FINACT2019A-02670-CHC-ROC.pdf

2019A-02670-CHC-ROC · Registrar of Contractors · 2020-03-05

REGISTRAR OF CONTRACTORS OF THE STATE OF ARIZONA

Vanessa Raquel Pena, Case No. 2019-02670 COMPLAINANT, Docket No. 2019A-02670-CHC-ROC v. FINAL ADMINISTRATIVE NE2AZ LLC, DECISION AND ORDER License No. ROC 310115, RESPONDENT.

Under A.R.S. § 41-1092.08(B), the Registrar may review and accept, modify, or reject

an administrative law judge’s written decision. If the Registrar modifies or rejects that

decision, then the Registrar must provide written justification setting forth the reasons for the

modification or rejection of each finding of fact or conclusion of law.

REGISTRAR’S ACCEPTANCE

In this case, a hearing was held, and the administrative law judge issued a written

decision. See Administrative Law Judge Decision, attached. The Registrar reviewed that

decision and accepts it.

CONCLUSION AND ORDER

Because the Registrar has accepted the administrative law judge’s decision, that

decision is the final administrative decision in this case and becomes effective on April 14,

2020.

FINAL NOTE

On page two, paragraph two, line three, add “one” between “is” and “open.”

On page two, paragraph three, line seven, “17, 2018” should be “14, 2016.” On page two, paragraph five, line 21, add “electrical” between “closet,” and “HVAC.”

of 2 REGISTRAR OF CONTRACTORS 1700 W. Washington St. – Ste. 105 – Phoenix, AZ 85007-2812 Telephone (602) 542-1525 Toll Free (877) 692-9762 Lg131 8/19 On page eight, paragraph 12, line 20, after “violation”, add “of subsection A, paragraph 22 of this section.” Dated March 5, 2020. By: /s/ Joseph Citelli Joseph Citelli Chief Counsel Chief of Legal Department and Recovery Fund Arizona Registrar of Contractors Copy mailed via USPS First Class Mail March 5, 2020 to: Respondent NE2AZ LLC 4139 E Breckenridge Way Gilbert, AZ 85234 Complainant Vanessa Raquel Pena 4216 W Hearn Rd Phoenix, AZ 85053 Copy sent electronically this same date to: Office of Administrative Hearings Jenna Clark, Administrative Law Judge Respondent at email address on record with the Registrar Complainant at email address on record with the Registrar Case No. 2019-02670 / KR

of 2 REGISTRAR OF CONTRACTORS 1700 W. Washington St. – Ste. 105 – Phoenix, AZ 85007-2812 Telephone (602) 542-1525 Toll Free (877) 692-9762 Lg131 8/19 RECEIVED 2.14.2020 ROC LEGAL

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Vanessa Raquel Peña, No. 2019A-02670-CHC-ROC COMPLAINANT, ADMINISTRATIVE LAW JUDGE v. DECISION NE2AZ LLC, ROC License: ROC 310115, RESPONDENT

HEARING: February 03, 2020 at 9:00 AM. APPEARANCES: Vanessa Raquel Peña (“Complainant”) appeared on her own behalf with Steve Klein as a witness. No appearance(s) by or on behalf of NE2AZ LLC (“Respondent”). Miguel Peña observed. ADMINISTRATIVE LAW JUDGE: Jenna Clark. _____________________________________________________________________ Having heard the evidence and testimony and having considered the record in this matter, the undersigned Administrative Law Judge hereby makes the following Findings of Fact and Conclusions of Law and issues the following RECOMMENDED ORDER to the Director of the Arizona Registrar of Contractors (“Registrar”). FINDINGS OF FACT BACKGROUND AND PROCEDURE 1. On December 28, 2016, the Registrar issued License No. 310115 for general residential B contracting to Respondent.1 Respondent’s address of record for the license is 4139 E Breckenridge Way, Gilbert, AZ 85234.2 Joseph Michael Clark is listed on the license as a Member.3 2. Pursuant to ARIZ. ADMIN. CODE R4-9-117 Administrative Notice is taken of Respondent’s prior License record, for License No. 310115, as reflected on the

1 See https://roc.az.gov/contractor-search?Id=a0ot0000000NpLt. At the time Complaint 2019-02670 was filed Respondent’s address of record was 6833 E. Menlo St., Mesa, AZ 85207. 2 Id. Id. Please note, there is no kinship between the undersigned Administrative Law Judge and Joseph Clark. RECEIVED 2.14.2020 ROC LEGAL

