ALJDEC decisions subject to certification as final

2018A-2052-CHC-ROC · Registrar of Contractors · 2019-02-22

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: February 05, 2019 at 1:30 PM. APPEARANCES: David and Michelle Applebaum (“Complainants”) appeared on their own behalf, with Steven Philpott as a witness. Ronald Johnson appeared on behalf of Paradise Peaks Construction (“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 Arizona Registrar of Contractors (“ROC”). FINDINGS OF FACT Background and Procedure 1. Pursuant to Ariz. Admin. Code R4-9-117, Administrative Notice is taken of Respondent’s license file as shown on the ROC’s public website as of February 05, 2019. According to the ROC’s public website, on January 30, 2005, the ROC issued License No. 203571 for General KB-2 Dual Residential and Small Commercial to Respondent.[1] License No. 203571 is current and renewed through January 31, 2021. Ronald David Johnson is listed as the Qualifying Party/Officer on the license, and Tami Marie Johnson is also listed as the Officer on the license.[2] Respondent’s address of record on the license is 2531 West Princeville Drive, Anthem, AZ 85086- 2908.[3] The license has a $14,000.00 surety bond through Old Republic General Insurance effective August 13, 2013. There is one open complaint against the license, which is presumed to be Complainant’s. No other disciplinary action is listed on the license. 2. According to the Complaint, on or about February 19, 2017, Complainant and Respondent entered into a contract agreement whereby Respondent agreed to whole-home remodel of their thirty five hundred square foot residence, including a twelve hundred square foot addition, for $336,480.00.[4] Complainant issued Respondent a personal check on March 14, 2017, for $60,000.00.[5] Complainant issued Respondent a personal check on April 13, 2017, for $58,720.00.[6] Complainant issued Respondent a personal check on June 05, 2017, for $100,000.00.[7] Complainant issued Respondent a personal check on June 22, 2017, for $50,000.00.[8] Complainant issued Respondent a personal check on September 09, 2017, for $41,590.00.[9] Complainant issued Respondent a personal check on September 15, 2017, for $60,000.00.[10] Complainant issued Respondent a personal check on October 18, 2017, for $23,206.75.[11] 3. On May 07, 2018, the ROC received a complaint from Complainant alleging poor workmanship.[12] 4. On May 08, 2018, the ROC issued a Jobsite Inspection Notification letter to the parties, advising that an onsite review would be conducted at the project site by an ROC investigator on May 22, 2018, at 11:00 a.m.[13] 5. On May 22, 2018, ROC investigator Steven Philpott (“Investigator Philpott”) conducted a review of the contract executed between the parties. Investigator Philpott also inspected the work that had been done on the project to date and took photographs of the property.[14] When he was finished, Investigator Philpott drafted inspection notes.[15] 6. On June 14, 2018, Investigator Philpott issued a Directive from the Registrar to Respondent because he substantiated Complainant’s allegation that the work Respondent had done on his project failed to meet minimum workmanship standards.[16] Respondent was put on notice that it had until July 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).[17] 7. On July 17, 2018, the ROC issued a Citation and Complaint to Respondent under Ariz. Rev. Stat. § 32-1155(A).[18] Respondent was given until August 01, 2018, to respond with its Answer.[19] 8. On July 23, 2018, Respondent supplied its Answer to the ROC.[20] Respondent alleged that it had reached out to Complainants on multiple occasions to remediate complaint action items, but was never able to make contact with Complainants despite its efforts.[21] 9. On August 03, 2018, the ROC referred this matter to the Office of Administrative Hearings, an independent state agency, for an evidentiary hearing on September 28, 2018. 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 Rule 4-9-108, titled “Minimum Construction Standards,” in the Arizona Administrative Code, and thereby of A.R.S. § 32-1154(A)(3). Charge 2: 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.”).[22]

