ALJDEC - Licensing

2022A-05254-RFA-LS-ROC · Registrar of Contractors · 2024-01-07

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Kimberly Isaak,

COMPLAINANT,

v.

Daniel Mark Henderson

dba Daniel M Henderson,

ROC License No. 191093,

RESPONDENT.

No. 2022A-05254-RFA-LS-ROC

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: November 02, 2023 & December 22, 2023.

APPEARANCES: Assistant Attorney General Mona Baskin, Esq. appeared on behalf of the Arizona Registrar of Contractors (“Registrar”) with Gail Matthews as a witness. Kimberly Isaak (“Complainant”) appeared on her own behalf. Daniel M. Henderson (“Respondent”) appeared on his own behalf. John Bowen observed.

ADMINISTRATIVE LAW JUDGE: Jenna Clark

EXHIBITS ADMITTED INTO EVIDENCE: The Notice of Appeal, Registrar Exhibits 1-6, September 14, 2023, Hearing Order, and November 02, 2023, Further Hearing Order were admitted into the record.

_____________________________________________________________________

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 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 for ROC License No. 191093, as reflected on the Registrar’s public website. On December 08, 2003, the Registrar issued ROC License No. 191093 for Specialty Dual CR-31 Masonry contracting to Respondent. The license was renewed through December 31, 2023, but was suspended by the Registrar on January 01, 2024, by operation of law for non-renewal. Daniel Mark Henderson is listed as the Qualifying Party and Owner on the license. Respondent’s address of record for the license is 26618 N. 59th Dr. Phoenix, AZ 85083. The license has an active $6,750.00 bond from Platte River Insurance Company, effective August 11, 2023. The license has been disciplined on one prior occasion, and has had one other complaint resolved or otherwise settled against it.

On June 27, 2022, the Registrar received a 12-item complaint filed by Complainant that alleged poor work performance of her pool and fire pit project. The Registrar designated it Complaint No. 2022-05254 and assigned Steven Avila (“Investigator Avila”) for investigation.

On August 15, 2022, Investigator Avila inspected the work that had been performed on the project to date and took 21 photographs of the project. When he was finished, Investigator Avila drafted Jobsite Inspection Notes. Ultimately, Investigator Avila determined that 4 complaint items; specifically complaint items 3, 5-6, and 11 constituted poor and/or incomplete work, and failed to meet the Registrar’s minimum workmanship standards. Investigator Avila also specifically noted the following:

At the time of the inspection it was determined that the respondent was not appropriately licensed with a B-5 General Swimming pool license. The B-5 license is what would be required to perform the scope of work that was contracted for between the respondent and homeowner. Respondent is currectly [sic] licensed with the licenses of CR-31 Masonry and CR-48 Ceramic, Plastic and Metal Tile. A written directive will not reflect the fact that the respondent shall perform additional work. Written directive will suggest that the respondent resonlve [sic] the matter appropriately without addition work being performed by the respondet [sic] due to the out of scope licensing.

(All errors in original.)

On August 19, 2022, Investigator Avila issued a Written Directive from the Registrar (“Directive”) to Respondent because he substantiated some of Complainant’s allegations that the work Respondent had done on the project failed to meet minimum workmanship standards. Respondent was put on notice that it had until 5:00 p.m. on September 06, 2022, to notify the Registrar of its compliance with the Directive or face discipline pursuant to Ariz. Rev. Stat. §§ 32-1154(A)(3), 32-1154(A)(22), and 32-1154(E). The Directive also included the following notice:

RESTRICTIONS

You may not perform or hire other contractors to perform work that is outside the scope of your license.

(Emphasis in original.)

On September 12, 2022, Investigator Avila escalated the matter to the Registrar’s legal department with the issuance of a Citation Recommendation.

On September 13, 2022, the Registrar issued a Citation to Respondent for alleged violations of Ariz. Rev. Stat. §§ 32-1154(A)(2)(b), 32-1154(A)(3); Ariz. Admin. Code R4-9-108(a), 32-1154(A)(16), and 32-1154(A)(22). Respondent was given until September 28, 2022, to respond with its Answer or face discipline pursuant to Ariz. Rev. Stat. §§ 32-1154(A)(22) and 32-1155.

