ALJDEC decisions subject to certification as final

04F-2575-ROC · Registrar of Contractors · 2004-07-28

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: July 14, 2004 APPEARANCES: Complainant Cynthia Hale appeared on her own behalf. Bob Whaley appeared on behalf of Respondent P A A Z Enterprises, L.L.C. ADMINISTRATIVE LAW JUDGE: Sondra J. Vanella _____________________________________________________________________ The question presented by this matter is whether P A A Z Enterprises, L.L.C. is subject to discipline for acts or omissions in violation of A.R.S. § 32-1154(A). Based on the evidence of record, the Administrative Law Judge makes the following Findings of Fact, Conclusions of Law and Recommended Order: FINDINGS OF FACT P A A Z Enterprises, L.L.C. (“PAAZ”) is the holder of a Class B- license (No. 155769) issued by the Registrar of Contractors (“ROC”). Billie Mills was PAAZ’s qualifying party until he resigned on March 12, 2003. Ray Aguilera has been PAAZ’s qualifying party since March 12, 2003. Bobby Whaley is a member of PAAZ and is PAAZ’s general manager. On or about April 1, 2002, David Babekov, doing business as PAAZ, entered into a written contract with Gavriel Gilkarov, doing business as DJ Fishborn, Inc., to construct a new home located at 2917 East Chipman Road in Phoenix, Arizona. See Construction Agreement contained in Exhibit 2. The construction contract price was $62,300. Id. On or about June 17, 2002, Complainant Cynthia Hale contracted with Gavriel Gilkarov, doing business as DJ Fishborn, Inc., for the purchase of the home located at 2917 East Chipman Road. See Residential Resale Real Estate Purchase Contract contained in Exhibit 2. The contract price was $109,000.00. Id. The construction of the home was completed by the end of July 2002 and Ms. Hale moved into the home on August 2, 2002. A review of the ROC’s official licensing records revealed that PAAZ’s license was suspended from June 1, 2002 until August 13, 2002. The credible evidence of record established that the construction of Ms. Hale’s home was ongoing during the months of June and July 2002, while PAAZ’s license was under suspension. In May 2003, Ms. Hale found numerous workmanship deficiencies with her home and contacted Mr. Babekov to correct the deficiencies. Mr. Babekov did not do so. Ms. Hale also contacted Bob Whaley, general manager for PAAZ. Mr. Whaley advised Ms. Hale that PAAZ was not responsible to perform any corrective work because it was not responsible for the construction of her home as Mr. Babekov was not associated with PAAZ. On or about June 17, 2003, Ms. Hale filed a complaint against PAAZ with the ROC, alleging workmanship deficiencies in the construction of her home. On or about July 16, 2003, ROC Inspector Bud Combs arrived at Ms. Hale’s residence to perform a jobsite inspection. However, prior to commencing the inspection, and after a conversation with Mr. Whaley and John Elkins of PAAZ, Mr. Babekov, and Ms. Hale, Inspector Combs determined that Mr. Babekov had been the general contractor for the construction of the residence, not PAAZ. Based upon the determination that a licensed contractor was not involved, Inspector Combs closed the complaint. On or about September 9, 2003, Ms. Hale filed a complaint against David Babekov, doing business as PAAZ, with the ROC, alleging unlicensed contracting activity. Ms. Hale indicated in her complaint that Mr. Babekov had contracted with Mr. Gilkarov to construct her home. The ROC investigated Ms. Hale’s complaint and discovered that although Mr. Babekov does not appear on PAAZ’s contracting license, he had been added as a member of the L.L.C. through an Article of Amendment filed on December 11, 2001. The Article of Amendment was signed by Bobby Whaley, PAAZ’s general manager. See ROC investigation report dated October 28, 2003, contained in Exhibit 2. The ROC’s investigation further revealed the following: a. The concrete subcontractor stated that he worked for Mr. Babekov and Mr. Whaley on a previous job, that he met Mr. Babekov through Mr. Whaley, that Mr. Babekov was the superintendent for Mr. Whaley, that Mr. Babekov hired him, and that Mr. Whaley was at the jobsite; b. The framing subcontractor stated that he was hired and paid by Mr. Babekov, and that he understood Mr. Babekov to be the superintendent for PAAZ; c. The electrician stated that he was hired by Mr. Babekov who was working for Mr. Whaley, that he met Mr. Babekov through Mr. Whaley, and that Mr. Whaley was present at the jobsite; d. Mr. Whaley denied any knowledge of the construction of the residence located at 2917 East Chipman, until Ms. Hale had contacted him; Mr. Whaley indicated that he stopped by the jobsite only to visit Mr. Babekov, but he was not aware that Mr. Babekov was constructing the house under PAAZ’s license; e. Mr. Whaley stated that Mr. Babekov was added to the L.L.C. because “this is a way for Babekov to hide money.” Mr. Whaley explained that Mr. Babekov and his wife were in the middle of a divorce and Mr. Babekov needed to conceal money; f. Mr. Babekov stated that he loaned Mr. Whaley money in reference to investments, that the loans were never repaid, and that Mr. Whaley made Mr. Babekov a member of PAAZ as a way for them to work together and for Mr. Whaley to be able to repay the loans; g. Mr. Babekov stated that two members of the L.L.C., Billie Mills and Earl Barnett, were aware that Mr. Babekov had the authority to work under PAAZ’s contracting license, constructing homes; h. Billy Mills, the former qualifying party for PAAZ during the construction of Ms. Hale’s home, submitted a signed statement indicating in pertinent part: “As qualifying party for PAAZ, I had the authority to permit and I did permit David Babekov to pull permits and construct houses under the license held by PAAZ while Bob Whaley was fully aware of the same. David Babekov was specifically authorized to pull a permit and oversee the construction of the home located at 2917 E. Chipman, Phoenix, AZ, in 2002. Any actions he took with respect to that house were done pursuant to the PAAZ Enterprises, L.L.C. license.” i. Earl Barnett, a member of PAAZ from early 2001 through May 2003, submitted a