ALJDEC decisions subject to certification as final

2019A-05311-CHC-ROC · Registrar of Contractors · 2020-06-04

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Yvonne Bickel,

COMPLAINANT,

v.

Zona Restoration LLC,

License No. 283644,

RESPONDENT.

No. 2019A-05311-CHC-ROC

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: April 24, 2020 at 1:00 PM & May 15, 2020 at 1:00 PM.

APPEARANCES: Michael Hughes, Esq. appeared telephonically on behalf of Yvonne Bickel (“Complainant”) with Duane Martin and Complainant as witnesses. Ryan Stewart, Esq. appeared telephonically on behalf of Zona Restoration LLC (“Respondent”) with Aaron Chapin as a witness. Steve Klein appeared telephonically as a witness for the Arizona Registrar of Contractors (“Registrar”).

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 Registrar.

FINDINGS OF FACT

Background and Procedure

On March 12, 2013, the Registrar issued License No. 283644 for general residential B contracting to Respondent. Respondent’s address of record for the license is 14175 W Indian School Rd., Suite B4-429, Goodyear, AZ 85395-8407. Michael Lee Gillis is listed as the Qualifying Party and Employee on the license, and Aaron Charles Chapin is listed as the Member on the license.

Pursuant to Ariz. Admin. Code R4-9-117, Administrative Notice is taken of Respondent’s prior License record, for License No. 283644, as reflected on the Registrar’s public website on May 15, 2020. Such prior License record reflects that Respondent’s license is currently active and renewed through March 31, 2021. The license has not been previously disciplined by the Registrar. The record also reflects that there is one complaint against Respondent’s license, which is presumed to be related to this matter. The license has an active $9,000.00 surety bond issued by Merchant’s Bonding Company effective December 19, 2016.

On or about October 23, 2019, the Registrar received a complaint from Complainant alleging abandonment and 25 specific allegations of poor workmanship on a whole-home restoration contract for a residential project located at 3727 W Echo Lane, Phoenix, AZ 85051.

The complaint was designated Complaint No. 2019-05311 and assigned to Steve Klein (“Investigator Klein“) for investigation.

On October 25, 2019, Investigator Klein issued a Jobsite Inspection Notification Letter to the parties which provided notice that an onsite inspection of the project would take place at 10:00 a.m. on November 13, 2019. On October 31, 2019, a notice was issued to the parties rescheduling the jobsite inspection for 2:30 p.m. on November 13, 2019.

On November 13, 2019, Investigator Klein completed his inspection of the underlying project. He did not, however, review the contract between the parties. Respondent was not in attendance. Ultimately, Investigator Klein substantiated Complaint Items 1, 3-19, and 21-25 and determined that the work Respondent had performed on the project fell below the Registrar’s minimum workmanship standards.

On December 17, 2019, a Directive from the Registrar “(Directive”) was issued to Respondent by Investigator Klein. The Directive instructed Respondent to complete the project per contract and provide written proof of completion to the Registrar no later than 5:00 p.m. on January 07, 2020.

On January 15, 2020, Investigator Klein issued a Compliance Jobsite Inspection Notification Letter to the parties which provided notice that an onsite inspection of the project would take place at 2:30 p.m. on January 28, 2020.

On January 28, 2020, Investigator Klein completed his compliance inspection of the underlying project. Ultimately, Investigator Klein substantiated that 19 complaint items had not been properly and/or correctly remediated.

On January 28, 2020, Investigator Klein issued a Citation Recommendation to the Registrar’s legal department for alleged violations of Arizona Revised Statutes (“Ariz. Rev. Stat.”) §§ 32-1154(A)(1), 32-1154(A)(3); namely Arizona Administrative Code (“Ariz. Admin. Code”) R4-9-108, and 32-1154(A)(22).

On January 31, 2020, the Registrar issued a Citation to Respondent which charged 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, 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).

On February 17, 2020, the Registrar received Respondent’s timely Answer to the Citation whereby Respondent alleged that work stopped on the project due to Complainant’s breach of contract. Specifically, Respondent alleged that Complainant was in violation of section 11 of the parties’ Work Authorization agreement which holds:

“Should Owner or Company fail to pay timely any amount owing at any time under the contract, immediately after notification that compensation is due, Contractor in addition to any other legal remedies or process available, may stop work and/or terminate the Contract and enter the premises and remove any portion of, or all materials or goods installed at or fixed to the premises under this contract, (so long as the work or removal does not substantially interfere with the materials or goods installed outside of this agreement), up the extent that they represent in their current condition the price then owing to the Contractor under the Contract.”

Respondent denied the existence of workmanship issues, and argued that the only reason there were incomplete items on the project was because of nonpayment. Respondent further argued that some of the corrective items identified in the Registrar’s Directive were not a part of the original scope of work, and that the Register had not afforded Respondent a reasonable amount of time for the remediations to be completed.

March 12, 2020, the matter was referred to the Office of Administrative Hearings, an independent state agency, for an evidentiary hearing. The matter was heard April 24, 2020, and on May 15, 2020.

Hearing Evidence

Complainant testified on her own behalf, called Duane Martin as a witness, and admitted Exhibits 8, 11-15, 26-31 and 33 into the record. Aaron Chapin testified on behalf of Respondent. Steve Klein testified on behalf of the Registrar. The Registrar’s hearing file (“Agency File”) and Notice of Hearing and Notice of Further Hearing were also admitted into the record as their own exhibits.

