ALJDEC decisions subject to certification as final

2018-3804-ROC-SSC · Registrar of Contractors · 2018-10-04

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: September 20, 2018 at 1:30 PM. APPEARANCES: Assistant Attorney General Thomas Raine, Esq. appeared on behalf of the Arizona Registrar of Contractors (“the Registrar”), with Bonny Allan, Dennis Bierma, Jack Grimm, Margarita Torres, Nicholas Estrada, Gregg McKeown, Morgan Wilkerson, and Ramakrishna Inti as witnesses. No appearance(s) on behalf of J & R Construction LLC (“Respondent”). ADMINISTRATIVE LAW JUDGE: Jenna Clark. _____________________________________________________________________ After review of the hearing record in this matter, the undersigned Administrative Law Judge makes the following Findings of Fact and Conclusions of Law, and issues this Recommended Order to the Director of the Registrar. FINDINGS OF FACT Background and Procedure 1. On December 02, 2017, the Registrar issued License No. KB-2.316956-D for dual building contracting to Respondent.[1] Respondent’s address of record for the license is 14015 W La Reata Ave. Goodyear, AZ 85395- 1478.[2] 2. Administrative notice is taken of Respondent’s prior License record as reflected on the Registrar’s public website on September 20, 2018.[3] Such prior License record reflects that Respondent’s license has not previously been issued formal discipline by the Registrar. Although, the record does reflect that there are ten open complaint against Respondent’s license, four of which are presumed to be related to this matter. Respondent has a $14,000.00 surety bond through Western Surety Company effective April 27, 2018. 3. On or about August 30, 2018, the Registrar issued an Order of Summary Suspension & Case Consolidation against Respondent after the Registrar received Notice of Qualifying Party Disassociation forms from Nedeljko Jovanovic and Ramakrishna Inti to be removed from Respondent’s license on February 28, 2018, and August 20, 2018, respectively, as well as nine homeowner and subcontractor complaints against Respondent and its owner and officer, Jeffery Daniel “JD” Ipson between April 10, 2018, and August 02, 2018, alleging abandonment, nonpayment, and failure to meet minimum workmanship standards.[4] 4. Upon investigation, the Registrar substantiated four homeowner complaints regarding abandonment of contract. Under the circumstances, the Registrar found that the public health, safety or welfare imperatively required emergency action under Ariz. Rev. Stat. § 41- 1092.11(B). 5. On August 30, 2018, the Registrar issued an Order setting an expedited evidentiary hearing on September 06, 2018, at 1:30 p.m. before the Office of Administrative Hearings (“OAH”), an independent state agency. The Registrar mailed the Order of Summary Suspension and Notice of Hearing to Respondent’s address of record on August 30, 2018.[5] 6. On August 30, 2018, the Registrar issued a Supplemental Notice that set forth additional facts that supported the summary suspension.[6] 7. On August 31, 2018, the Registrar issued a Notice of Errata that corrected several dating errors in its Supplemental Notice.[7] 8. Also on August 31, 2018, Respondent filed a Motion to Continue the hearing via email from “Terri” at [email redacted][8] requesting, in pertinent part: We ask that we move this hearing out further as it’s Labor Day week and will already be out of town. We have asked for our lawyer that will be handling this case he is already out of town as well. [sic]

The message was copied to [email redacted].[9] The Registrar did not oppose Respondent’s Motion to Continue. 9. On September 05, 2018, the Administrative Law Judge (“ALJ”) issued an order granting Respondent’s request to continue and scheduled a continued hearing for September 20, 2018, at 1:30 p.m. Respondent was instructed to have the representing attorney file a Notice of Appearance. OAH staff sent copies of the Order to Respondent at his address of record and email address. 10. An evidentiary hearing was held on the matters set forth in Order of Summary Suspension and Supplemental Notice on September 20, 2018, as follows: Charge 1: Abandonment of a Contract Without Legal Excuse (Ariz. Rev. Stat. § 32-1154(A)(1)) – Four Counts Charge 2: Minimum Workmanship Standards (Ariz. Rev. Stat. § 32- 1154(A)(3)) – Three Counts Charge 3: Contracting Outside the Scope of License (Ariz. Rev. Stat. § 32-1154(A)(16)) – One Count Charge 4: Failure to Take Appropriate Corrective Action (Ariz. Rev. Stat. § 32-1154(A)(22)) – Four Counts

