PDF copy: ALJDEC decisions subject to certification as final

2022A-02261-CHC-ROC · Registrar of Contractors · 2023-05-04

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Dallen Gardner, No. 2022A-02261-CHC-ROC

COMPLAINANT, ADMINISTRATIVE LAW JUDGE DECISION v.

Arizona Elite Pools and Backyards, LLC, License No. ROC 335473,

RESPONDENT.

HEARING: September 19, 2022, with further hearing on November 18, 2022; the record closed on December 5, 2022 APPEARANCES: Complainant Dallen Gardner appeared on his own behalf. Masako Gardner observed the proceedings. Andrew Wenker, Esq. represented Respondent Arizona Elite Pools and Backyards, LLC. Brandon Cotter and Alan Money1 appeared as witnesses for Respondent Arizona Elite Pools and Backyards, LLC. Arizona Registrar of Contractors Investigator Jack Grimm appeared as a witness. ADMINISTRATIVE LAW JUDGE: Sondra J. Vanella FINDINGS OF FACT 1. Arizona Elite Pools and Backyards, LLC (“Respondent”) is the holder of License No. 335473 issued by the Arizona Registrar of Contractors (“Registrar”). 2. On or about January 15, 2022, Dallen Gardner (“Complainant”) and his wife, Masako Gardner, contracted with Respondent to “provide all services, materials and labor for the construction of a new pool described in the attached Exhibits A and B . . .”2 Exhibit A was the Scope of Work dated December 11, 2020, and Exhibit B was the Proposal dated January 10, 2022.3 In December 2020, the parties had initially contracted for the construction of a pool, Complainant subsequently filed a complaint with the Registrar

1 Mr. Money’s testimony is not referenced herein as it proved to be irrelevant to the scope of the hearing and was exceptionally brief. 2 See Administrative Record at 46. Id. against Respondent, and the parties had attempted to resolve that complaint by the execution of the contract that controls in the instant matter, the January 15, 2022 contract. 3. Exhibit A to the contract included within Respondent’s scope of work, the following:4 Additional Options Grotto and Slide • The base price for the pool includes an allowance of $12,000 for construction of a grotto/waterfall/slide combination. Of note, this will allow for a 6’ to 7’ tall structure as well as ancillary support. Although the rendering shows a waterfall, other design ideas are available. Typically, these structures are highly custom and so we would design it with you.($15000 )

4. The total contract price “with everything included as described above” was $107,078.00.5 5. The parties’ contract contained a Payment provision which was included in

Exhibit B to the contract.6 The payment provision set forth the following payment schedule

and payments that had been made by Complainant:7

The original contract amount for the entire project is $107,078. Change orders include installation of upgraded surface color ($250), sea creature designs ($540 for 3), and privacy wall around pool equipment ($400 for 4' x 10') for a total project price of $108,268. Of this amount, the pool portion represents $73,616. The balance of the total ($34,652) goes towards hardscapes and additions. Breaking this up into the dictated payment structure would mean the pool payments would be dictated as follows: Down Payment - 15% or $11,043 Excavation - 25% or $18,405 Shotcrete - 25% or $18,405 Decking - 25% or $18,405 Remaining before application of finish materials - $7,358 Based on this structure, the total amount due at the current point is $47,853. Arizona Elite Pools has received the following payments: Id. at 52. 5 Id. at 53. Id. at 54. 7 Id. 2 12/11/20 - Contract signing payment 1: $16,911 1/8/21 - Contract signing payment 2: $16,911 2/25/21 - Excavation: $33,822 Total Paid:$67,644 Difference between amount due / amount paid: -$19,791

Proposed Structure Going forward regarding hardscape / additions - 30% ($10,396) at start of grotto / slide structure / slide: (use from overpaid amount) - 30% ($10,396) after completion of grotto structure / slide structure / slide: (use from overpaid amount, customer pays $1,001) - 30%($10,396) after installation of pool fence, sidewalk, RV gate, additional electric, water spicket by future spa, diving board / sleeves, turf grass.8 - Final Payment ($3,464) upon final completion of pool, hardscape and additions, removal of all trash, and start up orientation

6. On or about March 21, 2022, the Registrar received a Complaint against

Respondent from Complainant alleging abandonment and violations of several provisions

of the State’s contracting laws with respect to Respondent’s scope of work.

