ALJDEC decisions subject to certification as final

2018A-3969-RFA-ROC · Registrar of Contractors · 2019-08-12

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: July 26, 2019, at 9:00 a.m. APPEARANCES: SOS Mechanical HVAC LLC (“Respondent”) appeared through its qualifying party/member, Steve Fierros; the Arizona Registrar of Contractors (“the Registrar”) was represented by Thomas Raine, Esq., Assistant Attorney General; Robbin J. Brigham (‘Complainant”) appeared on her own behalf. ADMINISTRATIVE LAW JUDGE: Diane Mihalsky _____________________________________________________________________

FINDINGS OF FACT Background 1. According to the Registrar’s public website, on September 25, 2017, the Registrar issued License No. ROC 315986 for Specialty Dual CR-39 Air Conditioning and Refrigeration contracting to Respondent. 2. On June 5, 2019, the Registrar issued a Notice of Claim for Administrative Payout, notifying the parties that “Complainant filed a claim for payment with the Residential Contractors’ Recovery Fund [(“the Fund”)] pursuant to A.R.S. § 32-1154(G). After a review of the claim and all supporting documentation, the Fund has determined that Complainant is to be awarded $3,650.00, in the form of a payment issued by the Fund.”[1] 3. After Respondent requested a hearing on the amount of the payout, the Registrar referred Complainant’s claim to the Office of Administrative Hearings (“OAH”), an independent state agency, for an evidentiary hearing. 4. A hearing was held on July 26, 2019. The Registrar presented the testimony of Douglas Ulmer, the Legal Assistant in the Registrar’s Legal Department/Fund who had analyzed Complainant’s claim, and submitted thirteen exhibits. Respondent’s member/qualifying party, Steve Fierros, testified on its behalf and submitted one exhibit. Complainant testified on her own behalf. Background: The Underlying Workmanship Complaint 5. On or about August 24, 2018, Complainant filed a complaint against Respondent with the Registrar alleging poor work in connection with HVAC repair by Respondent at her residence in Apache Junction, Arizona (“project”).[2] 6. The complaint was assigned to Investigator Beau Cruz. Investigator Cruz performed a jobsite inspection on September 24, 2018, which Respondent did not attend.[3] 7. On September 25, 2018, Investigator Cruz on behalf of the Registrar issued a directive that required Respondent to correct certain deficiencies in Respondent’s work on or before October 11, 2018, at 5:00 p.m., in relevant part as follows: Complaint Item 1: Replacement on electrical box missing material to coat wiring Wiring with no anti-oxidant inhibitors at the connections (P-3). NEC 110.14 Electrical Connections. Because of different characteristics of dissimilar metals, devices such as pressure terminal or pressure splicing connectors and soldering lugs shall be identified for the material of the conductor and shall be properly installed and used. Conductors of dissimilar metals shall not be intermixed in a terminal or splicing connector where physical contact occurs between dissimilar conductors (such as copper and aluminum, copper and copper-clad aluminum, or aluminum and copper-clad aluminum), unless the device is identified for the purpose and conditions of use. Materials such as solder, fluxes, inhibitors, and compounds, where employed, shall be suitable for the use and shall be of a type that will not adversely affect the conductors, installation, or equipment."

Complaint Item 4: Drip pan filled with junk/screws clogged drain lines-no replacement recommended Remove all the debris, screws in the auxiliary condensate drip pan under evaporator coil unit in the attic.

Complaint Item 5: Drain lines clogged with debris from removing old and replacement of coil Drain line for auxiliary condensate drain pan is partially blocked with debris.

Complaint Item 6: Overflow of drip pan due to negligence of coil replacement Damaged/notched auxiliary drain pan and was bent at this point which affects the positive draining of pan.

Complaint Item 7: Flue to furnace loose – not put back on nor screwed back Exhaust flue to the furnace is not properly attached and/or secured with screws. Connections of exhaust vents shall comply [with] Chapter 24 Fuel Gas of the 2018 IRC (International Residential Code) and Chapter 8 Chimneys and Vents of the IMC (International Mechanical Code).

Complaint Item 8: Second drip pan not secured after coil replaced – resting on 2x4 Properly secure auxiliary condensate pan located in the attic as per current standards.

Complaint Item 10: Vents with insulation/debris/oil? Hanging from ceiling from attic work Insulation noted coming out of supply register in the Family Room.

