ALJDEC decisions subject to certification as final

2020A-03275-CHC-ROC · Registrar of Contractors · 2021-10-25

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Ronald Thomas Horton ,

COMPLAINANT

Gentry Remodeling LLC

License No. ROC 327364

RESPONDENT

No. 2020A-03275-CHC-ROC

ADMINISTRATIVE LAW JUDGE

DECISION

HEARING: October 5, 2021

APPEARANCES: Mickell J. Summerhays, Esq. for Complainant; Richard Klauer, Esq. for Respondent

ADMINISTRATIVE LAW JUDGE: Thomas Shedden

FINDINGS OF FACT

On March 29, 2021, the Registrar of Contractors (“ROC”) issued a Notice of Hearing on Contested Case setting the above-captioned matter for hearing on April 28, 2021 at the Office of Administrative Hearing.

The parties agreed to several continuances and the hearing was conducted on October 5, 2021.

Through its Notice of Hearing, ROC alleges that Respondent Gentry Remodeling LLC may have violated Ariz. Rev. Stat. sections 32-1154(A)(6), (A)(8), (A)(12) and (A)(16).

Gary Witkowski Respondent’s owner testified for Respondent. Respondent holds license numbers 327364 (CR-37), 327365 (CR-61), and 332463 (B-3)

Complainant is Ronald Thomas Horton.

Mr. Horton appeared through counsel, testified on his own behalf, and presented the testimony of Kurt Koerner and ROC investigator Randy Morris. Mr. Koerner is a licensed contractor whose experience includes twenty-five years as an adjunct professor at Arizona State’s Del Webb School of Construction.

Mr. Horton acknowledged having an incomplete and poor recollection of the events at issue and consequently his testimony is not reliable evidence.

Mr. Horton and Mr. Witkowski met at a restaurant owned by Mr. Horton.

Respondent performed plumbing work at the restaurant for Mr. Horton.

Respondent received its CR-61 license on January 10, 2020. Soon thereafter, Mr. Witkowski asked Mr. Horton if he could post a business card at the restaurant.

Mr. Horton expressed his need for a contractor to perform remodeling work at a house owned by Mr. Horton.

Mr. Horton had plans and a permit and work was underway before Respondent looked at the job.

On the permit application, Mr. Horton listed himself as the owner/builder and represented that the value of the job was $38,737.67.

The parties entered a verbal contract at a price not to exceed $150,000. When the parties entered the contract, Respondent had its CR-67 and CR-61 licenses, but not its B-3 license.

Through a check dated February 14, 2020 Mr. Horton made an initial payment of $50,000 and Respondent began work. Mr. Horton lived next door and visited the site frequently, perhaps as often as daily.

Mr. Witkowski focused his own work efforts on the plumbing, and Respondent engaged subcontractors to perform other work.

The house was essentially gutted and unlicensed contractors had been performing work before Respondent started its work.

While Respondent was working on the project, the plans were modified to increase the scope of work

Mr. Horton informed the city that he was the new contractor and arranged for a pre-inspection meeting.

During the pre-inspection meeting the inspector informed Respondent that the electrical system would not pass inspection. Mr. Horton was made aware of the need to upgrade or replace the electrical system and approved the work.

Leapfrog Electric was the subcontractor engaged to do the electric work and Mr. Horton requested and approved upgrades from Leapfrog.

While Respondent was working on the house, it discovered that cast-iron pipes that were part of the underground plumbing were deteriorated and needed to be replaced. It is not common for cast iron pipes to deteriorate.

Mr. Witkowski provided credible testimony it was not until after the parties entered their contract that it became known that the electrical system and underground plumbing had to be replaced.

Mr. Horton testified that he did not understand that the upgrading the electrical system and replacing the underground plumbing would increase the cost of the project.

After Respondent started work, a support post had to be removed for a footing to be poured and all the beams tied to that post had to be reinstalled. Respondent hire a subcontractor, Anthony Cruz, to do that work. Mr. Horton was happy when he learned that Mr. Cruz had been hired because he had done good work Mr. Horton at the restaurant.

Through a cashier’s check dated April 14, 2020, Mr. Horton made an additional payment of $62,000 to Respondent.

In late May or early June 2020, Respondent requested that Mr. Horton make another payment of $39,000.

According to Mr. Horton, he requested that Respondent provide an accounting, which Respondent would not do and Respondent walked off the job. ROC determined however that Mr. Horton terminated the contract on June 11, 2020.

