ALJDEC decisions subject to certification as final

2014A-4102-ROC · Registrar of Contractors · 2015-12-14

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: November 24, 2015 APPEARANCES: Complainant Arthur Reyes appeared on his own behalf. Respondent 3 Star Homes and Remodeling, Inc. appeared through Michael Patrick Drews (“Mr. Drews”), the former qualifying party on License No. 277334[1] and Dan Clifford Starwalt (“Mr. Starwalt”), the qualifying party on License No. 224034. ADMINISTRATIVE LAW JUDGE: Tammy L. Eigenheer _____________________________________________________________________

FINDINGS OF FACT Background and Procedure 1. On September 10, 2006, the Registrar of Contractors (“Registrar”) issued License No. 224034 for General Residential Contracting to Respondent. Since August 31, 2015, License No. 224034 has been suspended for lack of bond. 2. On February 26, 2012, the Registrar issued License No. 277334 for dual electrical contracting to Respondent. Since August 31, 2015, License No. 277334 has been suspended for lack of bond. 3. Respondent’s current address of record for both licenses is P.O. Box 552, Phoenix, Arizona 85010-5552. 4. On or about October 8, 2014, Complainant filed a Complaint with the Registrar against Respondent doing business as Stealth Solar, alleging that the savings on his electric bill that Stealth Solar promised when it installed a roof-top solar system on his residence had not materialized. 5. Complainant attached to his complaint Stealth Solar’s Limited Energy Savings Guarantee (“the Guarantee”), which provided in relevant part as follows: The Stealth Solar (the “company”) Energy Management System (the “system”) has been designed to significantly reduce homeowner’s present total actual energy usage. This is accomplished through the installation of specific energy savings products. The total energy reduction you will realize (“Guaranteed Reductions”) is dependent on specific circumstances, lifestyle and particular products installed as components of the system, Stealth Solar will guarantee, subject to the terms herein, that the total kilowatt hours you use to heat and cool your home will be reduced by the amount listed below. This reduction plan will result in a total reduction of the stated percentage listed below and will be calculated for you and the guarantee will be authorized by an agent of the company. As a part of this guarantee, the company may inspect your system, perform maintenance as we deem necessary, or make repairs to lower overall energy requirements for heating cooling your home through out [sic] the period of this guarantee. If any major appliances warrant repairs you will have said appliances repaired or replaced to maintain the same energy environment or better than when the system was installed.

Activation:

For the company to be able to complete the calculations and issue this guarantee and to establish the actual total energy usage of your home, we will require that you furnish the company with a copy of the monthly utility bills for the preceding twelve months ending with the bill for the month in which the installation of the System is completed. Theses [sic] bills need to be submitted to the company within 30 days of the completion of the systems installation. For us to be able to monitor your actual energy usage and to properly track the guarantee, you will be required to furnish the Company with a copy of your monthly utility bill for each of the following 12 months no later than 30 days after the end of each month. If our review identifies any unexplained increase in your total energy consumption, we reserve the right to contact you and determine if there is some outside factor that is affecting your recorded energy consumption. For example: your monthly bill may not have decreased as much as expected as a result of any increase in the rates you pay per kilowatt hour. The Company is making the guarantee on the total energy consumption which is a condition that we can assist you in controlling. As the company has no ability to control rate increases by the utility company which are generally covered by the Arizona Corporation Commission unless the utility is exempt for the regulation. Our guarantee is for the percentage stated below in decrease in net kilowatts usage. Similarly if you were to install a pool after the start of the guarantee period, we would not be able to guarantee the stated percentage in net reduction. Unusual circumstances such as this would have to be addressed separately and specifically and we will work with you to ensure that the net reduction of the core energy usage of your home decreases by the percentage guaranteed in this agreement.

. . . .

Your Responsibilities:

Since your actions can greatly affect energy use, this guarantee is void unless you use prudent energy management of your home, in order to maintain this guarantee, you agree to:

1. Furnish the company with copies of the required energy bills within the time frame listed above.

2. Use windows and doors prudently when operating your heating, ventilating and cooling (HVAC) systems.

3. Follow manufacture[r’]s instructions regarding HVAC system including annual inspections and filer [sic] replacement every 30 days.

4. Notify Stealth Solar of any changes to your home that may increase the energy use, its equipment or occupancy after the date of this guarantee so that appropriate adjustments can be made to the Guaranteed Reductions.

5. Submit any copies of utility bills, claims and notices in writing to: Stealth Solar 2600 North 44th Street Ste B-103 Phoenix, Arizona 85008. Submit claims for reimbursement relating to the guarantee within 30 days of the first anniversary of the date of the completion of installation of the system. Include proof that the HVAC system has been maintained and working in accordance with #3 above.