signed statement indicating in pertinent part: “I was fully aware of David Babekov had been given full authority to pull permits, open bank accounts and supervise construction for 2917 E. Chipman Rd. Phoenix, AZ. Bob Whaley was also fully aware of David Babekov being authorized to pull permits and build the home at 2917 E. Chipman Rd. Phoenix, AZ. Each morning during construction we (all members of PAAZ) met at my office at 1730 E. Broadway Rd. Phoenix, AZ to discuss updates on this home construction.” j. Mr. Babekov stated that he and Mr. Whaley had gone to the City of Phoenix together and pulled permits; k. Mr. Babekov stated that his account at Wells Fargo Bank had been authorized by Mr. Whaley; and l. On or about September 25, 2003, the ROC issued a Cease and Desist Order to Mr. Babekov indicating that the ROC had reasonable cause to believe that he was engaging in unlicensed contracting. The ROC re-opened Ms. Hale’s complaint after its investigation and above findings. Because the issue of whether PAAZ is responsible for the construction of Ms. Hale’s home is a threshold issue in this case, the Administrative Law Judge addresses that issue first. At hearing, Mr. Whaley argued that PAAZ had nothing to do with the construction of Ms. Hale’s home. In contrast to the foregoing, ROC Investigator Shirley Young credibly testified as to the findings made in the above-referenced investigation report. Mr. Mills credibly testified that he allowed Mr. Babekov to use PAAZ’s contracting license and that Mr. Whaley and Mr. Babekov were working together. The credible evidence of record established that Mr. Babekov was authorized to work under PAAZ’s contracting license. The credible evidence of record further established that Mr. Whaley knew or reasonably should have known of PAAZ’s business dealings and contracting activities as its general manager and member. Mr. Whaley’s claimed ignorance of PAAZ’s activities due to a lack of communication between its members does not relieve PAAZ of the responsibility for the construction activities taking place under PAAZ’s license, including the activity that took place while the license was under suspension. Therefore, the Administrative Law Judge finds that Ms. Hale properly filed her complaint against PAAZ, the licensed entity responsible for the construction of her home. Having found that PAAZ is responsible for the construction of Ms. Hale’s home, the Administrative Law Judge addresses the merits of Ms. Hale’s complaint. On February 20, 2004, Ms. Hale filed a renewed complaint against PAAZ with the ROC, alleging 32 deficiencies in the construction of her home attributable to work performed by PAAZ. Specifically, Ms. Hale alleged the following: 1. Large gaps around roof of the patio ceiling allowing moisture and insects to enter; 2. Door inside the garage that leads to the backyard is mounted on the outside of the house rather than on the inside, allowing an intruder to pull hinges and enter the garage; 3. The straps on the foundation were never sealed over when the stucco was installed, leaving the straps exposed; 4. On both sides of the driveway there is a lack of dirt protecting the sides of the foundation of the concrete slabs; there is erosion taking place creating a crevice under the driveway; 5. The black paper/shingles underneath the ceramic tile is curling up all around the trim of the home; 6. The bathroom cabinet doors are not aligned properly and rub against each other; 7. Door handles are loose despite frequently tightening them and locks almost bend the keys, they are so hard to unlock; 8. In the backyard there is not enough dirt on the east side of the foundation; 9. In the backyard on the west side of the house the water does not flow away from the foundation, rather the water settles next to the foundation of the house; 10. The stucco on the whole house is extremely thin; there are large cracks in the stucco and the stucco is falling off in several places; chicken wire is visible in numerous large areas around the entire house; 11. There is paint chipping off in numerous areas due to the fact that it is thin and the stucco was never sealed before the paint was applied; the color is fading all over the house and trim is not the color that I requested as stated in my purchase contract; 12. There is a sink hole in the backyard; I witnessed the workers burying trash of all kinds in the hole where the main water line leads to the house; 13. The ceramic tile in all of the entry way and some in the kitchen is hollow, discolored, and the grout is cracking and chipping out in large chunks; 14. The chandelier light fixture hanging above the kitchen table was not properly installed or grounded; 15. The seal around the window next to the front door was left twisted and not secured to the glass; 16. The weep screed seals around the whole house are far from the wall; 17. There is a large chip in the very southeast corner of the foundation; 18. There is a long crack in the wall of the entryway; 19. There is a leak in the sprinkler system in the front yard; 20. The front door trim is not laying flush against the stucco and there is a ½ inch gap that has been filled with caulking; 21. The kitchen window only has one pane of glass; all of the other windows have two panes of glass; 22. The window screens do not fit properly on any of the windows; the screens are either too tight to be removed or are too loose to fit securely; 23. There is no ceramic tile underneath the stove; 24. The dryer was not installed to manufacturer’s specifications; 25. There are big gaps on both sides of the garage door allowing mice to enter the garage; 26. The peak above the garage door contains loose ceramic tile; 27. There is a long crack in the driveway near the left side of the garage; 28. The brick fence was left untrimmed; 29. The kitchen cabinets appear to have more than 1/8 inch gap between the doors; 30. The bathroom tile is severely discolored and hollow; 31. The gravel in the front yard is considerably thin and almost bare in spots and weeds easily grow through the rocks; and 32. David Babekov and Gavriel Gilkarov on numerous occasions promised to extend and double the size of the entire patio.

