ALJDEC decisions subject to certification as final

08F-2172-ROC · Registrar of Contractors · 2009-02-02

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: January 21, 2009

APPEARANCES: Jerry Kosowsky, Complainant; Jeff Wills, Registrar of Contractors Inspector; Amie Tatalovich, Complaint's witness

ADMINISTRATIVE LAW JUDGE: Dorinda M. Lang _____________________________________________________________________ After filing a complaint with the Registrar of Contractors and requesting a hearing, the Complainant has established by a preponderance of the evidence that the egregious acts by the Respondent constituted numerous violations of the Arizona contracting statutes. Given the Respondent’s blatant violations and its dismal record with the Registrar of Contractors, it is recommended that the Respondent’s license in this matter be revoked and that numerous conditions be placed upon the Respondent’s reinstatement, if any, in the future. FINDINGS OF FACT 1. On September 29, 2005, Complainant, Jerry Kosowsky, contracted with the Respondent, R-Tek Services, LLC, ("R-Tek") for the construction of an addition to his home for the price of $29,402.99. On November 2, 2005, the parties contracted for additional work at a price of $20,956.00. 2. Contrary to their agreement, R-Tek began construction while Mr. Kosowsky was out of town. When he returned, he found that R-Tek had destroyed much of the landscaping and the sewer clean-outs and had poured a foundation that far exceeded the plans. R-Tek acknowledged the error and offered to expand the project at a good price, so Mr. Kosowsky agreed and an additional contract was entered on January 11, 2006 for an additional $44,477.00. Other agreements were entered on February 4, 2006, April 11, 2006, and May 12, 2006, changing various elements of the agreement. 3. R-Tek returned to work in April 2006 and demolished all areas at once, exposing the home to the outdoors. R-Tek then demanded that Mr. Kosowsky agree to change the terms of payment and threatened to abandon the project if he refused. Mr. Kosowsky agreed under pressure and paid more money. At that point, R-Tek did not return to work for several weeks. Over the next several months, R-Tek did little work on the project but showed a rapid change in personnel as 5 supervisors came and went and few workers returned with any regularity. 4. Over time, Mr. Kosowsky has paid about $133,000.00 and the project is far from finished. In December 2007, R-Tek sent Mr. Kosowsky a letter stating that it would finish the project for an additional $12,000 above the contract price. The demand seemed especially absurd since R-Tek claimed it was due extra payment on the custom door. In fact, Mr. Kosowsky had agreed to a more inexpensive door than the contract called for when R- Tek failed on at least two occasions to order the proper door. This had caused the front entry of the home to be boarded up for six months. Despite R-Tek's own error and the fact that Mr. Kosowsky was willing to accept a substitute that cost less, R-Tek demanded additional money for the substitution. 5. In pursuing his request to finish the project in December 2007, Mr. Kosowsky discovered that the building permit had expired in August 2007 because no City inspections had been called for. Mr. Kosowsky requested an inspection himself because R-Tek refused until they were paid more money. The inspector came and said that the work was so bad that he didn't want to write it up. In order to give R-Tek an opportunity to fix the work before he wrote it up, he made a list of items to repair. However, R-Tek demanded that the inspector submit a report rather than repair any items. As a result, the inspector wrote up 20 items. When Mr. Kosowsky sent a letter to R-Tek with the report included therein, R-Tek stopped taking phone calls or communicating with Mr. Kosowsky. 6. On February 1, 2008, Mr. Kosowsky filed a complaint with the Registrar of Contractors. On March 3, 2008, Inspector Jeff Wills conducted a job site inspection. The Respondent did not appear despite being notified. On March 11, 2008, Inspector Wills issued a Corrective Work Order directing R-Tek to complete or correct 66 items. The Registrar of Contractors issued a Citation and Complaint on October 1, 2008. R-Tek submitted an Answer claiming the Mr. Kosowsky had been mean to R-Tek's workers and tried to confuse them. 7. On January 20, 2009, Inspector Wills conducted a pre-hearing job site inspection, where the Respondent failed to appear again. He found that none of the items on the Corrective Work Order had been corrected and no attempts had been made to correct them. R-Tek had installed the wrong materials, wrong sizes and wrong types of items from what the contracts called for. It had also utilized unlicensed contractors and contractors who were working beyond the scope of their licenses. Inspector Wills stated that R-Tek's Answer said that it wanted payment before completing the punch list, but the state of the project was so far from completion that it could not be considered to be at the point of having a punch list. In fact, the project had effectively been abandoned. 8. The problems on the project were worsened by the fact that the plans were never on site, so the workers were always confused about what to do. The roof was exposed for 5 months, which caused flooding in the living room and kitchen and black mold grew in the bedroom wall. Mr. Kosowsky got a lung infection from sleeping in a room with mold in the wall. Numerous scorpions got into the house. And the extreme delays in completing the work prevented Mr. Kosowsky from being able to finance the project with a bank loan because the value of the home was not in evidence, and he had to retain his charges on the credit cards he had initially used to pay R-Tek.

