ALJDEC decisions subject to certification as final

2011A-878-ROC · Registrar of Contractors · 2012-04-11

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: November 8, 2011, with further hearing on February 8, 2012; the record closed on March 26, 2012 APPEARANCES: Assistant Attorney General Keely Verstegen represented the Registrar of Contractors. Fidelis V. Garcia, Esq. represented Respondent Cactus Roofing, L.L.C. ADMINISTRATIVE LAW JUDGE: Sondra J. Vanella _____________________________________________________________________ The question presented by this matter is whether Respondent Cactus Roofing, L.L.C. (“Cactus”) is subject to discipline for acts or omissions in violation of A.R.S. § 32-1154(A). Based upon the evidence of record, the Administrative Law Judge makes the following Findings of Fact, Conclusions of Law, and Recommended Order. FINDINGS OF FACT 1. Cactus is the holder of License No. K-42.244602-D issued by the Registrar of Contractors (“ROC”).[1] Jose A. Garcia Carrillo, also known as Alex Garcia, is a member of Cactus and its qualifying party. A Class K-42 license classification allows the scope of work permitted by the commercial L-42 Roofing and the residential C-42 Roofing licenses. The scope of work that may be performed under an L-42 Roofing License is as follows: Installation and repair of materials common to the industry that form a watertight, weather resistant surface for roofs and decks. Included is sheet metal when installed in conjunction with a roofing project, application of protective and reflective roof and deck coatings, application of dampproofing or waterproofing, and installation of roof insulation panels and other roof insulation systems above roof deck.

Arizona Administrative Code (“A.A.C.”) R4-9-102(B). The scope of work that may be performed under a C-42 Roofing License is as follows: Installation and repair of materials common to the industry that form a water tight, weather resistant surface for roofs and decks, including all accessories, flashing, valleys, gravel stops, and roof insulation panels above the roof deck. This scope includes all C-42R subclassifications.

A.A.C. R4-9-103(B). The C-42 scope of work includes Foam & Foam Panel Roofing, Liquid Applied Roofing, and Roofing Shingles & Shakes. Id. 2. On May 4, 2011, the ROC on its own motion issued a Citation and Complaint against Cactus alleging violations of A.R.S. §§ 32- 1154(A)(2), 32-1154(A)(3), namely A.A.C. R4-9-108, 32-1154(A)(7), 32- 1154(A)(9), 32-1154(A)(16), and 32-1154(A)(17), based upon six consumer complaints that had been filed against Cactus. These consumer complaints will be referenced by the last names of the complainants who filed the complaints, specifically, the Roye, Conley, Willock, Webber, Watson, and Cressman matters. 3. ROC Inspector Phil Coscia testified that he was asked by the ROC to investigate all of the complaints filed against Cactus due to the similarities of the complaints and because the ROC was seeing patterns emerge, including out-of-scope work, failure to perform work that Cactus had contracted and was paid to perform, ineffective and/or unnecessary work, and false advertising. Inspector Coscia has been an inspector with the ROC for eighteen years. Inspector Coscia testified that the ROC on its own motion issued the Citation and Complaint in the above-captioned matter for repeated violations of Arizona’s contracting laws. Inspector Coscia testified that he became involved in this matter in December 2010, and that he was not the inspector assigned to the underlying consumer complaints. Inspector Coscia testified that he met with the property owners and inspected the work performed by Cactus. 4. During the course of the hearing, three jurisdictional issues arose, all of which will be addressed in the Conclusions of Law. The Cressman Complaint 5. On August 27, 2010, Brooks Cressman filed a complaint with the ROC against Cactus on behalf of his deceased mother, Mary Cressman. Mr. Cressman was appointed as Personal Representative of Ms. Cressman’s estate on June 25, 2010, by the Maricopa County Superior Court. See Exhibit 1. The complaint alleged the following: i) Cactus failed to perform some of the work it had contracted to perform, including the removal of the existing shingle roof and replacing the plywood where needed and, instead, had installed a layer of shingles over the existing roof, which already had two layers of shingles; ii) the fence along the property line was to be painted on both sides, and only the inside of the fence along the south side of the property was painted; iii) Cactus contracted to paint the house and replace the wood in the eaves and peak as needed, but did not replace any wood; (iv) Cactus charged $14,000.00 to paint a 1200 square foot house, and it is not licensed to perform painting; and v) it appears that Cactus charged Ms. Cressman multiple times to paint the house and to replace wood, and the total charged for this work was $34,700.00. Id. 6. Mr. Cressman testified telephonically from Switzerland. Mr. Cressman testified that Cactus performed work at his mother’s home in late 2008. Mr. Cressman became aware of his mother’s dealings with Cactus in February 2010, when the social service agency providing services to his mother inquired about the impact of Cactus’s charges on Ms. Cressman’s finances. 7. In May 2010, Ms. Cressman passed away. When Mr. Cressman was going through the process of settling her estate, he discovered documents and bank records reflecting Ms. Cressman’s dealings with Cactus. Specifically, Mr. Cressman found three contracts between Cactus and Ms. Cressman. 8. The first contract, dated November 20, 2008, signed by Mr. Garcia, specified the following scope of work: For removing existing shingles For replacing plywood and A frame where needed For applying 30 yr dimentional [sic] shingles Timberline Also for removing panelboard on sides of home where needed and replacing with new For caulking entire home and painting with Versasatin Acrilic [sic] Latex house trim and eaves Also for installing new post in fence and stabilizing with concrete then staining all of fence both sides Also for removing and replacing wood on both peaks

