ALJDEC decisions subject to certification as final

2021A-03240-CHC-ROC · Registrar of Contractors · 2022-09-22

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Tracy Flanagan,

COMPLAINANT,

v.

Sador Development, LLC

ROC License No. 311174,

RESPONDENT.

No. 2021A-03240-CHC-ROC

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: January 10, 2022 & September 13, 2022.

APPEARANCES: Asha Sebastian, Esq. appeared on behalf of Tracy Flanagan (“Complainant”) with Complainant and Michael Flanagan as witnesses. Stephen Anthony, Esq. appeared on behalf of Sador Development LLC (“Respondent”) with John Cory May as a witness. David Fagerburg appeared on behalf of the Arizona Registrar of Contractors (“Registrar”).

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 prior License record as reflected on the Registrar’s public website. On January 23, 2017, the Registrar issued License No. 311174 General Residential B contracting to Respondent. The license is active, in good standing, and renewed through January 31, 2023. John Cory May is the Qualifying Party and Member on the license. Respondent’s address of record for the license is 515 E. Carefree Hwy. PMB 1261 Phoenix, AZ 85085. Respondent has an active $9,000.00 surety bond on the license issued by Sabdor Development LLC effective January 12, 2017. There is no prior discipline noted for the license, save two open complaints; one of which is presumed to be Complainant’s.

On July 13, 2021, the Registrar received a 5-item complaint from Complainant against Respondent’s License No. 311174 alleging poor workmanship of their project. Each complaint item contained one or more related sub-complaints. Attached to the complaint was a copy of Complainant’s purchase contract for the underlying property at issue. The Registrar designated it Complaint No. 2021-03240 and assigned to David Fagerburg (“Investigator Fagerburg”) for investigation.

On July 14, 2021, Investigator Fagerburg issued a Jobsite Inspection Notification Letter to the parties, advising that he would conduct an inspection of the project on August 04, 2021, at 11:30 a.m.

On or about July 21, 2021, Complainant provided supplemental documentation to the Registrar, which was forwarded to Respondent.

On or about August 02, 2021, Complainant provided additional supplemental documentation to the Registrar, which was forwarded to Respondent.

On or about August 04, 2021, Complainant provided additional supplemental documentation to the Registrar, which was forwarded to Respondent.

On August 04, 2021, Investigator Fagerburg conducted a review of the underlying residential property purchase agreement and inspected Respondent’s workmanship of the project. He also took 43 photographs of the project site.

On or about August 06, 2021, Complainant submitted a 5-item addendum complaint to Complaint No. 2021-03240 to the Registrar, which was forwarded to Respondent.

On August 10, 2021, Investigator Fagerburg issued an Addendum Jobsite Inspection Notification Letter to the parties, advising that he would conduct an inspection of the project on September 03, 2021, at 2:00 p.m.

On September 03, 2021, Investigator Fagerburg conducted an addendum inspection of the project, whereby he specifically reviewed the additional complaint items received for Complaint No. 2021-03240. He also took 14 photographs of the project site.

On September 10, 2021, Investigator Fagerburg issued a Jobsite Re-Inspection Notification Letter to the parties, advising that he would conduct an inspection of the project on September 15, 2021, at 11:00 a.m.

On September 15, 2021, Investigator Fagerburg conducted a re-inspection of the project. He also took 23 photographs of the project site. When he was finished, Investigator Fagerburg drafted his collective Jobsite Inspection Notes. Ultimately, Investigator Fagerburg determined that there were a total of 21 individual complaint items contained within Complainant’s original complaint and 5 individual complaint items contained within Complainant’s addendum; complaint items 1-12, 13a-c, 14a-d, 15-16, and addendum complaint items 17-21. Of those, Respondent agreed to remediate complaint items 1-11 relating to the metal roof, and Investigator Fagerburg substantiated 11 additional complaint items: 13a-c, 14a, 14c-d, 15-16, and addendum complaint items 17, 18a, and 21 as requiring correction and/or completion. In sum, Investigator Fagerburg concluded that at least 22 of Respondent’s construction items failed to meet the Registrar’s minimum workmanship standards.

On September 21, 2021, Investigator Fagerburg issued a Written Directive from the Registrar (“Directive”) to Respondent because he substantiated most of Complainant’s workmanship allegations against Respondent. Respondent was put on notice that it had until 5:00 p.m. on October 15, 2021, to notify the Registrar of its compliance with the Directive or face discipline pursuant to Ariz. Rev. Stat. §§ 32-1154(A), 32-1154(A)(22), and 32-1154(E).

On October 18, 2021, Investigator Fagerburg issued a Compliance Jobsite Inspection Notification Letter to the parties, advising that he would conduct an inspection of the project on October 20, 2021, at 1:30 p.m.

