ALJDEC

99F-2235-ROC · Registrar of Contractors · 1999-08-06

STATE OF ARIZONA IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Pursuant to notice, a formal hearing was held in this case on August 4, 1999, in Phoenix, Arizona, before Neal H. Jordan, Administrative Law Judge of the Office of Administrative Hearings. APPEARANCES For Complainant: James Griffin, pro se For Respondent: Tim McDaniel, Owner and Qualifying Party, pro se

FINDINGS OF FACT Based upon all the evidence of record, the following findings of fact are determined: 1. Respondent is a licensed contractor holding a Class B License No. 125649 that has been renewed to July, 2000. Tim Edward McDaniel is the owner and qualifying party for this license. 2. Complainants own a patio home located on North 26th Street in Phoenix, which home they had been leasing to third party tenants since 1992. In 1998, Complainants decided to sell the home they were then residing in and move into the patio home on N. 26th Street. Before doing so, however, they made the to decision to have extensive remodeling done in accordance with specifications they had drafted. 3. Respondent made a proposal (the “First Contract”) to Complainants to perform the remodeling work in accordance with a document dated November 29, 1998, which incorporated the specifications drawn by Complainants. The First Contract price for the work was $17,245.00, which amount was to be paid by an initial payment of $5748.30, with the balance being payable in five (5) weekly payments of $2,299.34 each. This Contract provided that the Complainants “prefer to have all work completed by December 24, 1998.” Complainants’ Ex. 1. 4. Respondent commenced the work under the First Contract on December 1, 1998. On December 16, 1998, Complainants and Respondent entered into a second proposal (the “Second Contract”) that provided for additional work to be added to the First Contract in six different areas for an additional price of $8,780.00. The balance then due under the First Contract was then $6,998.00, which, when added to the Second Contract, resulted in the adjusted amount of $15,678.00 remaining payable. The total aggregate contract price for both contracts was now $26,025.00. The payment schedule was then changed to accommodate the second Contract price by providing for five (5) new weekly payments of $3,135.60 each. See Complainants’ Ex. 2. 5. The payment schedule under the First Contract contemplated that the work would be completed by December 29, 1998, notwithstanding Complainants desire for the work to be completed before Christmas. The Second Contract created a new five week payment schedule and must be construed to mean that the work under both contracts was then contemplated to be completed by January 20, 1999. 6. Complainants continued to make regular weekly payments under the First and Second Contracts (collectively the “Contracts”) but did so without regard to the pace or progress of the required work being performed by Respondent. 7. In contemplation of the work being completed on the patio home in a timely fashion, Complainants sold their then residence, but when it came time to close on the sale of that home, the patio home was not in a habitable condition due to inordinate delays by Respondent forcing Complainants to execute a leaseback arrangement for a one month period at a cost of $2,000.00. When this leaseback occupancy expired, the patio home was still not in a habitable condition thereby causing Complainants to accept other living accommodations with friends, requiring them to store their furniture at another added expense, and settling their daughter in a different residence until the completion of the patio home. These findings acknowledge the Complainants were coping with a most difficult and stressful situation. 8. Notwithstanding Complainants continuing efforts to work with Respondent, including making regular payments beyond the value of completed work, the progress of work was unreasonably slow and delayed without justifiable cause. Respondent maintains that the value of the payments were consumed by onsite changes and extras continually being made to the work by Complainants, however, he produced no tangible or credible evidence to even suggest that this was indeed the case. 9. The day ultimately arrived at the end of February, 1999, when Complainants had no place else to live except for the patio home and, notwithstanding its incomplete and trashed condition, they moved in just to have a place to live. In order to do so they had to implore Respondent to hook up the light fixtures (after they paid $200.00) just to have lights in the home. 10. The weight and sufficiency of all the evidence of record supports the finding that from the date work commenced under the Contracts until the end of January, 1999, Respondent has: a) failed to properly provide for adequate labor and materials to complete the work in a timely and reasonable manner; b) failed to perform the work in a professional and workmanlike manner; c) failed to adequately protect the work in its partially completed state from damage by the elements and vermin; and, d) failed to employ properly licensed contractors in the plumbing trade to accomplish the work in a safe and acceptable manner. 