ALJDEC

99F-2148-ROC · Registrar of Contractors · 1999-08-20

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: August 12, 1999 at 9:00 a.m. APPEARANCES: Michael Bucca, Complainant, appeared on his own behalf. D. Kim Lough, attorney; Kyle Hart, and Jerry Palmer, appeared on behalf of Respondent. John Lindholtz appeared as a witness for Complainant. ADMINISTRATIVE LAW JUDGE: Dorinda M. Lang _____________________________________________________________________ Having heard the testimony of the witnesses and having read and considered the entire record in this matter, the undersigned Administrative Law Judge hereby makes the following Findings of Fact and Conclusions of Law and issues the following Recommended Decision to the Registrar of Contractors.

FINDINGS OF FACT 1. On March 27, 1995, Complainant hired Jerry Palmer, the qualifying party under Respondent’s Class B license, to design a home for the lot Complainant purchased in June 1995. Mr. Palmer is a licensed architect as well as a licensed contractor and did architecture work as well as some contracting for Complainant on this project. 2. While the proposal submitted by Respondent states that the owner, Complainant, would be responsible for grading and drainage plans (Exhibit A, pp. 2 and 6), Mr. Palmer hired a civil engineer for the grading and drainage plans. Mr. Palmer paid the engineer and was reimbursed by Complainant. Mr. Palmer testified at hearing that he is not licensed to design sewer systems and must rely on licensed civil engineers for that information when designing a home. 3. The plans for the home, including the grading and drainage information, were submitted to the City of Scottsdale for approval. After requiring a notation on the plans that a sewer line running next to the home was a dry sewer, the City approved the plans on March 6, 1996. The City charged Complainant a “sewer tap fee” for the privilege of tapping into Scottsdale’s sewer system. The plans called for tapping into a sewer line which ran in front of Complainant’s home. 4. The home was built according to the plans, though Mr. Palmer left the project in September 1996 and an unlicensed contractor completed the job. While the sewer tap was placed after Mr. Palmer left the project, a trench was dug to the sewer while he was there. Prior to digging the trench, the construction site manager, Kyle Hart, opened the sewer cover in front of Complainant’s home to inspect its depth. He found water at the bottom of the sewer and proceeded to dig the trench. 5. On April 16, 1997, Complainant moved into the completed home. (The Certificate of Occupancy was dated April 9, 1997.) On June 13, 1997, Complainant received a letter from the City of Scottsdale informing him that his home was connected to a dry sewer and that he would be required to install a septic system. On or about September 2, 1997, Complainant received a quote for the installation of a septic tank in the amount of $17,182.00. On December 11, 1997, he received another letter from the City of Scottsdale stating that the City would not accept responsibility for the error and would no longer pump the dry sewer for Complainant. Complainant subsequently installed a septic system. 6. On or about January 25, 1999, Complainant filed a complaint with the Registrar of Contractors alleging as follows: 1. Home at 10635 E. Pinnacle Peak Rd completed on April 9, 1997. 2. City of Scottsdale sent notification on June 13,1997 that the home was incorrectly connected to a dry sewer main. 3. Construction manager Palmer Building group also completed plans for home and pulled city permit in error. Palmer also selected and paid for engineer who completed site work. 4. Palmer Building group has not responded to repeated requests to pay for, or provide errors in omissions carrier to pay for additional costs to retrofit home for septic.

7. Complainant appeared at hearing and argued that he should not have to pay the cost of retrofitting his home for a septic tank due to an error on the part of another party. 8. Respondent appeared at hearing and argued that Mr. Palmer was justified in relying on the civil engineer’s report and the City’s plan approval (especially since they charged Complainant a sewer tap fee) in completing Complainant’s home plans. Respondent also argued that this complaint is against Mr. Palmer’s activities under his architect license and not under his contractor’s license and so should be dismissed as being brought in the wrong forum. Respondent further argued that Complainant was contractually responsible for the grading and drainage plans and was, therefore, in a direct contractual relationship with the civil engineer against whom he should proceed directly. Finally, Respondent argues that the City is at fault for providing incorrect sewer information when approving the plans.

