ALJDEC

97F-2633-ROC · Registrar of Contractors · 1997-11-07

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

|EMMETT BROWN, |(| | |SANDY MUSICK, |(|Case No.: 97-2633 | | |(| | |Complainants, |(|Docket No.: 97F-2633-ROC | | |(| | |vs. |(| | | |(|Recommended | |License No. 107536, Class B of |(|Decision and Order | |Q. S. I. BUILDERS, INC. (CORP), |(| | | |(| | |Respondent. |(| | | |(| | | |(| | | |(| |

HEARING: November 4, 1997, at 9:00 a.m. Appearances: The Complainants appeared pro persona. The Respondent appeared through Mr. James L. Hodges, Owner and Qualifying Party of Q. S. I. Builders, Inc. Administrative Law Judge: Grant Winston

This matter was brought on for administrative hearing on Tuesday, November 4, 1997. The Complainants appeared and represented themselves. The Respondent, Q. S. I. Builders, Inc., appeared through its Owner and Qualifying Party, Mr. James L. Hodges. Testimony and other evidence was produced and, based on the record taken as a whole, the following Findings of Fact, Conclusions of Law, and Recommended Order are made:

FINDINGS OF FACTS

1. The Respondent, Q. S. I. Builders, Inc., is, and at all times material hereto was, a contractor licensed in the State of Arizona, holding Class B License Number 107536.

2. Co-Complainant, Mr. Emmett Brown, purchased a home located at 8262 West Campbell, Phoenix, Arizona, in 1996. Prior to Mr. Brown taking possession of the home a fire almost completely destroyed it on August 14, 1996. Mr. Brown at the time of the fire had it insured by Farmers Insurance.

3. Mr. Brown obtained two estimates from two contractors for the cost of the restoration of his home: one of those contractors was Felton- Antrim Companies; the other was the Respondent, Q. S. I. Builders, Inc. Felton-Antrim’s bid came in at $56,812.21; Q. S. I.’s bid came in at $55,857.67. Mr. Brown awarded the job to Q. S. I.

4. On November 5, 1996, Farmers Insurance drafted a check payable to Emmett Brown, North American Mortgage Company, and Q. S. I. Builders, in the amount of $47,805.69, representing the claim payment on the insurance policy.

5. The actual written contract between Mr. Brown and Q. S. I. was entered into on November 30, 1996. The contract contained no mention of when the work was to be finished. Respondent’s owner and Qualifying Party, Mr. James L. Hodges, testified to a verbal understanding between and he and Complainants that Q. S. I. would have until some time in May of 1997, to complete the work. Complainants deny this. Insufficient evidence exists to find this agreement or understanding was ever reached between the parties.

6. According to the contract’s terms, the draws upon the insurance payoff were to be made in thirds: none third at the start of the work by Q. S. I.; one third upon completion of the rough-in and inspection by the City of Phoenix, and the final third upon completion and final inspection by the City of Phoenix.

7. North American Mortgage Company drafted a check on December 9, 1996, made payable to Emmett Brown and Q. S. I., in the amount of $17,925.03, an amount representing one-third of a second, revised estimate given by Q. S. I. (See: Finding of Fact 9 , infra.)

8. The construction permit from the City of Phoenix was not issued until January 9, 1997.

9. Q. S. I. supplied Co-complainant, Ms. Sandy Musick, who intended, and who Mr. Brown intended, to also reside at the house, a copy of its revised estimate of the job cost on February 17, 1997. The revised cost figure was $53,775.09. As of that date Q. S. I. had yet to come near completion of the contracted work, and, indeed, had not come near completion of the first one-third phase of the work.

10. The City of Phoenix issued an Inspector’s Notice regarding the project on February 25, 1997. The report noticed the need for engineering of the beams and posts installed in the house’s kitchen area. As the photographic evidence proved, there were some cracks at points in at least one of these beams that appeared to be more than cosmetic disfigurement. The report also noticed the same need as to connections, straps and anchoring of posts to the slab of the house. The report further mentioned the need to expose the kitchen wall in order for the inspector to trace out the electrical wiring; to secure and staple certain electrical wires, and noted the inspector’s concern about grounding of metal boxes, and removal of devices, switches and plugs.

11. On or about March 3, 1997, Ms. Musick and Mr. Hodges had a rather heated telephone conversation with each other concerning various aspects of the project that were dissatisfying to Ms. Musick and Mr. Brown, not the least of which was that the job was uncompleted. Additionally, as mentioned by Ms. Musick, no engineering report was ever obtained pursuant to the inspection report, and Q. S. I. had textured a ceiling in the house where it was supposed to have been “popcorned.”

