ALJDEC - Licensing

2022A-02913-CHC-ROC · Registrar of Contractors · 2023-04-13

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Anna Sepic,

COMPLAINANT,

v.

K L P Construction Inc.,

ROC License No. 153386,

RESPONDENT.

No. 2022A-02913-CHC-ROC

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: January 27, 2023 & March 27, 2023.

APPEARANCES: Gary Smith, Esq., appeared on behalf of Anna Sepic (“Complainant”) with Philip Coppola and Complainant as witnesses. Andrew Wenker, Esq. appeared on behalf of K L P Construction Inc. (“Respondent”) with Kenneth Plude and Daniel Aguilera as witnesses. Steve Klein appeared on behalf of the Arizona Registrar of Contractors (“Registrar”).

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 Arizona Registrar of Contractors (“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 March 22, 2000, the Registrar issued License No. 153386 General Residential B contracting license to Respondent. The license is in good standing and has been renewed through March 31, 2024. Kenneth Leonard Plude is listed as the Qualifying Party and Officer on the license. Respondent’s address of record for the license is 7041 E. Gary St. Mesa, AZ 85207. Respondent has an active $9,000.00 surety bond on the license issued by Contractors Bonding and Insurance Company, effective March 22, 2000. The license has not been previously disciplined by the Registrar, but has resolved or otherwise settled one prior complaint. There is one open complaint against the license which is presumed to be related to this matter.

On or about April 11, 2022, the Registrar received a 4-item complaint from Complainant against Respondent’s License No. 153386 that essentially alleged poor workmanship of their $152,229.00 home remodel project. Attached to the complaint were copies of Complainant’s proof of payments to Respondent. The Registrar designated it Complaint No. 2022-08966 and assigned to Steve Klein (“Investigator Klein”) for investigation.

The following day, on April 12, 2022, Complainant submitted a 40-item addendum complaint to the Registrar. Attached to the addendum complaint was a copy of the parties’ contract agreement, invoices Respondent issued to Complainant for the project, and an observational report.

On April 13, 2022, the Registrar issued a Jobsite Inspection Notification letter to the parties, advising that an onsite review would be conducted at the project site by Investigator Klein on June 15, 2022, at 10:00 a.m.

On June 15, 2022, Investigator Klein inspected the work Respondent had performed on the project to date. Respondent was present. Investigator Klein took 72 photographs of the project. When he was finished, Investigator Klein drafted Jobsite Inspection Notes. Ultimately, Investigator Klein substantiated 29 of 44 of complaint items. Specifically, Investigator Klein determined that complaint items 1-3, 5-6, 9-27, 29, 31, 33-34, and 43-44 constituted poor and/or incomplete work, and failed to meet the Registrar’s minimum workmanship standards. Investigator Klein also noted the following:

The Remodel project is incomplete. There was no building permit purchased. There are no plans. The Respondent stated he was hired as a consultant. The Complainant disagrees. She states he was hired as a general contractor. In addition, there are many contractual disputed issues. Respondent states they pulled off the job for non-payment. There isn’t a payment schedule on the bid/contract sheet.

(All errors in original.)

On June 16, 2022, Investigator Klein issued a Warning Letter to Respondent for an alleged violation of Ariz. Rev. Stat. § 32-1158(A) for Respondent’s failure to include all nine (9) required minimum elements in his contracts, including his contract with Complainant.

On June 16, 2022, Investigator Klein issued a Written Directive from the Registrar (“Directive”) to Respondent because he substantiated a number of Complainant’s complaint allegation(s) against Respondent. Respondent was put on notice that it had until 5:00 p.m. on July 29, 2022, to notify the Registrar of its compliance with the Directive or face discipline pursuant to Ariz. Rev. Stat. §§ 32-1154(A) and 32-1154(E). Correspondence was not returned as undeliverable to the Registrar.

A compliance jobsite inspection was not performed.

