ALJDEC

99F-1526-ROC · Registrar of Contractors · 1999-08-11

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: August 10, 1999 APPEARANCES: Danielle Girard, Secretary-Treasurer on behalf of Complainant, Creative Design Flooring, Inc., Case No. 99F-1338-ROC James Rivard, President, on behalf of Complainant, Rivard’s Cooling and Heating, Inc., Case No. 99F-1526-ROC Joel Sannes, Esq., on behalf of the Respondent, DM Western Sun Building Industries, L.L.C. ADMINISTRATIVE LAW JUDGE: Allen Reed _____________________________________________________________________

Preliminary Facts 1. In approximately April, 1998, the Respondent contracted with Craig and Kim Janney to remodel their home in the Arcadia area of Phoenix Arizona. The amount of the contract after change orders was in excess of $230,000.00. 2. As part of the remodeling project, the Respondent contracted with the Complainant, Creative Design Flooring, Inc. (Creative), for the installation of ceramic tile in bathrooms, wood flooring through the majority of the house, some carpeting, and vinyl and carpeting in a guest house. 3. The Respondent also contracted with the Complainant Rivard’s Cooling and Heating, Inc. (Rivard), for the installation of two heat pumps in the main house and one heat pump in the guest house. 4. On or about September 25, 1998, the Janneys refused to allow the Respondent to finish the work. The Respondent had been paid approximately $180,000.00, on the project. By letter dated September 28, 1998, the Respondent notified subcontractors that no further work was to be done at the Janney’s. 5. At the time of the Janney’s denial of access, Creative had installed ceramic tile, and laid the wood floor and carpeting in the main house. No work had been done by Creative in the guest house. 6. Rivard had installed the heat pumps and ductwork in the main house but not the guest house. 7. In November, 1998, The Janneys filed a complaint against the Respondent with the Registrar of Contractors (Registrar). The complaint was based in part on asserted problems with the work done by Creative and Rivard. 8. There is no evidence of record in the instant hearing that the work of either Creative or Rivard was inspected or evaluated by an inspector from the Registrar’s Office. The evidence was that the Janneys refused to allow the Respondent and therefore the Complainants, to do any corrective work which might have been necessary. 9. An inspection of the home by Elite Home Inspections, Inc. (Elite), on March 12, 1999, addressed multiple concerns. Findings in the report which are relevant in the instant case, are that the flooring was not complete, tub and shower tile was uneven, bathroom floor tile was cracked, heating did not operate and the airflow was restricted. 10. The Janney complaint against the Respondent came on for hearing from April 26 to 28, 1999, at which time it was settled by the parties off the record and the complaint was withdrawn (Case No. 99F-1356-ROC). 11. A separate settlement dated July 29, 1999, signed by counsel for the Janneys and the Respondent, and pertaining to a Superior Court case on the same issues as the administrative case, provides that the Respondent is to pay $20,000.00 to the Janneys by July 29, 1999, plus $25,000.00 by October 28, 1999.

Case No. 99F-1338-ROC Findings Of Fact 1. The Respondent entered into the contract with Creative in early September 1998. The contract amount was $17,975.00 for the main house and $792.00 for the guest house. A change order in the amount of $823.00 brought the total amount to $19,590.00. 2. On September 15, 1998, the Respondent paid $6,000.00 to Creative for the wood flooring materials. This is the only payment made by the Respondent to Creative. 3. During the first part of September, the remodeling project was left under the control of the Respondent’s supervisor, Alan Ayers (Ayers). Creative installed the ceramic tile in bathrooms. Shower and tub surround tile did not go all the way to the respective bathroom ceilings. The evidence on whether Creative was instructed to install tiles to the ceilings is conflicting. Ayers was unaware of this requirement at the time the work was done, Creative asserts it was never informed of the requirement. The Respondent’s majority owner, Dan McIntyre (McIntyre), testified he verbally informed Creative of the requirement. Considering the haphazard communication between the parties with respect to the specific requirements of this project, the weight of the evidence is that the Respondent did not satisfactorily inform Creative that the tile was to reach the ceiling. The lack of bull nose tile at the shower door also falls in the poor communication category and this is attributable to the Respondent. 4. Additional tile problems concern the master bathroom floor which was not begun on center causing the tiles at the walls too be uneven, a crack running through six floor tiles, failure to begin the shower tiles on center, poor grout joints and poor tile work on the sink counter tops in the laundry room and one of the bathrooms. 5. A new bathtub which had been installed in one of the bathrooms by the Respondent was chipped and had grout in it as a consequence of the tile work. 6. The wood floor which was installed covered nearly 1700 square feet. Video evidence shows that some areas of the floor have gaps between the planks and glue seepage or spillage. It is noted that the video only showed a limited area of the floor and did not establish the entire floor was in the above condition. Testimony at the Janney hearing indicated that the glue problem existed in the kitchen, living and dining rooms. 7. There was no evidence that an inspector from the Registrar’s Office ever made a determination regarding the workmanship of the floor or the tile. However, the evidence showed that some of the tile and wood floor work is of poor quality and would in all likelihood have required a certain amount of corrective work. 8. Toward the end of September, invoices were submitted by Creative to the Respondent for final payment on the work to the time of being barred from the home by the Janneys. The Respondent did not pay and verbal conversations between the principals of Creative and the Respondent took on a hostile tone. 9. Creative filed its complaint with the Registrar on October 20, 1998. Based on the evidence presented at the hearing, the Complainant seeks $12,798.00 as the amount owing (original contract for $18,767.00, plus $823.00 for leveler and labor, minus $6,000.00 paid by the Respondent and minus $792.00 for no work on the guest house).

