ALJDEC

96F-H0276-ROC · Registrar of Contractors · 1997-10-07

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: September 10, 1997 (Kingman, Arizona)

APPEARANCES: Complainant’s Mary and Kevin McGeever appeared on their own behalf; no one from Respondent Cougar Development appeared.

ADMINISTRATIVE LAW JUDGE: Eric A. Bryant _____________________________________________________________________

This case concerns Respondent Cougar Development’s construction of a large home for Complainants and their family in Bullhead City, Arizona. Complainants’ submitted many documents, and some photographs, into evidence at the hearing and provided testimony and witnesses. As noted above, Respondent was not present at the hearing. Therefore, Complainants’ evidence went uncontested. However, this tribunal has read and considered all correspondence from Respondent to the Registrar of Contractors’ Office, as provided by ROC to the Office of Administrative Hearings. This unusual step was taken so that the large amount of documentary evidence submitted by Complainants could be put into context. Also, most of the correspondence from Respondent to ROC and the Complainants is included in the evidence submitted by Complainants.[1] Therefore, based on the evidence considered and the testimony at the hearing, this Administrative Law Judge makes following Findings of Fact, Conclusions of Law, and Recommended Order finding Respondent in violation of the ROC statutes. FINDINGS OF FACT Notice of the Hearing Date 1. As noted above, Respondent did not appear at the hearing. However, this Office’s file shows that Respondent received notice of the time and place of the hearing. 2. According to ROC records, Respondent’s address of record is P.O. Box 157, Lake Havasu City, Arizona 86405. The ROC issued the Notice of Hearing for this case by certified mail on December 23, 1996, to that address. Respondent received the Notice of Hearing. In February 1997, Respondent requested a continuance of the hearing. The letterhead on Respondent’s continuance request gave the following address: “P.O. Box 157 Lake Havasu City, Arizona, 86403.” This Office issued an Order Granting Continuance on March 7, 1997, and it was mailed by regular mail to the 86403 address that Respondent had given this Office. The Order stated that a new date for a hearing in Kingman would be set in the future. The Order was not returned to this Office by the U.S. Postal Service. Subsequent actions of Respondent show that he received the Order Granting Continuance. Also, Respondent never filed a change of address with this Office. 3. On June 16, 1997, this Office issued a Notice of Continued Hearing, stating that the date of the hearing was September 10, 1997, in Kingman. This notice was mailed by regular mail to Respondent at the 86403 address that he had provided, the same address at which Respondent had received the Order Granting Continuance. 4. After the September 10, 1997, hearing, Respondent began calling this Office’s staff. Respondent filed a letter on September 24, 1997, stating that he had never received the notice of the new date. However, he did acknowledge that he received the Order Granting Continuance. That order was sent to the same address as the Notice of Continued Hearing. Furthermore, the Notice of Continued Hearing was never returned to this Office by the U.S. Postal Service. Respondent also stated that he made telephone calls to ROC after receiving the Order Granting Continuance and spoke with someone named “Rhonda.” The receptionist who answers phones at the Office of Administrative Hearings is Rhonda. 5. The Office of Administrative Hearings staff, as a routine practice, makes a record of every telephone call that comes to this Office relating to a case. This Office has no record of any telephone calls from Respondent to this Office after March 7, 1997, and before September 17, 1997. 6. The evidence shows that notice of the continued hearing date was mailed to Respondent at the address he provided to this Office. The Complaint 7. In the late Spring of 1995, Complainants picked out an unimproved residential plot in Bullhead City, Arizona, in order to have a custom home built there. They had already hired an architect, Tim Ching, to design the home. They had also received proposals from several contractors, including Respondent Keith Bolock dba Cougar Development. Respondent’s initial bid was for approximately $295,000. Complainants accepted this bid. All parties were aware at the time that the plans and specifications for the home had not yet been completed. The bidders for the project bid based on rough drawings of the home. 8. On June 5, 1995, Complainants and Respondent entered into a contract to build the home. The plans were not final and each party knew that details would need to be worked out to complete the plans. The contract (Exhibit 10), which was drafted by Respondent, contained a clause allowing for negation of bid allowances upon receipt of the final plans. It stated a contract price of $350,000, up from the earlier bid because the parties were refining the specifics of the home. According to the contract, the home would be single-story and approximately 4300 square feet. The construction was to conform to “Drawings” and “Specifications” and included “swimming pool, concrete walks, landscape, driveway and entrance.” The contract stated that there were two documents attached to it that contained specifications. However, there were no documents attached to the contract; the plans had not yet become final. Further, the project completion date was blank because the specifics of the house were not yet final. 