ALJDEC decisions subject to certification as final

2018A-4184-ROC · Registrar of Contractors · 2019-02-06

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: January 17, 2019, 1:30 P.M. APPEARANCES: Complainant Steven Jungk appeared on his own behalf; William Phillips, owner-operator, appeared on behalf of Respondent ADMINISTRATIVE LAW JUDGE: Roger A. Geddes _____________________________________________________________________ FINDINGS OF FACT Background and Procedure 1. Phillips Roofing, LLC (Respondent), is the holder of License Number 223367 issued by the Registrar of Contractors (Registrar). 2. On or about September 5, 2018, Steven Jungk (Complainant) filed a Complaint against Respondent with the Registrar alleging poor work in connection with the installation of a new roof by Respondent at a residential complex in Phoenix, Arizona (“project”). The Complaint reflected a contract amount of $28,000.00. 3. The Registrar performed an inspection of the project on October 4, 2018. Thereafter, the Registrar issued a Directive, dated October 5, 2018, requiring Respondent to correct various alleged deficiencies in Respondent’s work by October 22, 2018, as follows: Complaint Item 1: "Roof leaks in 4 units (multiple locations). Roof not properly sealed in most places." This was described and observed to be water leaking in the following locations: Unit 8: water leaking through the skylight. Unit 7: water leaking through the skylight. Unit 4: water leaking through the A/C filter. Unit 3: water leaking through the skylight.

