ALJDEC decisions subject to certification as final

2010A-308472241-ROC · Registrar of Contractors · 2011-01-20

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: December 30, 2009, April 6-7, 2010, July 12-16, 2010, September 20-21, 2010, and October 25-27, 2010. The record was kept open until January 3, 2011. APPEARANCES: Krishna M. Pinnamaneni, M.D. appeared personally. W.W. Smith Construction, Inc. and W, Inc. were represented by their attorney, William D. Sawkiw, Esq. ADMINISTRATIVE LAW JUDGE: Brian Brendan Tully _____________________________________________________________________ Overview The dispute in the above-entitled matters concerns the construction of a multi-million dollar, custom, steel-and-glass residence located at 13200 N. 136th Street, Scottsdale, Arizona. Krishna M. Pinnamaneni, M.D. was the owner/builder for the project. W.W. Smith Construction, Inc. and W, Inc. were involved in the steel work. The parties are involved in civil litigation that includes a pending appeal to the Arizona Court of Appeals concerning an arbitrator’s Award and Judgment. Dr. Pinnamaneni filed three Complaints with the Registrar of Contractors (Registrar) against W.W. Smith Construction, Inc. and W, Inc. Those Complaints were consolidated for hearing before the Office of Administrative Hearings. During the multiday hearing, the parties stipulated to the addition of several more issues. Based upon the evidence of record, the Administrative Law Judge makes following Findings of Fact, Conclusions of Law, and Recommended Orders: FINDINGS OF FACT Introductions 1. Pioneer Family Investments, L.L.C. (“Pioneer”) is the owner of the subject property. 2. Krishna M. Pinnamaneni, M.D. (“Complainant”) is the managing member of Pioneer. Complainant served as owner/builder for the subject project after the original general contractor, Wade Construction, left the project. Complainant previously served as the owner/builder for his medical office building. 3. Robert Brown is the architect for the subject project. In addition to performing architectural work on the project, Mr. Brown also provided construction management services, such as scheduling and supervising subcontractors. 4. W. W. Smith Construction, Inc. (“Respondent Smith”) is the holder of License No. 130083, a Class B- contracting license issued by the Registrar of Contractors (“Registrar”). William Willar Smith, III is Respondent Smith’s president and qualifying party. 5. W, Inc. (“Respondent W”) is the holder of License No. 249106, a Class B- contracting license issued by the Registrar. William Willar Smith, III is Respondent W’s president and qualifying party. 6. Respondent W’s contracting license was issued by the Registrar on September 25, 2008. The Contract 7. Complainant, as managing member of Pioneer, and Mr. Smith, as president of Respondent W, entered into “AIA Document A101™ - 1997 Standard Form of Agreement Between Owner and Contractor,” dated October 25, 2007 (“Contract”), wherein Respondent W agreed to perform specified steel work on the subject property. The Contract also specifically excluded certain steel work. 8. On page 1 of the Contract, the following language appears: “This document has important consequences. Consultation with an attorney is encouraged with respect to its completion or modification.” 9. At the time the Contract was executed, Respondent W was not a licensed contractor. Steel work on the project was performed by Respondent Smith until Respondent W obtained licensure. 10. Respondent W thought that it was properly licensed at the time it executed the Contract with Complainant, but later discovered that it was not. Respondent W contacted the Registrar to self-report its unlicensed contracting. The Registrar took no action against Respondent W. Shortly thereafter, Respondent W became properly licensed. 11. Although the timing of the disclosure is in dispute between the parties, Respondents did give notice to Complainant and his architect that Respondent W had become licensed. Complainant continued to conduct business with both Respondents. 12. The Contract was terminated by Complainant for cause, effective August 19, 2009.[1] Case 09-5357 Respondent Smith 13. On April 13, 2009, Complainant filed a written Complaint with the Registrar alleging workmanship deficiencies by Respondent Smith. The Registrar designated the Complaint as Case No. 09-5357. 14. The Complaint in Case No. 09-5357 listed the following Complaint items against Respondent Smith: 1) The front stairs (SE Corner) need additional support elements and cross bracing per our discussions, construction plans and drawings sent to Bruce Transon. 2) Steel blocking piece at North wall of Mechanical room common with Compressor pad. 3) Blocking plates at top of west wall of mechanical rm and office to create weather tight condition. 4) The tread angles on main interior stairs to receive glass steps, to be reviewed and coordinated with glass contractor. 5) Steel grating roofing similar to the floor grating, per plan. 6) Rear (west) steps stringers, from house to pool deck, per details from architect[.] 7) Owner revision East front steel step stringers at carport to first floor level need to be placed[.] 8) Angle steel edge not placed on west end of cupola prior to roofing pour and a flat steel trim piece is now required.. [sic] 9) W 8x 15 bm at elevator not installed. (support plates incorrectly placed by concrete contractor but bm can be hung from existing plates) 10) Steel stairs to be connected to lower conc. wall and anchor the staircase frame in front of the elevator area. 11) The steel blocking is required at the transition of steel deck direction above the W24x370 steel beam at second floor framing. 12) Several holes placed in second floor concrete need structural support. 13) Front replacement beam needs to be replaced prior to glass installation, so as to prevent potential damage to window systems[.] 14) Front entrance Metal gate[.] 15) Terrace/roof steel cabling and posts[.] 16) “X” steel cable over the south wall of the auto court. 17) Steel base for the eagle fountain[.] 18) Support steel for the opening over the fountain to support glass per Architect design[.] 19) Steel frame for third floor elevator stop area[.] 20) More items of incompletion are being forwarded by the project architect[.] [2] [Footnote added.]

