ALJDEC decisions subject to certification as final

2015A-629-ROC · Registrar of Contractors · 2015-12-04

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: November 30, 2015, at 1:00 p.m. APPEARANCES: Jose Luis Barraza (“Complainant” or “Mr. Barraza”) appeared on his own behalf; 3 Star Homes and Remodeling, Inc. (“Respondent”) appeared through Michael Patrick Drews (“Mr. Drews”), the former qualifying party on License No. CR11.277334-D,[1] and Dan Clifford Starwalt (“Mr. Starwalt”), the qualifying party on License No. B.224034-R. ADMINISTRATIVE LAW JUDGE: Diane Mihalsky _____________________________________________________________________

FINDINGS OF FACT Background and Procedure 1. On September 10, 2006, the Registrar of Contractors (“Registrar”) issued License No. B.224034-R for General Residential Contracting to Respondent. Since August 31, 2015, License No. B.224034-R has been suspended for lack of bond. 2. On February 26, 2012, the Registrar issued License No. CR11.277334- D for dual electrical contracting to Respondent. Since August 31, 2015, License No. CR11.277334-D 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 February 11, 2015, 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 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.[2]

The amount of the guaranteed reduction was 32%. Complainant and Stealth Solar’s salesperson signed the guarantee on September 11, 2012. 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 3104 East Camelback Road, Suite 353, Phoenix, Arizona 85016-4502, an unlicensed contractor, filed a written answer to the Citation. Stealth Solar’s written answer alleged that Complainant had not complied with the requirements of the Guarantee. 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 30, 2015. Mr. Barraza testified and submitted one exhibit. Respondent presented the testimony of Mr. Drews and Mr. Starwalt and submitted one exhibit. 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 Mr. Barraza’s 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. Mr. Barraza testified that he and his family moved into his residence in August 2009. Mr. Barraza submitted a summary of his electric bills from Arizona Public Service (“APS”) from August 2009, through February 2033,[3] which was the end of the term of his lease for the rooftop solar panels. The charts showed for each month columns for APS’s fees, the lease payment, the kilowatts used, and the kilowatt credit. Between November 2015, and February 2033, the chart showed only the solar lease payment.[4] Mr. Barraza did not submit the actual APS bills. 15. Mr. Barraza testified that his house had 4,730 square feet. Mr. Barraza testified that his APS bills were $211 less in 2011, $57 less in 2012, and $1,485 more in 2013, when the solar system was installed, without accounting for upgrades. Mr. Barraza testified that in August 2011, the air conditioner on the house was broken, which caused it to use more electricity. Mr. Barraza testified that the air conditioner has been fixed. 16. Mr. Barraza testified that he had made a claim to the AGO, but that although the AGO won its case against Stealth Solar, it was still trying to collect monies to compensate injured homeowners. 17. Mr. Barraza testified that he never would have agreed to a long- term lease of the solar system if he had known that his APS bills would increase. 18. Mr. Starwalt pointed out that the Stealth Solar’s Guarantee only promised a reduction in the kilowatts used and that the dollar amount of a monthly APS bill depended on many things, including rate increases, the condition and number of appliances and other improvements, including spas and pools, and the amount of insulation in the residence. Respondent submitted Fred Richie’s response to the AGO’s investigation on behalf of Stealth Solar, which alleged that Mr. Barraza’s actual reduction in kilowatt usage was 43.14% and that Stealth Solar had retained an independent energy audit organization to complete a comprehensive review of Mr. Barraza’s home and that its report had noted significant portions of the residence that had not been insulated during construction.[5] CONCLUSIONS OF LAW 1. This matter lies within the Registrar’s jurisdiction.[6] 2. Complainant bears the burden of proof to establish cause to discipline Respondent’s licenses by a preponderance of the evidence.[7] Respondent bears the burden to establish affirmative defenses by the same evidentiary standard.[8] 3. “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”[9] 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.”[10] 4. The Registrar’s statutes provide comprehensive qualifications and regulation of solar contractors in Arizona.[11] 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. 5. Stealth Solar could not have obtained a contractor’s license without a qualifying party.[12] 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.”[13] 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.[14] 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. 6. 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.[15] 7. 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 32% 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, Jose Luis Barraza’s complaint in Case No. 2015- 629 against 3 Star Homes and Remodeling, Inc.’s License Nos. CR11.277334-D and B.224034-R 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 4, 2015.

/s/ Diane Mihalsky 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] The Registrar’s electronic file, Intake Complaint Submittal1.pdf at 34. [3] Mr. Barraza’s chart showed “TBD,” for “To Be Determined” for the amount of electric bills for dates that would be covered by the lease term but that were still in the future. [4] See Complainant’s Exhibit A. [5] See Respondent’s Exhibit 1. [6] See A.R.S. § 32-1154(A). [7] 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). [8] See A.A.C. R2-19-119(B)(2). [9] Morris K. Udall, Arizona Law of Evidence § 5 (1960). [10] Black’s Law Dictionary at page 1220 (8th ed. 1999). [11] See A.R.S. §§ 32-1170 through 32-1170.01, 44-1762. [12] 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).

[13] A.R.S. § 32-1127. [14] See id. [15] Complainant did not allege, however, and the Registrar in the Citation did not charge a violation of A.R.S. § 32-1154(A)(9).

-----------------------

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