ALJDEC decisions subject to certification as final

2022A-03660-CHC-ROC · Registrar of Contractors · 2023-01-02

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Sue Zarkos ,

COMPLAINANT

Prestige Mechanical LLC

License No. ROC 310638,

RESPONDENT

No. 2022A-03660-CHC-ROC

ADMINISTRATIVE LAW JUDGE

DECISION

HEARING: December 15, 2022, 1:00 P.M.

APPEARANCES: James H. Hanson, Esq., appeared on behalf of Complainant; Jeremy Hartz, President of Respondent, appeared on behalf of Respondent

ADMINISTRATIVE LAW JUDGE: Roger A. Geddes

_____________________________________________________________________

FINDINGS OF FACT

Background and Procedure

1. Prestige Mechanical, LLC (Respondent), is the holder of License Number 310638 issued by the Registrar of Contractors (Registrar).

2. On or about May 5, 2022, Sue Zarkos (Complainant) filed a Complaint against Respondent with the Registrar alleging abandonment by Respondent in connection with the installation of refrigeration equipment by Respondent at the Evangelical Sisterhood of Mary in Phoenix, Arizona. (Complainant’s Exhibit No. 9).

3. After an inspection performed by the Registrar on July 1, 2022, the Registrar issued a Directive, dated July 5, 2022 (Complainant’s Exhibit No. 16), requiring Respondent to correct various alleged deficiencies in Respondent’s work by July 22, 2022, as follows:

Compliance Item: 1 - After negotiating during Jan/Feb 2021 with Prestige

Mechanical (Jeremy Hartz ) to have our 1989 walk-in freezer and walk-in cool room replaced / rebuilt, we signed the acceptance for $36,166.50 and gave the down payment check #15715 dated 2/16/2021 for the amount of $29,722.88.

The check cleared on 2/17/2021.

From August 2021 up until May 2022 there has been no further

communication from Mr. Hartz with us.;

Various attempts to reach him throughout Jan/Feb 2022 by voice messages, texts, emails and registered letter was refused and returned...We have had no response from him.;

We have had no proof, except his word, that he actually ordered the

construction materials and equipment from a California company in Feb. 2021.

He said that the custom production was still being postponed due to lack of insulation materials until summer, then it was going to be August, then

November, then to MARCH, 2022!!;

He at least owes us an explanation of what has occurred. When we did ask in August whether we should ask for a refund from the Ca. company, he said, "no, it is not possible".;

Because we would not file a lawsuit, we are hoping you can track him down and get clarity for us, and if possible, we can be eligible to file a recovery fund claim.

Thank you so much.

Investigator’s Observation: At the time of the inspection the old walk in freezer and equipment was still present. No new equipment has been installed or on site at the time of the inspection. Allegations are verified. Respondent shall complete project per original contract agreement

4. The Registrar then issued a Citation to Respondent, dated August 5, 2022 (Complainant’s Exhibit No. 20), for the alleged violation of the following:

a. A.R.S. § 32-1154(A)(1) (abandonment of a contract or refusing to perform without legal excuse for the abandonment);

b. A.R.S. § 32-1154(A)(3) (violation of Arizona Administrative Code Rule 4-9-108 for failure to meet minimum workmanship standards);

c. A.R.S. § 32-1154(A)(6) (doing of a fraudulent act by the licensee as a contractor resulting in another person being substantially injured);

d. A.R.S. § 32-1154(A)(22) (failure to perform corrective action without valid justification).

5. Thereafter, the Registrar issued a Final Administrative Decision and Order (Default), dated August 30, 2022 (Complainant’s Exhibit No. 22), which among other things, stated that “Respondent’s failure to answer within the time prescribed is deemed an admission of the acts charged in the Complaint” and issued a suspension of Respondent’s License No. 310638 for two days.

6. On September 27, 2022, Complainant sought, among other things, a hearing on a request for a restitution award under § 32-1156.01. (Complainant’s Exhibit No. 31).

