ALJDEC decisions subject to certification as final

2022A-00941-CHC-ROC · Registrar of Contractors · 2022-09-07

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Gail Higashi and

Kevin Higashi,

COMPLAINANTS

Pinnacle Custom Remodeling, LLC,

License No. ROC 246620,

RESPONDENT

No. 2022A-00941-CHC-ROC

ADMINISTRATIVE LAW JUDGE

DECISION

HEARING: August 25, 2022

APPEARANCES: Complainants Gail Higashi and Kevin Higashi appeared on their own behalf. Respondent Pinnacle Custom Remodeling, LLC failed to appear. Arizona Registrar of Contractors Investigator John Smith appeared as a witness.

ADMINISTRATIVE LAW JUDGE: Sondra J. Vanella

FINDINGS OF FACT

Pinnacle Custom Remodeling, LLC (“Respondent”) is the holder of License No. 246620 issued by the Arizona Registrar of Contractors (“Registrar”). Respondent’s Class R-62 License Classification of Minor Home Improvements allows Respondent to contract:

For projects of $5,000 or less including labor and materials, this classification allows the licensee to perform remodeling, repairs, and improvements to existing structures or appurtenances. The minor home improvement contractor shall not perform structural work to any existing structures or appurtenances, including load bearing masonry or concrete work (with the exception of on-grade flat work), and load bearing carpentry work (with the exception of patio or porch covers). Any work related to electrical, plumbing, air conditioning systems, and boilers must be subcontracted to an appropriately licensed contractor.

On or about January 21, 2021, Gail and Kevin Higashi (“Complainants”) contracted with Respondent for Respondent to perform remodeling of their home. The contract price was $74,184.00. Complainants paid Respondent a total of $156,462.93.

On or about February 4, 2022, the Registrar received a Complaint against Respondent from Complainants alleging poor work and abandonment of the project.

The Registrar assigned the Complaint to Investigator John Smith. After a March 1, 2022 Jobsite Inspection, Investigator Smith issued a 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 March 18, 2022.

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

Complaint Item 1: “Tile and grout lines are cracking”

Investigator’s Observations: Verified.

There is at least one cracked tile.

There are several areas of grout that is cracking and chipping out.

The contracted scope of work includes: “Patch and float any holes or cracks in concrete”

The contracted scope of work also includes installing the new tile.

In addition to the respondent being responsible for the concrete repair specified in the contract, the respondent accepted the condition of the concrete that he installed the tile on top of.

Quoted from Substantive Policy Statement 2017.01

Acceptance of the Surface

• "As a general principle in construction, a subcontractor who performs work on top of a surface prepared by another accepts the surface. The subcontractor should have inspected the surface for any flaws or defects that would affect the work he proposes before performing the work. If he found the surface to be unacceptable, he should have called any defects to the owner's or general contractor's attention so that the owner can choose whether to pay for the defective surface to be corrected or if the owner is not willing to pay to correct the surface, the contractor may obtain an explicit warranty disclaimer."

Source: Deebv. Check s Epoxy , No. 2014A-3258 (ALJ Decision at 11:11- 19).

Complaint Item 2: “Base boards are coming loose, another contractor told us the wrong nails were

used.”

This was described by the complainant to include the finish of the trim and the poor fit at the corners.

Investigator’s Observations: Verified.

• The trim is coming loose from the wall in several locations.

• The trim is unstained and unsealed.

• Incorrect type of trim. Window and door casing is installed as base trim.

o The trim installed along the floor is designed by the manufacturer to be window and door casing, not as base trim. The manufacturer’s base trim has a different profile than the manufacturer’s window and door casing.

• The installed trim and the installed trim corners are not the same profiles – resulting in very poor joints at all the corners.

o The manufacturer makes specific trim corners to match the profile of the base trim. The manufacturer does not make trim corners with a profile that matches the window and door casing.

Complaint Item 4: “ROC inspector told us that he was only licensed to work on jobs under $5,000”

Investigator’s Observations: The respondent has a R-62 Minor Home Improvements contractor’s license.