On October 20, 2021, Investigator Fagerburg inspected the corrective work that had been performed on the project and took 26 photographs. When he was finished, Investigator Fagerburg drafted his Compliance Jobsite Inspection Notes. Ultimately, Investigator Fagerburg determined that Respondent had only satisfactorily remediated one complaint item; complaint item 11. Investigator Fagerburg verified that Respondent had not performed corrective work necessary to remediate all remaining complaint items as required by the Directive.

On October 20, 2021, Investigator Fagerburg forwarded the matter to the Registrar’s legal department with the issuance of a Citation Recommendation.

On October 21, 2021, Respondent submitted a Request to Review/Dismiss Complaint No. 2021-03240.

On November 01, 2021, the Registrar issued a letter denying Respondent’s request(s).

On November 02, 2021, the Registrar issued a Citation to Respondent for an alleged violations of Ariz. Rev. Stat. §§ 32-1154(A)(3); Ariz. Admin. Code R4-9-108(a), and 32-1154(A)(22). Respondent was given until November 17, 2021, to respond with its Answer or face discipline pursuant to Ariz. Rev. Stat. §§ 32-1154(A)(22) and 32-1155.

On November 16, 2021, the Registrar received Respondent’s Answer, whereby Respondent generally denied violating the enumerated charges listed in the Citation, but alleged “[a]ll of the work complained of in the ROC complaint was due to common errors and mistakes by various subcontractors that are easily remediable,” and that Complaint No. 2021-03240 was filed solely as retaliation for Respondent filing a $7,000.00 civil suit against Complainant. Respondent additionally reiterated arguments it previously made in its Request to Review/Dismiss.

On November 19, 2021, the Registrar referred this matter to the Office of Administrative Hearings (“OAH”), an independent state agency, for an evidentiary hearing on January 10, 2022. Per the December 10, 2021, Notice of Hearing the issues to be determined are whether the Registrar has cause to discipline Respondent’s license based on the following alleged statutory violations:

Charge 1: A.R.S. § 32-1154(A)(3) – A.A.C. R4-9-108(a)

Charge 2: A.R.S. § 32-1154(A)(22)

Hearing Evidence

Complainant testified on her own behalf and called Investigator Fagerburg and Michael Flanagan as witnesses. Respondent called John Cory May as a witness. The Registrar’s agency file, including the Notice of Hearing, and Continuance Order were admitted into the record as their own exhibits. The substantive evidence of record is as follows:

Complainant owns residential property located at 38722 N. 15th Ave. Phoenix, AZ 85086. The property was constructed by Respondent, who employed the use of multiple subcontracted tradesmen.

On or about January 24, 2021, the parties entered into a residential property purchase agreement for the aforementioned property, whereby builder, Mr. May, agreed to sell the newly constructed property to Complainant and Mr. Flanagan for $1,100,000.00.

The parties executed a secondary agreement leaseback agreement, whereby Complainant agreed to lease the property at issue back to Mr. May for a fee, including a $6,000.00 security deposit.

Sometime after Complainant took possession of the property, a punch list regarding items and/or areas of concern were sent to Respondent for remediation, including, but not limited to: the roof, turf, kitchen cabinets, master closet, and interior water feature.

On or about July 16, 2021, Mr. May filed a lawsuit against Complainant regarding Complainant’s admitted refusal to return the aforementioned security deposit, in large part, because Respondent failed to correct a water feature in the residence estimated at $2,000.00 to repair.

Investigator Fagerburg identified a total of 22 of Complainant’s 26 complaint items for correction by Respondent.

No permit(s) were required to be obtained by Respondent in order for corrective work to be performed on the project.

During the Registrar’s Directive compliance period, Respondent only attempted to address two complaint items: 11 and 21, which were satisfactorily remediated.

Between September 21, 2021, and October 15, 2021, Respondent utilized subcontractors to address the Registrar’s Directive. The first trade was not scheduled until October 05, 2021. Although Respondent discovered that a number of necessary materials were unavailable toward the end of this time, Respondent did not make any requisitions requests to vendors or beseech the Registrar to extend the Directive’s compliance period though advised of the ability to do so.

Because Complainant granted Respondent access to the project site to perform corrective work after the expiration of the Registrar’s Directive compliance period, on December 30, 2021, Investigator Fagerburg issued a Prehearing Jobsite Inspection Notification Letter to the parties, advising that he would conduct an inspection of the project on January 07, 2022, at 1:30 p.m.

On January 07, 2022, Investigator Fagerburg reported to the project site to determine if Respondent performed additional corrective work. No photographs were taken, and no notes were taken. Ultimately, Investigator Fagerburg determined that the condition of the project had not changed, substantially or otherwise, since the date of his prior inspection.

Additional Evidence

Respondent participated in the underlying jobsite inspection, but did not participate in the compliance or prehearing inspections because Complainant had warned Mr. May that she did not want him on her property.

