ALJDEC - Licensing

2022A-03061-RFA-LS-ROC-RS · Registrar of Contractors · 2024-07-03

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Christian Martinez and Deysi Madrigal,

COMPLAINANTS,

v.

Desert Armor Coatings LLC

License No. ROC 331666,

RESPONDENT.

No. 2022A-03061-RFA-LS-ROC-RS

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: July 03, 2024 at 9:00 AM.

APPEARANCES: Assistant Attorney General Charles Hover III, Esq. appeared on behalf of the Arizona Registrar of Contractors (“Registrar”) with Gail Matthews as a witness. Christian Martinez (“Complainant Martinez”) and Deysi Madrigal (“Complainant Madrigal”) (collectively as “Complainants”) appeared on their own behalf. Cameron McEachren appeared on behalf of Desert Armor Coatings LLC (“Respondent”).

ADMINISTRATIVE LAW JUDGE: Jenna Clark.

EXHIBITS ADMITTED INTO EVIDENCE: The Notice of Hearing on Appealable Agency Action (“Notice of Action”), April 30, 2024, Minute Entry – Granting Continuance, and Respondent Exhibits C-E were admitted into the evidentiary record.

_____________________________________________________________________

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 Arizona Administrative Code (“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 December 17, 2020, the Registrar issued License No. 331666 to Respondent for Specialty Dual CR-8 Floor Covering contracting. The license is active, in good standing, and renewed through December 31, 2024. Cameron Isaac McEachren is the Qualifying Party and Manager on the license. Respondent’s address of record for the license is 1803 S. Longmore Mesa, Arizona 85202. Currently, Respondent has an active $6,750.00 surety bond on the license issued by Jet Insurance Company, effective March 19, 2024. There is one prior disciplinary event noted for the license, which is presumed to be related to this matter.

On an unknown date, the Registrar received a brief narrative complaint from Complainant Martinez, on behalf of Complainant Madrigal, against Respondent’s License No. 331666 alleging poor workmanship of an epoxy project between Respondent and Complainant Madrigal. The Registrar designated it Complaint No. 2022-03061 and assigned to Chris Fultz (“Investigator Fultz”) for investigation.

On May 11, 2022, Investigator Fultz conducted a review of the contract executed between the parties, took 14 photographs, and inspected the work that had been performed on the project. Respondent was present. When he was finished, Investigator Fultz drafted his Jobsite Inspection Notes. Ultimately, Investigator Fultz derived a single complaint item from Complaint No. 2022-03061, which he was able to substantiate based on his firsthand observations. Investigator Fultz concluded that the work Respondent had performed on the project failed to meet the Registrar’s minimum workmanship standards, and specifically noted the following:

The issues pointed out during the inspection, [sic] are consistent where the carpet tack strip was removed from the concrete flooring. However [sic] there was some bubbling outside that area. I also noted that there looks like what appears to be tape stuck inside the finish. This will need to be fixed by appropriate means.

On May 24, 2022, Investigator Fultz issued a Written Directive from the Registrar (“Directive”) to Respondent because he substantiated Complainant Martinez’s workmanship allegation(s) against Respondent. Respondent was further put on notice that it had until 5:00 p.m. on June 13, 2022, to notify the Registrar of its compliance with the Directive or face discipline pursuant to Arizona Revised Statute (“Ariz. Rev. Stat.”) §§ 32-1154(A), 32-1154(A)(22), and 32-1154(E).

On an unknown date, Investigator Fultz forwarded the matter to the Registrar’s legal department with the issuance of a Citation Recommendation.

On July 28, 2022, the Registrar issued a Citation to Respondent for an 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 12, 2022, to respond with its Answer or face discipline pursuant to Ariz. Rev. Stat. §§ 32-1154(A)(22) and 32-1155.

The Registrar received a timely Answer from Respondent.

