ALJDEC decisions subject to certification as final

2012A-1128-ROC · Registrar of Contractors · 2012-11-16

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: November 7, 2012, at 8:00 a.m. APPEARANCES: Complainant Elaine Hall appeared on her own behalf; Respondent A & R Remodeling & Repair LLC appeared through Kent Amos Misselhorn, its qualifying part and member. ADMINISTRATIVE LAW JUDGE: Diane Mihalsky _____________________________________________________________________

FINDINGS OF FACT Background and Procedure 1. The Arizona Registrar of Contractors (“the Registrar”) issued License No. B-3.178315-R to A & R Remodeling & Repair LLC (“Respondent”). Respondent’s address of record with the Registrar is 3233 North Ash Circle, Chandler, Arizona 85224-1278. 2. On or about March 1, 2012, the Registrar received a Complaint from Elaine Hall (“Complainant”) about Respondent’s alleged failure to complete a project to repair the roof, windows, siding, and paint at her house at 1723 West Cheryl Drive in Phoenix, Arizona. According to the Complaint, the only work that had been performed on the project was that the roof had been repaired, but that Respondent’s roofing subcontractor was suing Complainant for damages that exceeded the amount of her insurance claim. Complainant requested that the Registrar require Respondent to finish the project and to pay the roofing subcontractor. 3. On or about May 11, 2012, the Registrar received Complainant’s request for hearing because Respondent had not done anything to resolve the Complaint. 4. The Registrar issued a Citation and Complaint against Respondent charging a possible violation of A.R.S. § 32-1154(A)(1). 5. Respondent’s qualifying party and member, Kent A. Misselhorn, filed a timely written answer to the Citation and Complaint on its behalf, denying any statutory violation. Mr. Misselhorn affirmatively alleged that Paul McCabe had entered into an unauthorized contract with Complainant and that Complainant had made checks payable to Mr. McCabe personally, not to Respondent. 6. The Registrar referred the matter to the Office of Administrative Hearings, an independent state agency, for an evidentiary hearing. 7. A hearing was held on November 7, 2012. Complainant testified and submitted numerous exhibits. Mr. Misselhorn testified and submitted three exhibits on Respondent’s behalf. 8. Administrative notice is taken of Respondent’s prior License record as reflected on the Registrar of Contractors’ public website on November 15, 2012. Such prior License record reflects that Respondent’s License No. B-3.178315-R was administratively suspended for lack of bond on July 29, 2011. Hearing Evidence The Contracts 9. On October 5, 2010, a hailstorm damaged Complainant’s house. Complainant made a claim for the damages under her homeowner’s insurance policy. After Complainant’s homeowner’s insurer approved the claim and issued a check to her in the amount of $5,533.45, she contacted Respondent’s office. 10. Respondent’s office sent a contract salesperson, Mr. McCabe, to meet with Complainant with a folder full of Respondent’s promotional materials. On or about April 27, 2011, Complainant signed a contract that Mr. McCabe had prepared on Respondent’s form to allow him to negotiate with her homeowner’s insurer.[1] 11. On or about May 2, 2011, Complainant signed a contract that Mr. McCabe had prepared on Respondent’s form for it to replace the roof and siding on her house for a total contract price of $5,833.31, with a $2,783.45 down-payment and an additional $750.00 for permit fees to begin the project.[2] No one signed the May 2, 2011 contract on Respondent’s behalf. 12. Mr. Misselhorn testified that Mr. McCabe reported to Respondent that negotiations with Complainant and her homeowner’s insurer did not pan out. Mr. Misselhorn testified that Mr. McCabe did not inform Respondent that Complainant had signed the May 2, 2011 contract and that Respondent did not authorize the contract for repair work. 13. On or about May 4, 2011, Complainant issued a personal check in the amount of $2,783.45 for the down-payment. Although the copy of the check that Respondent submitted appeared to have been made payable to “Paul McCabe,” it appeared that the payee’s name had been altered.[3] 14. On or about May 4, 2011, Complainant issued a second personal check in the amount of $750.00 that was made payable to Mr. McCabe. Complainant testified that Mr. McCabe told her that because he did not know which local building authority would issue the permit, Complainant should issue the payment for the permit to him personally. 15. Complainant testified that Mr. McCabe subcontracted replacement of the roof to Tapia’s Tuff Roofs LLC, License No. K-42.240271-D (“Tapia’sTuff Roofs”). 16. Complainant submitted a contract dated May 18, 2011, between herself and Tapia’s Tuff Roofs to replace the roof on her house for a total price of $8,925.00 and showed credit for a $3,630.00 deposit and a remaining balance of $5,295.00.[4] Although Respondent’s name was not mentioned on the May 18, 2011 contract, Mr. McCabe and Tapia’s Tuff Roofs’ representative signed the contract. 17. On or about May 13, 2011, Complainant issued a third personal check in the amount of $2,000.00 made payable to Tapia’s Tuff Roofs.[5] 18. Mr. Misselhorn testified that Respondent did not receive any money from Complainant’s contracts with Mr. McCabe and Tapia’s Tuff Roofs. The Civil Judgments Complainant’s Judgment against Respondent 19. On or about February 23, 2012, Complainant filed a civil action against Respondent in Maricopa County Justice Courts, Arizona, Desert Ridge Justice Court Case No. CC2012-039234-RC for $9,999.00 plus $118.00 in court costs, explaining her civil claim for damages as follows: I contacted [Respondent] to repair hail damage on my home. They sent their employee Paul McCabe to assist me. I signed a contract with them. Mr. McCabe accepted checks from me made out to [Respondent] and then altered them to his name which [Complainant’s bank] cashed. Mr. McCabe hired a roofing company, [Tapia’s Tuff Roofs] to do my roof repair and did not pay them. In addition, the roofing company was seeking payment in excess of my insurance claim. [Respondent] has not completed the work as contracted which includes window repair, siding, and painting. [Tapia’s Tuff Roofs] is suing me under case number CC2012-018059 for payment when I did not hire them or agree to the pricing. I wish both cases to be heard at the same time [.][6]

