ALJDEC decisions subject to certification as final

2015A-4062-ROC · Registrar of Contractors · 2016-05-09

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: May 3, 2016, at 1:00 p.m. APPEARANCES: Equity Financial Planning LLC (“Complainant”) was represented by William A. Kozub, Esq., Berens Kozub Kloberdanz & Blonstein PLC; S and S Home Services LLC DBA Domination Construction (“Respondent”) appeared through Stephen Melkonoff (“Mr. Melkonoff”), its qualifying party and member. ADMINISTRATIVE LAW JUDGE: Diane Mihalsky _____________________________________________________________________

FINDINGS OF FACT Background and Procedure 1. On or about June 3, 2011, the Arizona Registrar of Contractors (“the Registrar”) issued License No. KB-2.273202-D to Respondent. 2. On or about September 23, 2015, Complainant filed a complaint against Respondent with the Registrar, alleging that Respondent had contracted to renovate a house at 2439 E. Coolidge Street, Phoenix, Arizona 85008 (“the project”) for a contract price of $131,534.22, and that although Complainant had paid Respondent $77,934.71, Respondent had abandoned the project after completing only 36% of the project of the contracted work. 3. The Registrar assigned the complaint to Investigator Steve Klein for investigation. Inspector Klein performed a jobsite inspection on December 16, 2016, which Respondent did not attend. On December 17, 2016, Investigator Klein issued a Directive on behalf of the Registrar that required Respondent to “complete project per original contract agreement, properly executed change orders, verbal agreements, local building codes and manufacturers installation instructions” on or before December 31, 2015, at 5:00 p.m. 4. Both parties requested a hearing. On or about January 29, 2016, the Registrar issued a Citation against Respondent’s license, charging cause to revoke or suspend its license under A.R.S. §§ 32-1154(A)(1) and 32-1154(A)(22). 5. Respondent filed a timely written answer to the Citation denying any statutory violation and affirmatively alleging that Complainant had denied Respondent access to complete the project. 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 May 3, 2016. Complainant appeared through its attorney, presented the testimony of Daniel Butterfield (“Mr. Butterfield”), its owner, and submitted eight exhibits. Mr. Melkonoff testified and submitted four exhibits on Respondent’s behalf. Investigator Klein also testified. Hearing Evidence 8. Complainant’s business includes purchasing residential properties, having renovations and upgrades performed on the properties, and eventually reselling the properties to members of the public at a profit. Complainant has several employees or associates who work in its office at 4048 N. 44th Street, Suite 100, Phoenix, Arizona 87008. 9. The residential property located at 2439 East Coolidge Street was initially built in the mid-1950’s and included a detached garage that had been converted into a living space at some point in the past. The renovations included converting the detached garage into a guesthouse. 10. Complainant originally had hired Bryan Rice (“Mr. Rice”) to perform the renovations and upgrades to the property at 2439 East Coolidge Street. Mr. Rice is the qualifying party and member of Rice Properties LLC, License No. B-3.193605-R. That license became inactive on April 2, 2012, and was not current when Complainant hired Mr. Rice, but Mr. Butterfield did not know that Mr. Rice did not possess a current license that was in good standing. 11. Mr. Rice also had an office in Complainant’s suite at 4048 N. 44th Street in Phoenix. Mr. Melkonoff testified that Mr. Rice also worked as a salesperson for Complainant. 12. Mr. Rice originally hired Respondent to help perform the renovations and upgrades to the property at 2439 East Coolidge Street. Mr. Melkonoff testified that he was also not aware that Mr. Rice did not possess a valid contractor’s license. 13. Respondent submitted bids to Mr. Rice doing business as Genesys Property & Investment to perform work on the property at 2439 East Coolidge St. in Phoenix, Arizona on June 2, 2014, and September 17, 2014.[1] The estimates are unsigned and the record does not reflect exactly what work was performed pursuant to the estimates. 14. On August 19, 2014, Genesys Property and Investment also submitted a bid to perform certain work on the property at 2439 East Coolidge St.