ALJDEC decisions subject to certification as final

2021A-06348-CHC-ROC · Registrar of Contractors · 2022-03-11

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Loretta Joyce Kriete,

COMPLAINANT,

v.

Surface Select Construction Inc.

ROC License No. 282405,

RESPONDENT.

No. 2021A-06348-CHC-ROC

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: February 25, 2022 at 1:00 PM.

APPEARANCES: Loretta Kriete (“Complainant”) appeared on her own behalf. Patrick Nance appeared on behalf of Surface Select Construction Inc. (“Respondent”). Jim Dimond appeared on behalf of the Arizona Registrar of Contractors (“Registrar”). Russel Kriete observed.

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 November 30, 2012, the Registrar issued License No. 282405 General Dual KB-2 Residential and Small Commercial contracting to Respondent. On October 18, 2021, the licensed was revoked by the Registrar. Patrick Tris Alter was named on the license at its Qualifying Party/Officer and Patrick Darrell Nance was also named as an Officer on the license. Respondent’s address of record for the license was 444 W. Calle De Caballos Tempe, AZ 85284. There is still an active $14,000.00 surety bond on the licensed issued by Western Surety Company, effective January 14, 2016. The license was disciplined by the Registrar on seven (7) prior occasions. The record also reflects one (1) prior complaint was settled or otherwise resolved with the license. There is one (1) open complaint listed for the license, which is presumed to be related to this matter.

Complainant owns residential property located at 1451 S. Hopi Trail Dewey AZ 86327-0781.

On September 12, 2020, Complainant and Respondent entered into a $63,335.00 for land preparation; including electrical, plumbing, and water and the installation of a manufactured home. Complainant paid $63,370.32 towards the project. Work on the project never commenced.

On December 02, 2021, the Registrar received an 8-item complaint from Complainant against Respondent’s License No. 282405 alleging abandonment of their project. The Registrar designated it Complaint No. 2021-06348 and assigned to Jim Dimond (“Investigator Dimond”) for investigation.

A Jobsite Inspection was not scheduled in this matter.

On December 09, 2021, Investigator Dimond forwarded the matter to the Registrar’s legal department with the issuance of a Citation Recommendation.

On February 19, 2021, the Registrar issued a Citation to Respondent for alleged violations of Ariz. Rev. Stat. § 32-1154(A)(1). Respondent was given until January 04, 2022, to respond with its Answer or face discipline pursuant to Ariz. Rev. Stat. §§ 32-1154 and 32-1155.

On December 30, 2021, the Registrar received Respondent’s Answer. In pertinent parts, Mr. Nance argued that he was “a victim of fraud perpetrated by a former business associate, Ryan Christensen” and denied any knowledge regarding Complainant’s project, as Mr. Christensen had conducted the “business activities” and “subsequently managed” the project in Respondent’s name.

On January 07, 2022, the Registrar referred this matter to the Office of Administrative Hearings (“OAH”), an independent state agency, for an evidentiary hearing on February 28, 2022. Per the January 21, 2022, Notice of Hearing the issue(s) to be determined are whether the Registrar has cause to discipline Respondent’s license based on the following alleged statutory violation(s):

Charge 1: A.R.S. § 32-1154(A)(1)

Hearing Evidence

Complainant testified on her own behalf, called Investigator Dimond as a witness, and submitted Exhibits 1-5 into the record. Patrick Nance testified on behalf of Respondent. The Registrar’s agency file was admitted into the record as its own exhibit. The substantive evidence of record is as follows:

From January 2020 through October 2021, Mr. Christensen was employed by Respondent as its Operations Manager. During that time Mr. Christensen was authorized to enter into construction contract agreements on behalf of Respondent, and also served as Respondent’s primary bookkeeper for accounts receivable and payable.

On January 06, 2021, Mr. Christensen executed a Lien Waiver for the project, whereby he acknowledge receipt of $35,443.00 from Complainant for permits. No permit(s) were ever obtained for this project.

Complainant’s mortgage company paid of $35,443.00 to Respondent directly.

On rare occasion Mr. Nance asked Mr. Christensen about Respondent’s current and pending projects, and was told that they were “fine” and “going okay.” Mr. Nance never asked for further substantiation or sought additional clarification(s) for himself because he “believed Mr. Christensen.”

When Mr. Christensen left Respondent’s employ, he took all of Respondent’s books with him, and absconded with a majority of Respondent’s bank balance. Mr. Nance was not made aware of Complainant’s project, or Mr. Christensen’s failure to begin her project, until Complain No. 2021-06348 was filed with the Registrar.

As of the date of the hearing, Respondent was unable to determine what monies in its bank account, if any, was attributed to funds Complainant tendered to Mr. Christensen for her project.

As of the date of the hearing, Respondent has not filed a criminal complaint against Mr. Christensen regarding his alleged embezzlement and fraud, nor has Respondent filed any civil action against Mr. Christensen in Municipal or Superior Court.

On an unknown date, Respondent issued a Cease and Desist Letter to Mr. Christensen.

In closing, Mr. Nance argued that Respondent should not be held liable for Mr. Christensen’s conduct, because Mr. Christensen had complete control over the company. Per Mr. Nance, Respondent had relied, to its detriment, on Mr. Christensen’s advice and opinions.

Complainant declined to provide a closing argument.

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.”

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

Statutes should be interpreted to provide a fair and sensible result. Statutes shall be liberally construed to affect their objects and to promote justice.

Ariz. Rev. Stat. § 32-1154(A)(3) includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license, “Abandonment of a contract or refusal to perform after submitting a bid on work without legal excuse for the abandonment or refusal.”

The substantive facts in this matter are clear. Upon review of the record, a preponderance of the evidence establishes that Mr. Christensen was Respondent’s Operations Manager at the time the parties entered into the underlying contract, that Complainant substantially paid for Respondent’s performance, and that Respondent failed to comply with any of the terms in the parties’ agreement.

Therefore, the only issue in dispute is whether Respondent raised a sufficient justification or excuse for failing to adhere to timely complete Complainant’s project per contract. This is an affirmative defense that Respondent bears the burden to establish. Here, although Mr. Nance’s claims against Mr. Christensen are credible, they do not outweigh Complainant’s more credible evidence or negate Mr. Nance’s duties and responsibilities as Qualifying Party for the license. By Mr. Nance’s own admission, he gave Mr. Christensen complete control over ROC License No. 282405; including entering in to contracts, overseeing projects, and all accounting for the business. While it is true that Mr. Nance was never directly involved with Complainant’s project, as the licensee’s Qualifying Party he bore the responsibility to ensure that all duties rightfully delegated were overseen and held accountable for, which he clearly failed to do. The underlying contract was established a full year prior to Respondent’s license revocation. It is a factor in aggravation that as the license’s Qualifying Party Mr. Nance was unaware of Complainant’s project until Complaint No. 2021-06348 was filed with the Registrar.

Therefore, because Complainant has established Respondent’s violation(s) of Ariz. Rev. Stat. § 32-1154(A)(1), and because Respondent failed to establish an affirmative defense by a preponderance of the evidence, cause has been established for the Registrar to discipline Respondent’s contractor’s license.

Complainant may petition the Registrar’s Recovery Fund for financial recompense 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 Surface Select Construction Inc., ROC License No. 282405, shall have its license revoked based on its violation(s) of Ariz. Rev. Stat. § 32-1154(A)(1).

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, March 11, 2022.

Office of Administrative Hearings

/s/ Jenna Clark

Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director

Registrar of Contractors