FINACT2017A-2008-RFA-ROC.pdf

2017A-2008-RFA-ROC · Registrar of Contractors · 2017-12-21

REGISTRAR OF CONTRACTORS OF THE STATE OF ARIZONA

Christina Davis, Case No. 2017-2008 COMPLAINANT, Docket No. 2017A-2008-RFA-ROC v.

911 Home Design & Construction LLC, FINAL ADMINISTRATIVE DECISION AND License No. 285926, ORDER RESPONDENT.

Under A.R.S. § 41-1092.08(B), the Registrar may review and accept, modify, or reject an administrative law judge’s written decision. If the Registrar modifies or rejects that decision, then the Registrar must provide written justification setting forth the reasons for the modification or rejection. MODIFICATION AND WRITTEN JUSTIFICATION Here, Administrative Law Judge Linda Marie Brown reviewed the evidence of “actual damages” and issued a written decision recommending that the Registrar of Contractors make payment from the Residential Recovery Fund to the Complainant in the amount of $14,461.74. The Registrar reviewed that decision and modifies it. In the recommended decision’s Conclusions of Law, Judge Brown cites the 1966 case United States Fidelity & Guaranty Co. v. Davis and writes that “‘Actual damages’ are those that will put the injured party in the position in which he was before he was injured.” See ALJ Dec. 6:18-20. The Registrar strikes that sentence and replaces it with the following: For the purposes of A.R.S. § 32-1132(A), “actual damages” are the reasonable cost of repairing the contractor’s defective work and completing the project, minus any portion of the contract price still unpaid to the original contractor. See Ramsey v. Arizona Registrar of Contractors, 384 P.3d 316, 320 (Ariz. App. 1st Div. 2016).

of 3 REGISTRAR OF CONTRACTORS 1700 W. Washington St. Suite 105 – Phoenix, AZ 85007-2812 Telephone (602)542-1525 1-877-692-9762 The Registrar also makes the following administrative corrections:

• On page 1, line 30 strike “2016” and insert “2017”. • On page 2, strike paragraph 6 and insert, “Respondent failed to submit an Answer to the Citation issued on June 21, 2017. Therefore a hearing was not conducted and it was deemed that Respondent admitted to the commission of the acts charged in the complaint. A Final Administrative Decision and Order was issued by the Registrar of Contractors on July 13, 2017, which suspended Respondent’s license for five days and assessed a $500.00 civil penalty for a violation of A.R.S. § 32-1154(A)(22)”. • On page 4, line 1 strike “20” and insert “21”.

• On page 5, line 10 strike “for the unpaid balance of the full contract” and insert “for items included

in the bids that were not ordered to be corrected by the written directive issued on May 22, 2017”.

CONCLUSION AND ORDER The Registrar hereby accepts the remainder of the Administrative Law Judge Decision, which becomes effective on January 30, 2018. Dated this 21st day of December 2017. Registrar of Contractors /s/ Nicole Sornsin ----------------------------------------------------------- Nicole Sornsin Assistant Director, Legal and Recovery Fund Copy mailed via USPS First Class mail and this 21st day of December 2017 to: Respondent 911 Home Design & Construction LLC 6745 E Superstition Springs Blvd Apt 1011 Mesa, AZ 85206-4313 Complainant Christina Davis 7425 E Bonita Dr Scottsdale, AZ 85250-7105

of 3 REGISTRAR OF CONTRACTORS 1700 W. Washington St. Suite 105 – Phoenix, AZ 85007-2812 Telephone (602)542-1525 1-877-692-9762 Complainant’s Attorney Sharon B Shively, Esq. Sacks Tierney P.A. 4250 N Drinkwater Blvd Fl 4 Scottsdale, AZ 85251-3987 Copy electronically sent this same date to: Office of Administrative Hearings Linda Marie Brown, Administrative Law Judge Office of the Attorney General Thomas Raine, Assistant Attorney General Copy sent electronically this same date to: Respondent at email address on record with the Registrar Complainant at email address on record with the Registrar Complainant’s counsel at email address on record with the Registrar Case No. 2017-2008/mm

of 3 REGISTRAR OF CONTRACTORS 1700 W. Washington St. Suite 105 – Phoenix, AZ 85007-2812 Telephone (602)542-1525 1-877-692-9762 Received IN THE OFFICE OF ADMINISTRATIVE HEARINGS 11/29/2017 ROC Legal

Christina Davis, No. 2017A-2008-RFA-ROC PLAINTIFF, v. ADMINISTRATIVE LAW JUDGE DECISION 911 Home Design & Construction LLC , License No: 285926 DEFENDANT.

