ALJDEC

97F-2190-ROC · Registrar of Contractors · 1997-11-13

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARINGS: September 3, 1997; October 16, 1997; October 17, 1997; Phoenix, Arizona APPEARANCES: Complainants: D. Samuel Coffman, Esq. Respondent: Brian A. Hatch, Esq. ADMINISTRATIVE LAW JUDGE: George A. Schade, Jr.

Based upon the evidence presented at the hearing, Administrative Law Judge George A. Schade, Jr. submits this Recommended Decision and Order to the Director of the Arizona Registrar of Contractors (“Registrar”). FINDINGS OF FACT[1] PROCEDURAL HISTORY AND FACTS 1. Respondent P H P Construction Co., Inc. (“P H P”) holds License No. 094374, Class B, issued by the Registrar on August 11, 1992. Mr. Michael Maurice Petersen is the qualifying party. 2. On March 12, 1997, Mr. and Mrs. Sheldon A. Vermes filed a complaint with the Registrar, alleging that P H P had abandoned a written contract for remodeling and had failed to complete numerous items as part of the remodeling of the house of Mr. and Mrs. Vermes in Scottsdale, Arizona. 3. On April 4, 1997, Mr. Robert Mechsner, the Registrar’s inspector assigned to this matter, conducted a jobsite inspection. 4. On April 14, 1997, Mr. Mechsner issued a Corrective Work Order, whose pertinent terms are set forth below in Finding of Fact No. 69. 5. On April 30, 1997, Mr. and Mrs. Vermes requested a hearing. 6. On May 15, 1997, the Registrar issued to P H P Citation and Complaint No. 97-2190 alleging violations of Arizona Revised Statutes (“A.R.S.”) §§ 32-1154(A)(1); 32-1154(A)(3), namely, Rule R4-9-108, Ariz. Admin. Code, 32-1154(A)(7); and 32-1154(A)(23). 7. On May 29, 1997, P H P answered the citation and complaint. P H P denied violating any of the provisions of A.R.S. § 32-1154, and alleged that Mr. and Mrs. Vermes had “caused an impossibility of performance,” and therefore, had breached the contract. 8. On June 16, 1997, the Registrar issued a Notice of Hearing. Under the authority of A.R.S. § 41-1092.02, the hearing was assigned to the Office of Administrative Hearings. The hearing was continued once by stipulation of the parties. 9. Hearings from 9:00 A.M. to 4:30 P.M. were held on September 3, 1997, October 16, 1997, and October 17, 1997. Both parties presented testimony and documentary evidence, and filed posthearing legal memoranda. THE CONTRACT 10. On September 10, 1996, Mr. and Mrs. Vermes and P H P entered into a written contract whereby Mr. and Mrs. Vermes agreed to pay P H P $85,087.37, and P H P agreed to complete remodeling at the Vermes residence (a two-story zoned condominium) in Scottsdale, Arizona. Mr. and Mrs. Vermes did not have a separate written contract for the remodeling project with either Mr. Mayes or Ms. St. Clair. The Other Participants in the Contractual Relationship 11. Mr. Thomas S. Mayes was the draftsman who prepared the drawings and building plans for the remodeling work at the Vermes residence. Mrs. Vermes provided designing ideas. Mr. Mayes gave Mr. and Mrs. Vermes his business card which identified him as a “designer.” See, Complainants’ Exhibit No. 11. The card shows P H P’s address and its residential and commercial contractor’s licenses. Despite the business card, Mr. Mayes testified he was an independent contractor and not an employee of P H P. For his drafting and assistance, P H P agreed to pay him 5% of all monies P H P received from this project, including a $2,000.00 design fee. 12. Ms. Blanca D. St. Clair, an independent contractor, was asked by Mr. and Mrs. Vermes to assist them with the remodeling project. She introduced Mr. and Mrs. Vermes to P H P. For her referral and assistance, P H P agreed to pay her 5% of all monies P H P received from this project. Ms. St. Clair and Mr. Mayes, with P H P’s consent, agreed to split the 10% allocated to them. Ms. St. Clair was described as the “sales representative” (she “sells remodeling”). 13. Ms. St. Clair testified that Mr. Mayes and she were “representing” P H P. Mr. Mayes was supposed to be at the jobsite “all the time,” to assist with the “many gray areas” which were bound to arise. The Contract 14. Mr. and Mrs. Vermes presented at the hearing “their” contract. Their contract consists of a plastic-covered binder, bound in such a way it cannot be unbound without irreparably damaging the binding, whose front cover reads in pertinent part: “Construction Work Order for The Sheldon & Kim Vermes Residence Submitted by: Thomas S. Mayes, Designer for php CONSTRUCTION COMPANY, INC.” The binder contains six color tabs (one each for the Office, Exercise Room, Living Room, Kitchen, Family/Laundry Room and Other Remodeling), and a seventh tab titled “Contract.” Each of the six tabs consists of three sections, (1) Description, (2) Work To Be Done, and (3) Additions/Changes. In all of the six tabbed sections, the space titled “Additions/Changes” is blank. The Vermes’ contract (under the seventh tabbed section) was signed by Mr. Vermes and Mr. Mayes only. Mr. Mayes gave Mr. and Mrs. Vermes this binder. See, Complainants’ Exhibit No. 1. 15. P H P presented “its” contract, which consists only of the same document found in the Vermes’ binder under the tab “Contract.” But P H P’s contract differs from the Vermes’ contract in that it contains more handwritten notations, Mrs. Vermes signed P H P’s contract, Mr. Petersen signed the contract, and there is a reference to a contingency of the approval of the subdivision’s homeowners’ association. See, P H P’s Exhibit No. 1. Lastly, the Vermes’ contract does not contain page 3, which P H P’s contract has (this might have been a clerical error in the preparation of the exhibit). Both the Vermes’ copy of “their” contract and P H P’s copy of “its” contract were signed on the same date, but it appears that Mr. Vermes and Mr. Mayes actually signed two different copies of the same document, as their signatures are not in exactly the same places in both documents. 16. Mr. Mayes testified the six color tabs found in the Vermes’ contract were intended to represent a “proposal” (“what was envisioned to happen”), and were not part of the contract. Mr. Mayes explained the six tabs or the proposals described the work to be done “by item,” while the contract described the work to be done “by trade.” This distinction, according to Mr. Mayes, is the practice in the construction industry. 17. Mr. and Mrs. Vermes testified they believed the six color tabs were part of the contract, as they were not told otherwise by either Mr. Mayes or Mr. Petersen, the tabbed sections contain many of the items they wanted P H P to do, and during the course of remodeling, the workmen would ask Mrs. Vermes for, and use, a copy of the individual room sheet when working in that particular room. 18. Mr. Mayes used a price sheet developed by Mr. Petersen and himself in determining the contractual prices submitted by P H P to Mr. and Mrs. Vermes. 19. On September 26, 1996, the parties executed a Change Order which modified the September 10, 1996, contract, by deleting the construction of a new office, adding some items, and reducing the amount of the contract to $70,087. This Change Order represented the first of three changes which were authorized in writing. The others were made on January 9, 1997, and on March 3, 1997. The first Change Order provided the following payment schedule, which except for the amounts, contained the same percentage breakdown stated in the contract: “TOTAL CONTRACT AMOUNT: $70,087.37 DESIGN FEE (RECEIVED): $ 2,000.00 DOWN PAYMENT (RECEIVED): $12,763.11 Due at beginning of any part of construction: $15,000.00 Due at beginning/delivery of any part of framing: $15,000.00 Due at beginning/delivery of any part of drywall: $15,324.26 Due at completion: $10,000.00” See, P H P’s Exhibit No. 2.

