ALJDEC decisions subject to certification as final

2019A-04430-CHC-ROC · Registrar of Contractors · 2020-06-01

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

John R. Krahn,

COMPLAINANT

Workmans Builders Inc.,

ROC License: ROC 193956,

RESPONDENT

No. 2019A-04430-CHC-ROC

ADMINISTRATIVE LAW JUDGE

DECISION

HEARING: May 11, 2020

APPEARANCES: John R. Krahn on his own behalf; Paul Frame, Esq. for Respondent

ADMINISTRATIVE LAW JUDGE: Thomas Shedden

FINDINGS OF FACT

On February 28, 2020, the Registrar of Contractors (“ROC”) issued a Notice of Hearing on Contested Case setting the above-captioned matter for hearing on April 1, 2020 at the Office of Administrative Hearing. The matter was continued and the hearing was conducted on May 11, 2020.

The Notice of Hearing shows that the hearing was set to consider the charges made in the complaint and citation that were served on Respondent Workmans Builders Inc., but through a clerical error does not give the date of service.

Through the Notice of Hearing, ROC alleges that Respondent may have violated Ariz. Rev. Stat. sections 32-1154(A)(3) and (A)(22).

Respondent holds license No. 193956. Workmans has been licensed since 1996, with its current “dual” license issued by ROC on March 11, 2004. Eric Workman is Respondent’s qualifying party.

Complainant is John R. Krahn.

No complaints other than Mr. Krahn’s have been filed against Respondent during the time it has been licensed.

On or about December 13, 2016, Respondent and Mr. Krahn and his wife entered a contract in which Respondent was the general contractor agreeing to build a new home for the Krahns.

A certificate of occupancy for the home was issued on or about September 1, 2017, and the Krahns moved in soon thereafter.

On September 3, 2019, Mr. Krahn filed with ROC a complaint against the Respondent alleging abandonment, poor work, and other deficiencies. On September 9, 2019, Mr. Krahn filed with ROC an addendum to his complaint. In this matter the two are considered one complaint but while the matter was pending at ROC, Respondent raised the issue that the two year statute of limitations elapsed between those two dates.

ROC’s Steve Nelsen conducted a jobsite inspection on November 14, 2019.

As identified by ROC, Mr. Krahn’s compliant consisted of twenty-six issues, of which Mr. Nelsen was of the opinion that nine were violations of workmanship standards. Four of those were corrected prior to the hearing and Mr. Krahn sought to limit the hearing to consideration of items 2 (paint), 4 (masonry fence), 10 (stucco), 16 (insulation) and 24 (ponding water) that he alleges had not been corrected.

Mr. Krahn asserted in his opening statement that Respondent had refused to correct the issues ROC ordered it to correct, but the evidence at hearing shows that prior to the hearing, Respondent made several offers to complete the work ROC ordered it to complete, but Mr. Krahn was unwilling to allow it access to do so after the deadline ROC imposed had passed.

At the hearing, Respondent affirmed that it was willing to make the repairs that ROC ordered it to make, but Mr. Krahn was unwilling to allow Respondent’s subcontractors access to do so.

ROC prepared two written Directives both dated November 21, 2019, and through which ROC ordered Respondent make repairs and provide ROC with proof of compliance by 5:00 p.m. on December 16, 2019.

Upon receipt of ROC’s Directive, Respondent began contacting subcontractors to complete the work ROC ordered it to complete, with Ms. Workman calling subcontractors who would then contact Mr. Krahn directly to schedule work. She testified to the effect that scheduling was difficult because people were very busy at that time.

Mr. Workman provided credible testimony that the Directive did not allow Respondent a reasonable amount of time to make the repairs that ROC ordered it to complete.

As of December 16, 2019, which was the date by which ROC required Respondent to provide proof of compliance with the Directive, Respondent’s subcontractors had completed some of the repairs ROC ordered it to complete, other repairs were in progress, others had been scheduled but were not underway, and apparently, some remained to be scheduled.

Mr. Krahn allowed the subcontractors who had started repairs to complete their work, but would not allow the other trades access to complete the remainder of the work.

Because Mr. Krahn was unwilling to agree to an extension of time for Respondent to complete the repairs ROC ordered it to complete, ROC refused to grant Respondent more time to comply with the Directive.

Item 2 – Paint

Regarding item 2, paint, ROC’s Directive provided that a fire door was warped and should be corrected; that there were minor drywall issues throughout the home, which were required to be corrected within the first year if occupancy; and that Respondent should also correct inconsistencies in cove base trim (2 areas- under oven and around corner from oven in hallway).

The drywall issues identified in item 2 were resolved before the hearing. As Mr. Nelsen’s notes show, the fire door was not warped, but rather there was an issue with the door jamb, which was also corrected before the hearing.