7. The Registrar assigned the Complaint to Investigator Jack Grimm. After an

April 26, 2022 jobsite inspection, at which both parties were present, Investigator Grimm

issued a May 5, 2022 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 May 25, 2022. You are directed to remedy the following violations by the appropriate means:

8 Respondent’s license classification does not allow it to install turf grass or an RV gate. 3 Complaint Item #1: #1 – Abandonment: 32-1154(A)(1). Contractor has abandoned the contract by refusing to move forward unless he is paid more money, despite the agreed upon contract price and payment schedule. Investigators Observation: Parties state that the last time anyone was on site working was 3-1-22. My understanding is this was the installation of the water line tile. The contract for this project was renegotiated and signed by Masako Gardner the wife of the complainant on 1-14-22 and signed by Brandon Cotter on 1-16-22. ROC jobsite inspection took place on 4-26-22. A little more than three (3) months after the new contract and dollar amounts were agreed upon by both parties to move forward. *No work has been performed in 8 weeks and the project and contractor representative Brandon Cotter states at this point he has no plans to continue.

Complaint Item #2: #2 – Failure to complete construction project for the price stated in the contract: 32-1154(A)(8). Contractor refuses to complete the project for the agreed upon contract price. Investigators Observation: As stated in complaint item #1 the contract was renegotiated and this was executed between parties due to stoppage of work in 2021. This was outlined in previous ROC complaint 2021-06573. Work had stopped and the parties renegotiated the contract and payments and that complaint was dropped by the complaint as he believed the project would move forward at this point. This current complaint was filed when work stopped again as the contractor stated he wanted more money and wants to go to arbitration over costs. Brandon Cotter states the costs overruns are related to grotto/waterfall/slide. The contracted portion of this has a stated allowance of $12,00o. No work related to the grotto/waterfall/slide has begun. This investigator was not presented with any working drawings or plans related to the grotto nor was presented with any documentation relating to costs. No work has been performed to the point of utilizing the allowed $12,000. Contract as signed by parties has an outlined payment schedule and based on the current status of the pool project and the payment schedule the complainant (Gardner) has at this point overpaid by $19,791 based on performance/completion point payments. *Contractor is refusing to move forward for the agreed upon contract price.

Complaint Item #3: #3 – Aiding or abetting a licensed or unlicensed person: 32-1154(A)(9)(a). Used the license of Arizona Elite Builders (312067) in 2020 and 2021 to represent that he was a licensed contractor, which he explained is one of his partners. He knew he was improperly using this license no later than 04/30/19, when he accepted service of the complaint in Maricopa County Superior Court cause CV 2019-006388. Used the license of Ruden Construction (323015) in obtaining the three permits from Maricopa County 4 in 2021, which he explained was also one of his partners. Allowed other unlicensed individuals to work under his license (335473) and the aforementioned licenses. When asked for the license number of the person from whom he solicited a bid on the grotto that exceeds $10K, contractor replied via email on 3/9/22, “As the licensed party, we can use labor at our discretion under our license. For trades that are fully autonomous we do use licensed contractors. However, most individual masonry crews are not licensed. We vet our people and their work, and they work under our license when on our job.” Contractor refuses to provide information about bids received or who has performed work despite customer’s request and the contract’s language that, “"Arizona Elite Pools shall provide to the Customer a List of each and every party furnishing materials and/or labor to Arizona Elite Pools as part of the Services, and where possible, the dollar amounts due or expected to be due with regards to provision of the Services herein described in the Scope of Work. Arizona Elite Pools declares, under the laws of the State of Arizona, that this List is a true and correct statement of each and every party providing materials and/or labor as part of the Services herein described. Investigators Observation: When the initial contract was executed 12-11- 2020 for this pool project Arizona Elite Pools and Backyards LLC was not a licensed entity. License #335473 was not issued until 11-10-21. That contract states this agreement shall be signed by Ernest and Patricia Link as the owners and on behalf of Arizona Elite Pools and Backyards by Brandon Cotter, Owner. That contract was not signed by any of the parties as listed and was signed by Jennie Morris stated as the designer. The license for Arizona Elite Builders #312067 is active and does not show any of the names as outlined in the contract as being an owner or representative of that license. License #323015 is an inactive drywall license that is not represented as Ruden Construction. This investigator was first on site on 1-7-22 regarding complaint 2021- 06573 and the only work that has taken place is the installation of the water line tile. Homeowner states he was not presented with the name and ROC license number of that tile installer. The homeowners states he has not received any information regarding the sub-contractors that have worked on site. The respondent has not presented any documentation to the ROC as to the allegation of unlicensed workers on site and he himself was unlicensed at the onset of this project. Homeowner has right to information regarding who will be working on site and the contractor’s license number. That information should be provided upon request. *Aiding and abetting warning letter will be issued. Contract as written also included a provision for hardscaping and/or landscaping. None of this work has been executed to date however the license for Arizona Elite Pools and Backyards LLC is a KA-5 Dual swimming

