ALJDEC decisions subject to certification as final

2017A-2635-CHC-ROC · Registrar of Contractors · 2017-12-01

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

John Crocker and Joanne Leslie Crocker,

COMPLAINANTS,

v.

Colt RR LLC,

License No. B.305550-R,

RESPONDENT.

No. 2017A-2635-CHC-ROC

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: November 27, 2017, at 1:00 p.m.

APPEARANCES: John Crocker and Joanne Leslie Crocker (“Complainants”) appeared through Mr. Crocker; Colt RR LLC (“Respondent”) appeared through Marc Kenneth Rasch (“Mr. Rasch”), its qualifying party/member.

ADMINISTRATIVE LAW JUDGE: Diane Mihalsky

_____________________________________________________________________

FINDINGS OF FACT

Background and Procedure

According to the Arizona Registrar of Contractors’ (“the Registrar’s”) public website, on or about June 2, 2016, the Registrar issued License No. B.305550-R for general residential contracting to Respondent. Mr. Rasch is the qualifying party/member and his father, Kevin Thomas Rasch (“Kevin Rasch”), is a member on this license. Respondent’s address of record on the license is 2248 N. Ocotillo Rd., Benson, Arizona 85602-8231.

On or about November 8, 2006, the Registrar had issued License No. A-5.208870-C for commercial excavating, grading, and oil surfacing to Respondent. Kevin Rasch is the qualifying party/member on License No. A-5.208870-C and Mr. Rasch is a member. The address of record for License No. A-5.208870-C is the same as for License No. B.305550-R.

On or about May 19, 2017, Complainants filed a complaint with the Registrar alleging that Mr. Rasch had had abandoned his contract to perform work at Complainants’ property at 1101 S. Terrace Dr., Prescott, Arizona 86303 and had charged $5,500.00 for permits, although it only paid $400.00 for the permits. According to the complaint, Respondent had started work on March 18, 2016, and had stopped work on July 22, 2016, and Complainants had paid Respondent $24,000.00 to date.

Complainants attached a “Cost Plus a Fee Agreement” to their complaint, which both parties had signed on March 18, 2016. The Cost Plus a Fee Agreement did not provide a description of the construction work that Respondent would perform, any estimated cost for the construction, the amount of any deposit that Complainants were required to pay, an estimated completion date, Respondent’s license number or address, Complainants’ mailing address, or the jobsite address, and did not apprise Complainants of their right to file a complaint with the Registrar for Respondent’s alleged violation of A.R.S. § 32-1154(A) with the time allowed by A.R.S. § 32-1155(A) or provide the Registrar’s public website address and telephone number.

Complainants also attached to their complaint a page of a permit dated August 16, 2016, for the grading and building pad at their property at Lots 6 and 4, APN# [SSN redacted] of Juniper Heights Terrace.

The Registrar assigned the complaint to its Investigator, Jim Dimond, for investigation. On or about June 26, 2017, Investigator Dimons performed a jobsite inspection, which Respondent did not attend because its representative was en route from Benson and had experienced vehicle issues.

On July 18, 2017, Investigator Dimond issued a Directive, requiring Respondent to correct by appropriate means certain deficiencies, in relevant part as follows:

Item 1- The investigation has determined that the issue of the permitting cannot determined as it is not addressed on any contract. The building code specifies that absent any other arrangement, permitting falls on the owner of the property.

The investigation also determined that it appears that the pad is not the specified dimension and does not allow the required setback from the existing septic system.

Additionally, the respondents invoice shows a charge for the installation of rip rap however there is no rip rap installed.

The respondent is to correct the condition in an appropriate manner.

Item 2- The respondents contract does not meet statutory requirements as set forth in ARS 32-1158.B

The respondent is to correct his paperwork in an appropriate manner to include the 9 elements listed in the statute and provide a compliant copy to the investigator in an appropriate manner. (see attached violation letter.)

The deadline for Respondent to comply with the Directive was on or before 5:00 p.m. on August 4, 2017.

After Respondent did not comply with the July 18, 2017 Directive, Investigator Dimond sent the complaint to the Registrar’s Legal Department.

