ALJDEC - Licensing

2022A-05726-CHC-ROC · Registrar of Contractors · 2023-10-01

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Fred Cutshalts ,

COMPLAINANT

Sun State Minor Home Improvements LLC

License No. ROC 288411,

RESPONDENT

No. 2022A-05726-CHC-ROC

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: September 12, 2023, 2:00 P.M.

APPEARANCES: Ryan D. Bailey appeared on behalf of Complainant: Timothy D. Butterfield, Esq., appeared on behalf of Respondent

ADMINISTRATIVE LAW JUDGE: Roger Geddes

_____________________________________________________________________

FINDINGS OF FACT

Background and Procedure

1. Sun State Minor Home Improvements, LLC (Respondent), is the holder of License Number 288411 issued by the Registrar of Contractors (Registrar).

2. On or about July 13, 2023, Fred Cutshalts (Complainant) filed a Complaint against Respondent with the Registrar alleging poor work in connection with home renovation performed by Respondent at a residence in Queen Valley, Arizona (“project”). The Complaint reflected a contract amount of $100,000.00.

3. The Registrar performed an inspection of the project on August 24, 2023. Thereafter, the Registrar issued a Directive, dated September 2, 2023, requiring Respondent to remedy the following violations by appropriate means by September 23, 2023:

Complaint Item 1: “Mislead on license allowed them to do. They are only licensed for $50k they charged us $100k;”

Investigator’s Observation: This allegation is verified.

Governing Rule: A.R.S. § 32-1154(A)(16): Knowingly contracting beyond the scope of the license or licenses of the licensee.

Complaint Item 2: “Did not replace subfloor, Covered up mold in laundry room; Used sub-par materials that are falling apart: Door don’t close

Floor not level, soft spots everywhere; Floor between front window and door is separated.”

Investigator’s Observation: This allegation is verified as the responsibility of the respondent.

Governing Rule: A.R.S. § 32-1154 (A)(3) - R4-9-108(a): Violation of any rule adopted by the registrar; Namely R 4-9-108(a) A contractor shall perform work in a professional and workmanlike manner.

Complaint Item 3: “ Plumbing throughout house was not installed correctly; Electric plates will not sit flat on walls; Fireplace masonry was not finished correctly; Recessed lighting in kitchen was not finished ;

Showers grout is cracking; No smoke detectors”

Investigator’s Observation: This allegation is verified as the responsibility of the respondent.

Governing Rule: A.R.S. § 32-1154 (A)(3) - R4-9-108(a): Violation of any rule adopted by the registrar; Namely R 4-9-108(a) A contractor shall perform work in a professional and workmanlike manner.

Complaint Item 4: “Baseboard and trim already breaking up; Cabinets were supposed to be custom but are not; No silverware drawer in kitchen;

Kitchen cabinets have gaps, refrigerator doesn't fit right, lazy Susan has gaps; didn't fix or remove any items in walls when painting. Like nails, hooks, switch plates. New deck added and attached to rotten wood.

No weather stripping on doors and no outer flashing installed outside or on deck; Countertops looks used and has a weird circles stained on it. Countertops seam is visible; I had to pay extra for electric work that was re-done; Closet door crooked and won't close.”

Investigator’s Observation: This allegation is verified as the responsibility of the respondent.

Governing Rule: A.R.S. § 32-1154 (A)(3) - R4-9-108(a): Violation of any rule adopted by the registrar; Namely R 4-9-108(a) A contractor shall perform work in a professional and workmanlike manner.

The Directive also stated “You may not perform or hire other contractors to perform work that is outside the scope of your license.”

4. After the expiration of the time period in the Directive and after being informed by Complainant that no resolution had been reached with Respondent, the Registrar then issued a Citation to Respondent dated, October 12, 2023, for the alleged violation of the following:

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

b. A.R.S. § 32-1154(A)(3) (violation of Arizona Administrative Code Rule 4-9-108(a)) for failure to perform work in a professional and workmanlike manner);

c. A.R.S. § 32-1154(A)(8) (failure in a material respect to complete a construction project or operation for the price stated in the contract);

d. A.R.S. § 32-1154(A)(12) (violation of A.R.S. § 32-1158(A) for failure to include required information in contract);

e. A.R.S. § 32-1154(A)(16) (knowingly contracting beyond the scope of the license;

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

5. The Registrar referred the matter to the Office of Administrative Hearings, an independent state agency, for an evidentiary hearing for, after various continuances, September 12, 2023, at 2:00 P.M.

6. At the hearing on September 12, 2023, Complainant Fred Cutshalts testified on his own behalf; James Austin and Mary Austin testified on behalf of Respondent. Jason Simpson, the Registrar Investigator (Investigator), testified on behalf of the Registrar. The Tribunal received and admitted Complainant’s Exhibit numbers 1 - 4 and Respondent’s Exhibit numbers 1 - 3.

