ALJDEC decisions subject to certification as final

2019A-04895-RFA-LS-ROC · Registrar of Contractors · 2021-11-29

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Joel Colin English, Debora English

COMPLAINANT

Creative Concepts Woodworking and

Remodeling Inc

License No. ROC 256431,

RESPONDENT

No. 2019A-04895-RFA-LS-ROC

ADMINISTRATIVE LAW JUDGE

DECISION

HEARING: July 27 and September 9, 2021

APPEARANCES: Joel Colin English and Debora English appeared on their own behalf; Kevin Harper, Esq. appeared for Respondent; John Tellier, Esq. appeared for the Registrar of Contractors

ADMINISTRATIVE LAW JUDGE: Thomas Shedden

FINDINGS OF FACT

On June 21, 2021 the Registrar of Contractors (“ROC”) issued a Notice of Hearing on Appealable Agency Action setting the above captioned matter for hearing at the Office of Administrative Hearings on July 27, 2021. The matter was convened on that date and further hearing was conducted on September 9, 2021. The record was then held open for submission and consideration of post-hearing briefs.

ROC’s Notice of Hearing’s “Statement of Matters Asserted” provides: “Respondent [Creative Concepts Woodworking and Remodeling, Inc.] has contested the Registrar’s determination regarding Joel Colin English and Debora English’s Recovery Fund Claim. The Registrar’s determination was made pursuant to A.R.S. §§ 32-1132 to 32-1133.01.”

Respondent holds KB-1 license number 256431 that was issued in 2020. Prior to that license being issued, Respondent held a CR-61 license.

Respondent appeared through counsel and presented the testimony of Matt Bayles, its qualifying party, and also presented the testimony of Nick Bacon, qualifying party for Bacon Family Contracting LLC that holds KB 1 license number 319131.

ROC’s website showed that Bacon’s license was suspended on September 9, 2021.

ROC presented the testimony of Tedi Quezada, a Legal Assistant II who evaluated Complainants’ recovery fund claim.

Complainants appeared and cross-examined ROC’s and Respondent’s witnesses, but presented no evidence of their own.

In February 2019, Complainants entered a contract with Respondent that called for Respondent to perform remodeling work at their house.

The two parties agreed to several change orders, not all of which were memorialized. The change orders resulted in the contract price being reduced to $85,823.18.

Included in these change orders was the gable that is the subject of complaint item 37 and a major change involving the garage door.

The original plan called for Respondent to raise the roof on a garage to allow for a ten-foot door to be installed. Complainants planned to park an RV in the garage, but the RV was too long for the garage, thereby defeating the purpose of raising the door to ten feet. Mr. Bayles explained that fixing the problem (i.e., the RV being too long for the garage) would have required cutting the trusses, but there was no engineering allowing Respondent to do so.

Consequently the two parties agreed that Respondent would not increase the height of the door and reduced the contract price.

On September 27, 2019, Complainants filed with ROC a complaint against Respondent. Complainant and Respondent are also parties in a civil lawsuit regarding the same construction project and dispute.

ROC investigator Lisa Melton inspected the work at issue on November 13, 2019 and again on January 10, 2020.

Ms. Melton identified fifty complaint items in Complainants’ complaint, but determined that only five required correction (items 16, 25, 37, 45, and 47).

On February 7, 2020, ROC issued a Directive to Respondent that provides in part:

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

Respondent shall complete project per original contract agreement, properly executed change orders, local building codes, and manufactures installation instructions.

Complaint Item 16: Excess spray foam at various locations

Investigator’s Observation: Corrected by Complainant prior to initial inspection with the exception of the interior garage man door. Work is not complete.

Governing Rule: ARS § 32-1154(A)(3), Poor work not performed in accordance with professional industry standards.

. . . .

Complaint Item 25: Concrete for toilet in master bath an open hole

Investigator’s Observation: Work is not complete.

Governing Rule: ARS § 32-1154(A)(3), Poor work not performed in accordance with professional industry standards.

. . . .

Complaint Item 45: Rough plumbing. All rough plumbing needs to be completed.

