ALJDEC decisions subject to certification as final

2020A-01640-CHC-ROC · Registrar of Contractors · 2020-11-18

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Christine Nguyen

COMPLAINANT

Streets of Joy LLC

DBA: Total Maintenance Service

License No. ROC 324017,

RESPONDENT

No. 2020A-01640-CHC-ROC

ADMINISTRATIVE LAW JUDGE

DECISION

HEARING: September 4 and October 30, 2020

APPEARANCES: Michael S. Wawro, Esq. appeared for Complainant Christine Nguyen on September 4, 2020; Ms. Nguyen appeared on her own behalf on October 30, 2020; Eric Jenkins appeared for Respondent

ADMINISTRATIVE LAW JUDGE: Thomas Shedden

FINDINGS OF FACT

On August 4, 2020, the Registrar of Contractors (“ROC”) issued a Notice of Hearing on Contested Case setting the above-captioned matter for hearing on September 4, 2020 at the Office of Administrative Hearings.

The matter was convened on that date and further hearing was conducted on October 30, 2020.

Through the Notice of Hearing, ROC alleges that Respondent Streets of Joy LLC d.b.a. Total Maintenance Service may have violated Ariz. Rev. Stat. sections 32-1154(A)(3) and (A)(22).

Respondent holds license number 324017 issued by ROC. Eric Jenkins is Respondent’s CEO.

Complainant Christine Nguyen owns a four-unit apartment building on South Newberry Lane in Tempe.

In January 2020, Ms. Nguyen and Respondent entered a contract under which Respondent would make various upgrades, including installing new water heaters at the apartments. There was an error in the contract in that Respondent entered a cost of $0.00 for one of the four units. When the error was brought to Ms. Nguyen’s attention, she accused Respondent of price gouging and posted a negative review online. The initial contract was not acted on and Ms. Nguyen hired someone else to do at least some of the work.

Nevertheless, the parties engaged in discussion about Respondent performing work at the apartments and entered a second contract on March 6, 2020. The terms of that contract are at issue in this matter.

The contract called for Respondent to (1) “install” tankless water heaters in all four units; (2) cleanup the back utility closet; (3) perform low maintenance landscaping; (4) spread rocks; and (5) repair a concrete crack.

The total price was $4750. Ms. Nguyen paid Respondent a deposit of $2375.

The contract shows that the water heaters and valves were $500 each, for a subtotal of $2000; during the parties’ negotiations they exchanged texts showing a cost of $350 each for the installation of the water heaters, $250 for the utility closet work, $300 for the landscaping, $300 for the rock, and $500 for the concrete.

Ms. Nguyen acknowledged that as of the hearing date, the only item not completed was the installation of the water heaters.

There are two areas of dispute: (1) the contract specified Rheem 240V 3 Heating Chambers RTEX-24 Residential Tankless Water Heaters, but Respondent delivered Marey brand gas tankless water heaters without obtaining Ms. Nguyen’s consent to do so; and (2) the parties disagree as to what “install” means in this case. Respondent asserts that “intall[ing]” the heaters meant hanging them and making the water connection, but not wiring the units to the breaker panel. Ms. Nguyen testified as to her understanding and expectation that “install[ation]” meant that the units would be operational.

The breaker boxes or panels at the property are not adequate for the Rheem units and would require replacement if the Rheem units were installed, and the power supply lines from the panel boxes to the heaters would also require upgrading.

During their negotiations, on January 31, 2020, Respondent informed Ms. Nguyen that the $350 installation cost for each water heater included a GFCI outlet and possibly a new breaker to be installed in Ms. Nguyen’s panel box depending on the set-up, which Respondent’s representative had not seen. In response, Ms. Nguyen sent Respondent a photograph of the apartments’ electrical panels.

On March 13, 2020, Respondent informed Ms. Nguyen that they had purchased the best water heaters for her, but delivery would be delayed.

Respondent removed the existing gas water heaters and installed Marey brand tankless gas water heaters in Ms. Nguyen’s apartments (although they may not have been fully operational).

When Ms. Nguyen learned that the wrong units had been installed she agreed to consider changing over to those units, but she determined that they were not acceptable.

The parties engaged in discussion about the issue via text messages between about March 25 and 31, 2020.

Mr. Jenkins informed Ms. Nguyen that her building was not wired for electric water heaters and that the gas heaters Respondent had obtained were the best heaters in her price range.

Ms. Nguyen took the position that she had paid for the Rheem water heaters and that Respondent had never informed her that her panel boxes could not support the electric heaters.

Mr. Jenkins offered to return the original gas heaters, and informed Ms. Nguyen that Respondent had not quoted a cost to rewire the building, that it was her responsibility to do so, and that Respondent could not do so for the contract price.

Ms. Nguyen responded that they had been discussing electric heaters throughout the process, that Respondent should have informed her if the building would not support the electric heaters, and that Respondent had told her there was nothing she needed to do when they had spoken about the project.

