ALJDEC

97F-2919-ROC · Registrar of Contractors · 1998-01-06

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: January 6, 1998

APPEARANCES: -Complainants: Represented by Attorney Gregory P. Gillis. -Respondent: Represented by Attorney Warren C. Ridge.

ADMINISTRATIVE LAW JUDGE: Casey J. Newcomb _____________________________________________________________________

On January 6, 1998, a hearing was held to determine if the Respondent had violated A.R.S. §32-1154(A)(1)(2)(3)(7)(9)&(23). The Complainants were represented by Attorney Gregory P. Gillis. The Respondent was represented by Attorney Warren C. Ridge. Evidence and testimony were presented. After a review of the entire record, the following Findings of Fact, Conclusions of Law and Recommended Decision and Order are made.

FINDINGS OF FACT Construction Loan Agreement

1. On or about May 7, 1996, Ralph and Jaquelyn Hoffman (the “Complainants”) and Wayne Robin Mickelson, the General Contractor for Mickelson Construction (the “Respondent”) entered into a Construction Contract (the “Contract”) to build a home at 8132 West Villa Chula Lane, Peoria, Arizona (the “Home”). Complainants’ Exhibit 1.

2. To pay for the Home, the Complainants entered into a Construction Loan Agreement with State Savings Bank, FSB. Pursuant to the terms of the Construction Loan

Agreement, State Savings Bank (“State Savings”) would disburse the principle amount of $200,906.50 to the Complainants in 5 separate installments or draws as set forth in Complainants’ Exhibit 2. The Complainants would receive each draw upon completion of the preceding phase of the construction project. Upon receiving each draw, the Complainants would transfer the money to the Respondent. The Respondent would use the draw to pay itself and the subcontractors.

3. Todd Buzas, the Construction Loan Manager for State Savings, testified that the loan arrangement with the Complainants was unique because State Savings usually pays the General Contractor directly in 80% to 90% of its construction loans. However, Mr. Buzas testified that directly paying the homeowner is not improper or illegal.

4. The first draw ($30,135.00) of the Construction Loan Agreement was paid to the Complainants on August 14, 1996. The Complainants promptly transferred this draw to the Respondent shortly thereafter. See Complainants’ Exhibit 3. A portion ($6,605.00) was retained by the Complainants to order doors for the Home. See Complainants’ Exhibit 4. The second draw ($50,226.00) was paid to the Complainants on September 20, 1996 and also was promptly transferred to the Respondent shortly thereafter. See Complainants’ Exhibit 3. The third draw was never disbursed to the Respondent for the reasons set forth below.

Abandonment

5. On September 23, 1996, the Complainants sent a letter to the Respondent expressing dissatisfaction with the quality of workmanship performed by some of the subcontractors at the Home. See Complainants’ Exhibit 6.

6. On September 30, 1996, the Complainants sent another letter to the Respondent expressing dissatisfaction with the employees of the plumbing subcontractor, Sierra Plumbing. The Complainants twice observed these employees drinking alcohol on the job. See Complainants’ Exhibit 7. Sierra Plumbing actually was a subcontractor for Scheller Plumbing which was a subcontractor for the Respondent. The Complainants demanded that Scheller Plumbing be replaced. Id. The Complainants also insisted that the Respondent hire Juan Rodriguez to do the stucco work on the Home. Id.

7. In the September 30, 1996 letter to the Respondent, the Complainants also demanded copies of all invoices from the Respondent’s subcontractors or vendors. Id. Furthermore, the Complainants stated that on any future draws, the Complainants would issue checks jointly to the Respondent and subcontractors only for work that had been performed satisfactorily. Id. Finally, the Complainants demanded that the Respondent provide to the Complainants daily status reports and the names of all the subcontractors working on the Home. Id.

8. On October 4, 1996, the Respondent sent a letter to the Complainants apologizing for the inappropriate behavior of the Sierra Plumbing employees. See Complainants’ Exhibit 8. However, the Respondent rejected the Complainants’ demand that joint checks be issued for the subcontractors. Id. The Respondent explained that he had contractual obligations with the subcontractors which would be jeopardized if the Complainant refused to sign a check. Id. Furthermore, the Respondent (not the Complainants) was solely liable to the subcontractors. Id. Due to the tensions between the parties, the Respondent insisted that State Savings pay the draws directly to the Respondent. Id.