Complaint Item 11: Vents upstairs blow almost no air now Ensure that all supply registers are properly balanced so as to supply adequate conditioned air flow into all bedrooms.

Complaint Item 13: Suction copper line isn’t insulated/cut open and exposed Cut/opened insulation on the refrigerant suction line to evaporator coil in the attic.

Complaint Item 14: Gaps in equipment leaking air in attic Ensure that all gaps in the unit and plenums area properly sealed so as to prevent conditioned air from escaping into the attic.

Complaint Item 15: Junk left in attic not disposed of properly Remove all the debris and garbage left in attic after removal and replacement of evaporator coil.

Complaint Item 16: Work not completed or up to code Respondent is to ensure that all work is performed according to current standards.[4]

8. Investigator Cruz performed a compliance inspection on October 18, 2018, and verified that no corrective action had been taken. Respondent’s qualifying party/member Mr. Fierros attended the compliance inspection. Investigator Cruz’ notes of his compliance inspection state in relevant part as follows: It should be noted that the parties agreed at the compliance jobsite inspection that complainant would procure three bids from other HVAC contractors to correct issues in the directive and respondent would choose which bid he accept, and respondent would pay complainant to have other contractor perform work as described in the directive. I alerted complainant, that if such avenue is pursued that other contractor would then be responsible for work performed, and complainant agreed to such.[5]

9. After the Registrar was informed that Complainant had obtained three bids but that Respondent had not paid Complainant to have any work performed, the Registrar issued a Citation on October 22, 2018, that charged cause to suspend or revoke Respondent’s contractor’s license under A.R.S. § 32-1154(A)(2),[6] A.R.S. § 32-1154(A)(3),[7] namely A.A.C. R4-9-108,[8] and A.R.S. § 32-1154(A)(22).[9] 10. After Respondent filed a written answer to the Citation, the Registrar referred Complainant’s workmanship complaint to OAH for an evidentiary hearing. On February 26, 2019, the Administrative Law Judge (“ALJ”) assigned to the case issued a decision that concluded that Complainant had established that Respondent had violated the statutes charged in the Citation.[10] 11. The ALJ’s decision specifically concluded as follows: There was no dispute that Respondent did not perform corrective action and that Respondent did not pay to have the corrective work performed. Respondent provided no valid justification for not proceeding with the corrective work. Respondent did not present sufficient evidence to show that the bids obtained by Complainant to complete the Directive items were excessive in scope or cost.[11]

12. Based on the above facts, the ALJ made the following conclusion of law: The evidence established that Complainant and Respondent did not have a written contract and were unable to agree on the terms of the scope of work to be completed at the time the written directive was issued. As such, it was not possible for Respondent to complete the contract as directed. Contrary to Respondent’s position, Complainant was not required to allow Respondent to complete what it thought was the agreed upon contract and then face additional charges from Respondent including hundreds or thousands more for leveling the subfloor. While Respondent was unable to complete the project per the contract, Respondent made no effort to complete the other corrective work following the written directive being issued by the Registrar.[12]

