ALJDEC decisions subject to certification as final

2018A-329-ROC-RHG · Registrar of Contractors · 2019-05-04

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

REHEARING: April 19, 2019 APPEARANCES: Monica Del Re, Complainant, Everett Butler, Esq. Complainant’s Attorney, Steve Philpot, ROC Investigator ADMINISTRATIVE LAW JUDGE: Randolph D. Wolfson

Procedural History This matter was originally heard on the January 24, 2018 Complaint of Ms. Monica Ann Del Re on July 25, 2018 and September 12, 2018. The undersigned ALJ issued his Findings of Fact, Conclusions of Law and Recommended Order on November 29, 2018. The ALJ found Respondent North Forty Enterprises, Inc. did not act as contractor under the facts presented and recommended the Complaint be dismissed. By the Registrar’s December 31, 2018 Order, the Registrar rejected the November 29, 2018 Findings of Fact, Conclusions of Law and Recommended Order. The Registrar’s December 31, 2018 Order determined:

Although Mr. Thompson claims he did not mark-up any materials or labor, nor did he profit from the work, the statute does not require a person to realize a profit to qualify as a contractor. See A.R.S. § 32-1101(3) (Requiring “compensation”, not “profit”)…. [T]he Registrar rejects the Administrative Law Judge Decision to the extent that the administrative law judge determined the Registrar did not have jurisdiction in this case because Respondent did not act as a contractor….The Registrar further rejects the Administrative Law Judge Decision to the extent that the administrative law judge determined that A.R.S. section 32-1121(A)(5)’s owner-builder exemption is negated in instances where a building permit is required.

The Registrar’s Conclusion and Order provided:

The Registrar, therefore, rejects the Administrative Law Judge Decision to dismiss the citation. The Registrar finds that Respondent, by and through its qualifying party and officer, accepted compensation for the work on Complainant’s project and therefore meets the statutory definition of a “Contractor” under A.R.S. § 32-1101(3). It Is Ordered, remanding the matter back to the Office of Administrative Hearings to determine if Respondent violated the statutes as charged in the Citation.

Following remand to the Office of Admistrtive Hearings from the Registrar, Rehearing in this matter was scheduled. Re-Hearing in this matter was noticed to all parties on January 7, 2019 for February 22, 2019. The February 22, 2019 Re-Hearing was continued to March 15, 2019 on Respondent’s late-filed Motion (filed two days prior to hearing). On March 6, 2019, Complainant requested a 30 day continuance to allow time for the parties to conduct a settlement conference through the Registrar’s Office. Complainant’s Motion to Continue was granted by the undersigned ALJ by his March 11, 2019 Minute Entry continuing Re-Hearing to April 19, 2019 at 1:00 p.m. The minute entry was served upon each counsel of record on March 11, 2019 via e-mail. FINDING OF FACTS The aforesaid March 11, 2019 Minute Entry continuing Re-Hearing to April 19, 2019 at 1:00 p.m. was served upon each counsel of record on March 11, 2019 via e-mail. The original January 7, 2019 Notice of Hearing informed the parties that “[f]ailure to attend the scheduled hearing is likely to result in an adverse ruling against you.” The Respondent did not request to appear telephonically and did not request that the hearing be continued. At 1:00 p.m. on April 19, 2019, the Complainant, her attorney, Complainant’s Architect and two ROC Investigators in the case personally appeared. Respondent did not appear. Respondent’s attorney [Fidelis V. Garcia, Esq] did not appear. No request to appear telephonically was filed nor was any Motion to Continue the Re- Hearing filed. At 1:15 p.m., extending professional courtesy, the undersigned ALJ directed Office of Administrative Hearings [OAH] staff to attempt contact with Fidelis V. Garcia, Esq., Respondent’s counsel, to inquire of counsel’s whereabouts. At 1:20 p.m. telephone contact was attempted to Fidelis V. Garcia, Esq. without success. Thereafter, at 1:29 p.m., e-mail was directed by to Fidelis V. Garcia, Esq. by OAH staff as follows: Hearing currently scheduled tried to reach you by telephone re: Monica Ann Del Re v. North Forty Enterprises Inc. 2018A-329-ROC- RHG scheduled today at 1:00 P.M.