Mr. Krahn testified that as of the hearing date, a stem wall (that he identified as part of item 2) had not been painted, but he provided no substantial evidence that this was a workmanship violation.

Item 4 – Masonry Fence

Regarding item 4, masonry fence or CMU wall, Mr. Krahn alleges structural defects and cracks. ROC directed Respondent to fill any cracks of greater than 1/8th inch and it directed Respondent to determine whether any structural problems existed.

Mr. Krahn also alleged that the wall was “shorted” on the Northwest corner of the lot, but ROC did not verify a workmanship violation.

Mr. Krahn presented no substantial evidence that a structural problem exists in the CMU wall. Although Mr. Krahn had introduced into evidence documents purporting to show that the CMU wall was not properly constructed, those documents do not show the same type of construction as the wall at issue and, as such, they have no probative value. In addition, the CMU wall was inspected four times (footers, steel, blocks and grout) during the construction, with the work passing inspection each time.

The weight of the evidence shows that the CMU wall can be properly repaired by the cutting of one or more control joints into the wall.

On January 27, 2020 (which was after ROC’s Directive elapsed) Respondent provided Mr. Krahn notice that a subcontractor would be at the house to repair the CMU wall (and item 24) on January 29, 2020. When that subcontractor (Terry Crocker of Payne Concrete) arrived on the 29th, Mr. Krahn would not allow him access to make the repairs.

The stucco on the CMU wall would need to be repaired after the control joint(s) were cut, which Respondent had scheduled to be completed January 30, 2020 (the day after Mr. Crocker went to the house to do the concrete work).

Item 10 - Stucco

Regarding item 10, stucco cracking, ROC ordered Respondent to correct cracks of greater than 1/16th of an inch. Prior to the hearing, Respondent’s subcontractor repaired the cracks, but that work left a small area (or areas) that required touch-up painting, which Respondent was willing to complete. Mr. Workman testified that the painter had been “lined up” to do that work, and he appeared to take the position that after Mr. Crocker had been denied access to complete the work on items 4 and 24, Respondent did not have the painter go to the house.

Item 16 - Insulation

Regarding item 16, insulation, ROC found that “There is a very small amount of insulation missing around an electrical repair. Respondent should verify insulation thickness meets code and/or make repairs.”

Mr. Krahn acknowledged that this was a simple item to fix. Respondent’s painter was going to make this repair, but as set out above, the painter was not sent to the house after Mr. Crocker was denied access.

Item 24 - Ponding

Regarding item 24, ponding, there is a small area of ponding in the garage being caused by a small “lip” of concrete at a control joint. ROC directed Respondent to correct this by the appropriate means.

The ponding can be repaired by grinding a small area of concrete at the control joint, which Mr. Crocker was prepared to do when he was denied access to the house on January 29, 2020.

ROC issued to Respondent a Citation dated January 15, 2020 through which it alleges that Respondent may have violated Ariz. Rev. Stat. sections 32-1154(A)(3) and (A)(22).

Through an email dated January 27, 2020, Respondent informed Mr. Krahn that the concrete subcontractor would be at the house on Wednesday (the 29th) to address item 4, cracking in the CMU wall, and item 24, ponding water in the garage.

Mr. Krahn responded to Respondent’s January 27th email stating that he had spoken to Mr. Nelsen and that Respondent now had only three choices: (1) to answer the Citation, (2) to request an informal settlement conference, or (3) to do nothing and have the allegations in the complaint be deemed as admitted. Mr. Krahn added that ROC had informed him that he no longer had to allow Respondent’s subcontractors access to the house.

Mr. Nelsen testified to the effect that his goal is for the parties to resolve their differences, which is what he tells the parties and encourages them to do.

The parties dispute whether the Krahns have paid Respondent in full for its work. Mr. Krahn asserts that he has made payment in full. In his original complaint, Mr. Krahn declared that he had paid to Respondent $732,969.77 and in his addendum he declared that he had paid to Respondent $734,550. Respondent does not agree that Mr. Kahn has made full payment on the contract and asserts that Mr. Kahn has paid to Respondent only $714,017.

ROC’s substantive policy statement 2017.01 sets out the following pertinent information:

Abuse of the Administrative Process

The Registrar of Contractors relies on complaints to carry out some of the mandates of the office. When anyone attempts to use the complaint process inappropriately, it undermines the Registrar’s ability to perform the duties that the citizens of Arizona depend on to ensure that the buildings in which they live, work, and play are safe. When that process is compromised, it is appropriate to dismiss the complaint in its entirety.

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Cooperation

“American jurisprudence implies in all contracts the obligation to cooperate in the performance of the contract and not to delay, hinder, or interfere with the performance of other parties. Over the years, owners have been found on numerous occasions to have breached their implied duty of cooperation in the context of construction contracts. Such instances have included failure to

provide timely site access, failure to inspect the work or complete other work necessary to allow the contractor to proceed, and failure to reasonably schedule and coordinate owner-controlled work.”