5 pool contractor and the scope of that license does not allow to bid or perform any work related to the R-21 Hardscaping and irrigation systems. *A warning letter will be issued. Complaint Item #10: #10 – Failure of a contractor to comply with any safety or labor laws or codes: 32-1154(A)(11). Maricopa County has adopted the 2012 International Residential Code, Rule 105.1 of which states that prior to the commencement of “any such work to be done, [the authorized agent] shall first make application to the building official and obtain the required permit.” Here, this unfinished pool was excavated before county permits were obtained, which was June 25, 2021. We were advised on February 10, 2021 that permits were approved, excavation occurred February 15, 2021, and on February 24, 2021 we had paid the contractor $67,644. We later learned that the permits had not been issued, were issued 06/25/21, and expired 12/23/21. Investigators Observation: A permit is in place and may be expired. However most permits can be renewed and/or extended. My understanding is any required inspections to this point have taken place. Verify the permit is valid and current prior to continuing any additional work.

Complaint Item #11: #11 – Violation of rule adopted by the registrar: 32- 1154(A)(3). Arizona Administrative Code R4-9-108 states that (a) a contractor shall perform all work in a professional and workmanlike manner and (b) use prudence and diligence in performing and completing tasks (b). A pool construction contract was signed 12/11/20 and the estimated time for completion was 12-14 weeks. It is now over 14 MONTHS and the project is not close to being finished. Contractor fails to communicate what is going on, permits have expired, contractor refuses to provide information about bids received or what work has been performed, and contractor refuses to move forward. We filed an ROC complaint 12/12/21 (2021-06573), inspector Grimm was assigned, and an inspection occurred 01/7/22. The parties entered into a new contract 01/16/2022 and the ROC complaint was withdrawn. Since that time, contractor has completely disregarded the new project term and payment schedule. Investigators Observation: Work has stopped and is incomplete. *Complete work per contract and terms.

ITEMS NOT REQUIRING CORRECTION The following complaint items require no action by the Respondent:

Complaint Item #4: #4 – Acting or conspiring with a licensed or unlicensed person: 32-1154(A)(9)(b). Used the license of Arizona Elite Builders (312067) in 2020 and 2021 to represent that he was a licensed contractor, which he explained is one of his partners. He knew he was improperly using 6 this license no later than 04/30/19, when he accepted service of the complaint in Maricopa County Superior Court cause CV 2019-006388. Used the license of Ruden Construction (323015) in obtaining the three permits from Maricopa County in 2021, which he explained was also one of his partners. Allowed other unlicensed individuals to work under his license (335473) and the aforementioned licenses. When asked for the license number of the person from whom he solicited a bid on the grotto that exceeds $10K, contractor replied via email on 3/9/22, “As the licensed party, we can use labor at our discretion under our license. For trades that are fully autonomous we do use licensed contractors. However, most individual masonry crews are not licensed. We vet our people and their work, and they work under our license when on our job.” Contractor refuses to provide information about bids received or who has performed work despite customer’s request and the contract’s language that, “"Arizona Elite Pools shall provide to the Customer a List of each and every party furnishing materials and/or labor to Arizona Elite Pools as part of the Services, and where possible, the dollar amounts due or expected to be due with regards to provision of the Services herein described in the Scope of Work. Arizona Elite Pools declares, under the laws of the State of Arizona, that this List is a true and correct statement of each and every party providing materials and/or labor as part of the Services herein described. Investigators Observation: Addressed in complaint item #3.

Complaint Item #5: #5 – Allowing one’s license to be used by a licensed or unlicensed person: 32-1154(A)(9)(c). Allowed other unlicensed individuals to work under his license (335473). When asked for the license number of the person from whom he solicited a bid on the grotto that exceeds $10K, contractor replied via email on 3/9/22, “As the licensed party, we can use labor at our discretion under our license. For trades that are fully autonomous we do use licensed contractors. However, most individual masonry crews are not licensed. We vet our people and their work, and they work under our license when on our job.” Contractor refuses to provide information about bids received or who has performed work despite customer’s request and the contract’s language that, “"Arizona Elite Pools shall provide to the Customer a List of each and every party furnishing materials and/or labor to Arizona Elite Pools as part of the Services, and where possible, the dollar amounts due or expected to be due with regards to provision of the Services herein described in the Scope of Work. Arizona Elite Pools declares, under the laws of the State of Arizona, that this List is a true and correct statement of each and every party providing materials and/or labor as part of the Services herein described. Investigators Observation: Addressed in complaint item #3.