There was no reply to the OAH e-mail. After having waited until 1:30 p.m. to start the hearing scheduled for 1:00 pm, hearing commenced in the absence of Respondent and Respondent’s attorney, Fidelis V. Garcia, Esq. and evidence received on the record. Inasmuch as Respondent did not appear through an authorized member, employee or attorney, Respondent did not present any evidence to defend its license. Respondent, North Forty Enterprises Inc., d/b/a, A C Zone, [“NFEInc] is the holder of license numbers 182531 [Specialty Commercial C-39 Air Conditioning, Refrigeration] and 182530 [C-39 Air Conditioning, Refrigeration] issued by the Arizona Registrar of Contractors (Registrar). As of November 29, 2019, both licenses are listed by the Registrar as currently suspended. Herb Thompson is the Qualifying Party and Officer on both of these licenses.[1] Complainant Monica Ann Del Re [“Del Re”] is the owner of the residence located at 5015 Calle De Los Flores in Cave Creek, Arizona [the “Residence”]. On or about June 20, 2017, Herb Thompson commenced site preparation and demo on the Del Re Residence for a re-model of Del Re Kitchen and living areas. There is no written contract between Del Re and NFEInc. There also is no written contract between Del Re and Herb Thompson. Del Re testified at hearing that she paid Herb Thompson the sum of $56,400.00 over the period of many months. [2] On or about January 24, 2018, the Registrar received a Complaint against Respondent from Complainant alleging Respondent performed poor work and abandoned the job. The Registrar assigned the complaint to its Investigator Steve Philpott. A Job Site Inspection [hereinafter “JSI”] was conducted by Investigator Philpot on February 6, 2018. The Complainant was present for the JSI. The Respondent did not appear at the JSI. As reported in Inspector Philpot’s JSI Notes[3] As recorded in Inspector Philpot’s JSI Notes[4] On January 24, 2018, The Complainant, Monica Ann Del Re, filed a complaint against the Respondent, North Forty Enterprises Inc. for alleged abandonment and workmanship violations arising from work performed at Complainant’s residence located at 5015 E Calle de los Flores, Cave Creek, AZ 85331. The parties do not have a written agreement. According to the complaint documents the respondent stopped work September 10, 2017 and the project is not complete.

I arrived at the complainant’s residence at the scheduled time. We proceeded to inspect the items on the complaint list and I found the following: I took 47 photos with my Cannon PowerShot A2600 Digital camera. The photos have been scanned into ROCIMS as a PDF file. PHOTOGRAPHIC EVIDENCE (PDF copy scanned to ROCIMS, Raw Files are in Evidence Locker).

….

Complaint Item 1: The complaint item has been submitted as a multiple page narrative, see complaint documents for actual text. Investigator’s Observation: This complaint item is substantiated.

Based on the complaint documents, • The Respondent has taken on the roll for this project as a “General Contractor”. • The Respondent is not properly licensed for the work that has occurred. • Complainant stated all money was paid directly to Respondent. Permits have not been obtained as required by the local jurisdiction. • Plumbing work, Electrical work, HVAC work and structural changes have been made to the home without permits. • The interior of the homes Kitchen, laundry room, dining room, living room and parts of the garage have been demolished and is currently uninhabitable. • See Jobsite photos for current condition on the home.

Prior to any work beginning all applicable permits shall be obtained by Respondent. Unpermitted work shall be inspected by the local building inspector and any building code deficiencies identified or code violations caused by the Respondent shall be corrected. Respondent shall complete project per plans and original contract agreement, properly executed change orders, local building codes, and manufactures installation instructions. Respondent shall not perform or hire other contractors to perform work that is outside the scope of the R39R.182531-R license. For workmanship violations outside the scope of your license, you may remedy those violations only by paying a properly licensed contractor hired by Complainant to correct your deficient workmanship or by reaching a financial settlement with Complainant.

