ALJDEC decisions subject to certification as final

2010A-20977850-ROC · Registrar of Contractors · 2010-10-05

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: September 16, 2010 at 8:00 a.m. APPEARANCES: Mateo Montaño appeared on Complainants’ behalf; Respondent O F A M Residential and Commercial Painting, L.L.C. did not appear. ADMINISTRATIVE LAW JUDGE: Diane Mihalsky _____________________________________________________________________

FINDINGS OF FACT Background and Procedure On March 23, 2004, the Registrar of Contractors (“the Registrar”) issued two licenses to Respondent O F A M Residential and Commercial Painting, L.L.C.: (1) License No. ROC194065, Class C-34 for residential painting and wall covering; and License No. ROC194064, Class L-34 for commercial painting and wall covering. Respondent’s address of record is 5045 W. Baseline Rd., #A105-119, Laveen, Arizona 85339-7392. On December 8, 2009, the Registrar received a complaint from Complainants Mateo and Joronda Montaño against Respondent that alleged 46 specifically enumerated items of complaint concerning Respondent’s rehabilitation of Complainants’ home at 1924 E. South Mountain Ave. in Phoenix, Arizona. On January 15, 2010, the Registrar’s inspector, Theodore (“Ted”) Gerold, performed a jobsite inspection. Inspector Gerold explained to the parties at the jobsite inspection that because most of the items of complaint were beyond the scope of Respondent’s C-34 license, it would need to hire an appropriately licensed contractor to repair or complete such work. On January 15, 2010, Inspector Gerold sent a letter to Respondent, informing it that the Registrar had information that it was performing or offering to perform work that was beyond the scope of its C-34 license, in violation of A.R.S. § 32-1154(A)(17). On January 25, 2010, Inspector Gerold issued a Corrective Work Order (“CWO”) that required Respondent within fifteen days to correct or complete of the original 46 complaint items. The CWO specifically did not require Respondent to correct complaint items Nos. 34, 36, 45, and 46. On January 21, 2010, the Registrar received Complainants’ request to amend the complaint to allege an additional three items. On February 11, 2010, Inspector Gerold performed a second jobsite inspection. On February 12, 2010, Inspector Gerold issued an amendment to the CWO, requiring Respondent within fifteen days to perform the following additional work: (1) To repair all roof leaks, except those caused by the air conditioning ductwork, and to complete the roof; (2) To repair all damages to the interior that the roof leaks had caused; and (3) To replace all damaged exterior wood. Complainants subsequently requested that a citation be issued against Respondent, and Inspector Gerold transferred the case to the Registrar’s Legal Department. On June 10, 2010, the Registrar issued a Citation and Complaint against Respondent, charging violations of A.R.S. § 32-1154(A)(1), (2), (3) (namely A.A.C. R4-9-108), (9), (13) (namely A.R.S. § 32-1124(B)), (17), and (23). Zimbalist Odhams, on behalf of Respondent, filed a timely written answer to the Citation and Complaint, denying any statutory violations and affirmatively alleging that Respondent had reached a settlement with Complainants that required Respondent to perform repairs by a certain deadline. The Registrar referred the matter to the Office of Administrative Hearings (“OAH”), an independent agency, for an evidentiary hearing. On August 3, 2010, the Registrar issued a Notice of Hearing, setting a hearing on September 16, 2010. The Registrar mailed a copy of the Notice of Hearing to Respondent at its address of record. A hearing was held on September 16, 2010. Although the beginning of the hearing was delayed fifteen minutes to allow Respondent additional travel time, it did not appear through a member or an attorney and did not contact the OAH to request a continuance or that the start of the hearing be further delayed. Respondent did not present any evidence to defend its license. Inspector Gerold testified at the hearing. Complainant Mateo Montaño also testified and submitted 14 exhibits. The Registrar’s record shows that on or about March 31, 2010, Respondent’s License No. ROC194065, Class C-34 was suspended as a matter of law for non-renewal. Additional Evidence In early 2009, Complainants were looking at various distressed foreclosed properties in the Phoenix area to purchase as their first family home. Complainants were planning to obtain a so-called 203(k) loan[1] to borrow funds not only to purchase but to substantially rehabilitate the home. Respondent submitted written bids for the rehabilitation of several properties that Complainants considered purchasing. Respondent’s bid forms showed its name as “OFAM, Inc. Painting and Construction.”