15. As a result of the Complaint in Case No. 09-5357, the Registrar’s assigned inspector, Jim Dimond, performed a jobsite inspection to view the Complaint items. 16. As a result of his jobsite inspection, Inspector Dimond wrote a letter, dated June 3, 2009, that recommended closing the Complaint in Case No. 09-5357 for the following reasons: RECOMMENDATION OF CLOSING

The original complaint included 20 items. At the time of inspection, the complainant issued a revised 14 item list and only those items were addressed. The other items were no longer at issue or were corrected prior to inspection.

Item 1 – Blocking plates at top of west wall of mechanical room and office to create weather tight condition. (The plans indicate 14 ga. Bent plate, all details where insulated space stops. This is one of those conditions. The lack of specific detail for this condition does not eliminate the need for the work. Detail 16/S-4 is showing beam bearing. While the lack of specific detail does not eliminate the need for the work, it is this inspector’s opinion that the bent plate is installed at the location called out on S-2 and is typical with the rest of the installation.

Bent plate installation at the requested location would be an additional item and a change order would need to be executed.

Item 2 - Rear (west) steps stringers, from house to pool deck, per revised details from architect. (Plan view submitted to Bruce and marked on site). Due to the concrete sloping in a direction other than what the plans call out, a revision was necessary.

Information gathered at the inspection indicates that the information was not provided until the day prior to the inspection. Contractor has indicated installing this item is his obligation and is prepared to do so.

Due to the information being provided on such short notice, it would be inappropriate to direct the contractor by way of Corrective Work Order to perform this task. However, lack of performance by the contractor could result in the amending of this finding.

Upon lack of performance, a second inspection of this item could be requested.

Item 3 - Header (red iron stud) to be attached to bottom of steel beams per revised architectural detail to be provided. It is this inspector’s opinion that this item is not structural in nature and the respondent’s contract is limited to structural items. This would be an extra and a change order would be required.

Item 4 - The tread connections on main interior stairs that receive glass steps to be reviewed by contractor and coordinated with Longo art glass for any requested additional steel items. It appears that a final design has not been completed and therefore the contractor cannot perform this task at this time.

Item 5 - Steel decking roofing similar to the floor deck per plan. It appears that the intended product to be installed also has not been finalized and the contractor cannot perform this task at this time.

Item 6 - Steel structural heights certification. This does not appear to be contractually obligated, however, the Respondent did agree to provide As-Builts.

Item 7 - Damage to front sewer cleanout by WW Smith tractor. The inspector cannot verify who damaged the clean out.

Item 8 - Cross bracing cable over low wall on South-west side. Information gathered at inspection indicates that this item is not structural in nature and excluded from the contract. The contractor did however, indicate that he would install the items upon presentation of a design.

Item 9 - Cable railing on roof terrace per plans. It is this inspector’s opinion that railings are specifically excluded from the contract.

Item 10 - Front fountain steel base. It is this inspector’s opinion that this is not a structural item and would not be included in the contract.

Item 11 - Front entry gate. It is this inspector’s opinion that this is an architectural item and not included in the contract.

Item 12 - X bracing in second floor deck opening on S-W deck. This item is not on the plans and was an extra done as a courtesy. However, the respondent did indicate that upon receipt of a design, that he would install the bracing.

Item 13 - W 8 x 15 beam at elevator; not installed. This item is not installed due to an error by the concrete contractor. In order for the respondent to make the correction, a change order would be appropriate. Upon correction of the embeds by any party, the respondent would be obligated to install the beam.