7. On October 17, 2022, the Registrar issued an Order Granting Complainant’s Request for Rehearing on the issue of restitution. (Complainant’s Exhibit No. 32).

8. The Registrar issued a Notice of Hearing, setting a hearing for December 5, 2022, at 1:00 P.M. The Registrar mailed a copy of the Notice of Hearing to Respondent on or about November 8, 2022, at its physical and email address of record.

9. At the hearing, Complainant Sue Zarkos testified on her own behalf. Steven Avila (“Investigator”) testified on behalf of the Registrar. Jeremy Hartz, president of Respondent, attended the hearing late and testified on behalf of Respondent. The Tribunal received and admitted Complainant’s exhibit numbers 1 - 42. No exhibits were submitted by Respondent.

10. The commencement of the hearing was delayed approximately 20 minutes due to Respondent’s absence. Respondent was called by Arizona Office of Administrative Hearings staff who left a voice message with Respondent regarding his failure to attend the hearing. Thereafter, Respondent called in to the hearing at about 1:55 P.M. during the testimony of Ms. Zarko stating he did not receive a link for the hearing.

11. The Investigator testified on behalf of the Registrar that no work was performed by Respondent after payment by Complaint and that he received no documentation from Respondent supporting his position that it was not possible to move forward with work due to supply issues with his supplier. (Complainant’s Exhibit No. 17).

12. Complainant Sue Zarkos testified that Respondent performed no work after she paid it $29,722.88 on February 16, 2022, for new refrigeration equipment. (Complainant Exhibit No. 2). She also testified that she was unable to recover any funds from Respondent’s bond and that due to the nature of the property, any recovery from the recovery fund was questionable.

13. Jeremy Hart testified on behalf of Respondent that the delay in delivering the refrigeration equipment was beyond his control due to supplier delays and that he was told by the supplier that there would be 35 percent cancellation fee of the $26,000.00 he had paid supplier if he cancelled the contract with the supplier. He indicated he was still awaiting the refund check from the supplier.

CONCLUSIONS OF LAW

1. The Registrar has jurisdiction over this matter, pursuant to A.R.S. § 32-1101, et seq., which authorizes the Registrar to impose disciplinary sanctions against licenses for violations of A.R.S. § 32-1154.

2. The burden of proof at an administrative hearing falls to the party asserting a claim, right, or entitlement and the standard of proof on all issues in these matters is by preponderance of the evidence. See Arizona Administrative Code Rule 2-19-119.

3. In this case, Complainant must demonstrate by a preponderance of the evidence that Complainant is entitled to restitution. Proof by a “preponderance” means that “the evidence is sufficient to persuade the finder of fact that the proposition is more likely true than not.” In re: Arnold and Baker Farms, 177 B.R. 648 (9th Cir. BAP (Ariz.) 1994). See also Culpepper v. State of Arizona, 187 Ariz. 431, 930 P.2d 508 (App. 1996). It is “evidence which is of greater weight or more convincing than the evidence which is offered in opposition to it; that is, evidence which as a whole shows that the fact sought to be proved is more probable than not.” BLACK’S LAW DICTIONARY 1182 (Rev. 6th ed. 1990).

4. The copy of the Notice of Hearing that the Registrar mailed to Respondent at its addresses of record was reasonable and Respondent is deemed to have received notice of hearing. A.R.S. §§ 41-1092.4 and 41-1092.05(D).

5. A.R.S. § 32-1154(A) includes in pertinent part among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license, any of the following acts:

1. Abandonment of a contract or refusal to perform after submitting a bid on work without legal excuse for the abandonment or refusal.

...

3. Violation of any rule adopted by the registrar.

...

6. The doing of a fraudulent act by the licensee as a contractor resulting in another person being substantially injured. For the purposes of this paragraph, "fraudulent act" means a material misrepresentation that a licensee makes, that is relied on by another person and that results in damage to that person or that person's property.