See Exhibit 1 at 12. The contract specified amounts of $9,700.00, $5,000.00, and $9,800.00, for a total contract price of $24,500.00. Id. The contact noted that it was paid in full. Id. 9. Mr. Cressman also found a second undated contract that specified the following scope of work: “For replacing pannel [sic] boards underhang Facial [sic] plywood joints A frames rebracing sealing with silicone and painting with [illegible] lifetime acrilic [sic].” See Exhibit 1, at 13. The contract was in the amount of $5,000.00 and noted that it was paid in full. Id. 10. Mr. Cressman also found a third contract dated December 22, 2008, and signed by Mr. Garcia, that specified the following scope of work: “For sealing entire home with sure seal clear acrylic watersealant For replacing Facial [sic] boards and pannels [sic] on north side of house Repairing underhand where needed.” See Exhibit 1, at 14. The contract was in the amount of $4,000.00 and noted that it was paid in full. Id. 11. Mr. Cressman obtained copies of the six checks written by Ms. Cressman to Mr. Garcia. The checks total $34,700.00 are as follows: i) check number 5016 dated November 17, 2008, in the amount of $5,000.00; ii) check number 1736 dated November 19, 2008, in the amount of $9,700.00; iii) check number 1737 dated November 24, 2008, in the amount of $5,000.00; iv) check number 1738 dated November 24, 2008, in the amount of $9,930.00; v) check number 1739 dated November 28, 2008, in the amount of $1,070.00; and vi) check number 5020 dated December 22, 2008, in the amount of $4,000.00. See Exhibit 1, at 4-10. 12. Mr. Cressman attempted to contact Cactus to inquire about the work it performed at Ms. Cressman’s home. Cactus did not respond to Mr. Cressman’s inquiries. Mr. Cressman testified that after he contacted the ROC in August 2010, he obtained other contractors’ estimates for the work that was completed and found huge discrepancies in what Cactus charged and what other contractors would have charged for the same work. Mr. Cressman testified that the house was 1200 square feet and that the market value of the amount of work done to the home was not commensurate with the $34,700.00 Ms. Cressman paid to Cactus. Mr. Cressman testified that the roof over the porch was a different color and different style and appeared to be older. Mr. Cressman testified that the old shingles were not removed and it was not clear whether any wood was replaced. Mr. Cressman testified that the fence around the property was to have been painted on both sides, and only the side near the house was painted and that the fence is 273 linear feet and only 100 linear feet were painted. Mr. Cressman testified that although the house was painted, it was already flaking. 13. On September 10, 2010, an inspection was conducted by Inspector James Hennessy, the assigned ROC inspector. Mr. Cressman testified that Inspector Hennessy could not inspect the roof because no one was present to point out the complaint issues. However, on September 13, 2010, a Corrective Work Order (“CWO”) was issued that did not include the roof. See Exhibit D. Mr. Cressman testified that the CWO ordered Cactus to hire properly licensed contractors to correct the painting issues and perform the woodwork on the home. Id. The CWO also indicated that the “out of scope issue” would be addressed as Cactus is not licensed to perform painting. 14. Mr. Cressman testified that after he filed the complaint against Cactus, Cactus began to contact him in September, October, and November of 2010, requesting to settle the matter. 15. In November 2010, Mr. Cressman entered into a Mutual Release and Settlement Agreement with Cactus, wherein Cactus agreed to pay to Mr. Cressman the sum of $5,000.00. See Exhibit A. Mr. Cressman testified that after the work directed to be accomplished by the CWO was completed by another contractor and after receiving payment from Cactus, he requested that the ROC close the complaint. Mr. Cressman acknowledged that the ROC was not a party to the settlement and did not approve it. 16. Regarding the Cressman complaint, Inspector Coscia testified that when he performed his inspection on January 6, 2011, the house had been sold and was vacant. Inspector Coscia testified that when he pulled up the edges of the gable ends, hips, ridges, and overhangs, he ascertained that there were three layers of shingles on the roof, and that Cactus had not stripped the roof as required by its contract with Ms. Cressman. Inspector Coscia testified that he was “positive” that the previous roof remained underneath the new roof installed by Cactus. Inspector Coscia further testified that two layers of roofing is the maximum number of layers permitted by code. Inspector Coscia testified that he determined that the roofing work was performed by Cactus because it matched the color and type of roof specified in the contract, specifically 30-year dimensional Timberline shingles. Inspector Coscia testified that the painting, the removal of panel board siding, fencing, and carpentry are beyond the scope of Cactus’s roofing license. Inspector Coscia testified that the work contracted to be performed by Cactus was redundant, that the amounts charged by Cactus are “extremely high,” that the contract amounts were more than half the total value of the house, and that there was duplicate invoicing. Inspector Coscia opined that the work performed by Cactus at the Cressman residence should have cost anywhere between $16,000.00 and $20,000.00, “at the most.” 17. Inspector Coscia testified that Mr. Cressman did not pursue his complaint to the ROC and, therefore, a Citation and Complaint against Cactus had not been issued. Inspector Coscia testified that “nothing requires the ROC to go ‘active’ when a complaint comes in” and that “the ROC has authority to open an ‘own motion’ case.” Inspector Coscia explained that most homeowners are unaware of the scope of licenses and that out-of-scope issues are more of a concern for the ROC than homeowners. 