9. Wayne Robin Mickelson testified that by early October 1996, he was very frustrated with the constant interference by the Complainants. Mr. Mickelson testified that he wanted to resolve his differences with the Complainants and to build their Home. However, he felt that the Complainants really wanted to be the General Contractor. Mr. Mickelson testified that the Complainants just needed to step back and let the Respondent build the Home.

10. On October 7, 1996, the Complainants sent another letter to the Respondent stating that Scheller Plumbing could remain on the job but only Tom Scheller could perform the plumbing work. See Complainants’ Exhibit 9. Furthermore, the Complainants demanded that the Respondent supervise Mr. Scheller at all times. Id. The Complainants also demanded that “a date and time frame will be stated in writing of what work will be performed, when the work will be performed, and a definite completion date.” Id.

11. In the October 7, 1997 letter, the Complainants once again insisted that Juan Rodriguez perform the stucco work. Id. However, the Respondent had already hired RV Plastering to perform this work. The Respondent testified that he refused to fire RV Plastering because he had a good working relationship with this company and RV Plastering already had started the job.

12. The Respondent testified that prior to October 8, 1996, he telephonically spoke to the Complainants. The Respondent testified that the Complainants gave him an ultimatum . . . fire RV Plastering and Scheller Plumbing or the Respondent would be fired.

13. On October 8, 1996, the Respondent sent another letter to the Complainant stating that “it is better that I pull out now before construction goes any further and the money situation becomes more of an issue than it is now. “ See Complainants’ Exhibit 10. The Respondent testified that the primary reason for this letter was the Complainants’ ultimatum to fire the two subcontractors. However, there is no specific mention of the ultimatum in this letter.

14. The Respondent testified that he was fired by the Complainants. The Complainants testified that the Respondent abandoned the jobsite.

15. Mr. Liem Tran, the Complainants’ neighbor, testified that Mr. Hoffman told him that the Complainants “were not happy” with the Respondent and that they had to “let him go.” Mr. Hoffman testified that he never said this to Mr. Tran.

16. Mr. Paul Reyes, a roofing subcontractor, was originally hired by the Respondent. However, he remained on the project after the Respondent’s departure. Mr. Reyes testified that Mr. Hoffman told him that the Complainants had “fired” the Respondent. Mr. Hoffman testified that he never made this statement to Mr. Reyes.

17. On July 18, 1997, John T. Stene, President of Nema Electric, Inc., sent a letter to the Registrar of Contractors (the “ROC”) stating that he “would go on record stating that Mr. Ralph Hoffman and Mrs. Jackie Hoffman did state to me that they fired Robin Mickelson of Mickelson Construction from the construction of their custom home.” See Complainant’s Exhibit 25.

18. The undersigned Administrative Law Judge is mindful that Complainants’ counsel did not have an opportunity to cross-examine Mr. Stene. However, this letter cannot be entirely discounted by the undersigned Administrative Law Judge.

19. The undersigned Administrative Law Judge finds that the Respondent was terminated from the Contract. The undersigned Administrative Law Judge was especially impressed with the testimony of Mr. Tran, an impartial neighbor.

Poor Workmanship

20. Complainant Jacquelyn Hoffman testified that she was very dissatisfied with the performance of the Respondent and his subcontractors. Mrs. Hoffman testified that blueprints prepared by Tim Burkle Design clearly show that the water service line was supposed to connect to the Home at the master bedroom. However, Scheller Plumbing incorrectly ran the water service line to under the dining room window. The Complainants reluctantly agreed to reroute the water service line to the front corner of the garage. However, Scheller Plumbing incorrectly ran the service line to the back corner of the garage. Mrs. Hoffman testified that the incorrect placement of the service line did not diminish the value of the Home. However, it was not aesthetically pleasing.

21. The Respondent testified that it was reasonable to run the water service line to the back corner of the garage because this is where the water heater is located. Furthermore, in a meeting with the Complainants, the Respondent disclosed that the water service line should run to the back corner of the garage. However, the Respondent conceded that the Complainants never verbally agreed to run the service line to the back corner of the garage.

22. In an August 11, 1997 letter to the Complainant, the Respondent proposed to make “the water service main not visible.” See Complainant’s Exhibit 18. However, the Complainant refused to respond to this letter. Mrs. Hoffman testified that the Respondent’s proposal was unreasonable due to drainage problems. Mrs. Hoffman testified that she does not want to move the water service line again. Rather, she will simply landscape around it.

