ALJDEC

98F-M1626-ROC · Registrar of Contractors · 1999-12-28

STATE OF ARIZONA IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Pursuant to notice, a formal hearing was held in this case over a period of five (5) days beginning on October 18, 1999 and continuing on October 19 and 20, 1999 and concluding on December 8 and 9, 1999, in Phoenix, Arizona, before Neal H. Jordan, Administrative Law Judge of the Office of Administrative Hearings. APPEARANCES For Complainant: John P. Silkey, Sr., Esq. 2409 S. Rural Rd., Suite C-4 Tempe, AZ 85282 For Respondent: D. Jay Ryan, Esq. 4150 W. Northern Ave. Phoenix, AZ 85051

FINDINGS OF FACT Based upon all the evidence of record, the following findings of fact are determined: Complainant, Maureen L. Leonhardt, is acting herein as attorney-in-fact pursuant to a General Power of Attorney (with durable provisions) signed by Edward S. and Phyllis S. Glasson (“Glassons”) dated March 11, 1997. Complainant’s Ex. 1. The Glassons are the record owners of a residential property located at 1884 East Concorda, Tempe, Arizona (the “Home”). Complainant, her husband Robert Leonhardt (“Robert”) and their daughter Jennifer Leonhardt (“Jennifer”) occupy and maintain the Home under the authority of the General Power of Attorney and other arrangements with the Glassons. On July 26, 1996, a “microburst” wind type tornado and rain storm occurred in the vicinity of the Home with such force that significant structural and water damage occurred. While investigating and processing an insurance claim with State Farm Insurance (“State Farm”) to settle the cost to repair the damages to the Home, a pair of unfortunate and tragic events occurred that resulted in Jennifer becoming severely disabled. As a result of Jennifer’s disabilities, Complainant and Robert were appointed Guardians of and Conservators for Jennifer by order of the Maricopa County Superior Court. Complainant’s Ex. 21. Since the injuries and disabilities sustained by Jennifer occurred during the course of her then regular employment, a claim has been made to the State (Arizona) Compensation Fund (the “State Fund”) resulting in an agreement to contribute funds necessary to rehabilitate the Home in order to render it compliant with the federal Americans with Disabilities Act (“ADA”). On September 22, 1997, Complainant entered into two separate contracts with Respondent. One contract was for repairs to the Home necessitated by the wind and rain storm damage and having a contract price of $16,814.89 (the “Repairs Contract”). The other contract was for the rehabilitation work authorized by the State Fund and included all work necessary to comply with ADA and having a contract price of $32,988.82 (the “ADA Contract”). See Respondent’s Ex. H and I, respectively. Each contract included a detailed scope of work itemization which was signed by a Marty J. Wolinski as Project Estimator. Each contract contains identical preprinted cover sheets bearing the verified signature of each party and included agreements regarding the following: i. “Work Authorization” designating Respondent to perform the repair work; authorizing Respondent to work with the insurance company for all purposes necessary to arrive at a scope of work and cost. j. “Assignment of Insurance Proceeds” provides that the costs authorized by State Farm and State Fund will be forwarded directly to Respondent. k. “Collection” provides for costs of collection should it be necessary to place the contracts, or either of them, with an attorney for collection. l. “Cancellation of Agreement” provides that Owner (the Complainant) may cancel the contracts before repairs are started at a price specified therein. Each contract also contains “Special Terms and Conditions” which identify further provisions agreed to by the parties, including payment provisions, workmanship standards, change orders, pre-existing conditions, and a specific provision providing that no completion date has been agreed upon or otherwise specified. The repairs and ADA work were of such magnitude that as part of the claim to State Farm and State Fund, Complainant and her family were compensated for eight weeks of alternative living arrangements at a local Residence Inn while the work proceeded. Complainant’s Ex. 19. During the course of construction, numerous disputes arose with particular concern expressed by Complainant over alleged poor and substandard workmanship and over a questioned liability regarding a theft of personal property that occurred during that time. Because these issues were not addressed to Complainant’s satisfaction, the instant complaint was filed on June 5, 1998 alleging 83 items of dispute. By a letter filed on January 4, 1999, Complainant amended the complaint by adding an additional 36 items. All