On August 02, 2022, Investigator Klein escalated Complaint No. 2022-02913 to the Registrar’s legal department with citation recommendations for violations of Ariz. Rev. Stat. §§ 32-1154(A)(3); Ariz. Admin. Code R4-9-108(a), and 32-1154(A)(22).

On August 05, 2022, the Registrar issued a Citation to Respondent for alleged violations of Ariz. Rev. Stat. §§ 32-1154(A)(3); Ariz. Admin. Code R4-9-108(a), and 32-1154(A)(22). Respondent was given until August 22, 2022, to respond with its Answer or face discipline pursuant to Ariz. Rev. Stat. § 32-1155.

On August 17, 2022, the Registrar received Respondent’s timely written Answer. In pertinent parts, Respondent conceded that due to Mr. Plude’s misunderstanding in reviewing the document, no corrective work was attempted during the Directive’s compliance period, and that Respondent was in agreeance to comply with the corrective order.

On August 19, 2022, the Registrar referred this matter to the Office of Administrative Hearings (“OAH”), an independent state agency, for an evidentiary hearing on October 07, 2022. Per the August 30, 2022, Notice of Hearing the issue to be determined is whether the Registrar has cause to discipline Respondent’s license based on the following charges:

Charge 1: A.R.S. § 32-1154(A)(3) – A.A.C. R4-9-108(a)

Charge 2: A.R.S. § 32-1154(A)(22)

Hearing Evidence

Complainant testified on her own behalf, called Investigator Klein and Philip Coppola as witnesses, and submitted Exhibits 36 a7nd 39. Respondent called Kenneth Plude and Daniel Aguilera as witnesses, and submitted Exhibits 1, 3, 13, 28, 33, 36, 48, 52-55, 58, 60-61, 63, 65, 68, 70, 73-75. The Registrar’s agency file (“Agency File”), including the Notice of Hearing, and all minute entries granting continuances were admitted into the record as their own exhibits. The substantive evidence of record is as follows:

Complainant owns residential property located at 4901 E. Ludlow Dr. Scottsdale, AZ 85254.

On an unknown date, Complainant hired Respondent as the General Contractor for her home remodel project. In turn, Respondent hired a majority of the subcontractors on the project for specialized portions of the work. Likewise, Respondent secured a majority of the materials and finishes for the project. The project included renovations to Complainant’s roof, windows, fireplace, garage, kitchen countertops and cabinetry, bathrooms, and master bedroom, whereby plumbing, framing, paint, HVAC and electric were involved.

Complainant directly ordered and paid for kitchen cabinetry, and their installation by Mr. Aguilera’s company.

Complainant also paid the drywall trade directly.

Initial work on the project commenced in June 2021, and stopped in January 2022.

Complainant tendered $58,636.00 in payments towards the project, approximately $34,000.00 of which was paid directly to Mr. Plude per his request.

From November 2022 through January 2023 Respondent was permitted to perform additional work at the project site to. During that time, Respondent coordinated payments for tile, electrical, and plumbing trades.

On January 24, 2023, Respondent submitted an Application for Permitting to the City of Scottsdale for Complainant’s project. The application was rejected by the building authority due to a lack of accompanying drawings.

On January 25, 2023, Investigator Klein performed a prehearing jobsite inspection of the project. After his inspection, Investigator Klein concluded that Respondent had satisfactorily completed and/or successfully remediated outstanding 7 substantiated complaint items. Specifically, Investigator Klein determined that complaint items 5, 10-11, 18, 24, 26, and 44 met the Registrar’s workmanship standards. Inversely, Investigator Klein determined that either no work or insufficient efforts had been made to address complaint items 1-3, 6, 9, 12-17, 19-23, 25, 27, 31, 33-34, and 43.

Additional Evidence

Mr. Coppola’s testimony

Philip Coppola holds 2 undergraduate degrees is Architecture, and is an Emeritus member of the American Institute of Architects. He is also the Qualifying Party and Member on ROC License No. 257844, as issued by the Registrar on August 16, 2009, for General Dual KB-2 Residential and Small Commercial contracting. In 2005 Mr. Coppola founded a construction litigation consulting firm.

