ALJDEC - Licensing

2021A-00640-CHC-ROC · Registrar of Contractors · 2023-04-26

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Charlie S. Pilato and

Dusanka Pilato,

COMPLAINANTS,

Desert Living General Contracting, LLC

License No. ROC 178030,

RESPONDENT.

No. 2021A-00640-CHC-ROC

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: April 11, 2023

APPEARANCES: Complainants Charlie Pilato and Dusanka Pilato appeared on their own behalf. Quentin Weber appeared on behalf of Respondent Desert Living General Contracting, LLC. Ray Purselley appeared as a witness for Respondent Desert Living General Contracting, LLC. Arizona Registrar of Contractors Investigator Steven Avila appeared as a witness. Lauren Pilato and Dan Peterson were present as observers.

ADMINISTRATIVE LAW JUDGE: Sondra J. Vanella

FINDINGS OF FACT

Desert Living General Contracting, LLC (“Respondent”) is the holder of License No. 178030 issued by the Arizona Registrar of Contractors (“Registrar”). Quentin Weber is a Member of Respondent.

On or about January 2021, Charlie Pilato and his mother, Dusanka Pilato, (“Complainants”) contracted with Respondent for the remodel of their home. The contract price was $147,700.00, and Complainants have paid Respondent $140,000.00.

On or about February 15, 2021, the Arizona Registrar of Contractors (“Registrar”) received a Complaint against Respondent from Complainants alleging abandonment with respect to Respondent’s scope of work.

The Registrar initially assigned the Complaint to Investigator Randy Morris. After a March 12, 2021 Jobsite Inspection, Investigator Morris issued a March 25, 2021 Written Directive to Respondent that provided as follows:

After investigation, the Registrar determined that you failed to meet the requirements of A.R.S. § 32-1154(A), and now issues this Directive requiring you to take appropriate corrective action. 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 June 30, 2021.

You are directed to remedy the following violations by the appropriate means:

During the JSI it was confirmed by the Respondent’s representative that no written contract has been issued. The Respondent’s representative also stated that there are verbal change orders, but nothing in writing. The Respondent is in violation of administrative statute ARS 32-1158 Minimum elements of a contract: any contract in an amount of more than one thousand dollars entered into between a contractor and the owner of a property to be improved shall contain in writing the nine elements of a contract as prescribed in the statute. A warning letter is being issued against the Respondent’s license number for this violation.

Scottsdale Building Permit #243750 was issued on 7/11/2018 and when the status of the permit was checked on the Scottsdale permit search site on 3/19/2021, the permit was noted to be active, however, the majority of required inspections have only partial approvals, due to incomplete work. This is written evidence confirming the Complainant’s allegation that the work has been scheduled for in excess of two years and has not been completed. It was also noted that the original work for the guest house addition received its certificate of occupancy on 10/18/2018.

A review of the required proof of payment submittals, it was noted that Complainant issued payments to the Respondent, payable to Desert Living General Contractors. It was also noted that the Complainant issued checks payable to the Respondent’s representative, Ray Purselley, check 113 for $3,000.00 on 5/10/2018, check 127 for $5,600.00 on 4/22/2018, check 131 for $2,763.00 on 5/7/2018, check 134 for $2,500.00 on 5/24/2018, check 136 for $9,000.00 (noted “loan”) on 6/8/2018. When asked about his relationship with the Respondent, Mr. Purselley stated he was not sure what his relationship with the Respondent is, stating he is not an employee, not sure if he is a 1099 contractor and eventually stated he thought he was a part owner of the contractor. When asked if he is listed anywhere as an “owner” of the company, Mr. Purselley stated he would have to find the paperwork showing his status with the company. A review of the Arizona Corporate Commission website does not show Mr. Purselley as a member or manager of the corporation. It is the opinion of this Investigator that Mr. Purselley is operating as an unlicensed sub-contractor for the Respondent and the Respondent is in violation of the Aiding and Abetting statute. ARS 32-1154 (A) (9): attempting to evade this chapter by (a) aiding or abetting a license or unlicensed person (c) allowing one’s license to be used by a license or unlicensed person. A warning letter is being issued against the

Respondent’s license number for this violation.

Both parties agreed that the amount paid to the contractor as of the date of the JSI is $140,000.00. This amount is approximately 95% of the total amount of the contracted for price. It is the opinion of this Investigator based upon the JSI that less than 50% of the project has been completed and the contractor has no legal excuse to stop or delay work.