7. The Investigator testified on behalf of the Registrar consistently with his findings contained in the Directive and his job inspection notes. Specifically, he testified that he mailed and emailed all pertinent documents regarding this matter to Respondent at its address of record, and that his notes reflect that he called Respondent on July 25, 2023, but did not receive a returned telephone call. He further testified that Complainant had advised him that Complainant had had no contact with Respondent prior to the Directive expiration date, and that consequently no corrective work had been done or no resolution had been reached. Lastly, he stated that Respondent had contracted beyond the scope of its CR-61 license due to the value of the contract exceeding $50,000.00. He further testified that the subject contract was lacking the contractor’s address, the estimated completion date, and the notice to homeowner.

8. Complainant Fred Cutshalts testified, as herein relevant to the Citation, that he purchased the home in April 2022 and proceeded with an entire home renovation with Respondent. He stated he stopped the work when he discovered that Respondent did not have the proper license for the project and then filed the subject Complaint.

He further testified that during the course of the contract there was a disagreement as to whether a new deck was part of the original scope of work. He stated a verbal agreement was reached to include the new deck for an additional amount of $4,000.00, bringing the total contract price to $104,000.00.

9. James Austin, testified, as herein relevant to the Citation, that he was aware of the $50,000.00 limitation on his CR61 license. He testified he received none of the notices from the Registrar regarding this matter even though he had verbally changed his address of record with the Registrar in February 2022.

10. Mary Austin, Respondent’s Qualifying Party, testified, as herein relevant to the Citation, that she had not received any of the notices from the Registrar regarding this matter and that she learned of the subject Complaint when she was checking the Registrar’s web site with respect to a bond matter. She stated she then called the Registrar and was told the address change Respondent made with the Registrar in February 2022 had been updated in some areas but not in others.

11. Administrative notice is taken of Respondent’s license record which reflects that Respondent’s License No. 288411 was first issued on February 3, 2014. Such license record also reflects one open case, no disciplined cases, and no resolved/settled cases.

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. To warrant such sanctions by the Registrar, Complainant must demonstrate by a preponderance of the evidence that Respondent violated the statutory section cited. 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. 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.

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3. Violation of any rule adopted by the registrar.

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8. Failure 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.

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12. Failure in any material respect to comply with this chapter.

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16. Knowingly contracting beyond the scope of the license or licenses of the licensee.

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22. Failure to take appropriate corrective action to comply with his 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.....

5. With regard to the “violation of any rule adopted by the registrar” under A.R.S. § 32-1154(A)(3) referenced in the Citation, the rule allegedly violated in this case is Arizona Administrative Code Rule 4-9-108(A) which requires that “[a] contractor shall perform all work in a professional and workmanlike manner.”

6. With regard to the “failure in a material respect to comply with this chapter [Chapter 10 of Title 32 the Arizona Revised Statutes (A.R.S. § 32-1101 et seq.)]” referenced in the Citation, A.R.S. § 32-1158(A) in Chapter 10 requires in pertinent part that any contract in an amount of more than one thousand dollars entered into between a contractor and the owner of a property to be improved shall contain in writing at least the following nine items:

1. The name of the contractor and the contractor's business address and license number.

2. The name and mailing address of the owner and the jobsite address or legal description.

3. The date the parties entered into the contract.

4. The estimated date of completion of all work to be performed under the contract.

5. A description of the work to be performed under the contract.

6. The total dollar amount to be paid to the contractor by the owner for all work to be performed under the contract, including all applicable taxes.

7. The dollar amount of any advance deposit paid or scheduled to be paid to the contractor by the owner.

8. The dollar amount of any progress payment and the stage of construction at which the contractor will be entitled to collect progress payments during the course of construction under the contract.

9. That the property owner has the right to file a written complaint with the registrar for an alleged violation of section 32-1154, subsection A. The contract shall contain the registrar's telephone number and website address and shall state that complaints must be made within the applicable time period as set forth in section 32-1155, subsection A. The information in this paragraph must be prominently displayed in the contract in at least ten point bold type, and the contract shall be signed by the property owner and the contractor or the contractor's designated representative....

7. A.R.S. § 32-1154(A)(1). Complainant has not presented sufficient evidence to establish that Respondent abandoned the contract or refused to perform without legal excuse in violation of A.R.S. § 32-1154(A)(1). Respondent testified that it was ready, willing, and able to perform corrective work. However, Respondent was in fact not legally able to correct the work, because its license allegedly did not permit it to perform corrective work (see below). Perhaps it could be argued that there was abandonment in a strict legal sense. However, the Tribunal finds this case not to be a true abandonment case, and finds that Respondent did not abandon the project or refuse to perform work.

8. A.R.S. § 32-1154(A)(3). Complainant has presented sufficient evidence to establish that Respondent failed to perform work in a professional and workmanlike manner and did not comply with Arizona Administrative Code Rule 4-9-108(a). No evidence was presented to dispute existence of any of the Directive items. It is acknowledged that many of the Directive items likely would have been corrected had Respondent had an opportunity to complete the project; however, its license did not permit it to complete the project. (see below).