The record does not contain any explanation of Complainant’s calculation of her claimed damages against Respondent in Case No. CC2012-039234-RC.[7] 20. Complainant submitted two affidavits of service in Case No. CC2012-039234-RC that stated in relevant part as follows: (1) On February 27, 2012, at 5:05 p.m. the process server attempted to serve the summons and complaint on Respondent’s statutory agent, Mr. Misselhorn, at 2108 West Bentrup in Chandler, Arizona, but the person at that address stated that he had resided at that address for five months and that Respondent and Mr. Misselhorn were not known to him[8]; and (2) On March 2, 2012, at 12:07 p.m. the process server served the summons and complaint on A & R Remodeling & Repair LLC at the Arizona Corporation Commission’s offices at 1300 West Washington Street in Phoenix, Arizona.[9] 21. Mr. Misselhorn testified that Respondent has had the same address for many years and that he was never personally served with the summons and complaint in Case No. CC2012-039234-RC. 22. On or about May 10, 2012, Complainant filed a Motion/Affidavit for Judgment by Default in Case No. CC2012-039234-RC requesting judgment against Respondent in the amount of $9,999.00 plus $118.00 in costs.[10] 23. On or about May 25, 2012, Judge Clancy Jayne issued a judgment in Complainant’s favor against Respondent in Case No. CC2012- 039234-RC in the amount of $9,999.00 plus $118.00 in costs, for a judgment in the total amount of $10,117.00.[11] 24. Mr. Misselhorn testified that he did not learn about Complainant’s judgment against Respondent in Case No. CC2012- 039234-RC until Complainant provided a copy of the default judgment to him at the hearing in this matter. Tapia’s Tuff Roofs’ Judgment against Complainant 25. On or about June 14, 2012, the court in Maricopa County Justice Courts, Arizona, Desert Ridge Justice Court Case No. CC2012- 018059 entered a judgment upon default in Tapia’s Tuff Roofs’ favor against Complainant in the amount of $6,000.00.[12] CONCLUSIONS OF LAW 1. This matter lies within the Registrar’s jurisdiction.[13] 2. The administratively suspended status of Respondent’s license does not deprive Complainant of her right to prosecute her Complaint against Respondent or prevent the Registrar from determining the merits of Complainant’s Complaint.[14] However, Respondent’s administratively suspended license status does prevent it from performing or from hiring others to perform any corrective work.[15] 3. Complainant bears the burden of proof and must establish Respondent’s statutory violation by a preponderance of the evidence.[16] Respondent bears the burden to establish an affirmative defense by the same evidentiary standard.[17] “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”[18] 4. “‘Under the doctrine of res judicata, a judgment on the merits in a prior suit involving the same parties or their privies bars a second suit based on the same cause of action.’”[19] Only the Registrar may penalize a contractor’s license, however, and “[t]he mere commission of a prohibited act is insufficient in and of itself to invalidate [a] license.”[20] 5. Under the doctrine of collateral estoppel, if the justice court’s judgment in a civil action in which Respondent was a party resolved the same issues that are present in this administrative matter, the parties cannot relitigate those issues.[21] A default judgment "is conclusive . . . on all issues which were or could have been litigated and is not subject to collateral impeachment at a subsequent time."[22] 6. Because the justice court’s default judgment in Case No. CC2012-039234-RC against Respondent found that Respondent was responsible for Mr. McCabe’s actions,[23] it is binding on this administrative tribunal unless and until Respondent has the judgment set aside on appeal. Because Mr. Misselhorn did not dispute that the scope of work described in the May 2, 2011 contract is not complete, Complainant established that Respondent violated A.R.S. § 32-1154(A)(1).[24] 7. Because Respondent was not a party to Tapia’s Tuff Roofs’ civil action against Complainant in Case No. CC2012-018059, the default judgment against Complainant does not establish that Respondent is responsible for paying Tapia’s Tuff Roofs any additional monies for replacing the roof on Complainant’s house.[25] RECOMMENDED ORDER Based on the foregoing, it is recommended that on the effective date of the final Order in this matter, the Registrar revoke Respondent A & R Remodeling & Repair LLC’s License No. B-3.178315-R. 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 five days from the date of that certification. / / / / / / / /