Item 14 - Several holes placed in second floor concrete need structural support. (Submitted service request) It appears that these holes were a result of improper layout by the HVAC contractor. This would be an ‘extra’ and a change order would be appropriate.

[Emphasis in the original.]

17. On September 2, 2009, the Registrar issued a Citation and Complaint in Case No. 09-5357 charging Respondent Smith with violating the provisions of A.R.S. § 32-1154(A) (2), (7), (3), namely A.A.C. R4-9- 108, and (13), specifically A.R.S. § 32-1124(B). 18. The Registrar forwarded Case No. 09-5357 to the Office of Administrative Hearings, an independent agency, for an evidentiary hearing. 19. At hearing, the preponderance of the evidence presented supported Inspector Dimond’s findings in Case No. 09-5357. Case No. 09-5357W Respondent W 20. On December 30, 2009, Complainant filed a second Complaint with the Registrar against Respondent W. The Registrar originally designated the second Complaint as Case No. 10-2301, but later re-designated it as Case No. 09-5357W. 21. In Section 4 of the Complaint in Case No. 09-5357W, Complainant indicated that he sought the following resolution to his Complaint: “Restitution of damages due to fraudulent conduct and deceptive business practices.” 22. In the Complaint in Case No. 09-5357W, Complainant listed the following Complaint items: #1. On 12/30/2009,[3] the contractor notified [sic] during AZ ROC Administrative Hearing case #09F-5357-ROC that the above stated fraudulent behavior became apparent only on 12/07/2009 while preparing for the hearing of the above noted case. The OAH administrative Judge advised that this fraudulent conduct and deceptions by W Inc. (W W Smith, President) were not mentioned in the case #09-5357-ROC since the license number of W Inc. (ROC License # 249106 B) and W W Smith construction [sic] Inc (ROC License # 1300083) are different and W Inc was not mentioned in Case # 09F-5357- ROC. This case hearing is continued to April 6th and 7th, 2010.

However, W W Smith owns both companies and thereby this unlicensed contractor issue of W Inc., at the time of entering into the contract with complainant, may not be discussed at this hearing per the OAH Judge. Therefore the complainant files this newfound fact (W Inc.’s fraudulent contract issue) for your consideration to be included in these proceedings or set up another proceeding to address these newfound facts. The contractors [sic] fraudulent conduct to deceive clients is within the jurisdiction of AZ ROC statutes as well as pursuant to Arizona Revised Statute Ann. § 13-2310(A) et seq. Complainant respectfully requests to add W Inc. also to the hearing that is being continued to April 6th and 7th, 2010 or set up another proceeding.

#2. While functioning under a fraudulent contract that has been induced to enter into with the complainant, W Inc. conducted tortuous [sic] interference with other trades with the project and conducted negligent performance and promoted slanderous propaganda of the complainant. The complainant respectfully requests to include these conduct issues of W Inc business practices in this hearing, or set up another proceeding, for decision to grant damages and penalties against W Inc.

[Footnote added.]

23. On March 17, 2010, the Registrar issued a Notice of Amendment that consolidated Case Nos. 09-5357 and 09-5357W and added A.R.S. § 32- 1154(A) (20) as a violation to the Citation and Complaint issued in these matters. 24. As to Complaint item #1, “WW Smith” does not own both Respondent Smith and Respondent W. They are two separate legal entities, although Mr. Smith has treated them interchangeably on the subject project. 25. Respondent W did not possess a contracting license at the time the parties executed the subject construction agreement. 26. There is no credible evidence that Respondent W fraudulently entered into the parties’ contract prior to receiving its contracting license. Complainant failed to establish the elements of fraud. 27. As the “owner/builder” for the subject project, Complainant had the statutory responsibility to contract only with duly licensed contractors in order to qualify for the licensing exemption provided by A.R.S. § 32-1121(A) (5). Without condoning Respondent W’s entering into the subject construction agreement while unlicensed, simple due diligence by Complainant, such as checking the Registrar’s electronic licensing records, would have disclosed Respondent W’s unlicensed status at the time. 28. Respondent W later became properly licensed by the Registrar. 29. Complainant’s allegation that Respondent W committed acts in violation of A.R.S. § 13-2310(A), a criminal fraud statute, is beyond the scope of the Registrar’s jurisdiction. 30. The evidence of record does not support Complainant’s allegation that Respondent W “conducted tortuous [sic] interference with other trades with the project and conducted negligent performance and promoted slanderous propaganda of the complainant.” 31. Complainant’s claim for compensatory damages, even if proven, would be outside the scope of the Registrar’s authority. Case No. 2010-[number redacted] Respondent Smith 32. On April 8, 2010, Complainant filed another Complaint with the Registrar against Respondent Smith. That Complaint was designated as Case No. 2010-[number redacted]. 33. In Section 4 of his third Complaint, Complainant listed the following relief that he sought from the Registrar: “Recovery on damages, including punitive damages allowed under Arizona Law for fraudulent conduct or deceptive business practice.” The Registrar lacks the authority to award such damages. Such relief may be sought in the pending civil litigation 34. In Section 5 of his third Complaint, Complainant lists the following Complaint items: The above noted cases’ hearing that took place on April 6 and 7, 2010 and further continued to July 12 to 16, 2010 before Judge Brain B. Tulley [sic]. The Complainant Krishna M. Pinnamaneni, MD, Managing Member of the Pioneer Family Investments, discovered more information and documents that supported more violations committed by W Inc. (ROC# 249106) and W. W. Smith Construction, Inc with ROC License # 130083 (same QP).

