ALJDEC decisions subject to certification as final

2019A-02133-RFA-ROC-RES · Registrar of Contractors · 2021-04-11

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Scott and Alison Brunsdon,

COMPLAINANTS,

v.

TLS Construction & Design Inc.,

F/K/A: Remodel and Build AZ Inc.,

License No. ROC 297420,

RESPONDENT.

No. 2019A-02133-RFA-ROC-RES

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: March 25, 2021 at 9:00 AM.

APPEARANCES: Assistant Attorney General John Tellier, Esq. appeared on behalf of the Arizona Registrar of Contractors (“Registrar”) with Katelyn Rolling as a witness. Scott Brunsdon appeared on behalf of Alison Brunsdon and his himself (“Complainants”). Thomas Straub appeared on behalf of TLS Construction & Design Inc. (“Respondent”). Alison Brunsdon and Beth Morrow observed.

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 April 15, 2015, the Registrar issued License No. 297420, for General Residential B contracting, to Respondent. Thomas Lawrence Straub is the Qualifying Party and Officer on this license. Respondent’s address of record on the license is 14602 E. Corrine Dr. Scottsdale, AZ 85259.

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. The license is active and renewed through April 30, 2021. The license has been disciplined by the Registrar on 1 prior occasion, which is presumed to be related to this matter. The license has a $9,000.00 surety bond issued RLI Insurance Company, effective March 05, 2020.

On April 25, 2019, the Registrar received an abandonment and poor workmanship complaint from Complainants, which included copies of pertinent contract agreements, invoices, proof of payments, and a summary of Complainants’ allegations against Respondent.

On June 28, 2019, Registrar investigator Beau Cruz (“Investigator Cruz”) conducted a review of the contract executed between the parties and inspected the work that had been done on the project to date. Respondent attended. Investigator Cruz took five photographs of the project. When he was finished, Investigator Cruz drafted Jobsite Inspection Notes.

On July 01, 2019, Investigator Cruz issued a Directive from the Registrar to Respondent because he substantiated two of Complainants’ complaint items that alleged Respondent’s work on the project failed to meet minimum workmanship standards. Respondent was ordered to complete the project per contract via appropriate means. Respondent was put on notice that he had until 5:00 p.m. on July 17, 2019, to notify the Registrar of its compliance with the corrective order or face discipline pursuant to Ariz. Admin. Code R4-9-108, and Ariz. Rev. Stat. §§ 32-1154(A)(22) and 32-1154(E).

Respondent failed to timely comply.

On July 23, 2019, the Registrar issued a Citation and Complaint to Respondent for alleged violations of Ariz. Rev. Stat. §§ 32-1154(A)(3); a violation of Ariz. Admin. Code R4-9-108, and 32-1154(A)(22). Respondent was given until August 07, 2019, to respond with its Answer or face discipline pursuant to Ariz. Rev. Stat. §§ 32-1154(A)(22) and 32-1155.

On August 07, 2019, the Registrar received Respondent’s Answer.

On August 19, 2019, the Registrar referred this matter to the Office of Administrative Hearings (“OAH”), an independent state agency, for an evidentiary hearing on October 16, 2019. Per the September 12, 2019, 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)(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.”).

As a result of the aforementioned hearing, on January 17, 2020, the Registrar issued a Final Administrative Decision and Order to the parties whereby Respondent was held to be in violation of Ariz. Rev. Stat. §§ 32-1154(A)(3); Ariz. Admin. Code R4-9-108, and 32-1154(A)(22). As such, the Registrar suspended Respondent’s license for two (2) calendar days and imposed a $200.00 civil penalty under Ariz. Rev. Stat. § 32-1154. On February 26, 2020, the Final Administrative Decision and Order became effective.

On or about May 11, 2020, the Registrar received Complainants’ 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 $40,001.68. Attached were documents titled Remodel Spending Schedule and Schedule of Compensation. Shortly afterward, the Registrar obtained copies of the parties’ underlying contract, proof of payments Complainants issued to Respondent, and a denial letter from Respondent’s surety company issued April 17, 2020.

On August 05, 2020, the Registrar issued a Notice of Claim for Administrative Award to the parties which held Complainants were awarded $4,164.72 from the Fund.

On August 19, 2020, Respondent filed an appeal and request for administrative hearing.

On August 21, 2020, the Registrar issued a Recovery Fund Quash Order to the parties which quashed the prior award notification and noted that an additional review of the proposed award was necessary.

On August 21, 2020, the Registrar issued a second Notice of Claim for Administrative Award to the parties which held Complainants were awarded $3,707.90 from the Fund.

On August 22, 2020, Complainants filed an appeal and request for administrative hearing.

On September 25, 2020, the Registrar once more referred the matter to OAH for an independent evidentiary hearing on November 09, 2020. Per the Notice of Recovery Fund Hearing, the issue for hearing was to determine if Complainants’ award from the Fund was properly calculated and appropriately issued pursuant to Ariz. Rev. Stat. §§ 32-1132 to 32-1133.01 and 32-1154(F), as justified by the evidence. The matter, however, was vacated from OAH’s calendar on November 17, 2020.

