ALJDEC decisions subject to certification as final

2018A-04784-ROC · Registrar of Contractors · 2019-03-26

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: March 15, 2019 at 1:30 PM. APPEARANCES: Penh Koetwongjun Beidler (“Complainant”) appeared on his own behalf, with Theoner Kleinschnittger and Jim Diamond as witnesses. No appearance(s) on behalf of EGA Build & Design, LLC (“Respondent”). ADMINISTRATIVE LAW JUDGE: Jenna Clark. _____________________________________________________________________ Having heard the evidence and testimony and having considered the record in this matter, the undersigned Administrative Law Judge hereby makes the following Findings of Fact and Conclusions of Law and issues the following Recommended Order to the Director of the ROC. FINDINGS OF FACT Background and Procedure 1. On January 10, 2018, the ROC issued License No. 317397 for general dual KB-2 residential and small commercial contracting to Respondent.[1] Respondent’s address of record for the license is 1714 E Diamond Ave. Mesa, AZ 85204-3628.[2] Samuel Joshua Cruz and Andrea Sotosainz Crus are listed respectively on the license as Member/Qualifying Party and Member.[3] 2. Administrative Notice is taken of Respondent’s prior License record, for License No. 317397, as reflected on the ROC’s public website on March 15, 2019. Such prior License record reflects that Respondent’s license is currently suspended by the ROC.[4] The license has been disciplined on one prior occasion, and the record reflects that there are two open complaints against Respondent’s license, one of which is presumed to be related to this matter.[5] Respondent has a cancelled $14,000.00 surety bond that was issued through RLI Insurance Company effective December 21, 2017, through January 02, 2019.[6] 3. On January 29, 2018, Complainant, his sister Theonor Kleinschnittgner, and Respondent entered into a contract agreement whereby Respondent agreed to remodel Complainant’s residential property located at 2201 N. 9th St. Phoenix, AZ 85006 to include flooring, guest bathroom, master bathroom, kitchen, laundry room, exterior patio, appliances, electrical, and paint, for the sum total of $37,480.00.[7] The project commenced on February 01, 2018, and was to be completed in six to eight weeks.[8] Ms. Kleinschnittgner issued progress payments to Respondent via personal checks cut on February 03, 2018, for $11,780.00, on March 24, 2018, for $9,000.00, on May 07, 2018, for $7,000.00, on May 23, 2018, for $5,200.00, on August 10, 2018, for $2,250.00, and on August 20, 2018, for $2,250.00 to cover the cost of the project.[9] 4. On October 09, 2018, the ROC received a complaint from Complainant essentially alleging abandonment and poor work performance.[10] Complainant included a copy of its contractual agreement with Respondent and progress payment invoices.[11] 5. On November 28, 2018, the ROC issued a Compliance Inspection Notification letter to the parties, advising that an onsite review would be conducted at the project site by an ROC investigator on December 17, 2018, at 2:00 p.m.[12] 6. On December 17, 2018, ROC investigator Timothy Pennington (“Investigator Pennington”) conducted a review of the contract executed between the parties. Investigator Pennington also inspected the work that had been done on the project to date and took twenty- nine photographs of the property.[13] When he was finished, Investigator Pennington drafted Compliance Jobsite Inspection Notes.[14] 7. On December 17, 2018, investigator Pennington issued a Building Permit Notification Letter to Respondent to advise that a required permit had not been obtained for the project, in violation of Ariz. Rev. Stat. § 32-1154(A)(2).[15] 8. On or about December 17, 2018, investigator Pennington issued a Minimum Elements of a Contract Warning Letter to Respondent to advise that its contract with Complainant violated Ariz. Rev. Stat. § 32- 1158.[16] 9. On November 15, 2018, Investigator Pennington issued a Directive from the Registrar to Respondent because he substantiated Complainant’s allegation that Respondent abandoned the contracted project and that the work Respondent had done failed to meet minimum workmanship standards.[17] Respondent was put on notice that it had until December 02, 2018, to notify the ROC of its compliance with the corrective order or face discipline pursuant to Ariz. Admin. Code R4-9-108, and Ariz. Rev. Stat. §§ 32-1154(A)(22) and 32-1154(E).[18] 10. On December 21, 2018, the ROC issued a Citation and Complaint to Respondent for alleged violations of Ariz. Rev. Stat. §§ 32- 1154(A)(2), 32-1154(A)(3), 32-1154(A)(9), 32-1154(A)(12)-1124(B), 32- 1154(A)(16), and Ariz. Admin. Code R4-9-108.[19] Respondent was given until January 07, 2019, to respond with its Answer or face discipline pursuant to Ariz. Rev. Stat. §§ 32-1154(A)(22) and 32-1155.[20] 11. On January 04, 2019, the ROC received Respondent’s Answer and Request for Settlement Conference.[21] As a result, on January 14, 2019, a Notice of Settlement Conference was sent to the parties which held that pursuant to Ariz. Rev. Stat. § 41-1092.06 the ROC set the matter for 9:00 a.m. on January 29, 2019.