ALJDEC decisions subject to certification as final

2019A-00647-CHC-ROC-RHG-2 · Registrar of Contractors · 2022-09-14

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Mitchell Evan Stevens ,

COMPLAINANT

Desert Lifestyles Inc.

License No. ROC 190993,

RESPONDENT

No. 2019A-00647-CHC-ROC-RHG-2

ADMINISTRATIVE LAW JUDGE

DECISION

HEARING: July 19, 2022

APPEARANCES: Raymundo Reyes, Esq. for Complainant; David Voss for Respondent

ADMINISTRATIVE LAW JUDGE: Thomas Shedden

This is a rehearing of a matter conducted on December 16, 2019 and January 5, 2021. Among the allegations is that Respondent may have performed work that did not meet the workmanship standards in violation of Ariz. Admin. Code section R4-9-108(a), which would also be a violation of Ariz. Rev. Stat. section 32-1154(A)(3).

In a complaint filed with the Registrar of Contractors, Complainant alleged Respondent committed twenty-four separate instances of poor work. ROC investigated and issued a Directive showing that only three of the listed complaint items (#5, #17 and #18) required correction. ROC subsequently issued to Respondent a Citation alleging a potential violation of subsection R4-9-108(a). ROC’s position as set out in the administrative record is to the effect its Citation was limited to the three complaint items identified in its Directive.

Because ROC did not cite Respondent for any alleged workmanship violations that it had not substantiated, the scope of the original hearing was limited to the three complaint items that were substantiated (#5, #17 and #18) as set out in ROC’s Directive.

After the original matter concluded, the undersigned issued an Administrative Law Judge Decision finding that it had not been proven that either complaint item #5 or #17 was a workmanship violation, and that although #18 was a violation, it had been repaired. The ALJ recommended that the case be dismissed, which recommendation ROC adopted in its Final Administrative Decision and Order issued on February 5, 2021.

Complainant filed an appeal of ROC’s Final Order in Maricopa County Superior Court. ROC appeared as a nominal party. The superior court issued a JRAD Ruling finding that the ALJ erred by limiting the original hearing to the three complaint items identified in ROC’s Directive. The court’s ruling was based primarily on Ariz. Rev. Stat. section 41-1061(F) that is not applicable to hearings before the Office of Administrative Hearings. See Ariz. Rev. Stat. § 41-1067.

ROC filed with the superior court a Motion for Clarification in which it pointed out that section 41-1061 et seq. did not apply this matter. ROC also noted that it had sole discretion in issuing citations and that ROC’s Citation controls the issues in the administrative hearing, whereas Complainant could file a civil suit against Respondent in which case his complaint would control the scope of the proceedings. In response to ROC’s Motion, the court directed the parties to brief two issues: (1) whether section 41-1061 et seq. applies to the matter, and (2) whether the scope of the hearing is limited to those items in ROC’s Citation or, whether as the court had determined, the scope included the issues in ROC’s Citation and the other issues in Complainant’s complaint.

Subsequently, the superior court issued an amended Order in which it informed the parties that it would not rule on ROC’s Motion unless ROC waived the protections of its nominal appearance, and it clarified that its intention was for the matter to be remanded for a hearing addressing all the allegations raised in Complainant’s complaint. ROC did not waive those protections and the court did not rule on ROC’s Motion for Clarification.

ROC issued its Notice of [Re]-Hearing, setting out the same issues as it alleged in its original Notice of Hearing. In light of the fact that ROC’s Notice of [Re]-Hearing did not show that the rehearing was to address all issues in Complainant’s complaint rather than only those issues for which ROC cited Respondent, and understanding that the superior court’s decision was based on section 41-1061 that is not applicable to this matter, after allowing the parties to brief the issue, the ALJ informed the parties that scope of the workmanship violations would be limited to those items for which ROC cited Respondent.

FINDINGS OF FACT

On March 10, 2022, the Registrar of Contractors (“ROC”) issued a Notice of Hearing on Contested Case setting the above-captioned matter for a rehearing on April 20, 2022 at the Office of Administrative Hearings. The matter was continued and the rehearing was conducted on July 19, 2022.

Through the Notice of Hearing, ROC alleges that Respondent Desert Lifestyles Inc. may have violated Ariz. Rev. Stat. sections 32-1154(A)(3), to wit R4-9-108(a), (A)(9), (A)(12), and (A)(22).

ROC’s Notice of [Re]-Hearing shows that the hearing would be conducted under Title 41, Chapter 6, Article 10. (Citing Ariz. Rev. Stat. § 32-1156.)