13. On March 15, 2019, the Registrar issued a Final Administrative Decision and Order, substantially adopting the ALJ’s Decision. [13] Respondent did not appeal the Registrar’s final order and it became effective on April 24, 2019. As a result of the Final Order, Respondent’s license was suspended for two days. Complainant’s Claim to the Fund 14. On or about May 8, 2019, Complainant submitted a claim to the Fund to recover the damages that were allegedly caused by Respondent’s poor work on the HVAC system, requesting a payout in the amount of $3,650.00.[14] 15. Mr. Ulmer testified that Complainant met all the statutory requirements to be eligible to make a claim for a payout from the Fund. Respondent’s license was active and in good standing when it contracted to perform and actually performed the work. Mr. Ulmer noted that Complainant submitted documentation to establish that she had attempted to make a clam against Respondent’s bond.[15] 16. Mr. Ulmer testified that Respondent was hired by Complainant’s home warranty company. Complainant submitted the email between her and the home warranty company in which its employee stated that it was sending Respondent out to service Complainant’s HVAC system.[16] Mr. Ulmer testified that the email established a contractual relationship between Complainant and Respondent for the work that Respondent performed at Complainant’s house. 17. Mr. Ulmer testified that some of the work that Respondent had performed was covered by Complainant’s home warranty, but other work Respondent had contracted directly with Complainant to perform.[17] 18. The Registrar submitted a statement from Complainant’s home warranty company that showed the service call that resulted in Respondent going out to work on Complainant’s house. Mr. Ulmer testified that Complainant had paid the $69.00 trip charge.[18] The Registrar also submitted Complainant’s check for $850.00 to Respondent for the additional work that her home warranty did not cover.[19] Mr. Ulmer testified that Respondent was not due any offset from the Fund payout for any unpaid amounts under the parties’ contract. 19. Complainant submitted with her claim to the Fund the same three estimates to repair the HVAC system that she had provided to Respondent pursuant to the agreement reached at the compliance inspection, as follows: 1. Agape Air LLC’s (“Agape’s”) bid in the amount of $3,250.00; 2. Johnny Cools’ bid in the amount of $3,731.00; and 3. Honest Air Care and Home Services’ (“Honest Air’s”) bid in the amount of $4,605.00.[20] 20. Mr. Ulmer testified that he checked all three contractors’ licenses and the licenses were all current and in good standing. Mr. Ulmer testified that he checked the items on the low bid that had been submitted by Agape and that items lined up with the directive. Mr. Ulmer testified that none of Agape’s line items were excessive. 21. Mr. Ulmer testified that because Agape’s bid did not include a line item for duct cleaning, which was required to satisfy Item No. 10 on the directive, he added $400.00 for this item from Honest Air’s bid to the payout.[21] 22. The last item on Agape’s bid in the amount of $1,575.00 provided for the following scope of work: Customer identified oil residue on suction line at the evaporator coil and notice the a/c unit was not cooling. Locate leak, recover refrigerant install a liquid line drier, pressure test, evacuate system and charge with new R22 refrigerant.[22]

Mr. Ulmer testified that he contacted Investigator Cruz about this item and was informed that because Complainant had called Respondent out to repair a leak in the HVAC system that prevented it from cooling, refilling the system would be part of the repair. 23. Mr. Ulmer prepared a spreadsheet of the amount of the payout that was based on the bids that Complainant submitted and the absence of an offset for any unpaid amounts, which resulted in the payout amount of $3,650.00.[23] 24. Mr. Fierros attempted to dispute whether the corrective work required on the directive was necessary. Because Respondent had not appealed the Registrar’s final order in the underlying workmanship complaint, the ALJ will not address most of Mr. Fierros’ testimony regarding the scope of necessary repairs. 25. Mr. Fierros noted that Investigator Cruz’ jobsite inspection notes stated that, with respect to the debris that was in the ducts, “Investigator is unable to determine if dust or dirt present on supply register was present prior or occurred after respondent performed work therefore, is unable to offer an opinion.”[24] Mr. Fierros testified that the insulation was taken off before the investigator got there, but the warranty company would not pay for duct cleaning. Mr. Fierros did not dispute that directive Item No. 10 required Respondent to correct the insulation that was hanging from the ducts.[25] 26. Mr. Fierros testified that Agape’s bid included replacing the plenum, which is the whole coil, for $1,300.00. Mr. Fierros noted that Item No. 7 on the directive only required the flue to the furnace to be reattached, that Item No. 11 only required Respondent to “Ensure that all supply registers are properly balanced so as to supply adequate conducted air flow into all bedrooms,” and that Item No. 14 required Respondent to “Ensure that all gaps in the unit and plenums area properly sealed so as to prevent conditioned air from escaping into the attic.”[26] Mr. Fierros noted that the directive did not require Respondent to replace the plenum and that 99% of the time, the coil does not match the plenum, but that manufacturers provide a piece of metal to adjust the connection between the coil and plenum. 27. The Registrar noted that Honest Air’s bid included a line item for “[i]nstall new plenums. (The plenum does not fit the new coil that is why it is not sealed right to need to get right size plenum to fit coil for proper install.)”[27] CONCLUSIONS OF LAW This matter lies within the Registrar’s jurisdiction.[28] When the Registrar has calculated the amount of a Complainant’s compensable damages and proposed a payout from the Fund to which he is entitled, the calculation is a prima facie showing of the amount that the Complainant is entitled to recover as a payout from the Fund. The burden shifts to Respondent to establish that the Registrar’s calculations were erroneous or not supported by a preponderance of the evidence.[29] “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] A.R.S. § 32-1154(G) provides in relevant part as follows: Notwithstanding any other provisions in this chapter, if a contractor's license has been revoked or has been suspended as a result of an order to remedy a violation of this chapter, the registrar may order payment from the residential contractors' recovery fund to remedy the violation. The registrar shall serve the contractor with a notice setting forth the amount claimed or to be awarded. If the contractor contests the amount or propriety of the payment, the contractor shall respond within ten days of the date of service by requesting a hearing to determine the amount or propriety of the payment. . . .