The Registrar was represented by Assistant Attorney General Thomas Raine, Esq., who submitted 35 exhibits and presented the testimonies of Bonny Allan, Dennis Bierma, Jack Grimm, Margarita Torres, Nicholas Estrada, Gregg McKeown, Morgan Wilkerson and Ramakrishna Inti. 11. Although the start of the duly noticed continued hearing was delayed eight minutes to allow Respondent additional travel time, Respondent did not appear on his own behalf, through an authorized officer, employee, or attorney, and did not contact OAH to request that the start of the hearing be further delayed. Respondent did not request to appear telephonically, nor did Respondent request that the hearing be continued a second time. Consequently, Respondent did not present any evidence to defend his license. Hearing Evidence Homeowner Complaints Margarita Torres’ Complaint (Case No. 2018-2809) 12. On June 19, 2018, Ms. Torres filed a complaint with the Registrar against Respondent, specifically citing JD Ipson, alleging abandonment of its December 11, 2017 contract to perform a home remodel and add an addition.[10] According to the evidence and Ms. Torres’ testimony, Ms. Torres paid Respondent $95,000.00 of the $100,000.00 contract price.[11] 13. Registrar investigator Jack Grimm testified that he conducted a jobsite inspection on July 18, 2018.[12] Respondent was not present. Investigator Grimm testified that he observed exposed framing and poured concrete, which was less than $95,000.00 worth of work.[13] Investigator Grimm further testified that he issued a Directive from the Registrar to Respondent on July 24, 2018, whereby he informed Respondent that it was in violation of Ariz. Admin. Code R4-9-108, and placed on notice that it substantiated that its work failed to meet minimum workmanship standards.[14] Respondent was ordered to remedy the following violations by appropriate means: a) Complete the project per contract and approved City of Glendale plans, b) Complete any corrections ordered by the City of Glendale building department, and c) Repair and complete property perimeter fence per agreement.

14. Respondent was required to notify the Registrar by 5:00 p.m. on August 10, 2018, that it had complied with the Directive or face further discipline pursuant to Ariz. Rev. Stat. § 32-1154(E) for violating Ariz. Rev. Stat. § 32-1154(A)(22) and Ariz. Admin. Code R4-9-108.[15] 15. Respondent did not comply with the Registrar’s Directive or refund monies paid to Ms. Torres.[16] Nicholas Estrada’s Complaint (Case No. 2018-3169) 16. On July 05, 2018, Mr. Estrada filed a complaint with the Registrar against Respondent, specifically citing JD Ipson, alleging abandonment of its February 22, 2018 contract to install an underground pool in his backyard.[17] According to the evidence and Mr. Estrada’s testimony, Mr. Estrada paid Respondent $9,000.00 of the $23,000.00 contract price.[18] Respondent also fraudulently re-deposited one of the checks Mr. Estrada issued in installment payments.[19] 17. Investigator Grimm testified that he conducted a jobsite inspection on August 13, 2018.[20] Respondent was not present. Investigator Grimm testified that he observed a hole dug in the ground, which was less than $9,000.00 worth of work.[21] Investigator Grimm further testified that he issued a Directive from the Registrar to Respondent on August 20, 2018, whereby he informed Respondent that he was in violation of Ariz. Admin. Code R4-9-108, placed on notice that he was working outside the scope of his license, and instructed Respondent to complete the project by appropriate means to satisfy the original agreement.[22] 18. Respondent was required to notify the Registrar by 5:00 p.m. on September 06, 2018, of his compliance with the Directive or face further discipline pursuant to Ariz. Rev. Stat. § 32-1154(E) for violating Ariz. Rev. Stat. § 32-1154(A)(22) and Ariz. Admin. Code R4-9- 108.