20. On October 10, 1996, P H P received Permit No. 113260 from the City of Scottsdale. This was the initial permit to begin the remodeling. 21. On November 19, 1996, P H P began the remodeling work. 22. Mr. and Mrs. Vermes made the following payments, which P H P collected: September 10, 1996 $12,763.11 November 18, 1996 $12,763.11 November 29, 1996 $17,286.89 January 14, 1997 $ 4,232.34 January 14, 1997 $ 7,500.00 February 5, 1997 $ 7,824.26 TOTAL $62,369.71 THE JOBSITE The Participants 23. Mr. Mayes was supposed to be present at the jobsite, in his words, “at least weekly,” to monitor the progress of the remodeling and assist Mr. and Mrs. Vermes with change orders, as required. Mrs. Vermes testified Mr. Mayes told her there were going to be a lot of “gray areas,” and he would work with Mr. and Mrs. Vermes on resolving the “gray areas.” He spoke primarily with Mrs. Vermes, who has a college degree and work experience in interior designing. Mr. Mayes turned ill in December with “triple pneumonia” and was not able to visit the Vermes’ house during most of that month. He returned in January, but by the end of the month, he stopped going to the jobsite. 24. Mr. Michael E. Cavender, P H P’s foreman at this project, testified Mr. Mayes visited for “about one or two weeks” or “maybe three weeks” primarily at the beginning of the project. Mr. Mayes “was there but not very often.” 25. Mr. Daniel E. Conley, a carpenter, testified that during a period of about a week and a half he was at the jobsite, he saw Mr. Mayes and Mr. Petersen once. 26. Mr. and Mrs. Vermes had discussed the remodeling project with Ms. St. Clair about a year prior to September, 1996, when she worked for another contractor. Ms. St. Clair referred them to P H P. She acted as a “liaison” between Mr. and Mrs. Vermes and, first, with Mr. Mayes, and later, with Mr. Petersen. She was at the jobsite at least once weekly, and on occasion, more often. 27. Mr. Petersen was at the jobsite at least once a week during the course of the work. He would remain anywhere from fifteen minutes to almost an hour (Mr. Cavender). Ms. St. Clair remembers having seen Mr. Petersen at the jobsite four times, including the day of Mr. Mechsner’s inspection. 28. Following is the number of workmen P H P had at the jobsite for the number of working days for each month: No. of Workers November December January February March

