ALJDEC decisions subject to certification as final

2019A-03406-RFA-ROC · Registrar of Contractors · 2020-05-08

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Darren James Hoggatt,

COMPLAINANT,

Danny Meador Construction LLC,

ROC License: ROC 296063, 286709,

RESPONDENT.

No. 2019A-03406-RFA-ROC

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: April 20, 2020 at 9:00 AM.

APPEARANCES: Darren J. Hoggatt (“Complainant”) appeared on his own behalf. No appearance(s) by or on behalf of Danny Meador Construction LLC (“Respondent”). Assistant Attorney General Sarah Asta, Esq. appeared on behalf of the Arizona Registrar of Contractors (“Registrar”) with Katelyn Rolling as a witness.

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 or about February 10, 2014, the Registrar issued License No. 286709, specialty dual CR-61 carpentry, remodeling and repairs contracting license, to Respondent. Daniel Eugene Meador is the Qualifying Party and Member on this license. Destiny Lynn Meador is also listed as a Member on the license. Respondent’s address of record on the license is 24654 N. Lake Pleasant Pkwy., Ste. #411, Peoria, AZ 85383-2782.

According to the Registrar’s public website, on or about January 22, 2015, the Registrar issued License No. 296063, general residential B contracting license, to Respondent. Daniel Eugene Meador is the Qualifying Party and Member on this license. Destiny Lynn Meador is also listed as a Member on the license. Respondent’s address of record on the license is 9802 W. Bell Rd. Sun City, AZ 85372.

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 On July 18, 2019, License No. 296063 was revoked by the Registrar. There are no open complaints against the license, however, the license has been disciplined by the Registrar on 24 prior occasions. The record also reflects that there is 1 resolved or otherwise settled complaint on the license. The license did have a $15,000.00 surety bond issued by Old Republic General Insurance Corporation effective January 06, 2019, which was cancelled on March 20, 2019. The license also had a $15,000.00 surety bond issued by RLI Insurance Company effective March 26, 2019, which was cancelled on August 11, 2019.

On June 28, 2019, Complainant filed a complaint against Respondent with the Registrar alleging abandonment. In the complaint, Complainant asserted that on or about June 11, 2018, Complainant and Respondent entered into a contract whereby Respondent agreed to perform residential kitchen and pool remodeling services for Complainant for the sum total of $110,719.07 plus the costs of additional Change Orders, and Respondent failed to complete the project as contracted. The Registrar received the complaint on July 02, 2019, whereby it was designated Complaint No. 2019-03406 and assigned to Dennis Bierma (“Investigator Bierma”) for investigation.

On an unknown date, Respondent issued a letter to Complainant whereby it provided information regarding the immediate dissolution of its company. Respondent advised that it would not be able to complete Complainant’s kitchen/pool remodel project, and provided information regarding the Arizona Residential Contractors’ Recovery Fund (“Recovery Fund”).

On July 17, 2019, Licenses Nos. 286709 and 296063 for Respondent were revoked via Consent Order. The Consent Order consolidated 10 homeowner complaints received by the Registrar, including Complainant’s.

On July 22, 2019, Investigator Bierma completed his inspection of Complainant’s project. Respondent was not in attendance. Ultimately, Investigator Bierma determined that Respondent had begun work on the project but had not completed it. Investigator Bierma further determined that the work Respondent had performed fell below the Registrar’s minimum workmanship standards.

On July 26, 2019, a Directive From The Registrar (“Directive”) was issued by the Registrar which instructed Respondent to complete the project per contract and provide written proof of completion to the Registrar no later than 5:00pm on August 13, 2019. Respondent was also put on notice that if its license had been revoked it was only permitted to remedy the listed violation(s) by paying a licensed contractor as hired by Complainant or by entering into a financial settlement agreement with Complainant.

Complainant and Respondent did not execute a financial agreement on or by August 13, 2019, to resolve Complaint No. 2019-03406.

On August 13, 2019, a Citation was issued and sent certified and first class mail to Respondent’s address of record charging Respondent with abandonment of contract in violation of Ariz. Rev. Stat. § 32-1154(A)(1), failure to meet minimum construction standards in violation of Ariz. Rev. Stat. § 32-1154(A)(3) and Ariz. Admin. Code R4-9-108, knowingly contracting beyond the scope of a license in violation of Ariz. Rev. Stat. § 32-1154(A)(16), and for failing to take corrective action after a written directive was issued by the Registrar in violation of Ariz. Rev. Stat. § 32-1154(A)(22). Respondent was advised to submit a written Answer to the Registrar by September 03, 2019, and that failing to do so would constitute an admission pursuant to Ariz. Rev. Stat. § 32-1155(B).