Investigator’s Observation: Work is not complete. Complete requirements of local building official relative to rough plumbing.

Governing Rule: ARS § 32-1154(A)(3), Poor work not performed in accordance with professional industry standards.

. . . .

Complaint Item 47: Shower. Tile on the shower floor needs to be completed.

Investigator’s Observation: Work is not complete.

Governing Rule: ARS § 32-1154(A)(3), Poor work not performed in accordance with professional industry standards.

On February 4, 2020, ROC issued an Amended Directive through which it added to the list of items requiring correction, item 37:

Complaint Item 37: Front gable. In addition to the other items already listed and inspected at this location and upon comparison with the construction plans, the posts installed are not the correct size and so the anchors supporting them are incorrect. The gable was not built per the design in the plans.

Investigator’s Observation: Gable has been modified (exterior paint & caulking) by other than Respondent. Gable posts/anchors are not per plan.

Governing Rule: ARS § 32-1154(A)(2), Plans Specifications and Building Code Violation.

In its Directive and its Amended Directive, ROC determined that none of the Complainants’ other 45 complaint items required correction.

On March 9, 2020, ROC issued to Respondent a Citation alleging that Respondent may have violated Ariz. Rev. Stat. sections 32-1154(A)(2)(a), (A)(3) and (A)(22).

A hearing was conducted (the workmanship hearing) at which ROC’s allegations were addressed.

In a Final Administrative Decision and Order dated June 25, 2020, ROC adopted an Administrative Law Judge Decision finding that Respondent had violated Ariz. Rev. Stat. section 32-1154(A)(2) because Respondent did not construct the gable according to the project plans and had not obtained a signed change order (item 37), that Respondent had violated subsection 32-1154(A)(3) as alleged in complaint items 16, 25, 45 and 47, and that Respondent had violated subsection 32-1154(A)(22).

Through its Final Administrative Decision, ROC suspended Respondent’s license and imposed against Respondent a civil penalty.

Complainants submitted to ROC a Recovery Fund Claim dated February 2, 2021 in which they verified that the contract amount was $98,700, that they had paid Respondent $63,000, that they had spent $10,121.61 to make repairs, that the lowest bid to complete the project or repairs was $48,378.85, that they had collected $4250 from Respondent’s bonding company, and that they anticipated receiving from the fund $30,000 less the bond recovery of $4250.

Ms. Quezada processed Complainants’ recovery fund claim.

Ms. Quezada has worked at ROC for about 4.5 years; her duties as pertinent to this matter include reviewing bids and other documents related to recovery fund claims.

Ms. Quezada acknowledged having little or no knowledge of construction per se, but explained that qualifications in construction were irrelevant to her job duties.

In support of their claim, Complainants submitted to ROC a bid from Bjerk Builders and a bid from Gus Brothers Construction for work Complainants allege was required to repaired or completed, and receipts for repair work they asserted had already been completed.

Ms. Quezada rejected the Bjerk Builders bid because it did not “align” with ROC’s Amended Directive, but found that Gus Brothers bid for $50,450 and Complainants’ receipts for $10,148.85 were compensable and represented Complainants’ loss of $60,598.85.

Ms. Quezada did not actually analyze Gus Brothers’ bid, and she testified that she was required to rely on Gus Brothers’ bid because Gus Brothers is a licensed contractor that should know what would be required to correct the deficiencies at issue. She testified to the effect that the person who submits the information to ROC is in the best position to say what needs to be done to correct the deficiencies for which Respondent’s license was suspended.

Any payout from the fund to the Complainants is limited to their actual damages. Ms. Quezada initially testified that Complainants’ actual damages were limited to the cost to repair or complete the five complaint items referenced in ROC’s Amended Directive, because these were the violations that had been sustained by the ALJ and ROC in the underlying workmanship hearing.

Subsequently, however, Ms. Quezada testified that Complainants’ actual damages included the cost to complete the project in conformity with the parties’ contract, because ROC’s Amended Directive included a statement calling for Respondent to complete the project in conformity with the original contract and properly executed change orders.