This license prohibits the respondent from contracting for, or performing work on, projects over $5,000.00 total including materials and labor.

Based on the respondents documents:

• The original contracted price for this project is $75,184.00

• The current amount the contracting is charging is $156,462.93

ADDITIONAL VIOLATIONS

In addition to the allegations in the complaint, the following violations were verified:

Warning Letter: Elements of a Contract.

Investigator’s Observations: The respondent’s contract is missing the following information:

• The date the parties entered into the contract

o The contract includes a start and completion date for the work, but does not indicate when the parties entered into the contract.

• Information about the customer’s right to file a complaint with the registrar

• Contact information for the registrar

REQUIRED CORRECTIVE ACTION: The respondent is to submit a copy of a current contract form that complies with A.R.S. § 32-1158

Warning Letter: Performing permit required work without a permit being obtained.

Investigator’s Observations: Based on the respondent’s contract documents, this project included modifying electrical wiring inside the walls.

This is permit required work that was performed without a permit being obtained.

Warning Letter: Working beyond scope of License.

Investigator’s Observations: The respondent has a R-62 Minor Home Improvements contractor’s license.

This license prohibits the respondent from contracting for, or performing work on, projects over $5,000.00 total including materials and labor.

Based on the respondents documents:

• The original contracted price for this project is $75,184.00

• The current amount the contracting is charging is $156,462.93

ITEMS NOT REQUIRING CORRECTION

The following complaint items require no action by the Respondent:

Complaint Item 3: “Tile was way over ordered and we lost a 25% restoring fee on the return”

Investigator’s Observations: This allegation is NOT verified. Although this complaint item alleges a financial dispute with the respondent, it alleges nothing indicating grounds for discipline under A.R.S. § 32-1154(A).

All errors in original.

After the expiration of the deadline in the Written Directive, Investigator Smith contacted Complainants and was informed that the parties were attempting to resolve the dispute.

Thereafter, Complainants informed Investigator Smith that the parties were unable to resolve the matter and no work was performed by Respondent. Consequently, a Compliance Inspection was not conducted and Investigator Smith 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)(2)(b), A.R.S. § 32-1154(A)(3), namely A.A.C. R4-9-108(a) and (b), A.R.S. § 32-1154(A)(12), namely A.R.S. § 32-1158, A.R.S. § 32-1154(A)(16), and A.R.S. § 32-1154(A)(22).

The Registrar referred the matter to the Office of Administrative Hearings, an independent state agency, for an evidentiary hearing.

The hearing of this matter was scheduled to convene on June 16, 2022, at 1:00 p.m. On the date and time set for hearing, Complainants appeared on their own behalf. Dan Morris appeared on behalf of Respondent. Investigator Smith was present.

The parties participated in a prehearing discussion outside of the presence of the Administrative Law Judge. As a result of that discussion, the parties entered into an agreement in principle, however needed additional time in order to execute the agreement. Therefore, the hearing was continued and set for a Status Update on July 18, 2022.

On June 20, 2022, Complainants filed a Status Update requesting that the matter be re-set for hearing.

On June 29, 2022, an Order setting the matter for continued hearing was issued to the parties. That Order advised the parties, in bold print, that the continued hearing was scheduled to convene on August 25, 2022, at 9:00 a.m., and contained a Google Meet link to join the hearing by video or by telephone. It was issued to Respondent’s email address of record that had been used throughout the course of the proceedings.

On August 9, 2022, Respondent filed a Motion to Continue the August 25, 2022 hearing.

On August 10, 2022, the Administrative Law Judge issued an Order Denying Continuance. The Order Denying Continuance advised the parties that Respondent’s Motion to Continue was denied and that the “matter remains scheduled for August 25, 2022, at 9:00 a.m.” (Emphasis in original.) The Order was sent to Respondent’s email address of record.

Respondent was therefore advised of the hearing date and time of August 25, 2022, at 9:00 a.m., on two separate occasions.