On September 30, 2022, the Registrar referred this matter to the Office of Administrative Hearings (“OAH”), an independent state agency, for adjudication. Per the Notice of Hearing on Contested Case (“Notice of Hearing”) the issue(s) to be determined were whether the Registrar had cause to discipline Respondent’s license based on the following charges:

Charge 1: A.R.S. § 32-1154(A)(2)(b)

Charge 2: A.R.S. § 32-1154(A)(3) – R4-9-108(a)

Charge 3: A.R.S. § 32-1154(A)(16)

Charge 4: A.R.S. § 32-1154(A)(22)

On November 28, 2022, and January 31, 2023, an administrative evidentiary hearing took place at OAH before ALJ Stone.

On February 12, 2023, ALJ Stone issued a Recommended Decision suggesting that the Director of the Registrar suspend Respondent’s contracting license for ten (10) days due to established violations of Ariz. Rev. Stat. §§ 32-1154(A)(2)(b), 32-1154(A)(3); Ariz. Admin. Code R4-9-108(a), 32-1154(A)(16), and 32-1154(A)(22), and that the Director also impose a $500.00 civil penalty against License No. 191093.

On February 14, 2023, the Registrar issued a Final Administrative Decision and Order to the parties which affirmed the Administrative Law Judge’s Recommended Decision. Respondent was held to be in violation Ariz. Rev. Stat. §§ 32-1154(A)(2)(b), 32-1154(A)(3); Ariz. Admin. Code R4-9-108(a), 32-1154(A)(16), and 32-1154(A)(22). As such, the Registrar suspended Respondent’s license for 10 day and assessed a $500.00 civil penalty against Respondent’s license per Ariz. Rev. Stat. § 32-1154. On March 26, 2023, the Final Administrative Decision and Order became effective.

On or about June 06, 2023, the Registrar received Complainant’s petition for payment from the Residential Contractors’ Recovery Fund (“Fund”), pursuant to Ariz. Rev. Stat. §§ 32-1132(A) and 32-1154(G), for $26,000.00. Attached was a copy of a May 19, 2023 Release and Assignment from Respondent’s bond insurer for a $4,250.00 payout award and a copy of the related check, Warranty Deed, Isaak Living Trust documents, residential parcel information, a copy of the underlying contractual agreement between the parties, Complainant’s proof of payments to Respondent, and three (3) repair bids.

On August 04, 2023, the Registrar issued a Notice of Administrative Award to the parties which held Complainant was eligible for a payout from the Fund, and awarded $30,000.00 for actual damages sustained under Ariz. Rev. Stat. § 32-1132.01(B).

On August 23, 2023, the Registrar received a timely appeal request for hearing from Respondent.

On September 06, 2023, the Registrar again referred the matter to OAH for an independent evidentiary hearing. Per the Notice of Hearing on Appealable Agency Action (“Notice of Appeal“) sent to the parties on September 14, 2023, the issue(s) for hearing are to determine if the Registrar’s Fund determination was properly made pursuant to Ariz. Rev. Stat. §§ 32-1132 to 32-1133.01, based on the evidence.

On November 02, 2023, and December 22, 2023, an administrative evidentiary hearing took place at OAH before the undersigned.

Hearing Evidence

At the hearing, the Registrar called Gail Matthews as a witness. Complainant and Respondent testified on their respective behalves. The substantive evidence of record is as follows:

Complainant owns residential property located at 10714 E. Autumn Sage Dr. Scottsdale, AZ 85255, which was the site of the underlying project at issue.

On or about November 06, 2021, the parties entered into a $39,000.00 contract for the remodel of Complainant’s pool and surrounding deck area, and the installation of a fire pit.

Complainant used a Home Equity Loan to fund the underlying project.

Complainant paid Respondent $30,312.00 towards their contract.

Work on the project commenced in early-November 2021, and stopped in late-December 2021.

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

Complainant owes Respondent an unpaid balance of $8,687.50 towards the underlying contract.

Complainant received a $4,250.00 bond payout for the underlying project.

As a result of Complaint No. 2022-05254 being filed with the Registrar, Respondent’s license was suspended for ten (10) day and assessed a $500.00 civil penalty.

Ms. Matthews was also able to confirm with Investigator Avila that Complainant’s first estimate, by Verve Design Partners (“VDP”) dated May 31, 2023, was the most appropriate bid, less $16,798.60 for landscaping, landscape lighting, and fountain which were out of scope with the parties’ original contract. Thus, the bid total was reduced from $78,368.75 to $61,570.15.

