ALJDEC

99F-3105-ROC · Registrar of Contractors · 1999-09-24

STATE OF ARIZONA IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Pursuant to notice, a formal hearing was held in this case on September 24, 1999, in Phoenix, Arizona, before Neal H. Jordan, Administrative Law Judge of the Office of Administrative Hearings. APPEARANCES For Complainant: Peter Loo, pro se For Respondent: Attorney John Tellier, Esq.

FINDINGS OF FACT Based upon all the evidence of record, the following findings of fact are determined: On June 21, 1998, Complainant and Respondent executed a written purchase contract (“Contract”) whereby Complainant agreed to purchase and Respondent agreed to construct a new home on Lot Number 224, in that subdivision known as Country Meadows, located in Glendale, Arizona. The Contract specified a purchase price of $116,500.00 and that Complainant made a down payment of $3,750.00. Respondent’s Ex. A. The parties also executed a Work Equity Agreement, bearing a last signature

date of October 13, 1998, whereby Respondent agreed to allow Complainant to perform interior painting of the new home for which the amount of $1,100.00 would be applied towards further down payments on the home. Respondent’s Ex. B. By a letter dated December 28, 1998, Complainant notified Respondent that he was again bringing to Respondent’s attention certain deficiencies that were of serious concern to Complainant. In particular, Complainant was anxious about the suspended ceiling in the kitchen not being properly anchored, that drywall was cracked and not properly installed, and other matters. This letter also contained a statement that “NO PATCHWORK IS ACCEPTABLE,” and that “I WILL NOT accept any patchwork on my new house. The kitchen area MUST be re-done correctly and I will request to inspect prior to texturing and painting.” Respondent’s Ex. F. Of particular note in this letter is Complainant’s statement in the last paragraph wherein he writes that “I will withdraw my contractual agreement with Hancock, and request for all advanced monies and damages (sic).” Id. On January 24, 1999, Complainant sent a letter to Respondent expressly stating “This is to inform you that I am withdrawing from my attempt to purchase this new home at your Country Meadows subdivision.” The purported reasons for this action continued to be Complainant’s concern over alleged deficiencies in construction, namely, the items referenced in Finding No. 3, and stating that the drywall in particular had not been redone as he requested. Respondent’s Ex. C. This letter asked for a full return of Complainant’s deposit. Id. Notwithstanding the letter evidenced by Respondent’s Exhibit C, Respondent continued with the construction of the home to its final completion and inspection. The evidence establishes that throughout construction the county building officials inspected each stage of construction, as required by the 1994 Uniform Building Code, and on January 20, 1999 gave final approval to all phases of construction. Respondent’s Ex. G. On February 1, 1999, Respondent, by its authorized construction personnel, conducted a “Ready Walk” during which any incomplete or unfinished items of construction were identified for completion, correction or repair. Respondent’s Ex. H. The testimony evinces that the purpose of this “Ready Walk” is to anticipate and correct any such items before the final walk- through with the Complainant, or, typically, with any buyer. The testimony establishes that most of these items were completed and/or repaired as required. A final walk-through of the completed house was scheduled by Respondent for February 9, 1999 with Complainant. The purpose was to allow Complainant the opportunity to identify incomplete or unfinished items in order to prepare a “punch list” prior to a closing of escrow on the home, which list was to give Respondent the opportunity to fully complete the home as required by the Contract. At this scheduled walk-through, Complainant appeared but after determining that a “rotten stud beam” had not been replaced (see Complainant’s Ex. 1D and 1E), that the suspended kitchen ceiling was allegedly not properly secured to the trusses to his satisfaction (see Complainant’s Ex. 2A and 2B), that certain gaps were not corrected above and below a certain window to Complainant’s satisfaction (see Complainant’s Ex. 1B and 1C), and that the entire drywall covering the walls and ceiling in the kitchen area had not been completely replaced with an opportunity for Complainant to inspect, Complainant refused to complete the walk-through and left the construction site. (See note on Respondent’s Ex. I). In light of Complainant’s statements contained in Respondent’s Exhibits C, D, and F, Respondent sent a registered letter to Complainant requesting he sign and return an enclosed form evidencing has assent to a cancellation of the Contract. Respondent’s Ex. I. On February 14, 1999, Complainant signed a document entitled “Request For Cancellation” acknowledging a deposit of $3,750.00. This cancellation document was accepted and approved by Respondent on February 18, 1999. Notwithstanding Complainant’s continuing statements that it was Respondent who canceled the Contract, the evidence of record establishes that Respondent did not solicit a cancellation of contract but merely responded to Complainant’s overtures announcing his intention to withdraw his acceptance of the Contract. Consistent with Complainant’s claim that Respondent called for the cancellation of the Contract, he is claiming by way of relief a return of the $3,750.00 down payment, and under the Work Equity Agreement reimbursement for the sums of $600.00 paid to a painter friend who assisted Complainant in painting the interior of the home, $100.00 for the rental of a paint sprayer and compressor, and $800.00 to compensate Complainant personally for his time spent in painting the interior of the home on his own behalf. The evidence is insufficient to provide a basis for a finding that the amounts claimed by Complainant for the interior painting were in fact incurred. Certainly, Complainant did provide work equity by painting the interior of the home, but without checks, receipts or other independent evidence to establish the cost or value of the same, the claim for relief in this regard has not been established. Although the testimony of Complainant is that Respondent has since sold the home to another party, no evidence was produced to established when such a sale occurred or at what price.

