ALJDEC

99F-510-ROC · Registrar of Contractors · 1999-10-20

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: October 20, 1999 APPEARANCES: Plaintiffs appeared on their own behalf and Defendant failed to appear. The Contractors’ Recovery Fund was represented by Assistant Attorney General, Patti Shelton. ADMINISTRATIVE LAW JUDGE: Mark A. Silver _____________________________________________________________________

Evidence and testimony were presented and, based upon the entire record in this matter, the following Findings of Fact, Conclusions of Law, and Recommended Order are made:

FINDINGS OF FACT

1. Defendant’s contracting license has been previously revoked by final Order of the Registrar of Contractors. Such revocation is determined to render this Defendant unable to remedy the violation of the State’s contracting laws which gave rise to the instant claim for damages.

2. The Registrar of Contractors has received advance notification of the existence and amount of the above named Plaintiffs’ claim for an administrative payout from the Contractors’ Recovery Fund. 3. This hearing was convened following Plaintiffs’ express request therefor, subsequent to their receipt of information that the Contractors’ Recovery Fund denied a significant portion of their monetary claim. 4. Plaintiffs seek to recover the sum of $20,000.00 from the fund. 5. The following salient facts were adduced at the hearing and are important to note: a. Plaintiffs entered into a contract with Defendant for specified remodel/addition work on their home. The total amount of this contract was $32,615.77. b. Although Defendant commenced work on the project, it was undisputed that it failed to complete the project. It was also undisputed that Plaintiffs paid Defendant the total sum of $23,915.77, as progress payments on the contract, prior to the date of Defendant’s abandonment of the project. Thus, only the sum of $8,700 remained, as unpaid on the original contract. c. After filing a complaint with the Registrar of Contractors and ultimately being advised that Defendant’s Class B license had been revoked, Plaintiffs sought bids from other licensed contractors to complete the project. Plaintiffs made a claim to the Contractors’ Recovery Fund using the bids received to support their claim for a payout from said fund. d. Plaintiffs filed their claim for a payout from the Contractors’ Recovery Fund on March 24, 1999. Although Plaintiffs received three bids from general contractors to complete the project, their preference was to use the bid from Drake Development Inc. (“Drake”) to support their claim that they were entitled to the maximum payout allowed by statute. e. A careful review of the actual claim form submitted by Plaintiffs to the Contractors’ Recovery Fund indicates that the Drake bid was for $22, 482.00 but that additional bids from subcontractors were also included to properly complete the project. The additional bids from subcontractors and/or suppliers totaled $10, 035.70 for roofing work, air-conditioning, and for windows and doors. Thus, Plaintiffs claimed that the total cost to properly complete the project was $32,517.70 and, in consideration of the aforementioned $8,700 not paid on the original contract with Defendant, Plaintiffs contended, on their submittal to the Contractors’ Recovery Fund, that their total actual damages were $23, 817.00, thereby entitling them to a $20,000.00 payout from the Contractors’ Recovery Fund. f. A jobsite inspection by the appointed inspector for the Registrar of Contractors was held in May 1999 in order to investigate the legitimacy of Plaintiffs’ claim for the maximum payout from the Contractors’ Recovery Fund. At the time of said inspection, Plaintiffs already had Drake and specified subcontractors complete the project. Notwithstanding the above- described claim that their estimated costs to complete and repair the project through Drake and the subcontractors would be $32,517.70, Plaintiffs averred at the jobsite inspection that they had only expended the total sum of $28,961.42 to properly complete the project. g. The assigned inspector for the Registrar of Contractors reviewed all of the facts of the instant matter, including the three bids from the licensed general contractors, and made his report to the Contractors’ Recovery Fund. Notwithstanding the aforementioned bids from subcontractors for the roofing work and air-conditioning, along with the bid for the windows and doors, a review of the bid submitted by Drake could lead a reasonable person to believe that for the sum of $22,482.00, Drake was agreeing to complete the entire project in question. Thus, the Contractors’ Recovery Fund determined that Plaintiffs should not have paid Drake more than $22,482.00 to have the project completed and under these facts and circumstances, the Contractors’ Recovery Fund opined that the sum of $13, 782.00 (after deducting the unpaid balance on the original contract) represented Plaintiffs’ actual damages. 6. In order to determine the reasonableness of Plaintiffs’ claim, it is necessary to examine the bid procedure accomplished by Plaintiffs, as well as the actual bids themselves. Evidence of record demonstrated that once Plaintiffs were advised that Defendant was revoked, they became very concerned about the statutory maximum ($100,000.00) that could be paid out from the Contractors’ Recovery Fund for any one contractor and therefore, they hurriedly got bids together for the purpose of having a submission to support their claim for a payout from said fund. 7. One of the bids submitted by Plaintiffs was from Sunvek. Although this bid was in the amount of $26, 657.38, it specifically states on the bid that it “does not include any work on the patio slab.” Another bid was from Cactus Ridge Builders (“Cactus”) and although this bid was for $23,400.00, it specifically provides certain recommendations that the concrete floor was not level and should be leveled, a specified patio beam was too small and should be changed, the new patio walls should be “framed out” to match the house, and the existing roof should be examined by a roofer. The bid from Cactus indicated that all of these recommendations or extras would be billed to Plaintiffs at a cost of $40.00 per hour plus material. 