9. In July 1995, Complainants’ purchase of the lot became final. At about that time, the subdivision developer brought the utilities from the street down to the location of the home on the flag-stem lot, approximately 150 feet. Respondent was present when this occurred and was aware of the placement of the utilities on the lot. Also at that time, percolation tests were done to determine a suitable site for a leach field that would be used for the home’s septic system. The only suitable site was under the driveway, adjacent to the utility box. Respondent was also present during the percolation tests and was aware from that time forward that the leach field would have to be at that spot. This, obviously, affected placement of the septic system leach lines. In fact, Respondent told the architect before the plans were final that the leach field would be under the driveway. This is the reason that the leach field is shown on the plans. Further, it was clear at that time that the utility lines would run to the next lot by going under the driveway where the leach field was planned. (Exhibit 18 -- photos C, D, and E.) 10. Also in July 1995, Complainants, Respondent, and the architect met to complete the plans for the home. From this meeting, everyone had a good idea of what the home would be, but the plans still needed to be completed for blueprinting. The plans became final on August 14, 1995. (Exhibit 17.) 11. On August 9, 1995, without final plans and specs, the parties entered into another contract. (Exhibit 10.) This contract was the same as the earlier one, except for a few changes. The dollar amount had changed to take into account a construction loan that Complainants and Respondent were in the process of getting. The contract still referred to plans and specs, even though those documents were not yet available. A project completion date was given as February 28, 1996. Respondent signed this contract, even though there were no final plans and specs. Like the June 5, 1995, contract, this document, drafted by Respondent, is very poorly written, especially considering the size of the construction project. 12. Next, the parties signed a Construction Loan Agreement (the “Agreement”) with Norwest Bank on September 1, 1995. (Exhibit 15.) The now completed plans were included with the Agreement and Respondent agreed to build according to those plans. The Agreement is much clearer about each party’s obligations and this tribunal gives it considerable weight. Most importantly, Respondent agreed to build the project according to the August 14, 1995, plans and specs. 13. Respondent’s progress on the home was slow. During Fall 1995 and Winter 1996 there were many money disputes between the parties. By February 1996, Respondent was still several months away from completing the project. Respondent had not yet begun to install the septic system, a major part of project. All but 10% of the construction loan funds had been disbursed to Respondent; by the Agreement, the rest would be disbursed upon completion of the project. After some struggle, the parties agreed to a new completion date of May 30, 1996. 14. The money disputes continued and the work progress slowed almost to a standstill in March and April. By June 1996, Respondent still had not begun to install a septic system and was doing very little work on the home. The relationship between the parties had deteriorated during the long months of construction because of the delay and the various money disputes, but eventually broke down in July because of the septic tank issue. Respondent had made repeated demands upon Complainants for extra money to cover the septic system. Complainants had refused because they felt that it was covered in the price of the home. On July 3, 1996, Respondent did some work at the site, left, and did not return for many days. Complainants’ patience ran out and they fired Respondent by letter dated July 15, 1997. (Exhibit 11.) Three days later Complainants began putting the septic system in under their own supervision. They finally moved into the house at the end of September 1996, 12 months after construction began, 7 months after the original completion date, and 4 months after the revised completion date. (Exhibit 1.) 14. During the course of construction, Respondent deviated from the plans without written change orders on numerous occasions. (See Exhibit 3.) Some of the more serious deviations occurred in the roof, the stucco finish, the placement of the air conditioning unit for the children’s bedrooms, and numerous electrical changes. For example, the plans call for a three-coat stucco: scratch coat, brown coat, and a finish coat. However, Respondent put only two coats on the home. Respondent had presented Complainants with an “upgrade or change order” to put on three coats. When they would not approve, Respondent put on only two coats. The plans, though, clearly call for three coats. (See Exhibit 17, sheet SP 1, Division 9(A), Stucco.) 15. Respondent also presented Complainants with other improper and false “upgrades or change orders” to get them to pay more money. One was for the swimming pool (Exhibit 14 -- November 7, 1995, “Statement”), which is specifically included in the contract between Respondent and Complainants. Another was the septic system, an item that is unquestionably necessary for the home. (Exhibit 13.) Respondent knew of the location of the septic system before the project even started because of the leach field placement and utility easement. Yet, he tried to get Complainants to pay more money because he would have to go under the easement to dig the leach field. This is something that should have been part of his original price, since all the conditions existed at the time he signed the contract. As general contractor, Respondent is responsible for knowing the land upon which he will build. He did not have legal excuse to abandon or delay the project over this issue. 16. Respondent’s course of conduct during the project was to claim that certain items were upgrades or that Complainants would have to pay more because the situation was different than he had expected or known about. However, insofar as any of those things were unknown to Respondent, he bore the risk because he signed the contract agreeing to build the home for a stated price and according to plans that were not yet final. This is illustrated best by the issue with the “extra square footage” that Respondent tried to get extra payment for. (Exhibit 14.) As noted above, the contract stated that the home to be built was approximately 4300 square feet. When the final plans came out, the home was actually 4500 square feet. This was not done intentionally by Complainants, it occurred as part of the architect’s plan finalization. Respondent tried to get more money from Complainants by claiming the “extra” square footage as an upgrade. However, Respondent had agreed to build according to the plans for the price stated. He signed the contract before the plans were final. Then he signed the Agreement after the plans were final. He had ample opportunity to delay the signing of the contract or change the Agreement. He bears the responsibility for his own poor foresight because he did not wait for the final plans before charging ahead with the project. He did not have a legal excuse to abandon or delay the project over this issue. 