ALJDEC decisions subject to certification as final

2021A-04496-RFA-LS-ROC · Registrar of Contractors · 2022-07-18

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Gregory and Denise Attaway,

Frederic and Sandra Brown,

Sebastian and Carol Marchese,

Victor Hernandez,

Tibor Geczo and Stephanie Jensen,

Marjorie and Stanford Lucier,

COMPLAINANTS,

vs.

American Pools LLC,

ROC License No. 319458,

RESPONDENT.

No. 2021A-04556-RFA-LS-ROC

No. 2021A-05254-RFA-LS-ROC

No. 2021A-04640-RFA-LS-ROC

No. 2021A-04496-RFA-LS-ROC

No. 2021A-04462-RFA-LS-ROC

No. 2021A-05535-RFA-LS-ROC

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: July 05, 2022 at 9:00 AM.

APPEARANCES: Assistant Attorney General Sara Asta, Esq. appeared on behalf of the Arizona Registrar of Contractors (“Registrar”) with Shaquira Adebule and Eric Ullinger as witnesses. Carol Marchese, Gregory Attaway, Frederic Brown, and Victor Hernandez (referred to individually as “Complainant” and collectively as “Complainants”) appeared on their own behalf. No appearance(s) by or on behalf of Tibor Geczo and Stephanie Jensen (Complaint No. 2021-04462) or Marjorie and Stanford Lucier (Complaint No. 2021-05535). No appearance(s) by or on behalf of American Pools LLC (“Respondent”).

ADMINISTRATIVE LAW JUDGE: Jenna Clark.

_____________________________________________________________________

Having heard the evidence and testimony and having considered the record in this matter, the undersigned Administrative Law Judge hereby makes the following Findings of Fact and Conclusions of Law and issues the following Recommended Order to the Director of the Registrar.

FINDINGS OF FACT

Background and Procedure

According to the Registrar’s public website, on May 02, 2018, the Registrar issued ROC License No. 319458 for General Dual KA-5 swimming pool contracting to Respondent. Dustin Thomas Cuprak is as the Qualifying Party/Member on the license. Sarah Kay Wagner and Alec Menconi are also listed on the license as Members. Respondent’s address of record for the license is 1815 W. Temple St. Chandler, AZ 85224.

Pursuant to Arizona Administrative Code (“Ariz. Admin. Code”) R4-9-117 Administrative Notice is taken of Respondent’s prior license record for ROC License No. 319458, as reflected on the Registrar’s public website. Although the license had been renewed through May 31, 2022, on March 02, 2022, it was revoked by the Registrar. The license had been disciplined by the Registrar on twenty-six (26) prior occasions, and also had seven (7) complaints that were settled or otherwise resolved against it. Currently, there are eleven (11) open complaints against the license. The license had a $14,000.00 surety bond issued RLI Insurance Corporation, effective April 09, 2018, but it has been cancelled.

Between September 10, 2021, and October 26, 2021, the Registrar received the six (6) complaints filed by Complainants in this matter, which alleged abandonment of contract and/or poor work performance. Attached to the complaints were various documents including, but not limited to, party contract(s) and proof of payment(s) to Respondent.

Complaint No. 2021-04556

On an unknown date, the Registrar issued a Citation and Complaint (“Citation”) to Respondent for alleged violations of Ariz. Rev. Stat. §§ 32-1154(A)(1); 32-1154(A)(3), namely Ariz. Admin. Code R4-9-108; and 32-1154(A)(12), namely 32-1158. Because Respondent failed to timely submit an Answer to the Registrar, Respondent was deemed to have admitted the act(s) charged in the Citation. As such, Respondent’s license was revoked by the Registrar pursuant to a Final Administrative Decision and Order effective October 28, 2021.

On or about November 24, 2021, the Registrar received Complainant Attaway’s petition for payment from the Residential Contractors’ Recovery Fund (“Fund”), pursuant to Ariz. Rev. Stat. §§ 32-1132(A) and 32-1154(G), in the amount of $30,220.00.