Respondent did not submit an Answer to the Registrar.

On September 16, 2019, 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)(1), 32-1154(A)(3); Ariz. Admin. Code R4-9-108, 32-1154(A)(16), and 32-1154(A)(22). As such, the Registrar revoked Respondent’s licenses under Ariz. Rev. Stat. §§ 32-1154 and 32-1155.

On September 19, 2019, the Registrar received a claim for payment with the Recovery Fund from Complainant. Complainant did not indicate a specific amount of deposit to be refunded, however, Complainant did specifically request a $30,000.00 payment from the Recovery Fund.

On November 21, 2019, the Registrar issued a Notice and Order of Recovery Fund Claim Denial which held that Complainant was not legally eligible for an administrative awarded from the Fund. Specifically, the Registrar determined that the sum total for the project was $138,287.43, the original contract price plus 7 additional Change Orders less $90,725.23 that Complainant had paid Respondent, leaving a balance owed of $47,562.20. The Registrar also determined that in remediating the project, Complainant issued payments totaling $53,062.00 to an unlicensed contractor through a third-party licensed entity. Because the Registrar determined that Complainant did not have actual damages as a result of the underlying project, Complainant was deemed to be ineligible to access the Recovery Fund.

On November 21, 2019, the Registrar received a timely appeal request from Complainant contesting his Recovery Fund denial.

On November 27, 2019, the Registrar referred the matter to the Office of Administrative Hearings (“OAH”) for an independent evidentiary hearing on January 09, 2020. The issue at hearing was to determine if an award and payment from the Recovery Fund pursuant to Ariz. Rev. Stat. § 32-1131 et seq. is justified by the evidence.

Hearing Evidence

At the hearing, the Registrar presented the testimony of Katelyn Rolling and submitted Exhibits 1-18. Complainant testified on his own behalf and submitted Exhibits C-G and I-M. The Notice of Hearing and the Registrar’s electronic hearing file (“Agency File”) were also admitted into the record as their own exhibits. The substantive facts are as follows:

Complainant owns residential property located at 8101 E Sheridan St. Scottsdale, AZ 85257, which is the site of the underlying project at issue.

Ms. Rolling is a Legal Assistant II for the Registrar. Ms. Rolling made the determination that Complainant was ineligible for a payout from the Fund.

On September 11, 2019, the Registrar issued a letter to Complainant that provided notice that “there is a limited amount of money available to remedy [Respondent’s] violations.” The Registrar specifically identified that, pursuant to Ariz. Rev. Stat. § 32-1139, the Recovery Fund was only permitted to payout a total of $200,000.00 for all claims filed against Respondent’s license, and that claims in excess “shall be paid on a pro rata share of the common liability.”

In his attempts to remediate his kitchen/pool project, Complainant enlisted the services of licensed contractors and an unlicensed firm.

In an $86,000.00 two-page contract executed between Complainant and Johnstone Investment Group LLC (“JIG”) on August 02, 2019, the parties agreed that Complainant would issue a deposit, three equal draw payments, and a final payment to perform work necessary to complete Complainant’s kitchen remodel. No payments were issued to JIG for the August 02, 2019, contract. Instead, payments totaling $55,062.00 were issued to 5 Diamond Building & Remodeling Co. (“5 Diamond”), an unlicensed contracting firm that is not a lawful subsidiary of JIG.

Complainant also issued the following remediation payments to complete portions of his project: $8,620.00 to GCS Glass & Mirror as a deposit, and $5,460.00 to Prado & Sons for handrail and pool skimmer installation.

The terms of Complainant’s original contract with Respondent did not include handrail and/or pool skimmer installation.

On or about November 27, 2019, Complainant received an email which provided notice that JIG transferred its contract with Complainant to Modcor LLC (“Modcor”). Complainant was instructed to issue remaining payments to Modcor instead of 5 Diamond. Between November 27, 2019, and December 24, 2019, Complainant issued payments totaling $35,149.00 to Modcor.

