ALJDEC decisions subject to certification as final

2020A-04788-CHC-ROC · Registrar of Contractors · 2021-12-06

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Sharon W Montgomery ,

COMPLAINANT

Seneca Construction LLC,

License No. ROC 299996,

RESPONDENT

No. 2020A-04788-CHC-ROC

ADMINISTRATIVE LAW JUDGE

DECISION

HEARING: May 18 and October 4, 2021

APPEARANCES: Sharon Montgomery and Robert Montgomery for Complainant; James L. Csontos, Esq. appeared for Respondent on May 18, 2021 and James Sparks, Esq. appeared for Respondent on October 4, 2021

ADMINISTRATIVE LAW JUDGE: Thomas Shedden

FINDINGS OF FACT

On April 13, 2021, the Registrar of Contractors (“ROC”) issued a Notice of Hearing on Contested Case setting the above-captioned matter for hearing on May 18, 2021 at the Office of Administrative Hearing. The matter was convened on May 18th and further hearing was conducted on October 4, 2021. The record was then held open for submission and consideration of written closing arguments.

Through its Notice of Hearing, ROC alleges that Respondent Seneca Construction LLC may have violated Ariz. Rev. Stat. sections 32-1154(A)(1), (A)(2)(b), (A)(3), and (A)(22).

Respondent holds license number 299996. Jahangir (John) Hashemi is Respondent’s qualifying party and an owner of the LLC. His brother Kamran Hashemi is also an owner.

The nominal Complainant is Sharon W. Montgomery. At the hearing, the parties agreed that her husband Robert Montgomery was also a proper Complainant.

Ms. Montgomery and Mr. Montgomery appeared on their own behalf and each testified. Complainant also presented the testimony of Steve Gallant, City of Scottsdale’s Building Inspector Supervisor.

Respondent appeared through counsel and presented the testimony of John Hashemi and Kamran Hashemi.

Both parties called Jacob Coker, qualifying party for Coker Construction LLC holder of KB-2 license number 318127. Coker was hired by Respondent to perform repair work after ROC issued a Directive to Respondent. Mr. Coker observed that there was hostility between the parties.

ROC investigator Randy Morris also testified.

Respondent was the general contractor building a multi-unit condominium in Scottsdale. Seneca Luxury Condominium LLC is the developer/owner; John and Kamran Hashemi are owners/members of that LLC.

Mr. Montgomery, as his sole and separate property, and SWM Enterprises LLC, are each 50% owners of unit 1012 that they purchased on July 31, 2020.

The unit was still under construction when purchased.

Complainants referred to both Mr. Montgomery and Ms. Montgomery as an owner of that unit.

Complainants purchased their unit with the intention of using it as a rental (30-day minimum) and for vacations.

Ms. Montgomery testified that the purchase price was $675,000 and that Complainants had paid $75,000 for repairs. Complainant did not offer into evidence any receipts for that reported repair work.

Ms. Montgomery is a realtor (not licensed in Arizona) who has experience in flipping houses and involvement in construction projects. Because the unit was new construction, Ms. Montgomery expected near perfection.

Complainants argue that Respondent’s license should be revoked to protect other consumers.

Through its opening statement, Respondent acknowledged that it had bitten off too much with this project. John and Kamran Hashemi both testified to the effect that Respondent is ready and willing to make any required repairs, and that it would have completed all repairs ROC ordered it to make but for the fact that Complainants’ denied access after ROC’s Directive expired.

The Hashemis also provided that they stand ready to honor any warranty claims made to Seneca Luxury Condominium LLC. Both John and Kamran Hashemi expressed their remorse that Complainants were not happy with their unit.

At the time of the hearing, six units had been sold and ROC received complaints from five purchasers, including the one at issue. As of the hearing dates, Respondent had resolved three of the five complaints, which were dismissed.

On October 5, 2020, the parties had what Ms. Montgomery described as an argument. Kamran Hashemi testified that Ms. Montgomery was upset and pretty much told Respondent to leave the project, which it did.

Ms. Montgomery explained that after October 5, 2020, Complainants had no verbal interactions with Respondents and all interactions were by email.

On or about October 8, 2020, Complainants submitted their complaint to ROC, through which they alleged poor work on Respondent’s part, but did not allege abandonment.

