid respondent 50% down and Respondent began work in mid-June 2017. Within a few days, the parties were in conflict.

In an email dated June 23, 2017, Complainant, through an attorney in Nevada, informed Respondent that she was canceling much of the project. Complainant did not provide a revised contract price, but rather indicated that no additional fees would be due until the remaining work was complete.

On June 26, 2017, Complainant’s Nevada attorney wrote to Respondent’s attorney that complete termination of the contract was being effected on a mutual basis.

On June 28, 2017, Complainant filed with ROC a complaint against Respondent alleging poor workmanship Respondent’s part.

ROC assigned Investigator Steve Nelsen to the complaint.

Mr. Nelsen performed a jobsite inspection on July 17, 2017, and on that date issued a directive ordering Respondent make certain repairs.

After learning that Complainant had made a misrepresentation to ROC, Mr. Nelsen issued an amended directive to Respondent, providing in pertinent part:

You are hereby directed to remedy the following violations by the appropriate means

1. Contractor installed broken coping pieces.

a. There were pieces of the coping with chips missing on the cut edges. The area where the new decking will be placed against the coping is rough and will not allow a seamless transition to the new decking.

2. Contractor broke/damaged numerous items without fixing/replacing: pool tiles, solar lights, home gate, autofiller.

a. There were numerous water line tiles and tiles below the diving board that were damaged by the Respondent, some repairs were [started], but not finished. Respondent should repair tiles that were damaged during demolition. I could not substantiate damage to the solar lights or home gate. I did notice cracks in the covers of the autofiller and autofiller neck that should be corrected.

3. Complete contracted items prior to alteration/deletion of items by Complainant.

The work was not fully completed and on August 10, 2017, ROC issued a Citation against Respondent’s contractor’s licenses, alleging that the Respondent may have violated Ariz. Rev. Stat. sections 32-1154(A)(3) and (A)(22).

On August 14, 2017, Complainant entered a contract with Boundary Waters Pools and Spas LLC (“Boundary Waters”) under which it completely remodeled Complainant’s pool and patio, including removing travertine paver coping that Respondent had installed.

Boundary Waters’ work was completed using a different design than Respondent’s contract called for, and Boundary Waters constructed features that were not called for in Respondent’s contract.

Complainant’s contract with Boundary Waters was for $41,207.84 and ROC determined that she had paid it $41,090, (meaning $117.84 was unpaid).

On October 31, 2017, a hearing was conducted at which the parties presented evidence on the alleged violations (the “workmanship hearing,” docket 2017A-3346-CHC-ROC), after which the Administrative Law Judge in that matter issued a Decision.

At the workmanship hearing, Mr. Nelsen acknowledged that the repairs of the rough pavers and broken tiles were relatively minor “punch list” repairs that would usually be performed at the end of the job when all other work was complete. Respondent’s Mr. Martinez testified as to his belief that the repairs could have been completed in less than a day.

In the Decision in the workmanship hearing, at Conclusion of Law No. 5, the ALJ found that:

Complainant established that Respondent’s workmanship did not comply with the Registrar’s or industry standards with respect to the broken coping pieces, damaged water line tiles, and cracks on the autofiller and autofiller neck noted in the August 11, 2017 amended directive. Although these items were relatively minor “punch list” items that would normally be addressed at the end of the project, the Registrar requires that if a contractor performs contracting work, the contractor comply with the Registrar’s standards.

(Underscoring added.)

Through a Final Administrative Decision and Order issued on November 21, 2017, ROC accepted the Administrative Law Judge Decision in the workmanship matter.

ROC suspended Respondent’s license for one day for the violations set out in workmanship matter’s Conclusion of Law No. 5, and assessed against Respondent a civil penalty of $100.

The ALJ did not find that Item 3 (complete contract except for items that were canceled) on the Amended Directive was a violation of statue or rule by Respondent.

On January 30, 2018, Complainant submitted to ROC a Recovery Fund Claim showing that the lowest bid to repair and/or complete the project was $35,401.38 and that she had actually paid $41,438.88 to repair and/or complete the project.

Complainant’s total cost to repair consisted of $41,207.84 that she purportedly paid to Boundary Waters and $231.04 for fence rentals.

Complainant’s original contract price with Respondent was $34,369.70; she has paid Respondent $17,184.85, and her Recovery Fund Claim shows that there was no balance due. ROC did not agree and found that Complainant had a balance due to Respondent of $17,184.85.

Through her Recovery Fund Claim, Complainant requested a payout of $30,000.

ROC’s Shaquira Adebule evaluated Complainant’s Recovery Fund Claim.

Ms. Adebule testified to the effect that the Amended Directive was informative in determining the actual damages that Complainant suffered and informative as to what was required to repair the work or complete the project.

Work that was not in the contract between Complainant and Respondent is not compensable.

