ALJDEC decisions subject to certification as final

2020A-03437-CHC-ROC · Registrar of Contractors · 2021-01-26

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Jeffrey Holmes,

COMPLAINANT,

v.

P R H Construction Inc.,

License Number ROC 256048,

RESPONDENT.

No. 2020A-03437-CHC-ROC

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: January 06, 2021 at 9:00 AM.

APPEARANCES: Jeffery Holmes (“Complainant”) appeared on his own behalf. Adam Abreu appeared on behalf of P R H Construction Inc. (“Respondent”). Steve Klein appeared from the Arizona Registrar of Contractors (“Registrar”) as a witness.

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

Pursuant to Ariz. Admin. Code R4-9-117, Administrative Notice is taken of Respondent’s active license file as shown on the Registrar’s public website January 06, 2021. On May 31, 2009, the Registrar issued License No. 256048 for General Dual KB-1 Building contracting license to Respondent. The license is active and renewed through May 31, 2021. Phillip Russel Harris is listed as the Qualifying Party/Officer on the license, along with Adam Michael Abreu who is listed as an Officer on the license. The address of record for the license is 106 S. 54th St., Chandler, Arizona 85226-3203. There is an active $14,000.00 surety bond listed for the license issued by RLI Insurance Company. The license has not been previously disciplined, however, the record reflects that there has been one prior complaint settled or otherwise resolved with the license. There is also one open case against the license, which is presumed to be Complainant’s.

On or about July 17, 2020, the Registrar received a complaint from Complainant that alleged poor workmanship of a $300,000.00 commercial building project. Complainant included copies of 2 contract agreements executed between the parties, Final Bid Proposal, a joint check $94,500.00 allowance letter dated February 18, 2020, and a $14,359.07 invoice dated September 13, 2019. The Registrar designated it Complaint No. 2020-03437 and assigned it to Steve Klein for investigation.

On August 06, 2020, Investigator Klein issued a Jobsite Inspection Notification Letter to the parties, advising that he would conduct an inspection of the project on August 19, 2020, at 10:00 a.m.

On August 19, 2020, Investigator Klein presented to the project site for his inspection. Both parties were present. Investigator Klein conducted a review of the contracts executed between the parties and inspected the work that had been performed on the project to date. When he was finished, Investigator Klein drafted his Inspection Notes whereby he substantiated 8 of Complainant’s 13 complaint items. However, because Complainant raised additional complaint items at the time of the inspection, the parties agreed to reset the jobsite inspection for September 16, 2020, at 10:00 a.m.

On September 16, 2020, Investigator Klein completed a second inspection of the project. Respondent was not present. Investigator Klein also took photographs of the project site and segment of the parties’ contact agreement.

On September 16, 2020, the Registrar received Complainant’s written addendum to the complaint containing 11 additional complaint items.

On September 16, 2020, Investigator Klein issued a Directive from the Registrar to Respondent because he substantiated Complainant’s allegation that Respondent’s workmanship on the project did not meet the Registrar’s minimum workmanship standards. Specifically, Respondent was advised to remediate substantiated complaint items 1, 3-6, 9-10, and 12. Respondent was put on notice that it had until 5:00 p.m. on October 07, 2020, to notify the Registrar of its compliance with the Directive or face discipline pursuant to Ariz. Admin. Code R4-9-108, and Ariz. Rev. Stat. §§ 32-1154(A)(3), 32-1154(A)(22), and 32-1154(E).

On September 18, 2020, forwarded Complainant’s addendum complaint to Respondent and issued a Directive Compliance Inspection Notification Letter to the parties, advising that he would conduct an inspection of the project on October 07, 2020, at 10:00 a.m.

On October 07, 2020, Investigator Klein conducted a Directive Compliance inspection of the project. Both parties were present. Investigator Klein determined that Respondent had not satisfactorily remediation substantiated compliant items 1, 4, 6, 10, and 12. None of Complainant’s addendum complaint items were substantiated by the Registrar.

On October 08, 2020, Investigator Klein forwarded the matter to the Registrar’s legal department whereby he suggested that Respondent be cited under Ariz. Rev. Stat. §§ 32-1154(A)(3); Ariz. Admin. Code R4-9-108, and 32-1154(A)(22).

On October 09, 2020, the Registrar issued a Citation to Respondent under Ariz. Rev. Stat. § 32-1155(A). Respondent was given until October 24, 2020, to respond with its Answer.

