ALJDEC decisions subject to certification as final

2016A-4647-CHC-ROC · Registrar of Contractors · 2017-09-25

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Alan and Rebecca Zehngut,

COMPLAINANT,

v.

K C R Enterprises, LLC,

License No: 235433

RESPONDENT.

No. 2016A-4647-CHC-ROC

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: July 26, 2017 at 1:00 PM

APPEARANCES: Alan and Rebecca Zehngut (“Complainants”); Kevin R. Gronau ((“Respondent1”) for KCR Enterprises, LLC (“Respondent”)); Charles Fichera ((“Respondent2”) for Respondent); Lindsay Brew ((“Mr. Brew”) attorney for Respondent); and Arlo Houston )(“Investigator Houston”) for the Registrar of Contractors (“ROC” or “Registrar”)).

ADMINISTRATIVE LAW JUDGE: Linda Marie Brown

_____________________________________________________________________

This matter was set by the Registrar of Contractors as a hearing to determine whether Respondent has violated Arizona Revised Statutes (“A.R.S.”) § 32-1154(A)(2) Departure from or disregard of plans or specifications; Rule 4-9-108, Minimum Construction Standards in the Arizona Administrative Code (“A.A.C.”) and thereby of A.R.S. § 32-1154 (A)(3); A.R.S.; § 32-1154 (A)(8) Failure in a material respect by the licensee to complete a construction project or operation for the price stated in the contract, or in any modification of the contract; and A.R.S.; § 32-1154(A)(22) Failure to take appropriate corrective action without valid justification. Respondent enters into evidence Exhibits 1 through 12. Testimony and evidence were presented and the following Findings of Fact, Conclusions of Law and Recommended Order are made.

FINDINGS OF FACT

Background and Procedure

Alan and Rebecca Zehngut (“Complainants”) contracted with KCR Enterprises, LLC (“Respondent”) on or about September 11, 2015, to perform a remodel to their home located at 5601 North Camino Real, Tucson, Arizona 85718.

KCR Enterprises LLC, (“Respondent”) is the license holder of KB2-235433-D with its place of business listed as 12112 North Rancho Vistoso Blvd, Oro Valley, AZ 85755-1840. On November 29, 2016, the Respondent was shown “suspended” for lack of bond. As of the date of this hearing, Respondent was current.

Complainants filed their Complaint with the Registrar on or about November 29, 2016. The Complaint included a preliminary scope of work dated September 11, 2015, to include the following items: mobilization, site preparation, footings and foundation, demolition, framing/roof, rough electrical, plumbing and mechanical, installation, drywall, stucco, masonry, millworks, paint, set finish electrical, plumbing, mechanical, tile and flooring. The total amount quoted was $168,785.00 to include labor, materials, to include debris removal and septic additional expenses.

At the time of filing the Complaint, Complainant noted work began on January 11, 2016, and ended November 4, 2016.

Complainants alleged against Respondent a total of seventy-five (75) items as either poor work or incomplete. In addition to the complained of items, Complainants also included a copy of the preliminary scope of work along with several change orders as follows: 02/03/2016: Change Order 030316 $6,978.00; 03/24/2016: Change Order 032316 Insulation $5,232.00; 03/24/2016: Change Order 03252016 Pool Bathroom $1,626.00; 05/24/2016: Change Order 05242016 Entry Window and Lightening $2,395.00.

Complainants stated the contract amount was $164,000.00 in its Complaint. While not exhaustive, Complainants provided several receipts for materials and labor, duplicate check stubs, and the following copies of checks made payable as:

Date Amount Ck No. Payable

10/24/2015 $20,000.00 1101 Charles Fichera

10/27/2015 $ 6,000.00 1102 Charles Fichera

12/01/2015 $ 5,000.00 1103 Charles Fichera

12/11/2015 $ 9,000.00 1104 KCR Enterprises

01/14/2016 $25,000.00 1108 KCR

02/04/2016 $10,000.00 1111 KCR

02/23/2016 $10,000.00 1112 KCR

03/01/2016 $15,000.00 1113 KCR

03/01/2016 $ 9,350.75 1114 Debra Meyer

03/15/2016 $10,000.00 1201 KCR

03/24/2016 $10,000.00 1205 KCR

04/06/2016 $ 8,604.00 1206 KCR

04/08/2016 $15,000.00 1207 KCR

05/06/2016 $15,000.00 1208 KCR

05/18/2016 $10,000.00 1209 KCR

05/31/2016 $20,000.00 1211 KCR

06/06/2016 $10,000.00 1212 KCR

06/29/2016 $10,000.00 1213 KCR

09/05/2016 $ 1,900.00 1217 Fernando Esquel

09/09/2016 $ 1,050.00 1218 James Cordova

09/15/2016 $ 2,000.00 1220 Balonous Cota (stucco)

09/15/2016 $ 426.79 1221 Charles Fichera

09/20/2016 $ 1,120.00 1222 James Cordova

09/22/2016 $ 800.00 1224 Balonous Cota

09/22/2016 $ 600.00 1225 Ray Cordova

10/06/2016 $ 1,200.00 1227 James Cordova

10/24/2016 $ 575.00 1229 Jack of All Trades

10/29/2016 $ 1,725.00 1230 Jack of All Trades

Investigator Arlo Houston was assigned to investigate the complaint and scheduled a Jobsite Inspection on December 19, 2016. At that inspection, Charles Fischera for Respondent and Alan Zehngut for Complainant were present. Investigator Houston substantiated sixty (60) of the 75 alleged workmanship issues Complainant listed in its Complaint. Investigator Houston obtained 35 photographs during his jobsite inspection which were uploaded into Case View Documents File labeled “2016-4647 Jobsite Inspection Photographs”.

On December 22, 2016, Investigator Houston issued a Directive from the Registrar listing various workmanship deficiencies that he substantiated during his Jobsite Inspection. The Respondent was directed to remedy with satisfactory written proof of compliance no later than February 6, 2017, at 5:00 p.m.

In addition to the various workmanship issues set forth in the Directive, Inspector Houston issued a warning letter noticing Respondents of contract deficiencies as set forth under A.R.S. § 32-1158(B).

On February 10, 2017, Investigator Houston sent out a formal closing letter advising Respondent that during a recent telephone conversation with Complainant that they will be formally closing the file and should Respondent fail to complete the work as per the written directive, then the matter would be reopened.

The matter was reopened on April 11, 2017.

A Compliance Inspection was conducted by Investigator Houston on April 18, 2017. Complainants were present. Investigator Houston took photographs, and found that 19 of the 60 items listed in the Directive were still in need of correction.

Respondent having failed to meet the deadline to remedy the workmanship issues listed in the Directive, the Registrar then issued a Citation dated May 12, 2017, against Respondent alleging possible violations as follows: Charge 1: A.R.S. § 32-1154(A)(2); Charge 2: A.A.C. § R4-9-108, and thereby A.R.S. § 32-1154(A)(3); Charge 3: A.R.S. 32-1154(A)(8) and 32-1158(B); and Charge 4: A.R.S. § 32-1154(22).

On May 25, 2017, Respondent submitted its Written Answer to Citation and Complaint stating that the person who was lead on the project lives in Utah which Complainants were aware of and was unable to spend every day on the project. Respondent asserted that it is willing to make corrections but it seems they are prevented from doing so. Respondent also stated that they do not understand the Investigator’s findings at the compliance inspection since they were not invited to the inspection. Respondent addressed each item listed in the Directive and set forth its position for each item.

The Registrar referred the matter to the Office of Administrative Hearings (“OAH”), an independent state agency, for an evidentiary hearing. On June 9, 2017, the Registrar issued a Notice of Hearing, setting the hearing at the OAH. The Registrar mailed a copy of the Notice of Hearing to Complainant at the address on its complaint and to Respondent at its address of record.

HEARING EVIDENCE.

Complainants testified that they contracted Respondent upon inspection of some of its prior work, and they verified with the Better Business Bureau and the Registrar of Contractors and found no complainants. Therefore, they engaged Respondent to perform work to their home. Complainants alleged that Respondent exceeded the scope of the budget, delayed the project, and used unskilled labor with no supervision and that they stopped performing work sometime in November 2016.