7 Complaint Item #6: #6 – Acting as agent, partner, associate or otherwise of a licensed or unlicensed person: 32-1154(A)(9)(d). Used the license of Arizona Elite Builders (312067) in 2020 and 2021 to represent that he was a licensed contractor, which he explained is one of his partners. He knew he was improperly using this license no later than 04/30/19, when he accepted service of the complaint in Maricopa County Superior Court cause CV 2019-006388. Used the license of Ruden Construction (323015) in obtaining the three permits from Maricopa County in 2021, which he explained was also one of his partners. Allowed other unlicensed individuals to work under his license (335473) and the aforementioned licenses. When asked for the license number of the person from whom he solicited a bid on the grotto that exceeds $10K, contractor replied via email on 3/9/22, “As the licensed party, we can use labor at our discretion under our license. For trades that are fully autonomous we do use licensed contractors. However, most individual masonry crews are not licensed. We vet our people and their work, and they work under our license when on our job.” Contractor refuses to provide information about bids received or who has performed work despite customer’s request and the contract’s language that, “"Arizona Elite Pools shall provide to the Customer a List of each and every party furnishing materials and/or labor to Arizona Elite Pools as part of the Services, and where possible, the dollar amounts due or expected to be due with regards to provision of the Services herein described in the Scope of Work. Arizona Elite Pools declares, under the laws of the State of Arizona, that this List is a true and correct statement of each and every party providing materials and/or labor as part of the Services herein described." ; Investigators Observation: Addressed in complaint item #3. Complaint Item #7: #7 – Knowingly entering into a contract with a contractor for work to be performed for which a license is required with a person that is not duly licensed in the required classification: 32- 1154(A)(13). Allowed other unlicensed individuals to work under his license (335473) and the aforementioned licenses. When asked for the license number of the person from whom he solicited a bid on the grotto that exceeds $10K, contractor replied via email on 3/9/22, “As the licensed party, we can use labor at our discretion under our license. For trades that are fully autonomous we do use licensed contractors. However, most individual masonry crews are not licensed. We vet our people and their work, and they work under our license when on our job.” Contractor refuses to provide information about bids received or who has performed work despite customer’s request and the contract’s language that, “"Arizona Elite Pools shall provide to the Customer a List of each and every party furnishing materials and/or labor to Arizona Elite Pools as part of the Services, and where possible, the dollar amounts due or expected to be due with regards to provision of the Services herein described in the Scope of Work. Arizona 8 Elite Pools declares, under the laws of the State of Arizona, that this List is a true and correct statement of each and every party providing materials and/or labor as part of the Services herein described. Investigators Observation: Addressed in complaint item #3.

Complaint Item #8: #8 – Acting in the capacity of a contractor under any license in a name other than as set forth on the license: 32-1154(A)(14). Used the license of Arizona Elite Builders (312067) in 2020 and 2021 to represent that he was a licensed contractor, which he explained is one of his partners. He knew he was improperly using this license no later than 04/30/19, when he accepted service of the complaint in Maricopa County Superior Court cause CV 2019-006388. Used the license of Ruden Construction (323015) in obtaining the three permits from Maricopa County in 2021, which he explained was also one of his partners. Allowed other unlicensed individuals to work under his license (335473) and the aforementioned licenses. When asked for the license number of the person from whom he solicited a bid on the grotto that exceeds $10K, contractor replied via email on 3/9/22, “As the licensed party, we can use labor at our discretion under our license. For trades that are fully autonomous we do use licensed contractors. However, most individual masonry crews are not licensed. We vet our people and their work, and they work under our license when on our job.” Contractor refuses to provide information about bids received or who has performed work despite customer’s request and the contract’s language that, “"Arizona Elite Pools shall provide to the Customer a List of each and every party furnishing materials and/or labor to Arizona Elite Pools as part of the Services, and where possible, the dollar amounts due or expected to be due with regards to provision of the Services herein described in the Scope of Work. Arizona Elite Pools declares, under the laws of the State of Arizona, that this List is a true and correct statement of each and every party providing materials and/or labor as part of the Services herein described. Investigators Observation: Addressed in complaint item #3. Complaint Item #9: #9 – Failure to comply with this chapter: 32- 1154(A)(12). Solicited bid(s) from unlicensed persons in violation of 32- 1151. Contractor states that he obtained a bid for the grotto from Luis Gutierrez, an unlicensed individual. When asked for the license number of Mr. Gutierrez, who submitted a bid on the grotto that exceeds $10K, contractor replied via email on 3/9/22, “As the licensed party, we can use labor at our discretion under our license. For trades that are fully autonomous we do use licensed contractors. However, most individual masonry crews are not licensed. We vet our people and their work, and they work under our license when on our job.” Contractor refuses to provide information about bids received or who has performed work despite 9 customer’s request and the contract’s language that, “"Arizona Elite Pools shall provide to the Customer a List of each and every party furnishing materials and/or labor to Arizona Elite Pools as part of the Services, and where possible, the dollar amounts due or expected to be due with regards to provision of the Services herein described in the Scope of Work. Arizona Elite Pools declares, under the laws of the State of Arizona, that this List is a true and correct statement of each and every party providing materials and/or labor as part of the Services herein described." Investigators Observation: Addressed in complaint item #3. All errors in original. 8. After the issuance of the Written Directive and the expiration of the time period in which to perform corrective work, Investigator Grimm learned that Respondent had not performed any further work on the project. Thereafter, Investigator Grimm 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)(1), A.R.S. § 32- 1154(A)(3), namely A.A.C. R4-9-108(a), A.R.S. § 32-1154(A)(8), and A.R.S. § 32- 1154(A)(22). Investigator Jack Grimm’s Testimony 9. Investigator Grimm testified consistently with his findings contained in the Written Directive. Investigator Grimm explained that the parties had originally contracted in December 2020, for the construction of a pool.9 Complainant paid $67,644.00 toward the contract price of $107,078.00.10 10. Thereafter, Complainant filed a Complaint with the Registrar against Respondent alleging abandonment, lack of a permit, and an improper fee structure.11 Investigator Grimm conducted a jobsite inspection regarding Complainant’s initial Complaint. Investigator Grimm testified that the parties re-negotiated their contract after the first complaint was filed and Respondent became properly licensed, as it had not