12. By letter dated March 18, 1997, and received by Mr. Hodges on March 21, 1997, Mr. Brown, through his attorney-in-fact Ms. Musick, rescinded the contract between himself and Q. S. I. for breach by Q. S. I. in failing to complete the work in a timely fashion, and other specific reasons including lack of professionalism and poor workmanship. Mr. Brown, on advice of counsel, allowed thirty days for Q. S. I. to respond to the letter of rescission. Q. S. I. did not respond during that time. By the time of this letter, Q. S. I. had been working on the project since at least November 30, 1996, but had not completed even the first one-third of the project, the portion for which they had received payment in the form of a check for the first draw. Not only was this unreasonable, but Q. S. I. was already calling for release of the second draw.

13. Mr. Brown then awarded the restoration job to the contractor who had originally competed against Q. S. I. for the job, Felton-Antrim. Felton-Antrim re-bid the completion of the restoration work on March 28, 1997, at a cost of $51,910.25. According to the estimate of Felton-Antrim, the work performed by Q. S. I. up to the date of the contract being terminated had a value of $4,902.00. However, according to the proof offered by the Co-Complainant Ms. Musick, the value of Q. S. I.‘s work was $6,429.00. Felton-Antrim began the work approximately the beginning of May, 1997, the Complainant having given Q. S. I. a month more or less after the letter rescinding the contract during which to respond, before giving over the work to Felton-Antrim. Felton-Antrim completed the work in a timely fashion to the complete satisfaction of the Complainants; all the work was essentially completed by Felton-Antrim before this hearing. Felton-Antrim to date has not been paid for the work owing to the funds provided by the insurance claim being tied up for want of release by Q. S. I.

14. Included in the work done by Felton-Antrim was the obtention of an engineering report on the previously stated beam that was cracking. It had knotholes in it as well, and was determined by the engineer report to be inadequate for the purpose, not being an architectural beam.

Conclusions of Law

1. This hearing was held under authority of and pursuant to A.R.S. §32- 1156 and A.R.S. §41-1092.

2. The Respondent herein is charged with possible violations of A.R.S. §32-1154.A.7., and 3., namely R4-9-108 (Poor Workmanship).

3. The preponderance of evidence in the administrative record taken as a whole supports the conclusion, here reached, that the Respondent did violate A.R.S. §32-1154.A.7., and 3., namely R4-9-108, in that Respondent contracted to do work, but failed to complete the work in a timely fashion, and the work it did complete was not up to workmanship standards, and Respondent has retained money for work not performed. Pursuant to A.R.S. §32-1158.A.4., any contract such as this one drafted by the Respondent, is to contain “the estimated date of completion of all work to be performed under the contract.” Respondent’s omission of that term, being in violation of the cited statute, constitutes a “wrongful act” under A.R.S. §32-1154.A.7. Absent that term, it is to be construed that the parties intended a reasonable completion date, and as found, the Respondent had unreasonably failed to approach the point of one-third completion of the contract by the time of rescission.

4. It is concluded, based on the findings of fact, that Respondent wrongfully has retained $11,496.03 for work not performed (that figure representing the difference between the draw for the first one-third of the work $17,925.03, and the value Co-Complainant Ms. Musick placed on the work actually done by Respondent Q. S. I.

5. It is further concluded that Respondent is wrongfully withholding disbursement of the remaining money being held in the account of North American Mortgage Company, to which it is not entitled, by refusing to release the requirement of his signature authorization for any future release of any portion of that fund.

6. Restitution to a party by way of the equitable remedy of “return of the full amount paid” by the injured party is appropriate in a disciplinary action such as this. See: Sunpower of Ariz. v. Registrar of Contractors, 166 Ariz. 437, 803 P.2d. 437 (App. 1991).

Recommended Order

In view of the foregoing it is hereby recommended that the Respondent’s Class B License Number 107536 be suspended until such time as Q. S. I. Builders, Inc. makes restitution to the Complainant, Mr. Emmett Brown, in the amount of $11,496.03, and demonstrates to the Registrar of Contractors that Mr. James L. Hodges has taken all necessary steps to effectuate the release of the remaining insurance claim money for the restoration work of the Complainant’s house. It is further recommended that if, on or before the effective date of this order, the Respondent has made restitution to the Complainant, Mr. Brown, and released his control over the remaining money which is the balance of Mr. Brown’s insurance claim proceeds so that he can pay the subsequent contractor, that no license suspension take place, and the Citation and Complaint in this matter be closed.

Dated this 6th day of November, 1997.

OFFICE OF ADMINISTRATIVE HEARINGS

_________________________________ Grant Winston Administrative Law Judge

Original mailed this day of November, 1997 to:

Michael P. Goldwater, Director Attn: Legal Department Registrar of Contractors 800 W. Washington, 6th Floor Phoenix, AZ 85007

Transmitted by:

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