The amount of the guaranteed reduction was 28%. Complainant and Stealth Solar’s salesperson signed the guarantee on January 4, 2014. 6. At one time, Respondent had added Stealth Solar as a dba to the name on the Registrar’s records. By the time of the hearing, the dba had been removed. 7. After Respondent did not resolve Complainant’s complaint, the Registrar issued a Citation that charged cause to discipline Respondent’s license under A.R.S. § 32-1154(A)(15), which includes among the grounds for suspension, revocation, and other disciplinary action against a contractor’s license, “[f]alse, misleading or deceptive advertising whereby any member of the public may be misled and injured.” The Registrar sent the Citation to 3 Star Homes and Remodeling, Inc. DBA: Stealth Solar, 3104 E. Camelback Rd. Ste. 353, Phoenix, AZ 85016-4502. 8. Fred Richie, the general manager of Stealth Solar at 4222 East Thomas Road, Suite 150, Phoenix, Arizona 85018, an unlicensed contractor, filed a written answer to the Citation. Stealth Solar’s written answer alleged that its review of Complainant’s Salt River Project Power and Water (SRP) bills indicated Complainant had realized a total savings of 41.61 percent, which was significantly higher than the guarantee level of 28 percent. 9. The Registrar referred the matter to the Office of Administrative Hearings, an independent agency, for an evidentiary hearing. A hearing was held on November 24, 2015. Complainant testified. Respondent presented the testimony of Mr. Drews and Mr. Starwalt. Hearing Evidence 10. Mr. Drews and Mr. Starwalt testified that they did not know why they were responsible for Stealth Solar’s advertising. Mr. Drews explained that four or five years ago, Arizona required solar companies to have a qualified individual on staff to protect the public because the installation of solar panels on the rooftop implicated other trades. Mr. Drews stated that Stealth Solar asked Mr. Starwalt to be the qualified individual and that the arrangement had worked well for Respondent. 11. Mr. Drews testified that otherwise, Respondent had nothing to do with Stealth Solar’s sales of solar systems to homeowners. Mr. Drews testified that if Stealth Solar’s installation of electrical panels had been deficient, Respondent would have corrected the deficiencies. 12. Mr. Starwalt testified that the Registrar changed Respondent’s mailing address to Stealth Solar’s mailing address without Respondent’s knowledge or permission. Mr. Starwalt testified that Respondent therefore did not receive the Complaint or the Registrar’s Citation. Mr. Starwalt testified that after Respondent changed its address of record back to the P.O. Box, Respondent received the Registrar’s Notice of Hearing. 13. Mr. Starwalt testified that the Attorney General’s Office (AGO) had investigated Stealth Solar, which was a different entity than Respondent. Mr. Starwalt explained that Fred Richie and his wife were the owners of Stealth Solar and had settled the AGO’s investigation. 14. Complainant testified that the 28 percent savings was promised by Stealth Solar if he installed energy saving measures including a radiant barrier, new insulation, a high efficiency pool pump, and others. Complainant stated that Stealth Solar promised savings of up to 80 percent if he installed the solar panels. Complainant submitted copies of his SRP bills showing that the savings promised to him were not realized. Complainant testified that he spent $7,600.00 on the recommended energy saving measures and another $26,000.00 on the solar panels. Complainant stated that if he knew he was going to save so little, he never would have bought the solar panels. 15. Administrative notice is taken of Respondent’s prior License record as reflected on the Registrar’s public website on December 14, 2015. Such prior License record reflects that Respondent’s License No. 224034 was suspended for lack of bond on August 31, 2015, and was revoked on December 8, 2015. Such prior License record also reflects that are seven open complaints against Respondent’s license. 16. Administrative notice is taken of Respondent’s prior License record as reflected on the Registrar’s public website on December 14, 2015. Such prior License record reflects that Respondent’s License No. 277334 was suspended for non-renewal from March 1, 2014, through March 3, 2014, was suspended for lack of bond on August 31, 2015, and was revoked on December 8, 2015. Such prior License record also reflects that are four open complaints against Respondent’s license. CONCLUSIONS OF LAW 1. This matter lies within the Registrar’s jurisdiction.[2] 2. Respondent’s revoked license does not deprive Complainant of his right to prosecute his complaint or prevent the Registrar from determining the merits of the complaint. See A.R.S. § 32-1154(D). 3. Complainant bears the burden of proof to establish cause to discipline Respondent’s licenses by a preponderance of the evidence.[3] Respondent bears the burden to establish affirmative defenses by the same evidentiary standard.[4] 4. “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”[5] A preponderance of the evidence is “[t]he greater weight of the evidence, not necessarily established by the greater number of witnesses testifying to a fact but by evidence that has the most convincing force; superior evidentiary weight that, though not sufficient to free the mind wholly from all reasonable doubt, is still sufficient to incline a fair and impartial mind to one side of the issue rather than the other.”[6] 5. The Registrar’s statutes provide comprehensive qualifications and regulation of solar contractors in Arizona.[7] A.R.S. § 32-1170 provides that “‘[s]olar contractor’ means a contractor, as defined in section 32-1101, who installs, alters or repairs solar devices.” A.R.S. § 32-1170.01 unequivocally provides that “[a]fter June 30, 1980, it is unlawful for a contractor to install, alter or repair a solar device without qualifying as a solar contractor pursuant to this article.” A.R.S. § 32-1170.02(A) provides as follows: To qualify as a solar contractor under this article, the applicant shall: 1. Submit to the registrar an application on forms prescribed by the registrar, identifying the applicant and the classification of license held or sought by the applicant, and pay the prescribed fee. 2. Pass an examination approved and conducted by the registrar that is specific to the solar requirements of the classification of license held or sought by the applicant. 3. Meet all other provisions of this chapter relating to obtaining and retaining an appropriate license.