9 See Complainant’s Exhibit 1. See Complainant’s Exhibit 2. 11 See Complainant’s Exhibit 6. 10 been.12 Complainant withdrew the initial Complaint because he wanted Respondent to complete the project. 11. The controlling contract in this matter is the contract executed by the parties in January 2022.13 The contract contains the following terms:14 21.ENTIRE AGREEMENT. This Contract contains the entire Agreement of the parties, and there are no other promises or conditions in any other contract or agreement whether oral or written concerning the subject matter of this Agreement. Any amendments must be in writing and signed by each party. This Agreement supersedes any prior written or oral agreements between the parties. ....

23.AMENDMENT. This Agreement may be modified or amended in writing, if the writing is signed by each party.

12. Investigator Grimm testified that he conducted the jobsite inspection in regard

to the instant Complaint on April 26, 2022, and took photographs during the inspection.15

At that point, three months had elapsed since the execution of the parties’ second contract

and sixteen months since the parties’ execution of their original contract. Investigator

Grimm testified that he advised Respondent to “build [the project] according to the

drawings,” however, Investigator Grimm was not provided with plans or drawings to view.

13. Investigator Grimm testified that during the April 26, 2022 jobsite inspection,

Respondent did not provide any written change orders or amendments to the contract and

Respondent did not verbally explain to Investigator Grimm what changes, if any, had been made. Investigator Grimm testified that the parties’ disagreement (the grotto) centers around an aspect of the contract for which there was no drawing or plan depicting what it was supposed to ultimately be. Therefore, there was no evidence provided to Investigator Grimm of a change in the plans as alleged by Respondent. 14. Investigator Grimm further testified that Respondent’s contract included the installation of artificial turf and an RV gate which is beyond the scope of its licensure.

Respondent License Number 335473 was not issued until November 10, 2021. 13 See Complainant’s Exhibit 8. Id. Emphasis added. 15 See Complainant’s Exhibit 12. 11 15. Investigator Grimm testified that the permit for the project has expired. 16. Investigator Grimm testified that Respondent requested an extension of the Written Directive deadline and Complainant declined to extend the Written Directive deadline. Investigator Grimm testified that Complainant was under no obligation to extend the period of the Written Directive and there was no evidence that Complainant denied access to Respondent during the period of the Written Directive. Investigator Grimm testified that Complainant explained to him the reason for not allowing an extension of the Written Directive as the lack of “movement forward” and the history between the parties. Investigator Grimm further testified that in order for Respondent to comply with the Written Directive concerning the landscaping and the RV gate, Respondent would have had to enter into a financial or other agreement with Complainant in order to comply due to the fact that landscaping and the gate installation are not within the scope of its pool license. 17. Investigator Grimm testified that based upon the information he received from the parties and the state of the project, it appears that Complainant has overpaid Respondent approximately $20,000.00. Complainant’s Testimony 18. Complainant testified that he and his family have had a “massive hole in the ground for over a year and a half.” 19. Complainant testified that on March 17, 2021, Jeanne Morris, Respondent’s designer, emailed Complainant’s wife the following:16 The Grotto final price was $11,700. We do have a few change orders. The deeper depth of the pool from 3ft to 3.5ft. ($440) the 2 outlets at the chicken coop. ($1200) The sea creatures ($540) Upgraded Surface Color ($250) $2430 -$300 $2130

This price will be added to the 3rd lump sum due.