Mr. Brew stated on behalf of Respondent that it was ready to perform but Complainants would not permit Respondent on the land unless they were there. This caused delays. In light of delays, the parties still maintained a working relationship and in February 2017, Complainant requested the matter be closed with the Registrar, and then reopened it in April 2017 by denying Respondent an opportunity to remedy.

Investigator Houston provided credible testimony that he was the investigator assigned to handle the matter. He further stated in narrative form a summary of the factual background leading up the Citation that was issued against Respondent.

Investigator Houston testified that a Prehearing Compliance Inspection was conducted on July 20, 2017, at the Complainants residence, and there was no change from the Compliance Inspection he conducted on April 18, 2017.

Investigator Houston referenced the 19 out of 60 items still in need of corrective action. Specifically, he testified as to his findings as open issues from his prehearing inspection as follows:

Outdoor shower not completed as per contract agreement.

Exterior paint job sub-par. Overspray on to parapet stone, hose bibs etc. and not properly finished.

Paint on all windows and not cleaned.

Finishing items inside of house not addressed and completed, i.e. door jams not adjusted, paint touchups.

Inside doors painted with two different sheens and this was not corrected.

Windows installed by contractor have not been final checked. Some of them not closing properly.

Screens for windows not installed.

Door hinges not completely installed – screws missing and incorrect screws used.

Dog door installed improperly. We paid someone else to have it realigned. Remains unfinished. Needs to be caulked and finished.

Storage room off of garage - no doorknobs installed, door frames unfinished.

Shelving in master closet was not installed as per contract.

Grout missing in master bath by outside door.

Existing storage cabinets that contractor removed from old garage were left in the rain. Cabinets warped on the bottom. Contractor agreed to repair cabinets. This has not been done.

There are cracks in the outside stucco.

Two different sheens of paint used in master bedroom for initial paint and touch up.

Sheet rock was over cut by ceiling vent in study.

All outside doors not sealed.

Stucco was installed over an electrical conduit on a back patio column.

Inadequate paint job on outside of house. Grey stucco can be seen through paint in some areas.

Mr. Brew asked Investigator Houston about the matter being closed on February 10, 2017, and whether Respondent was notified when reopened to which he replied, No, I did not notify Respondent that the matter was reopened.

Investigator Houston was asked if the remaining work is largely cosmetic to which he replied that he disagrees with in part. Specifically, the windows are not cosmetic. Mr. Brew asked if he was able to determine whether the windows were installed by a subcontractor, subject to warranty, to which he replied, no.

Mr. Brewer asked Investigator Houston when Respondent received notice of the compliance inspection of April 18, 2017, to which he replied the notice was mailed to the parties on May 8, 2017.

Complainants questioned Investigator Houston whether they are under any obligation to extend time to the Respondent to take corrective action after February 6, 2017, set forth in the Directive to which he replied, no.

Complainants testified that they do not have any witnesses but that they took pictures. They further stated that they provided more than adequate time for the Respondent to complete the work and that Respondent was well aware of the fact that they were going to contact the Registrar and request that the matter be reopened because they were again experiencing delays, and they maintained a log of the numerous days when no one would show up to work on the project. Complainants testified that they asked for Kevin to get involved as they contracted in September 2015 and the project keep on with delays. In May 2016, they had to move out of the home in order for additional work to be performed.

Complainants further argued that they began to become increasing dissatisfied with both Kevin and Charles and the time involved, and that they overran the budget. They believe to date they spent $291,628.56. In addition to the various change orders, Respondents did not perform the work in accordance with the contract agreement as noted in the Directive.

Complainants argued that the window repair amounts to a difference in opinion. Respondent asserts the work is cosmetic where they argue it is a functional issue. There were several workmanship issues.

Mr. Brewer asked Complainants if they closed the matter in February 2017 to which they replied, yes. But further testified that they were satisfied and then noticed more delay and that after Kevin not responding to their inquiry on a time line they reopened the case.