On November 4, 2020, ROC’s Mr. Morris conducted a jobsite inspection, but his notes are not in evidence or the record. Mr. Morris did not inspect every example of each complaint item, but rather looked only at representative samples.

Mr. Morris identified 138 alleged deficiencies as set out in Complainant’s complaint. His opinion was that 120 were workmanship deficiencies.

On December 10, 2020, ROC issued to Respondent a Directive through which it ordered Respondent to correct the complaint items that in Mr. Morris’s opinion were in violation of either the workmanship standards or another statute.

ROC’s Directive repeatedly shows that Respondent’s work does not meet the workmanship standards, but if gives no objective standards. For example, the Directive shows that the laminate flooring is not properly staggered at seams in some areas and that there was gap that was too large, but does not provide any information as to the required staggering or the allowable tolerance (if any) for gaps.

Mr. Morris explained that in its directives, ROC does not tell the contractor what to fix; instead ROC identifies “areas” or “systems” and expects the contractor to fix anything within that area or system that needs it. For example, item 33 shows that a panel on the garage door is damaged, so ROC expects the Respondent to inspect the entire garage door system and make any repairs that are necessary regardless of whether ROC identified these other deficiencies.

John Hashemi found ROC’s Directive to be unclear as to all that ROC was requiring Respondent to do.

ROC’s Directive informed Respondent that it had to comply with the Directive before 5:00 p.m. January 25, 2021.

During the time ROC allotted Respondent to make corrections, one of the Complainants had COVID and there was an eighteen day stretch with no work.

Because no work could be completed during those eighteen days, on February 1, 2021, ROC issued to Respondent an extension to its Directive through which it changed to February 12, 2021the date by which Respondent was required to show that it had complied with ROC’s Directive.

After receiving ROC’s Directive, Respondent began to make repairs, but Ms. Montgomery was not happy with their work. Consequently, Respondent stopped work and began to look for a contractor to hire to complete the work, which took some time.

Respondent hired Coker Construction to make the repairs that ROC ordered it to make and that were within the Coker’s KB-2 license. An exception is the floors, which Mr. Coker did not want to work on.

Coker was also working on three other units for which ROC had received complaints against Respondent.

Respondent’s records show it paid Coker more than $43,000.

Coker began working on or about December 25, 2020, it was working through February 12, 2021, and arrived to continue work on February 13, 2021, but Complainants would not allow Coker to do so because ROC’s deadline for compliance had passed.

Coker had ROC’s Directive and information from Respondent. Coker usually sent a crew of four, but sometimes it was two or six.

Much of Coker’s work was on the stairs, which took longer than expected. The work on the stairs was such that Coker could not bring in more workers to speed up the overall completion date.

Mr. Coker’s opinion was that all of Coker’s work met the workmanship standards, but it had not completed all the required work because it did not have enough time to do so. Had Complainant not denied Respondent/Coker access, Coker was prepared to finish the work within its scope. Mr. Coker estimated that it had completed 80 to 90% of that work and that it could have completed the remainder in two to three days.

COVID created delays or problems in that it was very difficult to get material even when that material had been paid for.

Ms. Montgomery prepared a table showing which of the items that ROC ordered Respondent to correct had been corrected as of February 15, 2021. Her opinion was that 52 of the 130 complaint items had been fixed.

Ms. Montgomery acknowledged that Coker was, with few exceptions, doing good work and that generally Complainants were satisfied with Coker’s work. One exception was the stairs, which Complainants did not believe were adequately repaired.

Nevertheless, Ms. Montgomery explained that Complainants would not allow Coker and Respondent to complete the repairs after ROC’s Directive expired because Respondent had ignored Complainants for two and one-half months (i.e., between October 5 and December 10, 2020, when ROC issued the Directive), and her opinion was that Respondent had had enough time to complete the work.

Respondent’s position is to the effect that on October 5, 2020, Ms. Montgomery told them to leave the project and it was not until ROC issued its Directive that Respondent had access to return to the project.

Complainants believe that an email in the record shows that Respondent had not been barred from the property, which is not an unreasonable reading, but that email did not explicitly call for Respondent to return to work, and by that time it appears that the parties’ relationship was broken.

John Hashemi and Kamran Hashemi each provided credible testimony showing that Respondent intended to correct all items requiring correction and that it would have done so if Complainants had allowed Respondent to keep working after ROC’s deadline expired.