On September 15, 2017, the Registrar issued a Citation that charged cause to suspend or revoke Respondent’s license under A.R.S. § 32-1154(A)(2), A.R.S. § 32-1154(A)(3), namely A.A.C. R4-9-108, and A.R.S. § 32-1154(A)(22).

Mr. Rasch filed a written answer to the Citation on behalf of Respondent, denying any statutory violations and affirmatively alleging in relevant part as follows:

It is my understanding [that] the building pad compaction is in question. When the pad was completed, compaction testing was performed. I will forward the compaction results from the soils engineer. It will be in the next email.

. . . .

I did not abandon the project. [Mrs. Crocker] directly told me to stop working. She was going with another contractor or Owner/Builder. I attached a screenshot of the text message.

Mr. Rasch attached to his written answer a text message exchange between himself and Mrs. Crocker. On November 28, 2016, at 12:35 p.m., Mr. Rascher informed Mrs. Crocker that he had spoken to Greg at Michael Daily’s office and that he had received the structural engineering, Greg was wrapping up the changes, and Mr. Rasch expected to have the plans in a few days. Mrs. Crocker responded on November 28, 2016, at 7:20 p.m., in relevant part as follows:

[Do] not drive to Phoenix. . . . They can mail them to us. We will not be doing anything until spring. Also, we will be getting bids from other local contractors and I am still thinking of owner build.

The Registrar referred the complaint to the Office of Administrative Hearings, an independent state agency, for an evidentiary hearing. An evidentiary hearing was held via videoconference from the Registrar’s Flagstaff office on November 27, 2017. Complainants testified and submitted four exhibits. Mr. Rasch testified on behalf of Respondent. Investigator Dimond also testified.

Additional Evidence

On or about April 4, 2016, Respondent provided a “Project Management Agreement” to Complainants that provided that Respondent “agrees to use his best efforts in a professional and workmanlike manner to manage and see to completion the construction of a single family residence (herein called the ‘Project’)” for Complainants at a cost of 10% of the cost of construction, based on the amount of the construction loan, plus a final draw of 50% of any unused loan funds at the time Complainants filed the notice of completion. The Project Management Agreement required Respondent, among other things, to obtain necessary permits and inspections, to manage the building process by obtaining at least three bids from subcontractors, and to be Complainants’ representative in the field. The Project Management Agreement did not include Respondent’s license number or address, Complainants’ mailing address, a total dollar amount, or the date(s) or stage(s) of construction on which progress payments would be due, and did not apprise Complainants of their right to file a complaint with the Registrar for Respondent’s alleged violation of A.R.S. § 32-1154(A) with the time allowed by A.R.S. § 32-1155(A) or provide the Registrar’s public website address and telephone number. Neither party signed the Project Management Agreement.

On or about April 9, 2016, Respondent issued an invoice for “grading, driveway, house pad, pipe at driveway” and “[r]ebuilding the housepad behind existing structure” in the total amount of $21,000.00 that provided the following itemized scope of work and amounts:

Grading Permit

$ 500.00

General Liability Insurance Policy

$ 2,000.00

Mobilization

$ 1,000.00

Clearing/Soils Test holes/Septic Tank exposed

$ 1,000.00

Grading

$12,000.00

SWPPP – Stormwater pollution prevention plan

$ 500.00

Rip rap (40 cubic yards) Both cut area and patio slope

$ 3,000.00

Complainants issued three checks to Respondent for the work: (1) On May 24, 2016, a check in the amount of $10,000.00 for “downpayment”; (2) On July 12, 2016, a check in the amount of $8,500.00 for “balance site work”; and (3) On July 22, 2016, a check in the amount of $5,500.00 for “building permit.”

Between March 2016, and July 2016, Mr. Rasch’s father, Kevin Rasch, performed grading on Complainants’ property using Respondent’s License No. A-5.208870-C.

On or about May 20, 2016, Red Butte Engineering, LLC (“Red Butte”) issued Geotechnical Engineering Recommendations for Complainants’ lot APN 110-09-052B in Juniper Heights to Mr. Rasch and Respondent. Red Butte recommended that Respondent “compact the sub grade, fill, backfill, sub-base fill, or base materials” to at least 95% compaction. The recommendations were based on the assumption that an engineer would approve all materials for fill placement and would monitor compaction.