3 0 4 3 2

4 18 13 8 6

1 1 4 6 4

0 0 0 0 1

0 1 0 2 0

Total Days 8 20 21 19 13 The table shows P H P had workmen at the jobsite for 81 days, with two or less workmen present 75% of the time. Mr. Cavender was present during the vast majority of these days. In attendance terms, he stands out as the “key employee” in this project, and he had “full authority” on all construction matters except pricing. P H P put three workmen on the job on February 4, 5, 10, 11, 18, 21, 24, and 25. 29. Mr. Mechsner testified that, in his opinion, he would consider this project to have been understaffed if two workmen were there all the time, and “four to six workers would be more appropriate for this job.” Chronology 30. The remodeling work, according to Mr. Petersen, Mr. and Mrs. Vermes, and Ms. St. Clair proceeded “very slowly” between November, 1996, and February, 1997. Mr. Cavender testified “the job was a bit slow.” By early February, Mr. and Mrs. Vermes were concerned about the slow progress. Their daughter was marrying on April 6, 1997, and they were planning on having guests stay at their house. The house was never finished in time for the guests. 31. On February 3, 1997, Mr. Petersen, Mr. and Mrs. Vermes, Ms. St. Clair, and Mr. Cavender met to discuss the progress of the remodeling. The parties agreed the work should move more expeditiously than up to that time, P H P would put four to five workers at the jobsite, a wall area would be opened to allow Mr. Mayes to proceed with drafting plans for the new office and obtaining City of Scottsdale approval, and Mr. Petersen would give weekly updates to Mr. and Mrs. Vermes. 32. On February 19, 1997, P H P obtained a second building permit from the City of Scottsdale. 33. On March 10, 1997, Mr. Cavender presented Mr. Vermes with an invoice for $11,831.96 for 19 items plus sales taxes. On the following day, Mr. and Mrs. Vermes received from P H P a Proposal for nine items at a cost of $7,296.00. According to Mr. Petersen, this invoice represented charges for work completed or underway, which Mr. and Mrs. Vermes had added to the contract and had previously agreed to pay extra. 34. According to Mr. and Mrs. Vermes, this invoice represented work which was part of the original contract. On March 12, 1997, Mr. Vermes answered the invoice and Proposal by agreeing to pay for some items but not all the items listed in the invoice and approving some of the items in the Proposal and disapproving others. 35. On March 13, 1997, Mr. Petersen responded to Mr. Vermes’ letter. It is clear from the correspondence exchanged during these four days that Mr. and Mrs. Vermes and Mr. Petersen had significant differences of opinion as to what the terms of their contract were. 36. On March 12, 1997, Mr. and Mrs. Vermes filed their complaint with the Registrar. 37. On March 24, 1997, P H P’s workmen left the jobsite. 38. On April 1, 1997, after raining, water entered through a loose tile on the roof and an open window whose plastic cover (installed by P H P) had been blown away. Rain caused damage to the interior of the house and to a painting of Mr. and Mrs. Vermes. On April 2, 1997, Mr. Vermes wrote a letter to P H P requesting that it take care of these problems. 39. On April 2, 1997, Mr. Petersen responded: “Due to your non payment and delays on informing us of what you want done with all of the changes, we are unable to proceed. The roof and windows are effected by these changes. When you make a decision on what you want done and free up the areas for work, we can continue with work.” See, P H P’s Exhibit No. 25.

