ALJDEC

98F-2038-ROC · Registrar of Contractors · 1998-06-17

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

The above-entitled matters came on for a consolidated hearing on June 17, 1998. Dove Framing (herein called “Dove”) appeared through its owner and qualifying party, Joseph Patrick (Joe) Gaiser, and Stetson Homes, L.L.C. (herein called “Stetson”) was represented by its attorney, Stephen A. Myers, Esq. 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. The above matters were consolidated for the purposes of hearing, since both involved the same underlying issues of law and fact and entailed the use of primarily the same witnesses and documentary evidence.

2. At the outset of the consolidated hearing, an amendment to the Citation issued against Dove Framing in Case Number 98-2038 was permitted so as to conform to the allegations specifically set forth in the filed complaint as well as to the proof to be introduced at the hearing by deleting the charged violation of the non-payment provisions set forth in A.R.S.§32-1154A(11) and substituting an alleged violation by Dove of the workmanship provisions contained in A.R.S.§32-1154A(3); namely, Rule R4-9- 108.

3. Pursuant to Dove’s communicated bids which were accepted by Stetson, Dove agreed to and did perform framing work as a specialty subcontractor on three residential structures that were being constructed by Stetson, as the general contractor on all of these projects. The contractual agreements between the parties contemplated that Stetson would furnish and pay for all necessary materials and that Dove would only provide all required framing labor. The total compensation for each project was calculated and communicated by Dove at the time of entry into the contracts after Dove had been given an opportunity to review and evaluate the plans and specifications applicable respectively to each of these dwellings. Any agreed extras in addition to the base proposals were to be charged for at a fixed hourly rate.

4. Dove has received payments from Stetson against periodic invoices on the various projects in the aggregate amount of $25,735.50. The evidence revealed that full payment had been made on one of the projects (Weaver home), but that sums were withheld from the other projects (Warner home and Lot 137 model home) in a total amount approximating $4,200.00. The testimony confirmed that when full and final payment was transmitted to Dove for the Weaver project, both parties were aware of the fact that offsets or back-charges applicable to that project existed and were to be deducted from sums subsequently to become payable from Stetson to Dove on the remaining projects.

5. There was effectively no disagreement with respect to a back- charge arising from the need to perform additional work on the trusses at the Weaver residence. The parties had expressly agreed that the costs of accomplishing necessary remedial work

would be back-charged against future amounts otherwise payable to Dove in light of its communicated inability to promptly rectify problems so as to pass required local inspections. Although the total amount of the eventual back-charge was felt by Dove to be rather high, it was admitted that an agreement as to such amount was concluded, and the approximate $4,200.00 balance currently claimed past due and owing had been calculated after giving full credit for the costs incurred by Stetson for the Weaver truss correction work.

6. The $4,200.00 approximate amount claimed to be past due and owing to Dove was clearly the subject of a dispute between the parties, which dispute cannot be held to be asserted by Stetson in bad faith. On the contrary, the bona fide nature of the dispute was demonstrated by a credible showing of the validity of several elements constituting of claimed offsets or back-charges which, when combined, represent a significant monetary amount.

7. After Stetson had afforded Dove what is found under the testimony to have been a reasonable opportunity to return to the Weaver jobsite and to correct various deficiencies in Dove’s performance of the trim portion of the carpentry work, Stetson arranged for the completion of all necessary remedial action through another licensed specialty subcontractor.

8. Stetson’s computation of the monetary amount asserted to be allocable to correcting Dove’s work on the Weaver home and, therefore, to be back-charged against Dove yielded a claimed offset in the sum of $1,760.00. However, some portion of this total appeared to be inappropriate because it related to labor costs for a subsequent change- back at the request of the property owner from chrome to brass fixtures after Dove had already previously changed these fixtures from brass to chrome. Another portion of the calculated total appeared to be unrelated to the successor subcontractor’s actual work performance but rather to time spent in walk-through inspections and negotiations with representatives of Stetson in formulating the scope and details of the remedial measures to be undertaken and accomplished by such subcontractor. It is, however, determined that no less than $1,500.00 of such added

expenses were attributable to the corrective efforts on Dove’s original jobsite work at the Weaver home.

9. It was not effectively disputed that Dove had experienced ongoing problems in securing and retaining an adequate workforce of skilled laborers so as to enable its expeditious performance of the framing work on the Lot 137 model home. Although the parties contemplated a time span of about seven working days for completing the contractual work, Dove required from five to seven weeks in order to finish its phase of the framing work.

10. As a direct consequence of such delay, a quantity of lumber materials, delivered by the supplier at the commencement of the framing work and utilized at a slower rate than was anticipated, became adversely affected by exposure to the prevailing weather conditions, requiring a substantial quantity to be replaced. Irrespective of the fact that Stetson was the party contractually responsible for ordering and paying for the lumber materials, the delay attributable to Dove is found to have been the primary cause of the ultimate damage to these materials from unnecessarily prolonged exposure to the elements which, in turn, generated an obligation for Dove to replace the damaged portion or to compensate Stetson for most all of the costs for necessary replacement materials.

11. A reasonable attempt was shown to have been made by Stetson to exclude from the total costs subsequently incurred the expense of additional replacement materials used to produce an office in the model home and a 4-car garage option, thereby allocating only that portion of the replacement materials to Dove that coincided with Dove’s bid for the basic residential structure. However, it is found that the resulting adjusted monetary figure of $1,503.17 should be further reduced so as to reflect some relatively small degree of comparative fault on the part of Stetson in discharging its general contractor’s jobsite supervisory duties of monitoring the use and protection of all delivered construction materials. It is determined that the realistic cost of replacing damage to materials that was traceable and properly allocable to Dove’s delayed performance was no less than $1,200.00.