18. Mr. Garcia testified that he performed work for Ms. Cressman’s neighbor and that he approached Ms. Cressman’s house because “it was a mess” and she was not taking care of the property. Mr. Garcia testified that Ms. Cressman had received citations and fines from the city and the homeowners’ association. Mr. Garcia testified that he cleaned the yard, trimmed trees, and helped Ms. Cressman take care of the yard. Mr. Garcia also proposed “fixing the house, more than the roof to bring it into compliance.” Mr. Garcia testified that when he left the property, his crew was tearing off the old roof, but because he was not present for all of the work, “he can’t say what happened after he left.” 19. Mr. Garcia testified that he met Inspector Hennessy at the property for the jobsite inspection, and showed him the work Cactus performed on the property, including installation of siding panels, fascia, wood, fences, and concrete. Mr. Garcia testified that Cactus complied with the CWO and hired a licensed painting contractor to paint the outside of the fence, and then entered into a settlement with Mr. Cressman. Mr. Garcia testified that the property looked beautiful when Cactus completed its work. 20. Mr. Garcia acknowledged that he was aware that Cactus was not licensed to perform the work that it performed at the Cressman home, except the roofing. Conley Complaint 21. On June 30, 2010, James Conley filed a complaint with the ROC against Cactus alleging the following: i) the elastomeric coating that Cactus applied to the roof was coming off in sheets and landing on the patio and in the pool; ii) foam repairs were not ground down smooth before they were coated; iii) when Cactus painted tiles on the Mansard roof, paint landed all over the body of the house, and Cactus had to repaint the house; iv) the paint got all over the plants, walkways, and landscape gravel; and v) Cactus took advantage of Mr. Conley by charging him too much money to perform minor repairs and to re-coat the roof. See Exhibit 2 at 2. The contract price was $9,400.00 and Mr. Conley paid Cactus in full. Id. at 1. 22. Mr. Conley’s contract with Cactus included under term number 5, “[T]ightening tiles and painting with Dunn Edwards Versaglo Red.” Id. at 3. 23. Inspector Coscia testified that he met with Mr. Conley on January 6, 2011. Inspector Coscia testified that the painting of the tile was not within the scope of Cactus’s license. Further, the entire house needed to be repainted due to overspray, and Cactus performed the painting to correct the overspray from the painted tile notwithstanding that it was not licensed to do so. 24. Inspector Coscia testified that Mr. Conley’s complaint was closed because he did not request a hearing. Inspector Coscia acknowledged that the ROC could have gotten involved in this complaint when it was filed, but did not. Inspector Coscia testified that the ROC initiated its complaint against Cactus due to the cumulative complaints and the pattern of those complaints, specifically out-of-scope work, “price- gouging,” and failing to perform contracted work. 25. Mr. Garcia acknowledged that Cactus painted the Conley residence due to the overspray from the Mansard tile roof, but testified that Mr. Conley was not charged for the painting. Watson Complaint 26. On October 24, 2008, Harry and Bea Watson filed a complaint with the ROC against Cactus alleging that Cactus installed 15-pound felt, notwithstanding that the parties’ contract specified 30-pound felt, and that Cactus charged $2,300.00 to spray a rafter with urethane to remedy dry rot. 27. The Watsons contracted with Cactus on August 28, 2008. See Exhibit 3, at 3. The contract specified in pertinent part: . . . . 5) Installed 30# felt on entire roof . . . . 9) For sealing A frame with urathaine [sic] rebracing joints and replacing where needed Also for painting underhang on front of house Id. 28. The contract price was $8,500.00 and was paid in full. See Exhibit 3, at 3. 29. Inspector Coscia testified that the issue regarding the felt was settled between the Watsons and Cactus. Inspector Coscia testified that on January 10, 2011, he conducted an inspection of the Watsons’ attic and saw no evidence of any urethane spray applied to the rafters, although Cactus charged the Watsons $2,300.00 for this work. Inspector Coscia testified that Mr. Watson is in his 70’s. Inspector Coscia testified that Mr. Watson stated that Mr. Garcia would not allow Mr. Watson on the roof, allegedly because it would void the warranty, and that Mr. Garcia stayed at the Watsons’ home until 8:00 p.m. trying to get paid. Inspector Coscia testified that although the Watsons were reluctant to pay Cactus, they felt pressured to pay. Inspector Coscia testified that the urethane spray is “hog wash” and of no value because a spray foam cannot accomplish a structural repair, and such structural repair would have been outside the scope of Cactus’s license. 30. Mr. Garcia testified that the Watson complaint was resolved after an argument with the Watsons, and that he agreed to pay the Watsons a sum of money even though he was “upside down” on the job and that he was “not happy about it.” Mr. Garcia testified that structural work needed to be done to the overhang by the front door to reinforce the wood, but that the overhang was too damaged to repair so Cactus replaced the rafters, drywall, and fascia. Mr. Garcia testified that this additional remediation work cost $2,300.00. Mr. Garcia testified that Mr. Watson fell into the attic and cut his forehead, so Mr. Garcia told him he could not remain on the roof any longer because he was not an employee of Cactus and was not covered by its contractor’s insurance. Webber Complaint 31. On June 19, 2009, Mary Michaelis filed a complaint with the ROC against Cactus on behalf of her neighbor, Iona Webber. The complaint alleged that the contract price more than doubled, and that after the work was performed, Cactus returned to convince Ms. Webber to enter into a contract for Cactus to coat the new shingle roof for a price of $1,700.00. The complaint further alleged that Cactus was unethical and was taking advantage of the elderly. 32. On September 12, 2008, Ms. Webber contracted with Cactus for the following scope of work: 1) For removing shingles and replacing plywood where needed; 2) For applying 30 dimentional [sic] Oak Ridge shingles new drip edge using 1½ coil nails; 3) For removing antenna and regalvanizing all vents on roof[;] Also for replacing facial [sic] board where needed; and 4) For reflashing skylights and sealing flat roof with elastotec roof coating white.