CONCLUSIONS OF LAW 1. This matter is within the jurisdiction of the Registrar of Contractors pursuant to A.R.S. §§32-1104(A)(4) and 32-1156. 2. The Citation and Complaint issued by the Registrar of Contractors in this matter alleged potential violations of A.R.S. §32- 1154(A)(3) and (7) and A.A.C. R4-9-108. 3. The Arizona Revised Statutes at §32-1154(A)(3) provides grounds for suspension or revocation of a contractor’s license for “[v]iolation of any rule adopted by the registrar”. The only applicable rule in the Arizona Administrative Code in this case refers to workmanship standards. A.A.C. R4-9-108. The problem in this case arose out of a design defect which resulted in a non-working sewer system. It is undisputed that the plans for the home were followed, but that the plans resulted in connection to a dry sewer. Therefore, it has not been established that the Respondent has violated the rule requiring that workmanship standards be met. 4. The Arizona Revised Statutes at §32-1154(A)(7) provides for suspension or revocation of a contractor’s license for the “doing of a wrongful or fraudulent act by the licensee as a contractor resulting in another person being substantially injured”. 5. In this case, the Respondent relied on a licensed civil engineer who in turn, it appears, relied on information from the City of Scottsdale. It was established that this is standard practice for a licensed architect, and there is no fraud or negligence involved in doing so. There is insufficient evidence to establish that Respondent knew or should have known that the sewer was dry, especially after one of its workers confirmed that there was water in the sewer. However, the result in this case was still a home owner with a home which was uninhabitable without incurring significant further expense, arising from plans which called for connection to a dry sewer line. 6. Design professionals in Arizona have been found not to warrant their work absent an express guarantee. Donnelly Const. Co. v. Oberg/Hunt/Gilleland, 677P.2d 1292, 139 Ariz. 184 (Ariz. 1984). 7. In this case, however, Mr. Palmer was providing architect services in conjunction with contracting services. An Arizona contractor furnishing plans for construction has been held to guarantee their sufficiency. Kubby v. Crescent Steel, 466 P.2d 915, 7 Ariz. 459 (Ariz. App. 1968). Subsequent cases have affirmed implied warranties of fitness for purpose and habitability on the part of a contractor. Woodward v. Chirco Const. Co., Inc., 687 P.2d 1269, 141 Ariz. 514 (Ariz. 1984); Nastri v. Wood Bros. Homes, Inc., 690 P.2d 158, 142 Ariz. 439 (Ariz. App. 1984). 8. While Mr. Palmer acted reasonably in relying on licensed professionals, his privity of contract with Complainant and the implied warranties arising out of his work as a contractor make him liable for doing a “wrongful” act in breaching his implied warranties of fitness and habitability of the home. Regardless, Mr. Palmer’s care to rely on the proper sources to ensure the accuracy of his plans should be considered a factor in mitigation in this case. Further, there is nothing in this Recommendation which would preclude Mr. Palmer from pursuing an action against the engineer or the City of Scottsdale in order to determine the ultimate responsibility for the harm done to Complainant. However, between Complainant and Respondent, the responsibility for the problem with the sewer system falls on Respondent. 10. Respondent’s argument that Mr. Palmer was acting under his architect’s license and not under his contractor’s license and therefore is being pursued in the wrong forum is not supported in reason. Clearly, Mr. Palmer was directing the course of construction under his own plans and was able, at any time until he left the project, to adjust the plans to meet the realities of construction should he have discovered the dry sewer. Mr. Palmer’s activities as an architect and as a contractor were sufficiently entwined to make him responsible for his activities under his contractor’s license. 11. Respondent’s argument that Complainant was contractually responsible for the grading and drainage plans is likewise not supportable. Though Complainant may have been responsible for those particular plans, Respondent did supply the engineer and, regardless of that fact, still gives a warranty that the home will be habitable and fit for its purpose. 12. Finally, Respondent’s argument that the City of Scottsdale or the engineer are at fault may be true. Again, Respondent is free to pursue them and receive reimbursement of his costs in this case if the civil court awards it. However, the duty to the home owner to provide a habitable home is the dispositive factor here. Complainant should not be forced to chase every potentially liable person in order to receive the home he paid for. The law provides that he is entitled to a warranty from his builder, with whom he contracted directly. It is the contractor, who is in the business of preparing plans and building homes, who is in a better position to find the ultimately liable party. 13. It is not a proper function of either the Office of Administrative Hearings or the Registrar of Contractors to adjudicate and award money damages which must be recovered, if at all, through civil court action. However, the Registrar is empowered by statute to impose reasonable conditions which may serve to reduce or eliminate any otherwise appropriate disciplinary penalties for proven violations of the State’s contracting laws. Whenever the performance of corrective or remedial measures on a job-site is no longer warranted or possible, the inclusion of a condition in the nature of restitution, total or partial, is fully appropriate and equitably justified. In this way, a Complainant in an administrative action who has sustained the burden of proving contracting law violations does not have to await the outcome of protracted civil litigation in order to recover at least a portion of a demonstrated loss and, of equal or perhaps greater significance, a licensed contractor/Respondent is given the means to control, to some extent, the severity of any disciplinary penalty. Moreover, any amounts paid in satisfaction of a condition affecting licensure may properly be evaluated, credited or applied against any civil judgment ultimately obtained in favor of either party.

RECOMMENDATION In view of the foregoing, it is recommended, commencing on the effective date of the Registrar’s Order, (thirty-five [35] days after the date of mailing by the Registrar of Contractors) that Respondent’s Class B license be temporarily and actively suspended until the Registrar receives proof that Respondent has paid restitution to Complainant in the amount of $17,182.00. In consideration of the mitigating factor of Mr. Palmer’s reliance on a licensed engineer and the representations of the City of Scottsdale, it is not recommended that any further disciplinary action be imposed herein.

Done this day, August 23, 1999.

OFFICE OF ADMINISTRATIVE HEARINGS

______________________________________ Dorinda M. Lang 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 ___________________________

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