The Registrar did not, and does not, contact contractors or handymen that participate in an applicant’s remediation project to acquire additional data for consideration prior to determining an applicant’s potential payout amount from the Fund.

The Registrar did not receive proof of a transfer of contract from JIG to Modcor, or any proof of payment that such a transfer took place. Complainant never provided the Registrar with proof that any of his disallowed remediation payments were actually issued to one or more licensed contractors.

The Registrar disallowed payments Complainant issued for work that was not originally included in the original contract with Respondent or Directive. The Registrar also disallowed payments Complainant issued to unlicensed contractors, and disallowed payments Complainant made for work that was too vague or otherwise could not be verified by the Registrar. An unpaid balance was also deducted from the compensable repair costs. Ultimately, the Registrar determined that Complainant was not eligible for an administrative payout from the Recovery Fund because Complainant’s payout calculations were negative.

On November 12, 2019, a Warning Letter was issued to JIG for an alleged violations of Ariz. Rev. Stat. §§ 32-1154(A)(9) and 32-1154(A)(13).

On November 19, 2019, a Warning Letter was issued to 5 Diamond for contracting without a license.

In closing, Complainant asserted that he reasonably believed the remediation payments he issued to 5 Diamond were to a legitimate subsidiary of a validly licensed contractor, based on information he was provided by JIG. Complainant further asserted that his belief was bolstered by information, references, and recommendations he obtained online when selecting JIG as the remediation contractor for his project. Complainant admitted that the proof of payments to Modcor he provided at hearing had not been previously disclosed to the Registrar because they were issued after his Recovery Fund petition had been denied. Complainant argued that he was entitled to a payout from the Recovery Fund because his “good faith” attempts to remediate his project with Respondent resulted in payments in excess of $80,000.00.

In closing, the Registrar argued that Complainant failed to sustain his burden of proof in the matter and therefore his appeal should be denied. The Registrar asserted that it accepted all allowable considerations permitted by law to determine Complainant’s eligibility, and that Complainant had not presented any evidence to rebut or refute the Registrar’s evidence. After Complainant’s payments on the original contract, valid remediation expenditures, and unpaid balance were all deducted from the original contract price it was determined that Complainant was not eligible for a payout from the Recovery Fund pursuant to Ariz. Rev. Stat § 32-1132.01.

CONCLUSIONS OF LAW

This matter lies within the Registrar’s jurisdiction and was properly brought before OAH for adjudication.

Complainant bears the burden of establishing by a preponderance of the evidence that the Fund’s payout amount was incorrect.

“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 § 32-1132(B) provides, in pertinent part, that only “individuals who are owners of residential property damaged by the failure of a contractor to adequately build or improve a residential structure, who reside at the property as their primary residence” are eligible for an award from the Recovery Fund.

Ariz. Rev. Stat § 32-1132.01 provides, in pertinent part, that an award from the Recovery Fund “[m]ay not exceed the actual damages suffered” and also “[m]ay not exceed an amount necessary to complete or repair a residential structure.” “Actual damages” means the reasonable cost of completing the contract and repairing the contractor’s defective performance, minus the part of the contract price still unpaid. The maximum individual award from the Recovery Fund is $30,000.00.

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.”

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.” “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.”

Based on the credible and available evidence of record, the Tribunal concludes that the Registrar soundly established Complainant’s eligibility to access the Recovery Fund and also correctly determined that Complainant was not legally eligible for an administrative awarded from the Recovery Fund.

Here, Complainant did not establish by a preponderance of the evidence that an award and payment from the Recovery Fund is justified and supported by the record in adherence with Ariz. Rev. Stat. § 32-1131 et seq. Complainant’s arguments that his remediation payments to 5 Diamond should have been considered by the Registrar because 5 Diamond is a subsidiary of JIG, and his remediation contract transfer from JIG to Modcor was validly executed are both technically and legally incorrect. Because Complainant did not sustain his burden of proof in this matter his appeal should be denied.

RECOMMENDED ORDER

Based on the foregoing,

IT IS RECOMMENDED that the Registrar affirm the Notice and Order of Recovery Fund Claim Denial dated November 21, 2019, and deny Complainant’s request for an administrative payout from the Recovery Fund.

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, May 08, 2020.

/s/ Jenna Clark

Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director

Registrar of Contractors