The substantive facts of record are as follows:

In or around early-2018, Complainant’s residence sustained extensive damage as the result of a fire.

On or about April 10, 2018, Complainant’s home insurance company, Country Financial (“Insurer”), entered into a tri-party agreement with Complainant and Respondent whereby Respondent agreed to perform restoration contracting for Complainant in exchange for Complainant’s and Insurer’s joint promise to pay Respondent the sum total of $189,542.55. On May 09, 2018, Respondent signed the contract.

Notably, the remediations, add-ons, and upgrades required to return the property to a pre-fire state and bring it up to code exceeded the maximum payable amount on Complainant’s insurance policy. Thus, Complainant was responsible for paying any cost(s) beyond what her policy paid out to Respondent on the project.

Insurer set Complainant’s restoration deadline for February 05, 2019, and would not grant a deadline extension. In order to obtain a depreciation refund, Complainant’s restoration project needed to be completed by this date.

The payment terms for the contract were located in sections 9, 11, 13, and 15 of the Terms and Conditions of the Work Authorization agreement.

Term 9 states, in pertinent part, that a 50% deposit was due before reconstruction services commenced, and the remaining balance was due upon completion of the project.

Term 11 states, in pertinent part, that if Insurer or Complainant fail to timely pay any amount owed under the contract, that Respondent may stop work and/or terminate the contract.

In July of 2018 work commenced on the project.

At least two verbal Change Orders were executed for bathroom framing and cabinet upgrading.

On or about May 21, 2019, Complainant and Respondent met with an adjuster Complainant hired to discuss how the parties could move forward on the outstanding items left needed to complete the project. Respondent requested additional monies. Complainant declined to pay. Although the parties communicated via email during the five months that followed their meeting, they could not come to an agreement.

On July 14, 2019, the City of Phoenix issued a building permit for the project.

Complainant tendered the following payments to Respondent on the project: $23,734.23 on May 07, 2018, $65,000.00 on January 04, 2019, and $50,000.00 on March 08, 2019.

In or around mid-July of 2019, Respondent stopped work on the project.

In closing, Complainant argued that she was not required to pay the outstanding balance owed on the contract until Respondent completed the project, Respondent’s willful refusal to perform on the contract constituted abandonment, and that the Registrar’s substantiation of 23 of her 25 complaint items established that the majority of work Respondent performed on the job fell below statutory workmanship standards. Complainant further argued that reconstruction that should have taken 6 months to complete has since displaced her from her home for over 2 years.

In closing, Respondent argued that although he did not completely perform on his contract with Complainant, he is excused or otherwise justified because of Complainant’s nonpayment on their contract. Respondent further argued that because he was not obligated to complete the project without payment, he was also excused or otherwise justified in not complying with the Registrar’s Directive. Respondent also argued that because workmanship of unfinished items could not be ascertained, the Registrar had erroneously cited Respondent with violating Ariz. Rev. Stat. § 32-1154(A)(3) and Ariz. Admin. Code R4-9-108.

CONCLUSIONS OF LAW

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 the Office of Administrative Hearings pursuant to Ariz. Rev. Stat. §§ 41-1092 et seq.

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.

The purpose of the Registrar’s licensing statutes is to protect the public from unscrupulous, unqualified, and financially irresponsible contractors.

Complainant bears the burden of proof to establish cause to discipline Respondent’s license by a preponderance of the evidence. Respondent bears the burden to establish factors in mitigation of the penalty and affirmative defenses 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.”

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.”

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.”

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.”

The evidence of record establishes that Respondent did not complete the project per the terms of his contract with Complainant, and that the work that Respondent did perform did not satisfy the minimum standards set for workmanship by the Registrar. It is also evident that Respondent failed to comply with the Registrar’s Directive.

Therefore, the only remaining issue to address is whether Respondent raised a sufficient justification or excuse for failing to timely complete or remediate Complainant’s project. These are affirmative defenses that Respondent bears the burden to establish. There is no evidence in the record that tends to suggest Respondent sustained its burden of proof here. Specifically, there is no evidence in the record to establish that Respondent ever executed a progress payment agreement or supplemental item agreement with Complainant outside of or in addition to their Work Authorization agreement, or that Respondent ever delivered to Complainant a written Pay or Quit notice. Respondent’s argument that he was excused or otherwise justified in failing to finish the project is not supported by the record. Lastly, the record reflects that Respondent failed to substantively address the workmanship issue outlined in the Registrar’s Citation. He has therefore acquiesced to that alleged violation.

Because Respondent did not meet minimum workmanship standards as required by Ariz. Admin. Code R4-9-108, Complainant has established a violation of Ariz. Rev. Stat. § 32-1154(A)(3). Because Respondent failed to take appropriate corrective action after the Directive was issued by the Registrar for the underlying project, Complainant has established a violation of Ariz. Rev. Stat. § 32-1154(A)(22).

Because Complainant has established the above-captioned statutory violations by a preponderance of the evidence, Complainant has also established cause for the Registrar to discipline Respondent’s license.

Complainant may petition the Registrar’s Recovery Fund for financial recompense regarding this matter, as this 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 five days after the effective date of the Final Order in this matter, Respondent Zona Restoration LLC, ROC License No. 283644, be suspended for two (2) days based on its violations of Ariz. Rev. Stat. §§ 32-1154(A)(3); Ariz. Admin. Code R4-9-108, and 32-1154(A)(22).

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, June 04, 2020.

/s/ Jenna Clark

Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director

Registrar of Contractors