ALJDEC decisions subject to certification as final

2018A-05465-ROC · Registrar of Contractors · 2019-10-02

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: September 19, 2019 at 1:30 PM. APPEARANCES: Ryan Houser, Esq. appeared on behalf of Airepros Air Conditioning and Heating LLC (“Complainant”) with Scott Casseday as a witness. No appearance(s) by or on behalf of DJS Building Services Inc. (“Respondent”). Michael Walsh, Keith Persons, and Kristi Casseday observed.

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 Arizona Registrar of Contractors (“Registrar”). FINDINGS OF FACT Background and Procedure 1. On August 17, 2016, the Registrar issued License No. 307954 for general dual KB-1 building contracting to Respondent.[1] Respondent’s address of record for the license is 6028 E. Joan De Arc Ave. Scottsdale, Arizona 85254-3829. David Andrew Stern is listed on the licenses as Qualifying Party and Officer.[2] 2. Pursuant to Ariz. Admin. Code R4-9-117, Administrative Notice is taken of Respondent’s prior License record for License No. 307954, as reflected on the Registrar’s public website on October 02, 2019. Such prior license record reflects that Respondent’s license was suspended for lack of bond on September 26, 2019.[3] There is no prior discipline listed for the license. The record shows that there is one open complaint against Respondent’s license, which is presumed to be related to this matter. Respondent had a $14,000.00 surety bond issued through Merchant’s Bond Company (Mutual) effective July 25, 2016 that was cancelled on September 12, 2018.[4] Respondent had a replacement surety bond, issued through Hudson Insurance Company effective August 30, 2018, that was cancelled on September 26, 2019.[5] Per the Registrar’s website, there have been no payments issued from either bond prior to cancellation. 3. On or about September 13, 2017, Complainant and Respondent entered into a contract agreement, as subcontractor and contractor respectively, whereby Complainant agreed to perform heating, ventilation, and air conditioning (“HVAC”) work for Respondent’s commercial project located 2540 W. Apache Trails, Ste. 106, Apache Junction, Arizona 85120 (“Laundromat Project”) for the sum total of $27,450.00.[6] On October 11, 2017, Complainant issued Invoice No. 17- 011 to Respondent for $27,011.95.[7] A progress payment of $23,668.00 was received by Complainant for Invoice No. 17-011, leaving a balance owed of $3,343.95. Notice of the balance owed was sent to Respondent on December 21, 2018.[8] On January 12, 2018, Complainant issued Invoice No. S28528 to Respondent for a 911.00 change order.[9] 4. On or about May 18, 2018, Complainant and Respondent entered into a contract agreement, as subcontractor and contractor respectively, whereby Complainant agreed to perform HVAC work for Respondent’s commercial project located at 4725 S. Rim Rd. Gilbert, Arizona 85297 (“Pizza Shop Project”) for the sum total of $41,000.00.[10] On August 27, 2018, Complainant issued Invoice No. 18-002-3 to Respondent for $6,000.00.[11] On July 19, 2018, Complainant issued Invoice No. 18-002- to Respondent for $20,000.00.[12] On September 10, 2018, Complainant issued Invoice No. S26283 to Respondent for a $795.00 change order.[13] No payments were received by Complainant from Respondent for the Pizza Shop Project. 5. On November 15, 2018, the Registrar received a complaint from Complainant alleging non-payment of services and/or materials against Respondent for the Laundromat Project.[14] 6. On December 21, 2018, the Registrar received a complaint from Complainant alleging non-payment of services and/or materials against Respondent for the Pizza Shop Project.[15] 7. On December 24, 2018, the Registrar issued a Non-Payment Complaint Notification Letter to the parties, advising that Respondent could supply any affirmative defenses or raise other issues to the Registrar by January 02, 2019.[16] Respondent did not respond. 8. On January 04, 2019, the Registrar issued a Citation and Complaint to Respondent for an alleged violation of Ariz. Rev. Stat. § 32- 1154(A)(10).[17] Respondent was given until January 21, 2019, to respond with its Answer or face discipline pursuant to Ariz. Rev. Stat. §§ 32-1155(A) and 32-1155(B).[18] 9. On January 24, 2019, the Registrar referred this matter to the Office of Administrative Hearings, an independent state agency, for an evidentiary hearing on March 14, 2019.[19] Per the Notice of Hearing issued on January 28, 2019, the issue to be determined is whether the Registrar has cause to discipline Respondent’s license based on the following charges: Charge 1: A violation of A.R.S. § 32-1154(A)(10) (“Failure by a licensee or agent or official of a licensee to pay monies in excess of seven hundred fifty dollars when due for materials or services rendered in connection with the licensee’s operations as a contractor when the licensee has the capacity to pay or, if the licensee lacks the capacity to pay, when the licensee has received sufficient monies as payment for the particular construction work project or operation for which the services or materials were rendered or purchased.”).[20]