According to Mr. Witkowski, he had provided Mr. Horton with accounting information as the job progressed and he was willing to give Mr. Horton copies of his receipts for any work that had not been accounted for, but Mr. Horton demanded the originals.

After Respondent made the request for $39,000, Mr. Horton and Mr. Witkowski met four times to discuss the request, at which meetings Mr. Horton became angry and cussed at Mr. Horton and his son.

It was during the fourth meeting that Mr. Horton cussed at Mr. Witkowski’s son, at which time Mr. Witkowski admonished him not to do so. Mr. Horton then told Mr. Witkowski to get the fuck out (of the restaurant) and Mr. Witkowski took it as Respondent being fired.

Two days later, Mr. Witkowski went by the house to see what Mr. Horton wanted to do, but Mr. Horton had already hired another contractor that was working on the house. Mr. Witkowski testified that this new contractor was not licensed.

On or about July 8, 2020, Mr. Horton filed with ROC a complaint against Respondent alleging abandonment and that Respondent had “misrepresented his license and ability to do the size of the job.”

On August 6, 2020, ROC’s Mr. Morris conducted a jobsite inspection.

Mr. Morris determined that Mr. Horton terminated the contract on June 11, 2020 and then hired another contractor to complete the project. Consequently, through a Dismissal Letter dated August 14, 2020, ROC dismissed Mr. Horton’s complaint citing Ariz. Rev. Stat. section 32-1155(D)(2).

On February 17, 2021, Mr. Horton’s attorney sent ROC a letter detailing perceived violations of statute unaffected by the fact that Respondent’s work had been modified by another contractor and requesting that the matter be reopened with Mr. Horton’s goal being to access the recovery fund.

Mr. Witkowski learned that Respondent was not properly licensed to perform work for more than $50,000. To obtain a B-3 license Respondent was required to take out a larger bond, which it did, and on March 2, 2021, Respondent received its B-3 license.

ROC reopened Mr. Horton’s Complaint and it issued to Respondent a Citation dated April 30, 2021 through which it alleges that Respondent may have violated Ariz. Rev. Stat. sections 32-1154(A)(6), (A)(8), (A)(12) and (A)(16).

At the hearing, Mr. Horton requested restitution in the amount of $19,439.59, based on calculations made by Mr. Koerner.

Mr. Koerner reviewed information provided by Respondent regarding its costs and payments to subcontractors, he made observations at the house, and he relied on information provided by Mr. Horton as to Respondent’s scope of work.

Because Mr. Horton did not have a clear memory of the parties’ interactions, Mr. Koerner’s opinions that are based on information from Mr. Horton are suspect for lack of foundation.

Respondent’s rate for plumbing work was $140 per hour, which Mr. Koerner found to be high, but he acknowledged that he did not know what other plumbers were charging, whereas Mr. Witkowski testified that some competitors’ rates are in the $250 to $350 hour range.

Although Mr. Koerner was of the opinion that some of Respondent’s other reported expenses were also high, he accepted that Respondent’s reported expenses of $92,826.63 were valid, which conclusion Mr. Horton accepted.

Mr. Horton determined that $19,439.59, or 21% of Respondent’s legitimate expenses of $92,826.63 was profit and overhead, for total project revenue of $112,320.22.

Profit and overhead of 21% is reasonable.

Mr. Witkowski acknowledges that Respondent exceeded the scope of its CR-61 license when it entered the contract with Mr. Horton because the contract was for more than $50,000. He testified however that he was not aware of the violation at the time it occurred. He attributed the error to Respondent’s failure to obtain a bond large enough for a B-3 license.

Explaining this, Mr. Witkowski testified to the effect that the same test is administered for the CR-61 and the B-3 licenses; he passed that test; but Respondent’s staff opted to pay for a bond that was sufficient to obtain the CR-61 license, but not the B-3 license (because it was cheaper).

It appears that in January 2020, Mr. Witkowski was not aware that Respondent was being issued the CR-21 license and not a B-3 license, which does not reflect favorably on him.

Soon after Mr. Witkowski learned that Respondent had the CR-61 license, Respondent paid additional bonding fee and Respondent received its B-3 license on March 2, 2021.

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).

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 term “knowingly” requires “[o]nly a knowledge that the facts exist that bring the act or omission within the provisions of the statute using such a word” and “[d]oes not require any knowledge of the unlawfulness of the act or omission.” Ariz. Rev. Stat. § 1-215(17).

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).

There was no substantial evidence adduced showing that Respondent is unscrupulous, unqualified, or financially irresponsible.

