ALJDEC decisions subject to certification as final

2019A-00422-RFA-ROC · Registrar of Contractors · 2020-03-03

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Alexander John MacPhail,

COMPLAINANT,

vs.

Desert Meadow Construction Co LLC,

ROC License: ROC 239372,

RESPONDENT.

No. 2019A-00422-RFA-ROC

ADMINISTRATIVE LAW JUDGE DECISION

HEARING:

APPEARANCES: Alexander John MacPhail (“Complainant”) appeared on his own behalf. Assistant Attorney General Elizabeth Campbell Esq. appeared on behalf of the Arizona Registrar of Contractors (“Registrar”) with Katelyn Rolling and Mike Springer as witnesses. Steven Barrett appeared on behalf of Desert Meadow Construction Co LLC (“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 Registrar.

FINDINGS OF FACT

Background and Procedure

According to the Registrar’s public website, on January 25, 2008, the Registrar issued ROC License No. 239372, General Dual KB-1 Building contracting license to Respondent. Stephen Frank Barrett is listed on the license as the Qualifying Party and Member. Respondent’s address of record for the license is PO Box 1533 Tombstone, AZ 85638-1533.

Pursuant to Ariz. Admin. Code R4-9-117, Administrative Notice is taken of Respondent’s prior license record as reflected on the Registrar’s public website on February 27, 2020. ROC License No. 239372 is active and currently renewed through January 31, 2022. There are no open complaints against the license, but there is one record of prior discipline that has been taken against the license. Respondent has a $14,000.00 surety bond for the license issued through RLI Insurance Company, effective January 25, 2008.

On or about January 25, 2019, the Registrar received a complaint filed by Complainant against Respondent alleging poor workmanship of a residential porch extension project. The Registrar designated the grievance Complaint No. 2019-00422 and assigned it to Mike Springer (“Investigator Springer”) for investigation.

On January 30, 2019, the Registrar issued a Jobsite Inspection Notification letter to the parties, advising that an onsite review would be conducted at the project site by an investigator on February 25, 2019, at 10:00 a.m.

On February 25, 2019, Registrar investigator Springer inspected the work that had been done on the project to date and took 19 photographs. When he was finished Investigator Springer drafted Jobsite Inspection Notes.

On February 25, 2019, Investigator Springer issued a Directive from the Registrar to Respondent because he substantiated Complainant’s allegation that the work Respondent had done on the porch extension project failed to meet minimum workmanship standards. Respondent was put on notice that he had until 5:00 p.m. on March 14, 2019, to notify the Registrar of its compliance with the Directive or face discipline pursuant to Ariz. Rev. Stat. §§ 32-1154(A)(3); Ariz. Admin. Code R4-9-108, 32-1154(A)(22), and 32-1154(E).

On March 25, 2019, Investigator Springer issued a Warning Letter to Respondent to advise that his contract with Complainant did not meet statutory minimum elements in violation of Ariz. Rev. Stat. § 32-1158(A). Respondent was further advised that failure to comply with Ariz. Rev. Stat. § 32-1158(A) was a violation of Ariz. Rev. Stat. § 32-1154(A)(12), which could result in discipline against Respondent’s license including suspension or revocation.

On March 25, 2019, Investigator Springer escalated Complaint 2019-00422 to the Registrar’s legal department with citation recommendations.

On March 26, 2019, the Registrar issued a Citation and Complaint to Respondent for alleged violations of Ariz. Rev. Stat. §§ 32-1154(A)(3); Ariz. Admin. Code R4-9-108, 32-1154(A)(12); specifically 32-1158, and 32-1154(A)(22). Respondent was given until April 10, 2019, to respond with its Answer or face discipline pursuant to Ariz. Rev. Stat. §§ 32-1154(A)(22) and 32-1155.

On April 08, 2019, the Registrar received Respondent’s Answer.

On April 17, 2019, the Registrar referred this matter to the Office of Administrative Hearings (“OAH”), an independent state agency, for an evidentiary hearing on June 14, 2019. Per the Notice of Hearing the issue to be determined was whether the Registrar had 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)(12) (“Failure in any material respect to comply with this chapter.”) Namely, A.R.S. § 32-1158.

Charge 3: 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.”).

On June 14, 2019, an administrative evidentiary hearing took place at OAH.

On July 02, 2019, OAH subsequently transmitted a Recommended Order to the Registrar’s Director, which held Respondent in violation of Ariz. Rev. Stat. §§ 32-1154(A)(3); Ariz. Admin. Code R4-9-108, 32-1154(A)(12); namely 32-1158, and 32-1154 (A)(22). The Order also held that Respondent’s license be suspended for three business days.

On July 15, 2019, the Order was accepted by the Director.

On August 26, 2019, the Final Administrative Decision and Order became effective.