Ultimately, Ms. Matthews determined that amended $61,570.15 bid from VDP was reasonable and within the scope of corrective work ordered by the Directive. However, because Complainant received a payout from Respondent’s bond, and owed Respondent an outstanding balance on their underlying contract, those additional deductions were made from the compensable bid amount. Therefore, Ms. Matthews concluded that Complainant’s $48,632.65 compensable damages, for compensable damages sustained as a result of Respondent’s poor workmanship, were statutorily capped at $30,000.00 under Ariz. Rev. Stat § 32-1132.01.

Respondent never appealed the Registrar’s Final Administrative Decision and Order.

Additional Evidence

Respondent testified that he appealed the Registrar’s Notice of Administrative Award because he believed Complainant was ineligible due to the fact that Respondent was still “in business” and “capable of finishing the project.” Respondent further testified that he appealed because Complainant was “only entitled to the deficit of contract.”

Per Respondent, the Recover Fund is punitive.

Respondent testified that he possesses a B-5 Swimming contracting license.

Administrative Notice is taken of all other licenses Respondent holds with the Registrar, as reflected on the Registrar’s public website. Currently, the only other license Respondent possesses is a General Residential B-6 Swimming Pool contracting license that was issued on February 28, 2017, which has been renewed through February 28, 2025.

Respondent testified that he did not use his pool license for Complainant’s project because “most of the work was masonry,” hence the discount for the work.

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, were eligible for a $30,000.00 payout from the Fund. The Registrar also argued that Respondent’s general assertions that Complainant was indelible to access the Fund because Respondent was willing to complete the project was baseless and immaterial. Per the Registrar, it has satisfied its fiduciary duty to comply with the pertinent sections of the law and protect the purpose of the Fund.

In closing, Complainant argued that she should not have to “bear the burden of Respondent’s misconduct,” and noted that the Fund’s $30,000.00 would not make her whole.

In closing, Respondent offered that he did not know how it would be feasible to reimburse the Fund and maintain his active licenses with 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 Recover Fund claim award was incorrect and/or improperly issued. The Registrar bears 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.

In the case at bar, however, a detailed factual analysis is not necessary because Respondent failed to present any compelling evidence at hearing. Here, Respondent’s general arguments that Complainant’s proposed award amount was “excessive,” and that remediations to Complainant’s project could have been completed for “less” are immaterial. The record reflects that Respondent’s contract with Complainant was vague, and that Respondent’s work on the project failed to meet the Registrar’s minimum workmanship standards. There is no applicable regulation that would require a remediating contractor to mirror corrective labor and costs with an original contractor’s contract. Moreover, Respondent’s opinion that Complainant is ineligible to access the Fund, without providing an indicia of evidence to support his contention, is irrelevant. Lastly, Respondent’s possession of a B-6 license is a red herring. While it would have been relevant in the underlying matter before ALJ Stone, it very likely would have been a factor in aggravation. In the present matter, however, it is immaterial. As such, 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 concludes that the Registrar soundly established Complainant’s eligibility to access the Recovery Fund, also correctly determined that Complainant is legally eligible for an administrative awarded from the Recovery Fund, and also properly calculated said award amount.

Therefore, the undersigned Administrative Law Judge must conclude that Complainant was properly awarded an administrative payout from the Fund.

Thusly, Respondent’s appeal must be denied.

RECOMMENDED ORDER

Based on the foregoing,

IT IS RECOMMENDED that the Registrar affirm the Fund’s August 04, 2023, $30,000.00 Notice of Administrative 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, January 08, 2024.

Office of Administrative Hearings

/s/ Jenna Clark

Administrative Law Judge

Transmitted by either mail, e-mail, or facsimile to:

Tom Cole, Director

c/o Legal Department

Registrar of Contractors

1700 W. Washington St., Ste. 105

Phoenix, AZ 85007

[email redacted]

Mona Baskin, Esq., Assistant Attorney General

Office of the Attorney General, Counsel for the Arizona Registrar of Contractors

2005 N. Central Ave.

Phoenix, AZ 85004

[email redacted]

Daniel Mark Henderson, Respondent

dba Daniel M. Henderson

26618 N. 59th Dr.

Phoenix, AZ 85083

[email redacted]

Kimberly Isaak, Complainant

10714 E. Autumn Sage Dr.

Scottsdale, AZ 85255

[email redacted]

By: OAH Staff