ALJDEC decisions subject to certification as final

2021A-03844-CHC-ROC · Registrar of Contractors · 2022-09-05

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Juliet Barnes,

COMPLAINANT,

v.

Xtreme Precision LLC

ROC License No. 323233,

RESPONDENT.

No. 2021A-03844-CHC-ROC

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: August 15-16, 2022.

APPEARANCES: Todd Feltus, Esq. and Mitchell Reber, Esq. appeared on behalf of Juliet Barnes (“Complainant”) with Andrew Hogan as a witness. Brian Pouderoyen, Esq. and James Hanson, Esq. appeared on behalf of Xtreme Precision LLC (“Respondent”) with Jeremy Walker, Donald Carroll, and Lexi Burnham as witnesses. Chris Allison 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 11, 2019, the Registrar issued License No. 323233 General Dual KB-2 Residential and Small Commercial contracting to Respondent. The license is active, in good standing, and renewed through January 31, 2023. Jeremy Shane Walker is the Qualifying Party, Member, and Manager on the license. Danette Lean Walker is also listed on the license as a Member and Manager. Respondent’s address of record for the license is 657 E. 11th Ln. Eagar, AZ 85925. Respondent has an active $14,000.00 surety bond on the license issued by Western Surety Company effective May 12, 2018. There is no prior discipline noted for the license, save one open complaint which is presumed to be Complainant’s.

On August 11, 2021, the Registrar received a 20-item complaint from Complainant against Respondent’s License No. 323233 alleging poor workmanship of their project. The Registrar designated it Complaint No. 2021-03844 and assigned to Chris Allison (“Investigator Allison”) for investigation.

On August 12, 2021, Investigator Allison issued a Jobsite Inspection Notification Letter to the parties, advising that he would conduct an inspection of the project on August 31, 2021, at 12:00 p.m.

On August 17, 2021, the Registrar received a 147-item addendum complaint from Complainant.

On August 31, 2021, 2021, Investigator Allison conducted a review of correspondence between the parties as no written agreement had been executed, as well as Complainant’s proof of payments on the project, and inspected the work that had been performed on the project to date. He also took 111 photographs of the project site. When he was finished, Investigator Allison drafted his Jobsite Inspection Notes. Ultimately, Investigator Allison determined that there were a total of 111 individual complaint items contained within Complainant’s original complaint. Of those, Investigator Allison substantiated 58 total complaint items. Specifically, Investigator Allison verified complaint items 10, 14, 17, 24-27, 30, 32, 37-38, 49-52, 54-63, 65-72, 78-84, 87-89, 91-93, 95-100, 102-104, 106-107, and 110. Investigator Allison concluded that the work Respondent had performed failed to meet the Registrar’s minimum workmanship standards.

On September 15, 2021, Investigator Allison issued a Warning Letter to Respondent for an alleged violation of Ariz. Rev. Stat. § 32-1158(A) for Respondent’s failure to include all nine (9) required minimum elements in his contracts, including his contract with Complainant.

On September 15, 2021, Investigator Allison issued a Written Directive from the Registrar (“Directive”) to Respondent because he substantiated nearly half 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), and that it had to obtain a building permit prior to the commencement of any corrective work on the project.

On October 13, 2021, the Registrar issued a Compliance Jobsite Inspection Notification Letter to the parties, advising that Investigator Allison would conduct an inspection of the project on October 20, 2021, at 11:00 a.m.

On October 20, 2021, Investigator Allison inspected the corrective work that had been performed on the project and took 70 photographs. When he was finished, Investigator Allison drafted his Compliance Jobsite Inspection Notes. Ultimately, Investigator Allison determined that Respondent had satisfactorily remediated 26 complaint items. Specifically, Investigator Allison verified complaint items 17, 24, 26, 38, 50-52, 57-58, 62-63, 66-68, 72, 80-81, 83, 93, 95-96, 99-100, 102, 106, and 110 had been satisfactorily corrected by Respondent per the Directive or were no longer at issue, but that Respondent had not performed corrective work necessary to remediate all remaining complaint items.

On November 01, 2021, Investigator Allison forwarded the matter to the Registrar’s legal department with the issuance of a Citation Recommendation.

On November 02, 2021, the Registrar issued a Citation to Respondent for a alleged violations of Ariz. Rev. Stat. §§ 32-1154(A)(3); Ariz. Admin. Code R4-9-108(a-b), 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 17, 2021, the Registrar received Respondent’s Answer, whereby Respondent generally denied violating the enumerated charges listed in the Citation, and argued that it agreed to “complete its scope of work in exchange for payment of approximately $100,000,” which it did.