The Complainant at this time submit following and respectfully requests AZ-ROC to add them to the ongoing hearing (continued to July 12 to 16, 2010) of the above noted cases for full examination of all the evidence that support allegations for a proper decision by the Administrative Judge of the OAH.

1. Contractor, W Inc., violated ARS § 32-1123 by bidding for contract on January 19, 2007 and entered into a contract on October 25, 2007 without license to do steel work, for Pioneer Family Investments and its managing Member, Krishna M. Pinnamaneni, at 13220 N 136th Place, Scottsdale, Arizona 85259, which has an aggregate worth of $333,600 (far more than one thousand dollars). Contract was attached to the above case files. 2. Unlicensed Contractor, W Inc, (later, after eleven months into a contract work, Licensed with ROC#249106) violated ARS §32-1124(B) by not informing unlicensed status and by deliberately not placing unlicensed status at the time on all written bids submitted, on proposal letterheads and other document used by the un-licensee to correspond with this customer (a potential customer at the time of negotiations) in the conduct of the business regulated by this chapter. 3. W. Inc acting as W.W. Smith Construction, Inc with ROC License #130083 (same QP), among several other violations of Arizona Revised Statutes, also violated ARS §32-1154 (A)(9) by failing in a material respect by the licensee to complete a construction project in a timely manner at 13220 N 136th Place, Scottsdale, Arizona 85259 for the price stated in the contract or in modification of the contract. 4. W.W. Smith Construction, Inc., a licensed contractor aided and abetted an unlicensed contractor, W Inc., at the time of contract negotiations and during the first eleven months of project construction to evade the conditions of his [sic] chapter of ARS § 32-1154 and violated in particular ARS § 32- 1154 (A)(10) by knowingly and recklessly combining or conspiring with a licensed or unlicensed person (same QP) by acting as agent, partner with intent to evade this chapter ARS 32-1154. 5. W. W. Smith Construction, Inc. violated ARS § 32-1154 (A) 15 by acting in the capacity of contractor, under its license issued, worked and aided or abetted a different unlicensed contractor (W. Inc) in a name other than as set fort [sic] upon the license. 6. W Inc under the disguise [sic] of W.W. Smith Construction Inc. violated ARS § 32-1158 A (1) by deliberately avoiding the license number on the contact [sic] negotiation documents and the contract and it has been a deception and fraud. 7. W.W. Smith Construction Inc. and W Inc Violated [sic] the Arizona Consumer Fraud Act (“ACFA”), ARS § 44-1522 (A), [sic] The act, use or employment by any person of any deception, deceptive act or practice, fraud, false pretense, false promise, misrepresentation, or concealment, suppression or omission of any material fact with intent that others rely upon such concealment. Suppression or omission, in connection with the sale or advertisement of any merchandise whether or not any person has in fact been misled, deceived or damaged thereby, is declared to be an unlawful practice. 8. W Inc and W. W. Smith Construction, Inc. have met all the tenets of common law fraud too and it must be addressed at hearing by reviewing the evidence. 9. Violation of Fire codes in construction of the project and it is in violation of the ROC workmanship standards too. 10. Caused deliberate and unnecessary Delays [sic] and damages to the project