10. Due to several requests submitted by Complainants, the matter was continued twice and ultimately heard by the Tribunal on February 05, 2019, at 1:30 p.m. Hearing Evidence 11. Complainants appeared on their own behalf with Investigator Philpott as a witness, and submitted three exhibits. Ron Johnson appeared on behalf of Respondent, and submitted two exhibits. The ROC’s electronic hearing file was also admitted into the record as its own exhibit. Mr. Applebaum’s testimony 12. Mr. Applebaum testified that he and his wife contracted with Respondent for a whole-home renovation of their residence; including kitchen, laundry room, master bathroom extension, master bedroom, walkways, and an addition, located at 6362 E. Amber Sun Dr., Scottsdale, AZ 85226, for $336,480.00.[23] 13. Mr. Applebaum testified that he and his wife made progress payments to Respondent for the work. 14. The Applebaums filed a complaint with the ROC on May 04, 2018, which listed twelve complaint items against Respondent for poor workmanship. 15. Per Mr. Applebaum, Respondent did not attempt to adhere to the Directive issued by the ROC. Mr. Applebaum denied having any contact with Respondent between June 14, 2018, and July 02, 2018. 16. Mr. Applebaum testified that he received a letter from Respondent on or about July 09, 2018, whereby Respondent asserted that he would comply with the ROC’s Directive. Mr. Applebaum testified that he did not return Respondent’s correspondence because it was received after the expiration of the ROC’s Directive. Mrs. Applebaum testimony 17. Mrs. Applebaum testified that there were issues with the installation of granite in the kitchen and bathroom, namely the seam(s) and a broken slab. Per Mr. Applebaum, she and her husband were not made aware of any issues prior to their move-in date of October 22, 2018, whereby they confronted Respondent with concerns they had based on their observations of the work that had been completed. Per Mr. Applebaum, Respondent replied by effectively stating that he declined to inform the Applebaums about issues with the granite beforehand because he wanted to see if they would notice. 18. Mrs. Applebaum testified that Respondent offered varying stories as to how and why the issues with the granite materialized. First, the Applebaums were told that the granite slab was broken on delivery. Next, the Applebaums were told that the fabricator provided two different sized slabs to the project site. 19. Mrs. Applebaum testified that she reviewed the receipt for the granite and that there were no notations regarding breakage. 20. Mrs. Applebaum testified that when she initially inquired with Respondent regarding the flooring, he told her that delivery was two weeks out. However, upon confirmation from the distributor Mrs. Applebaum learned that the tile was not ordered until September 25, 2018, which pushed delivery to ninety days out. Investigator Philpott’s testimony 21. Investigator Philpott testified that he was assigned Case 2018-2052 by the ROC on or about May 08, 2018. 22. Per Investigator Philpott, he originally scheduled a jobsite inspection for May 22, 2018, but rescheduled it for May 31, 2018, whereby it was conducted on that date. 23. Investigator Philpott testified that both parties were present for the inspection. Per Investigator Philpott, he took twenty-five photographs during his inspection of the project.[24] Ultimately, Investigator Philpott determined that of Complainant’s twelve complaint items, three were substantiated. Per his review of the agreement executed between the parties and corresponding documentation, Investigator Philpott determined that there was insufficient evidence to establish Respondent was required to “book match” the granite installed in the kitchen.[25] Investigator Philpott also determined that the seams in the granite satisfied the minimum industry standards.[26] Investigator Philpott found several surface scratches in several spots towards the ends of the granite, which he determined had been caused as a result of improper finishing.[27] However, because Complainant’s did not raise their concerns regarding said scratches within ten days of occupancy, Investigator Philpott held that the ROC had no jurisdiction to take action as the complaint was outside of the statute of limitations. Regarding the granite in the office bathroom, Investigator Philpott observed “veining” in the slab and determined that it had been improperly installed. 24. On June 14, 2018, Investigator Philpott issued a Directive to Respondent, which required Respondent to remedy complaint items four, six, and seven, by appropriate means no later than July 02, 2018.