On November 24, 2021, the Registrar referred this matter to the Office of Administrative Hearings (“OAH”), an independent state agency, for an evidentiary hearing on June 07, 2022. Per the December 17, 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)(3) – A.A.C. R4-9-108(b)

Charge 3: A.R.S. § 32-1154(A)(22)

Hearing Evidence

Complainant testified on her own behalf, called Investigator Allison and Andrew Hogan as witnesses, and submitted exhibits 5-11, 13-14, 16-17, 19-20, and 22-23 into the record. Respondent called Jeremy Walker, Donald Carroll, and Lexi Burnham as witnesses. The Notice of Hearing, continuance orders, and the Registrar’s agency file were admitted into the record as their own exhibits. The substantive evidence of record is as follows:

Complainant owns a 2,700 sq. ft. residential property located at 405 E. Maricopa Dr. Eagar, AZ 85925. When the property was purchased, in or around June of 2015, it suffered from extensive black mold throughout the structure. Complainant hired a spore removal company to make the property habitable. As a result, the dwelling essentially had to be stripped back down to the studs.

Complainant, seeking to remodel her entire home on a light budget to be “fully functional” with a “big beautiful kitchen,” was referred to Mr. Walker by his daughter, Ms. Burnham; Complainant’s friend and colleague.

In October 2020, the parties entered into a $100,000.00 residential renovation construction contract; including kitchen cabinetry, drywall, flooring, paint, light fixtures, plumbing, and electrical, for the aforementioned property. Because Complainant’s budget was so limited, the parties agreed that Respondent would focus construction on the livable space on the top floor of Complainant’s residence, and agreed to move downstairs only if funds continued to remain available. Additionally, because Respondent was doing Complainant’s project as a favor, no timeliness for completion or progress payments were scheduled as the parties agreed Respondent would send trades to Complainant’s site in between Respondent’s other projects, as they became available.

Complainant’s father (“Mr. Anderson”) agreed to cover the costs of the parties’ agreement. Between March and June 2021, Respondent issued three (3) invoices Complainant totaling $97,955.00. Between March and April 2021, Mr. Anderson tendered two payments to Respondent totaling $54,385.00 towards the contract prior Complainant’s complaint submission to the Registrar.

Work on the project commenced February 12, 2021, and stopped May 17, 2021. During that time, Respondent performed work throughout the entirety of Complainant’s residence, but did not complete any particular undertaking. Instead, Respondent took Complainant’s job “as far as we could take it” given the budget. Prior to ceasing work on the project for alleged nonpayment, Respondent did not issue written notice of its intent to quit to Complainant pursuant to the Arizona Prompt Pay Act under Ariz. Rev. Stat. § 32-1185.

On or about March 11, 2021, Respondent issued a $20,000.00 invoice to Complainant. Mr. Anderson paid the invoice the same date.

On or about April 11, 2021, Respondent issued a $34,385.00 invoice to Complainant. Mr. Anderson paid the invoice on April 22, 2021.

On June 21, 2021, though the project was not complete, Respondent issued a final invoice to Mr. Barnes for $43,570.00. After confirming with Respondent that no further work would be performed on her project absent additional payment, Complainant, by and through her father, withheld final payment from Respondent over her dissatisfaction with the state of her home and her father’s request for receipts that Respondent had not fulfilled.

At no time did Respondent warn Complainant that spike(s) in material or labor costs related to the global COVID-19 pandemic could or did impact her project.

On July 27, 2021, Complainant provided a 6-page punch list to Respondent.

On September 27, 2021, the parties agreed to commence corrective work per the Registrar’s Directive October 04-05, 2021, predicated on Respondent’s procurement of required building permits from the local governing authority. Once the Town of Eager issued a Remodel Permit for the project, No. RM2021-2, on October 05, 2021, Respondent was permitted to begin corrective work.

At no point in time between September 15, 2021, and October 15, 2021, did Respondent ever allege a denial of access to the project site. Nor did Respondent ever request an extension of the Directive’s compliance period.

Additional Evidence

Investigator Allison testified that the lack of a written contract in the case at bar played a critical role, as the basis for the terms were derived, per his observations, on what work Respondent performed on the project and what materials had been ordered. Although the parties agreed that Respondent would concentrate on the upstairs of Complainant’s residence, various rooms and areas downstairs were addressed by Respondent during construction.