On or about February 7, 2018, after the JSI, Investigator Philpott issued a Written Directive with a Corrective Work Order [“CWO”] to Respondent that provided as follows: You must notify the Registrar’s assigned Investigator of your compliance with this Directive prior to 5:00 p.m. on February 26, 2018. [emphasis in original].

You are hereby directed to remedy the following violations by the appropriate means:

• Prior to any work beginning all applicable permits shall be obtained by Respondent. • Unpermitted work shall be inspected by the local building inspector and any building code deficiencies identified or code violations caused by the Respondent shall be corrected. • Respondent shall complete project per plans and original contract agreement, properly executed change orders, local building codes, and manufactures installation instructions.

• Respondent shall not perform or hire other contractors to perform work that is outside the scope of the R39R.182531-R license. For workmanship violations outside the scope of your license, you may remedy those violations only by paying a properly licensed contractor hired by Complainant to correct your deficient workmanship or by reaching a financial settlement with Complainant.

The Registrar has determined that any workmanship violations alleged in the complaint but not listed above are unsubstantiated and do not require corrective action.

Following the issuance of the Written Directive and CWO, Mr. Philpott testified at the July 25, 2018 hearing in this case that the Respondent did not comply with the Corrective Work Order contained in the Written Directive. On the 13th day of March 2018, the Registrar issued a Citation against Respondent, charging possible violations of the following Arizona statutes: • A violation of A.R.S. § 32-1154(A)(2) via 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).

• A violation of A.R.S. § 32-1154(A)(9).[5] • A violation of A.R.S. § 32-1154(A)(12)[6] and, • A violation of A.R.S. § 32-1154(A)(16) (“Knowingly contracting beyond the scope of the license or licenses of the licensee.”) and • A violation of A.R.S. § 32-1154(A)(22). [failure to comply with the CWO][7]