Respondents do however raise good faith arguments that not every item identified by ROC actually was a workmanship defect.

John Hashemi’s opinion was that Respondent had completed 80 to 90% of the Directive and could have finished the remainder in an additional week to ten days.

Mr. Morris conducted a compliance jobsite inspection on February 22, 2021. Mr. Morris took photographs at the compliance jobsite inspection, but those photographs are not in the record ROC provided to the Office of Administrative Hearings and were not offered as exhibits.

Until the hearing, Mr. Morris was not aware that Coker was performing the corrective work.

Mr. Morris explained that at the compliance inspection, he was looking for things that were not fixed, rather than things that were. And that for complaint items with more than one installation, for example the three sets of stairs, if the first one he inspected was not fixed, he would not look further to see if the other two were corrected because it had been proven that the Directive was not complied with.

Mr. Morris acknowledged that Respondent had made corrections, but his opinion was that no complaint item was completely fixed and he concluded that Respondent had not complied with ROC’s Directive.

But Ms. Montgomery’s list dated February 15, 2021 shows that items that in Mr. Morris’s opinion were not repaired, actually had been repaired. At the hearing, Ms. Montgomery affirmed that her list was accurate.

Mr. Morris could not offer any opinion as to this discrepancy, and could only report what observed.

Kamran Hashemi’s opinion is that Mr. Morris was wrong because many items were completed as seen by his own observations, Coker’s reports, and Ms. Montgomery’s status sheet.

Mr. Coker also was of the opinion that Mr. Morris was incorrect and that items on ROC’s Directive had been properly repaired.

ROC issued to Respondent a Citation dated March 1, 2021, through which ROC alleges that Respondent may have violated Ariz. Rev. Stat. sections 32-1154(A)(1), (A)(2)(b), (A)(3), and (A)(22).

In or about April 2021, Complainants listed unit 1012 for sale at a price of $795,000. Ms. Montgomery acknowledged that the listing does not show that the workmanship is subpar or deficient in any way. The listing agent wrote the listing, but Ms. Montgomery had reviewed it and did not ask agent to modify the listing. She noted that Complainants had prepared a Seller’s disclosure or SPDS, but that is not in evidence.

Alleged Code Violations

Complainants received a certificate of occupancy in spring or summer 2020. Scottsdale received complaints from three unit-owners alleging that the inspector had missed issues during his final inspection.

Mr. Gallant first went to the site in November 12, 2020, and had been there ten to twenty times.

Mr. Gallant identified eighteen items that in his opinion were code violations that the original inspector had missed. Several were items that ROC had found to be workmanship violations, including the stairs and air conditioners, but the City itself does not apply ROC’s standards.

Mr. Gallant testified that the Respondent was given a list in November or December 2020 and told to correct these items. The only list in the record does not appear to be an official City of Scottsdale document. The list does not include the code provisions that Respondent is alleged to have violated, and those code provisions are not in the record.

The record has only one document related to the City’s inspections, a Test Certificate dated February 4, 2021. Although that document shows it is a Notice of Violation, it was not signed as having been received by Respondent or Complainants. It appears that the City never cited Respondent or issued NOVs related to the project.

The presumption is that a Certificate of Occupancy would not have been issued if code violations existed.

Mr. Gallant testified that he was not sure what happened because some of the alleged violations were obvious, for example no hand rail. He added that the City inspector who issued final approval for the Certificate of Occupancy had been disciplined.

Mr. Gallant’s opinion was that Respondent had remedied some of the alleged code violations before the ROC Directive expired.

But once ROC’s Directive expired, the City stopped making any effort to have Respondent correct any existing violations. Nevertheless, Mr. Gallant’s opinion was that code violations should be fixed and that Complainants should allow Respondent access to do so.

Respondent acknowledged that Mr. Gallant’s opinion was that there were eighteen code violations, with some not corrected. John Hashemi’s opinion was that Respondent had corrected all the issues, but if there were any uncured code violations Respondent would correct them.

Kamran Hashemi also testified that Respondent would correct any code violations if given access to do so.

According to Mr. Morris, ROC does not have jurisdiction to consider whether code violations exist, but based on Mr. Gallant’s findings, ROC had authority to cite Respondent for failing to comply with the code.