16 See Complainant’s Exhibit 5. 12 20. Complainant asserted that the final price of the grotto was $11,700.00 and that the scope of the grotto was clear to all parties. Complainant testified that the newly executed contract did not contain any changes in scope. Further, by the time the new contract was executed in January 2022, he had overpaid Respondent by $19,791.00. 21. Complainant testified that he withdrew the initially filed complaint on January 18, 2022, in order to move forward on the project with Respondent. Pursuant to the terms of the January 2022 contract, the completion date was to be March 27, 2022, and if the project was not completed by that date, Respondent was to pay liquidated damages for every month thereafter that the project was not completed. 22. On February 28, 2022, approximately one month after the execution of the new contract, Respondent informed Complainant that it could not construct the grotto for the agreed upon price due to an increase in the cost of materials and labor and that it would cost Complainant $35,000.00 to complete the grotto. Complainant believed that the increased costs were attributable to the delays in the project caused by Respondent, and therefore, would not agree to pay $35,000.00 for the construction of the grotto. 23. Respondent provided a bid to Complainant dated February 27, 2022, from RVCA Pool Tile, LLC that indicates the following scope of work: “Raised slide feature labor and all material included” for a total price of $35,300.00.17 Complainant contended that the reason the price increased for the grotto was because when the parties initially contracted for the project, Respondent obtained an estimate for the grotto from an unlicensed contractor. However, Respondent was unable to produce the bid to Complainant that it originally obtained and Complainant contended that Respondent could not utilize that original bid because the individual returned to Mexico and Respondent was warned by the Registrar that it could only utilize licensed contractors. Complainant contended that now, fourteen months later, Respondent was attempting to pass the increased costs to Complainant. Notably, Respondent’s new contract form that was revised in order to be compliant with the Registrar’s requirements, now contains an Escalation of Costs

17 See Respondent’s Exhibit 9. 13 provision.18 At the time the parties executed their second contract, in January 2022, the parties’ contract contained a set price and no escalation clause. Brandon Cotter’s Testimony 24. Brandon Cotter, Respondent’s General Manger, testified that he oversaw the project at issue. Mr. Cotter testified that Respondent’s scope of work is contained in Exhibit A of the parties’ contract. The scope of work did not change from the first contract to the second contract.19 25. Mr. Cotter explained that the cost of the grotto was determined “based loosely on what the customer is describing included as an allowance, but could be altered” and “if beyond allowance, the additional cost is passed on to the customer.” Mr. Cotter testified that initially the plans for the grotto were rough and the parties did not have a working set of plans. 26. In regard to the expired permits, Mr. Cotter testified that the permits were not renewed “because [Respondent] did not reach the point of calling for a new inspection” and “renewing is straightforward and simple.” 27. Mr. Cotter testified regarding the progress of the project. Mr. Cotter testified that Respondent began the excavation in early 2021. Mr. Cotter testified that delays on the project began when obtaining the permits from the city as that permitting process was “incredibly slow” because the city employees were “shorthanded and over-worked.” However, Mr. Cotter attributed the longest delay to the shortage of shotcrete. Mr. Cotter explained that Complainant’s pool was large and required several loads of concrete which was difficult to schedule due to the industry wide problem during COVID. According to Mr. Cotter, further shotcrete delays were attributable to two large projects in Phoenix that demanded an “obscene amount of concrete.” Mr. Cotter testified that these delays caused the parties’ relationship to deteriorate. However, Mr. Cotter did not explain why Respondent did not take the shortage of shotcrete into account when it initially contracted with Complainant in December 2020, as the COVID pandemic began in March 2020, and then again in January 2022, almost two years into the pandemic. See Complainant’s Exhibit 15. 19 See Respondent’s Exhibits 1 and 7. 14 28. Mr. Cotter testified that pursuant to the terms of the parties’ January 2022 contract, the project was to have been completed by April 23, 2022, “based on the status of the project at that time.” Mr. Cotter also testified that the date was “not dependent on the grotto,” notwithstanding that the design and engineering for the grotto was completed, because Respondent had not yet obtained any bids for the grotto. Mr. Cotter asserted that as of the execution of the January 2022 contract, the grotto was “still an allowance” (even though the design and engineering were completed) because Respondent was “not ready to begin construction of the grotto “so no subs were brought out to obtain bids based on the finalized plans.” Mr. Cotter did not explain how Respondent could estimate an allowance for the grotto without having obtained any bids for that portion of the project. 29. Mr. Cotter contended that Complainant wanted additional features, such as a climbing structure, a water feature, and electrical, resulting in a larger grotto requiring additional structural support. Mr. Cotter testified that these additions resulted in higher costs for additional engineering, masonry, and electrical work, and inflation, labor, and material costs had increased. Respondent did not produce the plans at hearing, nor would Respondent provide copies of the plans to Complainant (Complainant obtained the plans from the city), and Respondent did not provide any change orders establishing the alleged additions by Complainant. Further the only evidence of upgrades was a March 17, 2021 email from Jeanne Morris to Complainant’s wife that stated that the final price for the grotto was $11,700.00 and change orders totaled $2,130.00 for the deeper depth of the pool, two outlets at the chicken coop, sea creatures, and upgraded surface color.20 30. Further, the engineering for the grotto had been invoiced on January 22, 2021, thereby evidencing that the engineering for the grotto had been completed prior to the renegotiated contract in January 2022.21 Also, Respondent applied for a permit for the project on February 1, 2021, based upon those engineering plans.22 The April 26, 2021 invoice for rebar indicated “Grotto Pad with special engineering.”23