HEARING: November 9, 2017, at 1:00 PM APPEARANCES: Diego Serrano (“Respondent” for 911 Home Design & Construction LLC); Christina Davis (“Complainant”); Sharon Shively (“Ms. Shively” attorney for Complainants); Thomas Raine (“Mr. Raine” attorney for the Registrar of Contractors (Registrar or ROC)); Marlee McCormick (“Ms. McCormick” witness for the Registrar’s Recovery Fund); and Doug Ulmer (“Mr. Ulmer” Registrar Recovery Fund Observer). ADMINISTRATIVE LAW JUDGE: Linda Marie Brown _____________________________________________________________________ In accordance with A.R.S. § 32-1154(G) Respondent timely files its Notice to request an administrative hearing to contest an administrative payout to Complainant. The Recovery Fund issued Notice of Claim for Administrative Payout that in review of the claim, the Fund determined Complainants awarded $14,461.74. Based upon testimony and evidence, the Administrative Law Judge makes the following Findings of Fact, Conclusions of Law, and Recommended Order. FINDINGS OF FACT 1. Respondent is the holder of License No. CR61-285926-D issued by the Arizona Registrar of Contractors. 2. On or about April 14, 2016, Complainant filed a Complaint with the Registrar alleging poor workmanship issues against Respondent from an underlying contract

Office of Administrative Hearings 1400 West Washington, Suite 101 Phoenix, Arizona 85007 (602) 542-9826 Received 11/29/2017 ROCinterior executed on or about January 17, 2017. Respondent was contracted to provide Legal upgrades to her residence located at 7425 East Bonita Drive, Scottsdale, Arizona. Specifically, installation of wood flooring, painting the interior of the home, new cabinets in various rooms, epoxy in the garage and the remodel of two bathrooms. A contract addendum was added on January 21, 2017, including additional remodeling of the kitchen and laundry room. The contract amount was listed on said Complaint as $77,817.01. Ms. Davis paid $58,362.75.1 3. Ms. Davis’ Complaint was assigned to ROC Investigator Matt Gunstra. Investigator Gunstra performed a jobsite inspection on May 9, 2017. Investigator Gunstra substantiated 43 of the 96 complained of items under the governing rule of workmanship. He issued a Directive on May 22, 2017 for corrective action to be complete no later than June 20, 2017.2 4. Investigator Gunstra also issued three (3) separate warning letters to Respondent on May 16, 2017, for (1) aiding and abetting an unlicensed contractor, namely; Edgar Leon;3 (2) failure to obtain necessary building permits;4 and (3) operating beyond the scope of its CR61 license.5 5. On June 21, 2017, the Registrar issued a Citation against Respondent citing violations of Charge 1: A.A.C. R9-9-108 minimum construction standards, and thereby of A.R.S. § 32-1154(A)(3); Charge 2: A.R.S. § 31-1554(A)(9) aiding and 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; and Charge 3: A.R.S. § 32-1154(A)(22) failure to take appropriate correction action. 6. An evidentiary hearing was held. Respondent failed to appear. The Administrative Law Judge (ALJ) issued by default its recommendation that Respondent

