ALJDEC

99F-F0244-ROC · Registrar of Contractors · 1999-09-03

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: August 27, 1999 at 8:30 a.m. APPEARANCES: James Harris and Anna Hernandez[1] appeared on their own behalf; Michael Hubert Reilly appeared on his own behalf; Keystone West, Inc.’s qualifying party Robert Allen France appeared on its behalf. ADMINISTRATIVE LAW JUDGE: Diane Mihalsky _____________________________________________________________________

The parties presented evidence and testimony with respect to the interrelated issues of whether subcontractor Keystone West, Inc. installed the cabinets that homeowners James Harris and Anna Harris had chosen and whether general contractor Michael Hubert Reilly dba MR Construction unjustifiably refused to pay Keystone West, Inc. for the cabinets. Based upon the entire record, the undersigned makes the following Findings of Fact, Conclusions of Law and Recommended Order. FINDINGS OF FACT The Registrar of Contractors issued License No. 099864, Class C-30 to Keystone West, Inc. (“Keystone”), a corporation, on November 12, 1993. The Registrar issued License No. 116676, Class B to Michael Hubert Reilly dba MR Construction (“MR Construction”), an individual, on August 21, 1996. In May 1998, James Harris and his wife, Anna Hernandez, entered into a contract with MR Construction for construction of their residence, which included a $10,000.00 allowance for cabinets. Mr. Harris and Ms. Hernandez wanted a Santa Fe southwestern home with a rustic look. The interior and exterior doors of the home would be rustic looking wood with clearly visible grain and knotholes and the floor would be variegated slate. Mr. Harris and Ms. Hernandez decided that they wanted rustic maple cabinets. They looked for rustic maple cabinets at Home Base and Home Depot in Phoenix and at HomeCo., the subcontractor whom MR Construction usually uses for cabinets, and did not find anything they liked. Mr. Harris and Ms. Hernandez went to Keystone and found rustic maple cabinet samples that would fit their decor. Initially, they talked to Gary Anderson, an employee who later left to start his own cabinet company. Mr. Reilly at MR Construction told Mr. Harris and Ms. Hernandez to pick out cabinets that were acceptable and he would arrange payment through their construction lender. On or about June 8, 1998, Keystone submitted a proposal to MR Construction to supply and install cabinets in the residence. MR Construction approved the proposal, even though it did not check with either Mr. Harris, Ms. Hernandez or Keystone regarding exactly what was being ordered. After MR Construction approved the proposal, on August 3, 1998, Reggie Plett, who replaced salesman Anderson at Keystone, prepared an order for “Shaker/Maple” cabinets in a “natural” finish.” Testimony at the hearing established that “Shaker” refers to the type of door, not the finish or type of wood. Mr. Harris and Ms. Hernandez believed that “Shaker” referred to rustic maple. In September 1998, Keystone installed cabinets made of maple having a clear, barely visible grain, not the rustic maple that Mr. Harris and Ms. Hernandez had selected. It took several days for Mr. Harris and Ms. Hernandez to become certain that Keystone had not installed the cabinets they had had selected. Testimony was given regarding various admissions that Mr. Plett allegedly made about ordering the wrong cabinets. No evidence showed that Mr. Harris or Ms. Hernandez meant to order maple, as opposed to rustic maple, or that Mr. Plett had confirmed their choice by showing them a sample of what was shown on the order form before processing the order. Photographs of the interior of Mr. Harris and Ms. Hernandez’ residence show that the clear-grained maple cabinets that Keystone West installed, although beautiful, do not match or complement the rustic floor and other interior woodwork. Following Keystone’s installation of the cabinets, Mr. Harris obtained two samples of the cabinets he and Ms. Hernandez meant to choose, which also do not match what Keystone installed. On October 20, 1998, Mr. Harris made a complaint to the Registrar against Keystone, alleging among other things that “we were shown rustic maple cabinets [and] got blonde maple.” [Emphasis in original.] This complaint was designated Case No. F99-0134. On or about November 24, 1998, the Registrar’s Inspector Mark Schweiger performed a jobsite inspection in Case No. F99-0134. As a result of the inspection, on January 14, 1999, on behalf of the Registrar, Inspector Schweiger determined that no corrective action by Keystone was warranted with respect to five of the six items that Mr. Harris complained about. Mr. Harris and Ms. Hernandez presented no evidence or argument concerning and apparently abandoned these five items at the administrative hearing. With respect to the color and wood used in construction of the cabinets, however, Inspector Schweiger noted that “[t]he color of the Maple Cabinets appears to vary excessively from the sample. These Cabinets appear considerably lighter in tone.” Inspector Schweiger therefore directed Keystone to correct by appropriate means the color of the cabinets. Keystone did not comply with the Registrar’s directive and, on February 1, 1999, Mr. Harris and Ms. Hernandez requested an administrative hearing in Case No. F99-0134. On February 3, 1999, MR Construction made a complaint to the Registrar against Keystone, alleging that Keystone’s qualifying party had informed it that it had no intention of complying with the Registrar’s directive described above, which was designed Case No. F99-0244. Mr. Reilly requested an administrative hearing on April 3, 1999. On April 8, 1999, Keystone made a complaint to the Registrar against MR Construction, alleging nonpayment of the $5,527.29 remaining unpaid of the $10,150.79 contract amount, which was designated Case No. F99-0304. Keystone requested a hearing on May 19, 1999. The Registrar issued a Citation and Complaint in Case No. F99-0134 on February 9, 1999, charging Keystone with violations of A.R.S. § 32- 1154.A.2, .7, .23, and .3; the Registrar issued a Citation and Complaint in Case No. F99-0244, charging Keystone with violations of A.R.S. § 32- 1154.A.7 and .3; the Registrar issued a Citation and Complaint in Case No. F99-0304 on June 16, 1999, charging MR Construction