A.R.S. § 32-1132(A) describes the measure of damages that an eligible homeowner is entitled to recover from the Fund, in relevant part as follows: The residential contractors' recovery fund is established, to be administered by the registrar, from which any person injured by an act, representation, transaction or conduct of a residential contractor licensed pursuant to this chapter that is in violation of this chapter or the rules adopted pursuant to this chapter may be awarded in . . . an amount of not more than thirty thousand dollars for damages sustained by the act, representation, transaction or conduct. An award from the fund is limited to the actual damages suffered by the claimant as a direct result of the contractor's violation but shall not exceed an amount necessary to complete or repair a residential structure or appurtenance within residential property lines. . . .

(Emphasis added.) For the purposes of A.R.S. § 32-1132(A), “actual damages” are the reasonable cost of repairing the contractor’s defective work and completing the project, minus any portion of the contract price still unpaid to the original contractor.[32] Respondent did not appeal the Registrar’s conclusion in the underlying workmanship complaint that made Respondent responsible cleaning the ductwork. The Registrar also did not find that Complainant denied reasonable access for Respondent to perform repairs and Investigator Cruz’ notes of the compliance inspection state that Respondent agreed to pay its choice of one of the bids that Complainant would obtain to resolve the complaint. Respondent did not establish that the plenums did not require replacement to make the HVAC system fully functional. Therefore, Respondent did not establish that the proposed payout amount of $3,650.00 is inappropriate or more than what is necessary to allow Complainant to pay another contractor to repair the damages that Respondent’s repair of the HVAC system caused. RECOMMENDED ORDER In view of the foregoing, IT IS ORDERED that on the effective date of the final order in this matter, the Residential Contractors’ Recovery Fund shall pay $3,650.00 to Complainant Robbin J. Brigham. IT IS FURTHER ORDERED that under A.R.S. § 32-1139(B), the Registrar shall charge $3,650.00, plus interest at a rate of ten percent a year, to Respondent SOS Mechanical HVAC LLC’s License No. ROC 315986. 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, August 12, 2019.

/s/ Diane Mihalsky Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director Registrar of Contractors ----------------------- [1] The Registrar’s Exhibit 1. [2] See the Registrar’s Exhibit 2. [3] See the Registrar’s Exhibit 3. [4] The Registrar’s Exhibit 4 at 15-16. [5] The Registrar’s Exhibit 5 at 20. [6] A.R.S. § 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 codes of any 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.” [7] A.R.S. § 32-1154(A)(3) includes among the grounds to suspend or revoke a contractor’s license, “[v]iolation of any rule adopted by the registrar.”

[8] A.A.C. 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.” [9] A.R.S. § 32-1154(A)(22) includes among the grounds to suspend or revoke a contractor’s license, “[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.” [10] See the Registrar’s Exhibit 7. [11] The Registrar’s Exhibit 7 at 40, Conclusion of Law No. 8. [12] Id. at 4-5. [13] See the Registrar’s Exhibit 8. [14] See the Registrar’s Exhibit 8. [15] See the Registrar’s Exhibit 6 at 8 at 46-48. [16] See the Registrar’s Exhibit 9. [17] See the Registrar’s Exhibit 9 at 51. [18] See the Registrar’s Exhibit 10. [19] See the Registrar’s Exhibit 11. [20] See the Registrar’s Exhibit 12. [21] See the Registrar’s Exhibit 12 at 65. [22] The Registrar’s Exhibit 12 at 60. [23] See the Registrar’s Exhibit 13. [24] The Registrar’s Exhibit 3 at 12. [25] See the Registrar’s Exhibit 4 at 16. [26] The Registrar’s Exhibit 4 at 16. [27] The Registrar’s Exhibit 12 at 65. [28] See 32-1101 et seq. [29] See A.A.C. R2-19-119(A) and (B)(1); see also Vazanno v. Superior Court, 74 Ariz. 369, 372, 249 P.2d 837 (1952). [30] Morris K. Udall, Arizona Law of Evidence § 5 (1960). [31] Black’s Law Dictionary at page 1220 (8th ed. 1999). [32] See Ramsey v. Arizona Registrar of Contractors, 241 Ariz. 102, 106, 384 P.3d 316, 320 (App. 2016).

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