ALJDEC decisions subject to certification as final

2020A-00847-CHC-ROC · Registrar of Contractors · 2020-07-27

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

DS Deco Central LLC,

COMPLAINANT,

v.

Renaissance Residential LLC,

License No. ROC 291372,

RESPONDENT.

No. 2020A-00847-CHC-ROC

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: July 20, 2020 at 8:30 AM.

APPEARANCES: Todd Baxter, Esq. appeared on behalf of DS Deco Central LLC (“Complainant”) with Dennis Bierma, Joseph Kamleiter, and Russel McDaniel as witnesses. No appearance(s) by or on behalf of Renaissance Residential LLC (“Respondent”).

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 April 30, 2014, the Registrar issued License No. 291372, general KB-1 dual building contracting license to Respondent. Craig Steven Porter is the Qualifying Party and Member on this license. Jill Carlson Porter is also listed as a Member on the license. Respondent’s address of record on the license is 8925 E Pima Center Parkway, Suite 205 Scottsdale, Arizona 85258-4391.

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. ROC License No 291372has not previously been disciplined by the Registrar. There is one open complaint against the license, which is presumed to be related to this matter. The license had a $105,000.00 surety bond issued by Western Surety Company, but it was cancelled on December 06, 2019. Although the license had been renewed through April 15, 2020, Respondent voluntarily cancelled the license with the Registrar on November 01, 2019.

On February 18, 2020, Complainant filed a complaint against Respondent with the Registrar essentially alleging poor workmanship of a commercial condominium project. Complainant included a 5-page summary which detailed Complainant’s 3 grievances regarding Respondent’s workmanship on the underlying project.

On March 04, 2020, 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 March 31, 2020, at 10:00a.m.

On March 05, 2020, the Registrar issued a Rescheduled Jobsite Inspection Notification letter to the parties, advising that an onsite review of the project site had been rescheduled April 08, 2020, at 10:00a.m.

On April 08, 2020, Registrar investigator Dennis Bierma (“Investigator Bierma”) inspected the work that had been done on the project to date and took 24 photographs of the project. Respondent was not in attendance. During the inspection Complainant raised additional workmanship concerns. To afford Respondent due process, Investigator Bierma instructed Complainant to submit a complaint addendum to the Registrar.

On April 08, 2020, the Registrar received a complaint addendum from Complainant that contained 3 additional workmanship grievances.

On or about April 21, 2020, the issued an additional Jobsite Inspection Notification letter to the parties, advising that a second onsite review would be conducted at the project site by Investigator Bierma on April 23, 2020, at 8:00a.m.

On April 23, 2020, Investigator Bierma continued his inspection of the work that had been performed on the project to date, and took 33 additional photographs of the project. When he was finished, Investigator Bierma drafted Jobsite Inspection Notes.

On April 23, 2020, Investigator Bierma escalated Complaint 2019-00847 to the Registrar’s legal department with a Citation recommendation. No Written Directive from the Registrar was issued in this matter.

On April 24, 2020, the Registrar issued a Citation and Complaint to Respondent for alleged violations of Ariz. Rev. Stat. § 32-1154(A)(3) and Ariz. Admin. Code R4-9-108. Respondent was given until May 09, 2020, to respond with its Answer or face discipline pursuant to Ariz. Rev. Stat. § 32-1155(C).

On April 25, 2020, the Registrar received Respondent’s Answer.

On May 15, 2020, the Registrar issued an Amended Citation and Complaint to Respondent for alleged violations of Ariz. Rev. Stat. § 32-1154(A)(3) and Ariz. Admin. Code R4-9-108, whereby the Registrar specifically identified the following 5 workmanship issues:

Kitchen cabinets in common areas. The filler piece of trim between the lower cabinet and the fridge has not been completed. There are holes throughout cabinet and trim pieces that still remain and have not been completed.

HVAC in Unit 5009. The AC in this unit does not adequately cool the structure and is not working efficiently.

Water leaks in the first and second floors of the parking garage.

Leaking windows in Unit 7001.

Door to the electrical room on the east side of the building by the transformers appears to be out of level and the reveal around the door is not consistent or even, resulting in the door being difficult to open.

Respondent was given until May 30, 2020, to respond with its Answer or face discipline pursuant to Ariz. Rev. Stat. § 32-1155(C).

On May 27, 2020, the Registrar received correspondence from Respondent whereby Respondent requested that previously received correspondence from April 25, 2020, serve as its Answer to the Amended Citation.

In its Answer Respondent stated that it had filed for bankruptcy on December 20, 2019, and that the case was “pending before the US Bankruptcy Court for the District of Arizona under Case No. 19-15934-DPC.” Respondent argued that since it had already voluntarily cancelled its license with the Registrar, that any potential disciplinary action(s) it was facing as a result of the Amended Citation were moot. Respondent further argued that any penalties the Registrar attempted to levy against Respondent would be in violation of 11 U.S.C. Sec. 362(a), and would result in a claim against the Registrar.