Complainant Attaway noted in his petition that his contract with Respondent was for $30,000.00, of which an outstanding balance of $1,931.54 remained owed.

Attached was a bond denial letter from Respondent’s insurance company, and one (1) repair bid.

On January 11, 2022, the Registrar asked Complainant Attaway to submit an additional bid, which he did on January 25, 2022.

On April 07, 2022, the Registrar issued a Notice of Administrative Award to the parties which held that Complainant Attaway was awarded $4,836.87 from the Fund.

On April 11, 2022, the Registrar received an appeal letter from Complainant Attaway contesting his award amount from the Fund.

Complaint No. 2021-05254

On December 06, 2021, the Registrar received Complainant Brown’s petition for payment from the Residential Contractors’ Recovery Fund (“Fund”), pursuant to Ariz. Rev. Stat. §§ 32-1132(A) and 32-1154(G), in the amount of $40,391.69.

Complainant Brown noted in his petition that his contract with Respondent was for $43,445.19, of which an outstanding balance of $3,453.50 remained owed.

Attached was a bond denial letter from Respondent’s insurance company, and one (1) repair bid.

On April 07, 2022, the Registrar issued a Notice of Administrative Award to the parties which held that Complainant Brown was awarded $9,422.12 from the Fund.

On April 12, 2022, the Registrar received an appeal letter from Complainant Brown contesting his award amount from the Fund.

Complaint No. 2021-04640

On an unknown date, the Registrar issued a Citation and Complaint (“Citation”) to Respondent for alleged violations of Ariz. Rev. Stat. §§ 32-1154(A)(1); 32-1154(A)(2)(a); 32-1154(A)(3), namely Ariz. Admin. Code R4-9-108; and 32-1154(A)(12), namely 32-1158. Because Respondent failed to timely submit an Answer to the Registrar, Respondent was deemed to have admitted the act(s) charged in the Citation. As such, Respondent’s license was revoked by the Registrar pursuant to a Final Administrative Decision and Order effective October 28, 2021.

On November 25, 2021, the Registrar received Complainant Marchese’s petition for payment from the Residential Contractors’ Recovery Fund (“Fund”), pursuant to Ariz. Rev. Stat. §§ 32-1132(A) and 32-1154(G), in the amount of $24,182.80.

Complainant Marchese noted in her petition that her contract with Respondent was for $38,276.24, of which an outstanding balance of $14,093.44 remained owed.

Attached was a bond denial letter from Respondent’s insurance company, and two (2) repair bids.

On April 07, 2022, the Registrar issued a Notice of Administrative Award to the parties which held that Complainant Marchese was awarded $8,053.00 from the Fund.

On April 10, 2022, the Registrar received an appeal letter from Complainant Marchese contesting her award amount from the Fund.

Complaint No. 2021-04496

Because Respondent filed a timely Answer with the Registrar, an administrative hearing was held on December 09, 2021, to determine whether grounds existed for the Registrar to take disciplinary action against Respondent’s license. As a result, on January 07, 2022, the Registrar revoked Respondent’s license pursuant to a Final Administrative Decision and Order, effective February 16, 2022.

On December 01, 2021, the Registrar received Complainant Hernandez’s petition for payment from the Residential Contractors’ Recovery Fund (“Fund”), pursuant to Ariz. Rev. Stat. §§ 32-1132(A) and 32-1154(G), in the amount of $27,042.44.

Complainant Hernandez’s noted in his petition that his contract with Respondent was for $43,458.14, of which an outstanding balance of $16,415.70 remained owed.

Attached was a $9,000.00 bond approval letter from Respondent’s insurance company, and proof of project remediation payments.

On April 08, 2022, the Registrar issued a Notice of Administrative Award to the parties which held that Complainant Hernandez’s was awarded $8,446.89 from the Fund.

On April 19, 2022, the Registrar received an appeal letter from Complainant Hernandez contesting his award amount from the Fund.