items included claims of poor workmanship and incompleteness as required by the contracts. As a result of the complaint being filed in this matter, an on-site inspection was conducted by an assigned inspector for the Registrar of Contractors, which led to the issuance of a corrective work order letter, dated January 20, 1999, (the “CWO”) being sent to Respondent addressing each and every item set forth in the complaint as amended or supplemented. The weight and sufficiency of the evidence establishes that the following construction deficiencies necessitating repair, correction or completion are attributable to the contractual obligations that Respondent perform in a workmanlike manner. For the sake of consistency and ease of reference, the following numbers will correspond to the same numbers listed on the complaint, the addendum and the CWO. Compliant Items 7. Water is ponding at the north side of the wheelchair ramp, an area that requires proper drainage control. 8. A handrail is required by the Uniform Building Code (the “UBC”) to be installed at the east side of the Home. 9. Addressed later as a separate item. 11. A City of Tempe building inspection has now been performed and a Notice to Comply dated June 2, 1998 must be addressed. Upon completion of all items required by this Notice and as delineated herein, a final inspection by the City of Tempe building inspection official must be performed indicating acceptance of all matters subject to inspection. 12. Same as No. 11 above. 13. Tile grout color does not match throughout Jennifer’s bathroom. 14. Shower head and rod are not adequately secured in Jennifer’s bathroom. 15. Tape joints and wall texture at towel rack and cabinets in Jennifer’s bathroom evidence poor workmanship. 16. Door jam on east exit door improperly installed. 17. Replace electrical outlets at wet bar and hallway to existing prior to storm damage. 20. Reinstall plexiglass covering in wet bar per agreement. 21.Provide the “Finish Hardware porta ramp roll-up 30” x 5’ “ per the ADA Contract. 24. Repair and or secure the loose telephone jack box in Jennifer’s bedroom. 28. Size of opening at kitchen stove/oven is improper to facilitate removal. 31. Handicapped safety pads under sink in Jennifer’s bathroom not installed. 33. Addressed later as a separate item. 34. Addressed later as a separate item. 35. Properly install the intercom system as required by the ADA Contract. 37. Damage exists to the tint on three (3) windows requiring replacement. 38. Broken window pane in French door in living room. Door itself in need of painting after window repair. 39. Addressed later as a separate item. 40. Tile installation incomplete in master bedroom shower area. 41. Addressed later as a separate item. 44. Lights under cabinet at kitchen counter are loose. 48. Inspect and secure storm gutters for proper installation. 50. Provide ceiling fans per both contracts, and/or provide Complainant a proper credit for documented cost for the ceiling fan for Jennifers’ bedroom not to exceed contract line price for this item. 51. Repair or replace master bedroom door and stain in acceptable color. Also correct for chip at bottom of door if not replaced. 52. Doors were required to be “painted” per the contracts. If not completed then should do so. If completed then repaint to match all existing like doors. 53. Replace mirror cabinet removed during demolition in master bedroom. If cannot locate removed cabinet, then replace with an equal or similar styled mirror cabinet. 54. Properly secure alarm in west bedroom and the motion detector in living room. 56. Since no other construction work has taken place within recent years prior to that of Respondent, it is reasonable to infer that the paint on the items listed were caused by Respondent’s workers and should, therefore, by removed by Respondent. 58. Complete proper installation of microwave oven shelf. 61. Drywall texture oversprayed on window and screens in Jennifer’s room requires removal. 63. Adjust window in master bedroom bath to function properly. 64. Scratch on gold colored filler piece on hall bathroom shower door requires repair. 65. Addressed later as a separate item. 66. Loose plumbing access cover adjacent to toilet in Jennifer’s bathroom. 67. Provide missing key to clock caused to be repaired by Respondent. 68. Remove and clean up debris in attic. 77. Addressed later as a separate item. 79. Replace window treatment for kitchen window due to it not being properly stored for reuse by Respondent. 80. Ensure the three (3) pocket doors are matching in finish and appearance and that each functions properly for the intended purpose. 81. Install blown-in insulation in accordance with the Repairs Contract. 82. Adjust pull-out faucet/spray to function for purposes intended.