and Mr. Reilly with violations of A.R.S. § 32-1154.A.7 and .11. Both contractors timely answered the Citations and Complaints against them, denying having committed any statutory violations, and the three cases were consolidated and set for hearing. The Citation and Complaint issued by the Registrar advised Keystone that, if it were found in violation of any contracting law, its prior disciplinary record of final Registrar of Contractors’ orders might be considered in mitigation or aggravation. Accordingly, notice is taken of official records of the Registrar of Contractors, which reveal that, if the Registrar accepts this recommended decision, it will be the only final agency order against Keystone on the Registrar’s current record. Therefore, Keystone’s prior record is deemed to be excellent and, thus, is viewed as a matter in mitigation for any disciplinary penalties to be imposed as a direct result of this case. CONCLUSIONS OF LAW In this administrative proceeding, MR Construction, Mr. Harris, and Ms. Hernandez bear the burden of proof to establish that Keystone committed a statutory violation by installing the wrong cabinets and refusing to replace them with the cabinets that Mr. Harris and Ms. Hernandez meant to order by a preponderance of the evidence. See A.A.C. R2-19-119; see also Culpepper v. State, 187 Ariz. 431, 438, 930 P.2d 508, 515 (App. 1996). Keystone bears the burden to establish that MR Constructed refused to pay monies owed as part of its contracting activities. See id. “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.” Morris K. Udall, Arizona Law of Evidence § 5 (1960). A preponderance of the evidence is “evidence which is of greater weight or more convincing than evidence which is offered in opposition to it; that is, evidence which as a whole shows that the fact sought to be proved is more probable than not.” Black’s Law Dictionary at page 1064 (6th ed. 1990). The evidence establishes that Mr. Plett on behalf of Keystone wrote down the wrong kind of cabinets on the order form and that Keystone installed cabinets in Mr. Harris and Ms. Hernandez’ residence that they had not selected. At the hearing, Keystone attempted to argue it should not be liable because it installed the “Shaker/maple” cabinets that were shown on the order form and, if rustic maple had been ordered, some other designation would have appeared. This argument must fail, however, because there was no evidence that Mr. Reilly, Ms. Hernandez, or Mr. Harris understood that “Shaker/maple” did not refer to what they meant to order. Rather, it is a term of art whose meaning is well known to specialists, like Keystone and its employees, in the industry. Professional standards require a specialist to make sure that he or she understands what the customer orders, not blame the customer for not understanding terms of art as well as a professional. Because a preponderance of evidence shows that Mr. Harris and Ms. Hernandez wanted rustic maple cabinets and that Keystone knew or should have known this fact before the cabinets were ordered, Keystone is responsible for misunderstanding or mis-transcribing the order. The evidence therefore shows that Keystone violated A.R.S. § 7,[2] 23,[3] and 3[4] when it installed the wrong cabinets and refused to comply with Inspector Schweiger’s directive. The evidence does not establish that MR Construction or Mr. Reilly violated any statute in failing to pay Keystone the balance of the subcontract. A.R.S. § 32-1154.A.11 includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license “[f]ailure by a licensee . . . to pay monies in excess of seven hundred fifty dollars when due for materials or services rendered in connection with the licensee’s operations as a contractor when the licensee has the capacity to pay . . . .” [Emphasis added.] Because Keystone has refused to complete the contract and furnish the cabinets it should have known or found out that Mr. Harris and Ms. Hernandez wanted, no additional payments are currently due under the subcontract and, therefore, Keystone’s complaint is premature. RECOMMENDED ORDER In view of the foregoing, it is recommended that the Registrar suspend Keystone West, Inc.’s contracting License No. 099864, Class C-30, on the effective date of the Registrar’s order, thirty-five days after it is mailed. It is further recommended that, if Keystone furnishes proof in writing to the Registrar that it has taken appropriate action to install rustic maple cabinets in Mr. Harris and Ms. Hernandez’ residence, no license suspension should take place and the Registrar may close Case Nos. F99-0134 and F99-0244. It is further recommended that the Registrar dismiss Case No. F99- 0304 against Michael Hubert Reilly dba MR Construction’s License No. 116676, Class B. Done this day, September 13, 1999.

______________________________________ Diane Mihalsky Administrative Law Judge

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

Registrar of Contractors Michael P. Goldwater 800 West Washington, 6th Floor Phoenix, AZ 85007 ATTN: Joyce Armijo

By ___________________________

----------------------- [1] The undersigned on her own motion has amended the caption to include Ms. Hernandez as a complainant to reflect her ownership interest in the residence where the cabinets at issue were installed. [2] This statutory subsection includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license “[t]he doing of a wrongful or fraudulent act by the licensee as a contractor resulting in another person being substantially injured.”

[3] This statutory subsection includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license “[f]ailure to take appropriate corrective action to comply with this chapter or with rules adopted pursuant to this chapter without valid justification within a reasonable period of time after receiving written directive from the registrar.”

[4] This statutory subsection includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license “[v]iolation of any rule adopted by the registrar.” The rule violated here was A.A.C. R4-9-108, which requires that “[a]ll work shall be performed in a professional and workmanlike manner” and that “[a]ll work shall be performed in accordance with any applicable building codes and professional industry standards.”

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