Respondent holds license No. 190993 issued by ROC. Dave Campbell is Respondent’s president and David Voss is its construction manager.

Complainant is Mitchell Evan Stevens.

In December 2017, Mr. Stevens and Respondent entered an “Owner Builder” contract that called for Respondent to build a pool and spa at Mr. Stevens’s house. Complainant also hired other contractors to perform work on the project, but the parties dispute the full scope of that other work.

The contract price was $80,000, much of which Mr. Stevens paid to Respondent in cash.

On February 7, 2019, Mr. Stevens filed with ROC a complaint alleging poor work on Respondent’s part and setting out twenty-four allegations.

ROC investigator Stephen Lawton conducted a jobsite inspection on April 11, 2019 and a re-inspection on June 24, 2019.

On July 9, 2019, ROC issued to Respondent a Directive that provides in pertinent part:

*** You must provide the Registrar with satisfactory written proof of your compliance with this Directive prior to 5:00 p.m. on July 31, 2019.

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

1. Complaint Item 5: Spa has two leaks in the outer shell. Shell is too thin around spa.

Investigator’s Observation: It appears that there might be possible leaks in the spa area. Need to determine cause.

Governing Rule: Workmanship Rule: ARS 32-1154 (A) (3); Namely R4-9-108

2. Complaint Item 17: The wiring on the heat pump was wired incorrectly.

Investigator’s Observation: It appears that the heater is not functioning properly, possible miss wiring. Need to determine cause. All electrical circuits, controls, etc., should be installed to meet the requirements of the N.E.C. and local electrical codes.

Governing Rule: Workmanship Rule: ARS 32-1154 (A) (3); Namely R4-9-108

3. Complaint Item 18: The blower keeps blowing off the pipe.

Investigator’s Observation: It was observed at time of inspection that the blower line was blowing off. Need to determine cause. All electrical circuits, controls, etc., should be installed to meet the requirements of the N.E.C. and local electrical codes.

Governing Rule: Workmanship Rule: ARS 32-1154 (A) (3); Namely R4-9-108

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

(Underscoring added.)

ROC issued to Respondent a Citation dated September 4, 2019 through which it alleges that Respondent may have violated Ariz. Rev. Stat. sections 32-1154(A)(3), to wit R4-9-108(a), (A)(9), (A)(12), and (A)(22).

On October 4, 2019, the Registrar of Contractors (“ROC”) issued its original Notice of Hearing setting the matter for hearing on November 6, 2019 at the Office of Administrative Hearings. The Notice of Hearing shows that Respondent is alleged to have violated sections 32-1154(A)(3), to wit R4-9-108(a), (A)(9), (A)(12), and (A)(22).

The original hearing was continued and was convened on December 16, 2019. On that date, ROC’s investigator Mr. Lawton was available to testify, but neither party chose to ask questions of him. After Mr. Lawton was excused, the parties agreed to mediate their dispute.

Mediation was conducted and a tentative settlement was reached, but ultimately, Mr. Stevens requested that the original matter be reset for hearing.

After receiving disclosures from the parties, the ALJ issued an Order informing the parties that the scope of the hearing was limited to issues officially noticed, which, with respect to the alleged workmanship deficiencies meant those complaint items (#5, #17 and #18) for which ROC cited Respondent.

The original matter was reconvened on January 5, 2021, at which time Messrs. Stevens, Voss and Campbell testified.

At that time, the parties attempted to present evidence related to their mediation and tentative settlement. The ALJ informed the parties that he would not hear that evidence and reiterated that the scope of the hearing was necessarily limited to the issues properly noticed, which with respect to the alleged workmanship deficiencies meant those complaint items (#5, #17 and #18) for which ROC cited Respondent.

At the original hearing:

Regarding complaint item #5, Mr. Voss testified that the spa was not leaking, which had been demonstrated through pressure testing, and that the problem was that the spa was being overfilled and water was seeping under the coping.

Although Mr. Stevens disputed Mr. Voss’s testimony regarding the spa, his exhibits include leak-detection test results on the spa’s plumbing from November 29, 2019 showing that there was no leak and recommending inspection of the pipe and pump sizes. His exhibits also include a January 6, 2020 quote from All Valley Pool Repairs for a number of tasks including repairing “leak at auto fill separation in grout” but it does not specify whether this is at the spa or the pool itself.

Regarding complaint item #17, Mr. Voss testified to the effect that the heater did not require correction, but rather that the issue was that the heater was being used to heat both the spa and the pool, which can be done in a manual mode, but not under the automatic setting; the automatic setting is for the spa only.

