ALJDEC

98F-2788-ROC · Registrar of Contractors · 1998-12-30

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

CONSOLIDATED HEARING: December 30, 1998. APPEARANCES: The Complainants appeared personally. Respondent Arizona Real Estate Group dba Arizona Homes (“Arizona Homes”) was represented by its attorney, Nick Rayes, Esq. Respondent Canac Kitchens U S Limited (“Canac”) was represented by its authorized employee, Paul Lantz. ADMINISTRATIVE LAW JUDGE: Brian Brendan Tully _____________________________________________________________________

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 basic issues of law and fact, and both entailed the use of the same evidence and witnesses. 2. Respondent, Canac Kitchens U. S. Limited, is the holder of License No. 127965, a Class C-30 license, issued by the Registrar of Contractors. A review of the official records of the Registrar of Contractors indicates that Canac’s Class C-30 license was issued on November 21, 1997. There is no record that Canac possessed a contractor’s license issued by the Registrar prior to that date. 3. Paul Alan Lantz is Canac’s qualifying party. 4. Respondent Arizona Real Estate Group, Inc., doing business as Arizona Homes, is the holder of License No. 126320, a Class B license, issued by the Registrar of Contractors. A further review of the official records of the Registrar indicates that Arizona Homes’ Class B license was issued on August 1, 1997.There is no record that Arizona Real Estate Group, Inc., doing business as Arizona Homes, possessed a contractor’s license issued by the Registrar prior to that date. 5. Todd Alan Aanenson is listed on the Registrar’s records as the President and qualifying party for Arizona Homes. 6. On or about February 3, 1997, Arizona Homes submitted a proposal to build a custom home to the Complainants. Arizona Homes was to serve as the project’s designer and general contractor. The proposal was signed by Todd A. Aanenson as president of Arizona Homes. The proposal did not list an Arizona contractor’s license number and classification. 7. Attached to Arizona Homes’ proposal was a summary of specifications, which provided, among other things, for “oak, maple or cherry custom wood cabinets with 42 inch uppers” in the gourmet kitchen. 8. On or about February 9, 1997, Todd A. Aanenson, on behalf of Arizona Homes, and the Complainants executed a letter of intent allowing Arizona Homes to complete a preliminary budget, planning and investigation into the project following payment of a retainer fee. The letter of intent further provided that the parties would enter into a subsequent formal agreement. The letter of intent was amended by the parties on February 17, 1997. The document does not list an Arizona contractor’s license for Arizona Homes. 9. On or about April 15, 1997, the Complainants and Todd Aanenson, doing business as Arizona Homes, entered into a written agreement for the construction of Complainants’ residence. 10. The summary specifications referenced in the parties written agreement provided for, among other things, “wood cabinets with 42 inch uppers” in the kitchen rather than “oak, maple or cherry custom wood cabinets with inch uppers” described in the summary specifications for Arizona Homes’ prior proposal to build a custom home which had been submitted to Complainants. 11. On or about October 29, 1997, Canac submitted a written quotation to Arizona Homes for cabinets to be constructed and installed in Complainants’ kitchen, two bathrooms, face frame linen and laundry room. 12. Sometime in November of 1997, the Complainants met with a Canac sales representative. Since Canac did not have a showroom to view samples, the sales representative directed the Complainants to several homes that had Canac installed cabinets at Fulton Homes in Tempe. 13. On or about December 5, 1997, Canac’s sales representative wrote a letter to Arizona Homes with new pricing reflecting changes and options discussed by her with the Complainants at the earlier meeting. That letter did not list an Arizona contractor’s license number for Canac. The shop drawings for the kitchen cabinets contain measurements in centimeters rather than inches as used in earlier drawings due to Canac being a Canadian company which utilizes metric measurements. 14. It is determined that Complainant Joe Bencze signed the metric shop drawings but did not acknowledge his understanding of the dimensions for the cabinets. 15. On or about February 16, 1998, Complainant Joe Bencze approved Arizona Homes change order summary for draw # 4, which provided, among other things, that the kitchen cabinets had been finalized on February 5, 1998 and that Complainants had a surplus allowance of $592.00 for cabinets. 16. On or about April 1, 1998, Canac’s sales consultant wrote a letter to Complainants submitting additional quotes for the following items: small crown molding in the kitchen, laundry areas, cabinets, light valances in the kitchen, decor doors, and drawers on the back of the island; center styles with matching foil skin tape edge, foil skin under the cabinet over refrigerator area; decor doors; two inch light valances; and 4.5” crown molding. 17. On or about March 31, 1998, the Complainants drafted a service request seeking repairs to the following items: all center styles with wood foil on center; missing drawer front and door front on 30cm cabinet; all cabinets need to be adjusting; dro (sic) sticks and does not open smoothly will not run out, electrician will not install cooktop until this cabinet is adjusted; lazy Susan does not turn in cabinet, needs to be adjusted; plastic stops do not match on cabinets, makes banging noise when they are closed; master bath drawers splitting wood on front at angle drawers, joints do not look good; knobs missing from the face frame in the master bathroom, scribe or edge finish in the face frame; two drawers in the bathroom sticking and not moving easily; fix center styles and add crown molding in the laundry room; and add foil under cabinet above refrigerator. 18. On or about April 1, 1998, Complainant Sharon Bencze made a handwritten notation on the April 1, 1998, quote sheet indicating her approval of the quotes. 