See Exhibit 4, at 3. The contract price was $7,000.00 and was signed by Mr. Garcia. Id. 33. On September 13, 2008, Ms. Webber contracted with Cactus for the following scope of work: 1. For removing existing flat roof all rotted plywood drip edge and flashings then cleaning all debree [sic]; 2. For applying 90 wt peel [and] stick rolled roofing with drip edge; Also for replacing all plywood where needed; 3. For repairing drywall and caulking underhang on back of house then painting with acrilic [sic] latex

See Exhibit 4, at 4. The total contract price was $14,800.00, with $7,000.00 allocated for the “main roof,” $5,500.00 allocated for the “flat roof,” and $2,300.00 allocated for “underhang and facia [sic].” Id. The contract was signed by Mr. Garcia. Id. 34. The advertisement that Ms. Webber relied upon indicates that Cactus performs work on “walk decks,” as well as roofing. See Exhibit 4, at 5. 35. On January 19, 2011, Inspector Coscia conducted an inspection of Ms. Webber’s home. Inspector Coscia testified that the existing roof had not been stripped and that he verified this by peeling up new shingles at the gable ends and hips and observing the old shingles underneath. He further testified that the drywall and painting work specified in the contract dated September 13, 2008, was beyond the scope of Cactus’s license. However, Inspector Coscia testified that he did not observe that this work was even performed. Inspector Coscia further testified that Cactus reused the existing vents, contrary to the contractual requirements. 36. Inspector Coscia testified regarding Cactus's website advertising. Inspector Coscia testified that Cactus advertises that it can perform deck painting and staining, deck repair, house painting, home maintenance, deck walks, and mold remediation. See Exhibit 6. Inspector Coscia testified that all of the work in Cactus’s website advertising, with the exception of roofing, is outside the scope of Cactus’s K-42 roofing license, and that Cactus does not hold any other licenses. 37. Inspector Coscia testified that because Ms. Webber did not request a hearing, a Citation and Complaint was not issued by the ROC against Cactus and that Ms. Webber’s complaint was closed. Inspector Coscia testified that the ROC’s overall concerns regarding Cactus as they relate to the Webber complaint are the repeated out-of-scope contracting, the practice of raising the contract price, the practice of not performing the work it was contracted to perform or performing “token” work, and that all of the homeowners with the exception of Mr. Roye are elderly or disabled. 38. Mr. Garcia testified that he was unaware of the Webber complaint until he received a phone call from the ROC, and then was told to “forget about it.” Mr. Garcia testified that he did not hear anything else about the Webber complaint until the ROC issued the Citation and Complaint in the above-captioned matter. 39. Mr. Garcia testified that he neither agrees nor disagrees that the old vents were used, and acknowledged that they may have been reused. Mr. Garcia testified that the drywall repair was performed on the front and rear of the carport because it had been hit by a car. Mr. Garcia testified that he was actually present when this work was performed, thereby acknowledging that Cactus performed work outside the scope of its license. Regarding the additional charges on the second contract, Mr. Garcia testified that the back patio roof was added and that it was 40 feet long. Willock Complaint 40. On November 2, 2010, Lester C. Willock filed a complaint against Cactus with the ROC alleging: i) that Cactus sealed the new shingle roof when sealing was not necessary; ii) that Cactus sprayed the rafters with a coating to reinforce them and Mr. Willock did not request that this work be performed; iii) that Cactus stated that it waterproofed outside walls, yet one cannot access those walls without opening the siding; iv) that Cactus charged $5,700.00 for unnecessary work; and v) that Cactus proposed to perform additional work after all of the contracted work was purported to be completed. 41. On June 16, 2010, Mr. Willock contracted with Cactus for the following scope of work: 1) Tear off entire roof (2 layers) 2) Install 15# pnd felt underlayment 3) Install 2 x 2 drip edge starter galvanized 4) Install 30 yr (Shasta White) Owens Corning shingles 30 (illegible) 5) Install 20 yr 3 tab (Shasta White) to hip and ridge 6) Install new ridge vent flex roll system 7) Replacing hoods T tops turbines 8) Clean and dispose all debree [sic] 9) For spraying underside decking (illegible) with (illegible) reflective coating 10) Reinsulating where needed sealing joint with urathaine [sic]

