ALJDEC decisions subject to certification as final

2018A-04939-ROC · Registrar of Contractors · 2018-11-07

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: October 26, 2018 at 9:00 AM. APPEARANCES: Assistant Attorney General John Tellier, Esq. appeared on behalf of the Arizona Registrar of Contractors (“the Registrar”), with Joseph Citelli, Timothy Nelson, Ann Heil, and Randy Morris as witnesses. Jesse Jackson appeared on behalf of American Home 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 May 07, 2015, the Registrar issued License No. 314354 for Specialty Dual CR-61 Carpentry, Remodeling and Repairs to Respondent.[1] On June 21, 2018, the Registrar issued License No. 320521 for General Residential B-3 General Remodeling and Repair contracting to Respondent.[2] Jesse Dale Jackson is listed as the Qualifying Party/Member on both licenses.[3] Respondent’s address of record for the licenses is 10245 E Pantera Avenue, Mesa, AZ 85212-2317. 2. Administrative notice is taken of Respondent’s prior license record as reflected on the Registrar’s public website on October 26, 2018. Such prior license records reflect that Respondent’s License No. 320521 has not previously been issued formal discipline by the Registrar, but License No. 314354 has been disciplined once prior. The record reflects that there are three open complaints against License No. 314354, which are presumed to be related to this matter. Respondent has a $6,750.00 surety bond for License No. 314354 through RLI Insurance Company effective June 13, 2017, and a $9,000.00 surety bond for License No. 320521 through RLI Insurance Company effective June 05, 2018. Both bonds are active. 3. Between August 13, 2018, and September 17, 2018, the Registrar received two homeowner complaints against Respondent alleging abandonment of contract and another homeowner complaint alleging poor workmanship against Respondent. Upon investigation, the Registrar substantiated all three complaints. 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). 4. On October 19, 2018, pursuant to Ariz. Rev. Stat. § 41-1092.11(B), the Registrar issued an Order of Summary Suspension and Notice of Promptly Instituted Proceeding against Respondent.[4] The Registrar mailed the Order to Respondent’s address of record.[5] The Order set an expedited evidentiary hearing for October 26, 2018, at 9:00 a.m. before the Office of Administrative Hearings (“OAH”), an independent state agency. 5. On October 22, 2018, the Registrar issued a Supplemental Notice that set forth additional facts that supported Respondent’s summary suspension.[6] 6. An evidentiary hearing was held on the matters set forth in Order of Summary Suspension and Supplemental Notice on October 26, 2018, as follows: Charge 1: Abandonment of a Contract Without Legal Excuse (Ariz. Rev. Stat. § 32-1154(A)(1)) – Two Counts Charge 2: Minimum Workmanship Standards (Ariz. Rev. Stat. § 32- 1154(A)(3); Ariz. Admin. Code R4-9-108) – Three Counts Charge 3: Failure to Complete Construction Project for Contracted Price (Ariz. Rev. Stat. § 32-1154(A)(8)) – One Count Charge 4: Failure to Comply with Safety Laws or Labor Codes (Ariz. Rev. Stat. § 32-1154(A)(11)) – One Count Charge 5: Failure to Materially Comply (Ariz. Rev. Stat. §§ 32- 1154(A)(12) and 32-1158(A)) – Two Counts Charge 6: Failure to Take Appropriate Corrective Action (Ariz. Rev. Stat. § 32-1154(A)(22)) – One Count

The Registrar was represented by Assistant Attorney General John Tellier, Esq., who submitted twenty-eight exhibits and presented the testimonies of Joseph Citelli, Timothy Nelson, Ann Heil, and Randy Morris. Jesse Jackson testified on behalf of Respondent and submitted three exhibits. The Registrar’s electronic hearing file was also admitted into the record as its own exhibit. Hearing Evidence Homeowner Complaints Timothy Nelson’s Complaint (Case No. 2018-2683) 7. On or about June 08, 2018, Mr. Nelson filed a complaint with the Registrar against Respondent, alleging poor work performance of their September 19, 2017, contract to perform a home remodeling project.[7] Mr. Nelson also accused Respondent of working outside the scope of his license.[8] According to the evidence and testimony, Mr. Nelson paid Respondent $87,476.10 of the $111,230.10 contract price.