Done this day, November 16, 2012. /s/ Diane Mihalsky Administrative Law Judge Transmitted electronically to: William A. Mundell, Director Registrar of Contractors ----------------------- [1] See Complainant’s Exhibit 5 at 1. [2] See Complainant’s Exhibit 5 at 2. [3] See Respondent’s Exhibit C at 1. According to a document that was attached to the Complaint that Complainant filed with the Registrar, on or about July 12, 2011, Complainant submitted an Affidavit of Forgery to her bank that alleged that the May 4, 2011 check for $2,783.45 was made payable to Respondent, but that it had been altered to be made payable to Mr. McCabe. [4] See Complainant’s Exhibit 10. [5] See Respondent’s Exhibit C at 3. The record does not contain the reason for this payment or who paid the $3,630.00 deposit shown on Tapia’s Tuff Roofs’ May 18, 2011 contract. [6] Complainant’s Exhibit 3. [7] The jurisdictional limit for justice courts in Arizona is $10,000.00 exclusive of interest and costs. See Ariz. Const. Art. 6 § 32(C). [8] See Complainant’s Exhibit 6 at 3. The address at which the process server attempted to serve A & R Remodeling & Repair LLC on February 27, 2012, is the address of record shown on the Arizona Corporation Commission’s public website. The record in this matter does not explain the limited liability company’s two different addresses of record with the Registrar and with the Arizona Corporation Commission. [9] See id. at 1. [10] See Complainant’s Exhibit 4. [11] See Complainant’s Exhibit 1. [12] See Complainant’s Exhibit 2. The default judgment indicates that it was rendered with a hearing. The record does not contain Tapia’s Tuff Roofs’ complaint in Case No. CC2012-018059 or any explanation of its calculation of damages in its civil action against Complainant. [13] See A.R.S. §§ 32-1151 to 32-1169. [14] See A.R.S. § 32-1154(C). That statute provides that “[t]he 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 . . . .” [15] It is unlawful for anyone without a contractor’s license in good standing to engage in contracting. See A.R.S. § 32-1151. “Contractor” is defined as anyone who “does himself or by or through others” performs construction. A.R.S. § 32-1101(A)(3) (emphasis added). [16] See A.R.S. § 41-1092.07(G)(2); A.A.C. R2-19-119(A) and A.A.C. R2-19- 119(B)(1); see also Vazanno v. Superior Court, 74 Ariz. 369, 372, 249 P.2d 837 (1952). [17] See A.A.C. R2-19-119(B)(2). [18] Morris K. Udall, Arizona Law of Evidence § 5 (1960). [19] Hawkins v. State of Arizona, Department of Economic Security, 183 Ariz. 100, 103, 900 P.2d 1236, 1239 (App. 1995) (quoting Gilbert v. Board of Medical Examiners, 155 Ariz. 169, 174, 745 P.2d 617, 622 (App. 1987)). [20] Hunter Contracting Co. v. Sanner Contracting Co., 16 Ariz. App. 239, 243, 492 P.2d 735 (1972). [21] Gilbert, 155 Ariz. at 169, 745 P.2d at 622 (quoted in Hawkins, 183 Ariz. at 103, 900 P.2d at 1239). [22] Dairyland Ins. Co. v. Richards, 108 Ariz. 89, 91, 492 P.2d 1196, 1198 (1972). [23] See, e.g., Dairyland Insurance Company, 108 Ariz. at 91, 492 P.2d at 1198. [24] A.R.S. § 32-1154(A)(1) 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.” [25] If the Registrar accepts this recommendation and revokes Respondent’s License No. B-3.178315-R as a result of the violation of A.R.S. § 32- 1154(A) that Complainant established in this matter, she may make a claim to the Residential Contractors’ Recovery Fund. Because the Registrar was not a party to Complainant’s civil action against Respondent in Case No. CC2012-039234-RC, the default judgment in that case does not establish the amount of damages as defined by A.R.S. § 32-1132(A) that Complainant suffered as a result of Respondent’s statutory violation.

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