See Exhibit 5, at 3. The contract price was $13,650.00. Id. Mr. Garcia signed the contract and the contract notes that it was paid in full. Id. 42. On October 1, 2010, Mr. Willock contracted with Cactus for Cactus to “repair facia [sic] overhang and sealing with clear acrylic shingle seal.” See Exhibit 5, at 4. The contract price was $5,700.00, was signed by Mr. Garcia, and states “paid in full.” Id. 43. ROC Inspector Eric Ulinger testified that he performed a jobsite inspection at the Willock residence on November 19, 2010. On November 30, 2010, Inspector Ulinger issued a CWO to Cactus directing Cactus to take corrective action within 15 calendar days as follows: 1. Coated new shingles with a sealer that was not needed. Coating of a new roof is not typical and in my opinion not appropriate. Additionally I inspected the roof and found no evidence of a sealer having been applied. Based upon the fact that the complainant paid for a sealer that does not appear to have been applied the contractor shall reimburse the complainant the amount he paid for the application of the sealant.

2. Sprayed a reflective coating to the roof trusses and underside of the sheathing. This contractor is not properly licensed to apply reflective coatings in an attic area. I entered the attic only to find that the coating was applied only as far as one could see while standing on the ground looking up into the attic. The contractor is out of scope of one’s license and is in violation of ARS § 32-1154.17 [sic]. The contractor is to correct by the appropriate means using a properly licensed contractor or reimburse the complainant the amount paid for the uncompleted work.

3. The contractor claimed that some roof rafters (trusses) were dry- rotted and coated them with urethane to reinforce them. No dry rot was found at the time of the inspection and applying urethane will not restore the integrity to a compromised wooden member. The contractor is not properly licensed to perform repairs to roof structures. Contracting out of scope of ones [sic] license is in violation of ARS § 32-1154.17 [sic] Based upon the fact that the complainant paid for the application of urethane which is not evident and not an appropriate means to reinforce a roof truss the contractor is to reimburse the complainant the amount he paid for the urethane.

4. The contractor claimed water was running down the rafters and into the exterior wall cavities and sprayed material into the walls to correct the condition. There is no evidence that the contractor applied any material into the wall cavities. The contractor is not properly licensed to perform work of this nature. Contracting out of scope of ones [sic] license is in violation of ARS § 32-1154.17 [sic] Based upon the fact that the complainant paid for the application of a material to be sprayed into the wall cavities and no such work appears to have been performed the contractor is to reimburse the complainant the amount paid.

5. The homeowner was charged $5,700.00 for unnecessary work. It is this inspector’s opinion that the homeowner was charged money for work that was not needed and/or not performed. The contractor is to reimburse the amount of $5,700.00 to the complainant.

6. The homeowner thought that the contractor had completed the work in June of 2010 and was told additional work was need[ed] in October of 2010. It is this inspector’s opinion that the contractor acted in an unprofessional manner when he solicited additional work to be performed on a roof that was 4 months old. See items 1-5.

