ALJDEC decisions subject to certification as final
2020A-02939-CHC-ROC · Registrar of Contractors · 2020-12-08
IN THE OFFICE OF ADMINISTRATIVE HEARINGS
Kenneth Matthew Augusto
COMPLAINANT
v.
Cityluxe Companies LLC
License No. 286561,
RESPONDENT
No. 2020A-02939-CHC-ROC
ADMINISTRATIVE LAW JUDGE DECISION
HEARING: December 4, 2020
APPEARANCES: Complainant Kenneth Matthew Augusto, appeared on his own behalf via Google Meet. Don McElwain for appeared via Google Meet on behalf of Respondent Cityluxe Companies, LLC. Steven Lawton, Investigator for the Registrar of Contractors appeared via Google Meet.
ADMINISTRATIVE LAW JUDGE: Adam D. Stone
_____________________________________________________________________
FINDINGS OF FACT
Cityluxe Companies, LLC (Respondent) is the holder of License No. 286561 issued by the Arizona Registrar of Contractors (Registrar).
On or about August 5, 2019, Kenneth Matthew Augusto (Complainant) signed a contract with Respondent for construction of a guest house in his back yard.
On or about June 17, 2020, the Registrar received a Complaint containing thirteen items against Respondent from Complainant alleging poor work with respect to the project.
The Registrar assigned the complaint to Investigator Steven Lawton. The original inspection was performed on July 13, 2020.
Investigator Bernal then issued a written directive on or about August 6, 2020 to Respondent that provided as follows:
After investigation, the Registrar has verified that your work fails to meet minimum workmanship standards. A.R.S. § 32-1154(A)(3); A.A.C. R4-9-108. Failure to comply with this Directive constitutes a violation of A.R.S. § 32-1154(A)(22) and may result in the issuance of a citation, discipline of your license, and a civil penalty pursuant to A.R.S. § 32-1154(E) of up to $500.00. You must notify the Registrar’s assigned Investigator of your compliance with this Directive prior to 5:00 p.m. on September 11, 2020.
. . .
You are hereby directed to remedy the following violations by the appropriate means:
Complaint Item 1: Sheetrock used during foundation pour as a form needs to be removed and repaired
Investigator’s Observation: It was observed that there was sheet rock residue on concrete stem.
Governing Rule: Workmanship Rule: ARS 32-1154 (A) (3); Namely R4-9- 108 (A&B)
Complaint Item 2: Kitchen Cabinets are installed incorrectly and defective from supplier
Investigator’s Observation: It was observed and verified that the cabinet was not installed per industry standards. It was also observed that the cabinet may be defective and should be covered by the manufacturer and is not covered by the ROC for workmanship.
Governing Rule: Workmanship Rule: ARS 32-1154 (A) (3); Namely R4-9-108 (A&B)
Complaint Item 3: Bathroom walls are so out of plum that toilet and sink are visually askew
Investigator’s Observation: It was observed and verified that the bathroom walls were out of square and plumb. Walls should be straight within 1/4" and plumb within 1/4" measured from floor to ceiling at corners.
Governing Rule: Workmanship Rule: ARS 32-1154 (A) (3); Namely R4-9-108 (A&B)
Complaint Item 4: Main room walls have a waive in them as you look down the length of them- all four walls
Investigator’s Observation: It was observed that the walls were wavy and not straight. Walls should be straight within 1/4" and plumb within 1/4" measured from floor to ceiling at corners.
Governing Rule: Workmanship Rule: ARS 32-1154 (A) (3); Namely R4-9-108 (A&B)
Complaint Item 5: AII power outlets and switches are covered in caulk and off-center from the wall
Investigator’s Observation: It was observed and verified that the outlets and switch covers were covered with caulk.
Governing Rule: Workmanship Rule: ARS 32-1154 (A) (3); Namely R4-9-108 (A&B)
Complaint Item 6: Some of the floor tiles were installed with chipped corners and grout is poorly installed
Investigator’s Observation: It was observed and verified that there were chipped tiles and grout lines were not even.
Governing Rule: Workmanship Rule: ARS 32-1154 (A) (3); Namely R4-9-108 (A&B)
Complaint Item 8: The sliding glass door installed incorrectly-door sticks closed and no lock installed inside or out.