These statutes require Stealth Solar to have had its own license to install, alter, or repair solar devices in Arizona. 6. Stealth Solar could not have obtained a contractor’s license without a qualifying party.[8] The qualifying party would have been obliged to be “regularly employed by the licensee and . . . actively engaged in the classification of work for which such responsible managing employee qualifies in behalf of the licensee.”[9] The qualifying party would have been prohibited from taking any other employment that would conflict with these obligations and could have been a qualifying party on only one other license, but only if there was a common ownership of at least 25% of each licensee.[10] Although Mr. Starwalt apparently believed himself to be the qualified individual who association allowed Stealth Solar to engage in solar contracting in Arizona, he did not perform the oversight over Stealth Solar that is required for qualifying parties in Arizona. 7. A.R.S. § 32-1154(A)(9) includes among the grounds for suspension, revocation, and other disciplinary action against a contractor’s license, “[a]iding or abetting a licensed or unlicensed person to evade this chapter, knowingly or recklessly combining or conspiring with a licensed or unlicensed person, allowing one’s license to be used by a licensed or unlicensed person or acting as agent, partner, associate or otherwise of a licensed or unlicensed person with intent to evade this chapter.” Under A.R.S. § 32-1154(A)(9), because Respondent allowed Stealth Solar to use its license, Respondent is responsible for Stealth Solar’s violation of Arizona contracting statutes.[11] 8. Complainant did not establish by a preponderance of the evidence that Stealth Solar violated A.R.S. § 32-1154(A)(15) by engaging in false, misleading, or deceptive advertising, however, because he did not establish that his annual kilowatt usage was not 28 percent lower than the year before Steal Solar installed the solar system or that, if his usage failed to decrease by the guaranteed amount, the failure is not attributable to other causes. Complainant also did not establish that he complied with the requirements of Stealth Solar’s Guarantee. RECOMMENDED ORDER Based on the foregoing, it is recommended that on the effective date of the order in this matter, Arthur Reyes’s complaint in Case No. 2014-4102 against 3 Star Homes and Remodeling, Inc.’s License Nos. 277334 and 224034 shall be dismissed. 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, December 14, 2015.

/s/ Tammy L. Eigenheer Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director Registrar of Contractors ----------------------- [1] According to the Registrar of Contractors’ public website, Mr. Drews resigned as qualifying party on the license on December 2, 2015. [2] See A.R.S. § 32-1154(A). [3] See A.R.S. § 41-1092.07(G)(2); A.A.C. R2-19-119(B)(1); see also Vazanno v. Superior Court, 74 Ariz. 369, 372, 249 P.2d 837 (1952). [4] See A.A.C. R2-19-119(B)(2). [5] Morris K. Udall, Arizona Law of Evidence § 5 (1960). [6] Black’s Law Dictionary 1220 (8th ed. 1999). [7] See A.R.S. §§ 32-1170 through 32-1170.01, 44-1762. [8] See A.R.S. § 32-1122(B)(1)(e); see also A.R.S. § 32-1167(B) (If the qualifying party disassociates from the licensee, after 60 days license shall be suspended by operation of law until the licensee does qualify through another person). [9] A.R.S. § 32-1127. [10] See id. [11] Complainant did not allege, however, and the Registrar in the Citation did not charge a violation of A.R.S. § 32-1154(A)(9).

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