With regard to the alleged lack of any notice to Respondent of this matter until after the Citation was issued, the Tribunal does not consider this to be a deprivation of Respondent’s due process rights that resulted in prejudice to Respondent. In that Respondent had allegedly already exceeded the scope of its license, Respondent had no right to do any further work or to hire a contractor to perform corrective work. The Investigator testified that a Directive was issued, not to require corrective work, but to give Respondent the opportunity to resolve the matter with Complainant. Any attempt to characterize this opportunity as a right is unpersuasive. Under ordinary circumstances, notice is critical because Respondent would have a right to perform correct work and Complainant would have had the obligation to allow corrective work. Here, that is not the case and Complainant had no corresponding obligation to attempt to reach a resolution.

Further, whether Respondent received the Complaint and Directive or not, once it became aware of this case, which appears to have been in October 2022, it has always had the opportunity to attempt to resolve this case. Granted, Respondent may have become aware later than it would have desired. However, Respondent has had the opportunity to resolve this matter now for eleven months, and therefore any lack of notice has not prejudiced that opportunity, which is all the Directive afforded it.

9. A.R.S. § 32-1154(A)(8). Complainant has presented sufficient evidence to establish that Respondent has failed in a material respect to complete a construction project for the price stated in the contract in violation of A.R.S. § 32-1154(A) (8). While Respondent stated that a majority of its work was done, it conceded that “a significant amount still remained.” (see Respondent’s Written Answer to Citation and Complaint).

10. A.R.S. § 32-1154(A)(12). Complainant has presented sufficient evidence to demonstrate that Respondent failed in a material respect to comply with A.R.S. § 32-1158(A) with regard to the required contents of the contract. The evidence was uncontradicted that the contract between the parties for the project was in excess of $1,000.00, but that such contract was lacking Respondent’s address, the estimated completion date, and the notice to homeowner. (Complainant’s Exhibit no. 2). While the Tribunal offered Respondent the opportunity to submit a new proposed form contract, no such form has been received to date.

11. A.R.S. § 32-1154(A)(16). Complainant has presented sufficient evidence to demonstrate that Respondent knowingly contracted beyond the scope of its license and consequently should be disciplined for a violation of A.R.S. § 32-1154(A)(16). The evidence reflected that the amended contract between the parties was for an amount of $104,000.00, and that Respondent admitted it knew that its CR61 license was limited to projects of a value of $50,000.00 or less.

12. A.R.S. § 32-1154(A)(22). Complainant has presented sufficient evidence to establish that Respondent failed to perform any corrective action without a valid justification, and consequently should be disciplined for a violation of A.R.S. § 32-1154(A)(22). The Tribunal does not consider Respondent’s legal inability to perform corrective work caused by its own actions to be a valid justification contemplated by the statute.

13. A.R.S. § 32-1156.01. Complainant submitted a request for an award of restitution under A.R.S. § 32-1156.01 for the amount of $25,000.00, the amount paid to Respondent in excess of $50,000, the limitation amount on Respondent’s license. However, Complainant has failed to persuade the Tribunal that this case was of such a nature to warrant such an award, or that such a method of calculation Complainant proposes would be proper. The request is denied.

14. Accordingly, Complainant has met his burden of proof to establish that Respondent’s license should be disciplined for a violation of A.R.S. § 32-1154(A)(3), A.R.S. § 32-1154(A)(8), A.R.S. § 32-1154(A)(12), A.R.S. § 32-1154(A)(16), and A.R.S. § 32-1154(A)(22).

RECOMMENDED ORDER

Based on the foregoing, it is recommended that on the effective date of this Order, Sun State Minor Home Improvements, LLC’s, License Number 288411 is suspended for five (5) days.

IT IS FURTHER RECOMMENDED that within thirty (30) days off the effective date of the final order, Respondent shall provide acceptable written proof to the Registrar that Respondent has created or modified its form contracts to include all of A.R.S. § 32-1158(A)’s nine required terms. If Respondent fails to provide such acceptable written proof within such time period, Respondent’s contractor’s license shall be suspended or continue to be suspended until it does so.

IT IS FURTHER RECOMMENDED that pursuant to A.R.S. § 32-1154(E), Respondent must pay to the Registrar, a civil penalty of $250.00 in certified funds on or before 30 days from the effective date of this Order.

IT IS FURTHER RECOMMENDED that if Respondent fails to pay the entire amount of the civil penalty on or before thirty 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)(5), unless Respondent tenders payment of the outstanding prior civil penalty.

Pursuant to A.R.S. § 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 forty (40) days from the date of that certification.

Done this day, October 2, 2023.

/s/ Roger Geddes

Administrative Law Judge

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

Martín Quezada

Director - Registrar of Contractors

1700 W. Washington Street, Suite 105

Phoenix, AZ 85007

[email redacted]

Ryan D. Bailey, Esq.

STONE CANYON LAW, PLC

[email redacted]

Roger C. Decker, Esq.

Timothy D. Butterfield, Esq.

Udall Shumway

[email redacted]

By: OAH Staff