On or about March 2, 2004, Ms. Hale submitted to the ROC a list of amendments to the complaint as follows: 1. The front bathroom vent/fan has not worked for several months; 2. The front bathtub faucet is coming away from the wall and is not sealed and is allowing water to seep into the crevice creating a possible mold problem; 3. The baseboard in the living room is not laying flush against the wall and leaves a gap for insects to enter; 4. The front outside lights on the garage short out often and require the light bulbs to need frequent changing; 5. The seal around the window next to the front door and the seal around the living room window were never fastened down properly to the glass; 6. There is loose, hollow, and discolored tile throughout the laundry room, kitchen, entryway and bathrooms; and 7. The dirt next to the walkway in the front yard is very low.

ROC Inspector John Clark was assigned to investigate Ms. Hale’s complaint. Inspector Clark scheduled a jobsite inspection for March 5, 2004. Ms. Hale, Ms. Hale’s father, Mr. Whaley and John Elkins of PAAZ, were present for that inspection. On March 18, 2004, following the jobsite inspection, Inspector Clark issued a Corrective Work Order (“CWO”) under which the ROC gave PAAZ 15 days to take corrective action with regard to complaint item numbers 1, 2, 5, 6, 10, 11, 13, 14, 15, 18 21, 22, 23, 25, 27, 29, 30, and 31, and the amendment to the complaint, numbers A2, A3, A4, A5 (which is the same as 15), A6 (which is the same as complaint item numbers 13 and 30), and A8 (pantry door is hard to open and the margins are uneven – contractor to correct by appropriate means) – which was not specified in the amendment list, but was most likely added at the jobsite inspection. Complaint item number 19 was not addressed due to weather, but was addressed at a subsequent inspection. On or about March 9, 2004, Ms. Hale submitted to the ROC another amendment to her complaint as follows: 1. The cover for the electrical service panel is separated from the hinges and there are large gaps and large cracks in the stucco all the way around the electrical box; 2. Garage door is not square in opening; 3. The air conditioning is sagging on the roof surface; 4. The walls in the bathrooms have nail poppings; 5. The dishwasher is not square in the opening; 6. The fiberglass in the master bathroom is chipped; 7. The master bathroom faucet in the bathtub is loose; 8. Soffit vent screens in the attic are blocked with insulation; 9. Attic wiring is too close to attic opening; 10. Ridge cap flashings are missing and are not covering top tile fasteners, and ridge tiles at HVAC unit are broken and missing; 11. There are numerous cracked, broken, or missing tiles on the roof; 12. The valley flashings are too close together and do not allow for proper drainage; 13. The roof vents for the attic are loose or missing; and 14. There are no bird stops and there are birds nesting under the ceramic tile.