Registrar’s public website on February 03, 2020. Such prior License record reflects that Respondent’s license is currently active. The license has been disciplined on two prior occasions, and the record reflects that there is open complaint against Respondent’s license, which is presumed to be related to this matter.4 Respondent has a cancelled $9,000.00 surety bond that was originally issued through Merchants Bonding Company (Mutual) effective November 14, 2016, through July 21, 2019.5 3. On or about November 17, 2018, Complainant and Respondent entered into a flood mitigation and remodeling agreement whereby Respondent agreed to repair and remodel Complainant’s residential property located at 4216 W. Hearn Rd., Phoenix, AZ 85053 to include demolition and removal, HVAC, electrical, plumbing, flooring, foyer, guest bathroom, half bath, master bathroom, master bedroom, guest bedrooms, kitchen, laundry room, closets, living room, stairs, and paint, for the sum total of $76,168.18.6 The project commenced on November 19, 2018, and was to be completed by March 18, 2019.7 $30,467.27 was due at signing, $19,042.04 was due once the project was half complete and again once the project was three quarters complete, and $7,616.83 was due as final payment upon completion.8 4. Complainant issued two payments to Respondent on December 19, 2018, for $40,000.00, and on August 29, 2018, for $12,022.54 to cover the cost of the project.9 5. On December 11, 2018, a Change Order was executed between the parties regarding modifications to the scope of work in the kitchen, family room, foyer, bedrooms, bathrooms, laundry room, closet, and HVAC for a total of $4,890.00.10 The completion date was extended to May 06, 2019, and then later to June 07, 2019.11 6. On May 22 2019, the Registrar received a complaint from Complainant alleging abandonment and poor work performance.12 Complainant included a copy of her

Id. Id. See Agency File, pages 28-87. See Agency File, pages 28-73. 8 See Agency File, page 86. See Agency File, pages 88 and 117. 10 See Agency File, pages 24-27 and 89-90. See Agency File, pages 60 and 63-73. 12 See Agency File, pages 21-22. 2 RECEIVED 2.14.2020 ROC LEGAL

contractual agreement with Respondent, a Change Order agreement, proof of payments issued to Respondent, and subcontracting agreements.13 7. On June 04, 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 July 11, 2019, at 10:00 a.m.14 8. On July 11, 2019, Registrar investigator Steve Klein (“Investigator Klein”) conducted a review of the contract executed between the parties. Investigator Klein also inspected the work that had been done on the project to date and took fourteen photographs of the project.15 When he was finished, Investigator Klein drafted JOBSITE INSPECTION NOTES.16 9. On July 11, 2019, Investigator Klein issued a DIRECTIVE FROM THE REGISTRAR to Respondent because he substantiated Complainant’s allegation that Respondent abandoned the contracted project and that the work Respondent had done failed to meet minimum workmanship standards.17 Respondent was put on notice that it had until July 30, 2019, to notify the Registrar of its compliance with the DIRECTIVE or face discipline pursuant to ARIZ. ADMIN. CODE R4-9-108, and ARIZ. REV. STAT. §§ 32- 1154(A)(22) and 32-1154(E).18 10. On August 21, 2019, the Registrar issued a CITATION AND COMPLAINT to Respondent for alleged violations of ARIZ. REV. STAT. §§ 32-1154(A)(1), 32-1154(A)(2), 32-1154(A)(3); ARIZ. ADMIN. CODE R4-9-108, and 32-1154(A)(22).19 Respondent was given until September 05, 2019, to respond with its ANSWER or face discipline pursuant to ARIZ. REV. STAT. §§ 32-1154(A)(22) and 32-1155.20 11. On September 05, 2019, the Registrar received Respondent’s ANSWER whereby Respondent denied abandoning Complainant’s project, and instead argued that

See Agency File, pages 23-88. See Agency File, pages 135-137. Notably, this correspondence was returned to the Registrar as undeliverable by the United States Postal Service on June 28, 2019. See Agency File, pages 153-166 16 See Agency File, pages 130-131. See Agency File, pages 120-121. 18 Id. See Agency File, pages 15-21. 20 Id. 3 RECEIVED 2.14.2020 ROC LEGAL

it had informed Complainant that work on the project would be performed “in between” Respondent’s work for other clients.21 Respondent admitted that it had not obtained building permits from the local city authority prior to commencing work on the project, but denied ever being provided or served with a copy of the Registrar’s DIRECTIVE.22 Respondent did not directly address the Registrar’s allegation of poor work. Attached to its ANSWER, Respondent included a Change of Address form (RCL302) which provided updated postal mailing and electronic mailing information from Joseph Clark.23 No update was provided for Respondent’s telephone number. 12. On September 09, 2019, the Registrar referred this matter to the Office of Administrative Hearings (“OAH”), an independent state agency, for an evidentiary hearing on October 15, 2019. Per the NOTICE OF HEARING the issue to be determined is whether the ROC has cause to discipline Respondent’s license based on the following charges: Charge 1: A violation of A.R.S. § 32-1154(A)(1) (“Abandonment of contract or refusal to perform after submitting a bid on work without legal excuse for the abandonment or refusal.”) Charge 2: A violation of A.R.S. § 32-1154(A)(2) (“Departure from or disregard of plans or specifications or any building codes of the 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.”). Charge 3: 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 4: 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.”).24