[9] 8. Per the evidence, Registrar investigator Matt Gunstra issued a warning letter to Respondent on June 18, 2018, advising that a B or B-3 contracting license was required for the Nelson project, which Respondent did not possess.[10] Respondent was advised that operation outside the scope of his contracting license, per Ariz. Admin. Code R4- 9-102, R4-9-103, and R4-9-104 violated Ariz. Rev. Stat. § 32- 1154(A)(16), which constituted grounds for the Registrar to suspend or revoked Respondent’s license.[11] 9. Per the evidence, Investigator Gunstra conducted a jobsite inspection on July 03, 2018, whereby he took twenty-six photographs.[12] Both parties were in attendance. Of the twenty-nine complaints levied against Respondent, Investigator Gunstra substantiated eight of them. 10. On July 09, 2018, Investigator Gunstra issued a warning letter to Respondent for using unlicensed subcontractors on the Nelson project, in violation of Ariz. Rev. Stat. § 32-1154(A)(9).[13] Respondent was advised that “aiding and abetting an unlicensed person is a class 1 misdemeanor” pursuant to Ariz. Rev. Stat. § 32-1164(A)(1).[14] 11. Investigator Gunstra issued a Directive[15] from the Registrar to Respondent on July 09, 2018, whereby he informed Respondent that his work failed to meet minimum workmanship standards in violation of Ariz. Admin. Code R4-9-108, and further placed Respondent on notice that he was required to remedy the following violations by appropriate means: Complaint Item 8a: Poor workmanship: Bowed studs Complaint Item 8c: Poor workmanship: Poorly filled block cells under beam Complaint Item 8d: Poor workmanship: Inadequate framing at windows Complaint Item 8e: Poor workmanship on Roofing: Insufficient number of layers of underlayment on slopes under 2:12, damaged or missing drip edge, unsealed nails, laps on SBS not sealed properly, pipe vent located in valley, irregular exposure on several rows, missing or uneven shingles, shingles to SBS transition incorrect, vent flashings not shingled around properly Complaint Item 8f: Poor workmanship: Warped fascia on eave Complaint Item 8i: Poor workmanship: Separation of new framing from existing block wall in hallway

12. Respondent was required to notify the Registrar by 5:00 p.m. on July 26, 2018, that he had complied with the Directive pursuant to Ariz. Rev. Stat. § 32-1154(A)(22) and Ariz. Admin. Code R4-9-108 or face further discipline per Ariz. Rev. Stat. § 32-1154(E).[16] 13. Respondent did not comply with the Registrar’s Directive by the July 26, 2018, deadline or refund monies paid to Mr. Nelson. 14. On August 08, 2018, Mr. Nelson submitted an addendum to his complaint to the Registrar whereby he alleged violations of Ariz. Rev. Stat. §§ 32-1154(A)(2), 32-1154(A)(3), 32-1154(A)(9), 32-1154(A)(10), 32- 1154(A)(13), 32-1154(A)(15), 32-1154(A)(16), 32-1154(A)(19), and 32- 1154(A)(23) against Respondent.[17] 15. As a result of Mr. Nelson’s addendum submission to the Registrar, another jobsite inspection was conducted on August 16, 2018, whereby an additional twenty-six photographs were taken.[18] Both parties were in attendance. Investigator Lawton noted that none of the six complaint items identified in the Registrar’s Directive were corrected and/or completed by Respondent.[19] 16. A Citation was issued to Respondent on August 23, 2018, alleging violations of Ariz. Rev. Stat. §§ 32-1154(A)(3), 32-1154(A(8), 32- 1154(A)(22), and Ariz. Admin. Code R4-9-108.[20] 17. Respondent timely filed his Answer to the Citation with the Registrar on September 07, 2018.[21] In his Answer Respondent denied all allegations listed in the Citation, and raised nine affirmative defenses.[22] Ann Heil’s Complaint (Case No. 2018-3672) 18. On or about August 07, 2018, Ms. Heil filed a complaint with the Registrar against Respondent, alleging abandonment of their June 08, 2018, contract to perform a home remodeling project.[23] Ms. Heil also accused Respondent of failing to obtain requisite building permits from the city for the project.[24] According to the evidence and testimony, Ms. Heil paid Respondent $5,070.00 of the $16,900.00 contract price.