Inspector Clark scheduled a second jobsite inspection for March 26, 2004. Ms. Hale, Ms. Hale’s father, and Mr. Whaley, were present for that inspection. On March 31, 2004, following the second jobsite inspection, Inspector Clark issued an Amendment to the CWO under which the ROC gave PAAZ 15 days to take corrective action with regard to the following amended complaint items beginning with number A9 for purposes of continuity: A9, A11, A12, A13, A15, A16, A18, A19, A22, and A23. Inspector Clark also addressed Complaint item number 19 that had not previously been addressed due to weather. However, at the time of the jobsite inspection, Ms. Hale informed Inspector Clark that she no longer wished to pursue this item of complaint. At the time of hearing, Mr. Whaley acknowledged that all of the deficiencies ordered to be repaired pursuant to the CWO and Amendment thereto, are in need of corrective work, however, Mr. Whaley contended that PAAZ was not responsible for such work because Ms. Hale’s home was constructed without the knowledge or permission of PAAZ. At hearing, Ms. Hale addressed item number 24 of her complaint, alleging that the dryer was not installed to manufacturer’s specifications. Ms. Hale credibly testified that the dryer was installed utilizing improper venting, and submitted Exhibit 1 into evidence corroborating her testimony. The Administrative Law Judge finds, based on the weight of the credible evidence presented at hearing, that in addition to the items delineated in the CWO and the Amendment thereto, PAAZ improperly installed the dryer and is responsible to reinstall the dryer per manufacturer’s specifications. CONCLUSIONS OF LAW 1. In this proceeding, Ms. Hale bears the burden to prove, by a preponderance of the evidence, that PAAZ is subject to discipline for violations of A.R.S. § 32-1154(A)(2), (A)(3), (A)(7), (A)(10), (A)(18) and/or (A)(23), as charged by the ROC in its April 14, 2004 Citation and Complaint. See Arizona Administrative Code (“A.A.C.”) Rule R2-19-119. 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). 2. The Administrative Law Judge concludes that Ms. Hale met her burden of proof as to all six of the ROC’s charges. 3. Under A.R.S. § 32-1154(A)(2), a contractor is subject to discipline for “departure from or disregard of plans or specifications or any building codes . . . in any material respect which is prejudicial to another . . .” The Administrative Law Judge concludes that PAAZ failed to install the dryer in Ms. Hale’s home per manufacturer’s specifications. Therefore, the Administrative Law Judge concludes that PAAZ violated A.R.S. § 32- 1154(A)(2). 4. Under A.R.S. § 32-1154(A)(3), a contractor is subject to discipline for “violation of any rule adopted by the registrar.” In this case, the ROC charged PAAZ with a violation of A.A.C. R4-9-108, which, among other things, requires contractors to perform work in a professional and workmanlike manner and in accordance with any applicable building codes and professional industry standards. The Administrative Law Judge concludes that Ms. Hale demonstrated that PAAZ failed to perform its work at her home in a professional and workmanlike manner as evidenced by the numerous workmanship deficiencies found by Inspector Clark and acknowledged by Mr. Whaley. Therefore, the Administrative Law Judge concludes that PAAZ violated A.R.S. § 32-1154(A)(3). 5. Under A.R.S. § 32-1154(A)(10), a contractor is subject to discipline for “aiding or abetting a licensed or unlicensed person to evade this chapter, knowingly combining or conspiring with a licensed or unlicensed person, allowing one’s license to be used by a licensed or unlicensed person or acting as agent, partner, associate or otherwise of a licensed or unlicensed person with intent to evade this chapter.” The Administrative Law Judge concludes, based on the weight of the credible evidence presented at hearing, including the ROC’s investigation report, and the testimony of Ms. Young and Mr. Mills, that despite Mr. Whaley’s claim of ignorance regarding Mr. Babekov, PAAZ knew and actually gave Mr. Babekov, an unlicensed individual, permission to use its license and construct Ms. Hale’s home. Mr. Whaley’s claimed ignorance does not excuse PAAZ’s actions. Consequently, the Administrative Law Judge concludes that PAAZ is in violation of A.R.S. § 32-1154(A)(10). 