From approximately, February 03, 2022, to March 03, 2022, Mr. Coppola’s firm inspected Complainant’s property to evaluate the workmanship of complaint items in Complaint No. 2022-08966. On March 03, 2022, a Report on Observation was issued as a result. Ultimately, the firm concluded that Respondent had been hired as the General Contractor for the project, not a Consultant, and that Respondent’s workmanship fell below industry standards in areas including, but not limited to:

Failing to obtain building permit(s), failing to obtain plans, and failing to adhere to the Registrar’s minimum workmanship standards regarding countertops, stucco, roof, drywall, framing, exposed wiring, squaring, and clearance, resulting in code violations, leaks, and inhabitability of the premises.

Mr. Coppola opined that if all requisite materials had been available during the Directive’s compliance period, Respondent should have been able to remediate and/or complete all substantiate complaint items within 3 weeks.

Closing Argument

In closing, Respondent argued that Complainant had hired Mr. Plude as a Project Manager for a whole-home renovations project that she served as the General Contractor for. Respondent also argued that Complainant volitionally went over her own project budget, and that the only reason work on the project ceased was because Complainant stopped paying trades and Respondent. Respondent opined that all remaining “punch list” items could be addressed in a matter of a few weeks, and further opined that Mr. Plude’s misunderstanding regarding the Directive did not warrant discipline from the Registrar.

In closing, Complainant argued that she substantially relied on Respondent’s expertise for the completion of her project, and that Respondent’s poor workmanship and/or lack of trade supervision resulted in subpar performance on the job. Complainant asked that discipline be imposed against ROC License No. 153386 harshly, in light of the extent of the underlying statutory violations.

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 for the Registrar to discipline Respondent’s license by a preponderance of the evidence. Respondent bears the burden to establish factors in mitigation of the penalty and affirmative defenses by the same evidentiary standard.

“A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.” A preponderance of the evidence is “[t]he greater weight of the evidence, not necessarily established by the greater number of witnesses testifying to a fact but by evidence that has the most convincing force; superior evidentiary weight that, though not sufficient to free the mind wholly from all reasonable doubt, is still sufficient to incline a fair and impartial mind to one side of the issue rather than the other.”

Ariz. Rev. Stat. § 32-1154(A)(3) includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license, “[v]iolation of any rule adopted by the registrar.”

Ariz. Admin. Code R4-9-108(a) requires that “[a]ll work shall be performed in a professional and workmanlike manner.”

Ariz. Rev. Stat. § 32-1154(A)(22) provides, in pertinent part, that “[a] holder of a license may not fail to take appropriate corrective action to comply with this chapter or rules adopted pursuant to this chapter without valid justification within a reasonable period of time after receiving a written directive from the registrar. The written directive shall set forth the time within which the contractor is to complete the remedial action. The time permitted for compliance shall not be less than fifteen days from the date of issuance of the directive. A license shall not be revoked or suspended nor shall any other penalty be imposed for a violation of this paragraph until after a hearing has been held. The Registrar has the authority to issue license discipline under this provision, including summary suspension, revocation, or imposing a civil penalty or recovery fund award.”

Ariz. Rev. Stat. § 32-1154(E) provides, in pertinent parts, that the Registrar may “[i]mpose a civil penalty not to exceed five hundred dollars on a contractor for each violation. The failure by the licensee to pay any civil penalty imposed results in the automatic revocation of the license thirty days after the effective date of the order providing for the civil penalty.” It also provides that “[n]o future license may be issued to an entity consisting of a person who is associated with the contractor, unless payment of any outstanding civil penalty is tendered.”

The material facts in the case at bar are clear.