12. With respect to the Warner project, which was physically located in Page, Arizona, and which encompassed only the rough framing of the dwelling, the plans and specifications furnished to Dove by Stetson are found to have been somewhat ambiguous as to the provisions for an entertainment center. Moreover, Stetson did not arrange for the availability of any supervisory on-site representative to help resolve potential and actual construction or plan interpretation problems. It must be held that Stetson did not sustain its burden of sufficiently proving that Dove breached a duty to construct an entertainment center in the Weaver home, and consequently, the attempted back-charge of the sum of $1,620.00 for the costs paid to the successor subcontractor to provide an admittedly more expensive cabinetry feature is not found to be supportable hereunder.

13. Irrespective of any inability to recoup from Dove the cost of providing the entertainment center, other identified costs were incurred by Stetson to complete the rough framing on the Warner home after Stetson found it necessary to arrange for the successor subcontractor to provide items called for by the applicable plans but omitted or left incomplete by Dove. It was credibly established that these other added costs incurred by Stetson, exclusive of the entertainment center, were in an aggregate amount of not less than $1,000.00, the expenditure of which sum by Stetson on the Warner project is determined to have been appropriate and reasonably necessary, thereby constituting a proper offset by Stetson against any sums claimed owing to Dove.

14. The Registrar of Contractors is not empowered to adjudicate and award money damages for breach of contract claims by the respective parties who must instead pursue available civil court remedies. Although reasonable restitutionary conditions may often be included in a disciplinary Order, serving to reduce or eliminate any otherwise appropriate penalties against a licensee, in this case the combined total of appropriate set-offs or counterclaims by Stetson appears at the minimum to be in the aggregate sum of over $3,700.00 which comes within a few hundred dollars of entirely wiping out any approximate balance presently claimed due to Dove, and if and when any judgment is ultimately obtained, may perhaps slightly or significantly exceed such

balance. Both parties are and should be left free to liquidate their respective rights, defenses, claims, set-offs and/or counterclaims by seeking and obtaining a judgment following litigation before a civil court of competent jurisdiction.

15. Notwithstanding the foregoing, determinations may be properly made and entered as to the charged contracting law violations. The existence of a bona fide monetary dispute precludes any finding of a liquidated sum past due and owing to Dove. Unless or until a civil judgment is obtained and is subsequently left unpaid, no violation by Stetson may be held to have been sufficiently proven. Moreover, the record is devoid of any indication that any written directive from an assigned Inspector for the Registrar instructing Stetson to pay a sum certain had ever been issued in this case. The inclusion of a charged violation consisting of not complying with written agency directives is found to have been inappropriate, and in any event, not proven at the hearing.

16. A different result must follow with respect to the charges in the complaint filed by Stetson against Dove. The testimony and evidence adduced at the hearing relating to the major portion of the claimed back- charges or off-sets not only serves to render the monetary claim by Dove unliquidated and sharply disputed but also sufficiently confirms and validates Stetson’s allegations of substandard or deficient workmanship attributable to Dove, as described in the above findings, in violation by Dove of the State’s contracting laws. Additionally, Dove’s failure to accomplish the framing of several items on the Warner residence, as detailed in the applicable plans, (apart from and excluding the entertainment center item) and the construction delays leading to damaged construction materials delivered but not promptly used in the framing of the Lot 137 model home, are found to constitute wrongful acts on the part of Dove to the detriment of Stetson within the meaning of another code section charged in the Citation against Dove.

CONCLUSIONS OF LAW

1. No violations of the provisions of A.R.S. §32-1154A charged in the Citation issued against Stetson Homes were adequately proven.

2. The evidence of record sufficiently established that Dove Framing has violated the wrongful act (not fraudulent act) provisions of A.R.S. §32- 1154A(7) and the workmanship provisions contained in A.R.S. §32-1154A(3); namely, Rule R4-9-108.

RECOMMENDED ORDER

In view of the foregoing, it is recommended that the entire Citation and Complaint issued against Stetson Homes in Case Number 98-1008 be dismissed without prejudice to the future rights, if any, of Dove Framing to pursue available collection remedies through civil court action.

It is further recommended, with respect to the Complaint and Citation and Complaint in Case Number 98-2038 issued against Dove Framing, that commencing on the effective date of the Registrar’s Order (thirty-five [35] days after the date of mailing by the Registrar), the Class C-07 license of Dove Framing shall be placed on probation for a period of 45 days.

It is further recommended in Case Number 98-2038, in addition to the above penalty against the license of Dove Framing, that any restoration of Dove’s rights to resume contracting, whether or not probationary, shall be subject to a condition that Dove Framing first post an additional surety bond, cash deposit or alternative deposit for a period of 12 months in the amount of $1,000.00, such bond or deposit to be in addition to the required surety bond, cash deposit or recovery fund participation set forth in A.R.S.§32-1152. Cash or alternative additional deposits, if utilized, shall be returned only after the expiration of an additional two year period following the above-provided 12 month period and only if no claims are then pending.

Dated: June 26, 1998.

OFFICE OF ADMINISTRATIVE HEARINGS

______________________________________ Robert. I. Worth Administrative Law Judge

Original transmitted on _____________________

by: _____________________________ , to:

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

ATTN: Joyce Armijo -----------------------

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