23. The undersigned Administrative Law Judge finds that the Respondent’s failure to accurately position the water service line shows poor workmanship and a disregard for the Home’s blueprints. However, any penalty arising from this violation should be mitigated due to the Complainants’ failure to respond to the Respondent’s August 11, 1997 letter.

24. Mrs. Hoffman testified that the Complainants had to hire Larry Pernica, a licensed contractor, to fix and finish the Scheller/Sierra plumbing job. Mr. Pernica testified that he encountered several problems at the Home including (1) the incorrect framing of the wall in the guest bath, (2) damage to the tub and shower units, (3) a valve assembly that was incorrectly installed sideways, (4) numerous leaks and nails in the copper tubing at the water heater, and (5) the test plug for the underground plumbing was left in the line.

25. In the August 11, 1997 letter to the Complainants, the Respondent requested a detailed cost accounting for the labor and materials used in correcting the framing problem in the guest bath. See Complainants’ Exhibit 18. However, the Complainants refused to answer this letter.

26. The undersigned Administrative Law Judge finds that the Respondent’s failure to properly frame the wall in the guest bath shows poor workmanship and a disregard for the Home’s blueprints. However, any penalty arising from this violation should be mitigated due to the Complainants’ failure to respond to the Respondent’s August 11, 1997 letter.

27. Mrs. Hoffman also testified that Scheller Plumbing used 1” piping for the water service line. However, the blueprints called for 1-1/4” piping. The Respondent corrected this problem.

28. Mrs. Hoffman testified that the Respondent did not follow the blueprints for constructing the overhang on the Home. The blueprints required a 24 inch overhang. However, the subcontractor cut off all but 6 inches of the overhang. The Respondent also corrected this problem.

29. Mrs. Hoffman testified that the Respondent failed to pay Marvin Windows Planning Center $14,941.00 for windows resulting in a lawsuit naming the Complainants and the Respondent as Codefendants. The Respondent testified that it was the Complainants’ sole responsibility for ordering and paying for the windows. The undersigned Administrative Law Judge declines to further comment on the merits and disposition of this Superior Court lawsuit.

30. The Complainants testified that as a result of the Respondent’s “abandonment” and poor workmanship, the Complainants were $4,400.00 over budget at the completion of the project. Mrs. Hoffman testified that this amount would have been far greater had the Complainants not put forth an extraordinary amount of their own time and labor on the Home. The Respondent calculated that the Complainants were actually $6,423.26 under budget. However, the Complainants’ counsel successfully demonstrated that the Respondent’s calculations were based upon flawed documents and assumptions.

31. The undersigned Administrative Law Judge finds that the Complainants were over budget and substantially injured by the Respondent’s poor workmanship.

Procedural History

32. In October of 1996, the Respondent asked the ROC to perform a courtesy inspection of the Home. The Respondent testified that he wanted the ROC to verify that his work was within industry standards. However, the Complainants refused the courtesy inspection.

33. On or about June 3, 1997 (approximately seven full months after the Respondent’s departure), the Complainants filed a Complaint with the Registrar of Contractors (“ROC”) listing 15 specific issues that required resolution. On or about June 30, 1997, the Complainants filed an Addendum to their original Complaint adding 8 more issues.

34. On July 21, 1997, ROC Inspector John Ratcliff inspected the Home with the Complainants. Wayne Robin and Dawn Mickelson (on behalf of the Respondent) appeared for the inspection but were denied access to the Home by the Complainants. Inspector Ratcliff testified that the Mickelsons were required “to wait in the street” during the inspection.

35. Inspector Ratcliff testified that it was extremely difficult to pinpoint the problems in workmanship at the Home because the alleged problems had already been corrected by the Complainants. Accordingly, the undersigned Administrative Law Judge finds that it is extremely difficult to verify or prove the existence of all of the 23 items listed in the Complainants’ Complaint and Addendum. Obviously, the October 1996 courtesy inspection would have shed some light on all of these issues. Unfortunately, the Complainants refused the courtesy inspection and waited a full seven months to file their Complaint (when most of the alleged problems had already been corrected).