Notwithstanding Mr. Pulde’s assertions that Respondent was hired by Complainant as a Consultant, the relevant and credible evidence of record establishes that Respondent was hired as the General Contractor for the underlying project. This fact is overwhelmingly supported by payments Complainant tendered to Mr. Pulde, which were then issued, in part, to trades he hired for the project. The record also reflects that Investigator Klein substantiated 29 of Complainant’s 44 complaint items for poor work, as failing to meet the Registrar’s minimum workmanship standards. Based on contract-related correspondence authored by Respondent, the record also establishes that these items were Respondent’s responsibility. Furthermore, there is also no dispute that Respondent took no action to address the Registrar’s subsequent Directive during the afforded compliance period. Although Respondent was able to complete or otherwise correct 6 additional complaint items prior to the prehearing jobsite inspection in the matter, 23 remained at issue as of that date and a building permit still had not been obtained by the local building authority. Thus, violation(s) of Ariz. Rev. Stat. § 32-1154(A)(3); Ariz. Admin. Code R4-9-108(a), have been established by a preponderance of the evidence.

Therefore, the only issue in dispute is whether Respondent raised a sufficient justification or excuse for failing to adhere to the Registrar’s Directive and complete Complainant’s project per contract. This is an affirmative defense that Respondent bears the burden to establish. Here, Respondent did not sustain its burden. There is no evidence in the record that excuses or otherwise justifies Respondent’s inaction and/or lack of performance on this project. Mr. Plude’s “inexperience” with the Registrar’s administrative processes is not a defense. Thus, a violation of Ariz. Rev. Stat. § 32-1154(A)(22) has been established by a preponderance of the evidence.

Because Complainant has established Respondent’s violations of Ariz. Rev. Stat. §§ 32-1154(A)(3) and 32-1154(A)(22), Complainant has also established cause for the Registrar to take disciplinary action against Respondent’s license.

Complainant may petition the Registrar’s Recovery Fund for financial recompense regarding this matter.

RECOMMENDED ORDER

Based on the foregoing,

IT IS RECOMMENDED that five days after the effective date of the Final Order in this matter, Respondent K L P Construction Inc., ROC License No. 153386, be suspended for two (2) days based on its violations of Ariz. Rev. Stat. §§ 32-1154(A)(3) and 32-1154(A)(22).

IT IS FURTHER RECOMMENDED that the Registrar require Respondent to pay the sum total of $250.00 (two hundred fifty dollars) in certified funds as a civil penalty in this matter.

IT IS FURTHER RECOMMENDED that if Respondent fails to pay the entire amount of the civil penalty on or before thirty (30) days following the effective date of the Registrar’s Final Order, the Registrar shall revoke Respondent’s license, effective on such deadline date. No future license shall be issued to any entity consisting of persons associated with Respondent, as defined in Ariz. Rev. Stat. § 32-1101(A)(5), unless Respondent tenders payment of any outstanding prior civil penalty.

Notice

Pursuant to Ariz. Rev. Stat. § 41-1092.08(I), the licensee may accept the Administrative Law Judge Decision by advising the Office of Administrative Hearings in writing not more than ten (10) days after receiving the decision. If the licensee accepts the Administrative Law Judge Decision, the decision shall be certified as the final decision by the Office of Administrative Hearings.

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, April 13, 2023.

Office of Administrative Hearings

/s/ Jenna Clark

Administrative Law Judge

Transmitted electronically to:

Martín Quezada, Director

c/o Legal Department

Registrar of Contractors

1700 W. Washington St., Ste. 105

Phoenix, AZ 85007

[email redacted]

Anna Sepic, Complainant

Guidant Law, PLC, Counsel for Complainant

c/o Gary Michael Smith, Esq.

402 E. Southern Ave.

Tempe, AZ 85282

[email redacted]

KLP Construction Inc., Respondent

Lang & Klain, PC, Counsel for Respondent

c/o Andrew Wenker, Esq.

6730 N. Scottsdale, Rd., Ste. 101

Scottsdale, AZ 85253

[email redacted]

By: OAH Staff