In performing her evaluation, Ms. Adebule consulted with Investigator Nelsen to help ensure that any payout from the fund was limited to Complainant’s actual damages.

At this hearing, Mr. Nelsen confirmed that the items for which Respondent’s license was suspended were minor punch list items that could have been repaired. Rather than having those items repaired, Complainant had Respondent’s work removed and replaced. Mr. Nelsen’s opinion was that ROC was generous in what it allowed Complainant credit for.

On December 5, 2019, ROC issued a Notice of Claim for Administrative Payout showing that Complainant would be awarded $357.91 in the form of a payout from the Recovery Fund.

Complainant requested a hearing, which led to this matter being conducted.

At the hearing, Ms. Adebule testified as to her evaluation of Complainant’s Claim.

Of the items listed in the Boundary Waters’ invoice, the following were disallowed by ROC as they were not part of the contract between Respondent and Complainant: chip out the interior and remove debris; install interior mini pebble; repair light run; install new light; add sheer descent; and add ceramic turtles.

ROC also disallowed repair of tile at patio because that item was not substantiated as deficient work during the workmanship hearing, and the demo of concrete and removal of debris because it was not itemized as required to eliminate costs for work that was disallowed.

ROC also partially disallowed the cost to install tile at the waterline because the contract between Respondent and Complainant called for 150 feet, whereas Complainant had Boundary Waters install 210 feet. As such ROC allowed a pro rata amount of 71.4% of Boundary Waters’ cost to repair.

ROC determined that Complainant’s disallowed or non-compensable costs totaled $23,778.28. ROC also determined that Complainant had an unpaid balance of $117.84 due to Boundary Waters, which is not compensable to Complainant.

The disallowed or non-compensable costs of $23,778.28 plus unpaid balance $117.84 equals $23,896.12, which ROC then deducted from the Complainant’s total claimed cost to repair of $41,438.88, resulting in a final allowable cost of $17,542.76.

Complainant has paid to Respondent only one-half of the original contract price, with the unpaid balance being $17,184.85.

ROC deducted from Complainant’s allowable costs of $17,542.76 the unpaid balance of $17,184.85, resulting actual damages of $357.91, which it notified the parties was to be awarded to Complainant.

Complainant presented the testimony of G. Alan Shelton, a licensed general contractor and home inspector.

Mr. Shelton provided his opinion that ROC had not properly calculated the cost comply with the Amended Directive, which included items that were necessary in his opinion to comply with Amended Directive item 3. But that allegation was not proven during the workmanship hearing and therefore did not result in discipline against Respondent’s license.

Mr. Shelton reviewed the contracts, plans, photographs and other documents, but did not visit the site, or talk to Mr. Nelsen or a representative from Respondent, but he did talk to someone from Boundary Waters.

Mr. Shelton prepared a report in which he provided his opinion as to which items in the Boundary Waters’ contract were necessary to comply with the Amended Directive.

Mr. Shelton’s opinion was that: item 1, demo of concrete and removal of debris; item 7, repair of the patio tile; item 10, repair light run; and item 13, building up the wall to add the sheer descent, were items that should have been included in ROC’s calculations.

He also was of the opinion that ROC erred when it allowed reimbursement for only 150 feet of tile at the waterline (item 4) and that ROC should have made an adjustment to allow part of the cost to chip out interior and remove debris and install mini pebble (items 5 and 6).

Mr. Shelton agreed with ROC’s other findings.

Mr. Shelton calculated that Complainant’s cost to repair in compliance with Amended Directive was $28,240.51, which includes the $17,542.76 that ROC found was required plus an additional $10,697.75 for the items Mr. Shelton believes ROC should have included.

Regarding items 5, 6, 7 and 10, Mr. Shelton relied on input from Boundary Waters, which may have been biased.

Regarding item 1, Complainant did not show that this was part of her original contract with Respondent.

Regarding item 4, the original contract calls for only 150 feet of tile.

Regarding items 5 and 6, relying on Boundary Waters, Mr. Shelton asserts that if Complainant had not had the interior of the pool refurbished, which is not part of Respondent’s scope, the cost to install the tile at the waterline (item 4) would have been more than Boundary Waters charged because it would have been more labor intensive to install that tile. Consequently, Mr. Shelton was of the opinion that ROC should have allowed the cost for this purported additional labor.

Regarding item 7, Mr. Shelton opined that the travertine tile had to be removed because the project would not have been code-compliant. But Respondent’s license was not suspended for any code violation related to that tile and it has not been proven that there was a code-violation.

Regarding item 10, there is no proof that Respondent was responsible for the damage and it was not cited for this damage in the workmanship matter.

Regarding item 13, Complainant did not show that this was part of her original contract with Respondent.

CONCLUSIONS OF LAW

Unless otherwise provided by law: the party asserting a claim, right, or entitlement has the burden of proof; a party asserting an affirmative defense has the burden of establishing the affirmative defense; and the proponent of a motion shall establish the grounds to support the motion. Ariz. Admin. Code § R2-19-119(B).