On October 24, 2020, the Registrar received Respondent’s Answer whereby Respondent argued (1) its plumbing subcontractor was instructed by Complainant to complete the plans differently from the design because Complainant had decided to delete several layout items, (2) the air curtains were installed by another vendor from one of Complainant’s other locations, (3) denied HVAC was a part of its contract with Complainant, (4) argued that “epoxy” was a stain that Respondent had completed, (5) denied that “duckwork” was missing and instead noted missing diffusers had since been installed, (6) light fixtures were a part of its contract with Complainant but that it replaced 2 fixtures notwithstanding, (7) patio doors have been remediated, (8) roll up doors have been remediated, (9) denied issues with any electrical wiring, and (10) only cabinetry to be installed at host stand, not office. Overall, Respondent argued that the parties’ dispute amounted to a contractual dispute that should be more appropriately settled outside of the Registrar’s jurisdiction.

On November 13, 2020, the Registrar referred this matter to the Office of Administrative Hearings, an independent state agency, for an evidentiary hearing on January 06, 2021. 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 charges:

Charge 1: A violation of Rule 4-9-108, titled “Minimum Construction Standards,” in the Arizona Administrative Code, and thereby a violation of A.R.S. § 32-1154(A)(3).

Charge 2: 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 and Respondent testified on their own behalves. Neither offered any exhibits. The Registrar’s electronic hearing file and Notice of Hearing were the only exhibits admitted into the record. The substantive evidence is as follows:

Complainant is a franchise owner of Native Grill & Wings located at 2501 W. Happy Valley Rd. #12 Phoenix, Arizona 85085. On December 28, 2018, Complainant entered into a commercial sublease on the space, a previously-existing restaurant, from HVTC LLC.

Because Complainant is a franchisee, he was required to choose a pre-approved contractor for the corporate build-out by the franchisor. Respondent was selected.

On February 18, 2019, the parties entered into a commercial contract agreement for $269,965.75 to build a Native Grill & Wings restaurant at Complainant’s subleased space. Chris Cooper of Arizado, Inc. is listed on the contract as the architect of record for the project.

On October 31, 2018, work on the project commenced. On September 30, 2019, the restaurant opened for business.

On or about March 11, 2020, the parties entered into a secondary contract agreement whereby Complainant agreed to sign a $94,500.00 joint check with Respondent “[T]o be issued to the landlord of the property to complete payment terms for ... the project.”

On March 11, 2020, Complainant signed a lien release.

No written Change Orders were executed between the parties.

A September 13, 2019, invoice from TND Design Studio for $14,359.07 indicates it is for the design and installation of Complainant’s Glyco system.

In closing, Complainant argued that his franchisor, though not a party to Complainant’s contracts with Respondent, was highly involved in the underlying project and went so far as to make modifications to the terms of several contract items unbeknownst to Complainant and without his consent. Complainant also argued that as of the Compliance Inspection date, complaint items 1 (i.e. plumbing), 4 (i.e. floor epoxy), 10 (i.e. office cabinetry), and 12 (i.e. Glyco system) remained outstanding.

In closing, Respondent argued that on cross-examination Complainant conceded that it had instructed Respondent “not to plumb as planned,” and therefore should not be held liable for a workmanship violation. Respondent also argued that Complainant never established that it had been responsible or otherwise required to install office cabinetry, and therefore Respondent could had committed a statutory violation in that regard. Respondent further argued the evidence established that another vendor had been responsible for the design and installation of Complainant’s Glyco system, so Respondent should not be liable for any issues stemming therefrom.

CONCLUSIONS OF LAW

This matter lies within the Registrar’s jurisdiction and has been properly brought before the Office of Administrative Hearings for adjudication.

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.

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(A)(22) provides, 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.

Here, the credible evidence of record reflects that the only substantiated complaint item that remained outstanding on October 07, 2020, was complaint item 4. Respondent was either not responsible, or had satisfactorily remediated, complaint items 1, 6, 10, and 12.

Therefore, the only remaining issue is whether Respondent raised sufficient justification or excuse for failing to timely and completely address compliant item 4 as instructed by the Registrar’s Directive. This is an affirmative defense that Respondent bears the burden to establish. Here, the record reflects that Respondent used a stain instead of epoxy on Complainant’s flooring, which are discernably different from one another. As Respondent failed to timely remediate this issue, and the parties never came to a financial arrangement to settle this dispute, Respondent is in violation of Ariz. Rev. Stat. §§ 32-1154(A)(3); Ariz. Admin. Code R4-9-108, and Ariz. Rev. Stat. § 32-1154(A)(22) because Respondent did not provide the Tribunal with an affirmative defense sufficient to satisfy the evidentiary standard.

Therefore, Complainant has established grounds for the Registrar to discipline Respondent’s license based on the above statutory violations.

RECOMMENDED ORDER

Based on the foregoing,

IT IS RECOMMENDED that five days after the effective date of the Final Order in this matter, Respondent P R H Construction Inc., ROC License No. 256048, be suspended for two (2) days.

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 Final Order will be40 days from the date of that certification.

Done this day, January 26, 2021.

/s/ Jenna Clark

Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director

Registrar of Contractors