The Registrar referred this matter to the Office of Administrative Hearings, an independent state agency, [“OAH”], for an evidentiary hearing regarding Del Re’s Complaint against NFEInc. Hearing on the matter commenced before the OAH on July 25, 2018, 2018. Del Re was unable to submit its entire case-in-chief during the time allotted for at the July 25, 2018 hearing. Therefore, the matter was continued until November 19, 2018 for Further Hearing. On November 19, 2018, further hearing on the matter was conducted and concluded. At the July 25, 2018 hearing Inspector Philpot testified that Del Re had submitted her Complaint in a narrative form. She asserted poor workmanship and abandonment by NFEInc. Inspector Philpot noted that the Complainant was present for the JSI but NFEInc ignored the JSI notice and was not present for the JSI. • Mr. Philpot noted that NFEInc is a licensed contractor but is authorized only to provide HVAC contractor services. • Inspector Philpot testified that most of the work performed at the Del Re residence by NFEInc was outside the scope of NFEInc’s license. He testified that demolition, plumbing, electrical, structural construction and other non-HVAC related construction work was performed by NFEInc without being licensed to perform such work. • Inspector Philpot testified that work was performed by NFEInc without obtaining any permits or permit inspections as required for the work performed by NFEInc. • Inspector Philpot testified that the demolition performed by NFEInc was done recklessly without consideration of structural instability created by NFEInc’s poor workmanship. He said a load bearing wall was removed without an engineer’s review or analysis. Inspector Philpot stated that the demolition, tampering with load bearing walls without benefit of an engineer’s analysis, is dangerous and that he was concerned that NFEInc conduct might cause a collapse of the structure. • Inspector Philpot testified that the Living Room support beam was seated directly on top of cinderblock wall in violation of local code. This is a clear workmanship issue too, he said. • Inspector Philpot testified that the door from Del Re’s garage to the house is not a fire-rated door. He testified that this is a workmanship issue as well. • Inspector Philpot testified that the residence is uninhabitable as a result of NFEInc.’s work. It appeared to Inspector Philpot that the work had been completely abandoned and left unfinished.[8] • Inspector Philpot testified that a plumber, Gordon Braegelmann was used at NFEInc’s request to perform plumbing work on this project.[9] Gordon Braegelmann, he said, is not a licensed plumber. • Inspector Philpot testified that an unlicensed tile installation contractor, Jason Jenson was used at NFEInc’s request to perform tile work on this project.[10] • Inspector Philpot testified that an unlicensed concrete contractor, J.C. Concrete was used at NFEInc’s request to install a beam in the garage to replace a center post, to install pavers, to move and install a gate to the pool area and to install a center bean in the living room area on this project. • Inspector Philpot testified that is not nor has there ever been a written contract between Del Re and NFEinc. Inspector Philpot testified that Del Re provided ledger records of payments to NFEInc.’s qualifying party, Herb Thompson, totaling in excess of $1,000.00[11] Following the Registrar’s rejection of the ALJ’s Recommended Order in this case and remand for hearing, a re-hearing was conducted on April 19, 2019 at 1:00 p.m.[12] in the absence of Respondent and Respondent’s counsel. Complainant Del Re testified that NFEInc. Undertook demolition of the interior of her home that NFEInc. was never directed to perform such as demolition of drywall and removal of support beams. She said that she requested wood floors. Instead, only concrete was installed. She stated she did not instruct NFEInc. to commence construction without first obtaining proper permits and approvals for the construction. Admitted through Del Re was Exhibit C-1, a ledger record of payments to NFEInc, its agents or sub-contractors in the amount of $56,400.00; Exhibit C-2, Del Re’s reckoning of an estimate in the amount $44,578.90 required to bring the residence up to a point where correction to NFEInc.’s work can be started and Exhibit C- 3, a group of color photographs of the Del Re residence’s interior conditions left by NFEInc. Del Re call her architect, John Reddell to testify. He stated that he is trained and qualified to evaluate workmanship in construction and to estimate values for construction on this project. He explained that exhibit C-1 states the value of the work in place at $19,624.00. He testified that the cost to correct the NFEInc.’s poor workmanship is reflected in Exhibit C-2 and is estimated at $44,578.90. He said that the beams need to be corrected that were installed by Respondent. They were cut in half and then installed – which is an improper way to construct weight bearing members. Items were torn out which should not have been, he said, such as furring strips of the fire-place and all of the insulation was removed from the walls and ceiling of the home. Administrative notice is taken of Respondent’s prior License record as reflected on the Registrar’s public website. Such prior License record reflects that NFEInc., as of May 4, 2019, both licenses are listed by the Registrar as currently suspended that no prior discipline has been imposed arising out of a Complaint.

CONCLUSIONS OF LAW This matter lies within the Registrar’s jurisdiction. See A.R.S. § 32-1101 et seq. Complainant bears the burden of proof to establish Respondent’s statutory violation by a preponderance of the evidence. See A.R.S. § 41- 1092.07(G)(2); A.A.C. R2-19-119(A) and A.A.C. R2-19-119(B)(1); see also Vazanno v. Superior Court, 74 Ariz. 369, 372, 249 P.2d 837 (1952). “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.” Morris K. Udall, Arizona Law of Evidence § 5 (1960). A.R.S. §32-1154. Grounds for suspension or revocation of license. A. The holder of a license or any person listed on a license pursuant to this chapter shall not commit any of the following acts or omissions: 1. Abandonment of a contract or refusal to perform after submitting a bid on work without legal excuse for the abandonment or refusal.

2. Departure from or disregard of plans or specifications or any building codes of this state or any political subdivision of this state in any material respect that 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.

3. Violation of any rule adopted by the registrar. ….

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. ….

12. Failure in any material respect to comply with this chapter.

13. Knowingly entering into a contract with a contractor for work to be performed for which a license is required with a person that is not duly licensed in the required classification .…

16. Knowingly contracting beyond the scope of the license or licenses of the licensee ….

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.

