ALJDEC decisions subject to certification as final

2019A-04226-CHC-ROC · Registrar of Contractors · 2020-01-29

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Armida Gomez,

COMPLAINANT

E L K Contractors Inc.,

ROC License: ROC 173482,

RESPONDENT

No. 2019A-04226-CHC-ROC

ADMINISTRATIVE LAW JUDGE

DECISION

HEARING: January 9, 2020, 1:00 P.M.

APPEARANCES: Complainant Armida Gomez appeared on her own behalf; J. Grant Walker, Esq., appeared on behalf of Respondent

ADMINISTRATIVE LAW JUDGE: Roger A. Geddes

_____________________________________________________________________

FINDINGS OF FACT

Background and Procedure

1. E L K Contractors, Inc. (Respondent), is the holder of License Number 173482 issued by the Registrar of Contractors (Registrar).

2. On or about August 20, 2019, Armida Gomez (Complainant) filed a Complaint against Respondent with the Registrar alleging abandonment of the project in connection with Respondent’s remedial repairs of Complainant’s mobile home residence in Clifton, Arizona (“project”) due to water damage.

3. The Registrar performed an inspection of the project on September 16, 2019. Thereafter, the Registrar issued an Amended Directive, dated September 17, 2019, requiring Respondent to correct various alleged deficiencies in Respondent’s work by October 4, 2019, as follows:

Complaint Item 1: MASTER BEDROOM-no demolition of paneling and no new insulation as specified in contract.

Investigator’s Observation: Paneling has not been removed prior to drywall. It is reasonable to believe that the insulation behind the paneling was not replaced either.

Complaint Item 2: MASTER BEDROOM-improperly painted, not all of the molding and base boards were installed.

Investigator’s Observation: Paint is peeling in this room at the corners. Baseboard installation is not mentioned in the contract.

Complaint Item 4: LIVING ROOM-no demolition of paneling and no new insulation as specified in contract.

Investigator’s Observation: Paneling has not been removed prior to drywall. It is reasonable to believe that the insulation behind the paneling was not replaced either.

Complaint Item 6: LIVING ROOM-flooring was not completed and vents were not replaced. (Verbal agreement)

Investigator’s Observation: Flooring is 95%. Respondent started work, it is reasonable to believe they would finish this item.

Complaint Item 7: LIVING ROOM-archway was not properly installed {broken and molding not installed properly)

Investigator’s Observation: Original paneling was reused in the middle of the archway. It is improperly fastened and is not flush to the arch molding.

Complaint Item 8: KITCHEN-no demolition of paneling and no new insulation as specified in contract.

Investigator’s Observation: Paneling has not been removed prior to drywall. It is reasonable to believe that the insulation behind the paneling was not replaced either.

Complaint Item 10: KITCHEN-refrigerator cabinet (paneling not demo as specified in contract as part of kitchen)

Investigator’s Observation: Refrigerator area not demoed to remove paneling. Original cabinet remains.

Complaint Item 11: KITCHEN-no drywall installed in refrigerator space.

Investigator’s Observation: Original paneling remains in fridge area, no drywall. Cabinets are missing handles/pulls.

Complaint Item 12: KITCHEN-(verbal agreement that cabinets would not placed and living room flooring would be installed

Investigator’s Observation: Flooring is 95%. Respondent started work, it is reasonable to believe they would finish this item.

Complaint Item 13: PANTRY-no new base and pantry cabinets installed as specified in contract.

Investigator’s Observation: Pantry cabinets are original, no new cabinets installed.

Complaint Item 14: LAUNDRY ROOM-no demo of paneling and no new insulation as specified in contract. Adj. wall to kitchen.

Investigator’s Observation: Paneling remains on adjacent kitchen wall.

(Kitchen divider wall does not need insulation)

Complaint Item 16: KITCHEN-partition was not finished properly.

Investigator’s Observation: Partition edges are not painted.

4. After the Registrar was informed by Complainant that corrective work had not been completed, the Registrar issued a Citation to Respondent, dated October 22, 2019, for the alleged violation of the following:

a. A.R.S. § 32-1154(A)(2) (departure from or disregard of plans or specifications or any building code standards);

b. A.R.S. § 32-1154(A)(3) (violation of Arizona Administrative Code Rule 4-9-108 for failure to meet minimum workmanship standards);

c. A.R.S. § 32-1154(A)(22) (failure to perform corrective action without valid justification).

5. The Registrar referred the matter to the Office of Administrative Hearings, an independent state agency, for an evidentiary hearing. The Registrar issued a Notice of Hearing setting a hearing for January 9, 2020, at 1:00 P.M.