[22] Respondent failed to appear. 12. On January 16, 2019, the ROC referred this matter to the Office of Administrative Hearings, an independent state agency, for an evidentiary hearing on March 15, 2019. Per the Notice of Hearing the issue to be determined is whether the ROC has cause to discipline Respondent’s license based on the following charges: Charge 1: A violation of A.R.S. § 32-1154(A)(2) (“Departure from or disregard of plans or specifications or any building codes of the state or any political subdivision of the state in any material respect which is prejudicial to another without consent of the owner or the owner’s duly authorized representative and without the consent of the person entitled to have the particular construction project or operation completed in accordance with such plans and specifications and code.”). Charge 2: A violation of Rule 4-9-108, titled “Minimum Construction Standards,” in the Arizona Administrative Code, and thereby of A.R.S. § 32-1154(A)(3). Charge 3: A violation of A.R.S. § 32-1154(A)(9) (“Aiding 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.”) Charge 4: A violation of A.R.S. § 32-1154(A)(12) – A.R.S. § 32- 1124(B). (“Failure in any material respect to comply with this chapter; namely 32-1124(B).”) Charge 5: A violation of A.R.S. § 32-1154(A)(16) (“Knowingly contracting beyond the scope of the license or licenses of the licensee.”) Charge 6: A violation of A.R.S. § 32-1154(A)(22) (“Failure 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. The written directive shall set forth the time within which the contractor is to complete the remedial action. The time permitted for compliance shall not be less than fifteen days from the date of issuance of the directive.”).[23] Hearing Evidence 13. Complainant appeared on his own behalf with Theoner Kleinschnittger and ROC investigator Jim Diamond as witnesses, and submitted six exhibits. The ROC’s electronic hearing file and Notice of Hearing were also admitted into the record as their own exhibits. No appearance(s) by or on behalf of Respondent. Investigator Diamond’s testimony 14. Investigator Diamond testified that Investigator Pennington was originally assigned to Case 2018-04784, but that as of early-January 2019 Investigator Pennington was no longer employed by the ROC, so he took over the case. 15. Investigator Diamond confirmed that Investigator Pennington issued a Directive on November 15, 2018, as a result of his jobsite inspection the day prior, which substantiated Complainant’s poor workmanship allegations. Per Investigator Diamond, another investigator named Danny Owen was also present for the inspection. Investigator Owen substantiated the unlicensed contracting claims against Respondent. Notably, by the Directive compliance deadline of December 02, 2018, Respondent failed to comply. 16. On December 17, 2018, Investigator Pennington held a compliance jobsite inspection. Investigator Pennington noted that complaint items #2, #3, #5, #6, #7, #8, #12, #13, #14, #15, #17 and 18 had not been corrected, complaint items #4 and #11 were poorly corrected, and complaint item #9 was corrected. 17. Investigator Diamond testified that he scheduled the prehearing jobsite inspection for March 12, 2019, whereby Respondent failed to appear. Investigator Diamond determined that there are numerous issues with the tile flooring, including failing grout, both the front and rear patio epoxy coatings are failing, the closet doors in the guest bedrooms are improperly aligned, and the glass tile work in the bathrooms are particularly deficient. 18. Per Investigator Diamond, Samuel Cruz unofficially partnered with a man named Lance Wills, whereby Mr. Wills was unlicensed and working unrestricted under Mr. Cruz’s license.[24] 19. Investigator Diamond noted that he has not been able to reach Respondent since he was assigned to the case. Complainant’s testimony 20. Complainant testified that he initially bought the property through his corporation for “flipping,” but decided against the idea and transferred the home to his sister, Theoner Kleinschnittger as owner/occupant. 21. Per Complainant, because he was out of State during most of Respondent’s remodeling, Ms. Kleinschnittger was the main point of communication with Respondent. Ms. Kleinschnittger’s testimony 22. Ms. Kleinschnittger testified that the deed to the property is in her name and Complainant’s name. 23. Per Ms. Kleinschnittger, she made all of the progress payments to Respondent, which totaled $37,480.00. Although the project was to be completed within six to eight weeks, it took approximately nine months to complete and the work that was done was subpar. 24. Ms. Kleinschnittger further testified that Respondent addressed some of the complaint items identified in the Directive, but not to her satisfaction.[25] Ms. Kleinschnittger denied ever depriving Respondent of access to the project site.[26] 25. Per Ms. Kleinschnittger, she hired an independent inspector to review the work Respondent performed on the tile floor and shower tile installation of her home. The inspection took place on October 10, 2018, by inspector Vincent Ferranti of FCI Floor Covering Inspections.