[2] Mr. Odhams told Complainants that Respondent was a general contractor. On June 19, 2009, Respondent submitted a bid to perform certain specified rehabilitation of a large, older adobe brick house at 1924 E. South Mountain Ave., for the total price of $27,920.00. The bid included repair of the roof, pool tile and deck, HVAC system, plumbing system, and electrical system, replacement of damaged windows, and replacement of exterior doors and wood, as well as painting the interior of the house. Respondent’s bid form did not show its license number, preceded by the acronym, “ROC.” On July 14, 2009, Complainants and Mr. Odhams entered into a Homeowner/Contractor Agreement under which Complainants accepted Respondent’s bid to rehabilitate the house. In August 2009, Respondent started work on the rehabilitation project. The 203(k) program required Respondent to submit draw requests to Complainants and Complainants to sign the draw requests to certify that the work had been completed to their satisfaction. The draw requests were then submitted to Complainants’ lender’s program consultant for him to authorize payment of the draw requests. On September 1, 2009, Complainants’ lease expired on the rental in which they and their young son had been living. After the lease expired, Complainants and their son lived in motels and with family members. Between September 1 and September 28, 2009, Respondent submitted and Complainants signed three scheduled draw requests and one contingency draw request, in the total amount of $27,920.00. Complainants’ lender paid the full amount of the contract, $27,920.00, to Respondent. Mr. Montaño testified that Respondent did not fully perform the work described in the draw requests to Complainants’ satisfaction. Nonetheless, Complainants signed Respondent’s draw requests because they were eager to move into their new home. Because Respondent was a small business that might not have sufficient funds to advance for the project, Complainants thought that advancing money to Respondent would encourage it to complete the project more quickly. The contract did not require Respondent to remodel or to perform any work on the kitchen or bedroom closets. Nonetheless, Respondent’s crew substantially gutted the kitchen and removed shelving from one of the bedroom closets. Complainants moved into the house in November 2009. Since they moved in, they have done dishes in two five-gallon buckets because they do not have a kitchen sink. They only have one fully functional bathroom. Inspector Gerold performed a prehearing jobsite inspection on September 13, 2010. He testified that ten specific complaint items had been completed or repaired in a professional and workmanlike manner. Complainants presented credible evidence to establish that the original and amended complaint items summarized below had not been repaired or completed:[3] 3. Deteriorated circuit box on east side of house, which might not comply with code. 4. Exposed wires in the southeast bedroom along the west wall and in the northeast corner of the closet. 7. Gap between the electrical outlet and the adobe on the west wall in the southeast bedroom. 8. Gap between the light switch and drywall in the pantry. 11. Incomplete or deficient plumbing in the kitchen, northwest bathroom, and laundry area. 13. Incomplete tile at the back (north) door. 14. Poor workmanship on the transition strips between the wood floor and tile in two areas of the northern living room and adjoining library. 15. Poor workmanship on the transition strip between the wood floor and tile in the southeast bedroom. 16. Poor workmanship on the transition strip between the west living room and dining room. 17. No shoe molding in the southeast bedroom (all walls), pantry (all walls), and kitchen (north and south walls). 19. Hole in the grout in the north living room 6 tiles from southern door. 20. Gap in the wood floor in the northwest library close to the north wall. 21. Exposed plastic underlayment in the southeast bedroom along north wall. 22. Paint splattered on tile and wood floor in the northeast bedroom, northeast bathroom, north living room, and south dining room. 23. Stained/dirty molding in the northeast bathroom along west wall. 24. Missing exterior replacement doors in the north living room (north), laundry area, and west living room (south), and poor workmanship on installation of east door in the kitchen. 26. A total of six incorrectly sized replacement windows installed in the northeast bedroom on the north wall and south wall, north living room on the west wall, southeast bedroom on the east wall and south wall, and the dining room on the south wall. 27. The original window in the west living room along the west wall was not replaced. 28. Missing air conditioning register in the northeast bedroom. 30. Caulk smeared across the lintels of the south and east windows in the southeast bedroom. 31. Paint touchup needed throughout the entire house, especially in the north living room on the north exterior door trim and in the kitchen on the east exterior door trim. 32. Poor workmanship in patching the kitchen ceiling drywall where original stove vent was removed. 33. Gap between the drywall on the west and south walls of the northwest library. 35. Excess grout on two glass blocks in the northeast bathroom shower. 37. Missing shelving and clothes rod in the southeast bedroom closet. 38. Deficient installation of cabinet above microwave, deficient drywall repairs, and missing cabinets, countertops, sink, dishwasher, garbage disposal, plumbing, and flooring in the kitchen. 39. Deficient interior painting and drywall repair in pantry. 40. Incomplete or deficient framing, drywall repair, painting, and plumbing in the laundry area. 41. Deficient ceiling repair and nonfunctional toilet and bath/shower in the northwest bathroom. 42. Deficient or incomplete adobe repair and painting of walls and ceiling in the west living room. 43. Missing gutters and elastomeric coating on the roof; missing skylight replacement above laundry area; and unsealed parapets. 44. Repair pool tile and pool deck. 47. Damaged exterior wood around the southeast bedroom windows on the south and east walls and on the eaves, overhang, and fascia on the north and east sides of the roof. 48. Interior roof/ceiling leak in the northeast bathroom light fixture above the shower. 49. Substantial collateral damage throughout the interior from roof leaks.