Air Conditioning Units

There are eight vent-less air conditioning/HVAC units controlled by a unit on the roof.

There is no dispute that the units were not functioning properly.

Mr. Morris acknowledged that the problem was not bad work per se on Respondent’s part, but ROC’s position is that Respondent is nevertheless responsible in first year even if the units are under warranty.

John Hashemi’s opinion was that all eight units were not malfunctioning, but rather the mother board in the unit on the roof was the problem and that Complainants should have called Mitsubishi to correct the problem.

Kamran Hashemi’s opinion was that either the units were not properly programed or that there was an issue with the master unit that the manufacturer would need to fix.

Kamran Hashemi testified that the air conditioning units in Complainants unit were installed in the same manner as those in the other units, and those other units were all functioning properly.

At the hearing, Ms. Montgomery testified that she had paid a company called Desert Diamond less than $300 to fix the problem, which they told her was bad wiring, but there is no receipt or job-ticket in evidence.

Ms. Montgomery also testified that Mitsubishi had been to the site and said the issue was probably the installation.

The HVAC work requires a licensed subcontractor and is not in Coker scope of work.

Floors

Mr. Morris’s opinion was that there were soft spots in the flooring where it was not properly secured, that there was an area with an improper gap, and that there were areas that were not properly staggered at the seams. Complainant did not present any standards by which these allegations could be objectively evaluated.

Kamran Hashemi did not agree that these were deficiencies.

According to Kamran, by design the floor is “floating” on a pad and not glued down, which in Kamran’s opinion is why it feels soft. His opinion was that the photographs in ROC’s record show that the floor is properly staggered and properly spaced for the planks being used. The requirement is at least two inches edge to edge.

Stairs

The unit has three flights of stairs, totaling fifty-two steps.

Mr. Coker reported that were some workmanship deficiencies in the initial stair installations.

Respondent acknowledged that there were problems with original stair treads and rather than trying to repair those treads, Respondent opted to fabricate new redwood treads. This was expensive in comparison to buying the treads, which is what Respondent had done for the initial installation, and provides better quality.

Coker spent most of its time on the stairs and it took longer than Mr. Coker had expected. The stairs are intricate and work on the stairs limited the number of other workers who could be working at the unit.

Mr. Coker’s opinion was that as of February 12, 2021, the stairs were close to complete, with required pieces on order, and that the work was code-compliant.

Complainants assert that new redwood steps are cracked and are emitting sap. Respondent’s position was that there were no cracks, but there was “checking.” In the photograph under consideration, Mr. Coker saw neither, but did see a knot.

Regarding the alleged sap, Mr. Coker provided credible testimony that what Complainants were referring to was not a deficiency, but rather a result of the wood needing to acclimate. His opinion was that this was an issue requiring touch-up work.

Mr. Coker also testified to the effect that wood shifts and that there may have been a need for some adjustments.

The Skylight

Complainants allege that a skylight was deficient because Respondent did not remove plastic sheeting or film that then melted to the lens.

A search of ROC’s Directive does not reveal the words “sky” or “skylight,” and it appears that ROC did not allege through its Directive that there was any deficiency.

Mr. Coker did not recall seeing the skylight on any list except as a touch-up item.

Ms. Montgomery testified that a distributor told her that the lens needed replacement.

John Hashemi found Ms. Montgomery’s testimony about the skylight to be vague, but in the photograph Complainants submitted he thought it looked fine.

Respondent installed the skylights in all units following the same procedures, including taking the film off. The lens is not clear class, it is UV protected, which is why it looks as it does in the photograph.

Respondent has a close relationship with the manufacturer, Belco, and a representative was present when the skylight was installed.

Respondent was not saying that Ms. Montgomery was wrong as to what this distributor told her, but the Hashemis did not know whether that person had personally inspected the skylight or was relying on something else such as photographs.

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.").

Substantial evidence is evidence that a reasonable mind would use to reach a conclusion. See Mealey v. Arndt, 206 Ariz. 218, 76 P.3d 892 (App. 2003).

“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).

Although Respondent acknowledged biting off too much, there was no substantial evidence to show that it 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:

1. Abandonment of a contract or refusal to perform after submitting a bid on work without legal excuse for the abandonment or refusal.