Complainants testified that in May 2016, Mr. Rasch informed them that the building pad had been tested for compaction and that the test showed that the pad showed at least 95% compaction.

Mr. Rasch testified that in May 2016, Red Butte performed a compaction test at the site that showed at least 95% compaction. Mr. Rasch testified that he did not bring Red Butte’s letter regarding the results of the compaction test because he was uncertain about the matters that would be at issue at the hearing. Mr. Rasch testified that his father Kevin Rasch, had the letter from Red Butte attesting to the results of the compaction test that it had performed in May 2016, but that Kevin Rasch was out in the field and not available for the hearing.

On or about May 24, 2016, Respondent obtained the permit for the site work on Complainants’ property under License No. A-5.208870-C for the project. The record does not contain documentary evidence of the cost of the permit, aside from Complainants’ assertion in the complaint that they filed with the Registrar that the permit cost $400.00.

Between December 29, 2016, and October 3, 2017, Mrs. Crocker and Mr. Rasch exchanged texts and emails about progress on the project and whether Respondent had obtained the necessary permits.

On or about May 15, 2017, Complainants issued a check made payable to Yavapai County Development Services in the amount of $4,861.96 for “building permit final.”

On or about November 21, 2017, Timothy R. Robbins, P.E., of Butte sent a letter to Complainants, stating that Red Butte did not perform compaction testing on Complainants’ lot, in relevant part as follows:

Per our discussion Mr. [Marc] Rasch with [Respondent] requested [Red Butte] prepare a soils report for the referenced lot. [Red Butte] performed a site evaluation and collected soil samples on April 20, 2016, and completed the soils report on May 20, 2016, which was subsequently emailed to Mr. Rasch on the same date.

It is our understanding that Mr. Rasch then performed grading on the lot which involved cutting soil in the high areas and placing fill in the low areas in order to construct a level building pad. During the construction of the pad [Red Butte] was not contacted by Mr. [Rasch] to inspect and perform compaction testing in accordance with the 2012 International Residential Code and/or 2012 International Building Code, as adopted by Yavapai County.

In November 2017, Complainants retained Red Butte to perform additional soils testing at their property. After performing various tests, including nuclear density test results, on November 17, 2017, Mr. Robbins on behalf of Red Butte certified that “the structural backfill tested . . . is suitable for the construction of a ‘Slab on Grade’ foundation system for a single family residential structure.”

Investigator Dimond testified that Complainants’ problem was that the building pad was not sized to meet the footprint of the house that they intended to build. The location of the eastern end of the pad would not allow the required setback from the previously installed septic tank. Investigator Dimond testified that he did not know whether the footprint could be enlarged, whether special engineering would allow the house to be build, or whether an architect could modify the building pad to allow construction of the house that Complainants wanted to build.

Investigator Dimond acknowledged that there was a large tree on the northeast corner of the building pad that may have impacted the location of the pad.

Investigator Dimond testified that no rip rap was on site, despite Complainants having paid for the rip rap.

Investigator Dimond testified that to date, he has not received a form contract from Respondent that complies with A.R.S. § 32-1158(B).

Mrs. Crocker testified that she had not seen any evidence that Respondent had purchased a general liability insurance policy or formulated or submitted a stormwater pollution prevention plan to Yavapai County.

Mr. Rasch testified that he had provided Complainants with all the bids that Respondent had obtained from subcontractors on the project, so Complainants could use the bids to proceed as owner/builder on the project. Mr. Rasch testified that to date, Respondent had not made any money on the project.

Pursuant to A.A.C. R2-9-117, administrative notice is taken of Respondent’s disciplinary history on the Registrar’s public website. As of this date, Respondent’s License No. B.305550-R is current and in good standing. The Registrar has never before disciplined this license and Complainants’ complaint appears to be the only one pending against the license.

CONCLUSIONS OF LAW

This matter lies within the Registrar’s jurisdiction.

Complainants bear the burden of proof to establish cause to discipline Respondent’s license by a preponderance of the evidence. Respondent bears the burden to establish factors in mitigation of the penalty and affirmative defenses by the same evidentiary standard.