Investigator’s Observation: It was observed that the door does not have a lock on it and does not fit squarely causing binding of the door.
Governing Rule: Workmanship Rule: ARS 32-1154 (A) (3); Namely R4-9-108 (A&B)
Complaint Item 9: Hole in the wall above the shower allowing water to run in
Investigator’s Observation: It was observed and verified as to the hole in drywall at shower head.
Governing Rule: Workmanship Rule: ARS 32-1154 (A) (3); Namely R4-9-108 (A&B)
Complaint Item 10: Shower valve protrudes out of the wall and water runs into the wall
Investigator’s Observation: It was observed and verified that the valve and valve trim do not sit flush to the tiled wall.
Governing Rule: Workmanship Rule: ARS 32-1154 (A) (3); Namely R4-9-108 (A&B)
Complaint Item 11: AII fencing around Pool House is splattered with construction materials
Investigator’s Observation: It was observed and verified that there is splatter on the fencing and pool house wall near the pool equipment.
Governing Rule: Workmanship Rule: ARS 32-1154 (A) (3); Namely R4-9-108 (A&B)
Complaint Item 13: Stepping stones and artificial grass removed for construction but not reinstalled
Investigator’s Observation: It was observed and verified that turf and stepping stones have not been reinstalled per agreement of change order #2.
Governing Rule: Workmanship Rule: ARS 32-1154 (A) (3); Namely R4-9-108 (A&B)
Following the issuance of the written directive, no attempts were made by Respondent to fix the directive items prior to the September 11, 2020, deadline. Thus, there was no Compliance Inspection performed.
On September 18, 2020, the Registrar issued a Citation against Respondent, charging possible violations of A.R.S. § 32-1154(A)(3), namely A.A.C. R4-9-108; A.R.S. § 32-1154(A)(12), namely A.R.S. § 32-1158.02; A.R.S. § 32-1154(A)(13), and A.R.S. § 32-1154(A)(22).
A hearing was held via Google Meet on December 4, 2020.
At hearing, Investigator Lawton testified generally as to the issues in the directive. Investigator Lawton testified that this was a “very contentious deal”, and was not privy to the restraining orders and complaints to the Arizona Attorney General’s office.
Investigator Lawton testified that Mr. McElwain informed him at the jobsite inspection that Respondent had hired unlicensed contractors to perform the work.
Complainant testified on his own behalf and submitted 26 exhibits which were admitted into the record.
Complainant testified that the contracted price for the project was $50,000.00 and he had paid a total of $43,700.00.
Complainant testified that on or about February 12, 2020, the parties entered into change order #1, which was to include construction of a fire wall, adding a few doors as well as adding a wooden entry from wheelchair access. The parties also agreed to a revision of the last two contract payments, such that “$7,700.00 would be paid when the roof is tiled and either the drywall is hung and taped or the Stucco is ready to paint, and the last pay when the final inspection tag is received.”
Next, Complainant testified despite the fact that there was no work completed on the change order, on April 15, 2020, Ms. McElwain sent a text message requesting that Complainant advance him $5,000.00.
Complainant proposed that for $3,000.00, Respondent would return or replace several missing tools and accessories and repair or replace several items. This was agreed upon and signed by Mr. McElwain, and became change order #2.
Complainant then testified that he gave Mr. McElwain the $3,000.00, but after April 17, 2020, Mr. McElwain decided not to work.
In addition, Complainant testified that he had a friend look at the work done by Respondent who stated it was amateurish. Complainant then testified that he had a different company to the property to prepare a quote for repair and a quote for replacement.
Next, Complainant testified that in addition to the complaint items, many of his personal tools and accessories went missing and that someone cut the air conditioning lines.
Complainant testified that from April 1, 2020 through June 9, 2020, almost nothing was done by Respondent to fix and continue the project.
Finally, Complainant testified that he was seeking revocation of Respondent’s license and the maximum fine/penalty under the law.
Mr. McElwain testified on Respondent’s behalf and presented 29 pages of exhibits. Marc Dunn also testified on behalf of Respondent.
Mr. McElwain testified that the job was going “very sweet and good conversations” until Complainant refused to give him the last $7,000.00.