Complaint Item 4: "Due to what I believe was continued water intrusion from a faulty roof instillation, we have interior damage not limited to floor damage, ceiling, and paint damage." This was described and observed to be damage caused by water leaking in the following locations: Unit 8: flooring, drywall, and paint damage around and below the skylight. Unit 7: flooring, drywall, and paint damage around and below the skylight. Unit 4: flooring damage in the area below the HVAC filter. Unit 3: drywall and paint damage around and below the skylight. 4. After the Registrar performed a compliance inspection on October 4, 2018, and observed that corrective work had not been performed or completed, the Registrar then issued a Citation to Respondent, dated October 31, 2018, for the alleged violation of the following: a. A.R.S. § 32-1154(A)(3) (violation of Arizona Administrative Code Rule 4-9-108 for failure to meet minimum workmanship standards); b. A.R.S. § 32-1154(A)(12) (violation of A.R.S. § 32-1158(A) for failure to include required information in contract); c. A.R.S. § 32-1154(A)(22) (failure to perform corrective action without valid justification). 5. The Registrar referred the matter to the Office of Administrative Hearings, an independent state agency, for an evidentiary hearing. The Registrar issued a Notice of Hearing setting a hearing for January 17, 2019, at 1:30 P.M. 6. At the January 17, 2019, hearing, Complainant Steven Jungk appeared and testified on his own behalf and presented the testimony of Ann Gregory, Paul Schneider, and Shanna Kraus. William Phillips, owner of Respondent, appeared and testified on behalf of Respondent. John Smith, the Registrar Investigator (Investigator), testified on behalf of the Registrar. The Tribunal received and admitted Complainant’s Exhibit numbers - 2 and Respondent’s exhibit letters A - Q, and A - 1.[1] 7. The Investigator on behalf of the Registrar testified as to his communications with Complainant and Respondent, his inspections of the project, and the Directive issued by the Registrar as a result of his observations from his inspections. He specifically testified that he performed his first inspection on September 27, 2018, but that Complainant’s representative had declined a water test because Respondent had been doing work the day before and that morning. As a result, the Investigator indicated he dismissed the Complaint on October 1, 2018. 8. After being informed the subject roof was still leaking on October 2, 2018, he stated he reopened the Complaint and that he performed another inspection on October 4, 2018. He stated he performed a water test on the roof of the multi-unit complex and he observed that the roofs of units 3, 7, and 8 leaked at their respective skylights and that unit 4 leaked around its air duct. He stated that he also observed interior damage to drywall and flooring as a result of the leaking. 9. He indicated he was advised on October 16, 2018, that there was leak in unit 1, but he stated that he performed a water test the next day which did not evidence such a leak. He stated that he was informed by both parties on October 30, 2018, that there were no more leaks but that the interior damage had not been resolved. 10. He further testified that he performed a prehearing inspection on January 16, 2019, and observed that interior work still had not been corrected. He stated that Complainant also reported new leaks in units 5 and 6, but he advised Complainant that those had not been part of the Directive. As to the violation of A.R.S. § 32-1158(A) for failure to include required information in the contract, the Investigator indicated that the contract was missing an estimated completion date and the notice regarding the Registrar was no bolded. (Respondent’s Exhibit A). 11. Complainant Steven Jungk, property owner, testified that the roof was completed in August 2017 and there have been continuous roof leaks on the property. He stated Respondent came out two days before the inspection and patched the roof without permission so that a water test could not be substantiated. He stated he was responsible for obtaining quotes for the interior damage but he was unable to do so within the timeline and he gave a one week extension and he came up with a quote. 12. Ann Gregory, property manager, testified on behalf of Complainant that when she first advised Respondent of the leaks, she was told Respondent would charge $250.00 to come out to the property and $1,000.00 and later $2,500.00 to transfer the warranty on the roof. She indicated the Respondent’s roof work had been done for a previous owner of the property in August 2017 but that there was a five year warranty. 13. Paul Schneider, maintenance man, testified on behalf of Complainant that he was present at the first Registrar inspection and that he walked the roof and pointed out the areas that were leaking and that Respondent stated that the leaks would be taken care of. He testified further that Respondent had come out the night before the first inspection do work without permission or notifying Complainant. 14. Shanna Kraus, property manager with Gregory Real Estate Management, testified on behalf of Complainant that she had met with Mr. Phillips once and that she had reported the leaks in units 5 and 6. She stated that she had never had a conversation with the Registrar. 15. William Phillips, owner of Respondent, testified on behalf of Respondent that he had a $250.00 charge to examine the roof and $1,000.00 to transfer the warranty. He stated that when he went out the first time, he observed four new vents installed. 16. Mr. Phillips further testified that he informed his workers to reseal around the skylights which was done before the inspection. He stated that two days later he was informed that it was still leaking but he was not able to attend the inspection at which a water test was performed. He further stated that his workers went out later and fixed the areas around the skylights and did a successful water test. 17. Mr. Phillips stated that he attempted to correct the interior damage but was told he could not do the work to repair the interior damage and had to reimburse Complainant for the repair. He said Complainant told him the repair damage would cost approximately $5,000.00. He further stated he asked for an exact number and had said he would overnight a check to Complainant. (Respondent’s Exhibit L). He stated he also requested a copy of the bid. (Respondent’s Exhibit M). He further testified that Complainant did not provide a copy and instead reneged and wanted to go through a licensed contractor instead of using a maintenance man to do the repairs. He stated he later received an estimate, dated November 12, 2018, from Complainant for interior repair in the amount of $106,000.00 which reflected damage in all 8 units. (Complainant’s Exhibit 1). . CONCLUSIONS OF LAW 1. The Registrar has jurisdiction over this matter, pursuant to A.R.S. § 32-1101, et seq., which authorizes the Registrar to impose disciplinary sanctions against licenses for violations of A.R.S. § 32-1154. 2. The burden of proof at an administrative hearing falls to the party asserting a claim, right, or entitlement and the standard of proof on all issues in these matters is by preponderance of the evidence. See Arizona Administrative Code Rule 2-19-119. 3. To warrant such sanctions by the Registrar, Complainant must demonstrate by a preponderance of the evidence that Respondent violated the statutory section cited. Proof by a “preponderance” means that “the evidence is sufficient to persuade the finder of fact that the proposition is more likely true than not.” In re: Arnold and Baker Farms, 177 B. R. 648 (9th Cir. BAP (Ariz.) 1994). See also Culpepper v. State of Arizona, 187 Ariz. 431, 930 P.2d 508 (App. 1996). It is “evidence which is of greater weight or more convincing than the evidence which is offered in opposition to it; that is, evidence which as a whole shows that the fact sought to be proved is more probable than not.” BLACK’S LAW DICTIONARY 1182 (Rev. 6th ed. 1990). 4. A.R.S. § 32-1154(A) includes in pertinent part among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license, any of the following:

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

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

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….