Additional Evidence

On November 19, 2021, the Registrar issued a Pro Rata Notification Letter to Complainants that advised, in pertinent parts, as follows:

[T]here is a limited amount of money available to remedy American Pools LLC violations, and the Registrar will need to begin gathering all eligible claims to ensure that all statutory requirements are complied with.

Please complete and return the enclosed claim form, along with the required documentation listed in Section H of the claim form, to the Registrar no later than December 19, 2021.

Under A.R.S. § 32-1139, “The liability of the fund shall not exceed two hundred thousand dollars for any one residential contractor’s license.” Because American Pools LLC has a single license, the maximum amount of money the Residential Contractors’ Recovery Fund can pay out to remedy American Pools LLC violations is $200,000. This requirement is imposed by statute and cannot be exceeded by the Registrar.

Notably, the Recovery Fund claims process is bound by A.R.S. § 32-1139, which states:

If claims against the fund on behalf of any one residential contractor’s license exceed two hundred thousand dollars, the claims shall be paid on a pro rata share of the common liability, and the registrar or a court entering an order for payment after the sum of two hundred thousand dollars has been paid from the fund shall modify the order indicating that no further recovery from the fund shall be allowed.

Here, the Registrar anticipates the dollar amounts associated with the claims against American Pools LLC may exceed the $200,000 limitation.

[T]he Registrar must determine the total amount of damages sustained in all eligible Recovery Fund claims. If the damages exceed the $200,000 limitation each claimant’s individual damages are then divided by the total damages of all complainants to determine their percentage of the aggregate damages caused by the contractor. The claimant’s individual percentage is then multiplied by $200,000 to determine the amount of money to be paid out of the $200,000 maximum liability.

The Registrar intends to bring this matter to a fair and equitable conclusion and compensate in a timely manner eligible claimants who were damaged by American Pools LLC.

After the Fund reviews all eligible claims, the Registrar will contact you with additional information on how the Fund will proceed.

On May 06, 2022, the Registrar referred the above-captioned consolidated matters to the Office of Administrative Hearings (“OAH”) for an independent evidentiary hearing. Per the Notice of Hearing on Appealable Agency Action (“Notice of Hearing”) sent to the parties on May 13, 2022, the issue for hearing is to determine if Complainants’ awards from the Fund were properly calculated and appropriately issued pursuant to Ariz. Rev. Stat. §§ 32-1132 to 32-1133.01 and 32-1154(F), as justified by the evidence.

Hearing Evidence

At the hearing, the Registrar called Shaquira Adabule and Eric Ullinger as witnesses and submitted Exhibits 1-89. Complainant Attaway, Complainant Brown, Complainant Marchese, and Complainant Hernandez testified on their own behalves. The Notice of Hearing was also admitted into the record as its own exhibit. The substantive evidence is as follows:

By the time the Registrar began their damage calculations for Complainants, a total of thirty (30) homeowners had filed claims against Respondent’s license. The total damages of all claims, including Complainants’, was $572,620.31.

Complaint No. 2021-04556

Complainant Attaway owns residential property located at 27234 Red Rock Rd. Wellton, AZ 85356, which was the site of the underlying project at issue.

Ms. Adebule is a Legal Assistant II for the Registrar. Ms. Adebule made the determination that Complainant Attaway was eligible for a payout from the Fund because he satisfied all statutory requirements for an administrative payout.

To determine the appropriate amount of the administrative award, Ms. Adebule verified the contract amount between the parties, the contract terms, and the amount paid on the contract by Complainant Attaway. Next, Ms. Adebule confirmed that Complainant Attaway filed against Respondent’s bond. Ms. Adebule also reviewed Complainant Attaway’s repair bids and opted to accept the bid from Conrad’s Inc. Pool & Spa Construction (“Conrad’s”) because it was from an appropriately licensed contractor, encompassed necessary remediations in line with the original contract, and was the least expensive bid submitted. Additionally, Ms. Adebule was able to confirm with Investigator Ruben Perez (“Investigator Perez”) that Conrad’s bid was neither excessive in cost(s) nor inclusive of items outside the scope of remediations necessary to complete the project. Ms. Adebule calculated Complainant Attaway’s actual damages by disallowing payments Complainant Attaway issued for work that was not originally included in the parties’ contract, and then deducted the unpaid balance he owed on the parties’ original contract. Ms. Adebule then determined Complainant Attaway’s percentage of pro rata shares by dividing his individual damages by the total sum of damages. Complainant Attaway’s percentage was then multiplied by the $200,000.00 maximum liability of Respondent’s license, resulting in a $4,836.87 administrative payout from the Fund.