Addendum to Complaint 1. Replace or repair as required to correct for the chip in hinge side of door at the master bedroom. It is not certain if this is the same item as set forth above at No. 51. 3. Correct for improper patch repair on master bathroom vanity sink. 5. Secure vanity sink and install scribe molding in Jennifer’s bathroom. 6. Install escutcheon on wall drain in Jennifer’s bathroom. 8. Install scribe molding at Jennifer’s workstation cabinet. 11. Adjust doorbell for louder ring or replace with one that will ring more appropriately to alert occupants of a visitor. 14. Incomplete staining/painting of cabinet facing on dishwasher. 15. Fill screw holes and stain as appropriate to match adjacent surface. 16. Remove overpaint on strike plate at hallway closet door. 17. Correct for paint drip runs on door frames and molding for all doors worked on. 25. Repair for evident water damage to cabinets in Jennifer’s bathroom, wet bar and workstation. 26. Complete grout at ends of pocket doors. 27. Addressed later as a separate item. 29. Replace shower door frame to match all other existing hardware. 32. Replace scratched mirror on sliding door to hallway closet. 33. Replace closet rod brackets as agreed upon. 34. Adjust window frame in dining room to function properly. 35. Patch and texture hole in ceiling in living room above desk/computer.

All other enumerated items of the complaint, as amended, except as noted specifically below, and presented at the instant hearing, were either corrected, found not to have been established as workmanship deficiencies, or are matters upon which Complainant failed to sustain the requisite burden of proof. Complainant has alleged, as item No. 17 of the complaint, that Respondent is responsible for the chips that have occurred in the soltillo tile on the patio and at the front entry. Complainant did not substantiate by any credible evidence that these chips were caused by Respondent and, in the face of evidence that a sealant material was present over the chipped areas, it must be found that Respondent is not responsible for this claim. A. The Repairs Contract provided for wallpaper to be removed and replaced indicating the quality of wallpaper to be selected was to be a “high grade.” The wallpaper was selected by Complainant at a retail outlet of a supplier designated by Respondent. However, after installation it was determined the wall surface could not be adequately floated to mask an unsightly look with the wallpaper selected. A different, but high grade vinyl wallpaper was then selected and installed by subcontractors beholden to Respondent. This installation, with the exception of Jennifer’s room, evidences deficiencies in that corners are separating and pulling away from the wall, and seams appear to be splitting and separating. It is clear that the wallpaper selected was a “high grade” paper and was approved by Complainant. The deficiency, therefore, is in the installation which now requires appropriate repairs. There is no evidence that a full replacement of the wallpaper is required. 16.B. The wallpaper selected by Complainant for the master bedroom bath was discontinued so that additional rolls could not be ordered to complete the installation around the removed mirror cabinet. This room remains incomplete due to the disputes that have since arisen between the parties. It is incumbent upon Respondent to finish this room in accordance with the Repairs Contract. Complainant contracted with the same wallpaper supplier and its installer to provide and install wallpaper and window treatments for Jennifer’s room. To the extent there is a duplicate charge for such work and materials by Respondent, then proper credits should be issued for that purpose. Since Complainant contracted separately for this work, it is not the obligation of Respondent to provide any resources for corrections or repairs for this item. The commercial grade built-in dispensers for Jennifer’s bath are found to be non-contract items that Complainant may desire to have installed. There is no credible evidence to establish this is a matter of contract for which Respondent is responsible. As an integral part of the ADA Contract, Respondent was to install a combination bath shower with wheelchair access for Jennifer. The evidence is undisputed that after two attempts the shower area still fails to properly drain shower water. The testimony establishes that the slope to the shower floor is inadequate to accommodate the drainage of water. The present condition is found to be unacceptable and must be properly reconstructed so the shower may be properly used for the purposes intended without having it flooding the remaining bath area. It is found on the basis of all the credible evidence that both contracts were substantially completed by the end of December, 1997. Continuing issues remaining to be resolved at that point included the shower floor in Jennifer’s bathroom, the wallpaper, certain incomplete items under the contract (ceiling fans and an intercom system), and a punchlist, although the punchlist was constantly in a state of creation with Complainant. When the remaining items of work and the punchlist had not been completed by the middle of May, 1998, testimony establishes that Complainant made threatening remarks about getting another contractor to finish the contracts, that the City of Tempe would be contacted for inspections, that legal counsel would be sought and that Complainant may be filing complaints with the Registrar of Contractors and the Better Business Bureau. For reasons of its own, Respondent construed these remarks as being the expressed intent on the part of Complainant to terminate the contracts, and by letter placed the onus on Complainant to respond or Respondent would assume it is no longer the contractor for these projects. See Respondent’s Ex. BB. Matters were not resolved to the satisfaction of Complainant and the instant complaint was filed. Throughout the pendency of this case, it is found that Respondent has consistently held itself out as being ready, able and willing to complete all remaining work, particularly that work set forth in the CWO. For reasons that have not been made clear by the record, Complainant has not responded to Respondent’s overtures to schedule mutually convenient times to effect all remaining repairs and punchlist items. At the hearing evidence was introduced by Complainant in an attempt to establish a cost/damage amount that would be incurred if another contractor were to be hired to complete the work. See Complainant’s Ex. 4. However, the author of the cost estimates did not testify and no proper foundation was laid to lend any credence to these cost estimates. Accordingly, such estimates are found to lack any credibility and will be given no evidentiary value. Respondent has submitted final invoices into evidence in an effort to establish a balance due on each contract owed by Complainant. These final invoices, for the purposes of this hearing and decision, are found to be in error, contain inaccuracies and are not supported by credible independent evidence. Both contracts provide that changes in the scope of work ordered by the owner must be agreed to in writing. This was not done. While a waiver of this provision is certainly arguable, no evidence to support a quantum meriut claim was offered. Accordingly, no findings can be made relative to the financial matters concerning the contracts since there is no credible evidence upon which to base any such findings. During the course of construction, while Complainant and her family were residing away from the Home, a theft occurred that resulted in the loss of certain personal property. Respondent, not acknowledging responsiblilty, nevertheless submitted the claim to its insurance company for processing. For reasons that remain unclear to this tribunal, Complainant refused or neglected to cooperate with the adjusters assigned to evaluate the claim and, as a consequence, the claim was refused. It is found that Respondent acted properly in this regard. This is precisely what insurance is for and Complainant’s reluctance to cooperate must be construed against the claim with a finding that Respondent bears no continuing responsibility therefore.