6. Under A.R.S. § 32-1154(A)(18), a contractor is subject to discipline for “contracting or offering to contract or submitting a bid while the license is under suspension or while the license is on inactive status.” The Administrative Law Judge concludes, based upon a review of the ROC’s official licensing records, that PAAZ’s license was suspended from June 1, 2002 until August 13, 2002, and that the construction of Ms. Hale’s home was ongoing during the months of June and July 2002, while the license was under suspension. Therefore, the Administrative Law Judge concludes that PAAZ is in violation of A.R.S. § 32-1154(A)(18). 7. Under A.R.S. § 32-1154(A)(23), a contractor is subject to discipline for “failure to take appropriate corrective action . . . without valid justification within a reasonable period of time after receiving a written directive from the registrar.” Based upon the credible evidence of record, the Administrative Law Judge concludes that no valid justification existed for PAAZ’s non-compliance and therefore, the Administrative Law Judge concludes that PAAZ is in violation of A.R.S. § 32-1154(A)(23). 8. Under A.R.S. § 32-1154(A)(7), a contractor is subject to discipline for “the doing of a wrongful or fraudulent act . . . as a contractor resulting in another person being substantially injured.” The Administrative Law Judge concludes that PAAZ committed wrongful acts that substantially injured Ms. Hale by allowing its license to be utilized by an unlicensed individual for the construction of her home, and by PAAZ failing to perform its work at Ms. Hale’s home in a professional and workmanlike manner. Therefore, the Administrative Law Judge concludes that Ms. Hale established that PAAZ violated A.R.S. § 32-1154(A)(7). 9. Based on the foregoing, it is appropriate for the ROC to impose discipline against PAAZ’s license. 10. The ROC’s April 14, 2004 Citation and Complaint advised PAAZ that in the event of a finding of a violation against it, PAAZ’s prior disciplinary record of final ROC orders could be considered in mitigation or aggravation. Accordingly, subsequent to the conclusion of the instant hearing, the Administrative Law Judge took notice of prior final disciplinary orders against PAAZ in the ROC’s official records. Those records revealed that PAAZ has been the subject of two final ROC disciplinary orders within the past two years. 11. Upon consideration of all of the facts and circumstances presented by this case, the Administrative Law Judge concludes that the ROC should suspend PAAZ’s Class B- license. 12. The ROC’s authority in disciplinary matters such as the one presented herein includes the ability to impose reasonable conditions that allow the disciplined contractor to reduce the scope of the disciplinary action taken against it. The Administrative Law Judge deems the exercise of such authority to be appropriate in the instant case, and preferable to imposing discipline against PAAZ’s license without providing a condition to reduce or eliminate same. 13. In consideration of the foregoing, the Administrative Law Judge concludes that the ROC should suspend PAAZ’s Class B- license subject to the condition that PAAZ can avoid such suspension by performing the corrective work specified in the ROC’s March 18, 2004 CWO with the addition of Item Number 24, and the March 31, 2004 Amendment thereto. RECOMMENDED ORDER Based on the foregoing, the Administrative Law Judge makes the following Recommended Order: On the effective date of the Order entered in this matter, PAAZ’s Class B- license (No. 155769) shall be suspended until the ROC receives written proof that PAAZ has performed the corrective work specified in the ROC’s March 18, 2004 CWO, with the addition of Item Number 24, and the March 31, 2004 Amendment thereto. It is further recommended, in addition to the foregoing license suspension, if any, that PAAZ’s Class B- license be placed on active suspension for a period of ten (10) days, followed immediately by a period of 180 days disciplinary probation. This additional disciplinary penalty shall commence on the effective date of the Order entered in this matter or the date on which notice of PAAZ’s compliance with the terms of this Order is filed with the Registrar, whichever is later. In the event of certification of the Administrative Law Judge Decision by the Director of the Office of Administrative Hearings, the effective date of the Order will be forty (40) days from the date of that certification.

Done this day, July 26, 2004.

______________________________________ Sondra J. Vanella Administrative Law Judge

Original transmitted by mail this ____ day of July, 2004, to:

Israel G. Torres, Director Registrar of Contractors ATTN: Jennifer Brown 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