ALJDEC

99F-1173-ROC · Registrar of Contractors · 1999-06-21

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: March 23 and June 21, 1999 APPEARANCES: Neal Thomas, Complainant, in his own behalf Jonathan Olcott, Esq., on behalf of the Respondent ADMINISTRATIVE LAW JUDGE: Allen Reed _____________________________________________________________________

Findings of Fact The Complainant wanted to add an addition to his home in Paradise Valley, Arizona. The addition would include adding closets, a utility exercise room, storage room and outside pool restroom. Based on the actual dimensions of the house, the addition was to be approximately 45 1/2 feet by 16 feet. The Complainant had a friend who was going to architectural school, prepare some drawings. The work depicted by the plans was too expensive and the Complainant did some revisions and began contacting contractors for estimates. The Complainant and Respondent met in June of 1998, and entered a time and materials agreement for the construction and remodeling work. The Respondent does not normally have employees. There is no formal written contract between the parties although memoranda evidencing some elements of the contract were exchanged. A preliminary schedule prepared by the Respondent for the construction of the project showed it was to have final inspection on September 30, 1998. Ed Stubenrauch (Stubenrauch), an architect, was hired by the Complainant and prepared a set of plans for the addition and remodeling using the prior plans. The Stubenrauch plan was in error. The dimensions for the addition were approximately a foot and a half longer in the drawings than they should have been based on the actual size of the Complainant’s house. The Complainant paid the Respondent $6,000.00 to begin the work. The Complainant requested information about the hourly wage the Respondent would charge for various types of labor. The Respondent answered that amounts of $8.00 to $15.00 would be charged for laborers and $20.00 for journeymen (Rod McDonald, a framer). Subcontractors and laborers, even if selected by the Respondent, were subject to approval by the Complainant. The Complainant could hire whomever he desired directly, and at times used employees from his own business. The Complainant requested that the Respondent provide proof of liability and worker’s compensation insurance. The Respondent did not carry any Worker’s Compensation Insurance for employees during the course of this job because he claims not to have had any employees. The evidence shows some of the workers used by the Respondent were day laborers. The Respondent copied the time cards for the various persons working on the project and would submit them to the Complainant. The Respondent initially paid the wages to these persons from funds provided by the Complainant. Sometimes the Respondent paid the company providing the laborers and sometimes the Respondent would contact the laborers directly to do work on the job and the Respondent would pay them. The Respondent did not comply with statutes or rules governing social security, worker’s compensation or unemployment insurance, for these laborer’s on those occasions when the Respondent called them directly to do work. Rod McDonald, a framer, testified he considered himself an employee of the Complainant because he negotiated his hourly rate with the Complainant, turned his time into the Complainant, and was paid directly by the Complainant once or twice after which time the Respondent merely handled the paperwork and payment issues. Exhibits show the Respondent submitted time sheets and charged for McDonald’s time for the weeks ending July 16th , 23rd , 30th, August 3rd, 27th, and September 3rd, 1998. The Complainant testified he never paid McDonald directly and McDonald’s testimony on this matter is not considered credible. The invoice for July 15, 1998 shows the Respondent was already charging for labor performed the preceding week ($1,356.00). This is at the beginning of the construction which shows, and the Respondent acknowledged, that there was never any direct payment by the Complainant to workers who had been hired by the Respondent. The evidence simply does not support the Respondent’s contention that these workers were the Complainant’s employees. The argument that employee related costs are approximately 23% over wages and that the Respondent could not reasonably pay this when adding only 15% to labor cost does not establish a defense. It merely suggests that the Respondent did not intend to pay those employee related costs. It does not establish that the workers were the employees of the Complainant which assertion is suspect in light of the fact that the Complainant would then be responsible for possible employee related costs plus the 15% to the Respondent as a supervision fee. Regardless of the logic or illogic of the arrangement, the evidence shows that at various times workers were the Respondent’s employees. Work commenced in July, 1998. At the direction of the Complainant, the roof which originally had a slight slope (a 1/4 inch per foot) was raised a foot to a height of nine feet. Upon being raised, the roof no longer had a slope. Water was to be drained off by means of raised areas on the roof (crickets), which would direct water toward appropriately located drains. Crickets are an acceptable way to obtain drainage from a flat non sloping roof. A drawing dated August 21, 1998 showing the roof with the crickets was done by the architect. The drawing is not to scale and does not show the required dimensions of the crickets. At the hearing, the Complainant intimated that the outside slope of the roof could have been retained even though the roof was raised a foot and would have no slope inside the addition. The Complainant also asserted he was not sufficiently informed regarding the fact that the raised roof would have no incline with only the crickets to provide drainage. There was no satisfactory evidence that the Complainant communicated his wishes regarding the roof to the Respondent or the architect in a timely manner. The evidence shows that the Complainant took an active role in the construction of the addition including requiring changes as the project went along. Although this does not fully relieve the Respondent of certain responsibilities, it tends to modify the nature of the relationship between the parties. When a person with limited or no construction experience begins a project with incorrect plans, attempts to exercise detailed control over the project, make changes during the project as well as maintain minimal costs, that person must be prepared to accept their share of the responsibility for mistakes and some of the problems which may arise as a consequence of the above. Invoices submitted by the Respondent to the Complainant dated July 15, 1998 through September 17, 1998, amount to approximately $18,441.00 for materials, $11,468.00 for labor, plus 15% for the Respondent’s fee (approximately $4,483.00), for a total of $34,392.00. The Respondent executed lien waivers over the same period acknowledging payment of $34,345.00. It was not affirmatively argued by either side that the invoices and lien waivers constituted the total billings and payments between the parties. In the absence of evidence to the contrary, it is assumed the evidence reflects total billings and payments. At the foundation stage of the construction, the Respondent and architect became aware of the fact that the plans were wrong. The error was subsequently disclosed to the Complainant. It was determined the best solution would be to revise the plans and diminish the size of the individual rooms in the addition. The revised plans were not produced for the hearing and there is some question whether they were ever completed. In addition, there is some question of when the Complainant was informed in relation to the actual construction. According to the Complainant, he did not learn about the problem until after framing had been done. The exterior framing was begun even though revised framing plans were not provided. By the end of September and early October, 1998, areas of contention arose between the parties. The Respondent claimed that the workers were not being paid timely and the Complainant wanted a firm cost to finish the project rather than continuing the time and material arrangement. Work on the project ceased. By early November, 1998, the Complainant told the Respondent that he no longer wanted the Respondent on the job. The evidence consisting of the invoices and waiver of liens referenced in paragraph 11 above, with the invoice and lien waiver amounts almost the same, shows that the Respondent was being paid for the work being done. The assertion by the Respondent that he did not continue with the work because workers were not being paid is not accepted. Some areas which had been identified as problems by the Complainant were corrected by the Respondent. However, the addition was not completed by the Respondent. The Complainant had another contractor rebuild the roof and haul away debris. The Complaint was filed with the Registrar of Contractors (Registrar) on October 8, 1998. On November 9, 1998, Inspector Bob Mechsner (Mechsner), of the Registrar’s Office, performed an inspection of the work done at the Complainant’s Home. On November 13, 1998, Mechsner issued a Corrective Work Order (CWO) to the Respondent. The only items from the CWO which are still at issue concern reimbursement by the Respondent for the correction and completion of the roof by another contractor, the Respondent providing proof of worker’s compensation insurance and the question of reimbursement for debris removal by another contractor. These issues are more appropriately matters for resolution in a civil proceeding because they are more akin to traditional damages than restitution. Conclusions of Law The allegations of the Citation and Complaint consist of A.R.S. §32- 1154(A)(2), material departure from plans and specifications, (A)(3), violation of any rule, specifically A.A.C. R4-9-108 workmanship standards, (A)(4), failing to comply with statutes relating to worker’s compensation insurance (A)(7), wrongful or fraudulent acts, (A)(23), failure to take appropriate remedial action.