Compliance Item: - 1. “1. Renovation has been in progress for several years and is nowhere near completed. The following items still need completing:

Tile throughout entire house (subs stopped mid project because they were not getting paid)

Baseboards

Tile in bathrooms has to be completed

Master extension has not been done (footing was started, but concrete has not been poured and wall has not been torn down. This also includes the roof that needs to be added.)

Drywall in bathroom

All appliances (haven't been ordered)

Front door has not been ordered

lighting fixtures have not been ordered

Cabinets have not been ordered (down payment was not put down)”

Investigator’s Observation: At the time of the JSI the Respondent ‘s representative stated that the work has been slowed because of unpaid change orders, however, the Respondent’s representative was not able to provide any evidence of the change orders. The Respondent was not able to provide any reason or legal excuse for the refusal to perform work in a timely manner after submitting a bid on work. It is the opinion of this Investigator that the Respondent is in violation of 32-1154 (A) (1): abandonment of a contract or refusal to perform after submitting a bid on work without legal excuse for the abandonment or refusal.

The allegation is verified. The Respondent shall complete the fully complete the contract, including obtaining the required certificate of occupancy approval by the local authority having jurisdiction.

All errors in original.

By email to the parties dated July 23, 2021, Investigator Morris extended the deadline for the Written Directive to August 31, 2021.

On August 18, 2021, Investigator Morris issued another extension of the Written Directive to November 1, 2021.

On November 5, 2021, Investigator Morris emailed Complainants the following:

Today is Friday November 5, 2021 at approximately 1600 hrs. When we talked on Monday of this week, I gave you until today to decide how you wish to proceed, either close the complaint or schedule a compliance job site investigation. The time to decide has run out. I will be creating a compliance job site investigation at 5PM today and will plan on scheduling the CJSI as early as possible for next week. Please advise me what you have decided, the Directive expired 4 days ago and I must move forward.

On November 5, 2021, Complainants responded to Investigator Morris’ email as follows:

We apologize for the delayed response. After speaking with both Quentin and Ray throughout this week, we have decided to pause the complaint for the time being. They are promising that they will continue to move forward and complete the house before Christmas. While we are very weary, we are trying to be cautiously optimistic and give them one last chance. We did tell them that if we do not see proof and progress, we will reopen the complaint.

Investigator Morris closed the Complaint on November 8, 2021.

On or about February 22, 2022, the Complaint was re-opened and re-assigned to Investigator Steven Avila. A Compliance Inspection was scheduled for April 14, 2022, however, it was re-scheduled at Complainants’ request. The Compliance Inspection was re-scheduled to July 1, 2022. Thereafter, Complainants once again requested that the Compliance Inspection be re-scheduled due to ongoing negotiations, and some work being performed by Respondent.

On November 30, 2022, Complainants contacted Investigator Avila to advise that the parties were unable to reach a settlement.

On December 21, 2022, Investigator Avila conducted a Compliance Inspection. Respondent was not present for the Compliance Inspection. Investigator Avila’s Compliance Jobsite General Notes state the following:

Complainant stated at the inspection that the compliance inspection was delayed for an extended period of time due to ongoing negotiations between the complainant and the respondent. Complainant stated that due to negotiations falling through and the respondents license #178030 being revoked the project is now abandoned. Complainant requested the compliance inspection after all other negotiations failed.

Compliance Findings:

Compliance Item: 1. Renovation has been in progress for several years and is nowhere near completed. The following items still need completing:

Tile throughout entire house (subs stopped mid project because they were not getting paid)

Baseboards

Tile in bathrooms has to be completed

Master extension has not been done (footing was started, but concrete has not been poured and wall has not been torn down. This also includes the roof that needs to be added.)

Drywall in bathroom

All appliances (haven't been ordered)

Front door has not been ordered

lighting fixtures have not been ordered

Cabinets have not been ordered (down payment was not put down)”

Governing Rule: Workmanship Rule: ARS §32-1154 (A)(1)

(Abandonment/Refusal)

Investigator’s Observation: At the time of the compliance inspection performed on December 21, 2022 it was determined that the scope of work to be performed by the respondent remained in an incomplete status. Items from the original written directive that remain unfinished were:

Item - Tile throughout entire house (subs stopped mid project because they

were not getting paid)

Stauts – The tile in the majority of residence was completed but no tile was

installed in the master bedroom at the time of the inspection.