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.”) It is the Complainant’s position that it was Respondent who breached the Contract by not acceding to his demands that all repairs be made at his direction and under a perceived right of personal and incremental inspection. Conversely, it is Respondent’s claim that Complainant breached the Contract by announcing in writing prior to the completion of the home that he was not going to honor his obligations under the Contract. Respondent presented exhibits and testimony at the hearing that pointedly raises the defense of breach of contract based upon the contention that the Complainant had anticipatorily repudiated the Contract. It is contended that the evidence established that Complainant’s conduct conveyed a very clear intent not to accept the home or be bound by the Contract. “Anticipatory breach of contract exists where the repudiating party expresses a positive and unequivocal manifestation that he will not render the required performance when it is due.” Oldenburger v. Del E. Webb Development Co., 159 Ariz. 129, 131, 765 P.2d 531, ___, (App. 1988). In order for Respondent to prevail on its contention that Complainant anticipatorily repudiated the Contract, they are required to present undisputed facts that the Complainant conveyed an unequivocal intent to repudiate the Contract if the home was not repaired strictly in accordance with his wishes and demands. A mere implication that Complainant will not perform is insufficient. Id. at 131. The record is clear from Respondent’s Exhibits C, D, and F, which are written letters from Complainant to Respondent, that Complainant manifested an intention not to be bound by the terms of the Contract unless his demands for repairs were satisfactorily met without question. These letters were admitted into evidence without objection by Complainant and constitute undisputed evidence as to the facts contained therein. “Repudiation may be shown by language that under a fair reading ‘amounts to a statement of intention not to perform except on conditions which go beyond the contract’.” Id. at 132, citing Restatement (Second) of Contracts, Sec. 250 comment b (1981). There is no factual dispute that Complainant intended not to be bound by the Contract based upon these letters. Evidence of this intent is more clearly manifested when Complainant appears at the final buyer walk-through before closing of escrow and refuses to complete the punch list because his repair demands had not been met to his satisfaction. The evidence is clear that Complainant anticipatorily repudiated the Contract constituting a breach of contract. Complainant’s claim that Respondent breached the Contract by failing to comply with his repair demands is without merit. Even assuming the requested repairs constituted a breach of contract, the evidence establishes that they were minor in nature and capable of being repaired or corrected in accordance with industry standards at the time the punch list was developed. The finding that the items of concern to Complainant were minor is bolstered by the evidence that the home was duly inspected by county building officials and passed all building code inspections. Further, undisputed testimony of a licensed contractor, who was the framing contractor of this home, established that all concerns of Complainant were minor and were appropriately corrected. Other testimony also establishes that the cracked drywall was repaired according to acceptable workmanship standards. If Complainant had intended to have the home constructed in accordance with stricter construction standards than delineated in the Contract, such intent should have been codified at that time. Since the alleged defects claimed by Complainant are found to have been minor in nature, and assuming the same provided a basis for a finding that Respondent breached the Contract, Complainant, nevertheless, had a continuing duty to complete the performance of the obligations on his part to be performed. Zancanzro v. Cross, 85 Ariz. 394, 400, 339 P.2d 746, ___ (1959). If Complainant had closed escrow, he would then have been in a position of asserting a claim for damages for whatever loss the minor breach has caused, if any. However, we need not address this point further since it is found that Respondent did not breach the Contract, and that the real question at issue is what effect Complainant’s breach of Contract has as a defense to the complaint filed in this case. Complainant’s withdrawal and refusal to complete the terms of the Contract on his part to be performed constitutes an anticipatory repudiation that must be held to be a material breach of contract. When a material breach of contract has occurred the Respondent would have been excused from further performance at that time if it had so elected. Zancanzro, Id. at 400. Under the terms and provisions of the Contract, Respondent is entitled to retain the deposit and any value added work equity contributed by Complainant as elements of damages for the default of Complainant by its breach of contract. It is concluded, as a matter of law, that Complainant, by the weight and sufficiency of all the evidence of record, has failed to sustain the burden of proof necessary so as to provide a basis upon which the claim for relief could be granted.

RECOMMENDED ORDER

In view of the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Citation in the captioned case No. 99-3105, and the Complainant upon which it is based, be dismissed.

DONE AND ENTERED this day, September 29, 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

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

Office of Administrative Hearings 1700 West Washington, Suite 602 Phoenix, Arizona 85007 (602) 542-9826