*Note: The following item was added by this inspector as an administrative violation. 7. Per the homeowner a contract was not provided prior to the work being performed and was invoiced upon completion of the work. ARS § 32-1158.B requires that any contract over one thousand dollars be in writing and contain the information items 1-9 as stated in the statue [sic]. The contractor is in violation of ARS § 32-1158.B

See Exhibit 5, at 9 and 10. 44. Inspector Ulinger testified consistently with the findings contained in the CWO. Inspector Ulinger testified that he could find no evidence of sealer being applied in that there was no sheen. Further, Inspector Ulinger performed a water test and testified that water did not bead. Inspector Ulinger testified that he is “confident” that if any sealer had been applied to the roof, he would have been able to verify it. Inspector Ulinger opined that sealing a new roof is not necessary. Inspector Ulinger testified that the structural work that Cactus contracted to perform was outside the scope of its roofing license, and that the structural work specified in the contract was not incidental to roofing work, such as work on a truss. Inspector Ulinger further testified that the application of spray insulation is outside the scope of the K-42 roofing license held by Cactus, and that Cactus should not enter an attic to perform work. 45. Inspector Ulinger further testified that Mr. Willock is an elderly homeowner who informed him that the contractor insisted that additional work needed to be performed or the roof would not last. Inspector Ulinger testified that Mr. Willock told him that the contractor “badgered” him and “bullied his way into the door” and refused to leave until Mr. Willock agreed to sign the second contract, and that although he did not want to agree, he thought that if he did not, he “might get hurt.” 46. Inspector Ulinger testified that Cactus paid Mr. Willock a sum of money and the complaint was closed because Mr. Willock did not want to pursue it. 47. Inspector Ulinger testified that the ROC received numerous complaints against Cactus from elderly homeowners wherein they complained that Cactus was taking advantage of them, working outside the scope of its license, performing poor work, and not performing work pursuant to the terms of its contracts. 48. Mr. Garcia testified that Cactus paid Mr. Willock a total of $5,900.00 to settle the complaint. Mr. Garcia acknowledged that a urethane sealer was not applied to the roof and that applying a sealant to a new roof is not necessary. Roye Complaint 49. Mark Roye filed a workmanship complaint against Cactus with the ROC. ROC Inspector Rick Oelke investigated the complaint, performed a jobsite inspection, and on September 16, 2009, issued a CWO to Cactus directing it to accomplish specified remedial work within 15 calendar days. On September 23, 2009, Inspector Oelke issued an Addendum to Corrective Work Order dated September 16, 2009, directing Cactus to perform additional corrective work within 15 calendar days. 50. At some point thereafter, the ROC issued a Citation and Complaint against Cactus, Cactus filed a written answer to the Citation and Complaint, and the matter was set for hearing before the Office of Administrative Hearings. 51. On April 13, 2010, the administrative hearing of the Roye matter, Case No. 10-0527, convened. The parties were represented by counsel, and entered into a settlement agreement, the terms of which were read into the record. 52. On April 14, 2010, the undersigned Administrative Law Judge issued an Order Vacating Hearing Due to Settlement. 53. On May 27, 2010, the ROC issued an Order of Closing in Case No. 10- 0527. CONCLUSIONS OF LAW In this proceeding, the ROC bears the burden to prove, by a preponderance of the evidence, that Cactus is subject to discipline for violations of A.R.S. § 32-1154(A)(2), A.R.S. § 32-1154(A)(3), namely A.A.C. R4-9-108, A.R.S. § 32-1154(A)(7), A.R.S. § 32-1154(A)(9), A.R.S. § 32- 1154(A)(16), and A.R.S. § 32-1154(A)(17) as charged by the ROC in its May 4, 2011 Citation and Complaint. See A.A.C. 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). / / / / / / Statute of Limitations Cactus asserted that the Webber, Watson, and Cressman complaints relied upon by the ROC in the instant proceeding are outside of the ROC’s jurisdiction because they fall outside of the two-year statute of limitations period. Cactus relied on A.R.S. § 32-1155(A), which provides the following: Upon the filing of a written complaint with the registrar charging a licensee with the commission, within two years prior to the date of filing the complaint, of an act that is cause for suspension or revocation of a license, the registrar after investigation may issue a citation directing the licensee, within ten days after service of the citation upon the licensee, to appear by filing with the registrar the licensee's written answer to the citation and complaint showing cause, if any, why the licensee's license should not be suspended or revoked. . . . The two year period prescribed by this subsection shall commence on the earlier of the close of escrow or actual occupancy for new home or other new building construction and otherwise shall commence on completion of the specific project.

A.R.S. § 32-1154(B) states: The registrar may on the registrar's own motion, and shall on the written complaint of any owner or contractor that is a party to a construction contract or a person who suffers a material loss or injury as a result of a contractor's failure to perform work in a professional and workmanlike manner or in accordance with any applicable building codes and professional industry standards, investigate the acts of any contractor within this state and may temporarily suspend, with or without imposition of specific conditions in addition to increased surety bond or cash deposit requirements, or permanently revoke any or all licenses issued under this chapter if the holder of the license issued pursuant to this chapter is guilty of or commits any of the acts or omissions set forth in subsection A of this section. . . .

(Emphasis added.)