[25] 19. Per the evidence, Registrar investigator Beau Cruz issued a warning letter to Respondent on August 21, 2018, advising that he had not executed a proper contract for the Heil project, in violation of Ariz. Rev. Stat. § 32-1158(A).[26] Respondent was further advised that nine minimum elements were required in a contracting agreement, and that Respondent’s failure to comply with the statute violated Ariz. Rev. Stat. § 32-1154(A)(12), which constituted grounds for the Registrar to suspend or revoked Respondent’s license.[27] 20. Per the evidence, Investigator Cruz conducted a jobsite inspection on October 12, 2018, whereby he took six photographs.[28] Respondent was not in attendance. Of the four complaints levied against Respondent, Investigator Cruz substantiated two of them. 21. Investigator Cruz issued a Directive[29] from the Registrar to Respondent on October 18, 2018, whereby he informed Respondent that his work failed to meet minimum workmanship standards in violation of Ariz. Admin. Code R4-9-108, and further placed Respondent on notice that he was required to remedy the following violation(s) by appropriate means: Permit required for remodel. Respondent is to obtain building permits from local jurisdiction required to complete project, if the local jurisdiction determines that there are corrective issues during the inspection the Respondent will have to correct by Appropriate Means.

(Emphasis included in original.) 22. Respondent was required to notify the Registrar by 5:00 p.m. on October 28, 2018, that he had complied with the Directive pursuant to Ariz. Rev. Stat. § 32-1154(A)(22) and Ariz. Admin. Code R4-9-108, or face further discipline per Ariz. Rev. Stat. § 32-1154(E).[30] 23. Respondent did not comply with the Registrar’s Directive by the October 28, 2018, deadline or refund monies paid to Ms. Heil. Jacob Herigstad’s Complaint (Case No. 2018-04344) 24. On or about August 29, 2018, Mr. Herigstad filed a complaint with the Registrar against Respondent, alleging abandonment of their April 19, 2018, contract to perform a home remodeling project.[31] Mr. Herigstad also accused Respondent of leaving the project site in an unsafe and hazardous condition.[32] According to the evidence and testimony, Mr. Herigstad paid Respondent $43,200.00 of the $96,000.00 contract price.[33] 25. Per the evidence, Registrar investigator Randy Morris conducted a jobsite inspection on October 03, 2018, whereby he took twenty photographs.[34] Respondent was not in attendance. Of the three complaints levied against Respondent, Investigator Morris substantiated all three of them.[35] 26. Per the evidence and testimony, Investigator Morris issued a warning letter to Respondent on October 18, 2018, advising that Respondent had not executed a proper contract for the Herigstad project, in violation of Ariz. Rev. Stat. § 32-1158(A).[36] Respondent was further advised that nine minimum elements were required in a contracting agreement, and that failure to comply with the statute violated Ariz. Rev. Stat. § 32-1154(A)(12), which constituted grounds for the Registrar to suspend or revoked Respondent’s license.[37] 27. A Citation was issued to Respondent on October 22, 2018, alleging violations of Ariz. Rev. Stat. §§ 32-1154(A)(1), 32-1154(A)(3), 32- 1154(A)(12), 32-1158(A), and Ariz. Admin. Code R4-9-108.[38] 28. Respondent failed to submit a timely Answer to the Registrar. Jesse Jackson’s testimony 29. Mr. Jackson testified that he is the owner of American Home Construction LLC and entered into remodeling contracts with Mr. Nelson, Ms. Heil, and Mr. Hergistad. Mr. Jackson testified that he had difficulties managing all three projects. 30. Mr. Jackson admitted to working outside the scope of his license and having used unlicensed subcontractors on the Nelson project. Mr. Jackson admitted to not possessing building permits prior to the start of the Heil project. Mr. Jackson denied leaving the Hergistad project in an unsafe condition, but argued that if an unsafe condition was present at the time of the Registrar’s inspection it was the fault of the subcontractors on the project. 31. Mr. Jackson conceded to not having finished any project by the date of the hearing or refunding any monies paid to homeowners. 32. Mr. Jackson did not specifically address why he did not comply with the Registrar’s Directives but testified that he was willing to finish each of the projects. CONCLUSIONS OF LAW 1. These matters are within the Registrar’s jurisdiction.