11. The evidence also establishes that the nature and extent of the work to be performed by Respondent under the Contracts clearly required a building permit to be obtained from the City of Phoenix. Not only did Respondent fail to obtain any such permit, he incorrectly, at best, informed Complainants that one was not needed or required.[1] 12. On or about February 2, 1999, Respondent is found to have abandoned the job, and although he had been paid 92% of the contract price on the Contracts, he left the construction site in a deplorable condition, with the work having been only completed to the extent of 40 to 50%. 13. During the month of February, 1999, Respondent, in response to the complaint being filed with the Registrar of Contractors, showed up sporadically and accomplished work of little consequence given the extensive delays already experienced and having received virtually all of the contract price under the contracts.[2] 14. As a result of the complaint being filed in this matter, a jobsite inspection was conducted by an agency assigned inspector which led to the issuance of a corrective work order directive (the “Corrective Work Order”) being sent to Respondent requiring that corrective or remedial work be performed within a stated period of time. Complainants’ Ex. 5. 15. The Corrective Work Order confirmed the items listed in Complainants complaint as being incomplete and, further, found six of the items to be of poor workmanship requiring corrective repairs. The more egregious issue addressed in the Corrective Work Order concerned Respondent’s failure to obtain necessary and required construction permits. (See Finding No. 11). It is unknown to what extent the construction performed by Respondent meets current and applicable building codes as adopted by the City of Phoenix.[3] 16. To the date of the hearing, Complainants have continued to live in their patio home under untenable conditions directly the result of the activity or inactivity of Respondent. The work described in the complaint and the Corrective Work Order has not being attended to in any reasonable manner consistent with Respondent’s obligations under the Contracts. The conditions under which Complainants must continue to live include: a) having to bail out the kitchen sink after washing dishes into hand buckets in order to dispose of the waste water elsewhere; b) conditions that make the master bathroom virtually unusable for the purposes intended; c) having walls, studs and other areas exposed to damage by the elements and vermin; d) having portions of the construction remaining incomplete; and, e) living with the Corrective Work Order fully ignored. 17. The evidence supports the finding that Respondent, on at least one occasion, informed Complainants that they should find someone else to complete the work. Further, Respondent has failed to make any reasonable effort to effectuate repairs, to make corrections, to complete the contracts and to obtain any necessary building permits. 18. Respondent’s sole defense is his testimony that the money payable under the Contracts was used up in changes and extras ordered by the Complainants, however, as noted in Finding No. 8, Respondent has produced no credible evidence to support such a defense. 19. The evidence produced by Complainants strongly supports a finding that Respondent is unwilling to complete and/or correct the work provided for under the Contracts. In addition, Complainants have also produced credible and persuasive evidence that provides the basis upon which to determine what the cost would be to correct, repair, and complete the Contracts due to Respondent’s breach thereof. Complainants’ Exhibit No. 8 states the cost to accomplish such work will be $18,500.00, and Complainants’ Exhibit No. 9 states the cost will be the amount of $15,840.00. It is found on the basis of this credible evidence that the cost Complainants will incur to complete and correct the work of Respondent, as required under the Contracts and the Corrective Work Order, is the sum of $15,840.00, which is found to and fairly represents the direct and compensable damages sustained by Complainants in this matter. (Note: such damages do not take into consideration other consequential damages that Complainants have sustained, the itemization of which has not been presented in this case).