Hearing Evidence 10. After multiple continuances at the request of the parties, the matter was heard on September 19, 2019. No appearance(s) by or on behalf of Respondent. Complainant called Scott Casseday to testify and submitted fifteen exhibits. The Registrar’s electronic hearing file and Notice of Hearing were also admitted into the record as their own exhibits. 11. Complainant and Respondent have worked together over the last several years, and in that time Respondent has timely paid Complainant’s invoices per their agreement(s). 12. Complainant completed the Laundromat and Pizza Shop projects for Respondent. Respondent did not file any complaints with the Registrar regarding Complainant’s work on either project. 13. After several months of nonpayment on issued invoices, Complainant contacted Respondent to inquire about the delay. Complainant was advised that Respondent was experiencing financial hardship due to sudden and unexpected personal medical bills. Respondent expressed that although he was paid in full from the Laundromat Project and Pizza Shop Project[21], he was unable to pay Complainant due to his mounting medical bills. Respondent expressed his desire to work out a payment plan to bring his debts with Complainant current. 14. For a few months Respondent paid $1,000.00 toward the debt he owed Complainant on the Laundromat Project, but stopped. Respondent never made a payment on the debt he owed for the Pizza Shop Project, but the owner of that project has agreed to pay Complainant $10,000.00 for the work it performed on that job. 15. On May 27, 2019, Respondent, through his attorney, agreed to assign proceeds from another project over to Complainant to settle part of his debt with Complainant[22], but later withdrew the funds from his attorney’s possession.[23] Respondent never provided Complainant with the agreed upon funds. 16. Because Respondent had not paid his outstanding debt to Complainant, Complainant has suffered financially. Specifically, Complainant has had to take out loans to keep his business open, Complainant has not been able to repair or replace broken machinery, suffered payroll issues, and has had two Mechanic’s Liens placed against his business.[24] CONCLUSIONS OF LAW 1. The Registrar 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 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.[25] 3. The purpose of the Registrar’s licensing statutes is to protect the public from unscrupulous, unqualified, and financially irresponsible contractors.[26] 4. The Notice of Hearing the Registrar mailed to Respondent’s address of record is sufficient, and Respondent is deemed to have received notice of the hearing in this matter.[27] Because the Registrar 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 Registrar as well. 5. Complainant bears the burden of proof to establish cause to discipline Respondent’s license by a preponderance of the evidence.[28] Respondent bears the burden to establish factors in mitigation of the penalty and affirmative defenses by the same evidentiary standard.[29] 6. “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”[30] 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.”[31] 7. Ariz. Rev. Stat. § 32-1154(A)(10) includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license, “[F]ailure by a licensee or agent or official of a licensee to pay monies in excess of seven hundred fifty dollars when due for materials or services rendered in connection with the licensee’s operations as a contractor when the licensee has the capacity to pay or, if the licensee lacks the capacity to pay, when the licensee has received sufficient monies as payment for the particular construction work project or operation for which the services or materials were rendered or purchased.” 8. Ariz. Rev. Stat. § 32-1156.01 states, in pertinent part, that after a hearing an Administrative Law Judge may provide restitution to any person who is injured by an action of a licensee. 9. Ariz. Rev. Stat. § 32-1154(E) holds, in pertinent parts, that the Registrar 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.” 10. Here, the material facts are not in dispute. 11. The credible evidence of record reflects that Respondent owes Complainant an outstanding balance of $21,049.95 on valid subcontracting agreements executed between the parties in 2017 and 2018. Although afforded ample time and opportunity by Complainant, Respondent failed to make a good-faith payment or set up a payment plan to pay off its debt to Complainant. 12. Therefore, the only issue remaining is whether Respondent raised a sufficient justification or excuse for failing to pay Complainant on their two contracts. 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. Respondent’s absence is a factor in aggravation. The record shows that Respondent failed to promptly and completely pay Complainant for labor and/or materials on two projects, and had no affirmative defense(s) for doing so. 13. Because Complainant established by a preponderance of the evidence that Respondent violated Ariz. Rev. Stat. § 32-1154(A)(10), Complainant has also established cause for the Registrar to discipline Respondent’s contractor’s license.

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 DJS Building Services Inc., doing business as All-In-One Contractors, ROC License No. 307954 shall be revoked. IT IS FURTHER RECOMMENDED that that five days after the effective date of the Registrar’s Final Order in this matter, Respondent provide proof of a $21,049.95 payment, in certified funds to Complainant, to the Registrar pursuant Ariz. Rev. Stat. § 32-1156.01.

IT IS FURTHER RECOMMENDED that if Respondent fails to pay the entire amount of the ordered restitution five days after the effective date of the Registrar’s Final Order in this matter, a civil penalty of $500.00 shall be assessed against Respondent. 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 Registrar’s Final Order, the Registrar 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, October 04, 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=a0Yt000000ACYAzEAP. [2] Id. [3] Id. [4] Id. [5] Id. [6] See Hearing File, page 13; see also Complainant Exhibit 12. [7] See Hearing File, page 14; see also Complainant Exhibit 5. [8] See Hearing File, page 24. [9] See Hearing File, pages 15 and 25. [10] See Hearing File, pages 17-20; see also Complainant Exhibit 2. [11] See Hearing File, page 22; see also Complainant Exhibit 6. [12] See Hearing File, page 23. [13] See Hearing File, page 21. [14] See Hearing File, pages 29-30. [15] See Hearing File, page 16. [16] See Hearing File, page 28. [17] See Hearing File, pages 6-11. [18] Id. Notably, Respondent’s Answer is not included in the Registrar’s file but is presumed to have been timely received. [19] See Notice of Hearing. [20] Id. [21] See Complainant Exhibit 7. [22] See Complainant Exhibit 13. [23] See Complainant Exhibit 14. [24] See Complainant Exhibits 3 and 4. [25] 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). [26] See Aesthetic Property Maintenance v. Capital Indem. Corp., 183 Ariz. 74, 900 P. 2d 1210 (1995). [27] See Ariz. Rev. Stat. §§ 41-1092.04, 41-1092.05(D), and 41-1061(A). [28] 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). [29] See Ariz. Admin. Code R2-19-119(B)(2). [30] Morris K. Udall, Arizona Law of Evidence § 5 (1960). [31] 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