See Agency File, page 4. 22 Id. See Agency File, page 5. 24 See NOTICE OF HEARING. 4 RECEIVED 2.14.2020 ROC LEGAL

HEARING EVIDENCE 13. Complainant appeared and testified on her own behalf with Investigator Klein as a witness. No appearance(s) by or on behalf of Respondent. The Registrar’s agency file and NOTICE OF HEARING were admitted into the record as their own exhibits. Investigator Klein’s testimony 14. Investigator Klein testified that he was assigned by the Registrar to investigate Complaint 2019-02670. 15. Per Investigator Klein, licensees are responsible for ensuring that their contact information on file with the Registrar is correct and up to date. The Registrar uses information, as provided by a licensee, to issue correspondence via regular United States Postal mail and email. 16. On June 28, 2019, the JOBSITE INSPECTION LETTER originally sent to Respondent on June 04, 2019, was returned to the Registrar by the United States Postal Service as undeliverable/unable to forward.25 On July 02, 2019, Investigator Klein sent an email to Respondent with the JOBSITE INSPECTION LETTER as an attachment, but it was immediately returned as undeliverable.26 Investigator Klein telephoned Respondent that same day and left a voicemail message regarding Respondent’s returned mail. 17. Respondent did not attend the July 11, 2019, Jobsite Inspection. 18. On August 17, 2019, Investigator Klein received written confirmation from Complainant that Respondent failed to comply with the Registrar’s DIRECTIVE.27 19. On August 19, 2019, Investigator Klein forwarded Complaint 2019-02670 to the Registrar’s legal department with citation recommendations, as he had not had any contact with Respondent between the issuance of the DIRECTIVE and expiration of the compliance deadline. Complainant’s testimony

25 See Agency File, page 137. See Agency File, page 133. 27 See Agency File, pages 122-124. 5 RECEIVED 2.14.2020 ROC LEGAL

20. Complainant testified that she and her husband own the residential property located at 4216 W. Hearn Rd., Phoenix, AZ 85053. Per Complainant, the two-story home is approximately 2,600 square feet and has four bedrooms and three bathrooms. 21. While Complainant and her family were away on a week-long vacation, a water pipe in an upstairs bathroom burst and caused flood damage so extensive that it resulted in the second floor of her home caving and crashing down to the first floor. Most of the home’s interior was extensively damaged or essentially destroyed. 22. Complainant was instructed by her homeowner’s insurance company (“Insurance Company”) to obtain and provide them with three remediation/remodel quotes.28 Insurance Company chose the middle estimate which was Respondent’s company. 23. After Respondent was issued the first $40,000.00 payment communication ceased between the parties. 24. Multiple Change Orders were executed on the project, in part, to get Respondent to agree to incremental progress deadlines. After Respondent missed several deadlines and stopped responding to Complainant’s text messages and emails, Complainant filed a complaint with the Registrar. 25. Complainant testified that her family has been displaced from their home for nearly two years due to Respondent’s abandonment of their project. CONCLUSIONS OF LAW 1. The Registrar has jurisdiction over this matter pursuant to ARIZ. REV. STAT. §§ 32-1101 et seq. and 32-1154(A). The matter was properly brought before OAH pursuant to ARIZ. REV. STAT. §§ 41-1092 et seq. 2. The Registrar may resolve contractual disputes if such resolution in ancillary to its regulatory mission and may penalize a contractor’s license by ordering payment of restitution if a proven statutory violation was not remedied by corrective action.29

28 See Agency File, pages 91-114. See ARIZ. REV. STAT. § 32-1156.01; Sunpower of Arizona v. Arizona Registrar of Contractors, 166 Ariz. 437, 441, 803 P.2d 430, 434 (App. 1990). 6 RECEIVED 2.14.2020 ROC LEGAL