“A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.” 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.”

Neither the signed Cost Plus a Fee Agreement nor the unsigned Project Management Agreement included all of the terms that A.R.S. § 32-1158(B) requires licensed contractors to include in contracts with property owners that exceed $1,000.00. Although the absence of a specific scope of work makes Complainants’ complaint more difficult to resolve and a written contract that complied with A.R.S. § 32-1158(B) very well may have avoided this dispute, the Citation did not charge Respondent with cause to suspend or revoke its license under A.R.S. § 32-1154(A)(12). Respondent is on notice, however, to bring its form contracts into compliance with applicable statutes.

It appears that Respondent obtained a permit from Yavapai County for grading and the building pad on May 24, 2016. Complainants did not submit any plans that showed the building pad was constructed in the wrong place or with the wrong dimensions. Therefore, Complainants did not establish cause to suspend or revoke Respondent’s contractor’s license under A.R.S. § 32-1154(A)(2).

Complainants established that they paid Respondent in full for grading at the site, that after completing grading, Respondent did not have a compaction test performed, and that a compaction test was necessary to proceed with construction. Therefore, Complainants established cause to suspend or revoke Respondent’s contractor’s license under A.R.S. § 32-1154(A)(3), namely A.A.C. R4-9-108.

The complaint that Complainants filed with the Registrar did not complain that Respondent had not purchased the general liability insurance policy and had not prepared the stormwater pollution prevention plan for which it charged Complainants. Because Respondent was not given notice that these items would be at issue, they do not provide grounds to suspend or revoke its contractors’ license. Although the record contains some evidence that Yavapai County issued permits on May 24, 2016, and August 16, 2016, and that Complainants paid for a final permit on May 15, 2017, the record does not show the cost of the permits, who paid for the first two permits, or whether the second two permits were for work that Respondent undertook for compensation from Complainants. Complainants may seek damages from Respondent for any excessive or unwarranted charges by filing a civil action in a court of competent jurisdiction.

Complainants have established that they paid Respondent $3,000.00 for rip rap and that Respondent failed to install the rip rap. Because this item was included in the complaint that Complainants filed with the Registrar, Complainants established additional grounds to suspend or revoke Respondent’s contractor’s license under A.R.S. § 32-1154(A)(3), namely A.A.C. R4-9-108. The Registrar may resolve contractual disputes if such resolution in ancillary to its regulatory mission and may penalize a contractor’s license by ordering payment of restitution if a proven statutory violation was not remedied by corrective action. Restitution of the $3,000.00 that Complainants paid for rip rap is appropriate in this case.

Complainants established that Respondent did not install rip rap, refund $3,000.00 to Complainants for the rip rap, or compact the building pad to comply with the July 18, 2017 Directive. Therefore, Complainant established cause to suspend or revoke Respondent’s contractor’s license under A.R.S. § 32-1154(A)(22).

RECOMMENDED ORDER

Based on the foregoing,

IT IS ORDERED that on the effective date of the final order in this matter, Respondent Colt RR LLC’s License No. B.305550-R shall be suspended for five (5) business days.

IT IS FURTHER ORDERED that thirty calendar days after the effective date of the final order in this matter, Respondent’s contractor’s license shall again be suspended unless Respondent has provided satisfactory written evidence to the Registrar that it has paid Complainants John Crocker and Joanne Leslie Crocker three thousand dollars ($3,000.00) by certified or cashier’s check. If Respondent does not provide such proof, Respondent’s license shall remain suspended unless and until it provides such proof. If Respondent provides such satisfactory written proof within 30 days of the effective date of the final order, no second suspension shall take place and the Registrar shall close Case No. 2017-2635.

IT IS FURTHER ORDERED that Respondent shall pay the sum of $500.00 as a civil penalty pursuant to A.R.S. § 32-1154(E).

IT IS FURTHER ORDERED that if Respondent fails to pay the entire amount of the civil penalty on or before thirty days following the effective date of the final order, the Registrar shall revoke Respondent’s license, 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, December 1, 2017.

/s/ Diane Mihalsky

Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director

Registrar of Contractors