[2] The record does not reflect exactly what work was performed pursuant to this bid or who performed the work. 15. On August 27, 2014, Complainant also obtained a bid from Johnny Cools to perform certain HVAC work at the property at 2439 East Coolidge St.[3] On May 14, 2014, Complainant obtained a bid from Rawhide Roofing to perform roofing work at the property.[4] The record does not reflect exactly what work was performed pursuant to these bids or who performed the work. Thomas W. Rogers, who was a potential or actual purchaser of the property at 2439 East Coolidge St., approved these bids. 16. When Mr. Butterfield realized that Mr. Rice did not possess a valid license, he asked Respondent to enter into a contract to cover the bids previously submitted by Mr. Rice and/or Genesys Property and Investment so that the property at 2439 East Coolidge St. could be marketed and sold to a member of the public. 17. On October 14, 2014, the parties entered into a contract for Respondent to perform the renovations and upgrades at the property at 2439 East Coolidge St. to which Respondent’s bids to Mr. Rice, Genesys Property and Investment’s bid, Johnny Cools’ bid, and Rawhide Roofing’s bid were attached as Exhibits A through G.[5] The contract did not explain these attachments. 18. Although some work has been done on the project, both the main house and guest house were substantially incomplete as of the date of the hearing. 19. Mr. Melkonoff testified that because the zoning for the property was single family residential, he could not get a permit for the work on the former detached garage that was to be converted into a guesthouse without first getting a zoning variance. Mr. Melkonoff testified that the only permit that Respondent contracted to provide was for the guesthouse plumbing and that Respondent did not contract to get a zoning variance for the project. 20. Mr. Melkonoff pointed out that Respondent’s contract provided that with respect to access, “[u]nless agreed in writing by Contractor, all permit fees and access rights necessary for performance of the work under this agreement shall be obtained by the Owner” and that “Contractor shall be given free and complete access to all areas necessary for the performance of the work.”[6] Mr. Melkonoff testified that despite the permit issues, Respondent continued to work on the main house through the end of December 2014. 21. On January 8, 2015, Mr. Butterfield called a meeting at the project to discuss the permit issues. Respondent did not attend the meeting. Mr. Melkonoff testified that he had only received a few hours’ notice of the meeting and that he had prior commitments that he could not reschedule. 22. Mr. Butterfield testified that while he was at the property on January 8, 2015, he noticed that there were indications that there had been a break-in at the project. Mr. Butterfield testified that he changed the lockbox to secure the property. 23. Mr. Melkonoff testified that when Respondent’s employees returned to the property, they could not access the jobsite because the lockbox combination had been changed. Between January 8, 2015, and January 22, 2015, Respondent sent the following emails regarding access to the jobsite: 1. On January 12, 2015, Mr. Melkonoff sent an email to Mary Linebeck at expertrealty.advisors.com with a copy to Mr. Butterfield at [email redacted], stating that Mr. Melkonoff received Mr. Butterfield’s voice mail and that if he had been given more than two hours’ notice of the January 8, 2015 meeting, he would have attended, but that he had prior commitments that prevented him from attending the meeting.[7] 2. On January 19, 2015, Mr. Melkonoff sent an email about the changed lockbox code to Mr. Rogers, the putative purchaser or owner of the house, and to Ms. Linebeck, requesting access to the jobsite.[8] They did not respond to the email. 3. Mr. Melkonoff testified that Ms. Linebeck had an office in Complainant’s suite at 4048 N. 44th St. and that Mr. Butterfield had instructed Respondent to direct communications about the project to her. Respondent submitted emails dated between October 2, 2014, and January 22, 2015, to Ms. Linebeck about the project.[9] Ms. Linebeck copied at least one her responsive emails to [email redacted], but not to Mr. Butterfield at Complainant’s email address. 24. On January 22, 2015, Mr. Melkonoff sent an email to Ms. Linebeck stating as follows: I haven’t received any response from anybody regarding the Coolidge project in nearly 10 days. I have also been denied access to the property without explanation or warning during that time period despite my numerous attempts to make contact.