Mr. Brewer asked Complainants if they ever expressed to Respondent they were not satisfied. Complainants stated they had the discussion. Respondent enters Exhibit 11, an email dated July 11, 2017, from Rebecca Zehngut to Charles and Kevin stating, they are not interested in mediation, and that to correct the remaining issues, Complainants would accept a sum certain to hire contractors of their choosing, Respondent would warrant the work for two years from the date of the last repair, the house must pass final inspection and a sum certain that would allow them to complete the work and repairs.

Kevin Gronau (“Respondent1”) testified that he is the Qualifying Party for KCR Enterprises, LLC. The company has been in business since 2007, focusing primarily on remodels. He has personally been involved in around 50-100 remodels in the Tucson-Oro Valley area. He refutes that Respondent caused delays and provided log notes that track all of his time put into the project. He stated that Complainants knew he traveled back and forth between Arizona and Utah.

Respondent1 provided a copy of a communication received from Complainants dated April 4, 2017, and his reply on April 11, 2017, and provided them with a timeline on his return to Tucson but when he returned in May 2017, he was not able to get in to complete.

Respondent1 explained that other jobs needed to be complete in order for it to finish corrective action. For example, the garage cabinets install needed to have the floor finished prior to install which was to be done by a subcontractor hired by Complainants. Respondent was not responsible for the garage door paint, either. Also Respondent is prepared to have the window screens addressed on-site by a skilled laborer.

Charles Fichera (“Respondent2”) testified that he serves as project manager for KCR Enterprises, LLC. He has 20 years’ experience. He stated that Complainants home is an older home and required changes along the way. That the rain season impeded their progress.

Respondent2 stated that they work to ensure customers are happy with the progress and that he sent a message to Rebecca in order to work with Complainants to resolve any outstanding issues.

Respondent2 further testified that they continue to stand behind making things right with Complainants and sent a certified letter on June 20, 2017, to which the received no response. He further stated that of the amount Complainant argued they paid to Respondent that not all of those funds were paid to Respondent but went to pay subcontractors such as $15,000.00 to the interior decorator.

Complainants argue they have been more than reasonable in allowing additional time to having all of the work complete in accordance with the agreement, and that they wanted upgrades and modifications to a custom home and wanted the workmanship to reflect the expectation of a custom home. In April 2017, they found it futile to continue as there were 3 attempts to repaint, 3 different stucco contractors, and issues that surfaced over quality workmanship. Therefore, they are seeking discipline be imposed against Respondent.

Mr. Brew stated that the items listed on the Directive were noted as below standards and cosmetic in nature. That the Respondent had no idea that Complainants were dissatisfied and reopened the matter until they received the Citation. He argues that Respondent’s due process rights are infringed upon since they were not noticed that the case was reopened or invited to participate in the compliance inspection.

Respondent1 added that they are still willing to bring in a window specialist to address the issue, as well as finish up the remaining items on the directive.

CONCLUSIONS OF LAW

This matter is within the jurisdiction of the Registrar of Contractors pursuant to A.R.S. §§ 32-1104(A)(4), 32-1154(B) and 32-1156.

2. The Citation issued by the Registrar of Contractors in this matter alleged potential violations of Charge 1: Arizona Revised Statutes (“A.R.S.”) § 32-1154(A)(2) provides grounds for suspension or revocation of a contractor’s license for departure from or disregard of plans, specifications or building codes “in any material respect that is prejudicial to another” without consent of the owner or his or her representative; Charge 2: Rule 4-9-108, Minimum Construction Standards in the Arizona Administrative Code (“A.A.C.”) and thereby of A.R.S. § 32-1154 (A)(3); Charge 3: A.R.S. 32-1154(A)(8) Failure in a material respect by the licensee to complete a construction project or operation for the price stated in the contract or in any modification of the contract; and Charge 4: A.R.S.; § 32-1154(A)(22) Failure to take appropriate corrective action without valid justification.

3. Complainant bears the burden of proof to establish Respondent’s statutory violation by a preponderance of the evidence. “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”

4. Regarding Charge 1 of the Citation, Complainant failed to establish that Respondent departed from any plans as no plans were provided. Other than change orders that were presented, no material evidence was presented that Respondent departure from or disregarded any plans. Complainants made no reference to the Preliminary Scope of Work in support of what they contracted for as compared to what they received. A copy of the building permit was provided in the Complaint. Therefore, Complainants failed to meet their burden. For this reason, this Tribunal finds that Respondent did not violate A.R.S. § 32-1154(A)(2).