Ms. Quezada prepared a spreadsheet that included pertinent facts and the calculation of a recommended or proposed payout to Complainants.

Ms. Quezada’s spreadsheet shows that she found Complainants had spent $10,148.85 in compensable repairs and that Gus Brothers’ bid of $54,450 was also compensable, which totals $60,598.85.

Ms. Quezada acknowledged that the $60,598.85 included work that was not included in the five complaint items for which ROC suspended Respondent’s license.

From the $60,598.85, Ms. Quezada deducted Complainants’ unpaid balance of $35,700, which leaves $24,898.85.

Ms. Quezada then recommended that Complainants be awarded a payout of $24,898.85.

At the hearing, Ms. Quezada acknowledged that she should have deducted from the proposed award the $4250 that Complainants received from the bonding company.

According to Ms. Quezada, she made another mistake in that Complainant and Respondent had entered a change order that reduced the scope of work and the contract price to $85,823.18. Consequently, the unpaid balance on the contract was $22,823.18, and not $37,500. Ms. Quezada testified however that her two mistakes offset one another.

The Gus Brothers bid includes costs for work that was eliminated from the two parties’ agreement through a change order, but Ms. Quezada apparently did not take that into account when she determined Complainants’ damages.

Through a Notice of Claim for Administrative Award dated May 19, 2021, ROC informed Complainants and Respondent that “the Fund determined that Complainant is to be awarded $24,898.85 in the form of a payment issued by the Fund.”

Through its Notice of Claim for Administrative Award, ROC informed Complainants and Respondent that “In accordance with A.R.S. § 32-1133.01, both Complainant and Respondent have 15 days from the date of mailing of this Notice to file an administrative hearing request to contest the amount or propriety of the payment.”

At the hearing, Ms. Quezada confirmed that no award or payout from the fund had actually been issued, and that before a payout can be made, ROC will need to issue a Final Order directing the fund to make that payout.

Ms. Quezada confirmed that she did not have authority to authorize an actual payment of an award from the fund.

Mr. Bacon reviewed ROC’s Final Order adopting the ALJ Decision and photographs provided by Respondent to prepare an estimate as to the cost to repair. Mr. Bacon has twenty years of construction experience and has been preparing construction estimates regularly for the last ten years. Mr. Bacon estimated that the total cost to remedy all five violations is $2728.24, which includes profit and overhead.

Complaint item 16, excessive spray foam – Mr. Bacon testified that this is not a structural issue and can be removed at a cost of about $150 for labor.

Mr. Bayles estimated that the spray foam overspray could be repaired in about ten minutes with some scraping or touch up. The cost would be $100 to $150 for a half-day’s labor, which is the minimum charge.

Mr. Bacon estimated that complainant item 25 (supply and pour concrete around the toilet) could be repaired for $160 in labor and materials.

Mr. Bayles estimated that repairing item 25 would cost $200 for two bags concrete and two hours of labor.

Complainants’ expenses and receipts show that they paid $105 to complete or repair item 25.

Complaint item 45 is to complete the rough plumbing. Rough plumbing is the drains and pipes located underground, in the walls or in the attic. It must all be inspected and approved before the drywall may be installed, which was done before Complainant filed its complaint.

The plumbing work that was not complete is not rough plumbing, but rather trim work, for example adding the quarter-turns and p-traps. Mr. Bacon estimated that this trim work could be completed for about $348.75 in labor and material.

Mr. Bayles estimated that this trim work could be completed for $700 to $800 in labor and material.

Mr. Bacon estimated that complaint item 47, completing installation of tile in the master bathroom, could be done for $506.35 in labor and material.

Mr. Bayles estimated that the tile in the shower could be completed for $400.

Mr. Bacon testified that there were several ways that item 37, the gable posts could be corrected. He estimated that removing the 4 x 6 posts and anchors and replacing those with 6 x 6 posts and new anchors could be accomplished for $1380 in labor and material. He acknowledged that there might be a need for an engineer’s approval, which could increase the cost by $200 to $300, and that he was unaware that two arches required replacement, which would add about $800 to the cost.