1 State’s Exhibit 1: Administrative Complaint (04/14/2017). State’s Exhibit 2: AZ ROC Directive from Registrar re: 2017-2008 (05/22/2017). A.R.S. § 32-1154(A)(9). A.R.S. § 32-1154(A)(2). A.R.S. § 32-1154(A)(16). Received 11/29/2017 ROC Legal be disciplined and license suspended for five (5) business days and pay a $500.00 civil penalty. The Registrar accepted the ALJs recommendation.6 7. On July 25, 2017, Complainant submitted a claim to the Registrar’s Recovery Fund for damages in the amount of $81,950.00.7 8. Complainant homeowner provided a copy of the initial Contract and Addendum Contract8 and proofs of payment as follows: check no. 639 dated 01/21/2017 in the amount of $38,908.50; check no. 655 dated 03/17/2017 in the amount of $1,733.24; check no. 657 dated 03/27/2107 in the amount of $19,454.25; check no. 664 dated 04/01/2017 in the amount of $2,660.76 (lighting, mirror & floral) and check no. 665 dated 04/01/2017 in the amount of $2,660.76 (bedframe).9 9. Three bids for repair work were provided as follows: Bid 1 -- 06/28/2017— On the Level Repair Remodeling, LLC proposed $81,950.00; Bid 2 -- 05/05/2017 – Rocky Mountain Restoration proposed $87,143.70; and Bid 310 -- 07/27/2017 – Arizona Hardwood Floor Supply, Inc. proposed $31,015.41, Z Custom Renovations, LLC proposed $43,980.00, On the Level Repair Remodeling, LLC proposed $28,665.00 and R&J Electric proposed $1,917.50.11 10. On August 9, 2017, the Registrar sent a letter to Claimant requesting additional documentation necessary to help establish eligibility on whether the claimant is eligible to receive compensation from the Recovery Fund. 11. Claimant provided proofs of payment and contracts for emergency repairs allegedly resulting from Respondent’s workmanship.12 However, those amounts are not at issue for purposes of this hearing. 12. Upon review of Complainant’s claim, the Registrar Recovery Fund issued its Notice of Claim for Administrative Payout in the amount of $14,461.74. The Notice provided a 15-day window for either party to contest the determination.13

State’s Exhibit 4: Final Administrative Default (07/13/2017). 7 State’s Exhibit 5: AZ ROC Recovery Fund Claim Form (07/25/2017). State’s Exhibit 6: Contract and Addendum Contract (01/17/2017). 9 State’s Exhibit 7: Homeowner Proofs of Payment. Bid 3 encompassed 4 separate bids based on work to be performed by each contractor. State’s Exhibit 8: Contractor bids. State’s Exhibit 9: Proofs of payment and contracts for emergency repairs. State’s Exhibit 9 Notice of Claim for Administrative Payout (09/08/2017). Received 11/29/2017 13. On September 20, 2017, Respondent timely filed its notice to ROC Legal request an administrative hearing.14 14. At hearing, Sharon Shively, attorney for the complainant motioned to vacate the hearing because she asserted Respondent is attempting to introduce new evidence that should have been presented at the discipline hearing, and because it failed to appear to defend at the underlying hearing, it waived its right to raise new facts. 15. Thomas Raine, Counsel for the Registrar, stated that the findings of fact in the underlying matter were by default and there is no objection to permitting the Respondent an opportunity to be heard. 16. The Administrative Law Judge agreed and the hearing proceeded. 17. Respondent argued that the contract price is incorrect and that there was additional work that caused the price to increase leaving a balance owed to Respondent. 18. Respondent testified he was not properly heard at the evidentiary hearing. Respondent was reminded the underlying matter has already been decided and today’s hearing is limited to determine whether or not the payout determination should be upheld. 19. Mr. Raine stated that Complainant had a contract with Respondent and that the ROC investigator substantiated issues under the workmanship rule; therefore the claim payout amount should be affirmed. 20. Respondent testified that he did contract with Ms. Davis and the work started February 2, 2017. His last day on the project was April 2, 2017. He argued that Complainant agreed to additional work that would increase the costs but testified that no change order issued. 21. Marlee McCormick, Claims Reviewer, testified that Complainants’ payout in this matter is determined upon a full evaluation of the jobsite inspection, the underlying Directive issued and findings from the Administrative hearing. 22. Ms. McCormick further testified that upon an information analysis and review of the scope of work, she then compares the underlying directive with the bids submitted by the Complainant. In comparison, the lowest bid of the three for actual harm

State’s Exhibit 12: Respondent’s Request for Hearing. Received 11/29/2017 to Complainant’s residence was selected as set forth in the Recovery ROC Fund Legal cost calculation spreadsheet.15 23. Ms. McCormick testified that the following computation was used to determine compensable actual damages. Ms. McCormick utilized the low bid from On the Level Repair Remodeling LLC and determined actual damages equaled: $81,950.00 (lowest bid) plus $1,033.00 (allowable emergency repairs) minus $19,454.26 (unpaid balance on contract), $7,500.00 (payout from the Respondent’s bond company) and $41,567.00 (complainant’s insurance payout) equals $14,461.74.