3. The purpose of the Registrar’s licensing statutes is to protect the public from unscrupulous, unqualified, and financially irresponsible contractors.30 4. The NOTICE OF HEARING the Registrar mailed to Respondent’s address of record is sufficient, and Respondent is deemed to have received notice of the hearing in this matter.31 Because the Registrar mailed all correspondence to Respondent in the same manner and failed to receive any mail returned as undeliverable, Respondent is deemed to have received all correspondence regarding this matter from the Registrar as well. 5. Complainant bears the burden of proof to establish cause to discipline Respondent’s license by a preponderance of the evidence.32 Respondent bears the burden to establish factors in mitigation of the penalty and affirmative defenses by the same evidentiary standard.33 6. “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”34 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.”35 7. ARIZ. REV. STAT. § 32-1154(A)(1) includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license, “[a]bandonment of contract or refusal to perform after submitting a bid on work without legal excuse for the abandonment or refusal.” 8. ARIZ. REV. STAT. § 32-1154(A)(2) includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license,

See Aesthetic Property Maintenance v. Capital Indem. Corp., 183 Ariz. 74, 900 P. 2d 1210 (1995). See ARIZ. REV. STAT. §§ 41-1092.04, 41-1092.05(D), and 41-1061(A). 32 ARIZ. REV. STAT. § 41-1092.07(G)(2); ARIZ. ADMIN. CODE R2-19-119(B)(1); see also Vazanno v. Superior Court, 74 Ariz. 369, 372, 249 P.2d 837 (1952). 33 See ARIZ. ADMIN. CODE R2-19-119(B)(2). MORRIS K. UDALL, ARIZONA LAW OF EVIDENCE § 5 (1960). BLACK’S LAW DICTIONARY at page 1220 (8th ed. 1999). 7 RECEIVED 2.14.2020 ROC LEGAL

“[d]eparture from or disregard of plans or specifications or any building code standards without consent of the owner.” 9. ARIZ. REV. STAT. § 32-1154(A)(3) includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license, “[v]iolation of any rule adopted by the registrar.” 10. ARIZ. ADMIN. CODE 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.” 11. ARIZ. REV. STAT. § 32-1154(A)(22) holds, in pertinent part, that “[a] holder of a license may not fail to take appropriate corrective action to comply with this chapter or 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. The Registrar has the authority to issue license discipline under this provision, including summary suspension, revocation, or imposing a civil penalty or recovery fund award.” 12. ARIZ. REV. STAT. § 32-1154(E) holds, in pertinent parts, that the Registrar may “[i]mpose a civil penalty not to exceed five hundred dollars on a contractor for each violation. The failure by the licensee to pay any civil penalty imposed results in the automatic revocation of the license thirty days after the effective date of the order providing for the civil penalty. It also holds that no future license may be issued to an entity consisting of a person who is associated with the contractor, unless payment of any outstanding civil penalty is tendered.” 13. Here, the material facts are not in dispute. 14. It is undisputed that Complainant contracted with Respondent for a residential flood mitigation and remodeling project. It is also undisputed that Complainant issued payments to Respondent for services and materials on said project. It is further undisputed that Respondent commenced work on the project without possessing a valid 8 RECEIVED 2.14.2020 ROC LEGAL

building permit, did not complete the work per contract, and that the work Respondent performed on the project fell below the Registrar’s minimum workmanship standards. Moreover, it is undisputed that the Registrar issued its DIRECTIVE to Respondent on July 11, 2019, which required Respondent’s full compliance by July 30, 2019, and that Respondent failed to timely comply. 15. Therefore, the only remaining issue to address is whether Respondent raised a sufficient justification or excuse for failing to timely and completely finish Complainant’s project per contract. This is an affirmative defense that Respondent bears the burden to establish. Because Respondent failed to appear and provide testimony, this burden has not been sustained. The record shows that Respondent failed to adhere to a Registrar DIRECTIVE, and had no affirmative defense(s) for doing so. 16. Because Complainant established violations of ARIZ. REV. STAT. §§ 32- 1154(A)(1), 32-1154(A)(2), 32-1154(A)(3); ARIZ. ADMIN. CODE R4-9-108, and 32- 1154(A)(22) by a preponderance of the evidence, Complainant has also established grounds for the Registrar to take disciplinary action against Respondent’s license and impose a civil penalty against Respondent pursuant to ARIZ. REV. STAT. § 32-1154(E).

17. Complainant may petition the Registrar’s Recovery Fund for financial

recompense regarding this matter, as the Tribunal has no jurisdiction to award a refund

of the underlying amount contracted between the parties. RECOMMENDED ORDER Based on the foregoing, IT IS RECOMMENDED that that on the effective date of the FINAL ORDER in this matter Respondent NE2AZ LLC, ROC License No. 310115, shall be revoked. 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 40 days from the date of that certification. Done this day, February 13, 2020.

/s/ Jenna Clark Administrative Law Judge

9 RECEIVED 2.14.2020 ROC LEGAL

Transmitted electronically to:

Jeffrey Fleetham, Director Registrar of Contractors

10