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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6. The doing of a fraudulent act by the licensee as a contractor resulting in another person being substantially injured. For the purposes of this paragraph, "fraudulent act" means a material misrepresentation that a licensee makes, that is relied on by another person and that results in damage to that person or that person's property.

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8. Failure in a material respect by the licensee to complete a construction project or operation for the price stated in the contract, or in any modification of the contract.

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12. Failure in any material respect to comply with this chapter.

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16. Knowingly contracting beyond the scope of the license or licenses of the licensee.

Ariz. Rev. Stat. section 32-1158 lists nine elements that must be set out in writing in any contract of more than $1000 entered into between the owner of a property and the contractor.

Ariz. Rev. Stat. subsection 32-1154(B)(3) provides that ROC “May temporarily suspend ... or permanently revoke any or all licenses issued under this chapter if the holder of the license ... commits any of the acts or omissions set forth in” subsection 32-1154(A).

A CR-61 license allows the contractor to perform general remodeling, additions, replacements, and repairs to existing structures, provided that the total cost of labor and materials is $50,000 or less. Ariz. Admin. Code § R4-9-103(B).

The preponderance of the evidence shows that Respondent entered a contract for greater than $50,000 at a time when it did not have its B-3 license. Consequently, Respondent violated Ariz. Rev. Stat. section 32-1154(A)(16).

Mr. Horton argues that when entering the contract Respondent made a material misrepresentation that Mr. Horton relied on in violation of subsection 32-1154(A)(6) because Respondent was representing that it was qualified to perform the work and was properly licensed when it was not.

Mr. Horton’s claim that he relied on Respondent is suspect because he does not have an accurate recollection of the facts at issue.

It has not been proven that Respondent did not possess the requisite technical knowledge to perform the work at issue, and the fact that Mr. Witkowski had passed the B-3 examination before Respondent entered the contract is evidence that he did have the requisite knowledge. There was also no evidence adduced showing that Respondent’s work was deficient or that Mr. Horton did not receive fair value for the $112,000 he paid respondent. It has not been proven that Respondent made a material misrepresentation when entering the contract.

It has not been proven that Respondent violated Ariz. Rev. Stat. section 32-1154(A)(6).

It has not been proven that Respondent violated Ariz. Rev. Stat. section 32-1154(A)(8) because the preponderance of the evidence shows that Mr. Horton agreed to changes in the scope of work, that those changes increased the cost of the work beyond the original price of $150,000, and he was aware that at least some of those changes would increase the contract price.

The preponderance of the evidence shows that Respondent violated Ariz. Rev. Stat. section 32-1158, because its contract with Complainant was not in writing and did not include the required elements. This is also a violation section 32-1154(A)(12).

Because Respondent has violated subsections 32-1154(A)(12) and (16), ROC has authority to discipline its license.

Mr. Horton requests restitution of $19,439.59, but has not proven that restitution is warranted in this matter because he has not proven that he suffered any disadvantage or harm.

Mr. Horton concedes that Respondent had valid expenses of $92,826.63 and the preponderance of the evidence shows that profit and overhead of 21% is not unreasonable. Consequently, Mr. Horton has not shown that he did not receive fair value for the $112,000 he paid Respondent. Mr. Horton also did not prove that Respondent’s work was deficient in any way. Consequently, Mr. Horton has not proven any injury for which recompense is warranted.

Respondent provided ROC with a copy of its form contract while the matter was pending and there was no evidence adduced to show that that contract does not conform to the statutory requirements. Consequently, the violation of subsection 32-1154(A)(12) has been remedied and no discipline is appropriate.

Mr. Witkowski acknowledged his error in violating subsection 32-1154(A)(16) by entering a contract that exceeded the $50,000 limit on Respondent’s CR-61 license. But Mr. Horton suffered no injury and this violation was not based a lack of contracting knowledge or poor work, but rather was one based on Respondent’s failure to take out a large enough bond. Upon learning of Respondent’s error, Mr. Witkowski paid for the increased bond and now holds the B-3 license that allows it to perform the same scope of work without a financial limit.

Consequently, although Mr. Witkowski’s lack of attentiveness when obtaining the original bond and license is a concern, no discipline is appropriate for this violation.

RECOMMENDED ORDER

IT IS ORDERED that case number 2020-03275 is dismissed.

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, October 25, 2021.

/s/ Thomas Shedden

Thomas Shedden

Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director

Registrar of Contractors

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-137160-45720000