On August 12, 2022, the Registrar referred 2022A-03061-CHC-ROC to the Office of Administrative Hearings (“OAH”), an independent state agency, for an evidentiary hearing on October 07, 2022. Per the September 01, 2022, Notice of Hearing on Contested Case (“Notice of Hearing”) the issues to be determined were whether the Registrar had cause to discipline Respondent’s license based on the following alleged statutory violations:

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)

On October 07, 2022, an administrative evidentiary hearing took place at OAH before Administrative Law Judge (“ALJ”) Sondra Vanella. On October 20, 2022, ALJ Vanella issued her Recommended Decision to the Director of the Registrar, which suspended License No. 331666 for three (3) days for Respondent’s violations of Ariz. Rev. Stat. §§ 32-1154(A)(3) and 32-1154(A)(22), and also assessed a $500.00 civil penalty against Respondent pursuant to Ariz. Rev. Stat. § 32-1154(E).

On November 02, 2022, pursuant Ariz. Rev. Stat. § 41-1092.08(B), the Registrar issued a Final Administrative Decision and Order (“Final Order”) whereby the ALJ’s Recommended Decision was accepted. On December 12, 2022, the Final Order became effective. Neither party appealed.

On or about January 30, 2023, the Registrar received Complainant Madrigal’s petition for payment from the Residential Contractors’ Recovery Fund (“Fund”), pursuant to Ariz. Rev. Stat. §§ 32-1132(A) and 32-1154(G). Attached were proof of Complainant’s residency for the underlying property, proof of the parties’ underlying contract and payments made to Respondent for the project, and proof of a $4,250.00 disbursement from Respondent’s insurance company. Also attached were two (2) repair bids: a $36,400.00 bid from American Epoxy Arizona, and a $31,220.00 bid from The Garage Floor Company (“GFC”).

On March 18, 2024, the Registrar issued a Notice of Claim for Administrative Award (“Notice of Award”) to the parties which held that Complainant was awarded $26,950.00 from the Fund.

On April 19, 2024, the Registrar received an appeal letter from Complainant solely contesting the amount awarded from the Fund.

On March 21, 2024, the Registrar received a timely appeal of the Notice of Award from Respondent.

On April 01, 2024, the Registrar referred 2022A-03061-RFA-LS-ROC-RS to OAH for an independent evidentiary hearing. Per the Notice of Action sent to the parties on April 29, 2024, the issues for hearing are to determine whether Complainant’s award from the Fund was properly calculated and appropriately issued pursuant to Ariz. Rev. Stat. §§ 32-1132 to 32-1133.01 and 32-1154(F), as justified by the evidence.

On July 03, 2024, an administrative evidentiary hearing took place at OAH.

Hearing Evidence

At the hearing, the Registrar called Gail Matthews as a witness. Complainant Martinez testified on behalf of Complainants. Cameron McEachren testified on behalf of Respondent. The substantive evidence is as follows:

Complainant Madrigal owns residential property located at 8753 W. Palo Verde Dr. Glendale, Arizona 85305. Complainant Madrigal shares the property as her primary residence with Complainant Martinez.

On or about April 01, 2022, Complainant Madrigal and Respondent entered into a $19,000.00 epoxy coating agreement, which also included concrete preparation, primer, and clear over design coating. Complainant Madrigal paid Respondent in full for the project.

From April 01, 2022, to June 13, 2022, ROC License No. 331666 was active and in good standing with the Registrar.

Ms. Matthews is a Legal Assistant II for the Registrar. Ms. Matthews made the determination that Complainant Madrigal was eligible to access the Fund, and also eligible to receive an administrative payout from the Fund, because she satisfied all statutory requirements for an award. Specifically, Ms. Matthews determined the following:

Complainant Madrigal owned and occupied the residential property at issue.

ROC License No. 331666 was appropriate to perform the contracted work, and active during the relevant time period.

Complainant Madrigal paid the full contract price. There was no unpaid balance remaining between the parties.

As a result of Complaint No. 2022-03061 being filed with the Registrar, Respondent’s license was suspended for three (3) days and assessed a $500.00 civil penalty.