CONCLUSIONS OF LAW The Office of Administrative Hearings has jurisdiction over the subject matter and the parties hereto pursuant to A.R.S. §41-1092 - 1092.12 (1998). The Complainant has brought this complaint and accordingly bears the burden of proving by a preponderance of the evidence that the allegations contained therein are true. Culpepper v. State, 187 Ariz. 431, 930 P.2d 508 (Ct. App. 1996); Smith v. Arizona Department of Transportation, 146 Ariz. 430, 706 P.2d 756 (App. 1985), (the standard of proof is that of the “preponderance of evidence.”) The Respondent is charged with the violation of A.R.S. §32-1154 A (1), (2), (7), (9), (10), (16), (23), and (3), namely Rule R4-9-108, as set forth in the Citation and Complaint and the amended complaint dated July 26, 1999. The relevant provisions of the statute are as follows: 1. Abandonment of a contract or refusal to perform after submitting a bid on work without legal excuse for the abandonment or refusal. 2. Departure from or disregard of plans or specifications or any building codes of the state or any political subdivision of the state in any material respect which is prejudicial to another without consent of the owner or the owner's duly authorized representative and without the consent of the person entitled to have the particular construction project or operation completed in accordance with such plans and specifications and code. 3. Violation of any rule adopted by the registrar. . . . .

7. The doing of a wrongful or fraudulent act by the licensee as a contractor resulting in another person being substantially injured.

. . . .

9. Failure in a material respect by the licensee to complete a construction project or operation for the price stated in the contract, or in any modification of the contract. 10. Aiding or abetting an unlicensed person to evade the provisions of this chapter, knowingly combining or conspiring with an unlicensed person, allowing one's license to be used by an unlicensed person or acting as agent, partner, associate or otherwise of an unlicensed person with intent to evade provisions of this chapter.

. . . .

16. False, misleading or deceptive advertising whereby any member of the public may be misled and injured. . . . .

23. Failure to take appropriate corrective action to comply with this chapter or with rules adopted pursuant to this chapter without valid justification within a reasonable period of time after receiving a written directive from the registrar. The written directive shall set forth the time within which the contractor is to complete the remedial action. The time permitted for compliance shall not be less than fifteen days from the date of issuance of the directive. A license shall not be revoked or suspended nor shall any other penalty be imposed for a violation of this paragraph until after a hearing has been held pursuant to the provisions of this article. . . . .