Respondent did not appear through an authorized member, employee, or attorney. Respondent filed another request to continue the hearing after the hearing had proceeded and concluded. On August 25, 2022, at 11:44 a.m., almost three hours after the time set for hearing, after giving a fifteen minute grace period for appearance, and after the hearing had concluded, Respondent filed a Motion to Continue the hearing. The Motion indicated the following:

I am extremely sorry for any inconvenience I may have caused related to my absence in this morning's hearing. I honestly was sitting at home reviewing all paperwork for the case with my wife. We were under the impression the hearing was at 1:00pm today. (8-25-22) I profusely apologize and meant no disrespect to the court and the Higashi's. I know your time is valuable.

I had a prepared offer with a lifetime warranty under the new license and LLC. I know this is a huge ask but I would like the opportunity to present my offer and plead my case. Thank you for your consideration. Sincerely Daniel Morris

Respondent had proper notice of the hearing. Because Respondent failed to appear, Respondent did not present any evidence to defend its license.

Investigator Smith testified consistently with his findings contained in the Written Directive and the Jobsite Inspection Notes. Investigator Smith testified regarding the issuance of the three warning letters to Respondent as set forth in the Written Directive, specifically, Respondent’s failure to comply with the minimum elements of a contract, failing to obtain the proper permit, and contracting beyond the scope of Respondent’s license that limits Respondent from performing work exceeding the amount of $5,000.00.

Investigator Smith testified that Respondent did not attend the Jobsite Inspection, and that Respondent’s poor work was verified. During his testimony, Investigator Smith referenced several photographs taken during the Jobsite Inspection that depict Respondent’s poor work, including loose base trim, lack of stain or sealer, mismatched seams, missing grout, and inadequate floor preparation. Investigator Smith testified that because Respondent did not perform any corrective work, he did not conduct compliance or pre-hearing inspections.

Ms. Higashi testified that the tile and grout are cracking and referenced a March 19, 2022 letter from S & N Tile Company. Ms. Higashi testified that the letter explains why all of the tile needs to be replaced. Ms. Higashi further testified that Respondent utilized an inappropriate product to seal the cracks in the concrete, as the product used by Respondent was not to be used on cracks over 1/8” wide and that most of the cracks in the concrete exceeded that width. Ms. Higashi further testified that Respondent did not install an underlayment and did not follow industry standards.

Administrative notice is taken of Respondent’s prior License record on September 7, 2022. Such prior License record reflects that Respondent’s License No. 246620 was first issued on June 15, 2008, and is suspended for nonrenewal effective July 1, 2022. Such prior License record also reflects that there is only the instant open complaint, no resolved/settled complaints, and no 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.”

The evidence established that the scope of Respondent’s work included electrical wiring inside the walls, that such work required a permit, and that Respondent failed to obtain a permit. Therefore, Complainants established that Respondent violated A.R.S. § 32-1154(A)(2)(b).

The evidence established that Respondent’s work was not in conformity with the Registrar’s standards as Respondent’s work was not performed in a professional and workmanlike manner, and was not performed in accordance with industry standards or applicable building codes as evidenced by Respondent’s failure to obtain the required permit. Therefore, Complainants established that Respondent violated A.R.S. § 32-1154(A)(3), namely A.A.C. R4-9-108(A) and (B).

The evidence established that Respondent’s written contract for the project did not contain all of the required elements for a contract. 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 established that Respondent contracted beyond the scope of its license. The contract price and amounts paid far exceeded the limits of Respondent’s license classification, and Respondent performed electrical work which is beyond the scope of its license. Therefore, Complainants established that Respondent violated A.R.S. § 32-1154(A)(16).

The evidence established that Respondent did not complete the corrective work following the issuance of 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. 246620.

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 it has amended its contracts to include the nine (9) terms required by A.R.S. § 32-1158(A). If Respondent fails to establish to the Registrar that it has brought its contracts into compliance with A.R.S. § 32-1158(A) within thirty (30) days, its contractor’s license shall be suspended until it demonstrates that it has done so.

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.

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-137160-45720000Done this day, September 7, 2022.

/s/ Sondra J. Vanella

Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director

Registrar of Contractors

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-137160-45720000By Miranda Alvarez

Legal Secretary