Although Complainant limited Respondent’s access the project site prior to the issuance of the Directive, the site remained available for Respondent to access throughout the course of the Registrar’s Directive compliance period. A denial of access did not occur in this matter.

Closing Arguments

In closing, Respondent argued that the reason the 20 outstanding complaint items were not addressed during the Directive compliance period was because (a) the Registrar failed to provide sufficient time, (b) delays were a direct result of COVID-19 related supply-chain issues, and (c) because Respondent prioritized repairing Complainant’s roof over all other complaint items. Respondent opined that discipline against its license was uncalled-for because it remained willing to complete the repairs at issue per the Registrar’s minimum workmanship standards.

In closing, Complainant argued that although the Registrar was only statutorily required to provide Respondent with 15 days to complete corrective work, a total of 24 days were provided, and in that time Respondent only addressed 2 complaint items and left 20 unaddressed; which was odd considering Respondent agreed that complaint items 1-10 required corrective work. Complainant opined that discipline against Respondent’s license was warranted because violations of Ariz. Rev. Stat. §§ 32-1154(A)(3) and 32-1154(A)(22) were established.

CONCLUSIONS OF LAW

The Registrar has jurisdiction over this matter pursuant to Ariz. Rev. Stat. §§ 32-1101 et seq. and 32-1154(A). The matter was properly brought before OAH pursuant to Ariz. Rev. Stat. §§ 41-1092 et seq.

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(a) requires that “[a]ll work shall be performed in a professional and workmanlike manner.”

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.”

Ariz. Rev. Stat. § 32-1154(E) provides, in pertinent parts, that the Registrar may “[i]mpose a civil penalty not to exceed five hundred dollars on a contractor for each violation. The failure by the licensee to pay any civil penalty imposed results in the automatic revocation of the license thirty days after the effective date of the order providing for the civil penalty.” It also provides that “[n]o future license may be issued to an entity consisting of a person who is associated with the contractor, unless payment of any outstanding civil penalty is tendered.”

The material facts in this matter are clear.

It is clear from the record that the property at issue was built by Respondent and purchased by Complainant nearly one year after it was constructed. It is also clear that prior to filing a complaint with the Registrar, Complainant provided a list of her concerns to Respondent and asked that they be addressed. An overwhelming majority of Complainant’s concerns were validated when Investigator Fagerburg issued a Directive substantiating 22 of Complainant’s 26 complaint items. It is also clear that Respondent was given from September 21, 2021, through October 15, 2021, to perform corrective work per the Registrar’s Directive, and that Respondent was informed on no less than two occasions; July 14, 2021 and October 12, 2021, that Respondent could request a compliance deadline extension, which Respondent never did. It is further clear from the record that corrective work did not commence until October 05, 2021, and that only 2 complaint items were addressed by Respondent and satisfactorily remediated.

Therefore, the only issue in dispute is whether Respondent raised a sufficient justification or excuse for failing to adhere to the Registrar’s Directive and complete Complainant’s project per contract. This is an affirmative defense that Respondent bears the burden to establish. Here, Respondent did not sustain its burden. There is no evidence in the record that excuses or otherwise justifies Respondent’s inaction and/or lack of performance on this project. Here, the Registrar afforded Respondent sufficient time to perform corrective work, and Respondent neither provided substantial evidence of material delays or that Respondent had sought an extension of the Directive’s compliance period from the Registrar. Respondent’s argument that Mr. May prioritize repairing Complainant’s roof over addressing all other complaint items is nonsensical given Respondent’s agreement to address complaint item 1-11, as they all pertained to the workmanship of Complainant’s roof.

Therefore, because Complainant has established Respondent’s violations of Ariz. Rev. Stat. §§ 32-1154(A)(3); Ariz. Admin. Code R4-9-108(a), and 32-1154(A)(22), Complainant has also established cause for the Registrar to discipline Respondent’s contractor’s license.

Complainant may petition the Registrar’s Recovery Fund for financial recompense regarding this matter.

RECOMMENDED ORDER

Based on the foregoing,

IT IS RECOMMENDED that five days after the effective date of the Final Order in this matter, Respondent Sador Development, LLC, ROC License No. 311174, be suspended for five (5) days based on its violations of Ariz. Rev. Stat. §§ 32-1154(A)(3) and 32-1154(A)(22).

IT IS FURTHER RECOMMENDED that the Registrar require Respondent to pay the sum total of $200.00 (two hundred dollars) in certified funds as a civil penalty in this matter.

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 shall 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 Ariz. Rev. Stat. § 32-1101(A)(5), 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.

Done this day, September 23, 2022.

Office of Administrative Hearings

/s/ Jenna Clark

Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director

Registrar of Contractors

By Miranda Alvarez

Legal Secretary