CONCLUSIONS OF LAW The matter lies within the Registrar’s jurisdiction.[4] The Notice of Hearing that the Registrar mailed to Respondent at its address of record was reasonable, and Respondent is deemed to have received the Notice of Hearing.[5] Complainants bear the burden of proof to establish Respondent’s statutory violations by a preponderance of the evidence.[6] “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”[7] A preponderance of the evidence is “[t]he greater weight of the evidence, not necessarily established by the greater number of witnesses testifying to a fact but by evidence that has the most convincing force; superior evidentiary weight that, though not sufficient to free the mind wholly from all reasonable doubt, is still sufficient to incline a fair and impartial mind to one side of the issue rather than the other.”[8] The suspended status of Respondent’s does not preclude Complainants from pursuing their administrative remedy or deprive the Registrar of jurisdiction to revoke, suspend, or otherwise penalize Respondent’s contractor’s license as a result of any statutory violations that Complainants establish in this case.[9] Complainants established that Respondent violated A.R.S. § 32- 1154(A)(3)[10] and (23)[11] with respect to its initial construction of and failure to repair the complaint items summarized at Finding of Fact No. 29 after the CWO was issued. Complainants authorized payment to Respondent for the full amount of its contract, yet the rehabilitation project is still substantially incomplete. Therefore, Complainants established that Respondent violated A.R.S. § 32- 1154(A)(1)[12] and (9).[13] Respondent’s C-34 license for residential painting and wall covering only allows it to perform “[s]urface preparation and application of materials common to the painting and decorating industry for protective and decorative purposes.”[14] Most of the work that Respondent undertook to perform under its contract to rehabilitate Complainants’ home was beyond the scope of its C-34 license. “‘Knowingly’ imports only a knowledge that the facts exist which bring the act or omission within the provisions of the statute using such word. It does not require any knowledge of the unlawfulness of the act or omission.”[15] “‘Notice of facts and circumstances which would put a man of ordinary prudence and intelligence on inquiry is . . . equivalent to knowledge of all the facts a reasonably diligent inquiry would disclose.’”[16] Because Respondent should have known that its C-34 license did not allow it to contract for most of the work to rehabilitate Complainants’ home, Complainants have established that Respondent violated A.R.S. § 32-1154(A)(17).[17] Complainants submitted Respondent’s bids for the project at 1924 W. South Mountain Ave. and another project that did not show Respondent’s license number, preceded by the acronym, “ROC.” Therefore, Complainants established that Respondent violated A.R.S. § 32-1154(A)(13).[18] Complainants did not present any evidence to establish that Respondent’s work on the rehabilitation project departed from plans or violated code. Therefore, Complainants did not establish that Respondent violated A.R.S. § 32-1154(A)(2).[19] Respondent’s suspended license prevents it from performing even the work that lies within the scope of its C-34 license or from hiring another appropriately licensed contractor to correct the substantial incomplete or deficient work that is beyond the scope of its C-34 license.[20] RECOMMENDED ORDER Based on the foregoing, it is recommended that, on the effective date of the Registrar’s order in this matter, the Registrar revoke Respondent O F A M Residential and Commercial Painting, L.L.C.’s License No. ROC194065, Class C-34. It is further recommended that the Registrar require Respondent to pay the sum of $500.00 as a civil penalty pursuant to A.R.S. § 32-1154(D).