...

22. Failure 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....

6. A.R.S. § 32-1156.01 provides that “[a]fter a hearing pursuant to this article, an administrative law judge may recommend that a licensee provide restitution to any person who is injured or whose property is damaged by an action of the licensee.”

7. Complainant has been injured by an action of Respondent. There is no dispute that Complainant paid $29,722.88 to Respondent and has suffered the injury of economic loss due to the action of Respondent. While it may be Respondent’s supplier that indirectly caused this economic injury, it was the responsibility of Respondent to safeguard the funds that Complainant paid and entrusted to it.

8. In considering a restitution award, it is noted that “the remedy of restitution is not confined to any particular circumstance or set of facts. It is, rather, a flexible, equitable remedy available whenever the court finds that ‘the defendant, upon the circumstances of the case, is obliged by the ties of natural justice and equity’ to make compensation for benefits received.” Murdock-Bryant Const., Inc. v. Pearson, 146 Ariz. 48, 53 (1985) (quoting D. Dobbs, Remedies § 4.2 at 235 (1973)).

9. With regard to Respondent’s actions that may support an award of restitution, Respondent is deemed to have admitted the acts charged in the Complaint and Citation, namely, abandonment of a contract or failure to perform work, failure to perform work in a professional and workmanlike manner, the doing of a fraudulent act resulting in a substantial injury, and failure to perform corrective work. While it is questionable whether Respondent is permitted to rebut these admissions at this juncture, it is noted that Respondent provided no documentary evidence that it paid its supplier for the refrigeration equipment from the funds paid to it by Complainant. Accordingly, in view of these wrongful acts, particularly the fraudulent act, that resulted in Complainant paying funds to and conferring a benefit upon Respondent, Complainant has established that under these circumstances, this is a proper case for restitution under A.R.S. § 32-1156.01.

10. With regard to Complainant’s request for an award of interest from February 16, 2022, on the amount of $29,722.88 payed by Complainant to Respondent, the Tribunal declines to award such interest. A person who is liable to make restitution of property is liable for supplemental enrichment in the form of interest to the extent that such further enrichment is either realized in fact or appropriately presumed. Restatement (Third) of Restitution and Unjust Enrichment § 53(1) (2011). “Liability for the use value of money may be imposed by an award of prejudgment interest ... whenever the failure to award interest would contribute to the unjust enrichment of defendant.” Id. at § 53(4). While the Tribunal bases its award of restitution on Respondent’s wrongful conduct which divested Complainant of her funds, the evidence presented did not persuade the Tribunal that Respondent was ultimately unjustly enriched by his conduct.

RECOMMENDED ORDER

Based on the foregoing, it is recommended that ten (10) days from the effective date of this Order, Prestige Mechanical, LLC ‘s, License Number 310638 is suspended until the Registrar receives and accepts written verification that Prestige Mechanical, LLC, has paid $29,722.88 to Complainant in certified funds.

It is further recommended that if and when the Registrar receives and accepts Respondent’s evidence that it has paid Complainant $29,722.88 in certified funds, the Registrar may close this Complaint.

In the event of certification of this Administrative Law Judge Decision by the Director of the Office of Administrative Hearings, the effective date of the Order will be five days from the date of the certification.

Done this day, January 4, 2022.

/s/ Roger Geddes

Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director

Registrar of Contractors

Complainant

Sue Zarkos

9849 N 40th St

Phoenix, AZ 85028

[email redacted]

JAMES N. HANSON, Esq.

LANG & KLAIN, P.C.

6730 N. SCOTTSDALE RD., SUITE 101

SCOTTSDALE, ARIZONA 85253

[email redacted]

Attorney for Complainant

Respondent

Prestige Mechanical, LLC

17026 W. Saguaro Lane

Surprise, AZ 85388

[email redacted]

By Miranda Alvarez

Legal Secretary

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