[27] When he was finished, Inspector Ferranti drafted an inspection report and attached thirty-eight photographs.[28] Notable portions of Inspector Ferranti’s report include findings that Respondent had “egregious grouting irregularities,” “lippage,” and “poor layout and planning, resulting in narrow tile.”[29] 26. Ms. Kleinschnittger testified that she inquired with Respondent about obtaining a building permit from the city for her project, but that Respondent replied one was not needed and if it became necessary later he would obtain it. 27. Ms. Kleinschnittger also testified that she and Complainant intentionally left certain items off of their complaint with the ROC because they wanted to remediate the items as soon as possible in order to make the residence habitable for Ms. Kleinschnittger. To that end, she paid $2,055.00 to make corrections to the exterior and interior paint, lighting, smoke detectors, drywall, and plumbing.[30] 28. Ms. Kleinschnittger provided six construction bids that she obtained between October 25, 2018, and March 12, 2019, to show the total approximate cost of remediation for her project, which is estimated to be just shy of $40,000.00.[31] CONCLUSIONS OF LAW 1. The ROC has jurisdiction over this matter pursuant to Ariz. Rev. Stat. §§ 32-1101 et seq. and 32-1154(A). The matter was properly brought before the Office of Administrative Hearings pursuant to Ariz. Rev. Stat. §§ 41-1092 et seq. 2. The ROC 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.[32] 3. The purpose of the ROC’s licensing statutes is to protect the public from unscrupulous, unqualified, and financially irresponsible contractors.[33] 4. The Notice of Hearing the ROC mailed to Respondent’s address of record is sufficient, and Respondent is deemed to have received notice of the hearing in this matter.[34] Because the ROC mailed all correspondence to Respondent in the same manner and failed to receive any mail returned as undeliverable, Respondent is deemed to have received all correspondence regarding this matter from the ROC as well. 5. Complainant bears the burden of proof to establish cause to discipline Respondent’s license by a preponderance of the evidence.[35] Respondent bears the burden to establish factors in mitigation of the penalty and affirmative defenses by the same evidentiary standard.[36] 6. “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”[37] 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.”[38] 7. Ariz. Admin. Code R4-9-108 requires that “[a]ll work shall be performed in a professional and workmanlike manner” and that “[a]ll work shall be performed in accordance with any applicable building codes and professional industry standards.” 8. Ariz. Rev. Stat. § 32-1154(A)(2) includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license, “[d]eparture from or disregard of plans or specifications or any building code standards without consent of the owner.” 9. Ariz. Rev. Stat. § 32-1154(A)(3) includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license, “[v]iolation of any rule adopted by the registrar.” 10. Ariz. Rev. Stat. § 32-1154(A)(9) includes among the grounds for suspension, revocation, or 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. 11. Ariz. Admin. Stat. § 32-1154(A)(12) holds that a holder of a license may not fail in any material respect to comply with the chapter. 12. Ariz. Rev. Stat. § 32-1124(B) holds, in pertinent part, that “[l]icenses issued under this chapter and any renewals shall be signed by the registrar or the registrar's designated representative and by the licensee. The license shall be nontransferable, and satisfactory evidence of possession shall be exhibited by the licensee on demand. The license number appearing on any licenses held by the licensee shall be preceded by the acronym "ROC" and shall be posted in a conspicuous place on premises where any work is being performed, shall be placed on all written bids submitted by the licensee and shall be placed on all broadcast, published, internet or billboard advertising, letterheads and other documents used by the licensee to correspond with the licensee's customers or potential customers in the conduct of business regulated by this chapter.” 13. 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.” 14. Ariz. Rev. Stat. § 32-1154(A)(22) holds, in pertinent part, that “[a] holder of a license may not fail to take appropriate corrective action to comply with this chapter or rules adopted pursuant to this chapter without valid justification within a reasonable period of time after receiving a written directive from the registrar. The written directive shall set forth the time within which the contractor is to complete the remedial action. The time permitted for compliance shall not be less than fifteen days from the date of issuance of the directive. A license shall not be revoked or suspended nor shall any other penalty be imposed for a violation of this paragraph until after a hearing has been held. The ROC has the authority to issue license discipline under this provision, including summary suspension, revocation, or imposing a civil penalty or recovery fund award.” 