35. On June 16, 2010, the Registrar issued a Citation and Complaint in Case No. 2010-[number redacted], charging Respondent Smith with violating the provisions of A.R.S. § 32-1154(A) (2), (3), namely A.A.C. R4-9-108, (7), (9), (10), (13), specifically A.R.S. § 32-1158, (15), (16), and (20).[4] 36. Complaint item 1 in Case No. 2010-[number redacted] is an allegation against Respondent W, who was not charged in the case. 37. Complaint item 2 in Case No. 2010-[number redacted] is an allegation against Respondent W, who was not charged in the case. 38. Complaint item 3 in Case No. 2010-[number redacted] is an allegation against Respondent W, who was not charged in the case. Notwithstanding the foregoing, it is determined that the steel work was performed in a timely manner, except for payment delays by Complainant, scheduling delays by Complainant and his architect, and delays in responding to reasonable requests for clarification of plans and/or specifications by Complainant and/or his architect. Further, there is no credible evidence that Respondents failed to complete the steel scope of work for the contract price or any approved change order. 39. As to Complaint item 4 in Case No. 2010-[number redacted], Respondent Smith did aid and abet Respondent W during the subject project. However, there is credible evidence that Mr. Smith mitigated that violation by disclosing it to the Registrar and completed the licensing process, resulting in Respondent W obtaining licensure. 40. As to Complaint item 5 in Case No. 2010-[number redacted], there is credible evidence to support the allegation. 41. As to Complaint item 6 in Case No. 2010-[number redacted], the subject construction contract failed to list Respondent Smith’s contracting number, as required by statute. 42. As to Complaint item 7 in Case No. 2010-[number redacted], any alleged violation of the Arizona Consumer Fraud Act, A.R.S. § 44-1522(A) is beyond the Registrar’s jurisdiction to enforce, if proven. 43. As to Complaint item 8 in Case No. 2010-[number redacted], the evidence of record does not support a finding that Complainant established the elements of common-law fraud by Respondent Smith. 44. As to Complaint item 9 in Case No. 2010-[number redacted], there is insufficient evidence that Respondent Smith violated local fire codes. The fire block that Complainant claims should have been installed by Respondent Smith was not included in the plans and specifications. There is a question as to whether the local fire code requires fire block in a steel building. There is no evidence that Complainant submitted a change order for such work to Respondent Smith or that Respondent Smith verbally agreed to perform such additional work. 45. As to Complaint item 10 in Case No. 2010-[number redacted], Respondent Smith did not cause “deliberate and unnecessary [d]elays and damages to the project,” as alleged by Complainant. Respondent Smith performed its scope of work to workmanship standards. Any delays in Respondent Smith’s performance of the steel work are determined to have been caused by the acts or omissions of Complainant and/or Complainant’s agent. Additional Complaint Items Added During Hearing 46. During the hearing, the parties stipulated to adding several additional issues in these consolidated matters Exterior Spiral Staircase 47. The exterior spiral staircase was ultimately installed by another steel contractor at Complainant’s direction after Complainant’s termination of the Contract. 48. Complainant and his subsequent steel contractor are responsible for any alleged code violations with the installation of the exterior spiral staircase. The subsequent steel contractor made extensive changes to the staircase fabricated by Respondents. Kitchen Beam 49. The alleged deviation in the kitchen beam is determined to have been caused by the excess weight of the house’s roof resulting from Complainant’s concrete subcontractor pouring concrete beyond the concrete specifications. 50. Respondents are not responsible for the deviation in the kitchen beam. Interior Staircase 51. Remedial work to the interior staircase was performed after Complainant terminated the Contract. Therefore, Respondents are not responsible for any alleged deficiencies in the interior staircase.[5] Grating Steel 52. The grating steel was within the scope of the Contract. However, there was other work by other subcontractors that needed to be completed prior to performing the grating steel work. Complainant terminated the Contract prior to when the grating steel work should have been performed. The Parties’ Pending Civil Litigation and Arbitration 53. William Smith and Respondent W are in civil litigation against Complainant and Pioneer before the Superior Court of Maricopa County in Case No. CV2010-090435. 54. The Contract provided that a party had the contractual right to go to arbitration in a dispute between the parties. Complainant refused to participate in the arbitration as required by the Contract. 55. The claims submitted for arbitration by Mr. Smith and Respondent W were as follows: 1. Whether defendant Krishna Pinnamaneni wrongfully terminated the contract. 2. Whether defendant Krishna Pinnamaneni wrongfully demanded extra work outside of W, Inc.’s contractual scope of work. 3. Whether, as a result of defendant’s wrongful termination, W, Inc. is entitled to full payment of any unpaid retention. 4. Whether defendant Krishna Pinnamaneni breached the contract with W, Inc. by: a. failing to provide to W, Inc. reasonable evidence of financing under the contract; b. failing to act in good faith with respect to execution of the contract[.] 5. Whether W, Inc. is entitled to damages in the amount of $28,740.00, plus interest, fees, and costs.