9. Mr. Kosowsky's house sitter, Amie Tatalovich, testified as to many of the above issues. She also testified that R-Tek's Answer lied about Mr. Kosowsky being difficult to work with. In fact, she became involved because she was frustrated with how nice he was about all that R- Tek had done to him. 10. Mr. Kosowsky testified that he has received estimates of up to $250,000.00 to fix the items that must be corrected, many of which are dangerous, and to complete the project. He wants a finding that R-Tek defrauded him by tricking him into accepting a large project and then holding the project hostage until he paid it extra money. He also argued that it was fraudulent to use cheaper materials than the contract called for, such as was the case with several windows. He wants an order to return his money and access to the Recovery Fund. 11. The Respondent did not appear at hearing through any authorized representative or employee. 12. According to the records of the Registrar of Contractors, the license in this matter has 3 open and three closed complaints against it. It was suspended on July 11, 2008 for lack of bond. It has been revoked since October 17, 2008 as a result of Case No. 06F-M1119.ROC and it was revoked again on January 15, 2009 based on Case No. 08F-G0719-ROC. It has been suspended since October 8, 2008 until it complies with an order. CONCLUSIONS OF LAW 1. This matter is within the jurisdiction of the Registrar of Contractors pursuant to A.R.S. §§ 32-1104(A)(4), 32-1154(B) and 32-1156. 2. The Citation and Complaint issued by the Registrar of Contractors in this matter alleged potential violations of A.R.S. § 32-1154(A)(2), (3), (7), (17) and (23) and A.A.C. R4-9-108. The burden of proof at an administrative hearing is generally upon the Complainant. Utah Construction Company v. Berg et al, 68 Ariz. 285, 205 P.2d 367 (1949). Further, the standard of proof at hearing is a “preponderance of the evidence”. Smith v. Arizona Dept. of Transportation, 146 Ariz. 430, 706 P.2d 756 (App. 1985). 3. A.R.S. § 32-1154(A)(2) provides grounds for suspension or revocation of a contractor’s license for departure from or disregard of plans or specifications or building codes without consent of the owner or his or her representative. The Complainant has offered sufficient evidence to establish that the Respondent violated this portion of the statute. 4. A.R.S. § 32-1154(A)(3) provides grounds for suspension or revocation of a contractor’s license for “[v]iolation of any rule adopted by the registrar”. The Arizona Administrative Code requires contractors to meet minimum workmanship standards in the projects they undertake. A.A.C. R4-9-108. Although the project in this matter was incomplete, the Respondent refused to address any of the items that required correction, even though some of them were established to pose a hazard. Therefore, it has been established by the weight of the evidence that the Respondent violated this portion of the statute. 5. A.R.S. § 32-1154(A)(7) provides for suspension or revocation of a contractor’s license for the “doing of a wrongful or fraudulent act by the licensee as a contractor resulting in another person being substantially injured”. The Complainant has established a violation of this portion of the statute by fraudulently luring him into agreeing to numerous additional items and then holding the project hostage until the Complainant agreed to pay more money. 6. A.R.S. § 32-1154(A)(17) provides grounds for suspension or revocation of a contractor’s license for knowingly contracting beyond the scope of the license. The Complainant has established a violation of this portion of the statute by the weight of the evidence presented. 7. A.R.S. § 32-1154(A)(23) provides grounds for suspension or revocation of a contractor’s license for failure to take appropriate corrective action on a Corrective Work Order without valid justification and within a reasonable period of time. Since the Respondent made no attempts to address the Corrective Work Order or offered any legally valid excuse for its failure to do so, the Complainant has established a violation of this portion of the statute. 8. The Registrar of Contractors may consider the prior record of a contractor in any disciplinary proceeding. A.A.C. R4-9-117. On standing motion by the Registrar of Contractors, the computer records of the Registrar of Contractors may properly be considered to be evidence in the event the Administrative Law Judge finds a violation of any of the statutory provisions cited in the Citation and Complaint. 9. In this case, the Complainant has established that Respondent violated A.R.S. § 32-1154(A)(2), (3), (7), (17), and (23). The Respondent’s actions in this matter and the Respondent’s licensing record militate in favor of revoking the Respondent license. 10. Pursuant to the provisions of A.R.S. § 32-1154(B), the Registrar of Contractors may, after the license holder is found to have violated any of the State’s contracting laws, temporarily suspend or permanently revoke the license with or without the imposition of specific reasonable conditions. In appropriate cases, the included reasonable condition may properly take the form of a monetary payment in the nature of restitution, full or partial, to compensate for some or all of the damages or losses caused by acts or omissions of the licensee. Sunpower of Arizona v. Arizona State Registrar of Contractors, 166 Ariz. 437, 803 P.2d 430 (1990).