6. At the January 9, 2020, hearing, Complainant Armida Gomez testified on her own behalf and presented the testimony of Della Carlisle. Respondent presented the testimony of Laren Ellsworth, President, Tell Ellsworth, and Stacey Barney. Mike Springer, the Registrar Investigator (Investigator), testified on behalf of the Registrar. The Tribunal received and admitted Complainant’s exhibit letters A - H and Respondent’s exhibit numbers 1 - 12.

7. The Investigator on behalf of the Registrar testified as to his communications with Complainant and Respondent, his inspections of the project, and the Amended Directive issued by the Registrar as a result of his observations from his inspection. Specifically, he testified that the basis of the alleged violation of A.R.S. § 32-1154(A)(2) was the alleged failure to demolish all paneling and install new installation as per the contract specifications He stated that he was unable to verify whether insulation had been removed and replaced behind the exterior wall paneling. He further testified that he believed there had not been enough paint applied in various areas and that cabinets that Complainant referred to as pantry cabinets had not been replaced.

8. Complainant Armida Gomez testified she negotiated the contract with Laren Ellsworth for the contract amount of $7,850.50, (Complainant’s Exhibit A), and that there were certain verbal changes made to it without written change orders. She stated that one of the changes was that Mr. Ellsworth agreed to lay flooring she had or would purchase instead of supplying and installing upper kitchen cabinets. She questioned whether Respondent installed insulation as per the contract, but admitted that she was not present for most of the construction work to verify that.

9. Della Carlisle, daughter of Complainant, testified on behalf of Complainant that Respondent had not completed the flooring, had not replaced cabinets in what she called the “pantry” room, had failed to adequately paint was to be painted, and had broken an archway between two rooms. She presented photographs depicting such. (Complainant’s Exhibit E). She further presented a proposal from Jay’s Construction purportedly to do corrective work in the Directive for the amount of $13,274.30. (Complainant’s Exhibit D).

10. Tell Ellsworth, son of Lauren Ellsworth and employee of Respondent, testified on behalf of Respondent that he worked on the project and that when removing the paneling, they discovered that the electrical boxes were attached to paneling. He stated they were able to pull the paneling out far enough without detaching the electrical components in order to replace the insulation, remediate any mold, and, then apply drywall on top of the paneling. He further stated that he did the painting and that he applied several coats to the installed drywall and three or four coats to the ceiling. He stated that any paint peeling could have been caused by removing paint tape, but stated that tape was removed before the end of the job with the exception of tape on a mirror.

11. With respect to flooring, Tell Ellsworth testified that Complainant asked him whether he would install flooring for $75.00 that she had purchased, but that he and Stacey Barney did not want to do it even though Laren Ellsworth encouraged them to help out Complainant. He stated on the last day of the job, Complainant indicated she was only going to pay $50.00 for the installation of the flooring and was not going to pay the balance due on the contract with Respondent, so he left and the flooring was not completed.

12. Laren Ellsworth, President of Respondent, testified on behalf of Respondent that he was first called by Complainant’s insurer for a proposal to perform work in connection with damaged roofing, drywall in the ceiling, and flooring. He stated that because Complainant could not afford the $1,000.00 deductible in her homeowner’s policy, he and Complainant agreed that he would not do the flooring, would not paint the ceilings, and would not remove the debris. He further stated that during the course of working on the ceilings, he came across mold in the exterior walls resulting from a leaking roof. He said he proposed to Complainant’s adjustor that he would remove paneling in the exterior walls of the kitchen, living room, and master bedroom to clean the mold, replace the insulation, and apply drywall. He stated that any cabinets removed in connection with removal of exterior walls would require replacement cabinets. He further stated he prepared his bid to Complainant before the insurance adjustor arrived at a payout amount, and that that payout amount would not cover all the work Complainant wanted done.

13. Mr. Ellsworth further testified that Complainant approached him and asked him if he would install flooring that she had or would be purchasing. He stated that he quoted her a price of $400.00, which she stated was too much. He then stated that she could ask any of his workers to install the flooring on the side and that he subsequently talked to his son Tyler who agreed to do it. He further testified that the replacement of the cabinets in the “pantry” room, (Respondent’s Exhibit 12 (exhibit 10 therein)), was not part of the contract, and that he replaced an 18 inch pantry cabinet on the kitchen exterior wall next to double oven that he was told had not worked in years, and replaced the double oven with seven foot tall pantry cabinets. He further testified that his workers left on the last day of the job without completing it because Complainant indicated she would not pay the balance due on the contract.