24. Ms. McCormick stated when evaluating the claim, they made disallowances for the unpaid balance of the full contract. 25. Mr. Raine questioned Ms. McCormick on if it was determined that the additional work was agreed to would that be enough to change the outcome. 26. Complainant testified that she does not recall ever receiving a text message stating changes to the initial contract that would result in additional funds needed to which she replied, no. 27. Respondent did not provide any additional evidence of a signed copy of the alleged increase or change order to the underlying contract, or any evidence that Complainant had actually knowledge and consented to the purported changes. 28. Ms. Shively questioned Respondent on cross-examination in an attempt to provide a comparison to the total of each line item set forth under work description,16,17 in an attempt to demonstrate what appeared to be double billing for items initially paid for by Complainant. 29. In closing, Respondent asked that the payout determination be dismissed.

State’s Exhibit 10: RF Cost Spreadsheet. 16 State’s Exhibit 12: Respondent’s Request for Hearing include two (2) proposal/agreements dated 04/19/2017 $18,387.87 and 04/10/2017 $77,817.01 (Bates No. 0113-0114). See Complainant’s Exhibit C-14 dated 01/17/2017 $77,817.01. The referenced proposal/agreement is attached to Complainant’s Initial Complaint [ProLaw 09/25/2017: Initial Complainant Submittal1.pdf, p. 4 of 21 (600503.pdf)]. Note: Neither Exhibits 12 or C-14 of a proposal/agreement were executed. Received 11/29/2017 30. ROC Mr. Raine restated that whether a change order is signed or not, Legal it would not change the outcome and requests that the amount determined in the Notice of Administrative Payout be affirmed. CONCLUSIONS OF LAW 1. The burden of proof at an administrative hearing is generally upon the person who brings the action. Utah Construction Company v. Berg et al., 68 Ariz. 285, 205 P.2d 367 (1949); A.A.C. R2-19-119(B). Further, the standard of proof at hearing is by preponderance of the evidence. Smith v. Arizona Dept. of Transportation, 146 Ariz. 430, 706 P.2d 756 (App. 1985); A.A.C. R2-19-119(A). The Notice of Claim for Administrative Payout states that the party contesting bears the burden of proof to show entitlement to any amount other than that in the Notice. In this instance, Respondent bears the burden of showing, by a preponderance of the evidence, that the proposed payout amount is not reasonable and proper. 2. Complainants are injured persons within the definition in A.R.S. § 32- 1131(3) and is, therefore, entitled to recovery from the Fund. 3. According to A.R.S. § 32-1132(A), an award from the Fund is limited to “actual damages suffered by the complainant as a direct result of the contractor’s violation,” but “[n]o more than the maximum individual award from the fund shall be made on any individual residence or to any injured person.” “Actual damages” are those that will put the injured party in the position in which he was before he was injured. United States Fidelity & Guaranty Co. v. Davis, 3 Ariz. App. 259, 263, 413 P.2d 590, 594 (1966). 4. Under the facts and circumstances of this case, the Fund is empowered to determine and award, based on actual damages, an appropriate payment to Complainants pursuant to A.R.S. § 32-1132 and A.R.S. § 32-1154(F). 5. Because payouts from the Fund are limited to $30,000.00 per residence and per injured person, the Fund cannot pay Complainants more than $30,000.00 in total for actual damages suffered as a result of Respondent’s acts or omissions. 6. The evidence established that Complainant is entitled to an award. Respondent failed to meet its burden of proof in challenging the payout. The evidence of record supports an award to Complainant in the amount $14,461.74, which shall be

Received 11/29/2017 ROC Legal chargeable against Respondent and persons on the license as set forth in A.R.S. § 32- 1139(B). RECOMMENDED ORDER In view of the foregoing, IT IS RECOMMENDED that the Registrar of Contractors make payment from the Residential Contractors’ Recovery Fund to Complainant in the amount of $14,461.74. 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 Decision will be 40 days from the date of that certification.

Done this day, November 29, 2017. /s/ Linda Marie Brown Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director Registrar of Contractors