RECOMMENDED DECISION In view of the foregoing, it is recommended that Respondent’s Class B- license shall be revoked on the effective date of the Order entered in this matter. It is further recommended, in addition to the above provided penalty, that any restoration of Respondent’s contracting rights, whether or not probationary, shall be subject to a condition that Respondent first post an additional surety bond, cash deposit or alternative deposit for a period of twenty-four (24) months, including future renewal periods, in the amount of $100,00.00; such bond or deposit to be for the sole benefit of persons injured as defined in A.R.S. § 32-1131(3) and to be in addition to the required surety bond, cash deposit or recovery fund participation set forth in A.R.S. § 32-1152 (D). Cash or alternative additional deposits, if utilized, shall be returned only after the expiration of an additional two year period following the above-provided twenty-four (24) month period and only if no claims are then pending. It is further recommended, in addition to the above-provided penalties, if any, that Respondent pay the sum of $33,000.00 to the Registrar of Contractors by way of a civil penalty pursuant to A.R.S. § 32- 1154(D), representing $500.00 for each violation of A.R.S. § 32- 1154(A)(23), in which the Respondent refused to correct even one of the 66 items in the Corrective Work Order. The failure by Respondent to pay the entire amount of the aforesaid civil penalty, on or before 30 days following the effective date of the Order entered in this matter, shall result in the automatic revocation of Respondent’s contractor’s license, effective on such deadline date. No future license shall be issued to any entity consisting of persons associated with Respondent, as defined in A.R.S. § 32-1101(A)(5), unless payment of any outstanding prior civil penalty is tendered. Finally, it is recommended that any restoration of Respondent’s contracting rights, whether or not probationary, shall be subject to a condition that Respondent must reimburse the Complainant in the amount of $50,000.00 in partial restitution for the damages suffered by the Complainant at the Respondent’s hands. Once the above penalties have been imposed, Case No. 08F-2172-ROC shall be closed. If the Director of the Office of Administrative Hearings certifies this Administrative Law Judge Decision, the effective date of the order will be forty days from the date of certification. Done this day, February 2, 2009

OFFICE OF ADMINISTRATIVE HEARINGS

______________________________________ Dorinda M. Lang Administrative Law Judge

Original transmitted by mail this ____ day of ____________, 2009, to:

Registrar of Contractors Armando Contreras 3838 N. Central Ave. Phoenix, AZ 85012

By __________________________ -----------------------

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