There’s obviously a plan in place with this project and it appears to not include Domination Construction. I have multiple deposits paid out with my subcontractors. I’m going to inform them that this job has gone from an on hold status to canceled . . . .[10]

Mr. Butterfield testified that Respondent never attempted to contact him about access to the jobsite and that the project had never been cancelled. Mr. Butterfield testified that he was the sole owner of the project at 2439 E. Coolidge, not Ms. Linebeck or Mr. Rogers. 25. The contract that was submitted also did not provide for progress payments. Mr. Melkonoff testified that on January 8, 2015, Respondent had removed Saltillo tile, installed doors at the back of the house, replaced windows, installed rough plumbing and electrical, installed the HVAC system, performed mold remediation, and installed casing for the doors and windows. Mr. Melkonoff testified that Respondent was about due to receive the second draw for the project. 26. On March 5, 2015, Complainant entered into a contract with Rehm Custom Construction (“Rehm”) to obtain permits for the project. Between March 5, 2015, and May 5, 2015, Rehm obtained permits for the project, after providing “‘As-Built’ drawings for the site and existing structures,” providing plans for a required water meter upgrade, and electrical engineering plans, at a total cost to Complainant of $7,829.14.[11] As noted above, it is not clear whether these services were included in Respondent’s contract. It is also not clear whether the permit that Rehm obtained included a guesthouse. The record does not reveal whether Complainant provided Respondent with notice that the permit(s) had been obtained. 27. Mr. Melkonoff testified that Respondent did not attempt to comply with the Registrar’s December 17, 2015 Directive because it had been locked out of the project on January 8, 2015, and that, instead, Respondent requested a hearing. 28. Complainant submitted three exhibits to attempt to establish the amount of its damages caused by Respondent’s alleged abandonment of the project.[12] 29. According to the Registrar’s public website, Respondent’s license was current and in good standing on April 29, 2016. CONCLUSIONS OF LAW 1. This matter lies within the Registrar’s jurisdiction.[13] 2. Complainant bears the burden of proof to establish cause to suspend or revoke Respondent’s contractor’s license by a preponderance of the evidence.[14] Respondent bears the burden to establish affirmative defenses by the same evidentiary standard.[15] 3. “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”[16] 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.”[17] 4. Mr. Butterfield acknowledged that on January 8, 2015, Complainant changed the lockbox combination without informing Respondent. Although Respondent made several attempts to contact the person with whom it had been communicating about the project to obtain access to continue working on the project, Complainant made no attempt to contact Respondent between the times it changed the lockbox combination and filed the complaint with the Registrar, September 23, 2015. Complainant did not establish that Respondent abandoned the project in violation of A.R.S. §§ 32-1154(A)(1).[18] 5. Mr. Melkonoff acknowledged that Respondent made no attempt to comply with the Registrar’s December 17, 2015 Directive. Respondent did not present any evidence that Complainant refused to allow access to Respondent for it attempt to comply with the Directive. The parties’ various past disagreements do not justify Respondent’s refusal to do anything at all to comply with the Directive, even providing an accounting of its expenditures on the job. Complainant established that Respondent violated A.R.S. § 32-1154(A)(22).[19] 6. The record does not establish the scope of work that Respondent contracted to perform, the amount of work that it or others performed pursuant to its contract, or the parties’ relative degree of fault in reaching the impasse that prevented the project from proceeding. An award of restitution under A.R.S. § 32-1156.01 is not appropriate in this case. RECOMMENDED ORDER Based on the foregoing, it is recommended that on the effective date of the final order, Respondent S and S Home Services, LLC’s License No. KB- 2.273202-D shall be suspended for one business day. It is further recommended that Respondent shall be required to pay the sum of $250.00 as a civil penalty pursuant to A.R.S. § 32-1154(E). It is further recommended that if Respondent fails to pay the entire amount of the civil penalty on or before thirty days following the effective date of the Registrar’s Order, Respondent’s license shall be revoked, effective on such deadline date. No future license shall be issued to any entity consisting of persons associated with Respondent, as defined in A.R.S. § 32-1101(A)(5), unless Respondent tenders payment of any outstanding prior civil penalty. 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, May 9, 2016. /s/ Diane Mihalsky Administrative Law Judge Transmitted electronically to: Jeffrey Fleetham, Director Registrar of Contractors ----------------------- [1] See Complainant’s Exhibit A, Exhibits A, B, and D thereto. [2] See Complainant’s Exhibit A, Exhibit C. [3] See Complainant’s Exhibit A, Exhibit F. [4] See Complainant’s Exhibit A, Exhibit G. [5] See Complainant’s Exhibit A. [6] Complainant’s Exhibit A at 2. [7] See Respondent’s Exhibit 2 at 13. [8] See Respondent’s Exhibit 1 at 3. [9] See Respondent’s Exhibit 2 and 3. [10] Complainant’s Exhibit F. [11] See Respondent’s Exhibit 1 at 3. [12] See Complainant’s Exhibits C, E, and G. [13] See A.R.S. §§ 32-1131 to 32-1140. [14] 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). [15] See A.A.C. R2-19-119(B)(2). [16] Morris K. Udall, Arizona Law of Evidence § 5 (1960). [17] Black’s Law Dictionary at page 1220 (8th ed. 1999). [18] 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.” [19] A.R.S. § 32-1154(A)(22) includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license, “[f]ailure to take appropriate corrective action to comply with this chapter or with rules adopted pursuant to this chapter without valid justification within a reasonable period of time after receiving a written directive from the registrar.”

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