The Administrative Law Judge concludes that A.R.S. § 32-1155(A) does not apply to actions initiated by the ROC on its own motion. The Administrative Law Judge reaches this conclusion based upon the fact that the plain language of this subsection refers to written complaints filed with the ROC, and not to complaints initiated by the ROC. Further, as the ROC is not privy to every homeowners’ close of escrow or the completion date of their projects, the ROC cannot be held to the two year period set forth in A.R.S. § 32-1155(A). Additionally, the plain language of A.R.S. § 32-1154(B) specifically grants the ROC authority to investigate and discipline a contractor on its own motion, and there is no associated time constraint, as there is in A.R.S. § 32-1155(A). Cactus’s argument that the absence of a limitations period may deter contractors from settling disputes with homeowners is not persuasive. The ROC is a regulatory agency charged with protecting the public from unscrupulous contractors. The incentive to settle a matter with a dissatisfied homeowner will not deter an upstanding contractor because there would be no reason for the ROC to proceed on its own motion against such a contractor. Further, the evidence of record established that it is a rarity for the ROC on its own motion to file a case against a contractor, and that the ROC will do so only when a pattern of wrongful and unprofessional conduct is established. Based on the foregoing, the Administrative Law Judge concludes that the ROC is not precluded from pursuing Cactus on its own motion in any of the consumer complaints. Moreover, even assuming arguendo that it was, the Conley and Willock complaints fall within the two-year period, and the violations of this State’s contracting laws in those matters would be sufficient to warrant discipline of Cactus’s license. Citation and Complaint Contains No Allegation that Cactus is Licensed by the ROC 5. Cactus argued that the ROC lacks jurisdiction over this matter and that Cactus has been deprived of its due process rights because the ROC failed to allege in the Citation and Complaint that Cactus is a licensee subject to the ROC’s jurisdiction. The ROC argued that the ROC’s Notice of Hearing was legally sufficient pursuant to A.R.S. § 41-1092.05(D), and that the ROC has jurisdiction to impose discipline against its licensee pursuant to A.R.S. § 32-1101 et. seq. 6. The Administrative Law Judge finds after review and consideration of both Cactus’s and the ROC’s arguments at hearing and in their respective closing briefs, that Cactus’s argument is without merit. “Procedural due process requires notice and an opportunity to be heard in a meaningful manner and at a meaningful time.” Webb v. Arizona Board of Medical Examiners, 202 Ariz. 555, 558, ¶ 9, 48 P.3d 505, 508 (App. 2002) (citing Comeau v. Arizona State Board of Dental Examiners, 196 Ariz. 102, 106, ¶ 18, 993 P.2d 1066, 1070 (App. 1999)). Cactus’s license number was clearly identified in the caption of both the Citation and Complaint and the Notice of Hearing, Cactus answered the Citation and Complaint, Cactus participated in a two-day hearing, and submitted documents into evidence, including estimates and invoices referencing Cactus’s license number. Moreover, Cactus’s representative at hearing, Mr. Garcia, acknowledged that Cactus holds license number K-42.244602-D and does not hold any other license. Therefore, the Administrative Law Judge finds both that the ROC had jurisdiction and that Cactus had proper notice of the allegations against its license and an opportunity to defend. The ROC Failed to Include Cactus in Inspections as Required by Law 7. Cactus argued that the ROC violated the Regulatory Bill of Rights by failing to invite Cactus to participate in the ROC’s inspections and by failing to provide Cactus with the inspection reports that the ROC generated based on its inspections. Cactus argues that as a result of the ROC’s violations, any evidence related to the complaints should be excluded and not considered pursuant to A.R.S. § 41-1009(N). However, A.R.S. § 41-1009(N) states that “[i]f an inspector or regulator gathers evidence in violation of this section, the violation may be a basis to exclude the evidence in a civil or administrative proceeding.” (Emphasis added.) A.R.S. § 41-1009 appears to pertain to inspections of “any premises of a regulated person,” not the premises of a homeowner who filed an ROC complaint against a contractor, and Cactus did not cite any authority establishing otherwise. Therefore, the Administrative Law Judge concludes that A.R.S. § 41-1009 is inapplicable to this matter. Further, even if A.R.S. § 41-1009 were applicable, the Administrative Law Judge concludes that the exclusion of evidence would be discretionary, and under all of the circumstances herein, the Administrative Law Judge concludes that the evidence submitted by the ROC is admissible in this administrative proceeding. 8. 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 credible, probative, and substantial evidence of record established that Cactus violated A.R.S. § 32-1154(A)(2) in the Cressman, Watson, Willock, and Webber complaints. Regarding the Cressman matter, the evidence of record established that Cactus failed to remove the existing roof and installed another layer of shingles over the existing layers, resulting in three layers of shingles. Pursuant to code, only two layers of shingles are permitted. Regarding the Watson matter, the evidence of record established that Cactus installed 15-pound felt when the contract specified the installation of 30-pound felt. Further, Cactus contracted with the Watsons to apply a urethane spray on the rafters, yet failed to do so. Regarding the Willock matter, the evidence of record established that Cactus contracted to apply a clear acrylic sealer on the roof and failed to so do. Further, Mr. Garcia acknowledged that the application of such a sealer was not necessary, yet Cactus contracted for its application. Also, although Cactus contracted to spray the underside of the trusses and sheathing, the evidence of record established that Cactus sprayed only as far as the eye could see from the ground, and did not spray the entire area as required by contract. Regarding the Webber matter, the evidence of record established that Cactus failed to regalvanize the old vents, as required by contract, and re-used the old vents instead. Further, Cactus did not remove the old shingles, replace fascia or repair drywall pursuant to the terms of the contract. 9. 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 Cactus 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 the credible, probative, and substantial evidence of record established that Cactus failed to perform its work in a professional and workmanlike manner and in accordance with any applicable building codes and professional industry standards in regard to the Cressman and Willock matters. In the Cressman matter, Cactus failed to perform its work in a professional and workmanlike manner by failing to remove the existing two layers of old shingles and installing a third layer on top of two layers of old shingles, in violation of code. In the Willock matter, Cactus purported to be able to repair dry rot in the rafters with a urethane spray, when it is not possible to perform a structural repair with urethane spray. Therefore, the Administrative Law Judge concludes that Cactus is in violation of A.R.S. § 32-1154(A)(3). 10. Under A.R.S. § 32-1154(A)(7), a contractor is subject to discipline for “the doing of a fraudulent act by the licensee as a contractor resulting in another person being substantially injured.” The phrase “fraudulent act” has not been defined by the Arizona Legislature in the ROC statutes. At common law, fraud could be established through nine elements: In considering whether the evidence taken in its strongest light establishes actionable fraud, the plaintiffs must show a concurrence of nine elements, which are: "(1) A representation; (2) its falsity; (3) its materiality; (4) the speaker's knowledge of its falsity or ignorance of its truth; (5) his intent that it should be acted upon by the person and in the manner reasonably contemplated; (6) the hearer's ignorance of its falsity; (7) his reliance on its truth; (8) his right to rely thereon; (9) his consequent and proximate injury."[2]