3. As to the issue of poor workmanship, the evidence established by a preponderance that Respondent did not perform the work in a professional and workmanlike manner in violation of A.A.C. R4-9-108, and thereby of A.R.S. § 32-1154(A)(3). 4. By a preponderance of the evidence, NFEInc’s sub-contracted or otherwise at NFEInc.’s request utilized unlicensed contractors Gordon Braegelmann; Jason Jenson and J.C. Concrete, to perform tile work on this project. Thus, Del Re has proven by preponderance of the evidence that NFEInc. violated A.R.S. § 32-1154(A)(9). 5. By a preponderance of the evidence, Del Re has proven that NFEInc. commenced construction in this case without having obtained required local permits. Thus, NFEInc. has been proven to have violated A.R.S. § 32-1154(A)(12) . 6. It has been proven by a preponderance of the evidence that NFEInc. knowingly contracted beyond the scope of its license in violation of A.R.S. § 32-1154(A)(16). 7. By a preponderance of the evidence it has been established NFEInc. failed to take appropriate corrective action to comply [with the CWO] without valid justification within a reasonable period of time after receiving a written directive from the registrar. Thus, it is proven that NFEInc. violated A.R.S. § 32-1154(A)(22). 8. Pursuant to A.R.S. §32-1154(E), [t]he registrar may impose a civil penalty of not to exceed five hundred dollars on a contractor for each violation of subsection A, paragraph 22 of this section.…The failure by the licensee to pay any civil penalty imposed under this subsection results in the automatic revocation of the license thirty days after the effective date of the order providing for the civil penalty. A person who is or was named on a license of a contractor when an act or omission occurs that results in a civil penalty may not receive a new license under this chapter until the entire civil penalty is paid.

Inasmuch as NFEInc. has violated A.R.S. § 32-1154(A)(22), in light of the facts and circumstances presented, a civil penalty of $500.00 is reasonable and appropriate. RECOMMENDED ORDER Based on the foregoing, IT IS RECOMMENDED that on the effective date of the Order, the Registrar shall revoke the license numbers 182531 and 182530 held by North Forty Enterprises Inc., d/b/a A C Zone.

FURTHER IT IS RECOMMENDED that a civil penalty, payable only in certified funds, in the amount of Five Hundred Dollars ($500.00) be assessed against license numbers 182531 and 182530 held by North Forty Enterprises Inc., d/b/a A C Zone. FURTHER IT IS 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 Order, the Registrar shall 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 A.R.S. § 32-1101(A)(5), unless Respondent tenders payment of any outstanding 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, May 4, 2019. /s/ Randolph D. Wolfson Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director Registrar of Contractors

----------------------- [1] See, November 29, 2018 Findings of Fact in 2018A-329-ROC, ¶ 1. [2] See, November 29, 2018 Findings of Fact in 2018A-329-ROC, ¶ 2.

[3] [4] Agency Record, “Rcc100 Job Site Inspection Notes1.rtf.” [5] 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. [6] Failure in any material respect to comply with A.R.S. Chapter 32, et seq. Specifically charged is 1158(A): A violation of A.R.S. § 32-1158(A) (“Any contract in an amount of more than one thousand dollars entered into between a contractor and the owner of a property to be improved shall contain in writing at least the following information: 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 section 32-1154, subsection A. The contract shall contain the registrar's telephone number and website address and shall state that complaints must be made within the applicable time period as set forth in section 32- 1155, subsection A. The information in this paragraph 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 or the contractor's designated representative. This paragraph does not apply to a person who is subject to and complies with section 12-1365.”). [7] 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. [8] See, Exhibit C-3 from the April 19, 2019 hearing in 2018A-329-ROC-RHG comprised of numerous color photographs demonstrating the roughed out condition of the home’s interior. [9] See, Braglemann’s August 2, 2018 “Proposal” attached to Complainant’s Complaint and Agency Record, Insp Action Letter1.pdf and Insp Action Letter1.pdf. [10] See, August 15, 2017 “Invoice” and orders of Jason Jenson d/b/a infinite block of Chandler, AZ attached to Complaint. [11] See, ledger attached to Complainant’s Complaint as well as [12] See, Procedural History, ¶2 and¶3, supra.

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