5. As it relates to A.R.S. § 32-1154(A)(3) concerning a violation of any rule adopted by the Registrar, Rule 4-9-108(A) of the Arizona Administrative Code provides that “[a] contractor shall perform all work in a professional and workmanlike manner.” 6. As it relates to A.R.S. § 32-1154(A)(12) concerning failure in any material respect to comply with Chapter 10 of Title 32 the Arizona Revised Statutes (A.R.S. § 32-1101 et seq.), A.R.S. § 32-1158(A) in Chapter requires in pertinent part that 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 nine items as delineated therein. 7. A.R.S. § 32-1154(A)(3). Complainant has presented sufficient evidence to establish that Respondent’s work was not performed in a professional and workmanlike manner in violation of A.R.S. § 32-1154(A)(3). The evidence supports a finding that Respondent corrected the water leaks in units 3, 4, 7, and 8, which resolved Complaint Item 4. However, the Tribunal finds that Responsible is responsible for the interior damage reflected in Complaint Item 4 and there was no dispute that Respondent failed to correct such interior damage. 8. A.R.S. § 32-1154(A)(12). Complainant has not presented sufficient evidence to demonstrate a violation of A.R.S. § 32-1154(A)(12) for the failure on the part of Respondent in a material respect to comply with A.R.S. § 32-1158(A) regarding the required contents of a contract. Respondent stated that it had formerly submitted its form contract to the Registrar and that it had been approved. The Tribunal finds that the un- bolded disclosure and lack of a completion date not to be a material failure in the context of this case. 9. A.R.S. § 32-1154(A)(22). Complainant has not presented sufficient evidence to demonstrate a violation of A.R.S. § 32-1154(A)(22) for the failure on the part of Respondent to complete corrective action without valid justification. Respondent established that it was not permitted to repair the interior damage, presumably because such repair would have been outside the scope of its contractor’s license. Complainant acknowledged that the onus was upon him to provide Respondent with a bid for the repair of the interior damage. The only evidence of such a bid prior to the Directive deadline appears to have been Complainant’s verbal statement that the repair would cost approximately $5,000.00. Respondent requested something in writing or the actual written bid itself but there was no evidence presented by Complainant of an actual bid or about how this $5,000.00 was calculated. The Tribunal finds that it was not unreasonable for Respondent to request such substantiation and to not pay such amount until it was received. Complainant argued that Respondent was untimely in reporting the interior damage to its insurer and that Respondent was not cooperating with its insurer. However, Respondent is not obligated to proceed through its insurer to repair the damage; it is only obligated to pay Complainant for the damage in an amount that could be substantiated. In that Complainant did not substantiate the $5,000.00 repair cost, the Tribunal finds this to be a valid justification for Respondent not paying that amount or otherwise correcting the damage before the Directive deadline. 10. The Tribunal acknowledges that Complainant provided a $106,000.00 bid to Respondent, dated November 12, 2018, after the Directive deadline. (Complainant’s Exhibit 1). However, in addition to being untimely in that it did not afford Respondent the opportunity to meet its Directive deadline, the bid purported to be the cost to repair damage in all eight units. Further, even with respect to those four units specified in the Directive, the scope of the work in the bid appears to exceed the interior damage to be repaired as reflected in the Directive. Perhaps the bid could have been revised or tailored to address the damage reflected in the Directive and then offered to Respondent. However, there was no evidence presented that this was ever done. 11. Accordingly, the Tribunal concludes that Complainant has established that Respondent has not performed work in a professional and workmanlike manner in violation of A.R.S. § 32-1154(A)(3). However, because Respondent has presented a valid justification for not completing corrective work, the Tribunal finds that disciplinary action should not be imposed upon Respondent. RECOMMENDED ORDER Based on the foregoing, it is recommended that on the effective date of this Order, that the Citation and Complaint in this case shall be dismissed. In the event of certification of this 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 the certification. Done this day, February 6, 2019.

/s/ Roger Geddes Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director Registrar of Contractors

----------------------- [1] The Tribunal also took administrative notice of the Registrar’s file.

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