Source: Philip L. Bruner and Patrick J. O’Connor, Jr., Bruner & O’Connor on Construction Law, § 12:55 (West Group 2002) (citing inter alia Restatement (Second) of Contracts §§ 212 to 223); id. § 9:99 (noting subsidiary duties, including “an ‘implied duty’ to make timely decisions” and “an ‘implied duty’ to exercise inspection and approval rights reasonably”).

Denial of Access

Complainants are not prevented from refusing access because of their right to exclude others from their homes and it would not be appropriate to require contractors to trespass. [But it] is recognized that lack of access impinges on one party’s ability to defend itself and utilizing the benefits of the Registrar of Contractors is a privilege. Therefore, it is recommended that the Registrar dismiss complaints in which access is denied.”

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Notice and Opportunity to Cure

A breach cannot be said to be material if it is curable, notice to cure is given, and prompt steps are taken to cure or to offer assurances of cure. The right of a breaching party to be given an opportunity to cure its own material breach is an ancient equitable principle.... Cure is relevant to materiality by virtue of its focus on elimination of the breach and its implied assurance of intent to tender adequate future performance.... Providing a cure notice of curable breaches deemed by the nonbreaching party to be sufficiently material to warrant termination for cause is a fundamental prerequisite to termination.... Unless expressly waived, the right to cure is implied in every contract as a matter of law.”

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Professionalism

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Licensed contractors are expected to have sufficient professionalism to deal with difficult clients and situations.

CONCLUSIONS OF LAW

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 § R2-19-119.

“At a hearing on an agency action to suspend, revoke, terminate or modify on its own initiative material conditions of a license or permit, the agency has the burden of persuasion.” Ariz. Rev. Stat. § 41-1092.07(G)(2).

“At a hearing on an agency's imposition of fees or penalties or any agency compliance order, the agency has the burden of persuasion.” Ariz. Rev. Stat. § 41-1092.07(G)(3).

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.").

The Administrative Law Judge may consider ROC’s administrative record. See Ariz. Admin. Code § R4-9-118.

Ariz. Rev. Stat. section 32-1154(A) provides that

The holder of a license or any person listed on a license pursuant to this chapter shall not commit any of the following acts or omissions:

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3. Violation of any rule adopted by the registrar.

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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. The written directive shall set forth the time within which the contractor is to complete the remedial action. The time permitted for compliance shall not be less than fifteen days from the date of issuance of the directive. A license shall not be revoked or suspended nor shall any other penalty be imposed for a violation of this paragraph until after a hearing has been held.

Ariz. Admin. Code section R49108 provides that “A contractor shall perform all work in a professional and workmanlike manner[,] ” and that “a contractor shall use such skills, prudence, and diligence in performing and completing tasks undertaken that the completed work meets the standards of a similarly licensed contractor possessing ordinary skill and capacity.”

Ariz. Rev. Stat. section 32-1154(E) provides that ROC may impose a civil penalty of not to exceed five hundred dollars on a contractor for each violation of Ariz. Rev. Stat. section 32-1154(A)(22).

Substantive policy statement means:

[A] written expression which informs the general public of an agency's current approach to, or opinion of, the requirements of the federal or state constitution, federal or state statute, administrative rule or regulation, or final judgment of a court of competent jurisdiction, including, where appropriate, the agency's current practice, procedure or method of action based upon that approach or opinion. A substantive policy statement is advisory only.... Ariz. Rev. Stat. § 41-1001(22).

The preponderance of the evidence shows that Respondent violated Ariz. Admin. Code section R4-9-108 by failing to perform its work in a professional and workmanlike manner, which is also a violation of Ariz. Rev. Stat. section 32-1154(A)(3).

It has not been shown that Respondent violated Ariz. Rev. Stat. section 32-1154(A)(22) because the preponderance of the evidence shows that ROC’s Directive did not provide Respondent with a reasonable amount of time to make the repairs that ROC ordered it to complete.

Because Respondent has violated Ariz. Rev. Stat. section 32-1154, ROC has authority to discipline its license.

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

Considering the scope of the project, the proven workmanship deficiencies are minor and Respondent is willing and able to make any corrections that ROC believes are required. Respondent has been licensed since 1994 without any other complaints against its license, which is a factor in mitigation. There was no substantial evidence adduced showing that Respondent is unscrupulous, unqualified, or financially irresponsible. Consequently, it would not be fair or just to impose discipline against Respondent’s license.

Considering the factors set out in ROC’s substantive policy statement, it is appropriate to dismiss this matter.

RECOMMENDED ORDER

IT IS ORDERED that Case number 2019-04430 is dismissed.

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 is forty days after the date of that certification.

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-137160-45720000Done this day, June 1, 2020.

/s/ Thomas Shedden

Thomas Shedden

Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director

Registrar of Contractors

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