ALJDEC decisions subject to certification as final

2019A-04623-RFA-ROC · Registrar of Contractors · 2021-02-05

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Matthew Paul Klemish,

COMPLAINANT,

v.

Image Home Improvement Inc.,

License No. 139362, 182234, 313587,

RESPONDENT.

No. 2019A-04623-RFA-ROC

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: January 22, 2021 at 9:00 AM.

APPEARANCES: Assistant Attorney General John Tellier, Esq. appeared on behalf of the Arizona Registrar of Contractors (“Registrar”) with Gail Matthews as a witness. Matthew Klemish (“Complainant”) appeared on his own behalf. Stephen Deubel appeared on behalf of Image Home Improvement Inc. (“Respondent”). Tamara Schoenborn 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

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.

According to the Registrar’s public website, on or about October 05, 1998, the Registrar issued License No. 139362 for Specialty Dual CR-61 Carpentry, Remodeling and Repairs contracting license to Respondent. On January 08, 2021 the license was revoked by the Registrar. Stephen Deubel is listed on the license as the Qualifying Party and Officer. Respondent’s address of record on the license is 25207 N 16th Ave. Phoenix, AZ 85085. There is no disciplinary history or bond information listed for the license.

According to the Registrar’s public website, on or about January 29, 2003, the Registrar issued License No. 182234 for General B-2 Small Commercial contracting license to Respondent. On August 10, 2020, the license was revoked by the Registrar. Stephen Deubel is listed on the license as the Qualifying Party and Officer. Respondent’s address of record on the license is 15211 N 28th Pl. Phoenix, AZ 85032-4485. The license has been disciplined on 10 prior occasions, and there is currently 1 open cases against Respondent’s license. On June 28, 2020, a $5,000.00 surety bond for the license, issued by RLI Insurance Company effective May 09, 2017, was cancelled.

According to the Registrar’s public website, on or about May 12, 2017, the Registrar issued License No. 313587 for Residential B-3 General Remodeling and Repair contracting license to Respondent. On August 10, 2020, the license was revoked by the Registrar. Stephen Deubel is listed on the license as the Qualifying Party and Officer. Respondent’s address of record on the license is 15211 N 28th Pl. Phoenix, AZ 85032-4485. The license has been disciplined on 10 prior occasions, and there is currently 1 open cases against Respondent’s license. On June 28, 2020, a $9,000.00 surety bond for the license, issued by RLI Insurance Company effective May 09, 2017, was cancelled.

On September 11, 2019, Complainant filed a complaint against Respondent with the Registrar alleging poor workmanship. The complaint contained 23 complaint items. In the complaint, Complainant asserted that Respondent failed to materially perform under a $192,401.21 residential remodeling contract the parties entered into on or about November 03, 2018, and that the work Respondent had completed failed to meet the Registrar’s minimum workmanship standards. Complainant attached an estimate and proof of payments to the complaint. The Registrar received the complaint on September 13, 2019, whereby it was designated Complaint No. 2019-04623 and assigned to Randy Morris (“Investigator Morris”) for investigation.

On or about September 26, 2019, the Registrar received an addendum complaint from Complainant that contained 20 additional complaint items.

On October 31, 2019, the Registrar received a request from Complainant to add Abandonment as an allegation to the complaint.

On October 18, 2019, Investigator Morris completed his inspection of the project. Both parties were present. Ultimately, Investigator Morris substantiated 19 of 43 complaint items. Specifically, Investigator Morris determined that complaint items 1-6, 8-10, 12-20, and 22 required remediation by Respondent.

On November 06, 2019, Morris issued a Written Directive from the Registrar (“Directive”) to Respondent because he substantiated Complainant’s allegation that Respondent’s work on the project failed to meet minimum workmanship standards. Respondent was put on notice that he had until November 22, 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 December 09, 2019, the Registrar issued a Citation for alleged violations of Ariz. Rev. Stat. §§ 32-1154(A)(1), 32-1154(A)(3); Ariz. Admin. Code R4-9-108, 32-1154(A)(12); more specifically 32-1124(B), 32-1154(A)(1)2; more specifically 32-1158, and 32-1154(A)(22) to Respondent. The written complaint charged Respondent with failing to take corrective action after the Corrective Work Order was issued, and for the commission of an act or acts that would, if proved, be cause for the suspension or revocation of Respondent’s license. Respondent was advised to submit a written Answer to the Registrar by December 24, 2019, and that failing to do so would constitute an admission pursuant to Ariz. Rev. Stat. § 32-1155(B).