36. On or about August 4, 1997, Inspector Ratcliff sent a Corrective Work Order to the Respondent requiring that the Respondent correct only two items. The first item involved the location of the water service line to the Home. The second item involved the framing of the guest bath/shower. Inspector Ratcliff deferred to this tribunal on three other issues concerning abandonment, extra costs and workmanship. Inspector Ratcliff testified that corrective work was not required by the Respondent on the remaining issues in the Complainants’ Complaint and Addendum.

37. As stated above, on August 11, 1997, the Respondent sent a letter to the Complainants offering to adjust the water service line to make it less visible. The Respondent also requested a detailed cost accounting on the time and labor spent by the Complainants to correct the guest bath/shower problem. Complainant Jacquelyn E. Hoffman testified that she did receive the August 11, 1997 letter but decided not to respond to it because (1) the proposals were not practical and (2) she was expecting a “global settlement” involving this matter and the ongoing lawsuit described in Findings of Fact # 29.

38. The undersigned Administrative Law Judge finds that the Complainants’ failure to respond to the Respondent’s August 11, 1997 letter was unreasonable.

39. On or about September 18, 1997, the ROC issued a Citation and Complaint against the Respondent alleging violations of A.R.S. §32-1154(A) and Rule 4-9-108.

CONCLUSIONS OF LAW

1. The Appellant has the burden of proof, and the standard of proof on all issues is by a preponderance of the evidence. Culpepper v. State, 187 Ariz. 431, 930 P.2d 508 (App. 1996). A "preponderance 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. Although there is some credible evidence of abandonment, the undersigned Administrative Law Judge finds that the preponderance of the evidence shows that the Respondent did not violate A.R.S. §32-1154(A)(1) as set forth in Findings of Fact #14-19.

3. The undersigned Administrative Law Judge finds that the preponderance of the evidence shows that the Respondent violated A.R.S. §32-1154(A)(2) as set forth in Findings of Fact #20, 21, 23, 24 & 26.

4. The undersigned Administrative Law Judge finds that the preponderance of the evidence shows that the Respondent violated A.R.S. §32-1154(A)(3) and R4-9-108 as set forth in Findings of Fact #20, 23, 24 & 26.

5. The undersigned Administrative Law Judge finds that the preponderance of the evidence shows that the Respondent violated A.R.S. §32-1154(A)(7) as set forth in Findings of Fact #20, 21, 23, 24, 26, 30 & 31.

6. The undersigned Administrative Law Judge finds that the Complainants have failed to show by a preponderance of the evidence that the Respondent violated A.R.S. §32-1154(A)(9) as set forth in Findings of Fact #14-19.

7. The undersigned Administrative Law Judge finds that the Complainants have failed to show by a preponderance of the evidence that the Respondent violated A.R.S. §32-1154(A)(23) as set forth in Findings of Fact #35-38.

8. Although the Respondent has violated provisions of A.R.S. §32-1154(A), the undersigned Administrative Law Judge finds that the Respondent’s License Number B-079821 should not be revoked or suspended for the following reasons: A. The Respondent did not have the opportunity to correct existing workmanship problems because the Complainants unreasonably refused to respond to the Respondent’s August 11, 1997 letter. B. The Complainants refused the October 1996 courtesy inspection that could have pinpointed all of the problems (if any) showing poor workmanship by the Respondent. C. The Respondent did not have the opportunity to correct prior workmanship problems because the Complainants already corrected these problems prior to the ROC Inspector’s jobsite inspection. D. The Complainants do not want to relocate the water service line. Furthermore, the incorrectly positioned water service line does not diminish the value of the Home or the use of the water service line. E. The Complainants have already substantially corrected the poor framing in the guest bath. Furthermore, the Complainants refused to be reimbursed for this corrective expense by not responding to the Respondent’s August 11, 1997 letter.

9. The undersigned Administrative Law Judge finds that the Respondent’s Class B-079821 license should be placed on the disciplinary probation for the reasons set forth in Findings of Fact #20, 21, 23, 24 & 26.

RECOMMENDED DECISION AND ORDER

It is recommended that the Respondent’s Class B-079821 license shall be placed on disciplinary probation for a period of sixty (60) days commencing on the effective date of this Order (thirty-five days after the date of mailing by the Registrar).

Done this day, January 21, 1998.

______________________________________ Casey J. Newcomb Administrative Law Judge

Original transmitted by mail this ____ day of ____________, 1998, to:

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

ATTN: Joyce Armijo

By ___________________________ -----------------------

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