Item - Baseboards

Status – Baseboards remained unfinished in the master bedroom and master bath. Baseboards may also be required in other areas upon additional completion of these areas.

Tile in bathrooms has to be completed

Status – The master bathroom flooring remains unfinished.

Master extension has not been done (footing was started, but concrete has not been poured and wall has not been torn down. This also includes the roof that needs to be added.)

Status – Master bedroom concrete has now been poured. Rough framing has been installed (including roof) but no finishes throughout the master bedroom.

Drywall in bathroom

Status – Master bathroom remains unfinished and is missing drywall throughout the bath.

All appliances (haven't been ordered)

Status – Appliances were still not installed in the kitchen and dry bar area.

Front door has not been ordered

Status – Front door is now installed but paid for directly by the complainant.

lighting fixtures have not been ordered

Status – No lighting fixtures have been installed in the extension. This includes the master bedroom and master bathroom.

Cabinets have not been ordered (down payment was not put down)”

Status – Kitchen, master bath and dry bar area do not contain cabinets. Family seating area had cabinets present but the cabinets were not installed.

Other areas of the residence that remained incomplete were the back patio area. Tile was removed and nothing has been installed throughout the back yard area. Roof and exterior finished remain unfinished. Mechanical room remains incomplete.

Although some additional work was performed throughout the house the status of the project is not near full completion. Complainant has afforded the respondent multiple extensions to come to an amicable resolution.

All errors in original.

Thereafter, Investigator Avila forwarded the matter to the Registrar’s Legal Department. The Registrar issued a Citation against Respondent charging possible violations of A.R.S. § 32-1154(A)(1), A.R.S. § 32-1154(A)(2)(b), A.R.S. § 32-1154(A)(3), namely A.A.C. R4-9-108(a), A.R.S. § 32-1154(A)(9)(a), A.R.S. § 32-1154(A)(12), namely A.R.S. § 32-1158, and A.R.S. § 32-1154(A)(22).

Investigator Avila testified regarding the above lengthy procedural history of this matter, and further testified consistently with his findings contained in his Compliance Jobsite General Notes. Investigator Avila referenced some of the photographs he took during the Compliance Inspection. Investigator Avila testified that during his communications with Respondent, Respondent had mentioned that the price of materials had increased. Investigator Avila testified that Respondent should abide by the price stated in the contract and that there were no written change orders provided to him.

Mr. Pilato testified that he and his mother entered into a verbal contract with Respondent in 2018, the permit for the project was issued on July 11, 2018, and the project was to be completed by June 2019. Mr. Pilato testified that Respondent “took their money and did not come back,” however clarified that work was performed “little by little” including “knocking down walls and ripping up tiles.”

The parties executed a written contract in January 2021. Mr. Pilato testified that Respondent never ordered the appliances notwithstanding that Respondent’s representative, Ray Purselley, “took their money and did not order the materials.” Mr. Pilato testified that Complainants paid Mr. Purselley directly.

Mr. Weber testified that Mr. Purselley was authorized to receive monies from Complainants on behalf of Respondent in order to pay employees while Mr. Weber was hospitalized. Mr. Weber testified that the monies Complainants paid to Respondent were “consumed in the first 90 days” and that Respondent “ran out of money due to change orders.” Mr. Weber further testified that all change orders were on “a handshake.” Mr. Weber blamed the pandemic for many of the issues encountered, especially “financing issues” and asserted that after Respondent’s license was revoked, Respondent could no longer work on the project.

Ray Purselley testified regarding some of the work he performed on the project, including moving the laundry room, raising the ceiling, “reworking the beam,” plumbing, and electrical, and asserted that the “costs exceeded before they could even build the house.” Mr. Purselley testified that the change orders “tripled the costs” however, Mr. Purselley further testified that the change orders were all verbal and that there is “no paperwork” evidencing the change orders.

Administrative notice is taken of Respondent’s prior License record on April 20, 2023. Such prior License record reflects that Respondent’s License No. 178030 was first issued on September 9, 2002, and was revoked on August 17, 2022. Such prior License record also reflects that there are zero resolved/settled complaints, and two cases resulting in discipline against Respondent’s license.