On November 06, 2019, the Registrar received Complainant’s petition for payment from the Residential Contractors’ Recovery Fund (“Fund”), pursuant to Ariz. Rev. Stat. §§ 32-1132(A) and 32-1154(G), in the amount of $9,371.00. Attached were three bids Complainant had collected from contractors willing to remediate the porch extension project, and a bond denial letter from Respondent’s insurance company.

On November 12, 2019, the Registrar issued a Recovery Fund Notification Letter to the parties.

On December 17, 2019, the Registrar issued a Notice and Order of Recovery Fund Claim Denial.

On December 18, 2019, the Registrar issued a Notice of Claim for Administrative Award which held Complainant was awarded $9,371.00 from the Fund. The parties had until January 02, 2020, to appeal the amount or proprietary of payment.

On December 23, 2019, the Registrar issued a Recovery Fund Quash Order.

On December 23, 2019, the Registrar issued a Notice of Claim for Administrative Award which held Complainant was awarded $9,731.00 from the Fund. The parties had until January 07, 2020, to appeal the amount or proprietary of payment.

On January 06, 2020, the Registrar received an appeal letter from Respondent contesting Complainant’s award amount from the Fund.

On January 17, 2020, the Registrar again referred the matter to the Office of Administrative Hearings for an independent evidentiary hearing. Per the Notice of Hearing sent to the parties on March 03, 2020, the issue for hearing is to determine if Complainant’s award from the Fund was properly calculated and appropriately issued pursuant to Ariz. Rev. Stat. § 32-1154(F), as justified by the evidence.

On March 03, 2020, an administrative evidentiary hearing took place at OAH.

Hearing Evidence

At the hearing, the Registrar called Investigator Springer and Katelyn Rolling as witnesses and submitted 15 exhibits. Respondent called Stephen Barrett as a witness. Complainant did not present any evidence. The Registrar’s agency file and Notice of Hearing were also admitted into the record.

Investigator Springer’s testimony

Complainant’s porch extension, as originally installed by Respondent, requires repair and replacement. There is a leak, excessive caulking, and poor fastening on Complainant’s roof where the extension was installed.

The IGO bid that the Registrar chose, for Fund eligibility purposes, outlines a 8-step process that will satisfactorily remediate the underlying workmanship issues on Complainant’s project.

Katelyn Rolling’s testimony

For about the last year Ms. Rolling has been employed by the Registrar as a Legal Assistant II.

Ms. Rolling reviewed Complainant’s recovery fund petition and calculated Complainants’ administrative payout.

There is no statute of limitations on recovery fund claims.

In order to be eligible for an administrative payout applicant(s) must meet several requirements. First, the underlying contractor’s license must have been in good standing at the time the contract between the parties was executed. Second, the applicant(s) must own the property at issue as their primary residence, and occupy it. Third, the legal classification of the property must be a 3 or a 6. Fourth, the contractor must have been disciplined by either the Registrar, a Final Order issued by an Administrative Law Judge, or pursuant to a duly entered Consent Order between the contractor and the Registrar.

Here, Complainant satisfied all statutory requirements for an administrative payout from the Fund.

Respondent’s license was in good standing at the time the contract with Complainant was executed.

Ms. Rolling determined the contract execution date between the parties to be October 23, 2017. The contract price was $6,645.20. However, pursuant to a Change Order executed between the parties on November 21, 2017, the contract price was reduced to $5,775.88. Complainant paid Respondent in full.

Regarding the classification of Complainants’ property, at the time of filing the Registrar had incorrectly ass0essed Complainant’s property as a Category 2 based on misinformation received from the County Assessor’s office, which resulted in a denial of Complainant’s petition. However, upon receipt of correct information, the Registrar assessed the land as a Category 3 because it was real property Complainant owned and used as his primary residence.

In order to calculate Complainant’s damages, Complainant was required to obtain bids from other contractors so that the lowest one could be chosen by the Registrar, and then permissible remediation costs could be tallied to calculate Complainant’s award. Ms. Rolling chose Complainant’s first bid, from IGO, because it was the lowest of the itemized bids she received. Ms. Rolling calculated Complainants’ damages by going line by line between the IGO bid, the parties’ original contract, and consulting with Investigator Springer about his insights on the underlying project and the IGO bid. Ultimately, after addressing issues regarding an overage and credit card fee Complainant sustained, Ms. Rolling’s was able to calculate Complainant’s final payout.

On September 30, 2019, Respondent’s bond company, RLI Insurance Company (“RLI”), issued a denial letter to Complainant. The letter reads in pertinent part as follows:

At this time, RLI elects to exercise its right under ARS § 32-1152(E) and require that suit be filed, and judgment obtained, against the contractor and surety (RLI) before payment is issued under the bond (not to exceed the $4250.00 residential portion). Pursuant to A.R.S. § 32-1152 (E), the priority for payment through the bond shall be based upon the timing of the entry of a judgment, by an appropriate court.

