ALJDEC decisions subject to certification as final

2019A-00168-CHC-ROC · Registrar of Contractors · 2020-12-01

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Jason C. and Melissa W. Smith,

COMPLAINANT,

v.

Nicoll Construction LLC,

ROC License: ROC 290986,

RESPONDENT.

No. 2019A-00168-CHC-ROC

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: October 15, 2020

APPEARANCES: Jason C. Smith and W. Melissa Smith (Complainant) appeared telephonically. James D. Sparks, Esq., represented Respondent; he and Qualifying Party Brian Nicholl appeared telephonically.

ADMINISTRATIVE LAW JUDGE: Kay A. Abramsohn

_____________________________________________________________________

Respondent is the holder of License No. 290986, KB-1 Dual Building Contractor, issued by the Arizona Registrar of Contractors (Registrar) in 2014.

On or about January 10, 2019, the Registrar received Complainant’s Licensed Complaint Form (Complaint) containing a 31-item list of complaints regarding home construction, charges for items not installed, not receiving receipts, and some damage to property. Complainant indicated that the work had started on April 9, 2018 and had ended on November 26, 2018.

In April 2018, the parties contracted for construction of a custom-built home, according to certain specifications, at the cost of $220,000.00.

On February 7, 2019, Registrar’s Investigator Chris Allison conducted a jobsite inspection and thereafter issued a Written Directive (Directive), dated February 22, 2019, directing that corrective action was necessary as to the noted 18 items. The Registrar set March 18, 2019 as the deadline for Respondent’s compliance with the Directive.

On March 8, 2019, Investigator issued a Revised Directive, directing Respondent to take corrective action on 16 items.

Item #23 on the Directive indicated that, absent “change orders completed by buyer,” Respondent would be in violation of Ariz. Rev. Stat. § 32-1154(A)(8).

On March 18, 2019, Respondent emailed Investigator Allison, indicating to him that there had been a November 24, 2018 meeting with Complainant, at which the list of changes had been discussed with Complainant and that the parties had come to an agreement as to a final payment, a lien waiver, and a loan agreement.

Following a compliance inspection on March 20, 2019, Investigator Allison determined that 4 Directive items remained not in compliance with the Directive: Items #1 (kitchen countertop issue), #7 (sink scratches), #12 (back deck boards), and #23 (“no actual signed change orders ... to show cost alterations from the original price”).

The Registrar issued a Citation on March 22, 2019, charging Respondent with possible violations of: Ariz. Rev. Stat. § 32-1154(A)(3), namely Ariz. Admin. Code Section R4-9-108; Ariz. Rev. Stat. § 32-1154(A)(8); and, Ariz. Rev. Stat. § 32-1154(A)(22).

Ariz. Rev. Stat. § 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.”

Ariz. Admin. Code Section 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.”

Ariz. Rev. Stat. § 32-1154(A)(8) includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license, the failure to complete a project “for the price stated in the contract, or in any modification of the contract.”

Ariz. Rev. Stat. § 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.”

Following a June 3, 2019, pre-hearing inspection, Investigator Allison noted the following: the countertops had not been addressed since the compliance inspection; the sink scratches were not yet addressed; and, the back deck boards were not yet addressed. In his notes, Investigator Allison also stated that, following this inspection, Complainant notified him that Respondent had come back to address the sink and the deck boards, and that the sink was now satisfactory and the boards had been resealed and were drying.

The Registrar noticed the matter for hearing.

On April 6, 2020, the Tribunal conducted a telephonic pre-hearing conference. Mrs. Complainant indicated that only Item #1 remained at issue. While Respondent had taken corrective action on the kitchen countertop, the countertops remained unsatisfactory due to both safety issues and cosmetic issues. Respondent offered to try to remedy the countertop prior to administrative hearing and Complainant agreed. The matter was set for a status update

On June 23, 2020, Mrs. Complainant notified the Tribunal that the countertop was repaired and acceptable, and the “only pending item is determination on lack of change orders being completed by builder.”

Following continuances due to COVID and other good cause reasons, the hearing was rescheduled for October 15, 2020.

Investigator Allison testified that all “workmanship” items had been addressed with corrective action prior to the hearing, but that he had not been given copies of any change orders reduced to writing. Investigator Allison noted that some work originally complained of not being done had to do with allowances within the parties’ “set price” contract, which would call for a written change order for the price differences [when items were chosen and/or changed].

At hearing, Complainant’s position was that they had been told, or led to believe, the final amount due would be “even” as to any allowances and changes made, and that without any receipts having been provided at the time, they were unable to determine what was being spent or covered. Complainant argued that, on November 26, 2018, they signed the loan agreement under duress because they had to move into the home but they were not given any receipts or documentation as to the costs and they had no choice but to sign the agreement. At hearing, Complainant also testified that Respondent’s list of updated costs in Exhibit 14 was inaccurate, noting that Complainant had previously paid outright the difference in cost for the well and for the power line. Complainant essentially argued that Respondent took advantage of them and should not be permitted to conduct contract-accounting in this way in order to protect the public.

Complainant’s November 22, 2018 email to Respondent requested credits as to various changes and items of concern, and further requested itemized documentation of the final total cost of the construction.

Complainant’s December 4, 2018 email to Respondent again requested credits as to various changes and noted the details of items of concern, including itemization and documentation of the final total cost of the construction.