Access 40. During the entire time of the remodeling, Mr. and Mrs. Vermes remained living in their home. Mr. Petersen testified he had been told Mr. and Mrs. Vermes would be in Europe during the remodeling, leaving an uninhabited house. Mr. and Mrs. Vermes discussed being away for short periods of time, but they did not leave for any extended period of time while P H P was working. 41. Mr. Mechsner testified that when he asked Mr. Cavender, “several times,” during the jobsite inspection if the presence of Mr. and Mrs. Vermes had impeded job performance, Mr. Cavender always answered they had not been an impediment. 42. If Mr. Petersen had concerns about Mr. and Mrs. Vermes impeding access to the house and consequently the progress of the remodeling, this concern was not communicated to them, either orally or in writing, prior to the time P H P left the jobsite. 43. Mr. Petersen complained to Ms. St. Clair about the Vermes’ dogs, but she did not believe the dogs were a problem for the workmen. 44. Mr. Cavender testified that due to the house having only two doors available to the workmen, the garage being used as a storage place for tile (after January, 1997), and the subdivision’s parking restrictions, there was not much space to cut materials. The occupied home was not a “huge impediment,” but workers had to use the front or rear door, not convenient entries. He “found [Mr. and Mrs. Vermes] accommodating.” 45. Sometimes the workmen would have to move pieces of furniture, but primarily, Mr. and Mrs. Vermes cleared the rooms when given notice. They paid the tile contractor $1,500.00 to move the furniture. 46. With the exception of tile setters who worked in two rooms for five days in February, no other contractors besides P H P worked at the house during the time P H P worked there. Changes, Additions and Deletions to the Contract 47. The first changes to the remodeling work, following the September 25, 1996, Change Order, occurred on November 29, 1996. On December 1, 1996, Mr. Mayes informed Mr. Petersen of the changes Mr. and Mrs. Vermes wanted. 48. On January 2, 1997, Mr. Mayes confirmed with Mr. Vermes, Mr. Mayes’ discussions with Mr. Petersen regarding deletion of some remodeling items from the contract and adding new items at an additional cost of $8,464.69. On January 9, 1997, Mr. Vermes and Mr. Mayes executed a document titled “Change Order,” which implemented the January 2, 1997, memorandum from Mr. Mayes to Mr. Petersen. The effect of this second Change Order was to increase the contract amount to $78,552.06 ($70,087.37 + $8,464.69). 49. On January 14, 1997, Ms. St. Clair informed Mr. Petersen of some items pertaining to the roof above the dining room and the new office. 50. On January 27, 1997, Ms. St. Clair wrote to Mr. Petersen advising of Mr. and Mrs. Vermes’ wishes to have the remodeling completed by the third week of March. Ms. St. Clair asked that “complete plans” for the new office be prepared to be submitted to the homeowners’ association and a “written guarantee of 2’ window in dining room.” 51. On March 3, 1997, Mr. Vermes accepted a Proposal of $1,365.00 for changing windows in the Family Room. This Proposal represented an addition to the contract. This represented the third of the three Change Orders which were accepted and approved in writing. With this accepted Proposal, the final amount of the contract rose to $79,917.06 ($70,087.37 + $8,464.69 + $1,365.00). 52. During the remodeling, Ms. Vermes would leave handwritten notes for the workmen stating what to do. At the hearing, five notes were admitted. See, P H P’s Exhibits No. 39, 40, 41, 42, and 43. Mrs. Vermes’ handwritten notes were short, did not make major changes, and were more in the nature of “reminders” to the workmen. 53. Mr. Cavender carried a “small tablet” pad for authorized change orders. He completed “small” (Mr. Mayes) or “little stuff” changes without completing a written change order, but submitted major items and pricing issues to Mr. Petersen. ITEMS TO BE COMPLETED 54. In their posthearing legal memoranda (Exhibit A), Mr. and Mrs. Vermes presented a list of the items which, in their opinion, need to be completed and which they wish to be completed.[2] This list was prepared at the request of the Administrative Law Judge, who has reviewed every item. The list is incorporated by reference in this finding of fact to show the items Mr. and Mrs. Vermes wish to be completed. 