ALJDEC decisions subject to certification as final

2020A-02054-CHC-ROC · Registrar of Contractors · 2020-10-21

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Zack Alfred Funke,

COMPLAINANT,

v.

R & A Remodel & Demo LLC,

ROC License Nos. 305856 & 329101

RESPONDENT.

No. 2020A-02054-CHC-ROC

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: October 08, 2020 at 1:00 PM.

APPEARANCES: Zack Funke (“Complainant”) appeared on his own behalf with Randy Morris as a witness. Alberto Jimenez appeared on behalf of R & A Remodel & Demo LLC (“Respondent”). Gabriella Contreras served as the Spanish language interpreter.

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 Arizona Registrar of Contractors (“Registrar”).

FINDINGS OF FACT

Background and Procedure

On June 07, 2016, the Registrar issued License No. 305856 for Specialty Residential R-62 Minor Home Improvements contracting to Respondent. Respondent’s address of record for the license is 1205 W. Lydia Ln. Phoenix, AZ 85041-5927. Claudia Esmeralda Jimenez is listed on the license as the Qualifying Party/Member. Rosa Imelda Jimenez is also listed on the license as a Member.

Pursuant to Ariz. Admin. Code R4-9-117 Administrative Notice is taken of Respondent’s prior license record, for ROC License No. 305856, as reflected on the Registrar’s public website on October 08, 2020. Such prior license record reflects that Respondent’s license is active and currently renewed through June 30, 2020. The license has not been previously disciplined. The record reflects that there is one open complaint against Respondent’s license, which is presumed to be related to this matter. Respondent has a $4,250.00 surety bond for the license issued through RLI Insurance Company, effective April 22, 2016.

On May 29, 2020, the Registrar issued License No. 329101 for Specialty Residential R-61 Carpentry, Remodeling and Repairs contracting to Respondent. Respondent’s address of record for the license is 1205 W. Lydia Ln. Phoenix, AZ 85041-5927. Alberto Jimenez Moreno is listed on the license as the Qualifying Party. Rosa Imelda Jimenez and Claudia Esmeralda Jimenez are also listed on the license as Members.

Pursuant to Ariz. Admin. Code R4-9-117 Administrative Notice is taken of Respondent’s prior license record, for ROC License No. 329101, as reflected on the Registrar’s public website on October 08, 2020. Such prior license record reflects that Respondent’s license is active and currently renewed through November 29, 2020. There are no open complaints against Respondent’s license, and the license has not been previously disciplined. Respondent has a $4,250.00 surety bond for the license issued through RLI Insurance Company, effective May 19, 2020.

On April 23, 2020, the Registrar received a complaint filed by Complainant alleging that Respondent failed to meet deadlines and had misappropriate funds on a project while working under ROC License No. 166140. Attached to the complaint was a letter from Complainant that detailed the scope of work and crux of the monetary dispute between the parties, and several additional documents including invoices, receipts, proof of payment to Respondent, and a budget/expense report.

On April 24, 2020, the Registrar issued a Request for Information to Complainant that sought a copy of the underlying contract or purchase agreement, or detailed written explanation as to why no written agreement was executed between the parties.

On April 24, 2020, and April 27, 2020, Complainant provided responses to the Registrar, whereby he indicated that there was no written contract or pay schedule for the project, and that Respondent had made “installation mistakes” and “[charged] over 30% more than the original estimate.”

On May 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 May 22, 2020, at 9:30 a.m.

On May 22, 2020, Registrar investigator Randy Morris (“Investigator Morris”) inspected the work that had been done on the project to date and took 22 photographs of the project. When he was finished, Investigator Morris drafted Jobsite Inspection Notes. Ultimately, Investigator Morris substantiated 4 of Complainant’s 8 complaint items. Specifically, he determined that complaint items 3 and 6-8 constituted statutory violations.

On June 03, 2020, Investigator Morris issued a Written Directive from the Registrar (“Directive”) to Respondent because he substantiated Complainant’s allegation that the work Respondent had done on the project failed to meet minimum workmanship standards. Respondent was put on notice that he had until 5:00 p.m. on June 19, 2020, 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). Respondent was also advised that he was not permitted to perform or hire other contractors to perform work outside the scope of his license, and therefore could only remediate substantiated complaint items by entering into a financial settlement with Complainant.

On June 09, 2020, Respondent sent the following correspondence, in pertinent part, to the Registrar, “[W]e accept the charges for being irresponsible. We tried to negotiate but it lead to no were and they still don’t want to agree on price and it’s just a dead end.” [sic] Respondent concluded, “[I] know you don’t take care of money transactions but my time line is ending every day. I’m just afraid of paying and in the end I don’t get paid.” [sic]

On June 23, 2020, Investigator Morris issued Compliance Jobsite Inspection Notes to confirm and memorialize that the parties stipulated no settlement had been reached and no corrective work had been performed.

On June 23, 2020, Investigator Morris escalated Complaint No. 2020-02054 to the Department’s legal department with citation recommendations.

On June 24, 2020, the Registrar issued a Citation and Complaint to Respondent for alleged violations of Ariz. Rev. Stat. §§ 32-1154(A)(2)(b), 32-1154(A)(3); Ariz. Admin. Code R4-9-108, 32-1154(A)(12); namely 32-1158, 32-1154(A)(16), and 32-1154(A)(22). Respondent was given until July 09, 2020, to respond with its Answer or face discipline pursuant to Ariz. Rev. Stat. §§ 32-1154(A)(22) and 32-1155.

On July 07, 2020, the Registrar received Respondent’s Answer whereby Respondent. Respondent admitted that there was no contract for the underlying project. Respondent alleged that Complainant changed the scope of the project and admitted “It was our mistake to agree on such extension.” [sic] Respondent also alleged that he had not been paid for work performed, and opined that all work he had performed was done in a workmanlike manner “with little to no mistakes.”