In this case, the ROC did not address the nine elements required to establish fraud. The ROC established that Cactus has poor business practices and tends to take advantage of the elderly and disabled by charging for unnecessary work or for work not performed. However, the ROC did not establish that Cactus violated A.R.S. § 32-1154(A)(7). 11. Under A.R.S. § 32-1154(A)(9), a contractor is subject to discipline for “failure in a material respect . . . to complete a construction project or operation for the price stated in the contract, or in any modification of the contract.” The credible, probative, and substantial evidence of record established that Cactus violated A.R.S. § 32-1154(A)(9) in the Cressman, Webber, and Willock matters. In the Cressman matter, Ms. Cressman entered into at least three contracts with Cactus, and paid Cactus over $34,000.00, approximately half the value of her home. Some of the work specified in the contracts was duplicative. In the Webber matter, Cactus doubled the contract price over the course of one day. In the Willock matter, Cactus contracted to apply an unnecessary sealant on Mr. Willock’s new roof. 12. Under A.R.S. § 32-1154(A)(16), a contractor is subject to discipline for “false, misleading or deceptive advertising whereby any member of the public may be misled and injured.” Cactus’s website advertisement offered to perform work outside the scope of its Class K-42 license, specifically, deck painting and staining, deck repair, house painting, home maintenance, deck walks, and mold treatment. Therefore, the Administrative Law Judge concludes that Cactus violated A.R.S. § 32- 1154(A)(16). 13. Under A.R.S. § 32-1154(A)(17), a contractor is subject to discipline for “knowingly contracting beyond the scope of the license or licenses of the licensee.” The credible, probative, and substantial evidence of record, including, but not limited to Mr. Garcia’s own acknowledgement, established that Cactus knowingly contracted beyond the scope of its license when it contracted to and performed painting, fencing, and carpentry work in the Cressman matter, when it performed painting in the Conley matter, when it sprayed urethane in the Watson matter, when it contracted to perform drywall repair and painting in the Webber matter, and when it contracted to perform structural repairs to the roof trusses by spraying a reflective coating in the Willock matter. Therefore, the Administrative Law Judge concludes that Cactus violated A.R.S. § 32-1154(A)(17). 14. Upon consideration of all of the facts and circumstances presented by this case, the Administrative Law Judge concludes that the ROC should revoke Cactus’s Class K-42 license. RECOMMENDED ORDER Based on the foregoing, the Administrative Law Judge makes the following Recommended Order: Cactus’s License No. K-42.244602.D shall be revoked on the effective date of the Order entered in this matter. 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, April 11, 2012.

/s/ Sondra J. Vanella Administrative Law Judge

Transmitted electronically to:

William A. Mundell, Director Registrar of Contractors ----------------------- [1] Administrative notice is taken of Cactus’s licensing record as reflected on the ROC’s public website. According to the ROC’s public website, on April 9, 2012, Cactus’s License No. K-42.244602-D was current. There are two open complaints pending against Cactus’s license, and eight complaints have been closed as having been resolved/settled/withdrawn.

[2] Staheli v. Kauffman, 122 Ariz. 380, 383, 595 P.2d 172, 175 (1979). (Citations omitted.)

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