Rot Repair Contract by cnq18959


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                              STATE OF OREGON
                                       for the
                          CONSTRUCTION CONTRACTORS BOARD

In the Matter of the Arbitration between:

JOHN KHASTEDAI,                                                        File No: 135807-102

And                                                                ARBITRATION AWARD

                                    STATEMENT OF THE CASE

        This complaint was timely filed in accordance with ORS 701.143. All items determined
are within the scope of ORS Chapter 701 and require licensing with the Board. Complainant
alleges that Respondent Perales General Contracting, Inc. did not perform all the work that he
contracted to provide and that some of the work Respondent performed was not to industry
standards, which caused Complainant additional costs to fix and a delay in the project at the
worksite located at 212 D Street and 212 1/2 D Street, Springfield, Oregon. On June 19, 2006,
Complainant filed a Statement of Claim. On April 18, 2007, Complainant filed a Statement of
Damages form seeking monetary damages in the amount of $7,250.

       Pursuant to its authority under ORS 701.148(1), and subject to the provisions of ORS
701.148(4), the CCB, on June 7, 2007, referred this matter to the Office of Administrative
Hearings, as required under ORS 701.149, for binding arbitration, in accordance with OAR
Chapter 812, Division 10. A Notice of Arbitration Hearing, along with a copy of OAR Chapter
812 Division 10, was served on the parties. Steven F. Bear was appointed as the Arbitrator.

         The hearing was held on September 4, 2007, in Eugene, Oregon. Complainant appeared
and was not represented by counsel. Respondent’s president, Dionicio Perales (Perales),
appeared and was not represented by counsel. Both Complainant and Perales testified. Ed Litten
testified for Complainant. The hearing record was closed at the end of the hearing.

         Having duly heard the proofs and allegations of the parties, and having considered the
entire record, consisting of Exhibits 1 through 99 and Complainant’s Exhibits C1-C12 and a
digital recording of the arbitration hearing, I, the undersigned Arbitrator, enter the following:

Khastedai and Perales General Contracting, Inc., CCB File No. 135807-102
Page 1 of 4

        Complainant wanted to purchase the property at 212 and 212 1/2 D Street, in Springfield,
Oregon. 212 is a single family residence and 212 1/2 is a garage/shop area. This property was
owned by Steven & Kelly Sample (the Samples) and listed for sale through their broker. On or
about March 28, 2006, a sales agreement was negotiated that included the seller’s agreement to
“pay for necessary T&D repairs recommended in report.” (Ex. 33.) At that time the only
“report” was one performed on January 24, 2006 by Sightline, LLC. (Ex. 6-10.) This report
notes various general areas of concern and recommendations, which include: repair or removal
of certain wood due to wood rot and insect damage.

        On or about January 22, 2006, Sample contracted with Respondent for a fee of $5,100 to
perform “dry rot repair on shop post” and perform “dry rot repair on the bathroom.” (Ex. 4.)
The Samples walked the property with Respondent and explained that they wanted him to
perform only certain tasks that had been called for in the Sightline report. They pointed out the
bathroom and asked Respondent to repair the bathroom floor. The Samples also showed
Respondent two posts at the shop that were in need of repair. Within a week of that contract,
Respondent performed the work contracted for by the Samples and was paid his contract price
for that work. Respondent removed the sink and toilet from the bathroom, took up the bathroom
floor and repaired the dry rot areas in the floor area by removing and replacing the damaged
floor joists. The perimeter rim joists were not repaired by Respondent as this was not part of his
contract with the Samples. During this process a member of Respondent’s crew put a nail
through the sub floor that also penetrated the wood floor in the bedroom that adjoins the
bathroom. In the shop/garage, Respondent cut the bottom portions off of two support beams
(that had been contaminated by dry rot) and secured new pressure-treated material on the bottom,
bracing it by wood overlay secured with 8 penny nails.

        One of Respondent’s employees, Mike Kasa (Kasa), was hired separately by the Samples
to perform some dry rot repair. This was hourly work, not part of the Samples’ agreement with
Respondent and which the Samples paid Kasa to perform. The Samples also hired others to
perform work around their property in preparation for its sale.