Therefore, when and if suit is filed, RLI will respond accordingly. In the meantime, RLI must deny your claim against the bond as such is premature at this time.

Pursuant to ARS § 12-1641, failure to bring the required lawsuit within sixty days after your receipt of this notice will discharge the surety from all liability on the bond.

(All errors in original.)

Respondent’s testimony

Respondent does not contest Complainant’s eligibility for an administrative payout from the Fund. Respondent’s disagreement is with the Registrar’s calculation and issuance of Complainant’s $9,371.00 award. Respondent, however, did not present any evidence in position of his argument.

Closing Arguments

In closing, the Registrar argued that Complainant sustained every statutorily mandated requirement for payout from the Fund, and, per administrative calculations, Complainant was eligible for the $9,731.00 requested payout. The Registrar argued that Respondent’s disagreement(s) with the IGO’s bid were immaterial.

In closing, Respondent argued that the bids Complainant obtained should not have been considered by the Registrar, as they were out of scope with the original contract executed between the parties, and that the Registrar should have gone with less expensive remediation bids that Respondent had secured. Per Respondent, the Registrar should have required the contractor remediating the underlying project to provide “like materials” instead of materials that Respondent had not used. Respondent also argued that Administrative Law Judge Mihalsky’s decision for 2019A-00422-CHC-ROC was incorrect insofar as Respondent disagreed that had performed in violation of Ariz. Rev. Stat. § 32-1154(A)(3); Ariz. Admin. Code R4-9-108.

CONCLUSIONS OF LAW

This matter lies within the Registrar’s jurisdiction. The matter was properly brought before OAH.

The purpose of the Registrar’s licensing statutes is to protect the public from unscrupulous, unqualified, and financially irresponsible contractors.

Respondent bears the burden of establishing by a preponderance of the evidence that the Fund’s payout amount was incorrect and/or improperly issued. The Registrar bears the burden to establish factors in mitigation by the same evidentiary standard.

“A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.” 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.”

Pursuant to Ariz. Rev. Stat. § 32-1131 et seq., in order to be eligible to access the Recovery Fund an applicant must meet four eligibility criteria. See McMurren v. J.M.C. Builder, Inc., 204 Ariz. 345 (App. 2003). First, an applicant must meet the definition of a “person injured” set forth at Ariz. Rev. Stat. § 32-1131(3) which requires that the applicant be the owner of the residential real property at issue. Second, the property must have had a classification of three under Ariz. Rev. Stat. § 42-12003. Third, the owner of the property must have occupied, or intended to occupy, the property as a resident that is damaged by a [residential or dual licensed] contractor who has paid for financial protection from the Recovery Fund. These criterion must be met at either the time the contract was executed or at the time the injury accrued. Fourth, as set forth in Ariz. Rev. Stat. § 32-1132(A), the applicant must have contracted with a residential contractor whose license was in good standing at the time of contract execution.

Ariz. Rev. Stat. § 32-1154(F) provides that “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.”

Statutes shall be liberally construed to affect their objects and to promote justice. In interpreting a statute, “[w]e first consider the language of the statute and, if it is unclear, turn to other factors, including ‘the statute’s context, subject matter, historical background, effects, consequences, spirit, and purpose.”

Statutes should be interpreted to provide a fair and sensible result. “In applying a statute its words are to be given their ordinary meaning unless the legislature has offered its own definition of the words or it appears from the context that a special meaning was intended.”

The Tribunal is required to apply equitable principles when rendering decisions. The application of equity entails offering a remedy to avoid an unconscionable or unjust result. In the case at bar, however, a detailed factual analysis is not necessary because Respondent failed to present any evidence at hearing. As such, Respondent failed to sustain his burden of proof in this matter.

Here, the evidence is clear regarding to whom and how much Complainant would have to pay to remediate his contract with Respondent. The record reflects that the Registrar soundly established Complainant’s eligibility and how Complainant’s payout award amount was properly calculated at $9,371.00. Ms. Rolling credibly testified that she diligently made calculations to allow and disallow line items from the bid chosen by the Registrar, which is how she reached her final figure. Respondent offered no credible evidence to rebut Ms. Rolling’s testimony.

Therefore, the undersigned Administrative Law Judge concludes that Complainant was properly awarded a $9,371.00 payout from the Fund. Respondent’s appeal is denied.

RECOMMENDED ORDER

Based on the foregoing,

it is recommended that Respondent’s appeal be denied.

IT IS FURTHER RECOMMENDED that the Registrar affirm the $9,371.00 payout from the Fund as outlined in the Notice of Claim for Administrative Award, as issued on December 18, 2019.

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 forty (40) days from the date of that certification.

Done this day, February 04, 2020.

/s/ Jenna Clark

Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director

Registrar of Contractors