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2. Departure from or disregard of:

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(b) A building code of this state or any political subdivision of this state in any material respect that is prejudicial to another.

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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....

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

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).

Ariz. Rev. Stat. section 32-1154(E) provides that “The registrar may impose a civil penalty of not to exceed $500 on a contractor for each violation of [Ariz. Rev. Stat. 32-1154] subsection A, paragraph 22.”

There was no substantial evidence to show Respondent abandoned the project tin violation of Ariz. Rev. Stat. section 32-1154(A)(1) and that allegation is not proven.

Respondent’s work initially passed inspection and a certificate of occupancy was issued. Nevertheless, Mr. Gallant subsequently came to the conclusion that there were code violations. But neither Complainant nor Mr. Gallant identified any specific code provisions against which Mr. Gallant’s list of alleged violations could be checked and verified. ROC depends exclusively on Scottsdale’s determination and Mr. Morris did not consider the merits of the issues identified by Mr. Gallant. Scottsdale did not cite or penalize Respondent and is not requiring Respondent to fix the items that Mr. Gallant believes have not been brought up to code. On these facts, it has not been proven by a preponderance of the evidence shows that Respondent violated Ariz. Rev. Stat. section 32-1154(A)(2)(b).

Regardless, even if there were code violations, Complainants did not show that they were prejudiced as shown by their Redfin advertisement to sell the unit and that Respondent is willing to correct any existing code violations if Complainants give Respondent access, which is something Mr. Gallant said Complainant should do.

The preponderance of the evidence shows that Respondent did commit some workmanship violations. Mr. Coker acknowledged that the original stairs had spots that did not meet the workmanship standards. Also, the air conditioning was not working properly, and although Mr. Morris’s testimony shows that this was a manufacturing defect, under ROC’s standards, Respondent was responsible to ensure that the problem was corrected during the first year of operation.

Mr. Morris’s opinion was that the floor had deficiencies, but neither he nor Complainants presented any standard on which these allegations can be measured. In contrast, Respondent’s testimony regarding the overlap provided an objective measure that was not rebutted. On these facts, it has not been shown by a preponderance of the evidence that the floor does not meet the workmanship standards.

ROC’s Directive does not include an allegation that the skylight was deficient and it has not been proven that Respondent committed a workmanship violation.

Through Kamran Hashemi’s testimony, Respondent effectively acknowledged that there were other deficiencies. But Respondent would have corrected those deficiencies if it had been given enough time to do so.

Respondent violated Ariz. Admin. Code section R4-9-108(A), which is also a violation of Ariz. Rev. Stat. section 32-1154(A)(3).

Although Respondent did not complete the corrective work in the time that ROC ordered it to do so, Respondent’s failure is justified by the fact that it did not have a sufficient and reasonable period of time to do so. Respondent was actively working to complete the work when Complainant denied further access when the Directive expired. John Hashemi thought that Respondent could have completed the work in about ten days, which opinion was not rebutted. Regardless, of how long it may have taken, Respondent was committed and willing to complete all the work and the Hashemis through Seneca Luxury Condominium LLC are committed to honoring Complainants’ warranty. It has not been proven that Respondent violated subsection 32-1154(A)(22).

Because Respondent has violated the applicable statutes, ROC has authority to discipline its license.

The most serious allegation is that there are code violations, which was not proven. But even if there are such violations, the reasonable conclusion is that they are not serious because they were not discovered by the first inspector and Scottsdale is not making any effort to enforce these provisions. Moreover Respondent is willing to fix any alleged code violations still existing.

There are proven workmanship violations, the most serious of which appears to be the stairs and air conditioning. The preponderance of the evidence shows that the stairs had almost been completely fixed and that Coker would have completed the work if Respondent had been allowed access after the Directive expired.

Regarding the air conditioning, the evidence shows that Complainant spent $300 to repair an issue that ROC holds Respondent responsible for (although exact amount not in evidence).

Considering the facts of this matter, a one day suspension and restitution of $300 for the air conditioning repair is appropriate.

RECOMMENDED ORDER

IT IS RECOMMENDED that the Registrar suspend Respondent Seneca Construction LLC’s license number 299996 for one day and that ROC order Respondent to pay restitution to Complainants in the amount of $300.

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, December 6, 2021.

/s/ Thomas Shedden

Thomas Shedden

Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director

Registrar of Contractors

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