Complaint No. 2021-05254

Complainant Brown owns residential property located at 4466 W. Vaquero Ln. Yuma, AZ 85365, which was the site of the underlying project at issue.

Ms. Adebule made the determination that Complainant Brown was eligible for a payout from the Fund because he satisfied all statutory requirements for an administrative payout.

To determine the appropriate amount of the administrative award, Ms. Adebule verified the contract amount between the parties, the contract terms, and the amount paid on the contract by Complainant Brown. Next, Ms. Adebule confirmed that Complainant Brown filed against Respondent’s bond. Ms. Adebule accepted Complainant Brown’s sole repair bid from Conrad’s because it was from an appropriately licensed contractor, encompassed necessary remediations in line with the original contract. Additionally, Ms. Adebule was able to confirm with Investigator Perez that Conrad’s bid was neither excessive in cost(s) nor inclusive of items outside the scope of remediations necessary to complete the project. Ms. Adebule calculated Complainant Brown’s actual damages by deducting the unpaid balance he owed on the parties’ original contract from the total cost of the Conrad’s bid. Ms. Adebule then determined Complainant Brown’s percentage of pro rata shares by dividing his individual damages by the total sum of damages. Complainant Brown’s percentage was then multiplied by the $200,000.00 maximum liability of Respondent’s license, resulting in a $9,422.12 administrative payout from the Fund.

Complaint No. 2021-04640

Complainant Marchese owns residential property located at 27267 Red Rock Rd. Wellton, AZ 85356, which was the site of the underlying project at issue.

Ms. Adebule made the determination that Complainant Marchese was eligible for a payout from the Fund because she satisfied all statutory requirements for an administrative payout.

To determine the appropriate amount of the administrative award, Ms. Adebule verified the contract amount between the parties, the contract terms, and the amount paid on the contract by Complainant Marchese. Next, Ms. Adebule confirmed that Complainant Marchese filed against Respondent’s bond. Ms. Adebule also reviewed Complainant Marchese’s repair bids and opted to accept the bid from Conrad’s Inc. Pool & Spa Construction (“Conrad’s”) because it was from an appropriately licensed contractor, encompassed necessary remediations in line with the original contract, and was the least expensive bid submitted. Additionally, Ms. Adebule was able to confirm with Investigator Perez that Conrad’s bid was neither excessive in cost(s) nor inclusive of items outside the scope of remediations necessary to complete the project. Ms. Adebule calculated Complainant Marchese’s actual damages by deducting the unpaid balance she owed on the parties’ original contract. Ms. Adebule then determined Complainant Marchese’s percentage of pro rata shares by dividing her individual damages by the total sum of damages. Complainant Marchese’s percentage was then multiplied by the $200,000.00 maximum liability of Respondent’s license, resulting in an $8,053.00 administrative payout from the Fund.

Complaint No. 2021-04496

Complainant Hernandez owns residential property located at 10603 E. 38th Ln. Yuma, AZ 85365, which was the site of the underlying project at issue.

Mr. Ullinger is a Legal Assistant II for the Registrar. Mr. Ullinger made the determination that Complainant Hernandez was eligible for a payout from the Fund because he satisfied all statutory requirements for an administrative payout.