[39] 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.[40] 3. 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.[41] Respondent bears the burden to establish factors in mitigation of the penalty and affirmative defenses by the same evidentiary standard.[42] 4. “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”[43] 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.”[44] 5. 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.” 6. 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.” 7. Ariz. Rev. Stat. § 32-1154(A)(8) includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license, “[f]ailure in a material respect by the licensee to complete a construction project or operation for the price states in the contract, or in any modification of the contract.” 8. Ariz. Rev. Stat. § 32-1154(A)(11) includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license, “[f]ailure of a contractor to comply with any safety or labor laws or codes of the federal government, this state, or political subdivisions of this state.” 9. Ariz. Rev. Stat. § 32-1154(A)(12) 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.” 10. 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.” 11. Ariz. Rev. Stat. § 32-1158(A) holds, in pertinent part, that a contract between a contractor and property owner amounting to more than one thousand dollars must contain the following information in writing: 1. The name of the contractor and the contractor's business address and license number. 2. The name and mailing address of the owner and the jobsite address or legal description. 3. The date the parties entered into the contract. 4. The estimated date of completion of all work to be performed under the contract. 5. A description of the work to be performed under the contract. 6. The total dollar amount to be paid to the contractor by the owner for all work to be performed under the contract, including all applicable taxes. 7. The dollar amount of any advance deposit paid or scheduled to be paid to the contractor by the owner. 8. The dollar amount of any progress payment and the stage of construction at which the contractor will be entitled to collect progress payments during the course of construction under the contract. 9. That the property owner has the right to file a written complaint with the Registrar for an alleged violation of Ariz. Rev. Stat § 32-1154(A). The contract shall contain the Registrar's telephone number, website address, and shall state that complaints must be made within the applicable time period as set forth in Ariz. Rev. Stat § 32-1155(A). The information must be prominently displayed in the contract in at least ten point bold type, and the contract shall be signed by the property owner and the contractor.

12. Ariz. Admin. Code R4-9-108(A) states that “[a] contractor shall perform all work in a professional and workmanlike manner.” 13. 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.” 14. The material facts in this matter are undisputed. 15. The record reflects that Respondent abandoned without legal excuse the projects of Ms. Heil and Mr. Hergistad. Therefore, the Registrar established two violations of Ariz. Rev. Stat. § 32-1154(A)(1). 16. The record further reflects that Respondent did not meet minimum workmanship standards as required by Ariz. Admin. Code R4-9-108 on Mr. Nelson’s, Ms. Heil’s, or Mr. Hergistad’s projects. Therefore, the Registrar established three violations of Ariz. Rev. Stat. § 32- 1154(A)(3). 17. The record also reflects that Respondent did not complete Mr. Nelson’s project for the mutually agreed upon contracted price. Therefore, the Registrar established one violation of Ariz. Rev. Stat. § 32- 1154(A)(8). 18. The record establishes that Respondent left Ms. Heil’s project in an unsafe and hazardous condition, in violation of local and State safety and labor laws, whereby Ms. Heil or others could have been seriously injured. Therefore, the Registrar established three violations of Ariz. Rev. Stat. § 32-1154(A)(11). 