CONCLUSIONS OF LAW 1. 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). 2. The Complainants have brought this complaint and accordingly bear 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 (App. 1996). The Citation and Complaint alleges that Respondent violated A.R.S. §32-1154 A (1), (2), (7), (23), and (3), namely Rule R4-9-108. These provisions provide for disciplinary action to be taken against a licensee if, on the basis of credible evidence produced at a duly noticed hearing, it is found that a licensee has violated any of such provisions, either in whole or in part. The preponderance of the evidence convincingly establishes that not only did Respondent abandon the work under the Contracts, but also refused to continue without legal excuse or cause in violation of A.R.S. §32-1154 A (1). The issue of whether changes or extras were authorized by Complainants so as to consume the payments already made was not persuasively established and, in the absence of written change orders (which would adjust the price accordingly), as required by the Contracts, it was Respondent’s obligation to perform and complete the Contracts according to their terms. The requirement that all change orders be in writing can be waived if as a regular course of conduct the parties neglect or fail to insist on written changes; however, in this case, facts sufficent to establish a waiver of such requirement were not presented, although ample opportunity to do so was afforded Respondent. The preponderance of evidence weighs heavily against Respondent in connection with his failure to obtain necessary and required building permits. The testimony of the Complainants and the agency assigned inspector clearly point to this fact and furnishes the basis for the conclusion that Respondent has failed to adhere to the specifications set forth in the Contracts, and also failed to abide by the building codes applicable to this project. The failure to procure such building permits was clearly intentional for the apparent purpose to avoid the concomitant inspections attendant to the issuance of building permits. The totality of evidence on this issue supports the conclusion that Respondent’ conduct was in violation of A.R.S. §32-1154 A (2). This issue is particularly troublesome and one that is properly to be considered as a matter in aggravation when determining appropriate discipline against Respondent’s license. The preponderance of the evidence establishes that Respondent has committed a series of wrongful acts, all in violation of A.R.S. §32-1154 A (7). The weight of all the evidence of record convincingly establishes that Respondent intentionally failed to comply with the Corrective Work Order issued by the Registrar of Contractors in violation of A.R.S. §32-1154 A (23). A complainant is not required to suffer through a seemingly endless succession of inadequate and/or ineffective repair efforts by a contractor, whether in an attempt to comply with a Corrective Work Order or to meet any legal obligations under binding agreements. The facts of this case present a sound and justified reason for a departure from a long-standing policy of the Registrar of Contractors that presumptively allows a contractor an opportunity to correct or repair construction deficiencies which, through the hearing process, are found to exist. Respondent has presented no credible evidence that would satisfy the presumption in his favor. In fact, Complainants have provided sufficient evidence that effectively rebuts this presumption. The Registrar of Contractors’ authority in cases such as presented in this matter, includes the ability to impose restitution to restore complainants to a position they would have been in had the responsible contractor performed in a good and workmanlike manner and had not breached relevant contracts in a material manner. Based upon the weight and credibility of the evidence of record, an appropriate and reasonable condition in this case would consist of and order for the payment by Respondent to Complainants of the sum of $15,840.00 as restitutionary damages. The Registrar may order a “restitutionary remedy … as part of the Registrar’s regulatory authority to take appropriate disciplinary action against those who violate the licensing … “ laws set forth in A.R.S. § 32- 1154A (1) through (24), inclusive. An administrative award of damages is not an unconstitutional exercise of administrative authority where due process procedural rights are protected, where the authority to prohibit conduct has been well defined as in A.R.S. § 32-1154, and where judicial review is available as provided in A.R.S. § 12-901, et seq. Sunpower of Arizona v. Arizona State Registrar of Contractors, 166 Ariz. 437, 803 P.2nd 430 (App. 1990). 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 his license and that complaint was satisfactorily resolved by compliance as directed by the agency. 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 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 written proof that Respondent has paid or tendered the sum of $15,840.00 as restitutionary damages to Complainants. It is further recommended that if Respondent makes full and complete payment or tender to Complainants of said amount on or before the effective date of the Order entered in this matter, then the said license suspension shall not take place. DONE AND ENTERED, this day, August 6, 1999

______________________________________ Neal H. Jordan 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

James and Mary Griffin 3515 N. 26th Street Phoenix, AZ 85016

KOTH Construction 5527 E. Tano Street Phoenix, AZ 85044

By ___________________________

----------------------- [1] If a proper permit had been obtained and progress inspections made by authorized building officials, the difficulties Complainants have experienced most likely would not have occurred. [2] The Registrar of Contractors’ letter notifying Respondent of the complaint was sent February 8, 1999. [3] The unanswered question is whether the Complainants would have been permitted to occupy the patio home if a building permit had been obtained. Based upon the facts as presented, it is doubtful if a certificate of occupancy would have been issued to allow the present occupancy.