To determine the appropriate amount of the administrative award, Mr. Ullinger verified the contract amount between the parties, the contract terms, and the amount paid on the contract by Complainant Hernandez. Next, Mr. Ullinger confirmed that Complainant Hernandez filed against Respondent’s bond. Because Complainant Hernandez began mitigation of his pool project prior to the submission of his petition, the Registrar accepted his contract with Artesian Pools but disallowed portions of the agreement that were outside the scope of the parties’ original contract. Mr. Ullinger calculated Complainant Hernandez’s actual damages by monies received from Respondent’s bond, and then deducted the unpaid balance Complainant Hernandez owed on the contract. Mr. Ullinger then determined Complainant Hernandez’s percentage of pro rata shares by dividing her individual damages by the total sum of damages. Complainant Hernandez’s percentage was then multiplied by the $200,000.00 maximum liability of Respondent’s license, resulting in an $8,446.89 administrative payout from the Fund.

Complaint No. 2021A-04462

No testimony was offered regarding this complaint.

Complaint No. 2021A-05535

No testimony was offered regarding this complaint.

Closing Arguments

In closing, Complainant Attaway expressed his displeasure regarding the entirety of his recovery fund petition experience, and offered that he felt “hamstrung by the system.”

In closing, Complainant Brown contended that the recovery fund statutes needed to be modernized and made clearer for laypersons. Complainant Brown accused the Registrar’s determinations of going against the “intent and spirit of the law,” and beseeched the tribunal to make exceptions so that Complainants’ awards could be increased.

Complainant Marchese and Complainant Hernandez declined to provide closing arguments.

In closing, the Registrar argued that Complainants; including those that defaulted their appearances, individually and collectively, failed to sustain their burdens of proof in the matter. The Registrar noted that it is mandated by statue to administer the recovery fund, and as such, it is a fiduciary of the fund. Per the Registrar, to execute its duties faithfully it must adhere to all applicable statutes so as to ensure a fair process to all parties. The Registrar argued that in each underlying complaint all Complainants were found eligible to access the recovery fund, but due to the sheer volume of complaints received against Respondent’s license, the Registrar was statutorily obligated to cap the liability against the license at $200,000.00 – which all Complainants were notified of in November 2021. To that end, no evidence was presented to call the Registrar’s calculations into question or establish that the Registrar acted outside the scope of its authority in issuing the Notice(s) of Administrative Award at issue. Thus, the Registrar asked for its determinations to be affirmed and for Complainants appeals to be denied.

CONCLUSIONS OF LAW

This matter lies within the Registrar’s jurisdiction. The matter was properly brought before OAH.

The purpose of the Registrar’s licensing statutes is to protect the public from unscrupulous, unqualified, and financially irresponsible contractors.

Each Complainant bears the burden of establishing by a preponderance of the evidence that the Fund’s payout amount was incorrect and/or improperly issued in their respective case. The Registrar bears the burden to establish factors in mitigation 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. § 32-1132(A) provides, in pertinent part, that the recovery fund was established for the benefit of a claimant damaged by an act of a residential contractor.

Pursuant to Ariz. Rev. Stat. § 32-1131 et seq., in order to be eligible to access the Recovery Fund an applicant must meet specific eligibility criteria. An individual is eligible for an award from the residential contractors’ recovery fund if they both: (1) own residential real property that is damaged by the failure of a residential contractor to adequately build or improve a residential structure or appurtenance, and (2) actually occupy or intend to occupy the residential real property as the individual’s primary residence. Additionally, the applicant must have contracted with a residential contractor who was appropriately licensed either at the time of contract execution, when the first payment on the project was made, or when the work on the project first began.

Ariz. Rev. Stat. § 32-1132.01(B)(1) provides that payouts from the recovery fund are limited to the actual damages suffered by a claimant. Ariz. Rev. Stat. § 32-1132.01(H) provides that “actual damages” are the reasonable cost(s) of completing the contract and repairing the contractor’s defective performance, minus the part of the contract price still unpaid.