19. On or about April 16, 1998, Arizona Homes submitted a change order summary for draw # 5 for review and approval by Complainants. That change order provided for, among other things, additional decor doors, light valance and crown molding at a cost of $764.00. 20. Complainants subsequently filed complaints with the Registrar of Contractors against both Canac and Arizona Homes alleging that they violated provisions of the State’s contracting laws. 21. In response to the filed complaints, the Registrar’s assigned inspector performed a jobsite inspection at Complainants’ residence to assess the allegations of substandard workmanship made against the Respondents. 22. The inspector’s jobsite inspection resulted in the issuance of a Corrective Work Order dated August 6, 1998, to Arizona Homes directing it to undertake remedial actions to the following areas of deficient workmanship to cabinetry installed in Complainants’ kitchen, second bath, master bath and laundry room: the cabinets are not “custom wood cabinets” as advertised and are not what was selected by Complainants; the upper cabinet above the refrigerator is too short in height; cabinet backs are split; drawer bottoms are split; base cabinet baseboards do not line up; nail holes are not filled; there are unacceptable gaps between doors and drawers; door and drawer pulls do not match; doors and drawers do not operate smoothly; chips and voids are present in cabinets; the ends of the upper cabinets and the sides and back of the island cabinet do not match the face color of the cabinets; the upper kitchen cabinets were advertised as 42 inch in height, but installed cabinets are 41inch in height; the false drawer fronts at stove are not anchored; the stove vent hood opening is larger than the hood; and the island cabinet baseboard ends are not finished. 23. The Registrar’s inspector also issued a separate Corrective Work Order dated August 7, 1998, to Cancac directing it to undertake appropriate remedial repairs to the same areas described in Finding of Fact No. 22 above. 24. It is determined that Arizona Homes had a contractual obligation to furnish and install “wood cabinets w/42 inch uppers (see Allowance)” pursuant to the terms of the parties’ written agreement dated April 15, 1998, rather than “Oak, Maple or Cherry Custom Wood Cabinets w/42 inch Uppers” specified in the original proposal submitted by Arizona Homes which was not signed by Complainants. There is credible evidence of record that the summary specifications for the parties’ written agreement contains numerous changes from the specifications contained in the original proposal. 25. It is determined that neither Canac nor Arizona Homes used any false, misleading or deceptive advertising in their dealings with the Complainants. Complainants were afforded an opportunity to view Canac’s construction and installation of cabinets in several existing homes, notwithstanding that such construction by Canac appears to predate the issuance of its Class C-30 license by the Registrar. Canac further provided Complainants with brochures and samples for them to take and review. 26. Arizona Homes and Canac are deemed to have deviated from specifications for the cabinets set forth in the written contract between Arizona Homes and Complainants by failing to construct and install cabinets with 42 inch uppers. The fact that Canac is a Canadian company traditionally using metric measurements is not a valid justification for the 1” variance in height. 27. Canac is found to have failed to perform its scope of work to minimum workmanship standards in those areas described in Finding of Fact No. 22 above, except as to the selection and composition of the cabinets. 28. Arizona Homes, as the general contractor with direct contractual privity with the Complainants, is deemed responsible for the areas of deficient workmanship described in Finding No. 22 above, except as to the selection and composition of the cabinets. 29. Except as to the selection and composition of the cabinets, it is determined that the failure of both Arizona Homes and Canac to perform the work described in Finding No. 2 above to minimum workmanship standards and the failure to construct and install cabinets with 42” uppers as specified in the written contract between Arizona Homes and Complainants constitute wrongful acts by each which has substantially injured Complainants. 30. It is determined that Canac and Arizona Homes did not intentionally fail to timely comply with the respective written directives issued to them by the Registrar. Under all the circumstances, the hearing became the necessary forum to resolve the issue of remedial repairs, which the Respondents were prepared to perform but which the Complainants desired to have addressed at hearing. 31. Canac and Arizona Homes are deemed jointly and severally liable for correcting the proven areas of deficient workmanship described in Finding of Fact No. 22 above. However, it is further determined that an important prerequisite to the performance of those remedial repairs requires the construction and installation of 42” uppers as originally specified consistent with the cabinet product selection deemed having been made by Complainants. If the Respondents, either jointly or severally, cannot accomplish the proper construction and installation of 42” uppers, then it is determined that the Complainants then would not have received the intended benefit of its bargain with Arizona Homes. In such a scenario, it is found that Arizona Homes should be required to then remove the disputed cabinets and refund the money paid for such work to the Complainants. 32. The evidence of record supports a finding that Arizona Homes negotiated and entered into the written contract with the Complainants prior to the issuance of its Class B license by the Registrar on August 1, 1997. That factor is deemed a matter in aggravation which the Registrar may consider when imposing penalties for other proven contracting law violations. 33. The evidence of record also supports a finding that Canac negotiated with both Arizona Homes and Complainants prior to the issuance of its Class C-30 license by the Registrar on November 21, 1997. That factor is determined to be a matter in aggravation which the Registrar may consider when imposing penalties for other proven contracting law violations.