55. The agreement of the parties called for flat interior paint except in the Kitchen, Bathrooms and Laundry Room. There is no evidence showing a written change was done for Eggshell paint, a sheen, in the Exercise Room. The interior paint in the Exercise Room was to be flat paint. Mrs. Vermes told the painter she wanted Eggshell, he said “OK,” but that is as far as this issue went until the March 10, 1997, invoice was delivered. 56. The parties did not have a clear and complete agreement on the installation of a fireplace in the Family Room. Mrs. Vermes gave Mr. Mayes a photograph (she had taken at a model home) to show him the concept of what she wanted, so Mr. Mayes could draw the required plans. The plans did not materialize beyond the conceptual stage. When P H P’s workmen came, all they saw was the conceptual photograph. 57. The evidence does not show P H P agreed to purchase and install a fireplace in the Family Room. The tab marked “Other Remodeling” states, “Demo tile on facing of family room fire place and drywall to match existing room.” See, Complainants’ Exhibit No. 1. The parties might have spoken about the fireplace, but the plans for its completion did not materialize. 58. The plans for the fireplace in the Living Room were not completed, and this project did not progress very far before P H P left. Again, Mrs. Vermes provided Mr. Mayes a photograph of the desired concept. Mr. Mayes testified he “did not get to work on” this fireplace, that is, he did not prepare final plans for this fireplace. This fireplace is an ambitious project, involving a double stack ascending around a television niche and a moving picture frame, which will require further planning. Mr. and Mrs. Vermes purchased a fireplace for the Living Room, but the installation of the purchased fireplace will require a Change Order.[3] The contract called for the installation of a “zero clearance fire place” (wood burning). Mrs. Vermes did not purchase such a fireplace, but what she purchased was what would best work under the circumstances of this fireplace project. 59. A deco fireplace (nonburning) should be installed in the Master Bedroom. 60. The March 3, 1997, Proposal provided for the installation of 3.0’ x 5.0’ windows in the Family Room. P H P presented this Proposal and Mr. Vermes accepted it. This work should be completed and payment made as agreed. 61. The balcony in the hall was not completed and presents a safety hazard. The landing should be completed and the railing installed as specified in the building plans. 62. The book shelves in the new office should be built and completed as specified in the building plans. 63. The parties did not have a clear and complete agreement regarding all the work in the Courtyard. The scope of this work was being formalized when the relationship of the parties irreparably deteriorated. P H P was to relocate the entry gate and agreed to pour the concrete sidewalk up to a four foot width, and Mr. and Mrs. Vermes agreed to pay beyond four feet. Any other work was not contracted formally. 64. Mr. Mayes testified all the items listed in the “proposals” for the Living Room, Kitchen, Family Room and Other Remodeling (except the deco fire place in the Master Bedroom) were part of the “contract” or work P H P was to complete. THE JOBSITE INSPECTION 65. On April 4, 1997, Mr. Mechsner conducted his jobsite inspection. Mr. and Mrs. Vermes, Mr. Petersen, Ms. St. Clair, and Mr. Cavender attended the jobsite inspection, which lasted two and a half hours. 66. Mr. Mechsner testified the workmanship issues were “minor,” and Mr. Vermes “made it clear” workmanship was not the main issue, but the “incompleteness” of the project was the main issue. Further, the remodeling was not sufficiently complete to assess workmanship. 67. Mr. Mechsner estimated the completed work to be between 50% and 75% of what he characterized as a “fairly extensive remodeling project,” which “simply had stopped.” 68. During the jobsite inspection, the parties spoke and arrived at certain agreements. Mr. Mechsner testified “everyone shook hands,” and he thought the matter “had been settled.” Ms. St. Clair testified everyone shook hands, Mr. and Mrs. Vermes shed some tears, and “everything was wonderful,” all problems having been amicably and mutually resolved. Mr. Cavender testified he was “under the impression something had been arranged.” 69. On April 14, 1997, Mr. Mechsner issued a Corrective Work Order, whose pertinent terms stated: “#1). Homeowner and contractor entered into a verbal jobsite agreement concerning entry area sidewalk and block wall. Contractor agrees to pour sidewalk and footing during the week of April 7th. The homeowner agrees to accept responsibility for completing block wall, gate, and fountain, per jobsite agreement.