19. Moreover, it is clear from the record that Respondent did not materially comply with or correct the minimum element deficiencies in the Heil and Hergistad contracts per Ariz. Rev. Stat. § 32- 1154(A)(12). Therefore, the Registrar established two violations of Ariz. Rev. Stat. § 32-1158(A). 20. Lastly, the record reflects that Respondent failed to take appropriate corrective action after the Directive was issued by the Registrar for the Nelson project. Therefore, the Registrar established one violation of Ariz. Rev. Stat. § 32-1154(A)(22). 21. The facts that Respondent has shown a pattern of taking deposits and multiple payments on new contracts while previously failing to fulfill existing contract shows that, at this time, Respondent cannot be regulated. 22. Therefore, the only remaining issue to address is whether Respondent raised a sufficient justification or excuse for failing to timely complete or refund the aforementioned projects. These are affirmative defenses that Respondent bears the burden to establish. There is no evidence in the record that tends to suggest Respondent sustained his burden of proof. Mr. Jackson’s assertions that he is willing to finish the Nelson, Heil, and Hergistad projects are of no consequence. 23. Because the Registrar established by a preponderance of the evidence that Respondent failed to competently complete the Nelson, Heil, and Hergistad projects or refund the homeowners’ project monies, the Registrar has also established cause for Respondent’s licenses to suspended or revoked pursuant to Ariz. Rev. Stat. § 32-1154(A)(22). 24. The homeowners on the Nelson, Heil, and Hergistad projects may petition the Registrar’s Recovery Fund for financial recompense regarding these matters, as the Tribunal has no jurisdiction to award a refund of the underlying amounts contracted between Respondent and said homeowners. 25. The Tribunal holds that revocation of Respondent’s carpentry, remodeling and repairs contracting license, as well as Respondent’s general residential remodeling and repair contracting license are 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 October 19, 2018 Order of Summary Suspension of Respondent’s License Nos. 314354 and 320521 be affirmed. IT IS FURTHER RECOMMENDED that on the effective date of the Final Order in this matter, Respondent’s License Nos. 314354 and 320521 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, November 07, 2018.

/s/ Jenna Clark Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director Registrar of Contractors ----------------------- [1] See Registrar Exhibit A; see also https://roc.az.gov/contractor- search?Id=a0Yt000000ACY53EAH. [2] See Registrar Exhibit B; see also https://roc.az.gov/contractor- search?Id=a0Yt000000ACWb4EAH. [3] Jason Sean Stack is listed as a former Member with a disassociation date of June 05, 2018. [4] See Registrar Exhibits 1 and N. [5] Id. [6] See Registrar Exhibit 2. [7] See Registrar Exhibits C, D, and E. [8] Id. [9] See Registrar Exhibit E; see also Respondent Exhibit 3. [10] See Registrar Exhibit F. [11] Id. [12] See Registrar Exhibit G. [13] See Registrar Exhibit I. [14] Id. [15] See Registrar Exhibit H. [16] Id. [17] See Registrar Exhibit J. [18] See Registrar Exhibit K. Stephen Lawton conducted the inspection on behalf of the Registrar. [19] See Registrar Exhibit K. [20] See Registrar Exhibit L. [21] See Registrar Exhibit M. Respondent was represented by Counsel at this time. [22] See Registrar Exhibit M. [23] See Registrar Exhibits O, P, and Q. [24] See Registrar Exhibit Q. [25] See Registrar Exhibits O, P, and Q; see also Respondent’s Exhibit 2. [26] See Registrar Exhibit R. [27] Id. [28] See Registrar Exhibit S. [29] See Registrar Exhibit T. [30] Id. [31] See Registrar Exhibit V. [32] Id. [33] See Registrar Exhibits U and V; see also Respondent’s Exhibit 1. [34] See Registrar Exhibit W. [35] Id. [36] See Registrar Exhibit X. [37] Id. [38] See Registrar Exhibit Y. [39] See Ariz. Rev. Stat. § 32-1154(A). [40] See Ariz. Rev. Stat. § 32-1154(D) which provides, in pertinent part, 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 . . . .” [41] 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). [42] See Ariz. Admin. Code R2-19-119(B)(2). [43] Morris K. Udall, Arizona Law of Evidence § 5 (1960). [44] Black’s Law Dictionary at 1220 (8th ed. 1999).

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