56. On December 30, 2009, Arbitrator John T. Jezwick, Esq. issued an Award after a hearing in the arbitration. 57. Arbitrator Jezwick determined that Complainant wrongfully terminated the subject contract for cause. 58. As to Claim 2, Arbitrator Jezwick concurred with the Registrar’s June 3, 2009 letter that determined that Complainant requested work be performed that was outside the scope of the subject contract. 59. As to Claim 3, Arbitrator Jezwick found that Complainant and Pioneer wrongfully terminated Respondent W, who was determined to be entitled to payment of the unpaid retention. 60. As to Claim 4, Arbitrator Jezwick found that Complainant and Pioneer “breached the contract and failed to act in good faith with respect to the execution of the contract.” 61. The arbitrator found that Respondent W was entitled to specified damages and interest. 62. Complainant and Pioneer appealed the Arbitrator’s Award to the Court of Appeals, where that appeal is pending. 63. Respondent’s claim for restitution in these disciplinary proceedings should be addressed in the parties’ pending civil litigation, where the interests of all parties can be considered by the Court. In these disciplinary proceedings, the Registrar has no jurisdiction over Complainant and the claims by Respondents against Complainant. Any Allegation Not Specifically Addressed In the Above Findings of Fact 68. Any allegation not specifically addressed in the above Findings of Fact is determined to either lack sufficient evidence of record to support a finding of a statutory and/or regulatory violation by Respondents, to be outside the scope of Respondents’ contractual obligations pursuant to the Contract, to be work that meets minimum workmanship standards, to be work that was scheduled to be performed after the effective date of Complainant’s termination of the Contract, to be work completed by others at Complainant’s direction without Respondents having the opportunity to complete such work, and/or to be outside the Registrar’s jurisdiction. CONCLUSIONS OF LAW 1. The Registrar has jurisdiction over Respondents and the subject matters in these consolidated cases. 2. Pursuant to A.A.C. R2-19-119(B), Complainant has the burden of proof in these matters. The standard of proof is preponderance of the evidence. A.A.C. R2-19-119(A). 3. Pursuant to A.R.S. § 32-1121, an owner/builder is exempt from the state’s contract licensing requirements if, among other things, the owner/builder builds “with duly licensed contractors.” Therefore, an owner/builder is responsible for contracting “with duly licensed contractors” to be eligible for the exemption from licensing. Complainant failed to comply with the statute when he contracted with Respondent W, who was unlicensed at the time of entering into the subject contract. Complainant’s exercise of reasonable due diligence would have discovered the unlicensed status of Respondent W at that time. Complainant, as the owner/builder bears some responsibility for Respondent W’s unlicensed activity that he has complained about. Case No. 09-5357 Respondent Smith 4. Respondent Smith did not deviate from plans or specifications or depart from local building code requirements in violation of A.R.S. § 32-1154(A) (2), as charged in the Citation and Complaint issued by the Registrar. Complainant failed to sustain his burden of proof on this charge. 5. Respondent Smith committed a wrongful act in this matter, but it did not result in substantial injury to Complainant. Therefore, the Administrative Law Judge concludes that Respondent Smith did not violate the provisions of the former A.R.S. § 32-1154(A) (7)[6] as charged in the Citation and Complaint issued by the Registrar. Complainant failed to sustain his burden of proof on this charge. 6. Respondent Smith did not commit any fraudulent acts resulting in substantial injury to Complainant. Therefore, Respondent Smith did not violate the provisions of the former A.R.S. § 32-1154(A) (7) as charged in the Citation and Complaint issued by the Registrar. Complainant failed to sustain his burden of proof on this charge. 7. Respondent Smith did not violate the provisions of A.R.S. § 32-1154(A) (3), namely A.A.C. R4-9-108 as charged in the Citation and Complaint issued by the Registrar. On the contrary, Respondent Smith’s work met workmanship standards. Complainant failed to sustain his burden of proof on this charge. 8. Respondent Smith violated the provisions of A.R.S. § 32-1154(A) (13), specifically A.R.S. § 32-1124(B). Respondent Smith failed to properly list its contracting license on various documents. Complainant sustained his burden of proof on this charge. 9. Respondent Smith did not violate the provisions of A.R.S. § 32-1154(A) (20), as charged in the Amendment to the Citation and Complaint issued by the Registrar in Case No. 09-5337. Complainant failed to sustain his burden of proving that Respondent Smith’s activities in this case would have been grounds to deny the renewal of its License No. 130083. There is persuasive evidence that the Registrar had knowledge of the activities of Respondent Smith and Respondent W on the subject project. The Registrar even granted licensure to Respondent W with such knowledge. Complainant failed to sustain his burden of proof on this charge. Case No. 09-5337W Respondent W 10. Respondent W did not deviate from plans or specifications or depart from local building code requirements in violation of A.R.S. § 32- 1154(A) (2), as charged in the Citation and Complaint issued by the Registrar. Complainant failed to sustain his burden of proof on this charge. 