On June 05, 2020, the Registrar referred this matter to the Office of Administrative Hearings (“OAH”), an independent state agency, for an evidentiary hearing on July 20, 2020. Per the Notice of Hearing the issue to be determined is whether the Registrar has cause to discipline Respondent’s license based on the following charge(s):

Charge 1: A violation A.R.S. § 32-1154(A)(3) (“Violation of any rule adopted by the Registrar; namely, A.A.C. R4-9-108(a): A contractor shall perform all work in a professional and workmanlike manner.)

Hearing Evidence

Complainant called Investigator Bierma and Joseph Kamlieter as witnesses, and submitted 8 exhibits into the record. The Registrar’s agency file and Notice of Hearing were admitted into the record as their own exhibits. Although proceeding were delayed for approximately 15 minutes, there was no appearance by or on behalf of Respondent. OAH did not receive a written motion to continue or have Respondent appear via an alternative means for the hearing. The substantive facts are as follows:

Complainant is the owner and developer of commercial property located at 3131 N. Central Ave. Phoenix, Arizona 85012.

Respondent is a subcontractor.

On December 20, 2019, Respondent filed for bankruptcy in US Bankruptcy Court for the District of Arizona.

In or around February 2016, Complainant began the construction of a 110-unit condominium complex

On February 19, 2016, the parties entered into a written contractual agreement whereby Complainant agreed to pay Respondent the sum total of $19,300.000.00 in exchange for Respondent’s oversight and construction of Complainant’s project. Specifically, Respondent agreed to build a 5-story wood framed building above a 2-story subterranean parking garage; including a clubhouse, fitness center, lounge, lobby, pool, spa, and outdoor barbeque and seating area.

In total, Complainant paid Respondent approximately $17,200,000.00 on the project.

In its February 18, 2020, complaint Complainant accused Respondent of failing to address 3 specific workmanship issues; namely, (1) kitchen cabinets in a unit and the Common Areas of the complex, (2) HVAC repairs to multiple units, and (3) flooring issues in a unit.

After Investigator Bierma’s subsequent April 08, 2020, and April 23, 2020, jobsite inspections, he substantiated 5 of Complainant’s 6 workmanship complaint items.

On March 04, 2020, the Registrar received Respondent’s Notice of Bankruptcy Petition.

A Directive was not issued in this matter due to Respondent’s insolvency.

In its Answer to the Registrar, Respondent neither admitted nor denied the underlying workmanship allegation against its license. Additionally, Respondent did not address whether the Registrar had the authority or grounds to take disciplinary action against its license, but did argue that the Registrar was statutorily prohibited from assessing monetary penalties against it.

The parties never entered into a financial and/or sub-contractual agreement to resolve the underlying workmanship dispute.

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 OAH pursuant to Ariz. Rev. Stat. §§ 41-1092 et seq.

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

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 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. 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.

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. 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. 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(E) provides, 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 provides that “[n]o 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.”

Ariz. Rev. Stat. § 32-1154(F) provides, in pertinent parts, that the Registrar may “[i]mpose a civil penalty not to exceed $1,000 on a contractor for each violation of subsection A, paragraph 17 of this section.” It also provides that “[a] person who is or was named on a license of a contractor when an act or omission occurs that results in a civil penalty may not receive a new license under this chapter until the entire civil penalty is paid.”

The material facts in this case are not in dispute.

It is undisputed that Complainant substantially paid Respondent on the underlying contract. It is also undisputed that Respondent did not perform the project as contracted. It is further undisputed that Respondent acquiesced to the Registrar’s poor workmanship allegations, per its Answer, and did not make any attempts to remediate the work.

Therefore, the only remaining issue to address is whether Respondent raised sufficient justification or excuse for failing to complete the underlying project in a workmanlike manner. This is an affirmative defense that Respondent bears the burden to establish. Here, the record reflects that Respondent failed to complete the underlying project in a workmanlike manner, and had no affirmative defense(s) for doing so. Notably, Respondent’s pending bankruptcy proceeding does not bar or otherwise prohibit the Registrar from taking administrative action against its licensee.

Because Respondent’s performance on the underlying project did not meet the Registrar’s minimum workmanship standards, Complainant has established a violation of Ariz. Rev. Stat. § 32-1154(A)(3).

As such, 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) and 32-1154(F).

RECOMMENDED ORDER

Based on the foregoing,

IT IS RECOMMENDED that on the effective date of the Final Order in this matter Respondent Renaissance Residential LLC, ROC License No. 291372, be revoked.

IT IS FURTHER RECOMMENDED that the Registrar require Respondent to pay the sum total of $1,500.00 in certified funds as a civil penalty.

IT IS FURTHER RECOMMENDED that if Respondent fails to pay the entire amount of the civil penalty on or before thirty (30) days following the effective date of the Registrar’s Order, the Registrar shall not issue a license to any entity consisting of persons associated with Respondent, as defined in Ariz. Rev. Stat. § 32-1101(A)(5), unless Respondent tenders payment of any outstanding prior civil penalty.

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, July 27, 2020.

/s/ Jenna Clark

Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director

Registrar of Contractors