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Notice of Review and Appeal Rights

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Notice of Review and Appeal Rights Powered By Docstoc
					                BEFORE THE OFFICE OF ADMINISTRATIVE HEARINGS
                              STATE OF OREGON
                                       for the
                          CONSTRUCTION CONTRACTORS BOARD


In the Matter of the Arbitration between:

Alice Warner,                                                           File No: 102602-103
Complainant

And                                                                 ARBITRATION AWARD
United Heating & Air Conditioning, Inc., dba
United Garibay Heating & Air Conditioning, Inc.,
Respondent


                                    STATEMENT OF THE CASE

        Complainant, Alice Warner, filed this complaint with the Construction Contractors Board
(CCB) on August 22, 2007 alleging that the respondent, United Heating & Air Conditioning,
Inc., dba United Garibay Heating & Air, Inc., (United), was in breach of contract by installing a
heat pump in an incorrect location, installing the wrong size unit, and failing to perform the work
in a workman-like manner at a residence located at 1754 Orchard St., Eugene, Oregon. Ms.
Warner is seeking $25,550 in damages.

       On March 13, 2008, the CCB referred this complaint to the Office of Administrative
Hearings for binding arbitration, in accordance with ORS 701.147 and 148 and OAR 812-004-
0590. Administrative Law Judge Anita C. Smith was appointed to serve as arbitrator.

         On June 9, 2008 arbitration was held in Salem, Oregon. Ms. Warner appeared in person
and testified on her own behalf. United appeared through its president, Vince Fittipaldi, who
appeared personally and with counsel, Tanya O’Neil of Hershner Hunter, LLP. Mr. Fittipaldi
testified as a witness on United’s behalf.

       The record consists of the testimony of the witnesses and Exhibits 1 through 192, C-1
through C-15, C-17, C-19 through C-24, R-1 through R-8, R-10 through R-15, R-17 which were
admitted without objection. Exhibit C-18 was not admitted in accordance with a pre-hearing
discovery ruling. Exhibit R-16 was admitted over claimant’s hearsay objection. The record was
closed on June 9, 2008 at the conclusion of the hearing.

        I, the undersigned Arbitrator, enter the following:

                                               FINDINGS

        The parties entered into a contract on August 8, 2008. The contract called for United to
install a one ton heat pump unit in one part of the house and a geothermal heating system in
another. Although the contract provided for two separate heating systems, it was a single

Alice Warner and United Heating & Air Conditioning, Inc., CCB File No. 102602-103
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contract, consisting of three pages. Pages two and three were contemporaneously integrated into
the contract and initialed by both of the parties at the time that page one was signed.

        The contract was for a flat rate of $3,000 for the heat pump and $18,450 for the
geothermal unit, for a total cost of $21,450. The materials for heat pump were listed at $1,500
and the materials for the geothermal unit $9,475. Mr. Fittipaldi explained to Ms. Warner that the
geothermal unit would be custom built by the manufacturer for her house and once ordered, the
unit could not be returned. Ms. Warner paid United a deposit of $1,500 for the heat pump and
$9,500 for the geothermal unit. Within a few days of signing the contract, Mr. Fittipaldi ordered
the custom geothermal system for Ms. Warner’s house.

        Work on the heat pump was to be completed by August 18, 2006. However, asbestos
was discovered on the property and work on the heat pump was delayed at the mutual agreement
of the parties. The installation of the heat pump began in late August. The interior unit was
installed on the North wall in approximately the same location as the previous air conditioning
unit. The exterior unit was installed in the location designated by Ms. Warner. The installation
of the heat pump was substantially complete by September 6, 2006. Mr. Fittipaldi delivered
miscellaneous materials to Ms. Warner’s residence in anticipation of installing the geothermal
unit.

        After two weeks, Ms. Warner became dissatisfied with the interior unit because she did
not like the direction of the air flow, the holder for the thermostat remote control had not been
attached to the wall, and she did not have a manual. Between September 21 and September 25,
2006, Ms. Warner called Mr. Fittipaldi approximately six times to report her concerns with the
system. Ms. Warner actually spoke with Mr. Fittipaldi three times, once when she called him
and on two occasions when he returned her calls.

