ALJDEC

97F-L0262-ROC · Registrar of Contractors · 1997-12-23

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: December 11, 1997 APPEARANCES: Complainant was represented by his attorney, D. Kim Lough and Respondent appeared through its president, Charles Martin ADMINISTRATIVE LAW JUDGE: Mark A. Silver _____________________________________________________________________

Evidence and testimony were presented and, based upon the entire record, the following Findings of Fact, Conclusions of Law, and Recommended Order are made:

FINDINGS OF FACT

1. At the outset of the scheduled hearing, Complainant averred that he had received notice of the filing of a chapter 11 bankruptcy action by Respondent. Notwithstanding the existence of said bankruptcy filing and the automatic stay action that occurs as a direct result thereof, Complainant contends that the instant action before the Registrar should go forward under the provisions of 11 U.S.C. § 362b (4) which provides that the automatic bankruptcy stay does not apply to a proceeding by a governmental unit to enforce the unit’s police or regulatory power. Complainant contends that the instant action brought before the Registrar of Contractors involves a proceeding by the Registrar to enforce the State’s Contracting laws. Complainant’s position that the bankruptcy laws do not prevent the hearing of the instant complaint was effectively taken under advisement and the matter was allowed to proceed to hearing.

2. Complainant averred that he was bringing the instant action against the Respondent merely seeking a finding of contracting law violations and for disciplinary sanctions against Respondent’s contractor’s license. 3. Construction of Complainant’s new home was completed in 1993. Within a relatively short period of time, subsequent to commencing occupancy of the home, Complainant began noticing significant cracking in walls, tiles and the floor slab of the living room. As a direct result of this construction deficiency, the original general contractor on the project contacted his insurance company (“Auto Owners”) to pay the cost necessary to accomplish the repairs to the cracking of the home which appeared to be due to the fact the soil, upon which the home was constructed, was shifting and any repairs would necessarily involve a very significant cost. 4. Respondent submitted a bid to Auto Owners to perform the repairs needed in order to stabilize the soil and to complete all required cosmetic repairs to the structure. It is important to note that not only is Respondent a licensed contractor, but that Respondent’s president and qualifying party (“Martin”) is also a registered engineer, experienced in surveying, along with soil analysis and foundation experience. In fact, Martin holds himself out as a civil and structural engineer. 5. The following salient facts were adduced at the hearing and are important to note: a. In December 1994 Respondent submitted its visual and geotechincal investigation report of Complainant’s property to Auto Owners. b. In January 1995 Respondent submitted its proposal to perform the work to stabilize the shifting soil and complete all cosmetic repairs to the home. Shortly thereafter Respondent contracted to complete the proposed work. c. In March 1995 Respondent completed the contracted work to stabilize the soil and all cosmetic repairs to the home. d. Within a very short period of time after Respondent completed the above-described remedial work, Complainant again began to experience cracking in the home. e. Respondent performed specified remedial work in 1995 and 1996 in an attempt to provide further stabilization of the shifting soil. No cosmetic repairs were completed during these repair efforts due to Respondent’s desire to first determine if the repairs were effective. 6. Evidence of record demonstrated that the following deficiencies currently exist in Complainant’s home and are attributable to Respondent’s failure to adequately stabilize the soil in its initial completion of the contract in March 1995:

a. Floor slab cracking is telegraphing through the new vinyl installation in the kitchen. In addition, there is a visible hump in the kitchen and bathroom floors. b. Specified floors are out of level. c. Entryway tiles are separating from the grout. d. Drywall cracks are present inside the home. e. Stucco cracks are visible on the exterior walls. d. Certain doors are out of square. e. Interior wall texture is buckling in specified areas. f. Baseboards are separating from the wall. g. Staples were left in the roof fascia boards. h. Floor slab cracking is present in certain areas of the home and, in particular, there is a huge elongated crack in the living room floor slab, which in some areas of said crack the width ranges from approximately 3/4 to one inch. 7. Subsequent to Respondent’s last repair attempt, it has performed certain testing on the cracking in order to see if movement is still present on the property. Although Respondent contends that movement has stopped and the property is finally stabilized, evidence of record supports a finding that the cracking in the home continues to expand. 8. A jobsite inspection by the appointed inspector for the Registrar of Contractors was held, pursuant to which that Agency sent Respondent a letter directing it to repair the home. Notwithstanding the terms of said Agency directive, Respondent failed to comply with same. 9. Respondent disclaims any liability for the continued problems experienced in Complainant’s home based on its claim that the soil on Complainant’s property is extremely granular, thereby allowing water to penetrate deep into the soil as opposed to running off away from the home. However, Respondent’s president is an engineer, he examined the property prior to contracting to make the necessary repairs and no restrictions were placed on Respondent, by Auto Owners, regarding the method of investigation or repairs. 10. It was adequately demonstrated that Respondent knew from the time of his initial report (investigation) that the soil was very granular in nature and thus, water penetrating into the soil was a factor that should have been considered. However, for some reason he never mentioned this factor to Auto Owners or Complainant. It is important to note that the instant record showed Complainant complied with all of Respondent’s recommendations regarding altering his landscaping and installing specified drainage systems in order to have positive drainage and minimize any water getting into the soil around the foundation of the home. 11. It is clear that by contracting to stabilize the soil upon which Complainant’s home is constructed and accomplish all cosmetic repairs caused by the unstablized soil, that Respondent effectively accepted all conditions present on Complainant’s property and the terms of the contract as being adequate to accomplish a workmanlike result. Under all of the facts and circumstances presented herein, Respondent is estopped to disclaim any liability for the continued construction deficiencies in Complainant’s home based on its contention that the soil upon which the home is constructed is very granular, thereby allowing water to penetrate deep into the soil resulting in the movement of the structure. 12. Notice is hereby taken of official Registrar of Contractors’ public records, which reveal that Respondent’s contracting license has been suspended by operation of law for lack of a proper bond since November 27, 1997. Such suspension, alone, does not preclude this tribunal from conducting these administrative proceedings nor from issuing separate disciplinary orders. Moreover, Respondent’s existing suspended license status must be considered when determining appropriate penalties in this case. Little, if any, motivation would exist for any Respondent contractor to undertake and complete necessary remedial work in order to avoid a suspension of an already suspended license.

CONCLUSIONS OF LAW

1. Respondent violated the provisions of A.R.S. § 32-1154A (23), (7), and (3); namely Rule R 4-9-108. 2. Contrary to Complainant’s assertions, it is determined that the applicable bankruptcy laws prevent a private individual, such as Complainant, from continuing with his claim against Respondent, absent a properly issued Bankruptcy Court Order granting relief from the stay. The provisions of 11 U.S.C. § 362b (4) appear to apply to only those actions that are brought directly by the governmental unit. In the instant case the Registrar of Contractors is merely providing a forum for dispute resolution between two private parties. The Registrar is not actively involved in bringing this action against Respondent on its own motion. RECOMMENDED ORDER

In view of the foregoing, it is recommended that the Registrar of Contractors close this matter, unless Complainant files notice with the Registrar on or before the effective date of the Order entered in this matter that he has instituted proceedings before the appropriate Federal Court seeking relief from the automatic stay. In the event that the Registrar receives the aforementioned notice, then the matter should be transferred to the Registrar’s extended stay docket until such time as a disposition from the Bankruptcy Court is rendered.

Done this day, December 26, 1997.

_________________________________ MARK A. SILVER Administrative Law Judge

Original transmitted by mail this ____ day of December, 1997, to:

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

By _______________________________

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