With respect to A.R.S. §32-1154(A)(2), the allegation is not sustained because the architect’s plans which were initially given to the Respondent were incorrect. The architect was the Complainant’s agent and It was not shown that the Respondent had any obligation or undertook the duty of ensuring the correctness of the plans. Under the facts of the case, the Respondent was entitled to rely on these plans. With respect to workmanship under A.R.S. §32-1154(A)(3)/AAC R4-9-108, the Respondent testified that the Complainant instructed him to confer with the architect regarding any problems in the field. After the Complainant decided to raise the roof, the architect and Respondent decided to make it without an incline because the rippers were more expensive than crickets. There is no evidence that the crickets would not have been satisfactory or the roof as built was of substandard workmanship. Another workmanship issue arguably relates to the failure of the Respondent to determine that the plans were wrong until a significant portion of the project had been built. Although it could be argued that prudence would dictate that actual measurements be taken to confirm the dimensions on a plan or design, the Respondent had a right to rely on the architect’s drawings and specifications. Under the facts of this case, the error is not attributable to the Respondent as a workmanship violation. The Findings of Fact in paragraph 8 establish the violation of A.R.S. §32- 1154(A)(4). The Respondent’s testimony on the issue was not the most consistent and at times left the impression that the Respondent was being less than forthright. It strains credulity that the Respondent with his years of experience as a contractor did not know when a person is working as an employee. Attempts by the Respondent to address the worker’s compensation and unemployment insurance issues after the fact, do not cure the violation. The question of wrongful conduct under A.R.S. §32-1154(A)(7) concerns the Respondent’s failure to timely inform the Complainant of the error with the architectural drawing and the Respondent commencing the framing despite knowledge of the error. The question of how and when the Complainant was informed of the error in design and the actual dimensions cannot be satisfactorily answered based on the evidence. It is obvious that the parties left significant issues to oral communication. This resulted in the architect and the Respondent testifying to one set of facts on certain issues and the Complainant testifying to another set of facts on the same issues. In view of this conflicting evidence and with no satisfactory corroboration to support the Complainant’s assertion, no violation is found on this ground. No violation is found on the Respondent’s failure to return to work or to complete the work. It is evident that the parties had strained each other’s patience and that the Complainant wanted to change the terms of the agreement and obtain a fixed price. It is also apparent that the Respondent was not going to be amenable to this because of potential changes by the Complainant and the problems which were already attributable to the incorrect plan, the change in the roof and the Complainant’s demands regarding the construction of a patio. No wrongful act is found on this latter ground. There was insufficient evidence presented on the nature of and responsibility for the construction debris which was removed at the Complainant’s expense. Although no wrongful acts have been found, the Respondent is informed that the evidence in its entirety suggests something less than straightforward dealing on the Respondent’s part. Even though a suggestion is not sufficient evidence to justify a violation for wrongful acts, the record in this case does not show the Respondent in a favorable light. No violation of A.R.S. §32-1154(A)(23) is found. The parties can resolve their financial differences regarding any reimbursement to the Complainant for rebuilding the roof and hauling away debris in civil court. The other matters raised by the CWO have been corrected or were not satisfactorily addressed so as to prove a violation.

. . .

Recommended Order In view of the foregoing it is recommended that commencing on the effective date of the Order entered in this matter that the Respondent’s Class B license be placed on probation for a period of 120 days. Done this day, July 2, 1999.

______________________________________ ALLEN REED Administrative Law Judge

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

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

By _______________________________

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