[23] 19. Respondent did not comply with the Registrar’s Directive or refund monies paid to Mr. Estrada. Gregg McKeown’s Complaint (Case No. 2018-3495) 20. On July 26, 2018, Mr. McKeown filed a complaint with the Registrar against Respondent, specifically citing JD Ipson, alleging abandonment of its February 22, 2018 contract to perform remodeling of his home.[24] According to the evidence and Mr. McKeown’s testimony, Mr. McKeown paid Respondent $117,000.00 of the $150,796.25 contract price.[25] Respondent also fraudulently re-deposited three of the checks Mr. McKeown issued in installment payments.[26] 21. Registrar investigator Dennis Bierma testified that he conducted a jobsite inspection on August 23, 2018.[27] Respondent was not present. Investigator Bierma testified that he observed less than $100,000.00 worth of foundation and plumbing work had begun on the project.[28] 22. Investigator Bierma further testified that he issued a Directive from the Registrar to Respondent the same date whereby he informed Respondent that it was in violation of Ariz. Admin. Code R4-9-108, and instructed Respondent to complete the project per the original agreement by 5:00 p.m. on September 10, 2018, or face further discipline pursuant to Ariz. Rev. Stat. § 32-1154(E) for violating Ariz. Rev. Stat. § 32-1154(A)(22) and Ariz. Admin. Code R4-9-108.[29] 23. Respondent did not comply with the Registrar’s Directive or refund monies paid to Mr. McKeown. Morgan Wilkerson’s Complaint (Case No. 2018-3565) 24. On July 28, 2018, Mr. Wilkerson filed a complaint with the Registrar against Respondent, specifically citing JD Ipson, alleging abandonment of its March 13, 2018 contract to repair a staircase.[30] According to the evidence and Mr. Wilkerson’s testimony, Mr. Wilkerson gave Respondent a $1,900.00 cash down payment of the $3,800.00 contract price.[31] 25. Investigator Grimm testified that he investigated the matter and determined that Mr. Wilkerson had initially contracted with another contractor to build an exterior stairway to an upstairs residential unit, but it was torn down by order of the city because it was built without proper permits being obtained first. Respondent was brought in to rebuild the stairway. Although Respondent was given a down payment from Mr. Wilkerson, no work was ever started on the project. Respondent never refunded monies paid to Mr. Wilkerson. Notice of Qualifying Party Disassociation 26. Per the Registrar’s public website Nedeljko Jovanovic is a former Member on License No. KB-2.316956-D, and filed a Notice of Qualifying Party Disassociation with the Registrar for the license on February 28, 2018.[32] The length of Mr. Jovanovic’s tenure in either position for License No. KB-2.316956-D is unknown as he did not appear as a witness. 27. Ramakrishna Inti testified that he served as the Qualified Party for License No. KB-2.316956-D from March 01, 2018, through August 13, 2018. Mr. Inti ended his affiliation with Respondent when he filed a Notice of Qualifying Party Disassociation with the Registrar.[33] The disassociation was processed by the Registrar on August 20, 2018. Per Mr. Inti, JD Ipson asked him to join his company in December 2017 after responding to a printed solicitation for a Qualified Party for J & R Construction, and Mr. Ipson told Mr. Inti that he would be paid $1,600.00 monthly. Mr. Inti testified that he was never paid during the entirety of his employment and had little to know knowledge or involvement with any of the aforementioned projects.[34] Mr. Inti testified that when he expressed his concerns to Mr. Ipson regarding Respondent’s business practices, that Mr. Ipson told him he would not be liable.[35] CONCLUSIONS OF LAW 1. These matters lie within the Registrar’s jurisdiction.[36] 2. The summarily suspended status of Respondent’s licenses does not deprive the Registrar of its ability to prosecute these complaints or prevent the Registrar from determining the merits of these complaints.[37] 3. The Notice of Hearing that the Registrar mailed to Respondent at its address of record and the Order continuing the hearing at Respondent’s request which OAH mailed to Respondent’s address of record and email addresses were reasonable. Neither means of correspondence sent to Respondent were returned as undeliverable. Thus, Respondent is deemed to have received notice of the continued hearing.