Mr. Stevens acknowledged that Respondent had had Pentair come look at the heater and that Respondent was correct regarding the automation issue. He also testified however that the wiring had not been corrected, that the improper wiring was causing the propane heater to turn itself on, and that Pentair told him that the unit had the wrong circuit board. In support of his position, Mr. Stevens’s exhibits included an estimate by Arizona Mirage Pool Service and Repairs to provide equipment and perform a number of tasks, but does not show that the heater was improperly wired, and appears to show the work would allow for full automation of the heater (spa and pool).

Regarding complaint item #18, the blower, Mr. Voss testified that the blower had been replaced, although it did not require replacement, and the pipe for the blower had been raised. Mr. Voss was of the opinion that this problem was related to the fact that the water level in the spa was too high (i.e., that the spa was being overfilled).

Mr. Stevens testified that the problem was related to vigorous vibrations that were occurring in the spa and that raising the blower did not resolve the problem. In support of his position, Mr. Stevens referred to Arizona Mirage Pool’s and All Valley Pool’s estimates.

Mr. Lawton’s jobsite inspection notes show that on June 24, 2019, he could not verify that the spa was shaking or vibrating, which allegations made in were complaint item #12.

Mr. Voss acknowledged that the spa shakes and testified to the effect that Respondent was going to correct that issue when performing work that the parties had agreed to during the mediation, but Mr. Stevens requested that the matter be reconvened before that work could be undertaken.

The undersigned issued an Administrative Law Judge Decision dated January 25, 2021, finding in part:

There was no substantial evidence adduced showing that Respondent had violated Ariz. Rev. Stat. sections 32-1154(A)(9), (A)(12) or (A)(22).

It had not been shown that the spa leaked or that the heater was improperly wired (complaint items #5 and #17).

The preponderance of the evidence shows that the blower required repair (complaint item #18), which Respondent had completed by the date of the hearing.

Because the blower line required a repair, there was sufficient evidence to show that Respondent violated Ariz. Admin. Code section R4-9-108(a), which is a violation of Ariz. Rev. Stat. section 32-1154(A)(3).

Nevertheless, considering that Respondent had repaired the blower, it was appropriate to dismiss the matter without imposing discipline against Respondent’s license.

On February 5, 2021, ROC issued a Final Administrative Decision and Order accepting the ALJ Decision in all respects.

Complainant filed an appeal with Maricopa County Superior Court (case number LC2021-000068). ROC participated as a nominal party to that matter.

The superior court issued a JRAD Ruling on October 28, 2021. The court found that the ALJ erred by limiting the workmanship violations to those for which ROC cited Respondent. In reaching that conclusion, the court relied on Ariz. Rev. Stat. section 41-1061.

Section 41-1061 is not applicable to hearings at the Office of Administrative Hearings. See Ariz. Rev. Stat. § 41-1067 (T. 41, Ch. 6, Art. 6 applies only to “contested cases of agencies that are exempt from article 10 of this chapter as provided in section 41-1092.02.”).

The superior court’s JRAD Ruling called for the matter to be remanded to the ALJ to conduct a rehearing addressing all items raised in Complainant’s complaint.

On November 30, 2021 ROC filed a Motion for Clarification through which ROC informed the superior court that section 41-1067 shows that Title 32, Chapter 6, Article 6 is not applicable to hearings on ROC’s contested cases.

In its Motion for Clarification, ROC also set out its position that it has the sole discretion on whether to issue a Citation, that its Citation, not Complainant’s complaint sets the scope of the hearing, and that consideration of claims that were not the subject of ROC’s Citation raised due process concerns.

ROC also noted that Complainant could have filed a civil complaint against Respondent, in which case Complainant, not ROC, would control the issues.

In response to ROC’s Motion, the superior court directed the parties to brief two issues: (1) whether section 41-1061 et seq. is applicable to this matter; and (2) whether the scope of the hearing is limited to the issues in ROC’s Citation or as the court had ordered, the scope included the issues from ROC’s Citation and the other issues from Complainant’s complaint.

On December 6, 2021 ROC issued a Notice of Hearing on Contested Case setting the matter for rehearing on January 7, 2022. On December 8, 2021, at ROC’s request, the ALJ vacated that hearing.

On December 6, 2021, the superior court issued an Amendment to its JRAD Ruling to (1) clarify that the Court was ordering that the matter be remanded to the ALJ for a hearing on all issues raised in Complainant’s complaint; and (2) inform the parties that it would not rule on ROC’s Motion for Clarification unless ROC waived its status as a nominal party.