        On September 25, 2006, when Ms. Warner spoke with Mr. Fittipaldi, he told her that the
manual for the unit was on top of her refrigerator. Mr. Fittipaldi was out of town and could not
go to Ms. Warner’s house to show her how to adjust the unit. He was unable to tell her over the
telephone how to adjust the air flow and suggested she read the manual. Mr. Fittipaldi also
indicated he would have someone install the remote control holder.

        Based upon her reading of the manual, Ms. Warner determined the unit had been installed
in a location contrary to the manufacturer’s indications. Ms. Warner demanded that Mr.
Fittipaldi move the unit at his expense. Mr. Fittipaldi explained the unit had been installed in
the correct location. He offered to have a representative from the manufacturer come out to her
house and review the placement. If the representative recommended that the unit be moved, he
would have it moved at United’s expense, otherwise, Ms. Warner would have to pay to have it
moved.

        Later that same day, Ms. Warner called and left a message for Mr. Fittipaldi stating she
was canceling the contract because of (1) his lack of communication; (2) the location of the
interior heat pump unit; and (3) her concerns that United would not fulfill the service guarantee
for the geothermal system.

       On September 28, 2006, Ms. Warner sent United a letter, reiterating her demand that the
heat pump be moved and that her deposit for the geothermal unit be returned. Ms. Warner went
on to state that because of her dissatisfaction with Mr. Fittipaldi and the heat pump, she was

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canceling the contract. Ms. Warner demanded that Mr. Fittipaldi remove the materials for the
geothermal system that were previously delivered to her house. In response to the letter, Mr.
Fittipaldi again offered to move the unit if the manufacturer recommended it, but refused to
return her deposit on the geothermal unit, as the unit had already been delivered a few days
before and could not be returned to the manufacturer.

       On October 5, 2006, Ms. Warner sent Mr. Fittipaldi another letter stating she would hire
someone else to move the heat pump and deduct the cost from the outstanding balance on the
contract. Ms. Warner again demanded return of her deposit for the geothermal unit.

        On October 13, 2006, Mr. Fittipaldi delivered the geothermal unit to Ms. Warner’s house.
Mr. Fittipaldi did not remove the other materials, but left them at Ms. Warner’s house.

       On November 25, 2006, Ms. Warner paid United $900 towards the remaining $1,500
balance on the heat pump. Ms. Warner withheld $600 with the intent of having the unit moved.

       On August 27, 2007, Ms. Warner filed a complaint against United for breach of contract.
On October 3, 2007 in a letter to the CCB, Ms. Warner disclosed that she recently had
discovered the heat pump was a ¾ ton unit, not the 1 ton unit called for in the contract.

        On January 15, 2008, the CCB held an onsite meeting at Ms. Warner’s house. The
claims investigator recommended that a manufacturer’s representative review the placement of
the heat pump and that United should replace the unit with a one ton unit. Because both Ms.
Warner and Mr. Fittipaldi were claiming breach of contract over the geothermal system, the
investigator did not make a recommendation as to how to resolve that portion of the contract.

       On January 30, 2008, United sent a letter to Ms. Warner outlining that arrangements had
been made for a manufacturer’s representative to inspect the heat pump on February 5 or 6,
2008, at a time convenient for her. The letter also requested that Ms. Warner contact United to
arrange a time for the replacement of the ¾ ton unit.

       On February 6, 2008, the manufacturer’s representative inspected the heat pump and
determined that the location was appropriate for a ¾ ton unit or a one ton unit. After a series of
e-mails between Ms. Warner and United, in which United continued to offer to replace the ¾ ton
unit, Ms. Warner sent a letter to the CCB on February 29, 2008, stating she did not want United
do any further work on her property.

Complaint Item No. 1: Heat Pump

        After conducting an onsite investigation on January 15, 2008, the CCB investigator
recommended that a manufacturer’s representative inspect the location of the interior heat pump
unit. If the representative recommended the unit be moved, United would have to install the one
ton unit in the recommended location. If the location was appropriate, United was to replace the
¾ ton unit with a one ton unit.

       There was some discussion at hearing as to whether a sales representative was an
appropriate person to assess the location of the unit or whether it required a manufacturer’s
technician to make the assessment. Sales representatives are typically very well trained in the
application of their products. Evidence in the record indicates that not only was the

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representative trained by Mitsubishi, but he was also a trainer for Mitsubishi. I am satisfied that
the sales representative was qualified to assess the location of the unit.