Regarding Charge 2, Complainant established a violation of A.A.C. R4-9-108, and thereby of A.R.S. § 32-1154(A)(3). Complainant meets its burden of proof that the Directives surrounding the items substantiated by Investigator Houston had not been remedied. Testimony was taken that Complainants did not allow Respondent back on the property after mid-April 2017, to complete the work but the Directive required a completion date of February 6, 2017. Therefore, Complainants were under no obligation to allow access to Respondents. In fact, Complainants did provide greater flexibility by suspending its Complaint to allow Respondent additional time through February and March to complete the items listed on the Directive, and in April noticed increased delays and reinstated their Complaint with the Registrar. A Prehearing Inspection was conducted on July 20, 2017, and further substantiated that there were 19 items listed in the December 22, 2016 Directive that had not been satisfactorily remedied by Respondent.

Respondent testified that they had a family emergency in April and communicated on April 11, 2017 to Complainants that they would be returning in May 2017 to complete the work. However, Complainants lost confidence having already extended (8) weeks from the Directive date of February 6, 2017, and well within their rights to reinstate the Complaint. Therefore, Complainants established that Respondent did not completely perform the work in a professional and workmanlike manner in violation of A.A.C. R4-9-108, and thereby of A.R.S. § 32-1154(A)(3).

Regarding Charge 3, Complainants provided the Registrar a copy of the preliminary scope of work agreement, several change orders, copies of cancelled checks, and invoices for materials purchased and paid, which by far exceeded the price stated in the initial contract by at least $100,000.00. Therefore, Complainants established that Respondent violated A.R.S. §§ 32-1154(A)(8).

Regarding Charge 4, a finding of a violation under A.R.S. § 32-1154(A)(22) provides grounds for suspension or revocation of a contractor’s license for failure to take appropriate corrective action on a Directive without valid justification and within a reasonable period of time. Complainants established that they were more than reasonable in allowing Respondent adequate time to take corrective action and they failed to timely remedy the items substantiated in the December 22, 2016 Directive. By failing to take appropriate corrective action surrounding workmanship issues, Complainants established that Respondent violated A.R.S. § 32-1154(A)(22) as to those 19 items found still existing at the time of the Prehearing Inspection performed on July 20, 2017.

The Registrar of Contractors may consider the prior record of a contractor in any disciplinary proceeding. A.A.C. R4-9-117. Administrative notice is taken of the Registrar of Contractors website. As of the time of this recommendation, Respondent’s license was in good standing.

The preponderance of the evidence established that Respondent failed to provide adequate remedies to the Directive issued by the Registrar. This failure resulted in poor workmanship standards and failure in a material respect to complete a construction project or operation for the price stated in the contract. The Respondent failed to take appropriate means to comply with the Directive, thus the Tribunal concludes that Respondent violated the charged provisions of A.R.S. §§ 32-1154(A)(3), namely, A.A.C. R4-9-108, A.R.S. 32-1154(A)(8). and A.R.S. 32-1154(A)(22). No violation was established under A.R.S. § 32-1154(A)(2).

RECOMMENDED DECISION

Based on the foregoing, it is recommended that on the effective date of the Order, the Registrar shall suspend Respondent’s License No. B2-235433-D for a period of two (2) days.

It is further recommended that Respondent pay the sum of $250.00 to the Registrar of Contractors by way of a civil penalty pursuant to A.R.S. § 32-1154(E). The failure by Respondent to pay the entire amount of the aforesaid civil penalty, on or before 30 days following the effective date of the Order entered in this matter, shall result in the automatic revocation of Respondent’s contractor’s licenses 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 payment of any outstanding prior civil penalty is tendered.

In the event of certification of this Administrative Law Judge Decision by the Director of the Office of Administrative Hearings, the effective date of the Order will be 40 days from the date of the certification

Done this day, September 25, 2017.

/s/ Linda Marie Brown

Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director

Registrar of Contractors