[38] 4. The Registrar bears the burden of proof to establish grounds for suspension or revocation of Respondent’s contractor’s license by a preponderance of the evidence.[39] 5. “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”[40] 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.”[41] 6. Ariz. Rev. Stat. § 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.” 7. Ariz. Rev. Stat. § 32-1154(A)(3) includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license, “[f]ailure in any material respect to comply with this chapter.” 8. Ariz. Rev. Stat. § 32-1154(A)(16) includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license, “[k]nowingly contracting beyond the scope of the license or licenses of the licensee.” 9. Ariz. Rev. Stat. § 32-1154(A)(22) includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license, in pertinent part, “[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.” 10. Ariz. Admin. Code R4-9-108(A) states that “[a] contractor shall perform all work in a professional and workmanlike manner.” 11. Ariz. Admin. Code R4-9-108(B) states, in pertinent part, that “[a] contractor shall perform all work in accordance with any applicable building codes and professional industry standards.” 12. The evidence in this matter is undisputed. 13. The record reflects that Respondent abandoned without legal excuse the projects of Mr. McKeown, Mr. Estrada, Ms. Torres, and Mr. Wilkerson. Therefore, the Registrar established four violations of Ariz. Rev. Stat. § 32-1154(A)(1). 14. The record further reflects that Respondent did not meet minimum workmanship standards as required by Ariz. Admin. Code R4-9-108 on Mr. McKeown’s, Mr. Estrada’s, and Ms. Torres’ projects. Therefore, the Registrar established three violations of Ariz. Rev. Stat. § 32- 1154(A)(3). 15. The record also reflects that Respondent did not have the requisite license for Mr. Estrada’s pool project, and that Respondent did not properly subcontract the project out to an appropriately licensed subcontractor whose license was in good standing with the Registrar. Therefore, the Registrar established one violation of Ariz. Rev. Stat. § 32-1154(A)(16). 16. Moreover, the record reflects that Respondent failed to take appropriate corrective action for any of the aforementioned projects after Directives were issued by the Registrar for each project. Therefore, the Registrar established four violations of Ariz. Rev. Stat. § 32-1154(A)(22). 17. The Registrar also established that Respondent currently does not have a Qualifying Party listed on its license who is responsible for its contracting operations.[42] The Registrar also established that there are at least four unresolved complaints that are pending against Respondent’s license. Thus, the Registrar has established under Ariz. Rev. Stat. § 41-1092.11(B) that the public health, safety or welfare imperatively required that Respondent’s license be summarily suspended. The Registrar’s burden of proof in this matter has been sustained. 18. The facts that Respondent has shown a pattern of taking deposits and multiple payments on new contracts while previously failing to fulfill existing contracts, that no Qualifying Party is currently responsible for Respondent’s contracting operations, that no one appeared at the duly noticed continued hearing to defend Respondent’s license shows that, at this time, Respondent cannot be regulated. 19. The tribunal is especially troubled by the fact that Respondent engaged in the aforementioned conduct during the short nine month span of his licensure. 20. Under the circumstances, the Registrar has established more than ample cause to summarily suspend Respondent’s license. 21. The tribunal holds that revocation of Respondent’s dual building contracting license is appropriate and in the best interest of the public. RECOMMENDED ORDER In light of the foregoing facts and conclusions of law, IT IS RECOMMENDED that the Registrar’s August 30, 2018 Order of Summary Suspension of Respondent’s License No. KB-2.316956-D be affirmed. IT IS FURTHER RECOMMENDED that on the effective date of the final order in this matter, Respondent’s License No. KB-2.316956-D shall be revoked. 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, October 04, 2018.