Mr. McElwain testified that he admitted that workmanship issues existed that were documented in the written directive, but it was his belief that because there was a termination agreement on or about June 9, 2020, he no longer had responsibility to make the repairs.
Further, Mr. McElwain testified that he used unlicensed contractors on the job, however, he believed that because he paid them less than $1,000.00, he was not in violation of the statute.
In summation, Mr. McElwain believed that he was under duress to sign the second change order and believed that Complainant was running some kind of scam.
Marc Dunn testified for Respondent. Mr. Dunn testified that he helped negotiate the termination agreement, whereby Respondent would not be responsible for completing any further work on the project and Complainant would not owe the remaining $7,000.00.
Administrative notice is taken of Respondent’s prior License record on December 7, 2020. Such prior License record reflects that Respondent’s License No. 286561 was first issued on September 3, 2013, and is currently suspended. Such prior License record also reflects that there are two open complaints, namely the present complaint and complaint 2019-05347.
CONCLUSIONS OF LAW
This matter lies within the Registrar’s jurisdiction. See A.R.S. § 32-1101 et seq.
Complainant bears the burden of proof to establish Respondent’s statutory violations by a preponderance of the evidence. See A.R.S. § 41-1092.07(G)(2); A.A.C. R2-19-119(A) and A.A.C. R2-19-119(B)(1); see also Vazanno v. Superior Court, 74 Ariz. 369, 372, 249 P.2d 837 (1952). “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.” Morris K. Udall, Arizona Law of Evidence § 5 (1960).
The evidence established that Respondent’s work was not in conformity with the Registrar’s standards, and Respondent admitted the same. Therefore, Complainant established that Respondent did not complete the project in a workmanlike manner in violation of A.R.S. § 32-1154(A)(3), namely A.A.C. R4-9-108.
The evidence also established that Respondent failed to complete the corrective work following the Directive being issued. Respondent’s argument is misplaced that the termination agreement relieved it of responsibility for making the repairs. Respondent still remained responsible for the actual work that was performed prior to the termination agreement. Further, Respondent cannot demand additional funds to correct the work for which he was previously paid. This work should have been completed in a workmanlike manner from the beginning. Therefore, Complainant established that Respondent failed to take appropriate corrective action following a written directive from the Registrar in violation of A.R.S. § 32-1154(A)(22).
In addition, Respondent used unlicensed contractors to perform work on the project in violation of A.R.S. § 32-1154(A)(13). Mr. McElwain appeared to be confused as to A.R.S. § 32-1121, the “Handyman Exception” as it is more commonly referred. The “Handyman Exception” allowed for unlicensed workers to be shielded from the Registrar of Contractors regulation, so long as the amount they were paid plus the amount of materials added up to less than $1,000.00. Thus, while Respondent may have paid its unlicensed workers less than $1,000.00 per day, the materials involved greatly exceeded the $1,000.00 amount when taken in the aggregate.
Finally, in regards to the violation of A.R.S. § 32-1154(A)(12), namely A.R.S. § 32-1158.02, failing to meet minimum requirements of a contract; no evidence was presented as to the same, thus, Complainant has failed to meet its burden regarding this violation.
The events in this case are tragic. Missing tools and accessories, cut air conditioning lines, restraining orders, small-claims lawsuits and complaints to the Arizona Attorney General’s office all occurred on this relatively straightforward construction project. While the Complainant is seeking a full revocation of Respondent’s license to protect the public, this must be weighed against Mr. McElwain’s ability to earn a living.
RECOMMENDED ORDER
Based on the foregoing, it is recommended that on the effective date of the Order, the Registrar shall suspend Respondent’s License No. 286561 for a period of ten days.
It is further recommended that the Registrar require Respondent to pay the sum of $500.00 as a civil penalty pursuant to A.R.S. § 32-1154(E).
It is further recommended that if Respondent fails to pay the entire amount of the civil penalty on or before thirty days following the effective date of the Registrar’s final order, the Registrar 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 A.R.S. § 32-1101(A)(7), 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.
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Done this day, December 8, 2020.
/s/ Adam D. Stone
Administrative Law Judge
Transmitted electronically to:
Jeffrey Fleetham, Director
Registrar of Contractors
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