On March 26, 2020, Mr. Jenkins informed Ms. Nguyen that Respondent would return the original gas water heaters and refund the remainder of her deposit. Ms. Nguyen responded restating her position that she had contracted for the electric heaters and included copies of text messages the parties had exchanged during their original negotiations.

On March 30, 2020, Ms. Nguyen noted that Respondent had not replied to her text of March 26th, and she informed Respondent that if the work was not completed in conformity with the contract in the next seven days she would file a complaint with ROC.

On March 30, 2020, Mr. Jenkins informed Ms. Nguyen that he was working on a change-order to solve the matter, which would require reconfiguring the electrical panels to supply two-phase power to the units; he asserted that the contract did not include reconfiguration of the electric panel, the delivery of two phase power to the units or the addition of breakers; and he added that based on Ms. Nguyen’s text, he considered the matter to be closed, that he would adjust the cost to account for work that had not been completed, and that the new gas heaters would be removed and her old water heaters returned.

On March 31, 2020, Ms. Nguyen wrote stating that she had not canceled the contract, and that she expected Respondent to live up to the terms of the contract. Ms. Nguyen also noted that the January 31, 2020 text from Respondent showed that the installation cost might include adding a breaker.

On March 31, 2020, Mr. Jenkins replied noting that adding a breaker was not the same as wiring the units, that Respondent was not contractually obligated to wire the units, and that situations like this were typically dealt with by change order, but in this case it was best to cancel the contract. Ms. Nguyen responded to the effect that Respondent had informed her that the project was doable before she signed the contract and that Respondent had breached the contract.

Mr. Jenkins then informed Ms. Nguyen that Respondent would reinstall and test the original gas water heaters.

At 5:07 p.m. on March 31, 2020, Ms. Nguyen told Respondent to remove the new gas water heaters and to leave the original ones at the back of the house, and she asked how Respondent would send her the refund. At 5:35 p.m. on March 31st, Ms. Nguyen told Respondent to hold off on whatever it planned to do, and that unless there was a written change order Respondent was not authorized to do any work other than that which was in the original contract.

Mr. Jenkins responded to the effect that Respondent would honor her request and explained that the time in which Respondent could obtain a refund for the tankless gas water heaters would end after thirty days.

On April 1, 2020, Ms. Nguyen filed a complaint against Respondent in which she alleged abandonment, poor work, breach of contract, failure to perform, and substandard materials.

ROC investigator Paul Smith conducted a jobsite inspection on May 11, 2020. At that time none of the five contract items were complete, but Ms. Nguyen told Mr. Smith that she was not interested in any of the items except the failure to install the electric water heaters called for in the contract.

After the inspection, Mr. Jenkins, Ms. Nguyen and a friend of hers engaged in discussion of the matter. At that time, Ms. Nguyen agreed to consider possible solutions to the matter, but the evidence does not show that she agreed to any specific proposal.

Respondent prepared an Estimate dated May 14, 2020, through which it proposed to upgrade the four panel boxes for $5355, but which also required Ms. Nguyen to pay for and provide the water heaters.

On May 19, 2020, ROC issued to Respondent a Directive that provides in part:

You must notify the Registrar’s assigned Investigator of your compliance with this Directive prior to 5:00 p.m. on June 16, 2020.

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DIRECTIVE REQUIREMENTS

You are directed to remedy the following violations by the appropriate means:

The respondent is to complete the project in an accordance to the signed contracts, proposals and approved change orders in an appropriate manner.

If the local jurisdiction determines that there are corrective issues during the inspection the Respondent will have to Correct by Appropriate Means.

ROC issued a Citation on June 19, 2020, through which ROC alleges that Respondent may have violated Ariz. Rev. Stat. sections 32-1154(A)(3) and (A)(22).

At the hearing, Ms. Nguyen testified to the effect that she had expected the Rheem water heaters to be installed and operational for the price set out in the March 6, 2020 contract.

Mr. Jenkins testified to the effect that the parties’ contract did not call for the panel boxes to be upgraded and that Ms. Nguyen had been difficult to work with.

Mr. Jenkins testified to the effect that Respondent had erred when it initially recommended the tankless electric water heaters, that when it learned of its error (i.e., that Respondent’s building would need modification to support the electric water heaters) Respondent installed the gas water heaters without Ms. Nguyen’s approval, and that he had hoped that Respondent could convince her to use the gas water heaters.

ROC assistant chief of investigations, Steve Nelsen testified to the effect that it is ROC’s position that a contractor has violated Ariz. Admin. Code section R4-9-108(A) if it does not complete a project.

ROC’s substantive policy statement 2017.01 sets out the following pertinent information:

Professionalism

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Licensed contractors are expected to have sufficient professionalism to deal with difficult clients and situations.