#2). Beginning April 14th 1997, contractor shall complete construction projects, per contracts, agreements, plans and specifications in a workmanlike manner.

#3). Contractor shall pricing [sic] issues of extras with homeowner and provide appropriate lien releases.

#4). Due to roof not being completed prior to rain, several areas of drywall and paint have been damaged on interior of home. Contractor shall correct by appropriate means.”

70. Mr. Mechsner waited until April 14, 1997, to issue a Corrective Work Order because he believed Mr. and Mrs. Vermes and P H P had resolved their differences. According to Mr. Mechsner, P H P agreed to pour the Courtyard concrete sidewalk, and Mr. and Mrs. Vermes agreed to build the block fence to get “the matter settled.” P H P was to “restart” the remodeling work the week of April 14, 1997. Mr. Mechsner testified, “One thing I was certain was the agreement at the jobsite [inspection].” Item no. 1 of his Corrective Work Order “was a fair clear agreement” of the parties. 71. On April 9, 1997, Mr. Petersen wrote two letters, and a third one on April 10, 1997, to Mr. Mechsner requesting clarification as to the pouring of the concrete sidewalk and other items discussed at the jobsite inspection. Mr. Petersen wanted to know where in the parties’ contract, Mr. Mechsner had read the items which Mr. Mechsner had directed Mr. Petersen to complete. Mr. Petersen articulated his strong opinion he had been directed by Mr. Mechsner to complete items which were not part of the contract. Mr. Mechsner had not done a Corrective Work Order, but Mr. Petersen remembered what he had been told at the jobsite inspection. They also spoke by telephone where their conversations were not productive. Mr. Mechsner admitted he hung up once on Mr. Petersen after Mr. Petersen began getting irate, while in another call, Mr. Petersen told Mr. Mechsner to “shut the fuck off” and hung up on Mr. Mechsner. Mr. Mechsner testified this language and behavior are not the norm in his jobsite inspections. 72. After April 4, 1997, P H P did not do any work to comply with either the agreements reached during the jobsite inspection or the April 14, 1997, Corrective Work Order, and Mr. Petersen made no effort to deal directly with Mr. and Mrs. Vermes regarding the directives of the Order. Mr. Petersen testified he twice ordered concrete for the sidewalk, but the concrete was not delivered and P H P did not prove pouring the concrete slab required the consent of the homeowners’ association as it claimed. 73. Mr. and Mrs. Vermes have completed through other contractors the Courtyard and other items. The issue of monies paid to other contractors was not heard. P H P’S PRIOR DISCIPLINARY RECORD 74. The Registrar’s public records show that during the past two years only one confirmed complaint has been filed against P H P, and that is this complaint. MARICOPA COUNTY SUPERIOR COURT LITIGATION 75. Mr. and Mrs. Vermes have commenced civil litigation against P H P, in the Maricopa County Superior Court (Docket No. CV97-09072), based on the events surrounding this contract. The Administrative Law Judge heard no further evidence regarding that litigation and has not considered it in this recommended decision. CONCLUSIONS OF LAW A.R.S. § 32-1154 AND REGISTRAR’S RULE R4-9-108 The issues are did P H P violate A.R.S. §§ 32-1154(A)(1); 32- 1154(A)(3), namely, Rule R4-9-108, Ariz. Admin. Code, 32-1154(A)(7); and 32- 1154(A)(23)? A.R.S. § 32-1154(A) provides in the pertinent subsections: “A. 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:

1. Abandonment of a contract or refusal to perform after submitting a bid on work without legal excuse for the abandonment or refusal. *** 3. Violation of any rule adopted by the registrar. *** 7. The doing of a wrongful or fraudulent act by the licensee as a contractor resulting in another person being substantially injured. *** 23. 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 pursuant to the provisions of this article.”