11. Respondent W committed a wrongful act in this matter, but it did not result in substantial injury to Complainant. Therefore, the Administrative Law Judge concludes that Respondent W did not violate the provisions of the former A.R.S. § 32-1154(A) (7) as charged in the Citation and Complaint issued by the Registrar. Complainant failed to sustain his burden of proof on this charge. The evidence of record supports this conclusion. 12. Respondent W did not commit any fraudulent acts resulting in substantial injury to Complainant. Therefore, Respondent W did not violate the provisions of former A.R.S. § 32-1154(A) (7) as charged in the Citation and Complaint issued by the Registrar. Complainant failed to sustain his burden of proof on this charge. 13. Respondent W did not violate the provisions of A.R.S. § 32-1154(A) (3), namely A.A.C. R4-9-108 as charged in the Citation and Complaint issued by the Registrar. On the contrary, Respondent W’s work met workmanship standards. Complainant failed to sustain his burden of proof on this charge. 14. Respondent W violated the provisions of A.R.S. § 32-1154(A) (13), specifically A.R.S. § 32-1124(B). Respondent Smith failed to properly list its contracting license on various documentations. Complainant sustained his burden of proof on this charge. 15. Respondent W did not violate the provisions of A.R.S. § 32-1154(A) (20), as charged in the Notice of Amendment issued by the Registrar. Complainant failed to sustain his burden of proving that Respondent W’s activities in this case would have been grounds to deny the issuance of its License No. 249106. There is persuasive evidence that the Registrar had knowledge of the activities of Respondent Smith and Respondent W on the subject project. In fact, the Registrar granted the license after Respondent W’s disclosure of the activities of Respondent W and Respondent Smith on the subject project. Complainant failed to sustain his burden of proof on this charge. Case No. 2010-[number redacted] Respondent Smith 16. Respondent Smith did not deviate from plans or specifications or depart from local building code requirements in violation of A.R.S. § 32-1154(A) (2), as charged in the Citation and Complaint issued by the Registrar. Complainant failed to sustain his burden of proof on this charge. The evidence of record supports this conclusion. 17. Respondent Smith did not commit a fraudulent act resulting in substantial injury to Complainant, as concluded in Case No. 09-5357. Therefore, the Administrative Law Judge concludes that Respondent Smith did not violate the present provisions of the A.R.S. § 32- 1154(A) (7)[7] as charged in the Citation and Complaint issued by the Registrar in Case No. 2010-[number redacted]. Complainant failed to sustain his burden of proof on this charge. 18. Respondent Smith did not commit any fraudulent acts resulting in substantial injury to Complainant. Therefore, Respondent Smith did not violate the provisions of A.R.S. § 32-1154(A) (7) as charged in the Citation and Complaint issued by the Registrar. Complainant failed to sustain his burden of proof on this charge. 19. Respondent Smith did not violate the provisions of A.R.S. § 32-1154(A) (3), namely A.A.C. R4-9-108 as charged in the Citation and Complaint issued by the Registrar. On the contrary, Respondent Smith’s work met workmanship standards. Complainant failed to sustain his burden of proof on this charge. 20. Respondent Smith did not violate the provisions of A.R.S. § 32-1154(A) (9) by failing to complete the subject project for the price stated in the Contract, as charged in the Citation and Complaint issued by the Registrar. Complainant failed to sustain his burden of proof on this charge. 21. Respondent Smith violated the provisions of A.R.S. § 32-1154(A) (10) by aiding and abetting an unlicensed contractor, as charged in the Citation and Complaint issued by the Registrar. Respondent Smith performed Respondent W’s contractually obligated work while Respondent W was unlicensed. Complainant sustained his burden of proof on this charge. 22. Respondent Smith violated the provisions of A.R.S. § 32-1154(A) (13), specifically A.R.S. § 32-1158 by failing to comply with the minimum elements of a contract requirement, as charged in the Citation and Complaint issued by the Registrar. Complainant sustained his burden of proof on this charge. 23. Respondent Smith violated the provisions of A.R.S. § 32-1154(A) (15) by acting in the capacity of a contractor in a name other than as set forth on its contracting license, as charged in the Citation and Complaint issued by the Registrar. Complainant sustained his burden of proof on this charge. 24. Respondent Smith did not violate the provisions of A.R.S. § 32-1154(A) (16) by using false, misleading or deceptive advertising, as charged in the Citation and Complaint issued by the Registrar. Complainant failed to sustain his burden of proof on this charge. 25. The charge that Respondent Smith violated the provisions of A.R.S. § 32-1154(A) (20) is repetitive to the charged violation in Case No. 09F- 5337. Therefore, no violation is concluded to have been committed in Case No. 2010-[number redacted]. Restitution 29. The Administrative Law Judge declines to recommend restitution in this matter pursuant to A.R.S. § 32-1156.01 as requested by Complainant. The parties are engaged in civil litigation involving their financial dispute. The issue of Complainant’s entitlement to restitution or damages should be resolved in their civil litigation where the rights of both parties can be addressed, rather in the Registrar’s disciplinary proceedings in the above-provided matters. “Recovery on damages, including punitive damages allowed under Arizona Law for fraudulent conduct and deceptive business practices”