CONCLUSIONS OF LAW

Unless otherwise provided by law, a party asserting a claim, right, or entitlement bears the burden of proof; a party asserting an affirmative defense has the burden of establishing the affirmative defense. The standard of proof on all issues in this matter is that of a preponderance of the evidence. Ariz. Admin. Code § R2-19-119.

“At a hearing on an agency action to suspend, revoke, terminate or modify on its own initiative material conditions of a license or permit, the agency has the burden of persuasion.” Ariz. Rev. Stat. § 41-1092.07(G)(2).

“At a hearing on an agency's imposition of fees or penalties or any agency compliance order, the agency has the burden of persuasion.” Ariz. Rev. Stat. § 41-1092.07(G)(3).

A preponderance of the evidence is:

The 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.

Black’s Law Dictionary 1373 (10th ed. 2014).

Statutes should be interpreted to provide a fair and sensible result. Gutierrez v. Industrial Commission of Arizona, 226 Ariz. 395, 249 P.3d 1095 (2011)(citation omitted); State v. McFall, 103 Ariz. 234, 238, 439 P.2d 805, 809 (1968) ("Courts will not place an absurd and unreasonable construction on statutes.").

“Statutes shall be liberally construed to effect their objects and to promote justice.” Ariz. Rev. Stat. § 1-211(B).

The purpose of the Registrar’s licensing statutes is to protect the public from unscrupulous, unqualified, and financially irresponsible contractors. See Aesthetic Property Maintenance v. Capital Indem. Corp., 183 Ariz. 74, 900 P. 2d 1210 (1995).

The Administrative Law Judge may consider ROC’s administrative record. See Ariz. Admin. Code § R4-9-118.

Ariz. Rev. Stat. section 32-1154(A) provides that

The holder of a license or any person listed on a license pursuant to this chapter shall not commit any of the following acts or omissions:

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3. Violation of any rule adopted by the registrar.

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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. 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.

(Underscore added.)

Ariz. Admin. Code section R49108(A) provides that “A contractor shall perform all work in a professional and workmanlike manner.”

Ariz. Rev. Stat. section 32-1154(E) provides that ROC may impose a civil penalty of not to exceed five hundred dollars on a contractor for each violation of Ariz. Rev. Stat. section 32-1154(A)(22).

Substantive policy statement means:

[A] written expression which informs the general public of an agency's current approach to, or opinion of, the requirements of the federal or state constitution, federal or state statute, administrative rule or regulation, or final judgment of a court of competent jurisdiction, including, where appropriate, the agency's current practice, procedure or method of action based upon that approach or opinion. A substantive policy statement is advisory only....

Ariz. Rev. Stat. § 41-1001(22)

The preponderance of the evidence shows that Respondent violated Ariz. Admin. Code section R4-9-108(A) by delivering to the property gas water heaters rather than the electric water heaters specified in the contract, which is also a violation of Ariz. Rev. Stat. section 32-1154(A)(3).

The parties have a dispute as to what “installation” means in this case. Respondent’s text message of January 31, 2020 sets forth what Respondent was going to provide for the $350 installation price, which did not include the upgraded wiring from the panel boxes to the units or upgraded panel boxes. The preponderance of the evidence shows that after the Directive was issued Ms. Nguyen expected Respondent to provide the upgraded wiring and panel boxes, and that the parties could not reach agreement as to any additional cost for that work. Considering these facts, the matter is best seen as a good-faith contract dispute and Respondent’s failure to comply with ROC’s Directive is justified. It has not been shown that Respondent violated Ariz. Rev. Stat. section 32-1154(A)(22).

Because Respondent has violated Ariz. Rev. Stat. section 32-1154(A)(3), ROC has authority to discipline its license.

Under these facts and circumstances, it is appropriate to require Respondent to refund to Ms. Nguyen $1025 as restitution, which is the difference between her deposit of $2375 and $1350, which is the price of the work Respondent completed ($250 for the utility closet work, $300 for the landscaping, $300 for the rock, and $500 for the concrete). See Sunpower of Arizona v. Arizona Registrar of Contractors, 166 Ariz. 437, 803 P.2d 430 (App. 1990)(ROC may order a party to pay restitution as a condition to the reinstatement of a suspended license.).

RECOMMENDED ORDER

IT IS RECOMMENDED that on the effective date of the final Order in this matter, the Registrar of Contractors suspend Respondent Streets of Joy LLC d.b.a. Total Maintenance Service’s license number 324017 until such time that the Registrar receives proof that Respondent has paid to Complainant Christine Nguyen $1025 as restitution for Respondent’s violation of Ariz. Rev. Stat. section 32-1154(A)(3).

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 is forty days after the date of that certification.

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-137160-45720000Done this day, November 18, 2020.

/s/ Thomas Shedden

Thomas Shedden

Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director

Registrar of Contractors

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-137160-45720000