Complainant filed a claim asserting that she was entitled to a payout from the Recovery Fund pursuant to Ariz. Rev. Stat. section 32-1132. Respondent has a right to a hearing contesting any proposed payment before ROC may actually make a payment from the Fund. Ariz. Rev. Stat. § 32-1154(G); see also Ariz. Rev. Stat. § 41-1001(5)(defining contested case).

Consequently, Complainant bears the burden of proof show that she is a person injured who meets the requirements for a payout from the Recovery Fund. Ariz. Admin. Code § R2-19-119(B); see also Harvest v. Craig, 195 Ariz. 521, 524, ¶¶ 14-15 (App. 1999) (the party seeking a right granted by statute generally has the “burden of proving that [she] comes within the ambit of the statute”).

The standard of proof on all issues in this matter is that of a preponderance of the evidence. Ariz. Admin. Code § R2-19-119(A).

A preponderance of the evidence is:

The 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.

Black’s Law Dictionary 1373 (10th ed. 2014).

Statutes should be interpreted to provide a fair and sensible result. Gutierrez v. Industrial Commission of Arizona, 226 Ariz. 395, 249 P.3d 1095 (2011)(citation omitted); State v. McFall, 103 Ariz. 234, 238, 439 P.2d 805, 809 (1968) ("Courts will not place an absurd and unreasonable construction on statutes.").

“Statutes shall be liberally construed to effect their objects and to promote justice.” Ariz. Rev. Stat. § 1-211(B).

The purpose of the recovery fund is to provide improved protection for owners and lessees of property who contract for the construction or alteration of residential structures. McMurren v. JMC Builders, 204 Ariz. 345 (App. 2003).

“The assessments received by the registrar for deposit in the fund shall be held in trust for carrying out the purposes of the fund.” Ariz. Rev. Stat. § 32-1135.

“‘Person injured’ means “any owner of residential real property which is classified as class three property under [a section of the tax code] and which is actually occupied or intended to be occupied by the owner as a residence . . . who [is] damaged by the failure of a residential contractor . . . to adequately build or improve a residential structure or appurtenance on that real property.” McMurren at ¶ 8; see also Ariz. Rev. Stat. § 32-1131(3).

Any “person injured” by a licensed residential contractor’s violation of ROC’s statutes or rules may be awarded up to $30,000 from the residential recovery fund. But an “award from the fund is limited to the actual damages suffered by the claimant as a direct result of the contractor's violation ....” Ariz. Rev. Stat. § 32-1132(A).

“‘Actual damages’ ... mean[s] the reasonable cost of completing the contract and repairing the contractor's defective performance ‘less the part of the contract price still unpaid.’” Ramsey v. Ariz. Registrar of Contractors, 241 Ariz. 102, ¶ 8 (App. 2016)(adopting ROC’s definition of actual damages).

Complainant has not met her burden to show that ROC erred when it determined that her actual damages were $357.91.

Regarding items 1 and 13, Complainant did not show that this work part of her original contract with Respondent.

Regarding item 4, the original contract calls for only 150 feet of tile, and ROC’s decision to disallow the cost for more than that amount is not proven to be error.

Regarding items 5 and 6 as related to item 4, Complainant has not proven that she should be awarded labor costs that she did not actually incur.

Regarding item 7, Complainant did not prove that Respondent’s work was not code-compliant and Respondent’s license was not suspended for any code violation related to that tile.

Regarding item 10, there is no proof that Respondent was responsible for the damage and it was not cited, or found responsible, for this item in the workmanship matter.

Complainant argues that ROC should not have deducted the unpaid balance from the allowable costs, because the parties had canceled their contract. But under Ramsey, ROC was required to deduct any unpaid balance from the allowable costs.

Complainant argues that the balance was zero. Presumably, the amount due to Respondent after Complainant canceled portions of the contract would not be as high as if the cancelation had not occurred, but Complainant did not prove that during the hearing, and Complainant’s notice to Respondent that portions of the contract were being unilaterally canceled shows that Complainant recognized that there could be additional fees due to Respondent.

The preponderance of the evidence shows that the work for which Respondent’s license was suspended was minor punch-list type items and that that work could have been repaired. It was not reasonable for Complainant to remove and replace Respondent’s work, and Complainant’s claim could have been denied on that basis.

Consequently, ROC’s determination that Complainant is entitled to a payout from the Recovery Fund of $357.91 is affirmed.

RECOMMENDED ORDER

IT IS ORDERED that on the effective date of the final Order in this matter, the Registrar of Contractors shall order the Fund to make a payout of $357.91 to Complainant Ann De Jong.

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.

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-137160-45720000Done this day, August 3, 2020.

/s/ Thomas Shedden

Thomas Shedden

Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director

Registrar of Contractors

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001

-137160-45720000