       On April 6, 2006, Complainant had National Pest Control (Ed Litten) inspect the D Street
property. Litten found substantial pest and dry rot damage in the foundation and floor joists of
the house and concluded that the repair of the support beams in the shop/garage was not
adequate. Litten also found that the vapor barrier was pulled apart in the sub-floor area and that
there was fallen insulation in the sub-floor area. Litten submitted a bid to Complainant for
$7,200 to make the repairs he deemed necessary.

       On or about February 28, 2007, respondent sent Kasa to the property and he repaired the
vapor barriers, re-hung insulation that had come loose and pulled the nail in the wood floor and
repaired it. This was in response to a February 8, 2007 letter from the CCB notifying
Respondent that he now had a chance to make the repairs suggested in the inspector’s report.

Khastedai and Perales General Contracting, Inc., CCB File No. 135807-102
Page 2 of 4
                                       CONCLUSION OF LAW

        Complainant and Respondent did not have a relationship of the type necessary to allow
jurisdiction for the CCB to continue with this claim.


OAR 812-004-0320 contains the jurisdictional requirements for filing a claim with the CCB and
in pertinent part states:

        (5) Complaints will be accepted only when one or more of the following relationships
        exist between complainant and the respondent:
        (a) A direct contractual relationship based on a contract entered into by the complainant
        and the respondent, or their agents;
        (b) An employment relationship or assigned relationship arising from a Bureau of Labor
        and Industries employee claim;
        (c) A contract between the complainant and the respondent providing that the
        complainant is a trustee authorized to receive employee benefit payments from the
        respondent for employees of the respondent; or
        (d) A real estate purchase conditioned upon an inspection report or repairs made by the

        For owners of a home such as Complainant, the CCB has defined “direct contractual
relationship” in OAR 812-002-0250(1) as meaning:

        a relationship created by a contract between the complainant and the respondent
        providing that the respondent perform construction work in return for valuable
        consideration conveyed directly from the complainant to the respondent.

        Complainant has never had a contract with Respondent, either written or verbal.
Complainant entered into a sales agreement with the Samples, who had previously contracted
with Respondent to perform some work on their home and shop/garage. However, there was
never a direct contractual relationship between Complainant and Respondent as required by
subsection (5)(a) above. Subsection (5)(b) and (5)(c) apply to situations with employees and are
not applicable to Complainant’s Statement of Claim. Subsection (5)(d) comes closest to defining
the relationship between Complainant and Respondent; however, the work contracted for by the
Samples and performed by Respondent was performed in January 2006, which was well before
the March 25, 2006 counter offer submitted by Complainant that contained the provision that the
seller was to pay for necessary T&D repairs recommended in the report. There is no evidence to
support a finding that, after the March 25, 2006 counter offer, Samples had any contractual
relationship with Respondent to provide any additional work that might have been required
under the terms of that counter offer. The evidence was not persuasive that Complainant’s
purchase of the property was conditioned upon repairs made by (this) Respondent. Therefore,
subsection (5)(d) would not apply to this case.

Khastedai and Perales General Contracting, Inc., CCB File No. 135807-102
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       Complainant has not established that he and Respondent had one of the relationships
described in OAR 812-004-0320(5). Complainant has not met the requirements in OAR 812-
004-0320(5) for acceptance of the claim by the CCB. Because Complainant has not met this
requirement, there is no jurisdiction for the arbitrator to issue an order based on this complaint.

        The arbitrator also wants to make it clear that the persuasive evidence failed to prove that
Respondent was hired by the Samples to provide all of the repair work required by the T&D
report issued by Sightline. Complainant’s own witness proved the inadequacy of that report in
that it did not go into the depth and specificity necessary to properly document all the T&D
issues with this property. The arbitrator was not convinced that Respondent was hired to (or paid
for) a full repair of the property as provided for in the April 6, 2006, National Pest Control

       The fact that this order does not award damages to Complainant does not mean that
Complainant does not have legal remedies in other forums, but only that Complainant may not
be awarded damages against Respondent’s bond.

        Pursuant to ORS 701.147 and OAR 812-004-0250(2)(c), the complainant is not entitled
to recover the $50 complaint processing fee.

       Based on these Findings, and in accordance with ORS Chapters 701 and 36, and OAR
Chapter 812 Division 10, I enter the following:


       Complainant is not awarded any damages under Complainant’s Statement of Claim filed
June 19, 2006.

Dated this 18th day of September 2007

                                                      Steven F. Bear, Arbitrator

Khastedai and Perales General Contracting, Inc., CCB File No. 135807-102
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