See Complainant’s Exhibit 5. 21 See Complainant’s Exhibit 3. See Complainant’s Exhibit 22. 23 See Respondent’s Exhibit 36. 15 31. Mr. Cotter testified that due to inflation, Respondent shared its higher costs with customers and “would hope for grace from its customers.” Mr. Cotter testified that “every project took hits because of inflation.” Mr. Cotter testified that Respondent offered to “cover $10,000.00 of the increased costs.” Mr. Cotter contended that Complainant wanted upgrades “for no cost,” “wanted [Respondent] to absorb the cost of the upgrades,” and Complainant would not accept Respondent’s offer. 32. The parties’ January 2022 contract contains the following provision:24 6. MATERIALS AND/OR LABOR PROVIDED. Arizona Elite Pools shall provide to the Customer a List of each and every party furnishing materials and/or labor to Arizona Elite Pools as part of the Services, and where possible, the dollar amounts due or expected to be due with regards to provision of the Services herein described in the Scope of Work. Arizona Elite Pools declares, under the laws of the State of Arizona, that this List is a true and correct statement of each and every party providing materials and/or labor as part of the Services herein described.

33. On May 18, 2022, Respondent offered to provide to Complainant as part of the terms of an offered settlement agreement, after Complainant had previously repeatedly requested, the information concerning what subcontractors were working on the project.25 However, the parties’ contract provisions already required Respondent to provide this information. Respondent further demanded that Complainant pay $10,396.00 immediately toward the construction of the grotto.26 34. On May 19, 2022, Complainant responded to Respondent’s May 18, 2022 correspondence as follows:27 As we have always maintained, Elite is welcome to come back and build the pool per the contract, design, and plans that were mutually agreed upon. As Exhibit B of the contract indicates, the $10,396 that is due at the start of the grotto is to come from the amount we have already overpaid. Please provide the list that has been repeatedly requested since March 10 and we can coordinate dates.

See Complainant’s Exhibit 8. 25 See Respondent’s Exhibit 24. Id. 27 See Respondent’s Exhibit 25. 16 35. Exhibit B of the parties’ January 2022 contract specifies that 30% ($10,396.00) would be paid at the start of grotto/slide structure/slide and that a portion of the funds overpaid by Complainant would be applied to this portion of construction.28 Therefore, Respondent’s demands of Complainant were actually Respondent’s contractual obligations. 36. Mr. Cotter testified that Respondent was “hesitant to produce” the list of subcontractors because Complainant was “not nice to them” and that he was willing to provide the list “as long as [Complainant] didn’t contact anyone until after completion.” 37. Mr. Cotter testified regarding all of the work that was completed on the project. All of the work was completed prior to the renegotiation of the January 2022 contract and Complainant paid for this work as evidenced by the approximately $20,000.00 overpayment. 38. Mr. Cotter asserted a denial of access during the period of the Written Directive due to Complainant not providing dates for Respondent to return. However, Respondent had not provided to Complainant the contractually required list of subcontractors until May 25, 2022, and was demanding further payment from Complainant when such payment was not due.29 Moreover, Respondent requested access after the expiration of the Written Directive, on May 27, 2022, June 8, 2022, June 30, 2022, and July 6, 2022, all dates on which Complainant was under no legal obligation to provide access to Respondent.30 39. Administrative notice is taken of Respondent’s prior License record on December 21, 2022. Such prior License record reflects that Respondent’s License No. 335473 was first issued on November 10, 2021, and is active. Such prior License record also reflects that there is only the instant open complaint, zero resolved/settled complaints, and no discipline against Respondent’s license.