At hearing, Respondent’s position was that only pool contractors were required to produce written change orders pursuant to Ariz. Rev. Stat. § 32-1158.01(c), and that the parties had discussed all the cost differentials in late November 2018 when they executed the lien waiver and the loan agreement to pay the determined final amount. Respondent essentially argued that the overages on the final contract amount were due to items chosen that had exceeded the contract-stated allowance amounts. Mr. Nicholl testified that he had not heard Complainant complain about such documents during the construction.

Respondent argued that overages on the contract-stated allowances were not “change orders” and, even if such was the case, its updated list of the cost changes discussed with Complainant in late November 2018 should be determined to serve as a written change order. Respondent argued that the most appropriate action for the Tribunal to recommend would be to dismiss the Complaint, allowing the Registrar to issue a warning letter regarding a need for change orders.

Based on the hearing record, Respondent failed to complete all corrective action as determined was required by Investigator Allison, pursuant to the Directive, by the March 18, 2019 date. Therefore, Respondent violated Ariz. Rev. Stat. § 32-1154(A)(22).

Based on the hearing record, Respondent failed to demonstrate any executed change orders that modified the contract-stated price. The hearing record contains no written change orders completed by Complainant; further, Respondent did not dispute the sworn testimony Complainant provided regarding Complainant’s prior outright payment of $4,540.00 for the well construction, which Respondent calculated as an allowance overage for the final price. Therefore, Respondent violated Ariz. Rev. Stat. § 32-1154(A)(8).

Administrative notice is taken of Respondent’s License record with the Registrar, which reflects that this is the only case open regarding issues with Respondent; the Registrar’s record does not show any discipline on the license as of the date of this recommended decision.

CONCLUSIONS OF LAW

This matter lies within the Registrar’s jurisdiction. See Ariz. Rev. Stat. § 32-1101 et seq.

Unless otherwise provided by law, a party asserting a claim, right, or entitlement bears the burden of proof; a party asserting an affirmative defense has the burden of establishing the affirmative defense. The standard of proof on all issues in this matter is that of a preponderance of the evidence. Ariz. Admin. Code section R2-19-119.

In this case, Complainant bears the burden of proof to establish Respondent’s statutory violations by a preponderance of the evidence. See Ariz. Rev. Stat. § 41-1092.07(G)(2); Ariz. Admin. Code Section R2-19-119(A) and Ariz. Admin. Code Section R2-19-119(B)(1); see also Vazanno v. Superior Court, 74 Ariz. 369, 372, 249 P.2d 837 (1952). “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.” Morris K. Udall, Arizona Law of Evidence § 5 (1960).

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).

5. 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.").

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

7. The purpose of the Registrar’s licensing statutes is to protect the public from unscrupulous, unqualified, and financially irresponsible contractors. See Aesthetic Property Maintenance v. Capital Indem. Corp., 183 Ariz. 74, 900 P. 2d 1210 (1995).

8. Construction is not a perfect art and, normally, contractors must be allowed an opportunity to correct poor workmanship before their licenses may be suspended or revoked as a result of a failure to comply with workmanship standards.

9. Regarding the Complaint, Investigator Allison found 4 Directive items remained unaddressed at the time of the March 20, 2019 compliance inspection. At the time of a June 3, 2019 pre-hearing inspection, Investigator Allison found that those same four items remained uncorrected. Therefore, the Administrative Law Judge concludes that the Investigator-determined workmanship issues existed and, thus, Respondent is in violation of Ariz. Rev. Stat. § 32-1154(A)(3), specifically Ariz. Admin. Code Section R4-9-108 for failure to perform all work in a professional and workmanlike manner, and in violation of Ariz. Rev. Stat. § 32-1154(A)(22) for failure to take appropriate corrective action to comply with the Directive by the Directive deadline.

10. Additionally, regarding the final contract price, the hearing record demonstrated that, upon Respondent’s completion of work in November 2018, Respondent’s final contract price was more than the “price stated in the [parties’] contract, or in any modification of the contract.” A “modification” to a contract would take place during the time the contract was being performed and not at the end of work performance. During the construction, Respondent failed to prepare change orders executed/signed by Complainant to signify modifications to the parties’ contract. The Administrative Law Judge concludes that a listing or accounting of costs at, or after, the end of the construction would not serve to demonstrate modifications of a contract for purposes of the statutory provision calling for completing a contract at the price stated therein. While, the impact of an allowance overage is a change in the stated price of the parties’ contract, the actual changes or differences in the specified construction work is/are what comprises modifications to the contract. In this case, the parties’ contract was a “set-price” contract and, therefore, Respondent was contracted to complete the specified work for the contract-stated price. As a result of Respondent not completing the parties’ contract for the contract-stated price, and absent documenting changes or differences in the construction work that would or could affect the contract-stated price, the Administrative Law Judge concludes that Respondent failed to complete the parties’ contract for the stated price therein and is in violation of Ariz. Rev. Stat. § 32-1154(A)(8).

RECOMMENDED ORDER

Based on the foregoing, the Administrative Law Judge recommends that the Registrar impose discipline on Respondent’s ROC License 290986 as follows:

(a) a two business-day suspension on the effective date of the Registrar’s Order in this matter.

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.

Recommended this date, December 1, 2020

/s/ Kay Abramsohn

Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director

Registrar of Contractors