It is further recommended that if Respondent fails to pay the entire amount of the civil penalty on or before thirty days following the effective date of the Registrar’s final order, the Registrar revoke Respondent’s license, effective on such deadline date. Unless Respondent tenders payment of any outstanding prior civil penalty, 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), and the Registrar may discipline Respondent’s License No. ROC194064, Class L-34 under A.R.S. § 32- 1154(A)(21). 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, October 5, 2010.

/s/ Diane Mihalsky Administrative Law Judge

Transmitted electronically to:

William A. Mundell, Director Registrar of Contractors ----------------------- [1] A 203(k) loan is part of a program offered by the U.S. Department of Housing and Urban Development, Office of Housing to qualified first-time buyers. [2] The Registrar’s records do not show any license ever having been issued to a contractor by this name. [3] The items are referred to by their original complaint numbers, with the amended items of complaint referred to as Nos. 47-49. [4] See A.R.S. § 32-1101 et seq. [5] See A.R.S. §§ 41-1092.04; 41-1092.05(D). [6] See A.R.S. § 41-1092.07(G)(2); A.A.C. R2-19-119(A); see also Vazanno v. Superior Court, 74 Ariz. 369, 372, 249 P.2d 837 (1952). [7] Morris K. Udall, Arizona Law of Evidence § 5 (1960). [8] Black’s Law Dictionary at page 1220 (8th ed. 1999). [9] See A.R.S. § 32-1154(C) (“The expiration, cancellation, suspension or revocation of a license . . . shall not deprive the registrar of jurisdiction to proceed with any investigation of or action or disciplinary proceeding against such license, or to render a decision suspending or revoking such a license . . . “). [10] 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 cited 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.” [11] 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 a written directive from the registrar.” [12] This statutory subsection includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license, “[a]bandonment of a contract or refusal to perform after submitting a bid on work without legal excuse for the abandonment or refusal.” [13] This statutory subsection includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license, “[f]ailure in a material respect by the licensee to complete a construction project or operation for the price stated in the contract, or in any modification of the contract.” [14] A.A.C. R4-9-103. [15] A.R.S. § 1-215. [16] Maricopa Utilities Co. v. Cline, 60 Ariz. 209, 214, 134 P.2d 156 (1943) (quoting Schneider v. Henley, 61 Cal. App. 758, 763, 215 P. 1036, 1038 (1923)). [17] This statutory subsection includes among the grounds for suspension, revocation, and other disciplinary action against a contractor’s license “[k]nowingly contracting beyond the scope of the license or licenses of the licensee.” [18] This statutory subsection includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license, “[f]ailure in any material respect to comply with this chapter.” The specific statute charged was A.R.S. § 32-1124(B), which requires that licensed contractors include their license number preceded by the acronym “ROC” on “all written bids submitted by the licensee and . . . on all advertising, loan forms, lending institution forms, letterheads and other documents used by the licensee in the conduct of business regulated by this chapter.” [19] This statutory subsection includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license, “[d]eparture from or disregard of plans or specifications or any building codes of any state or any political subdivision of the state in any material respect which is prejudicial to another without consent of the owner or the owner’s duly authorized representative and without the consent of the person entitled to have the particular construction project or operation completed in accordance with such plans and specifications and code.” [20] See A.R.S. § 32-1151. This statute makes it unlawful for anyone to engage in contracting without “a contractor’s license in good standing.” A.R.S. § 32-1101(A)(3) defines “contractor” in relevant part as someone who “does himself or by or through others, or directly or indirectly supervises others” to perform contracting.

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