14. Stacey Barney, an employee of Respondent for two years, testified on behalf of Respondent, that he had been in the construction business for 20 years. He testified that in attempting to access the insulation in the exterior walls, they encountered electrical boxes attached to the paneling. He stated that instead of having to engage an electrical contractor to rewire the boxes and increase the cost to Complainant, he proposed not removing the boxes and simply dry walling over the paneling, which they did. He further testified that they did not cause the issue with the archway, but rather that they simply dry walled up to archway and only needed to remove the trim.

CONCLUSIONS OF LAW

1. The Registrar has jurisdiction over this matter, pursuant to A.R.S. § 32-1101, et seq., which authorizes the Registrar to impose disciplinary sanctions against licenses for violations of A.R.S. § 32-1154.

2. The burden of proof at an administrative hearing falls to the party asserting a claim, right, or entitlement and the standard of proof on all issues in these matters is by preponderance of the evidence. See Arizona Administrative Code Rule 2-19-119.

3. To warrant such sanctions by the Registrar, Complainant must demonstrate by a preponderance of the evidence that Respondent violated the statutory section cited. Proof by a “preponderance” means that “the evidence is sufficient to persuade the finder of fact that the proposition is more likely true than not.” In re: Arnold and Baker Farms, 177 B. R. 648 (9th Cir. BAP (Ariz.) 1994). See also Culpepper v. State of Arizona, 187 Ariz. 431, 930 P.2d 508 (App. 1996). It is “evidence which is of greater weight or more convincing than the evidence which is offered in opposition to it; that is, evidence which as a whole shows that the fact sought to be proved is more probable than not.” BLACK’S LAW DICTIONARY 1182 (Rev. 6th ed. 1990).

4. A.R.S. § 32-1154(A) includes in pertinent part among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license, any of the following:

2. Departure from or disregard of plans or specifications or any building codes of the state or any political subdivision of the state in any material respect that is prejudicial to another without consent of the owner or the owner's duly authorized representative....

3. Violation of any rule adopted by the registrar.

...

22. Failure 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.....

5. As it relates to the grounds under A.R.S. § 32-1154(A)(3) concerning a violation of any rule adopted by the Registrar, Arizona Administrative Code Rule 4-9-108(A), provides that “[a] contractor shall perform all work in a professional and workmanlike manner.”

6. A.R.S. § 32-1154(A)(2). Complainant has not presented sufficient evidence to establish cause to discipline Respondent’s contractor’s license under A.R.S. § 32-1154(A)(2), the departure from or disregard of plans or specifications or any building codes. The inspector testified that he could not confirm whether insulation was installed as per the contract specifications. Complainant testified that she was not present for most of the work, thus could not be sure whether the insulation was installed. Conversely, the workers for Respondent testified that they personally installed the insulation and there was no evidence presented to rebut this testimony. Consequently, the Tribunal finds that Complainant has failed to meet her burden of proof with respect to Complaint item numbers 1, 4, and 8 regarding the installation of the insulation.

7. A.R.S. § 32-1154(A)(3). Complainant has presented sufficient evidence to establish that a portion of Respondent’s work was not performed in a professional and workmanlike manner in violation of A.R.S. § 32-1154(A)(3).

Complaint item numbers 2 and 16. The parties disagreed as to the quality of the painting done by Respondent. Tell Ellsworth testified he personally painted the drywall and that he primed it and applied several coats. He further testified that the peeling paint could have been caused by removing painter’s edging tape, but admitted that the vast majority of the tape was removed before the last day of the job. Conversely, the Investigator testified that areas that had been painted could have used an additional coat and that some areas were peeling. The Tribunal finds that Complainant has met her burden of proof regarding this item with regard to the areas Respondent painted.

With regard to Complaint item number 2, the Tribunal finds that the contract did not require the supplying and installation of molding and baseboards.

Complaint item numbers 6 and 12. The parties disputed whether Respondent was responsible for the completion of the flooring. Respondent argued that it did not agree to nor did it do the flooring work and was not responsible for completing it because Respondent’s workers did the flooring as a side job. Complainant submitted that Respondent agreed to install flooring and did so in lieu of installing upper kitchen cabinets. Regardless of which version of the facts is true, the Tribunal finds that Respondent was responsible for the flooring. While it is true that flooring was not mentioned in the contract between the parties, the evidence reflected that Respondent was so intertwined with the performance of the flooring work that it assumed responsibility for its completion. Laren Ellsworth testified that he encouraged his workers to do the flooring and that he later asked Complainant for their compensation (at the same time he requested the balance due on the contract) that he indicated Complainant had promised. His son Tyler, an unlicensed contractor, ultimately did the flooring at the same time that Respondent was doing other work for Complainant. This was not a case where Complainant sought out the services of a third party flooring contractor from which Respondent can claim independence and lack of involvement. Accordingly, the Tribunal finds that Complainant has met her burden of proof regarding the completion of the flooring.