Complainant received a $4,250.00 bond payout for the underlying project from Respondent’s insurance company.

On March 15, 2024, Ms. Matthews verified with Investigator Fultz that Respondent’s poor workmanship required replacement, as opposed to repair.

The $31,220.00 bid from GFC was accepted by the Registrar because its scope of work satisfied the Directive and did not exceed it, and the company was appropriately licensed to perform corrective work

Ultimately, Ms. Matthews concluded that Complainant Madrigal’s $26,950.00 compensable damages, for damages sustained as a result of Respondent’s poor workmanship, fell under statutorily cap of $30,000.00 per Ariz. Rev. Stat § 32-1132.01.

Additional Evidence

On June 01, 2024, Respondent submitted an insurance claim for the repair of Complainant Madrigal’s baseboards to AmerAdjust. As of the date of the hearing, no payment had been issued to Complainant Madrigal by AmerAdjust.

On June 18, 2024, Respondent obtained an $11,450.00 repair bid for the underlying project from FLSCC (ROC License No. 346120).

On or about June 20, 2024, Respondent obtained an opinion from Epoxy2U LLC, which noted, in pertinent parts:

In a nutshell – 100% YES. Grinding the existing coating back down to concrete would be a HORRIBLE waste of time, money, and quite simply NOT NEEDED. Our Expoxy is extremely user friendly, an the only thing required would be simply profile the surface using a 17” Floor maintainter and several 80 or 100 Grit screens to make the surface porous again allowing any new coating to achieve a mechanical bond ... That’s it! [sic]

Epoxy2U did not include a ROC License number or provide a remediation estimate for labor and/or materials.

On July 02, 2024, Ms. Matthews relayed the FLSCC estimate and Epoxy2U LLC documents from Respondent to Investigator Fultz, who in turn opined that neither document affected his prior recommendations. Specifically, Investigator Fultz noted the following, in pertinent parts:

[Respondent] didn’t fix the issue during the directive timeframe and what he did try, did not fix the situation he created. We aren’t talking about a change of color, but the prep work wasn’t done properly and the issues are in the epoxy and I do not see a way to fix this without starting from a clean properly prepared base. As stated by [Respondent], He [sic] performed the grinding, cleaning and even some patching for the project and we still had all of the issues. The foundation of the product wasn’t done properly, This [sic] still needs to be addressed.

Investigator Fultz also referenced Findings of Fact 8 and 18-19 from ALJ Vanella’s related Recommended Decision.

Mr. McEachren testified that neither FLSCC nor Epoxy2U LLC inspected his workmanship prior to providing him with their respective opinions.

Per Mr. McEachren, the Registrar was misguided in relying on the GFC bid because he believed that the project warranted repair over replacement. Mr. McEachren opined that corrective work could be completed for less than the GFC bid, and further opined that the cost of the GFC bid was “out of this world high” and “astronomical.”

Closing Arguments

In closing, the Registrar opined that Respondent failed to sustain its burden of proof in the matter, and that no facts had been presented by Respondent to rebut the Registrar’s credible evidence. The Registrar argued that Complainant met every statutorily mandated requirement for payout from the Fund, and, per administrative calculations, was eligible for a $26,950.00 payout from the Fund. Per the Registrar, it had satisfied its fiduciary duty to comply with the pertinent sections of the law and protect the purpose of the Fund as its fiduciary.

In closing, Complainant Martinez argued that but for Respondent’s poor workmanship on the underlying project, and additional failed attempts to correct the deficiencies therein, Complainant Madrigal would not have petitioned for recompense from the Fund.

In closing, Respondent argued that the GFC bid was “unnecessarily expensive” and would likely force it out of business if accepted by the Registrar.

CONCLUSIONS OF LAW

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

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

Respondent bears the burden of establishing by a preponderance of the evidence that the Registrar’s Recovery Fund claim award amount was incorrect and/or improperly issued, and/or that Complainant was incorrectly and/or improperly deemed to be eligible to access the Fund. Both Complainant and the Registrar bear the burden to establish factors in mitigation by the same evidentiary standard.