On November 16, 2020, the Registrar issued a Recovery Fund Quash Order to the parties which quashed the second award notification. That same day the Registrar issued a Notice and Order of Recovery Fund Claim Denial to the parties which held that Complainants were ineligible to receive an administrative payout award from the Fund because they were not considered “damaged.” Specifically, the Registrar found that Complainants submitted a bid from an improperly licensed contractor. The contractor, Canyon Floors LLC, possessed a Specialty Dual CR-8 flooring contracting license which only permitted them to perform flooring work for residential and commercial projects, and prohibited all other work as being as being outside the scope of their license (including, but not limited to repairing, removing, and installing cabinets, crown molding, and countertops as identified for correction in the Registrar’s related Directive).

On December 14, 2020, the Registrar reopened the matter and referred it back to OAH for an independent evidentiary hearing on February 02, 2021. Per the Notice of Recovery Fund Hearing sent to the parties on December 30, 2020, the issue for hearing is to determine whether Complainants are eligible to access the Fund under Ariz. Rev. Stat. §§ 32-1131 et seq., based on the evidence.

On March 25, 2021, an administrative evidentiary hearing took place at OAH.

Hearing Evidence

At the hearing, the Registrar called Katelyn Rolling as a witness and submitted 18 exhibits. Scott Brunsdon testified on behalf of Complainants and submitted 1 exhibit. Respondent called Thomas Straub as a witness. The Notice of Recovery Fund Hearing was also admitted into the record. The substantive evidence is as follows:

The Brunsdon Family Trust owns residential property owned by located at 15156 E. Twilight View Dr. Fountain Hills, AZ 85268.

Ms. Rolling is a Legal Assistant II for the Registrar. Mr. Ulmer made the determination that Complainants are ineligible for a payout from the Fund.

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.

Although Complainants satisfied all statutory requirements for to access the Fund, Complainants are ineligible to receive an administrative payout because they submitted an invalid bid.

Here, Complainants only submitted 1 bid from a licensed contractor, Canyon Floors LLC, to perform corrective work under the Registrar’s Directive. Canyon Floors LLC, ROC License No. 324592, holds a Specialty Dual CR-8 Floor Covering license as of May 20, 2019. The Registrar’s Directive only required Respondent to remediate complaint items 39 (i.e. cabinets and crown molding) and 40 (i.e. soap stone countertop). No flooring remediations were required for the parties’ project.

On November 16, 2020, a Warning Letter was issued to Canyon Floors LLC for an alleged violations of Ariz. Rev. Stat. §§ 32-1154(A)(16) for contracting with Complainants outside the scope of its license.

In closing, Complainants argued that because they believed they were following applicable statutes and regulations when they submitted their bid from Canyon Floors LLC to the Registrar, that they should be awarded an administrative payout.

In closing, the Registrar argued that unlicensed or improperly licensed contractors are statutorily prohibited from performing contracting services and may be subject to discipline by the Registrar for knowingly engaging in such conduct. The Registrar further argued that permitting Canyon Floors LLC to remediate the parties’ contract, and thereby awarding Complainants with an administrate payout from the Fund, would amount to the Registrar encouraging, promoting, and rewarding unlicensed and improperly licensed contracting in direct conflict with its duty to protect the public.

Respondent did not provide a closing argument.

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. 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 neither Complainants nor Respondent presented any substantive evidence at hearing. In fact, Complainants conceded that they were unaware of the Registrar’s requisite licensing requirements for bid submission in Fund petitions, and admitted that Canyon Floors LLC were only licensed for flooring contracting. Complainants’ “alter ego doctrine” and “pierce the corporate veil” arguments are not applicable in this matter.

As such, Complainants failed to sustain his burden of proof in this matter.

Additionally, Respondent’s appeal is rendered moot by the issuance of the Registrar’s Notice and Order of Recovery Fund Claim Denial.

The record reflects that after multiple reviews the Registrar soundly established Complainants ineligibility to access the Fund. Ms. Rolling credibly testified how she diligently researched Canyon Floors LLC’s license and ultimately determined, after conferring with Investigator Cruz, that Canyon Floors LLC was not properly licensed to remediate any of the corrective items identified in the Registrar’s Directive.

Because Complainants offered no credible evidence to rebut Ms. Rolling’s testimony, the undersigned Administrative Law Judge must conclude that Complainants were properly denied access to the Fund. Complainants appeal is therefore denied.

RECOMMENDED ORDER

Based on the foregoing,

it is recommended that Complainants’ appeal be denied on the merits.

IT IS FURTHER RECOMMENDED that Respondent’s appeal is procedurally denied as moot.

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, April 12, 2021.

Office of Administrative Hearings

/s/ Jenna Clark

Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director

Registrar of Contractors