Mr. Bayles estimated that the cost to correct the gable would be $300 in material, $100 for the Simpson bolt/anchors, $800 for the two arches, and $600 in labor, for a total of $1800.

CONCLUSIONS OF LAW

Complainants have filed a recovery fund claim asserting that they are entitled to a payout from the recovery fund. Consequently, Complainants bear the burden of proof. Ariz. Admin. Code § R2-19-119(B).

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).

Ariz. Rev. Stat. section 32-1133.01 provides in pertinent part:

A. Notwithstanding any other provision in this chapter, if a contractor license has been revoked or 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.

B. The registrar must serve the contractor with a notice setting forth the amount claimed or to be awarded.

C. If the contractor contests the amount or propriety of the payment, the contractor must ... request[ ] a hearing to determine the amount or propriety of the payment. The contractor's failure to respond in writing within ten days after the date of service may be deemed a waiver by the contractor of the right to contest the amount claimed or to be awarded.

(Bolding and underscoring added.)

Ariz. Rev. Stat. § 32-1132.01 provides in part:

***

B. An award from the residential contractors' recovery fund may not exceed the actual damages suffered by the claimant as a direct result of a contractor's violation. Actual damages:

1. May not exceed an amount necessary to complete or repair a residential structure or appurtenance within residential property lines.

***

F. If the claimant has recovered a portion of the claimant's loss from sources other than the fund, the registrar shall deduct the amount recovered from other sources from the amount of actual damages suffered pursuant to subsection B of this section and direct the difference, not to exceed $30,000, to be paid from the fund.

***

H. For the purposes of this section, "actual damages" means the reasonable cost of completing the contract and repairing the contractor's defective performance, minus the part of the contract price still unpaid.

(Underscore added.)

Ariz. Rev. Stat. section 32-1139(B) provides in part:

If any amount is paid from the fund in settlement of a claim arising from the act, representation, transaction or conduct of a residential contractor, the license of the contractor shall be automatically suspended by operation of law until the amount paid from the fund is repaid in full, plus interest at the rate of ten per cent a year.

Ariz. Rev. Stat. section 32-1132(A) provides that: “The residential contractors' recovery fund is established ... for the benefit of a claimant damaged 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.” (Underscoring and bolding added.)

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

“’Appealable agency action’ means an action that determines the legal rights, duties or privileges of a party and that is not a contested case.” Ariz. Rev. Stat. § 41-1092(3).

“Contested case means any proceeding ... in which the legal rights, duties or privileges of a party are required or permitted by law, other than [Title 41, Chapter 6], to be determined by an agency after an opportunity for an administrative hearing.” Ariz. Rev. Stat. § 41-1001(5).

Respondent has a right to a hearing “to determine the amount or propriety of the payment” before ROC may actually make a payment from the Fund and no payment will be issued unless and until ROC issues an Order directing the Fund to make such a payment. See Ariz. Rev. Stat. § 32-1133.01. Respondent’s license will be suspended if ROC does issue a payout from the Fund. Ariz. Rev. Stat. § 32-1139. Consequently, this matter is a contested case.

The preponderance of the evidence presented shows that Complainants’ $10,148.85 in expenses was for work other than the five complaint items for which ROC suspended Respondent’s license.

The preponderance of the evidence presented shows that Complainants’ bid from Gus Brothers included work other than the five complaint items for which ROC suspended Respondent’s license

The preponderance of the evidence shows that the work for which Respondent’s license was suspended can be corrected for less than $4000.

Complainants have not proven that their actual damages exceeded the $4250 they have received from Respondent’s bonding company.

Consequently, Complainants’ claim for a payout from the fund should be dismissed.

RECOMMENDED ORDER

IT IS ORDERED that the Joel Colin English and Debora English’s claim for a payout from the recovery fund is denied.

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, November 29, 2021.

/s/ Thomas Shedden

Thomas Shedden

Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director

Registrar of Contractors

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-137160-45720000