/s/ Jenna Clark Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director Registrar of Contractors ----------------------- [1] See Registrar Exhibit 31. [2] Administrative notice is taken that https://jrconstructiongroup.com/ states that it operates under License No. KB-2.316956-D. [3] See https://roc.az.gov/contractor-search?Id=a0Yt000000ACW8NEAX. [4] See Registrar Exhibit 1. See https://roc.az.gov/contractor- search?Id=a0Yt000000ACW8NEAX. [5] See Registrar Exhibit 1. [6] See Registrar Exhibit 2. [7] See Registrar Exhibit 3. [8] Terri Jean Pierce is listed as the Member on License No. KB-2.316956-D, and is presumed to be the owner of email handle [email redacted]. [9] Jeffrey Daniel “JD” Ipson is alleged to be Ms. Pierce’s son, and is presumed to be the owner of email handle [email redacted]. See also Registrar Exhibit 35. [10] See Registrar Exhibit 25. [11] See Registrar Exhibit 26. A Change Order for $45,000.00 was created for the project, per Ms. Torres’ request because she increased the scope of the home addition. The final contract price for the project was $145,000.00. [12] See Registrar Exhibit 26. [13] Id. [14] See Registrar Exhibit 27. [15] Id. [16] See Registrar Exhibits 28 and 29. [17] See Registrar Exhibit 19. [18] See Registrar Exhibit 20. [19] See Registrar Exhibit 34. [20] See Registrar Exhibit 22. [21] Id. [22]See Registrar Exhibit 23. Notably, because Respondent was out of scope of his license he was further advised that he had to subcontract the pool project out to a licensed contractor of Mr. Estrada’s choosing or reach a financial settlement with him. [23] See Registrar Exhibit 23. [24] See Registrar Exhibit 15. [25] Id. [26] Id. [27] See Registrar Exhibit 16. [28] Id. [29] See Registrar Exhibit 17. [30] Id. [31] Id. [32] See https://roc.az.gov/contractor-search?Id=a0Yt000000ACW8NEAX. [33] See Registrar Exhibit 32; see also https://roc.az.gov/contractor- search?Id=a0Yt000000ACW8NEAX. [34] Ariz. Rev. Stat. § 32-1167(A) states that “[if] a person who qualified for a license ceases for any reason whatsoever to be connected with the licensee, both the licensee and the qualifying party shall notify the registrar in writing within fifteen days after such disassociation.” Although all dates of Respondent’s abandonment for all aforementioned cases predate Mr. Inti’s disassociation from License No. KB-2.316956-D, this tribunal does not possess the requisite jurisdiction to determine what liability, if any, Mr. Inti has in any of them as payout from the Recovery Fund is not a noticed issue in this matter. [35] See Registrar Exhibit 35. [36] See Ariz. Rev. Stat. § 32-1154(A). [37] See Ariz. Rev. Stat. § 32-1154(D). That statute provides that “[t]he expiration, cancellation, suspension or revocation of a license . . . shall not deprive the registrar of jurisdiction to proceed with any investigation of or action or disciplinary proceeding against such licensee, or to render a decision suspending or revoking such a license . . . .” [38] See Ariz. Rev. Stat. §§ 41-1092.04 and 41-1092.05(D). [39] See Ariz. Rev. Stat. § 41-1092.07(G)(2); Ariz. Admin. Code R2-19- 119(B)(1); see also Vazanno v. Superior Court, 74 Ariz. 369, 372, 249 P.2d 837 (1952). [40] Morris K. Udall, Arizona Law of Evidence § 5 (1960). [41] Black’s Law Dictionary at 1220 (8th ed. 1999). [42] See Ariz. Rev. Stat. §§ 32-1101(5), 32-1122(B)(1), and 32-1127.

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Office of Administrative Hearings 1740 West Adams Street, Lower Level Phoenix, Arizona 85007 (602) 542-9826