[28] 25. On July 02, 2018, Investigator Philpott inquired with Respondent regarding his compliance with the Directive. Respondent informed Investigator Philpott that he had not complied. Respondent alleged that Complainant’s had been out of state during the corrective period, and that they had not reached out to him to coordinate the remediation at issue. Respondent also informed Investigator Philpott that he had mailed the Directive to an incorrect address. As a result, Investigator Philpott agreed to extend the compliance deadline to July 16, 2018. 26. Although a modified Directive was not issued to the parties, a Compliance Inspection Notice was mailed to them on July 03, 2018.[29] 27. On July 09, 2018, Respondent issued a letter to Complainants whereby he agreed to remediate the three action items identified in the ROC’s Directive, but he refused to pay for the materials required to complete the remediation of the complaint items.[30] 28. Shortly afterward Mrs. Applebaum telephoned Investigator Philpott to ask which party was financially responsible to cover the cost of materials for the remediation at issue. Investigator Philpott testified that he informed Mrs. Applebaum the original agreement between the parties was still binding and would generally determine which party bore the financial responsibility of acquiring materials necessary to complete the remediation. 29. Investigator Philpott testified that in a fixed-price contract the contractor bore the responsibility of labor and materials, whereas in a labor-only contract a contractor would not bear financial responsibility for materials. In the case at bar, Investigator Philpott noted that Respondent had a $15,000.00 allowance.[31] 30. Investigator Philpott testified that he confirmed no work had taken place as of July 17, 2018, as neither party would consent to covering the cost of materials for the remediation. As a result, Investigator Philpott forwarded the case to the ROC’s legal department with a recommendation for a citation. Mr. Johnson’s testimony 31. Mr. Johnson testified that although he sent his July 09, 2018, letter to Complainants via email and certified mail, he did not receive a response from Complainants. 32. Regarding the granite for the project, Mr. Johnson testified that in order to secure a discount he originally purchased the slabs on his credit card.[32] Mr. Johnson noted that he used Complainants’ measurements when he ordered, and learned post installation that the measurements were short. Mr. Johnson argued that because he is a contractor and not a designer that he was not responsible for inspecting the granite prior to fabrication. 33. Later, per Mr. Johnson, he contested the charges when some of the slabs arrived damaged. Per Mr. Johnson, the party who delivered the damaged slabs should have replaced the granite at no charge to either Complainants or Respondent, including covering fabrications costs, but that did not happen as all sales were noted as final. Additional Evidence 34. There is no contract for the underlying project at issue. There is a two-page proposal signed by Ron Johnson dated February 19, 2017, for the entire remodeling project, totaling $396,480.00, which specifically notes Respondent had a $15,000.00 total granite allowance for the project.[33] There are also invoices from March 12, 2017, April 09, 2017, June 04, 2017, June 17, 2017, August 20, 2017, and October 15, 2017.[34] 35. Granite is mentioned on the June 04, 2017, June 17, 2017, and October 15, 2017, invoices. On the June 04, 2017, and June 17, 2017, invoices there is a note for “Granite Partial $10,000” and on the October 15, 2017, invoice there is a note under “Extras” for “Granite 1 Slab Red Cactus.”[35] CONCLUSIONS OF LAW 1. This matter lies within the ROC’s jurisdiction.[36] 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.[37] 3. Complainant bears the burden of proof to establish cause to discipline Respondent’s license by a preponderance of the evidence.[38] Respondent bears the burden to establish factors in mitigation of the penalty and affirmative defenses by the same evidentiary standard.[39] 4. “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] 5. Ariz. Admin. Code R4-9-108 requires that “a contractor shall perform all work in a professional and workmanlike manner, and that a contractor shall perform all work in accordance with any applicable building codes and professional industry standards.” 6. Ariz. Rev. Stat. § 32-1154(A)(3) holds that a holder of a license may not violate a rule adopted by the ROC. 7. 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. 