CONCLUSIONS OF LAW

1. The evidence of record is adequate to establish that Canac has violated the provisions of A.R.S. § 32-1154 (A)(7) and (3); namely Rule R4-9-108. 2. The evidence of record is deemed inadequate to establish that Canac has violated the provisions of A.R.S. § 32-1154 (A) (16) and (23). 3. The evidence of record is adequate to establish that Arizona Homes has violated the provisions of A.R.S. § 32-1154 (A) (7) and (3); namely Rule R4-9-108. 4. The evidence of record is inadequate to establish that Arizona Homes has violated the provisions of A.R.S. § 32-1154 (A) (16) and (23). 5. The Registrar is empowered to impose reasonable conditions to reduce or eliminate any penalties against a license for proven violations of the State’s contracting laws. Under all the circumstances, and in light of the failure of the Arizona Homes to provide Complainants with 42” uppers as specified in their written contract’s summary specifications for cabinets, a condition in a disciplinary Order which is in the nature of a contractual restitution, providing for a return of monies paid to Arizona Homes by Complainants, appears to be not only appropriate but also equitably warranted.

RECOMMENDED ORDER

In view of the foregoing, it is recommended commencing on the effective date of the Order entered in this matter that Arizona Homes Class B license be suspended until the Registrar of Contractors receives written proof:

1. That Arizona Homes remove the installed 41” uppers and replace them with 42” uppers as specified in its contract with Complainants; and 2. That the items set forth in Finding of Fact No. 22, with the exception of the cabinet selection, have been appropriately rectified by Arizona Homes; or 3. If the 42” uppers cannot be constructed and installed, then Arizona Homes shall remove all the cabinets and repay the Complainants the sum of money paid by them for the cabinets.

It is further recommended that if Arizona Homes properly accomplishes the aforementioned remedial work or removes the cabinets and refunds Complainants the sum of money paid for the cabinets on or before the effective date of the Order entered in this matter, then the above-provided license suspension against Arizona Homes shall not take place. It is further recommended in addition to the above-provided license suspension, if any, that Arizona Homes’ Class B license shall be placed on disciplinary probation for a period of sixty days commencing on the effective date of the Order entered in this matter or the date on which notice of Arizona Homes’ proper compliance with the terms of the entered Order is filed with the Registrar of Contractors, whichever is later.

In view of the foregoing, it is recommended commencing on the effective date of the Order entered in this matter that Canac’s Class C-30 license be suspended until the Registrar of Contractors receives written proof :

1. That Canac has removed the 41” uppers and replaced them with 42” uppers; and 2. That the items set forth in Finding of Fact No. 22 above have been appropriately rectified by Canac; or 3. Unless Arizona Homes has elected to pay, or has paid, Complainants the restitutional amount representing the return of money previously paid for the cabinetry.

It is further recommended that if Canac properly accomplishes the aforementioned corrective work and provides evidence that all cabinets have been removed or replaced or that and Complainants have been compensated by Arizona Homes as above-provided if the 42” uppers cannot be constructed and installed to minimum workmanship standards on or before the effective date of the Order entered in this matter, then the above-provided suspension of Canac’s contractor’s license shall not take place.

It is further recommended in addition to the foregoing license suspension, if any, that Canac’s Class C-30 license shall be placed on disciplinary probation for a period of sixty days commencing on the effective date of the entered Order or the date on which notice of Canac’s proper compliance with the terms of the entered Order is filed with the Registrar of Contractors, whichever is later.

Done this day, January 19, 1999.

_________________________________ BRIAN BRENDAN TULLY Administrative Law Judge

Original transmitted by mail/ or copy faxed this ____ day of ____________, 1999, 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