Registrar’s Rule R4-9-108(A), Ariz. Admin. Code, states “All work shall be done in workmanlike manner.” 1. In these administrative cases, the complainants have the burden of proof, and the standard of proof on all issues is by a preponderance of the evidence. See, Culpepper v. State, 187 Ariz. 431, 930 P.2d 508 (App. 1996), rev. denied (1997); Troutman v. Valley Nat. Bank of Arizona, 170 Ariz. 513, 826 P.2d 810 (App. 1992). A Apreponderance 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). 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 (6th ed., 1990). 2. The written contract between Mr. and Mrs. Vermes and P H P included the individual room sheets which Mr. Mayes prepared and gave to Mr. and Mrs. Vermes. See, Darner Motor Sales, Inc. v. Universal Underwriters Insurance Co., 140 Ariz. 383, 682 P.2d 388 (1984); Allen Steel Company v. Crossroads Plaza Associates, 119 Ut. Adv. Rep. 6, 16, 189 Utah LEXIS 124 (1989) (see, discussion in Vermes Posthearing Legal Memorandum, page 3). The individual tabs do not state anywhere they are a “proposal.” The document which P H P calls a “contract” is not titled that; it’s titled “Construction Work Order.” The entire document Mr. and Mrs. Vermes received was neatly bound, and bound in such a way that it cannot be unbound without irreparably damaging the binding. The document was given to them by Mr. Mayes, who not only carried a P H P business card with his name on it but also was the individual everyone agreed would work directly with Mr. and Mrs. Vermes and visit the jobsite frequently for monitoring and helping with the “gray areas.” The binder states on its front cover, “Submitted by Thomas S. Mayes, Designer 439-8240 for php Construction Company, Inc.” The evidence supports a conclusion that the actual agreement of the parties was expressed in all the documents in Mr. and Mrs. Vermes’ binder. 3. Changes, additions and deletions were made to the items in the September 10, 1996, “Construction Work Order” during the course of the project. Not all changes, additions and deletions were in writing. 4. Mr. and Mrs. Vermes did not impede the progress of the remodeling by restricting access. While it would have been more convenient to P H P’s workmen to work in an uninhabited house (not vacant because furniture remained), the evidence does not establish Mr. and Mrs. Vermes impeded the progress of the work to such an extent that justified P H P not completing the remodeling. 5. P H P abandoned its contract with Mr. and Mrs. Vermes without legal excuse, after partially performing under the terms of the contract. P H P raises two grounds for not completing the remodeling, first, payments were not made as scheduled, and secondly, the numerous changes slowed progress. First, P H P was paid $62,369.71 between September 10, 1996, and February 5, 1997. This amount represents 78% of the total due P H P under the agreement and three Change Orders. On April 4, 1997, according to Mr. Mechsner, the remodeling project was between 50% and 75% completed. The preponderance of the evidence does not establish P H P was not paid in accordance with the terms of the contract. Secondly, the number of changes were not unusually high or complex that they justified abandoning the contract. Clearly, better communications would have avoided many of the problems that arose, and likely, this entire controversy. There were no meaningful or substantial communications at the beginning of the project directly between the affected parties, Mr. and Mrs. Vermes and Mr. Petersen. Their use of intermediaries, with hindsight, was unproductive. Bluntly-speaking, Mr. Mayes proved of little use, if any, after early January, and Ms. St. Clair had no meaningful authority. Changes, additions and deletions should have been handled through written change orders. Three such orders were done.[4] According to Mr. Petersen, the March 10, 1997, invoice represented work done pursuant to authorized changes. But these changes should have been written up when first discussed, rather than wait until mid-March to present them in an invoice. The parties had done changes in writing in early January, so the procedures were familiar to them. 6. The entire record has been reviewed to determine the actual agreement of the parties shown by all the evidence. Each of the items in Exhibit A of Mr. and Mrs. Vermes’ posthearing legal memorandum I has been carefully reviewed. The evidence establishes P H P has not completed the following items under the terms of the parties’ written contract and written Change Orders: A. EXERCISE ROOM Install mirrored bi-fold doors for all closet openings. Adjust bi-fold doors that were installed. Finish recessed built-in for refrigerator and television with shelves. Finish lights inside closets with switches outside closets. Install cover plate for sprinkler. Paint new room and closets with flat interior paint. Install door/cover for access to attic. Add hanging rod under attic access. Install door to entry to exercise room. B. MASTER BEDROOM Repair hole left by air conditioning vent that was not used. Install deco fireplace (nonburning). Patch and paint room. Repair, finish and paint Master Bedroom closet where needed from fireplace opening. C. OFFICE Insulate around window and seal window. Build book shelves as specified in the building plans. Finish round walls to ceiling. D. HALL Finish balcony making it round a specified in the building plans. Install wood railing to match existing over open area. Paint to match existing house interior. E. LIVING ROOM Repair ceiling and walls and paint to match where damaged by water. Install ring for ceiling sprinkler. F. DINING ROOM Repair ceiling and walls and paint to match where damaged by water. G. FAMILY ROOM Supply and install 3.0’ x 5.0’ windows on either side of the fireplace pursuant to the March 3, 1997, Change Order. H. LAUNDRY Add shelves, hanging rods and doors to closets. I. GARAGE Finish closet for refrigerator started by P H P. Finish area demolished by P H P. J. KITCHEN Complete areas started by P H P. Adjust sliding doors installed by P H P. MISCELLANEOUS Repair and patch all areas as needed due to workers making holes for inspections. Finish underside of new Exercise Room and paint to match. Remove construction debris. 7. The evidence does not establish P H P violated A.R.S. § 32- 1154(A)(3), namely, the Registrar’s Rule R4-9-108, Ariz. Admin. Code. The evidence presented at the hearing was directed at the abandonment issue. Due to the incomplete state of the remodeling work done by P H P, issues of good workmanship were not presented. 