Case No 99F-1338-ROC Conclusions Of Law The Citation and Complaint allege violation of A.R.S. §32-1154(A)(7), wrongful or fraudulent conduct, and (11), failure to pay for materials or services when the licensee has the capacity to pay, or if the licensee lacks the capacity, when the licensee has received sufficient money for the particular project.

1. As part of its defense, the Respondent argues it has a set off against the claims of Creative. The case is novel to the extent that there was no independent evidence by an inspector of the Registrar’s Office regarding the necessity for corrective work. In addition, Creative was given no opportunity to correct any work which may not have met minimum standards, because the Janneys prevented the Respondent from finishing the contract. The Respondent estimates corrective work for the tile related problems including the bathtub, to be in excess of $6000.00. The Respondent assessed the replacement of the wood floor at the original contract amount ($11,462.00), plus an additional sum for labor to remove the current floor. These two amounts far exceed the amount owing to Creative. However, the evidence was insufficient to establish that the entire wood floor would have to be replaced and there is no evidence of the actual cost of any corrective work for either the tile or floor, or of any apportionment of the Respondent’s settlement with the Janneys for the tile or floor problems. The Respondent’s estimates (guesses) appeared highly self serving and lacked independent and objective evaluation. The written statement of Gene Orico (Orico) was considered. Aside from traditional hearsay problems, it is also noted that Orico does ceramic work for the Respondent. The document is given little weight and it is concluded that when all the evidence is considered it is insufficiently reliable to satisfactorily establish the amount of set off, if any, against Creative by the Respondent. However, the evidence is such that it cannot be said that the Respondent was without justification in presenting the defense and therefore neither fraud or wrongful conduct under (A)(7) has been proven. 2. The Respondent’s defense to (A)(11), failure to pay, is essentially that it had not been paid by the Janneys prior to being terminated. According to McIntyre, the Respondent may have been paid $8,000.00 on the flooring. This testimony was also somewhat uncertain. In any event, based on the most competent evidence, the Respondent was not paid between $40,000.00 and $50,000.00 which remained on the Janney contract, has had to take a loan to pay $20,000.00 to settle with the Janneys, still owes $25,000.00 on the settlement, has paid $5,000.00 in attorney fees on the case and owes another $25,000.00. McIntyre testified he was unable to pay Creative and Creative did not show by a preponderance of the evidence that the Respondent had been paid or was otherwise able to pay the amount which is claimed as owing. The Respondent has presented a competent defense to the administrative allegation and no violation of (A)(11), is found in the administrative context. 3. Based on conclusions 1 and 2 above, the monetary issues presented in this case are more properly addressed in a civil forum.

Case No. 99F-1526-ROC Findings Of Fact

1. On July 31, 1998, the Respondent and Rivard contracted for the installation of the heating and cooling system at the Janney home. The contract was for the ductwork and two heat pumps in the main house, and a heat pump in the guest house. The contract amount was $10,500.00. 2. On August 26 1998, the Respondent paid Rivard $5,250.00. 3. Rivard installed the heat pumps and ductwork in the main house and performed a flow test which showed the system was operating properly. The guest house installation was not accomplished as a consequence of the Janney’s disallowing the Respondent to complete the contract. 4. After unsuccessful attempts to obtain payment from the Respondent, Rivard filed its complaint with the Registrar on November 10, 1998. 5. The Elite report of March 12, 1999, shows the heating did not work but does not give a reason, and asserts that the air flow is restricted possibly because of undersized ductwork. There is no competent evidence of what if anything is, or was, required to correct the above noted conditions, or the cost of any such corrections. 6. The cost of materials, labor and profit for the heat pump which was not installed in the guest house is estimated at $2,000.00. The Rivard claim is for $3,250.00.

Case No. 99F-1526-ROC Conclusions Of Law The allegations in the Citation and Complaint concern A.R.S.§32- 1154(A)(7) and (11), previously referenced above in the Conclusions of Law, Case No 99F-1338-ROC. 1. Essentially the same defense (set off for poor workmanship), is presented in this case as was presented in Case No. 99F-1338-ROC (see above). However, the Respondent did not present credible evidence to establish cause or responsibility for the heat not working or purported restricted air flow. Nor did the Respondent establish or even attempt to establish a specific amount as a monetary set off for those problems. It is noted that the Elite inspection was nearly six months after Rivard last worked on the system. There was no evidence of how the system operated during that time (including a full winter season), when it ceased operating or anything else which would shed additional light on Elite’s findings. Based on this lack of evidence, no amount can be determined for any set off especially in light of the fact that there is insufficient evidence for a finding that the system failure was attributable to Rivard. 2. The Respondent testified he had only been paid $5,000.00 toward the heating and air conditioning on the Janney contract. There was no competent evidence to refute this testimony. The testimony regarding the Respondent’s financial condition as set forth in paragraph 2 of the Conclusions of Law in Case No. 99F-1338-ROC above, is incorporated into the instant conclusion as is the testimony that the Respondent is presently unable to pay any amount which may be properly owing. 3. The monetary issues presented in this case are more appropriately in a civil forum and no violations of A.R.S.§32-1154(A)(7) or (11), are found in the administrative context. Recommended Order In view of the foregoing it is recommended that the Citation and Complaint in Case Nos. 99F-1338-ROC and 99F-1526-ROC, be dismissed.

Done this day, August 13, 1999

______________________________________ Allen Reed Administrative Law Judge

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

Registrar of Contractors Mr. 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