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

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

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

Ariz. Rev. Stat § 32-1132.01 provides, in pertinent part, that an award from the Recovery Fund “[m]ay not exceed the actual damages suffered” and also “[m]ay not exceed an amount necessary to complete or repair a residential structure.” “Actual damages” means the reasonable cost of completing the contract and repairing the contractor’s defective performance, minus the part of the contract price still unpaid. The maximum individual award from the Recovery Fund is $30,000.00.

Statutes should be interpreted to provide a fair and sensible result. Statutes shall be liberally construed to affect their objects and to promote justice. In interpreting a statute, “[w]e first consider the language of the statute and, if it is unclear, turn to other factors, including ‘the statute’s context, subject matter, historical background, effects, consequences, spirit, and purpose.” “In applying a statute its words are to be given their ordinary meaning unless the legislature has offered its own definition of the words or it appears from the context that a special meaning was intended.”

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

The crux of the matter is whether repair or replacement would make Complainant Madrigal “whole,” and which bid she submitted, if any, could fulfill the corrective work order. In the case at bar, however, a detailed factual analysis is not necessary because Respondent failed to present any compelling evidence at hearing.

Here, the Registrar soundly established Complainant’s eligibility to access the fund, as well as the calculation and resulting award therefrom. Respondent’s opinion that Complainant is ineligible to access the Fund, without providing an indicia of evidence to support his contention, is irrelevant. Additionally, the Registrar’s calculations regarding Complainant Madrigal’s actual compensable damages are also correct.

The record credibly reflects that in order to remediate the underlying project, Respondent’s workmanship needs to be replaced with competent work. It cannot simply be repaired. Respondent’s assertions regarding the cost of the GFC bid is also irrelevant. There is no statute, regulation, precedent, or binding authority that requires an aggrieved homeowner or the Registrar to find the “cheapest” or “least expensive” repair/replacement option available. All that matters is that the relied upon bid not fall below or exceed the scope of work identified in the parties’ underlying contract or Directive, and that the remediating contractor be appropriately licensed by the Registrar. These requirements have been met here. Although the Tribunal empathizes with Mr. McEachren’s financial concerns for his business, it must be held that Respondent failed to sustain its burden of proof in this matter.

Based on the credible and relevant evidence of record, the Tribunal must conclude that the Registrar soundly established Complainant’s eligibility to access the Recovery Fund, as well as the amount of her administrative award. Therefore, the undersigned Administrative Law Judge must conclude that Complainant was properly awarded an administrative payout from the Fund.

Thusly, Respondent’s appeal is denied.

RECOMMENDED ORDER

Based on the foregoing,

IT IS RECOMMENDED that the Registrar affirm the Fund’s March 18, 2024, $26,950.00 Notice of Award.

IT IS FURTHER RECOMMENDED that the Registrar dismiss Respondent’s appeal.

NOTICE

In the event of certification of the Administrative Law Judge Decision by the Director of the Office of Administrative Hearings, the effective date of the Order will be forty (40) days from the date of that certification.

Done this day, July 05, 2024.

Office of Administrative Hearings

/s/ Jenna Clark

Administrative Law Judge

Transmitted electronically to:

Tom Cole, Director

c/o Legal Department

Registrar of Contractors

1700 W. Washington St., Ste. 105

Phoenix, AZ 85007

[email redacted]

Charles Hover III, Esq., Assistant Attorney General

Office of the Attorney General

2005 N. Central Ave.

Phoenix, AZ 85004

[email redacted]

Deysi Madrigal, Complainant

Christian Martinez, Complainant

8753 W. Palo Verde Dr.

Glendale, AZ 85305

[email redacted]

[email redacted]

Desert Armor Coatings LLC, Respondent

c/o Cameron McEachren, Agent

1803 S. Longmore

Mesa, AZ 85202

[email redacted]

By: OAH Staff