4. A preponderance of the evidence establishes that Respondent did not abandon the Repair Contract or the ADA Contract or refuse to properly perform the work under the Contract without legal excuse in violation of A.R.S. §32-1154 A (1). This not to say that Respondent acted responsibly when reacting to the termination threats, so-called, by Complainant. For Respondent to claim that Complainant terminated or repudiated the contracts, it must be shown that her language could fairly be understood to amount to a clear statement of intention not to perform except on conditions that went beyond the contracts. See Oldenburger v. Del E. Webb Development Co., 159 Ariz. 129, 765 P.2d 531 (App. 1988). Complainant’s statements cannot fairly be characterized as expressing a clear and unequivocal intention not to be bound by the contracts. They do express deep frustrations and even anger due to the seemingly endless delays in completing the work. However, such expressions, as made by Complainant, do not rise to a level that establishes a clear and unambiguous intent to terminate Respondent from further liability under the contracts, particularly since the contracts were admittedly substantially completed. 5. By a preponderance of the evidence it is established that Respondent disregarded the requirements of the local building code adopted by the City of Tempe by failing to obtain any requisite permits, but also, by failing to properly comply with building code specifications applicable to the work to be performed under the Contract, all in violation of A.R.S. §32-1154 A (2). 6. By a preponderance of the evidence, Complainant has established that Respondent has committed a wrongful act by failing to properly obtain all required building permits from the City of Tempe, in violation of A.R.S. §32-1154 A (7). The preponderance of all the evidence fails to establish that Respondent is in violation of A.R.S. §32-1154 A (9). The same reasoning stated in Conclusion of Law No. 4 relating to abandonment of contract also supports the holding that Respondent has not failed in any material respect to complete the contracts for the price stated in each. It is undisputed that the contracts were substantially complete as of the end of December, 1997. That being the case, it would have been entirely appropriate for Respondent to demand the final payments under each contract less a proportionate holdback representing the value of the items of work not completed or in need of repair. Accordingly, the evidence is insufficient to support a conclusion that a violation of (9) has occurred. There is no evidence that suggests that Respondent is in violation of A.R.S. §32-1154 A (10). Complainant has failed to sustain by a preponderance of evidence that Respondent perpetrated any false, misleading or deceptive advertising that inappropriately was misleading and injurious in violation A.R.S. §32-1154 A (16). The very fact that the contracts were substantially completed by the end of December, 1997, demonstrates that Respondent was capable of performing in accordance with its representations concerning competence and ability. The fact that Complainant now distrusts, dislikes and would prefer not to have to deal with Respondent ever again is not evidence of misleading or injury under this provision of the statutes. By a preponderance of the evidence, Complainant has established that Respondent has failed to comply with the Corrective Work Order issued by the Registrar of Contractors in violation of A.R.S. §32-1154 A (23). Respondent inappropriately relied upon its own interpretation of Complainant’s statements purportedly indicating a termination of its services under the contracts. Notwithstanding, Respondent has consistently evidenced a willingness to return to make any and all repairs necessary, including those listed on the CWO. To what extent a contractor must go to pursue access in order to comply with a CWO is a fact question that can, at times be difficult to resolve. In this case, the conclusion is inescapable that the relationship between the parties was seriously fractured to the point neither party truly wanted to deal with the other. However, this does not obviate a situation where a contractor, who has established a capability to perform, must be granted access to complete work despite ill feelings and dislikes. It is expected that all parties will cooperate appropriately to the end that all obligations under enforceable contracts are discharged without rancor By a preponderance of the evidence taken as a whole, Complainant has established that Respondent has failed to perform the work undertaken pursuant to the contracts in a professional and workmanlike manner in violation of A.R.S. §32-1154 A (3), namely Rule R4-9-108. The very fact that the shower in Jennifer’s bathroom has had to be re-sloped twice and still doesn’t function properly is evidence in support of this conclusion. The same holds true for the wallpaper and other similar matters. It is no excuse to state that a contractor is working with a difficult client who does not seem to be satisfied regardless of the effort put forth. Contractual obligations transcend personalities and it was incumbent upon Respondent to exercise its best effort to ensure that all work was done in a workmanlike manner the first time. It is recognized that both parties are at loggerheads with each other and would sincerely prefer this tribunal to be able to wave a magic wand and have it all resolved cleanly and quickly. They also recognize that this is not realistic and that for these contracts to be completed both parties will be required to surrender to their respective obligations and perform accordingly. This not only includes the requirement that Respondent comply with the order hereinafter to be entered, but also contemplates that Complainant will make all proper payments remaining due under the contracts. Based upon the foregoing, the entire record in this matter fails to establish any grounds to justify a departure from a long-standing policy of the Registrar of Contractors to allow a contractor a reasonable opportunity, after a hearing, to correct, remedy or repair any determined deficiencies in its work. A review of agency records in accordance with the standing motion before the Office of Administrative Hearings, reveals that Respondent, within the past two years, has had only one other complaint filed against its license and that complaint was essentially resolved in Respondent’s favor. This circumstance weighs in favor of Respondent in this case and will be viewed as a matter in mitigation when determining whether a suspension or permanent revocation as a disciplinary penalty should be imposed as a direct result of the findings and conclusions made in this case.

RECOMMENDED ORDER In view of the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED, commencing on the effective date of the Order entered in this matter, that the Class B license of Respondent shall be suspended until the Registrar of Contractors receives credible written proof that Respondent has accomplished appropriate and effective remedial work and completion of the Repair and ADA Contracts consistent with this decision. It is further recommended that if Respondent accomplishes the above described corrective work on or before the effective date of the Order entered in this matter, then the above license suspension shall not take place. ENTERED this day, December 29, 1999

______________________________________ Neal H. Jordan Administrative Law Judge

Original transmitted by mail this ____ day of ____________, 1999, to:

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

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

Office of Administrative Hearings 1400 West Washington, Suite 101 Phoenix, Arizona 85007 (602) 542-9826