ROC did not waive its status as a nominal party in superior court, and in an Order dated January 4, 2022 the Court denied ROC’s Motion for Clarification.

On March 10, 2022, ROC issued its Notice of Hearing on Contested Case setting this matter for rehearing on April 20, 2022.

With respect to the issues for hearing, ROC’s Notice of [Re]-Hearing was essentially identical to the Notice of Hearing in the original matter. Notably, ROC did not include any statement or notice showing that it intended the scope of the hearing to include workmanship violations that ROC had not included in the Citation it issued to Respondent.

The ALJ informed the parties that because the superior court’s JRAD Ruling was based on section 41-1061, the Ruling did not appear to provide a sufficient basis on which to expand the hearing beyond the workmanship allegations for which ROC cited Respondent.

The ALJ provided the parties an opportunity to brief the issue.

Neither ROC nor Respondent filed a brief.

Complainant filed a brief in which he did not acknowledge that section 41-1067 explicitly shows that section 41-1061 et seq. is not applicable to this matter, nor did he address ROC’s position to the effect that that scope of the hearing was limited to ROC’s Citation, with Complainant able to file a civil suit if he wanted to address other issues.

In his brief, Complainant argued that there was no statute limiting the scope of the hearing. The ALJ issued an Order showing that section 41-1092.07(F)(6) does limit the scope of the hearing to issues properly noticed, and that the scope with respect to the alleged workmanship violations was limited to the three issues for which ROC cited Respondent, i.e., complaint items #5, #17 and #18.

The rehearing was convened on July 11, 2022.

Mr. Stevens was represented by counsel and testified on his own behalf; he also presented the testimony of Bryce Reblin, operations manager for Arizona Mirage Pools.

Mr. Voss appeared and testified for Respondent, which also presented Mr. Campbell’s testimony.

ROC’s Assistant Chief of Investigations Steven Nelsen was present and available to testify, but neither party had questions for him.

Mr. Stevens testified that soon after the installation was complete, he began to experience problems some of which were corrected by another contractor that Respondent hired to do so.

Regarding the heater (item #17), Mr. Stevens testified to the effect that the heater turns on and off without any action on his part. Respondent’s position is to the effect that this is a result of a remote control system that was not installed by Respondent, but rather was something for which Mr. Stevens paid an electrician directly.

Mr. Stevens did not agree that he had hired someone else to install the remote control, but did not present any documentation or provide any reference to the contract to show that Respondent had installed the remote control system.

Regarding the heater (item #17), in his Opening Brief in superior court, Mr. Stevens argued to the effect that his allegation was that the heater would turn itself on and that testimony about whether the heater was intended to heat both the spa and pool was not on point.

Nevertheless, at the rehearing, Mr. Stevens testified to the effect that he wanted the heater to be capable of heating both the pool and the spa. Mr. Voss testified to the effect that the parties had discussed the fact that the heater would not be able to heat the spa and the pool at the same time, but Respondent had constructed the system to allow the pool or the spa to be heated by manually activating the appropriate valves that were installed for that purpose.

Mr. Reblin conducted a jobsite inspection in early 2019, but had not been to the site since that time. Mr. Reblin confirmed that as installed the unit could not heat both the pool and spa at the same time. According to Mr. Reblin, a new actuator would be required to correct the issue. But Mr. Reblin acknowledged that he did not refer to the parties’ contract during his inspection. That contract, under “cost breakdown,” shows the heater under the spa section, and not the pool section, which fact Mr. Stevens acknowledged during the hearing.

Mr. Reblin’s testimony did not address the allegation that the heater was turning itself on.

Mr. Stevens testified that the spa continues to leak and that he had large water bills when he left the autofill on. Exhibit 12 is Jobsite Photos that show some staining on the tile at the base of the spa that in Mr. Stevens’s opinion shows the spa is leaking.

Complainant’s exhibit 20, an estimate from All Valley Pool Repairs Inc. includes $150 to fix a leak at the autofill separation in the grout. Mr. Voss agreed that this was a reasonable price.

Complainant’s exhibit 21, an estimate from Garza Pools, shows that it would demo the existing surface (pool and spa) and then it would check the spa for leaks.

CONCLUSIONS OF LAW

Unless otherwise provided by law, a party asserting a claim, right, or entitlement bears the burden of proof; a party asserting an affirmative defense has the burden of establishing the affirmative defense. The standard of proof on all issues in this matter is that of a preponderance of the evidence. Ariz. Admin. Code § R2-19-119.