28 See Complainant’s Exhibit 8. See Respondent’s Exhibit 30. 30 Id. and see Respondent’s Exhibits 33, 34 and 35. 17 CONCLUSIONS OF LAW 1. This matter lies within the Registrar’s jurisdiction.31 2. Complainant bears the burden of proof to establish Respondent’s statutory violations by a preponderance of the evidence.32 Respondent must establish affirmative defenses by the same evidentiary standard.33 “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”34 3. In this case, Investigator Grimm found that Respondent had not completed the project and that Respondent had no intention of completing the project. Respondent acknowledged at hearing that it would not complete the project unless Complainant paid additional monies toward the construction of the grotto. Respondent failed to complete its scope of work pursuant to its contract. Respondent blamed its failure to complete the contract on Complainant’s unwillingness to pay additional monies for the construction of the grotto. Respondent asserted that Complainant made changes to the grotto that increased the costs, and that costs also increased due to inflation and COVID causing supply shortages. However, the credible and probative evidence of record established that any changes made by Complainant were prior to the execution of the January 2022 renegotiated contract. Respondent failed to provide any written change orders, Respondent did not produce the plans for Investigator Grimm or for the hearing, and Respondent only obtained a bid for the construction of the grotto after the execution of the January 2022 contract. Respondent’s attempt to transfer the increased costs to Complainant are not appropriate given Respondent’s failure to secure a bid for the grotto prior to the execution of the contract and Respondent’s lack of awareness of the actual costs of the construction. In January 2022, when the parties renegotiated their contract, Respondent would have had awareness of increased costs across the construction industry due to the pandemic. Regarding Respondent’s assertion that it ceased performance due to Complainant’s failure to pay the progress payment for the

31 See A.R.S. § 32-1101 et seq. See A.R.S. § 41-1092.07(G)(2); A.A.C. R2-19-119(A) and A.A.C. R2-19-119(B)(1); see also Vazzano v. Superior Court, 74 Ariz. 369, 372, 249 P.2d 837 (1952). See A.A.C. R2-19-119(B)(2). 34 MORRIS K. UDALL, ARIZONA LAW OF EVIDENCE § 5 (1960). 18 commencement of the construction of the grotto, the evidence of record established that Complainant overpaid Respondent approximately $20,000.00 and such overpayment was to be applied to the beginning stages of the construction of the grotto. The credible, substantial, and probative evidence of record established that Respondent failed to complete its scope of work over a prolonged period of time. Therefore, Complainant established that Respondent refused to perform without legal excuse and did not complete the project in a workmanlike manner in violation of A.R.S. §§ 32-1154(A)(1) and (A)(3), namely A.A.C. R4-9-108(a).35 4. The credible and probative evidence of record established that Respondent refused to perform its scope of work pursuant to the parties’ January 2022 renegotiated contract, contending that Complainant made upgrades to the grotto resulting in higher costs. Respondent refused to continue construction unless Complainant paid additional monies above the contract amount. However, Respondent did not produce any change orders and the evidence did not establish that changes were made after the renegotiated contract. The evidence established that higher costs were attributable to increased labor costs and supply shortages and Respondent’s failure to obtain a bid from its subcontractor for the construction of the grotto prior to contracting with Complainant in January 2022. Further, Complainant overpaid Respondent by approximately $20,000.00. Therefore, Complainant established that Respondent failed to complete the project for the price stated in the contract, or in any modification of the contract, in violation of A.R.S. §§ 32-1154(A)(8).36 5. The evidence established that Respondent did not complete the required corrective work following the Written Directive being issued. The Administrative Law Judge concludes based on the credible evidence of record as set forth above, that valid

A.R.S. § 32-1154(A)(1) includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license, “[a]bandonment of a contract or refusal to perform after submitting a bid on work without legal excuse for the abandonment or refusal.” A.R.S. § 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.” A.A.C. R4-9-108(a) requires that “[a] contractor shall perform all work in a professional and workmanlike manner.” 36 A.R.S. § 32-1154(A)(8) includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license, “[f]ailure in a material respect by the licensee to complete a construction project or operation for the price stated in the contract, or in any modification of the contract.” 19 justification did not exist for Respondent’s failure to comply with the Written Directive. Therefore, Complainant 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).37 RECOMMENDED ORDER Based on the foregoing, it is recommended that on the effective date of the Order, the Registrar shall suspend Respondent’s License No. 335473 for a period of seven (7) days. 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. 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, December 21, 2022.

/s/ Sondra J. Vanella Administrative Law Judge

A.R.S. § 32-1154(A)(22) includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license, “[f]ailure to take appropriate corrective action to comply with this chapter or with rules adopted pursuant to this chapter without valid justification within a reasonable period of time after receiving a written directive from the registrar.” 20 Transmitted electronically to: Jeffrey Fleetham, Director Registrar of Contractors [email redacted] Dallen Gardner [email redacted] Andrew J. Wenker, Esq. LANG & KLAIN PC [email redacted] [email redacted]

By Miranda Alvarez Legal Secretary

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