On May 20, 2020, an Administrative Law Judge Decision was issued in the underlying matter and affirmed in a *Final Administrative Decision and Order (“Order”) issued by the Registrar on May 22, 2020. On July 01, 2020, the Order became effective.

On August 03, 2020, the Registrar received a claim for payment with the Residential Contractors’ Recovery Fund (“the Fund”), in the amount of $30,000.00, from Complainant pursuant to Ariz. Rev. Stat. §§ 32-1132(A) and 32-1154(G). Attached was a May 20, 2020, denial of claim letter issued to Complainant from Respondent’s bond insurance, and 3 remediation estimates.

On October 08, 2020, the Registrar issued a Notice of Claim for Administrative Award (“Notice”) which held Complainant was awarded $30,000.00 from the Fund.

On an unknown date the Registrar received an appeal from Respondent contesting Complainant’s eligibility and award amount from the Fund.

On November 23, 2020, the Registrar referred the matter to the Office of Administrative Hearings (“OAH”) for an independent evidentiary hearing on January 21, 2021. The issue at hearing was to determine if Complainant’s award and payment from the Fund was appropriately issued and properly calculated pursuant to Ariz. Rev. Stat. § 32-1154(F), as justified by the evidence.

Hearing Evidence

At the hearing, the Registrar presented the testimony of Gail Matthews and submitted Exhibits 1-3 and 6-20 into the record. Complaint testified on his own behalf. Respondent presented the testimony of Stephen Deubel and submitted Exhibit D into the record. The Notice of Hearing was also admitted into the record as its own exhibit. The substantive evidence is as follows:

Complainant owns residential property located at 4045 E. Hazelwood St. Phoenix, AZ 85018.

No written contract regarding the underlying agreement exists between the parties. Instead, an estimate dated November 03, 2018, and construction timeline establish Respondent’s scope of work on the project and the payment terms between the parties.

Complainant paid a total of $109,300.00 on the project; at least $20,000.00 of which was paid directly to Respondent.

On or about August 03, 2020, after the Registrar’s Order became effective, Complainant submitted his claim for payment from the Fund. Included were repair bids from Platinum Companies for $249,773.14, WCg Custom Homes/Remodeling for $201,656.57, and KNC Contracting Inc. for $172,403.43.

The Registrar accepted KNC’s bid because it was the lowest.

Complainant’s property is classified as a 3, or residential, by the Maricopa County Assessor’s Office.

To calculate Complainant’s award amount from the Fund, Ms. Matthews deducted Complainant’s unpaid balance from the KNC repair bid. However, because the resulting balance exceeded the statutory maximum, the Registrar was not able to award Complainant more than $30,000.00.

Closing Arguments

In closing, the Registrar argued that although another company had been involved with the underlying project, it was Respondent’s performance that fell below minimum workmanship standards and Respondent’s failure to adhere to the Registrar’s Directive. The Registrar also argued that the evidence established Complainant’s eligibility to access the Fund and subsequent award payout amount had been properly calculated.

In closing, Complainant noted that the Fund’s $30,000.00 award would not completely remediate Respondent’s poor workmanship on the project, but would assist in getting remediations “back on track.”

In closing, Respondent argued that he was the victim of identity theft and that the Registrar erroneously held him liable for someone else’s wrongdoings. Respondent also argued that he had been advised by counsel, who had represented him in the underlying administrative complaint hearing, not to adhere to the Directive. Notably, Respondent failed to present any evidence during the hearing to substantiate one or more of the aforementioned arguments.

CONCLUSIONS OF LAW

This matter lies within the Registrar’s jurisdiction.

Respondent bears the burden of establishing by a preponderance of the evidence that the Fund’s payout amount was incorrect or improperly issued.

“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.”

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.”

The material facts in this matter are not in dispute.

Based on the credible and available evidence of record, the Tribunal concludes that the Registrar properly determined Complainant’s eligibility to access the Fund and appropriately calculated Complainant’s $30,000.00 payout award amount. Ms. Matthews credibly testified as to how she reached her final figure. Respondent did not provide sufficient evidence to rebut or otherwise refute this evidence.

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. Here, the evidence is clear regarding to whom and how much Complainant would have to pay to remediate his contract with Respondent.

Here, Respondent has not sustained its burden of proof in this matter. As such, Respondent’s appeal should be denied.

RECOMMENDED ORDER

Based on the foregoing,

it is recommended that the Registrar affirm the Notice of Claim for Administrative Payout dated May 22, 2020, and deny Respondent’s request to amend, nullify, or otherwise quash Complainant’s $30,000.00 payout amount from the 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, February 05, 2021.

/s/ Jenna Clark

Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director

Registrar of Contractors