“At a hearing on an agency action to suspend, revoke, terminate or modify on its own initiative material conditions of a license or permit, the agency has the burden of persuasion.” Ariz. Rev. Stat. § 41-1092.07(G)(2).

“At a hearing on an agency's imposition of fees or penalties or any agency compliance order, the agency has the burden of persuasion.” Ariz. Rev. Stat. § 41-1092.07(G)(3).

A preponderance of the evidence is:

The 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.

Black’s Law Dictionary 1373 (10th ed. 2014).

Statutes should be interpreted to provide a fair and sensible result. Gutierrez v. Industrial Commission of Arizona, 226 Ariz. 395, 249 P.3d 1095 (2011)(citation omitted); State v. McFall, 103 Ariz. 234, 238, 439 P.2d 805, 809 (1968) ("Courts will not place an absurd and unreasonable construction on statutes.").

“Statutes shall be liberally construed to effect their objects and to promote justice.” Ariz. Rev. Stat. § 1-211(B).

The purpose of the Registrar’s licensing statutes is to protect the public from unscrupulous, unqualified, and financially irresponsible contractors. See Aesthetic Property Maintenance v. Capital Indem. Corp., 183 Ariz. 74, 900 P. 2d 1210 (1995).

Communications made during mediations are confidential. See Ariz. Rev. Stat. § 12-2238.

The Administrative Law Judge may consider ROC’s administrative record. See Ariz. Admin. Code § R4-9-118.

Ariz. Rev. Stat. section 41-1061et seq. is not applicable to this matter. See Ariz. Rev. Stat. § 41-1067.

ROC has sole discretion when determining whether to issue citations. Ariz. Rev. Stat. § 32-1155. The administrative record shows that ROC did not cite Respondent for any alleged workmanship violations other than complaint items #5, #17 and #18.

The scope of the hearing is limited to the issues properly noticed. See Ariz. Rev. Stat. § 41-1092.07(F)(6). Because ROC did not cite Respondent for any complainant items other than items #5, #17 and #18, those are the only workmanship issues that have been properly noticed.

Ariz. Rev. Stat. section 32-1154(A) provides that:

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:

*****

3. Violation of any rule adopted by the registrar.

*****

9. Attempting to evade this chapter by:

(a) Aiding or abetting a licensed or unlicensed person.

(b) Acting or conspiring with a licensed or unlicensed person.

(d) Acting as agent, partner, associate or otherwise of a licensed or unlicensed person.

*****

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. 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.

Ariz. Admin. Code section R49108(A) provides that “A contractor shall perform all work in a professional and workmanlike manner.”

Ariz. Rev. Stat. section 32-1154(E) provides that ROC may impose a civil penalty of not to exceed five hundred dollars on a contractor for each violation of Ariz. Rev. Stat. section 32-1154(A)(22).

There was no substantial evidence adduced showing that Respondent has violated Ariz. Rev. Stat. sections 32-1154(A)(9), (A)(12) or (A)(22).

It has not been proven that the spa is leaking as a result of poor work on Respondent’s part (complaint item #5). To the contrary, Mr. Stevens had a pressure test conducted that shows there was no leakage from the spa’s plumbing. The evidence suggests two possible sources for the leakage Mr. Stevens has observed: the spa being overfilled causing water to get under the coping, and the leak at the autofill. But it has not been proven that either of these possible sources are the result of poor workmanship by Respondent.

It has not been proven that Respondent improperly wired the heater (complaint item #17). Although the heater will not work to heat the spa and the pool simultaneously, it has not been proven that the parties’ contract required the heater to do so. And although Mr. Stevens testified as to the heater turning itself on, the preponderance evidence does not show that this was as a result of poor work on Respondent’s part, and there is evidence to show that Mr. Stevens may have hired someone else to work on the remote system that may be causing the problem.

The preponderance of the evidence at the first hearing did show that the blower required repair, but Respondent had repaired that issue before the original hearing.

Because the blower line required a repair, there is sufficient evidence to show that Respondent violated Ariz. Admin. Code section R4-9-108, which is a violation of Ariz. Rev. Stat. section 32-1154(A)(3). Nevertheless, considering that Respondent has repaired the blower, it is appropriate to dismiss this matter without imposing discipline against Respondent’s license.

RECOMMENDED ORDER

IT IS ORDERED that case number 2019-00647 is dismissed.

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 is forty days after the date of that certification.

-54864001

001

-137160-45720000Done this day, September 14, 2022.

/s/ Thomas Shedden

Thomas Shedden

Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director

Registrar of Contractors

-54864001

001

-137160-45720000By Miranda Alvarez

Legal Secretary