17. Several times during the project, Respondent threatened to stop working, and did stop working, until he was paid more money by Complainants. (Exhibit 6 -- Fax dated 3/19/96; Exhibits 11 and 12.) Respondent was informed by ROC Inspector Jim Boyett at an April 1996 meeting on the home site that he could not stop work because of money disputes and that he must complete the project as stated in the contract and pursue his money disputes by other means. During this conversation, in response to Boyett’s statement that Respondent must follow the plans, Respondent replied that plans were merely “guidelines” that a general contractor, at his own discretion, could deviate from depending upon the circumstances. CONCLUSIONS OF LAW Notice of the Hearing Date 1. Respondent received legal notice of the continued hearing date. He had notice of the hearing itself because of the December 1996 Notice of Hearing. The only issue here concerns notice for the continued hearing date. Actual notice is not required. All that is required is that the Office of Administrative Hearings send orders to a party’s address of record, which is the address that Respondent provided OAH with in his continuance request. OAH complied with its legal duty to notify Respondent. The Complaint 2. Complainants have met their burden of proof and have shown that Respondent violated the Arizona statutes described below. 3. The evidence establishes that Respondent “drug his feet” and failed to complete the project because of money disputes with Complainants. It also shows that Respondent was paid approximately $295,000 in progress payments by the bank. Under the circumstances of this case, Respondent should have completed this project. The money disputes were not sufficient cause to stop work or hold the project hostage. Respondent’s conduct was wrongful and constitutes violations of A.R.S. § 32-1154(A)(1), (7), and (9), because Respondent did not have a sufficient legal excuse for failing to complete the contract. Respondent had access to other means of dispute resolution and could have used them. 4. Respondent’s conduct also constitutes violation of A.R.S. § 32- 1154(A)(2) because there are numerous deviations from the plans without applicable written change orders, including the roof construction, doorbell, closet poles, drawers in Master closet, wardrobe mirrors, stucco, electrical system, placement of air conditioning units, fireplaces, and grading. 5. Respondent’s conduct also constitutes violation of A.R.S. § 32- 1154(A)(7) because Respondent wrongfully presented items to Complainants as upgrades when they were clearly required by the contract or plans, including the septic system, the swimming pool, the “extra square footage,” and numerous smaller items. 6. The totality of the evidence also supports a conclusion that the home as built by Respondent when he left the project was unfit for its intended purpose because of the numerous deviations from the plans, the improper downgrades, and, foremost, the absence of a septic system. This constitutes an unworkmanlike result. Consequently, Respondent has violated A.R.S. § 32-1154(A)(3), namely Arizona Administrative Code (A.A.C.) R4-9- 108. 7. ROC records reveal that Respondent’s license is currently canceled because of Respondent’s failure to renew it in October 1996. This tribunal and ROC retain jurisdiction in this matter even though Respondent’s license is canceled. The record also reveals that Respondent first obtained the license in 1994 and has had no disciplinary action against it. 8. This tribunal finds the violations in this case to be severe and egregious. Respondent’s comment to Boyett about plans and specs being “guidelines” is particularly troublesome. He made improper and false statements to Complainants and took advantage of their naiveté about the construction industry. He also held the home hostage and threatened several times to pull off the job if his demands were not met. Especially egregious is the statement made in a July 10, 1996, letter from Respondent to Complainants during the septic system dispute: “How important is it really to you to move in?” (Exhibit 13; emphasis in original.) This was made in an attempt to get more money almost a year after the project had started and while the house was not habitable because there was no septic system. 9. Respondent’s conduct is intolerable and warrants an extreme measure to protect the public. This tribunal finds that revocation is appropriate.

RECOMMENDED ORDER Considering the findings and conclusions above, IT IS RECOMMENDED that License No. 104928, Class B, issued to Keith Alan Bolock dba Cougar Development, be revoked.

Done this 15th day of October 1997.

OFFICE OF ADMINISTRATIVE HEARINGS

______________________________________ Eric A. Bryant Administrative Law Judge

Copy mailed this ___ day of October 1997, to:

Mr. Michael P. Goldwater, Director ATTN: Jennifer Varela Registrar of Contractors 800 West Washington, 6th Floor Phoenix, AZ 85007

By ___________________________ ----------------------- [1] Complainants submitted a great number of documents in a large notebook, divided into groups. The groups were not numbered by Complainants, so this tribunal has numbered each group of documents with an evidence tag. Most of the groups contain many documents. It was not feasible to number each document.

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Office of Administrative Hearings 1700 West Washington, Suite 602 Phoenix, Arizona 85007 (602) 542-9826