Complaint item number 7. Both Tess Ellsworth and Stacey Barney testified that they only removed and reinstalled the trim from the archway and not the paneling portion that looks to be improperly fastened and not flush. Complainant presented no evidence to rebut this testimony and accordingly, the Tribunal finds that Complainant has failed to meet her burden of proof regarding this item.

Complaint item numbers 10, 11, and 14. The parties differed on whether the paneling on interior walls was to be removed by Respondent. The contract between the parties essentially was a remediation project to remediate the exterior walls items damaged by leaking water. The evidence reflects that the point of removing the paneling was to remove the old insulation and clean the areas of mold, and that this was done with respect to the exterior walls of the residence. It stands to reason that removal of paneling on interior walls was not contemplated by the parties because such walls would not be insulated and there was no evidence that there had been any water damage to interior walls. Accordingly, the Tribunal finds that removal of paneling on interior walls was not contemplated by the parties and was not part of the contract between the parties and that therefore, Complainant has failed to meet her burden regarding this item.

With regard to Complaint item number 11, the Tribunal finds that the contract did not require the supplying and installation of new handles.

Complaint item number 13. The parties clearly had a misunderstanding as to what pantry cabinets were to be replaced by Respondent, or more specifically, which cabinets were in fact pantry cabinets. Respondent argued that it removed a small kitchen pantry cabinet and installed new “pantry” cabinets in the kitchen. Complainant countered that Respondent failed to replace the cabinets in the “pantry” room. The contract listed the work to be performed in each room of the residence and the pantry cabinets to be removed and replaced are listed as being in the kitchen without mention of a pantry room. Complainant failed to present sufficient evidence that the pantry cabinets she alleged were not replaced were located in the kitchen, or if not, that Respondent otherwise was contractually required to remove and replace them. It is noted that in a proposal submitted by Complainant, the third party contractor proposes to replace the cabinets in the “Pantry/Laundry Room.” (Complainant’s Exhibit D). The contract with Respondent does in fact list a Laundry room, but does not require cabinets therein to be removed and replaced. (Complainant’s Exhibit A). Consequently, the Tribunal finds that Complainant has failed to meet her burden regarding this item.

8. A.R.S. § 32-1154(A)(22). Complainant has presented sufficient evidence to demonstrate a violation of A.R.S. § 32-1154(A)(22) for the failure on the part of Respondent to complete corrective action without a valid justification. There was no dispute that Respondent did not return to the project to perform any corrective action. Rather, besides Respondent’s position that no remedial work was necessary (a position rejected in part by the Tribunal above), Respondent also argued that Complainant’s indication that she would not pay the balance of the contract constituted an anticipatory repudiation of the contract, thereby excusing Respondent from any further performance on the contract. However, while the common law doctrine of anticipatory repudiation may be a valid defense in a contractual dispute, Respondent provided no legal authority to extend its applicability to a disciplinary proceeding, or more to the point, support a proposition that a homeowner’s repudiation of the contract would constitute a valid justification for not remedying work not done in a professional and workmanlike manner. Indeed, the Tribunal does not consider corrective action to be a form of further contractual performance on the part of a contractor, but rather to be a contractor’s compliance with a statutory duty to ensure that its work is performed in a professional and workmanlike manner. Accordingly, the Tribunal finds that Complainant’s failure to pay the balance of the contract was not a valid justification for Respondent to not proceed with corrective work.

9. Complainant has established that Respondent’s license should be disciplined for a violation of § A.R.S. § 32-1154(A)(3) with respect to Complaint item numbers 2, 6, 12, and 16, and A.R.S. § 32-1154(A)(22).

RECOMMENDED ORDER

Based on the foregoing, it is recommended that on the effective date of this Order, E L K Contractors, Inc.’s, License Number 173482 is suspended for two days.

IT IS FURTHER RECOMMENDED that pursuant to A.R.S. § 32-1154(E), Respondent must pay to the Registrar, a civil penalty of $200.00 in certified funds on or before 30 days from the effective date of this Order. Payment may be hand-delivered to the Registrar’s physical address or mailed to:

Registrar of Contractors

P.O. Box 6748

Phoenix, Arizona 85505-6748

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 final 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)(7), unless Respondent tenders payment of the outstanding prior civil penalty.

In the event of certification of this 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 the certification.

Done this day, January 29, 2020.

/s/ Roger Geddes

Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director

Registrar of Contractors

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