8. The evidence does not establish P H P violated A.R.S. § 32- 1154(A)(7). This provision requires a showing that a complainant has been “substantially injured” as a result of a licensed contractor’s “wrongful” act. The totality of the evidence showing how this remodeling project was conducted does not reach that level where it can be concluded P H P committed “wrongful” acts supporting disciplinary sanctions under the authority of A.R.S. § 32-1154(A)(7). Further, other statutory disciplinary provisions are more relevant and appropriate to the facts of this case. 9. P H P violated A.R.S. § 32-1154(A)(23), as P H P made no visible effort to comply with the Corrective Work Order issued on April 14, 1997. The evidence does not show any valid justification for P H P not to comply with the Corrective Work Order. A.R.S. § 32-1154(A)(23). Following the jobsite inspection, Mr. and Mrs. Vermes, Ms. St. Clair, Mr. Mechsner, and Mr. Cavender believed the parties had struck a mutual disposition to conclude this controversy. Agreements had been made in order to end it. Mr. Petersen’s letters to Mr. Mechsner days later show either Mr. Petersen was the only one who left that day without that impression, or he had a change of mind. The latter is more evident than the former. Mr. Petersen’s language and conduct towards Mr. Mechsner, following the jobsite inspection, while not an independent basis for imposing disciplinary sanctions pursuant to this provision, is not acceptable conduct for a general contractor. 10. The preponderance of the evidence does not support revocation of its contractor’s license, but neither does it absolve P H P of responsibility and disciplinary sanctions pursuant to A.R.S. § 32-1154. 11. The Registrar “may temporarily suspend, with or without imposition of specific conditions,” a residential contractor’s license for violations of any of the provisions of A.R.S. §32-1154(A). A.R.S. § 32-1154(B). 12. P H P’s disciplinary record, showing no adverse disciplinary actions during the past two years, may be considered in mitigation when formulating an appropriate recommended disposition of this matter. See, Rule R4-9-117, Ariz. Admin. Code. 13. The Registrar does not have authority to award compensatory damages, such as special and consequential damages. See, Sunpower of Arizona v. Arizona State Registrar of Contractors, 166 Ariz. 437, 803 P.2d 430 (App. Div. 2 1990), rev. denied (1991). Such claims must be brought in a judicial forum of competent jurisdiction. EXHIBITS Some of Mr. and Mrs. Vermes’ exhibits are large and cumbersome to store. Counsel are asked to call Ms. Cruz Serrano (542-9826) at the Office of Administrative Hearings to retrieve their exhibits, if judicial review will not be sought. Counsel’s cooperation in retrieving their exhibits is appreciated. RECOMMENDED ORDER For the Registrar It is recommended that the Registrar suspend P H P’s License No. 094374, Class B, unless and until the Registrar receives, on or before forty-five days after the effective date of the Registrar’s order of suspension, written notification that P H P has completed, or has caused to complete through licensed contractors, in good workmanlike manner, the following items: A. EXERCISE ROOM Install mirrored bi-fold doors for all closet openings. Adjust bi-fold doors that were installed. Finish recessed built-in for refrigerator and television with shelves. Finish lights inside closets with switches outside closets. Install cover plate for sprinkler. Paint new room and closets with flat interior paint. Install door/cover for access to attic. Add hanging rod under attic access. Install door to entry to exercise room. B. MASTER BEDROOM Repair hole left by air conditioning vent that was not used. Install deco fireplace (nonburning). Patch and paint room. Repair, finish and paint Master Bedroom closet where needed from fireplace opening. C. OFFICE Insulate around window and seal window. Build book shelves as specified in the building plans. Finish round walls to ceiling. D. HALL Finish balcony making it round as specified in the building plans. Install wood railing to match existing over open area. Paint to match existing house interior. E. LIVING ROOM Repair ceiling and walls and paint to match where damaged by water. Install ring for ceiling sprinkler. F. DINING ROOM Repair ceiling and walls and paint to match where damaged by water. G. FAMILY ROOM Supply and install 3.0’ x 5.0’ windows on either side of the fireplace pursuant to the March 3, 1997, Change Order. H. LAUNDRY Add shelves, hanging rods and doors to closets. I. GARAGE Finish closet for refrigerator started by P H P. Finish area demolished by P H P. J. KITCHEN Complete areas started by P H P. Adjust sliding doors installed by P H P. MISCELLANEOUS Repair and patch all areas as needed due to workers making holes for inspections. Finish underside of new Exercise Room and paint to match. Remove construction debris. If these corrective actions are timely completed, close Citation and Complaint No. 97-2190. For the Parties Having heard evidence for three full days, the Administrative Law Judge offers these suggestions to help the successful completion of this remodeling project: 1. Mr. and Mrs. Vermes and Mr. Petersen should deal directly with each other (or through their legal counsel), eliminating the use of intermediaries. 2. If changes are made, use written Change Orders prior to commencing work. 3. Communicate only with each other and not through the workmen. SUBMITTED this 13th day of November, 1997.

George A. Schade, Jr. Administrative Law Judge

The original Recommended Decision and Order was mailed on November 13, 1997, for distribution to the parties, to:

Michael Goldwater Director Arizona Registrar of Contractors 800 West Washington, 6th Floor Phoenix, Arizona 85007-2940

George A. Schade, Jr. ----------------------- [1] Official notice was taken of the documents needed to complete this procedural history.

[2] In their Posthearing Legal Memorandum, they state, “To the extent that the trier of fact orders PHP to complete the Contract, they should be required to complete all items in the Contract that have not already been completed by the Vermeses. See Exhibit “A” hereto as to unfinished items under the Contract.” Posthearing Legal Memorandum, page 2, lines 2-5. [3] The Vermes Posthearing Legal Memorandum states, “Here, the Contract is ambiguous on its face regarding the [Courtyard] gate and the remodel for the fireplaces, among other things.” Posthearing Legal Memorandum, page 6, lines 9-10. [4] Two were “Change Orders,” and one was a “Proposal.”

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