30. The Registrar is not the appropriate forum for such relief sought by Complainant. RECOMMENDED ORDERS Case No. 09-5337 Respondent Smith Respondent Smith’s License No. 130083 shall be suspended on the effective date of the Order entered in Case No. 09-5337 until the Registrar receives written proof, and the Registrar accepts such proof, that Respondent Smith has become fully compliant with the requirements of A.R.S. § 32-1124(B). If Respondent Smith provides the Registrar of written proof that its has become fully compliant with the provisions of A.R.S. § 32-1124(B) on or before the effective date of the Order entered in Case No. 09-5337, and the Registrar accepts such proof of compliance, then the above-provided license suspension shall not take place and the Citation and Complaint in Case No. 09-5337 shall be closed.

Case No. 09-5337W Respondent W Respondent W’s License No. 249106 shall be suspended on the effective date of the Order entered in Case No. 09-5337W until the Registrar receives written proof, and the Registrar accepts such proof, that Respondent W has become fully compliant with the requirements of A.R.S. § 32-1124(B). If Respondent W provides the Registrar of written proof that its has become fully compliant with the provisions of A.R.S. § 32-1124(B) on or before the effective date of the Order entered in Case No. 09-5337W, and the Registrar accepts such proof of compliance, then the above-provided license suspension shall not take place and the Citation and Complaint in Case No. 09-5337W shall be closed.

Case No. 2010-[number redacted] Respondent Smith Respondent Smith’s License No. 130083 shall be suspended on the effective date of the Order entered in Case No. 2010-[number redacted] until Respondent Smith provides the Registrar with written proof, and the Registrar accepts such proof, that Respondent Smith has become fully compliant with the provisions of A.R.S. §§ 32-1158 and 32-1154(A) (15). If Respondent Smith provides the Registrar with written proof that it has become fully compliant with the provisions of A.R.S. §§ 32-1158 and 32- 1154(A) (15) on or before the effective date of the Order entered in Case No. 2010-[number redacted], and the Registrar accepts such proof of compliance, then the above-provided license suspension shall not take place. In addition to the foregoing license suspension, if any, Respondent Smith’s License No. 130083 shall be placed on active suspension for a period of 5 days, followed immediately by a period of 90 days probation. This additional disciplinary penalty shall commence on the effective date of the Order entered in Case No. 2010-[number redacted] or the date on which the Registrar approves proof of Respondent Smith’s full compliance with the provisions of A.R.S. §§ 32-1158 and 32-1154(A) (15), 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 40 days from the date of that certification. Done this day, January 21, 2011.

/s/ Brian Brendan Tully Administrative Law Judge

Transmitted electronically to:

William A. Mundell, Director Registrar of Contractors ----------------------- [1] The Administrative Law Judge does not make any finding as to whether there was good cause for the termination. Such a decision should be made in the parties’ civil litigation. [2] At the commencement of the hearing, the Administrative Law Judge ruled that Complaint item 20 was too vague to allow for additional items to be added at hearing when the additional items had not been disclosed to Respondent Smith or the Registrar. [3] The date of the first day of hearing in Case No. 09F-5357 against Respondent Smith. [4] Respondent W was not charged in Case No. 2010-[number redacted]. [5] This Complaint item was a very recent one. On October 26, 2010, Mr. Brown testified that he did not become aware of any interior staircase issues until one week prior.

[6] “The doing of a wrongful or fraudulent act by the licensee as a contractor resulting in another person being substantially injured.” [7] “The doing of a fraudulent act by the licensee as a contractor resulting in another person being substantially injured.”

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