Additionally, Investigator Allison offered that there likely had never been a suspension of work for lack of nonpayment, as no documentation had every been produced to establish Complainant or Mr. Anderson were ever provided notice of such, nor had the Registrar. Per the parties, the contract was between $80,000.00 and $100,000.00. However, because Respondent had billed $97,955.00 for the entire project Investigator Allison believed that the parties had entered into a $100,000.00 contract.

The incomplete state of the entire project was puzzling to Investigator Allison when he first arrived for the jobsite inspection, because he had never come upon an instance where a contractor intentionally started construction and failed to complete it, as Respondent alleged. Per Investigator Allison, regulations require a licensee who commences construction to complete task(s) in a professional and workmanlike manner.

Closing Arguments

In closing, Respondent argued that the parties’ $100,000.00 residential remodel contract was for Respondent to “take it as far as it can go,” whilst prioritizing Complainant’s top floor. Respondent denied it ever agreed to address the lower level of Complainant’s home. Respondent argued that its unpaid “final invoice” established justification for its lack of performance. Respondent also argued that although Complainant had committed a “material breach” under common-law contract law, Respondent had continued to work nonetheless. Respondent further argued that it had not been given sufficient time to adhere to the Registrar’s Directive, as an additional 28 corrective items would require anywhere from 30 to 60 days to complete. Per Respondent, discipline could not be imposed by the Registrar as no statutory violations had been committed.

In closing, Complainant opined that Respondent had not taken her project seriously, and argued that Respondent’s workmanship were not impacted by the terms of the parties’ contract. Complainant argued that Respondent failed to focus on the top floor of her home, as evidenced by the fact that work on that level had not been completed despite Respondent commencing work on the lower level. Complainant also argued that Respondent wasted time trying to perform corrective work, as evidenced by the fact that Respondent did not begin addressing the Registrar’s Directive until October 05, 2021, and never asked for an extension of time to complete the repairs. Complainant denied there was an issue with “prompt payment” as the first two payments were tendered immediately, as would the last one had Respondent finished the work. Per Complainant, not only did she sustain her burden of proof, but she also established grounds for the Registrar to sanction Respondent as well.

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. Admin. Code R4-9-108(b) requires that “[a] contractor shall perform all work 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.”

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 the case are clear.

It is clear that Complainant paid Respondent $54,385.00 towards their $100,000.00 contract, but that the terms of the contract were not explicitly clear because Respondent failed to execute a written agreement; which the Registrar issued a Warning Letter for. It is also clear that Respondent agreed to take Complainant’s money “as far as it would go” and “focus on her top floor” before venturing into her lower level, budget permitting. However, almost immediately Respondent began construction throughout the entirety of Complainant’s residence, and did not finish construction on her top floor. Of the 111 individual complaint items contained within Complainant’s original complaint 54 were substantiated as failing to meet the Registrar’s minimum workmanship standards. Although Respondent was given from September 15, 2021, through October 15, 2021, to perform corrective work per the Registrar’s Directive, with the specific instruction not to commence work prior to obtaining a valid building permit, Respondent did not start until October 05, 2021, and only remediated 26 complaint items; 17, 24, 26, 38, 50-52, 57-58, 62-63, 66-68, 72, 80-81, 83, 93, 95-96, 99-100, 102, 106, and 110. Thus, 32 items remained outstanding as unaddressed by Respondent; specifically, complaint items 10, 14, 25, 27, 30, 32, 37, 49, 54-56, 59-61, 65, 69-71, 78-79, 82, 84, 87-89, 91-92, 97-98, 103-104, and 107.

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. Respondent’s “common law contract” argument is irrelevant, as is Respondent’s prompt pay argument under Ariz. Rev. Stat. § 32-1185. Here, Respondent admitted to deviating from contract terms by performing construction in the lower portion of Complainant’s residence without first completing work on the top floor, and further admitted to issuing a final invoice for all work performed under the contract. While Respondent is likely correct that 30-days was not sufficient time to address the Registrar’s Directive, that argument is moot as Respondent sat on its rights by failing to request an extension, which it knew or should have known was feasible, and did not commence corrective work until October 05, 2021.

Therefore, because Complainant has established Respondent’s violations of Ariz. Rev. Stat. §§ 32-1154(A)(3); Ariz. Admin. Code R4-9-108(a-b), 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 Xtreme Precision LLC, ROC License No. 323233, be suspended for ten (10) 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) 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 06, 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