        On February 6, 2008, the representative determined that the location of the unit was
appropriate and informed both Ms. Warner and United of his assessment. On February 29, 2008
the manufacturer’s representative in response to questions by the CCB, definitively stated that
the location of the heat pump unit was appropriate for both the ¾ ton unit and the one ton unit.

        Beginning in September 2006 and continuing through February 2008 United offered on
several occasions to remedy the situation with the heat pump, but Ms. Warner refused to allow
United the opportunity for cure. In an effort to comply with the recommendations of the CCB,
on January 30, 2008, United offered to replace the ¾ ton unit with a new one ton unit, even
though Ms. Warner had received benefit of the use of ¾ ton unit for the previous 17 months.
However, Ms. Warner refused and in a letter, dated February 29, 2008, Ms. Warner informed the
CCB that she did not want United to do any further work on her property. Because Ms. Warner
refused to allow United the opportunity to cure, she is awarded zero damages for this complaint
item.

Complaint Item No. 2: Geothermal System

         On September 25 and 28, 2006, Ms. Warner by both statement and conduct,
communicated to United that she was not going to perform her duties under the contract. Ms.
Warner refused to pay the remaining balance of $9,550 and demanded the return of the $9,500
she paid United for the geothermal system, thereby repudiating the contract. The question is
whether United was in material breach at the time of the repudiation. If the answer is yes, United
is entitled to an opportunity for cure. If United cannot or will not cure, then the issue becomes
that of damages. If the answer is no and United was not in material breach, Ms. Warner is now
in material breach for refusing to pay the remaining $9,550 balance on the contract and refusing
to allow United to perform its contractual obligations.

        The reasons Ms. Warner relied upon for repudiation were poor communication with Mr.
Fittipaldi, the unit was installed in a location contrary to the manufacturer’s instructions, and her
concerns that United would not fulfill its service guarantee for the geothermal system, primarily
because of the communication issue with Mr. Fittipaldi.

        As for the poor communication, Ms. Warner called Mr. Fittipaldi six times in four days.
Of those six calls, Mr. Fittipaldi answered one call directly and returned two others within that
same four day time period. As for the location of the heat pump unit, Mr. Fittipaldi offered to
have a manufacturer’s representative review the location. If the representative recommended
that the unit be moved, he would move it at United’s expense.

        Ms. Warner’s rationale for repudiating the contract was that if she could not trust United
to address her concerns about the heat pump, she could not trust United to follow through on its
five year service guarantee for the geothermal system. However, Mr. Fittipaldi’s response to Ms.
Warner’s concerns and his offers to remedy the situation with the heat pump was reasonable.
United installed the heat pump correctly in a workmanlike manner and responded to her concerns
in a professional, timely fashion. Ms. Warner failed to prove that United was in breach of
contract at the time she repudiated the contract or that United would reasonably be likely to
breach the contract in the future.

Alice Warner and United Heating & Air Conditioning, Inc., CCB File No. 102602-103
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       Ms. Warner’s refusal to pay the remaining $9,550 balance on the contract was a material
breach. Because Ms. Warner also repudiated the contract, United is excused from further
performance under the contract.

        As for the $9,500 Ms. Warner paid for the geothermal unit, the contract was a flat rate
contract. Regardless of what the actual cost of the geothermal unit and installation materials
might have been to United, Ms. Warner agreed to pay the amounts listed in the contract. From
this, one can infer that at the time Ms. Warner signed the contract, she believed those costs were
reasonable. It is not reasonable for Ms. Warner to now claim that the value of the equipment was
substantially less and therefore she should receive a refund. United was not in breach of
contract, Ms. Warner received the goods that she paid for, and therefore is not entitled to a
refund of the $9,500.

       The issue of whether United had a duty to mitigate its damages by attempting to sell the
geothermal unit is irrelevant. First, United did not incur any expense in purchasing the
equipment, as it had been purchased with Ms. Warner’s money. Second, according to OAR 812-
010-420, the respondent in a CCB arbitration is entitled to an offset of the amounts still owing by
the complainant on the contract, but cannot be awarded damages. In either case, there were no
damages for United to mitigate. Ms. Warner is awarded zero damages for this complaint item.

        Based on these Findings, and in accordance with ORS 701 and 36, and OAR 812, I enter
the following:

                                                 AWARD

        Complaint file number 102602-103 is dismissed.

        Dated this 12th day of August, 2008



                                                      Anita C. Smith, Arbitrator




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