CONCLUSIONS OF LAW

This matter lies within the Registrar’s jurisdiction.

Complainants bear the burden of proof to establish Respondent’s statutory violations by a preponderance of the evidence. “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.” A party asserting an affirmative defense has the burden of establishing the affirmative defense.

The evidence, including Mr. Weber’s admission, established that Respondent did not complete the project. Complainants paid Respondent $140,000.00 of the $147,700.00 contract price. Mr. Weber asserted that Respondent did not have enough funds to complete the project due to change orders. However, Respondent failed to establish this affirmative defense as it did not provide any evidence of the existence of any change orders. Respondent’s argument is not persuasive as the credible, substantial, and probative evidence of record established that less than fifty percent of the scope of work was yet to be completed. Therefore, Complainants established that Respondent abandoned the contract without legal excuse in violation of A.R.S. § 32-1154(A)(1).

The evidence, including Investigator Morris’ Written Directive, established that the City of Scottsdale issued a building permit for the project on July 11, 2018. However, when he inquired as to the status of the permit on March 19, 2021, although the permit was noted to be active, the majority of required inspections had only partial approvals due to Respondent’s incomplete work. Therefore, Complainants established that Respondent departed from or disregarded a building code in a material respect that is prejudicial to Complainants, in violation of A.R.S. § 32-1154(A)(2)(b).

In this case, Investigators Morris and Avila found that Respondent failed to complete the project despite receiving almost the full contract price from Complainants, and notwithstanding an exorbitant amount of time having transpired and multiple extensions granted, Respondent failed to complete the project. The credible, substantial, and probative evidence of record established that Respondent failed to perform the majority of its scope of work notwithstanding having received $140,000.00 of the $147,700.00 contract price. Therefore, Complainants established that Respondent did not complete the project in a professional and workmanlike manner in violation of A.R.S. § 32-1154(A)(3), namely A.A.C. R4-9-108(a).

The evidence, including Investigator Morris’ findings contained in the Written Directive, established that Mr. Purselley is operating as an unlicensed sub-contractor for Respondent and therefore, Respondent aided and/or abetted an unlicensed person. Therefore, Complainants established that Respondent violated A.R.S. § 32-1154(A)(9)(a).

The evidence established that Respondent did not provide a written contract for the project to Complainants. Therefore, Complainants established that Respondent failed to comply with the Registrar’s statute in violation of A.R.S. § 32-1154(A)(12).

The evidence, including Mr. Weber’s admission, established that Respondent did not complete the required corrective work following the Written Directive being issued notwithstanding repeated extensions of time within which to comply with the Written Directive, and the protracted period of time since the parties entered into their contract. Mr. Weber’s argument that Respondent did not comply with the Written Directive due to change orders is not persuasive as the credible, substantial, and probative evidence of record established that the majority of the scope of work was yet to be completed and the record is devoid of any documentary evidence establishing the existence of change orders. The Administrative Law Judge concludes based on the evidence of record that valid justification did not exist for Respondent’s failure to comply with the Written Directive. Therefore, Complainants 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).

RECOMMENDED ORDER

Based on the foregoing, it is recommended that on the effective date of the Order, the Registrar shall revoke Respondent’s License No. 178030.

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 (30) 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.

It is further recommended that, on or before thirty (30) days after the effective date of the final order, Respondent shall provide a sample contract to the Registrar to demonstrate that its contracts include the nine (9) terms required by A.R.S. § 32-1158(A). If Respondent fails to establish to the Registrar that its contracts are in compliance with A.R.S. § 32-1158(A) within thirty (30) days, its contractor’s license shall be suspended until it does so.

Pursuant to A.R.S. § 41-1092.08(I), the licensee may accept the Administrative Law Judge Decision by advising the Office of Administrative Hearings in writing not more than ten (10) days after receiving the decision. If the licensee accepts the Administrative Law Judge Decision, the decision shall be certified as the final decision by the Office of Administrative Hearings.

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 forty (40) days from the date of that certification.

Done this day, April 26, 2023.

/s/ Sondra J. Vanella

Administrative Law Judge

Transmitted by either mail, e-mail, or facsimile to:

Martín Quezada, Director

Registrar of Contractors

[email redacted]

Steven Avila

[email redacted]

Desert Living General Contracting, LLC

[email redacted]

Charlie S. Pilato

Dusanka Pilato

[email redacted]

By: OAH Staff