8. It is undisputed that the ROC required Respondent’s full compliance to the Directive by July 16, 2018. It is also undisputed that Respondent failed to comply. 9. Therefore, the only issue in dispute is whether Respondent raised a sufficient justification or excuse for failing to adhere to the ROC’s Directive and complete Complainants’ project. This is an affirmative defense that Respondent bears the burden to establish. 10. Here, Mr. Johnson raised two defenses. First, Mr. Johnson argued that Complainant’s never replied to the letter he issued on July 09, 2018, whereby he agreed to comply with the ROC’s Directive. Secondly, Mr. Johnson argued that it was Complainant’s responsibility to cover the costs associated with the purchase of materials necessary to complete the underlying remediation. 11. Mr. Johnson’s first argument is rendered moot by his second argument, as it was Respondent’s responsibility and not Complainants’ to purchase the granite needed for this project’s remediation. Had Respondent secured granite needed for the underlying remediation and been barred by Complainants from entering the project site, the result here would be different. In the instant case the proposal serves as the contract agreement executed between the parties. It does not refer specifically to the cost for labor or materials, nor does it explain the bases or operating procedure for the stated allowances. Notably, Respondent provided no further explanation during his testimony. Respondent did, however, admit to purchasing all of the granite for the project. Furthermore, the record reflects that Respondent did not exceed the allotted $15,000.00 allowance for granite as a total of only $10,665.91 was spent. 12. Based on the foregoing, however, Respondent has not provided sufficient mitigating evidence sufficient to overcome or rebut the credible evidence provided by Complainants. 13. Because Complainants 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 Complainants, as ordered by the ROC’s Directive, Complainants have also established cause for the ROC to suspend or revoke Respondent’s contractor’s license under Ariz. Rev. Stat. §§ 32-1154(A)(3), 32-1154(A)(22), and Ariz. Admin. Code R4- 9-108. 14. 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 Paradise Peaks Construction Inc. License No: 203571 shall be suspended for one (1) business day. 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, February 22, 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=a0Yt000000ACUOnEAP. [2] Id. [3] Id. [4] See Registrar’s electronic file at Intake Complaint Submittal1.pdf. [5] Id. [6] Id. [7] Id. [8] Id. [9] Id. [10] Id. [11] Id. [12] Id. [13] See the ROC’s electronic file at Rcc012 Formal Inspection Jobsite1.rtf. [14] See the ROC’s electronic file at Inv Photographs1.docx. [15] See the ROC’s electronic file at Rcc100 Jobsite Inspection Notes1.rtf. [16] See the ROC’s electronic file at Rcc014 Corrective Work Order1.rtf. [17] Id. [18] See the ROC’s electronic file at Rch424 Citation Multiple Charges Workmanship W221.rtf. [19] Id. [20] See the ROC’s electronic file at Lg Citation1.pdf. [21] Id. [22] See the ROC’s electronic file at Rch424 Citation Multiple Charges Workmanship W221.rtf. [23] The Applebaums also hired a pool company for the installation of a pool and deck in their backyard, landscapers for the front yard and backyard, as well as a third company for the installation of a home security system. None of the aforementioned companies are related to the matter at bar. [24] See the ROC’s electronic file at Insp Action Letters1.pdf. [25] See the ROC’s electronic file at Rcc100 Jobsite Inspection Notes1.rtf. [26] Id. [27] Id. [28] See the ROC’s electronic file at Rcc014 Corrective Work Order1.rtf. [29] See the ROC’s electronic file at Rcc078 Compliance Jobsite1.rtf. [30] See Complainant Exhibit 2. [31] See the ROC’s electronic file at Intake Complainant Submittal1.pdf. [32] See Complainant Exhibit 4; see also Respondent Exhibits A and B. Granite receipts, as charged to Respondent’s credit card, total $10,665.91 for the underlying project. [33] See the ROC’s electronic file at Intake Complainant Submittal1.pdf. [34] Id. [35] Id. [36] See Ariz. Rev. Stat. § 32-1154(A). [37] 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). [38] 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). [39] See Ariz. Admin. Code R2-19-119(B)(2). [40] Morris K. Udall, Arizona Law of Evidence § 5 (1960). [41] 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