8. Although the bids submitted by Sunvek and Cactus purport to show a price for the submission to the Contractors’ Recovery Fund, they are found to be somewhat vague as to the actual final cost that Plaintiffs would incur to properly complete the project. Based on the ambiguities referable to the final costs that these contractors would have charged, it is determined that their bids are not necessarily dissimilar from the actual final cost that Plaintiffs incurred to complete the project. 9. It is important to note, that evidence presented at the instant hearing demonstrated that Plaintiffs also received a bid from another contractor, which was not included in the submittal of their claim to the Contractors’ Recovery Fund, and this bid was in the amount of $40,000.00. 10. Although the Drake bid indicates a price for $22,482.00, Plaintiffs testified that the bid was hurriedly put together in order to have something to submit to the Contractors’ Recovery Fund. Evidence of record demonstrated that Plaintiffs and Drake agreed from the very beginning that Plaintiffs would pay specified subcontractors directly and pay Drake only for the work that Drake actually performed. In this regard, it was shown that Plaintiffs only paid Drake $11,405.00 for Drake’s work on the project and the balance of the payments went directly to subcontractors and/or suppliers. Moreover, it was adequately demonstrated that additional costs necessary to properly complete the project were discovered by Plaintiffs and Drake once the remedial work commenced. 11. In addition to the aforementioned $11,405.00 that was paid to Drake, the following represents a breakdown of all of the payments made by Plaintiffs to subcontractors or suppliers in order complete the project a. Concrete Coring--$170.00 to grind and level the concrete floor. It should be noted that although Concrete Coring did not possess a residential contractor’s license, it did have a commercial license at the time the work was performed. Therefore, the work that Concrete Coring performed is found to be beyond the scope of its license. b. Adam Wholesaler--$7,231.81 for windows and doors. Testimony from Plaintiffs at the instant hearing indicated that these costs were for the windows and doors that had been agreed upon between Plaintiffs and Defendant and included an agreed change order, executed by Defendant and Plaintiffs prior to Defendant’s abandonment of the project. c. K&C Associates--$2,903.00 for specified electrical work d. Johnson Alarm--$549.20 to re-reroute and replace alarm wires e. Diamond Roofing--$1044.90 for roofing of the addition and sealing of the skylight. f. Heser Masonry--$472.00 to replace specified columns, originally constructed by Defendant, in order to comply with local building codes. g. Home Depot--$573.65 for specified lighting fixtures and fans. h. Maryvale Refrigeration--$2,169.00 for the heat pump. i. Arizona Built Rite--$1,635.00 for the block wall construction that Defendant had agreed to accomplish. j. Custom Flow gutters--$200.00 for installation of gutters. Although the original plans and specifications called for parapet walls and scuppers on the roof, this feature was omitted from the remedial work in order to reduce costs and therefore, the gutters were added to the project as an alternative means to deal with the water coming off the flat roof. This change to the original plans and specifications was not found to be unreasonable. k. Dunn Edwards Paint--$277.86 for the exterior and interior paint. l. Accent Refinishing--$230.00 to paint specified work that Defendant had started but left unfinished in Plaintiffs’ kitchen. m. Pro Waste and Excavating--$200.00 for dumpster removal. Although the foregoing costs, including the sums paid to Drake, total over $28,961.42, Plaintiffs testified and presented a “flow chart” at the hearing indicating that their total cost was $28,961.42. Although this discrepancy in Plaintiffs’ numbers is unclear, this Tribunal will use the total cost figure presented by Plaintiffs as the basis for computing their actual damages. 12. The foregoing costs incurred by Plaintiffs to complete the addition/remodel project were not shown to be unreasonable in order to properly complete the project in accordance with good workmanship standards and in accord with all applicable building codes. Evidence presented at the hearing was sufficient to support a finding that the original bid submitted by Drake and included in the submittal to the Contractors’ Recovery Fund was, like the other bids received by Plaintiffs, a rough estimate of what the cost would be to complete the project. 13. Although the original position of the Contractors’ Recovery Fund is understandable based on the language and cost set forth in Drake’s bid, the record presented at the instant hearing clarified the nature of Drake’s bid and the fact that additional costs were contemplated by Plaintiffs and Drake at the time that Drake submitted its rough estimate of the cost to complete the project. Under all of the facts and circumstances presented at the instant hearing, it is adjudicated and determined that the actual damages sustained by Plaintiffs as a result of Defendant’s violations of the State’s Contracting laws is $20,261.42 ($28,961.42 minus the $8,700 unpaid balance on the original contract), thereby warranting a payout to Plaintiffs from the Contractors’ Recovery Fund for the maximum allowed by statute ($20,000.00). . . . . . . . . . . . . CONCLUSIONS OF LAW

1. Plaintiffs are determined to be injured persons as that term is defined in A.R.S. § 32-1131(3). 2. Under the facts and circumstances of this case, the Registrar of Contractors is empowered to determine and award proper payment to Plaintiffs from the Contractors’ Recovery Fund pursuant to A.R.S. § 32- 1154(E). 3. The within record supports an award to Plaintiffs in the amount of $20,000.00, all of which shall be appropriately chargeable against Defendant and/or persons on the license as set forth in A.R.S. § 32- 1139(B).

RECOMMENDED ORDER

In view of the foregoing, it is recommended on the effective date of the Order entered in this matter that the Registrar of Contractors shall commence and finalize payment procedures from the Contractors’ Recovery Fund to Plaintiff in the amount of $20,000.00.

Done this day, October 26, 1999.

______________________________________ MARK A. SILVER Administrative Law Judge

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

Michael P. Goldwater, Director Registrar of Contractors 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