Ariz. Rev. Stat. § 32-1139(A) provides that “The liability of the fund shall not exceed two hundred thousand dollars for any one residential contractor's license. If claims against the fund on behalf of any one residential contractor's license exceed two hundred thousand dollars, the claims shall be paid based on a pro rata share of the common liability, and the registrar or a court entering an order for payment after the sum of two hundred thousand dollars has been paid from the fund shall modify the order indicating that no further recovery from the fund shall be allowed.”

Ariz. Rev. Stat. § 32-1154(F) provides that “if a contractor’s license has been revoked or has been suspended as a result of an order to remedy a violation of this chapter the registrar may order payment from the residential contractors’ recovery fund to remedy the violation.”

Statutes shall be liberally construed to affect their objects and to promote justice. In interpreting a statute, “[w]e first consider the language of the statute and, if it is unclear, turn to other factors, including ‘the statute’s context, subject matter, historical background, effects, consequences, spirit, and purpose.”

Statutes should be interpreted to provide a fair and sensible result. “In applying a statute its words are to be given their ordinary meaning unless the legislature has offered its own definition of the words or it appears from the context that a special meaning was intended.”

The Tribunal is required to apply equitable principles when rendering decisions. The application of equity entails offering a remedy to avoid an unconscionable or unjust result.

In the case at bar, however, a detailed factual analysis is not necessary because Complainants failed to present any substantive evidence at hearing. Here, Complainants irrelevantly argued that they were dissatisfied with the timeliness and manner in which the Registrar took action against Respondent’s license, and also immaterially opined that the Registrar should not have deducted outstanding balance(s) owed to Respondent on their contracts from their calculable damages. Complainants offered no statutory prevision or regulation that would require the Registrar to issue substantially increased award amounts from the Fund to each aggrieved Complainant. Notably, credible evidence in the record specifically rejects Complainants’ contentions whereby Ms. Adebule and Mr. Ullinger confirmed that each award had been calculated within statutory guidelines using documentation that had been provided by each Complainant. Complainants’ general disagreements with the Legislature’s intent and effect of the applicable statutes do not overcome the Registrar’s overwhelmingly more credible and reliable evidence.

As such, the tribunal finds that Complainants have failed to sustain their burden of proof in this matter.

The record reflects that the Registrar soundly established Complainants’ eligibility and further established that Complainants’ administrative award payout amounts were properly calculated. Ms. Adebule and Mr. Ullinger credibly testified that they diligently reviewed all pertinent documentation, consulted, and made careful calculations to reach each final figure at issue.

Because Complainants offered no evidence to rebut the Registrar’s witnesses’ testimonies, the undersigned Administrative Law Judge must conclude that Complainants were properly awarded their payouts from the Fund.

Complainants’ appeals are denied.

RECOMMENDED ORDER

Based on the foregoing,

it is recommended that Complainants’ appeals be denied.

IT IS FURTHER RECOMMENDED that the Registrar affirm the $4,836.87 payout from the Fund as outlined in the Notice of Administrative Award, as issued on April 07, 2022, to Complainant Attaway.

IT IS FURTHER RECOMMENDED that the Registrar affirm the $9,422.12 payout from the Fund as outlined in the Notice of Administrative Award, as issued on April 07, 2022, to Complainant Brown.

IT IS FURTHER RECOMMENDED that the Registrar affirm the $8,053.00 payout from the Fund as outlined in the Notice of Administrative Award, as issued on April 07, 2022, to Complainant Marchese.

IT IS FURTHER RECOMMENDED that the Registrar affirm the $8,446.89 payout from the Fund as outlined in the Notice of Administrative Award, as issued on April 08, 2021, to Complainant Hernandez.

IT IS ORDERED, pursuant to Ariz. Admin. Code R2-19-111(4), R2-19-117, and R2-9-119(B)(1), Complaint Nos. 2021A-04462 and 2021A-05535 are vacated from OAH’s calendar due to no appearances by or on behalf of Tibor Geczo and Stephanie Jensen and Marjorie and Stanford Lucier. These matters are hereby remanded to the referring agency for further action, if any.

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, July 19, 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