15. Ariz. Rev. Stat. § 32-1154(E) holds, in pertinent parts, that the ROC may “[i]mpose a civil penalty not to exceed five hundred dollars on a contractor for each violation. The failure by the licensee to pay any civil penalty imposed results in the automatic revocation of the license thirty days after the effective date of the order providing for the civil penalty. It also holds that no future license may be issued to an entity consisting of a person who is associated with the contractor, unless payment of any outstanding civil penalty is tendered.” 16. Here, the material facts are not in dispute. It is undisputed that Complainant contracted with Respondent for a residential remodeling project that Complainant paid the agreed upon fees for Respondent’s services and materials, and the work that Respondent completed fell below the ROC’s minimum workmanship standards. It is further undisputed that the ROC issued its Directive to Respondent on November 15, 2018, and required Respondent’s full compliance by December 02, 2018. It is also undisputed that Respondent failed to comply. There are insufficient facts in the record to conclude that Respondent violated Ariz. Rev. Stat. §§ 32-1154(A)(2), 32-1154(A)(9) or 32- 1154(A)(16) by a preponderance of the evidence. 17. Therefore, the only issue in dispute is whether Respondent raised a sufficient justification or excuse for failing to timely and completely finish Complainant’s project per contract. This is an affirmative defense that Respondent bears the burden to establish. Because Respondent failed to appear and provide testimony, this burden has not been sustained. The record shows that Respondent failed to adhere to an ROC corrective work order, and had no affirmative defense(s) for doing so. 18. Because Complainant established by a preponderance of the evidence that Respondent failed to perform the scope of work included in his signed and paid for contract with Respondent, Complainant has also established cause for the ROC to suspend or revoke Respondent’s contractor’s license under Ariz. Rev. Stat. § 32-1154(A)(22). 19. Complainant may petition the ROC’s Recovery Fund for financial recompense regarding this matter, as the Tribunal has no jurisdiction to award a refund of the underlying amount contracted between the parties. RECOMMENDED ORDER Based on the foregoing findings of fact and conclusions of law, IT IS RECOMMENDED that that on the effective date of the Final Order in this matter, Respondent EGA Build & Design LLC, License No. 317397 shall be suspended for ten (10) business days. It is further recommended that the ROC require Respondent to pay the sum total of $500.00 as a civil penalty pursuant to Ariz. Rev. Stat. § 32- 1154(E). It is further recommended that if Respondent fails to pay the entire amount of the civil penalty on or before thirty days following the effective date of the ROC’s Order, the ROC 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 Ariz. Rev. Stat. § 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 40 days from the date of that certification. Done this day, March 27, 2019.

/s/ Jenna Clark Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director Registrar of Contractors ----------------------- [1] See https://roc.az.gov/contractor-search?Id=a0Yt000000ACXgUEAX. [2] Id. [3] Id. [4] Id. [5] Id. [6] Id. [7] See Hearing File, pages 77-78. [8] Id. [9] See Hearing File, pages 81-86. [10] See Hearing File, pages 137-138. [11] See Hearing File, pages 140-149. [12] See Hearing File, pages 35-37. [13] See Hearing File, pages 106-135 [14] See Hearing File, pages 27-29. [15] See Hearing File, pages 30-32. [16] See Hearing File, pages 33-34. [17] See Hearing File, pages 40-41. [18] Id. [19] See Hearing File, pages 15-21. [20] Id. [21] See Hearing File, page 8. [22] See Hearing File, page 5-6. [23] See Notice of Hearing. [24] The ROC has a current case pending against Respondent (e.g. Case No. 2018-05377) on multiple charges, and there are also criminal charges pending against Mr. Cruz and Mr. Wills regarding fraud and lack of licensure. [25] See Complainant Exhibits 15 and 18. [26] See Complainant Exhibits 3, 11, and 14. Ms. Kleinschnittger clarified that both Mr. Cruz and Mr. Wills performed work on her project, and would often blame one another for issues that arose during the remodel. [27] See Complainant Exhibit 6; see also Hearing File, pages 52-58. [28] Id. [29] Id. [30] See Complainant Exhibit 19. [31] See Complainant Exhibit 22. [32] See Ariz. Rev. Stat. § 32-1156.01; Sunpower of Arizona v. Arizona Registrar of Contractors, 166 Ariz. 437, 441, 803 P.2d 430, 434 (App. 1990). [33] See Aesthetic Property Maintenance v. Capital Indem. Corp., 183 Ariz. 74, 900 P. 2d 1210 (1995). [34] See Ariz. Rev. Stat. §§ 41-1092.04, 41-1092.05(D), and 41-1061(A). [35] 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). [36] See Ariz. Admin. Code R2-19-119(B)(2). [37] Morris K. Udall, Arizona Law of Evidence § 5 (1960). [38] Black’s Law Dictionary at page 1220 (8th ed. 1999).

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