On July 13, 2020, the Registrar referred this matter to the Office of Administrative Hearings (“OAH”), an independent state agency, for an evidentiary hearing on August 26, 2020. Per the July 24, 2020, Notice of Hearing the issue to be determined is whether the Registrar has cause to discipline Respondent’s license based on the following charges:

Charge 1: A violation of A.R.S. § 32-1154(A)(2)(b) (“Departure from or disregard of a building code of this state or any political subdivision of this state in any material respect that is prejudicial to another.”)

Charge 2: A violation of Rule 4-9-108, titled “Minimum Construction Standards,” in the Arizona Administrative Code, and thereby of A.R.S. § 32-1154(A)(3).

Charge 3: A violation of A.R.S. § 32-1154(A)(12) (“Failure in any material respect to comply with this chapter; namely, A.R.S. § 32-1158.”)

Charge 4: A violation of A.R.S. § 32-1154(A)(16) (“Knowingly contracting beyond the scope of the license or licenses of the licensee.”)

Charge 5: A violation of A.R.S. § 32-1154(A)(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.”).

Hearing Evidence

Complainant testified on his own behalf and called Investigator Morris as a witness. Alberto Jimenez testified on behalf of Respondent. The Registrar’s agency file (“Agency File”) and Notice of Hearing were admitted into the record as their own exhibits. The substantive evidence of record is as follows:

Complainant owns residential property, including a guesthouse in the back yard, located at 4409 N. 66th St. Scottsdale, Arizona 85251.

Complainant rents his guesthouse as a private hotel.

On or about November 30, 2019, Complainant entered into a verbal contractual agreement with Respondent whereby he agreed to tender the sum amount of $290,000.00 for Respondent to remodel the interior of his guesthouse, add a second story to it including a bathroom, and replace the roof of the secondary residence.

Work on the project began November 30, 2019, and was supposed to be completed by December 26, 2019.

Although there was no fee schedule for the project, Complainant paid Respondent $210,000.00 prior to filing his complaint with the Registrar.

Change orders and unexpected problems such as leaks, miscalculation of water/sewer lines, and material delays related to the global COVID-19 pandemic resulted in the extension of Respondent’s completion timeline for the project to April 2020.

In March 2020, Respondent informed Complainant that he needed additional monies to secure material and cover labor-related costs. Complainant conducted an audit of expenditures and determined that monies Complainant provided up to the date of Respondent’s request should have covered additional work on the project. Complainant refused to give Respondent any more money.

Because the parties could not come to an understanding over their monetary dispute, work on the project came to a halt.

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 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. Rev. Stat. § 32-1154(A)(2)(b) includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license, “[d]eparture from or disregard of a building code of this state or any political subdivision of this state in any material respect that is prejudicial to another.”

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(A)(12) includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license, “[f]ailure in any material respect to comply with this chapter.” Namely, Ariz. Rev. Stat. § 32-1158(A) which provides that a contract between a contractor and property owner amounting to more than $1,000.00 must contain the following information in writing:

The name of the contractor and the contractor's business address and license number.

The name and mailing address of the owner and the jobsite address or legal description.

The date the parties entered into the contract.

The estimated date of completion of all work to be performed under the contract.

A description of the work to be performed under the contract.

The total dollar amount to be paid to the contractor by the owner for all work to be performed under the contract, including all applicable taxes.

The dollar amount of any advance deposit paid or scheduled to be paid to the contractor by the owner.

The dollar amount of any progress payment and the stage of construction at which the contractor will be entitled to collect progress payments during the course of construction under the contract.

That the property owner has the right to file a written complaint with the Registrar for an alleged violation of Ariz. Rev. Stat § 32-1154(A). The contract shall contain the Registrar's telephone number, website address, and shall state that complaints must be made within the applicable time period as set forth in Ariz. Rev. Stat § 32-1155(A). The information must be prominently displayed in the contract in at least ten point bold type, and the contract shall be signed by the property owner and the contractor.

Ariz. Rev. Stat. § 32-1154(A)(16) includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license, “[k]nowingly contracting beyond the scope of the license or licenses of the licensee.”

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.”

Ariz. Rev. Stat. § 32-1154(E) holds, in pertinent parts, that the Registrar may impose 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 holds that no 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.

Here, the material facts are undisputed.

Here, Respondent admitted no permit was obtained for the project before he began work and he did not obtain one after he started. Respondent also admitted that he failed to execute a written contract with Complainant, and that he worked outside the scope of its license. The evidence of record also establishes that Respondent did not complete the project per the terms of his verbal 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 undisputed that Respondent failed to timely 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 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 in this matter.

Because Complainant established violations of Ariz. Rev. Stat. §§ 32-1154(A)(2)(b), 32-1154(A)(3); Ariz. Admin. Code R4-9-108, 32-1154(A)(12); namely 32-1158, 32-1154(A)(16), and 32-1154(A)(22) by a preponderance of the evidence, Complainant also established grounds for the Registrar to discipline Respondent’s license and assess a civil penalty against Respondent.

Complainant may petition the Registrar’s Recovery Fund for financial recompense regarding this matter, as the 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 on the effective date of the Final Order in this matter Respondent R & A Remodel & Demo LLC, ROC License No. 305856, be suspended for five (5) days.

IT IS FURTHER RECOMMENDED that the Registrar require Respondent to pay the sum total of $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 revoke Respondent’s license, effective on such deadline date. No future license shall be issued 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, October 21, 2020.

/s/ Jenna Clark

Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director

Registrar of Contractors