ALJDEC decisions subject to certification as final

2022A-05726-RFA-LS-ROC-RH · Registrar of Contractors · 2024-12-16

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Fred Cutshalts,

COMPLAINANT,

Sun State Minor Home Improvements, LLC

License No. ROC 288411,

RESPONDENT.

No. 2022A-05726-RFA-LS-ROC-RH

ADMINISTRATIVE LAW

JUDGE DECISION

HEARING: October 8, 2024, with further hearing on December 6, 2024

APPEARANCES: Ryan Bailey, Esq. represented Complainant Fred Cutshalts who was present. Timothy Butterfield, Esq. represented Respondent Sun State Minor Home Improvements, LLC. Jim Austin was present as a representative of Respondent Sun State Minor Home Improvements, LLC. Assistant Attorney General Charles Hover III represented the Arizona Registrar of Contractors on October 8, 2024. Assistant Attorney General Seth Hargraves represented the Arizona Registrar of Contractors on December 6, 2024. Doug Ulmer appeared as a witness for the Arizona Registrar of Contractors. Justen Vickery appeared as a witness for Complainant Fred Cutshalts.

ADMINISTRATIVE LAW JUDGE: Sondra J. Vanella

EXHIBITS ADMITTED INTO EVIDENCE: The Arizona Registrar of Contractors’ Exhibits 1-4; Respondent Sun State Minor Home Improvements, LLC’s Exhibit 1

FINDINGS OF FACT

Background and Procedure

The Arizona Registrar of Contractors (“Registrar”) issued License Number 288411 to Sun State Minor Home Improvements, LLC (“Respondent”).

On or about July 13, 2023, the Registrar received a Complaint against Respondent from Fred Cutshalts (“Complainant”) alleging poor work with respect to Respondent’s contracted scope of work. Respondent’s scope of work pursuant to the terms of the parties’ contract, as it relates to the instant matter, included the renovation of Complainant’s home.

As a result of the Complaint, the Registrar issued a Citation against Respondent charging possible violations of A.R.S. § 32-1154(A)(1), A.R.S. § 32-1154(A)(3), namely A.A.C. R4-9-108(a), A.R.S. § 32-1154(A)(8), A.R.S. § 32-1154(A)(12), namely A.R.S. § 32-1158, A.R.S. § 32-1154(A)(16), and A.R.S. § 32-1154(A)(22).

Respondent filed a timely answer to the Citation. An administrative hearing was held. In the October 2, 2023 Decision, Administrative Law Judge Roger Geddes considered Respondent’s arguments and concluded that Respondent violated all but one of the charged provisions of this State’s contracting laws.

On October 26, 2023, the Registrar issued a Final Administrative Decision and Order accepting the October 2, 2023 Decision and imposing a five day suspension, as well as a $250.00 civil penalty, and requiring Respondent to provide proof that its contract documents comply with statutory requirements. The effective date of that Order was December 5, 2023.

Complainant thereafter filed a claim with the Residential Contractors’ Recovery Fund (“the Fund”) to recover the cost of performing the corrective work. As part of the claim process, Complainant submitted bids from contractors that Complainant had received to perform the repair to the project.

The Registrar issued a Notice of Administrative Award, finding that Complainant’s actual damages were $30,000.00. Respondent requested a hearing, believing the award was too high. Complainant did not contest the amount of the administrative award. The Registrar referred the matter to the Office of Administrative Hearings for an evidentiary hearing.

A hearing was held on October 8, 2024, with further hearing on December 6, 2024.

Hearing Evidence

The Written Directive from the Registrar specified the following in pertinent part:

After investigation, the Registrar determined that you failed to meet the requirements of A.R.S. § 32-1154(A). . . .

You are directed to remedy the following violations by the appropriate means:

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.

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. Reference:

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.

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 striping 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.

All errors in original.

At the outset of the hearing the parties stipulated that Complainant meets the eligibility requirements to receive an award from the Fund. The issue for hearing focused on a determination of Complainant’s actual damages and an appropriate award amount.

Doug Ulmer, Legal Assistant and Claims Reviewer for the Fund, testified that he reviewed the Complaint, the Written Directive, the Jobsite findings, the October 2, 2023 Decision regarding the underlying Complaint, the parties’ contract, the payments made by Complainant, and bids submitted by Complainant, in determining that Complainant was eligible to file a claim with the Fund and in calculating Complainant’s actual damages.

Mr. Ulmer testified that his calculations took into account the contract price of $104,000.00 which encompasses the original contract amount of $100,000.00, and the amount of the parties’ verbal contract for the deck, in the amount of $4,000.00, as well as the payments made toward the contract price in the amount of $75,000.00, and concluded that there was a remaining balance in the amount of $29,000.00 on the contract.

Complainant initially submitted two estimates for completion of the project to the Fund. Those bids were ultimately rejected, as the Registrar required a bid “more in line with the Written Directive and the original contract.” The accepted bid was from Stronghold Enterprises (“Stronghold”) in the amount of $150,914.30.

Mr. Ulmer deducted the contract balance of $29,000.00 from the $150,914.30 bid, the amount of which far exceeds the maximum allowable award amount. As such, Mr. Ulmer determined that because Complainant’s actual damages exceed the Fund limitation, he recommended a payout from the Fund to Complainant in the amount of $30,000.00.

Mr. Ulmer testified that although the bid was not itemized, he took into account the fact that the replacement contractor will likely have to tear out and re-commence some of the work as any new contractor will not want to take on the liability of another contractor’s deficient work. Respondent questioned Mr. Ulmer extensively concerning some of the items in the Stronghold bid such as stacked stone for the fireplace and replacing all of the siding, contending that such items were “upgrades.” Mr. Ulmer testified that the Written Directive was vague and he could not question the investigator about it because the investigator is on military leave. However, Mr. Ulmer testified that sometimes additional work needs to be performed that is not addressed in the original contract or the Written Directive, in order to properly perform a repair, and that certain repairs may necessitate additional work. Mr. Ulmer clarified that the Registrar relies on a replacement contractor’s expertise in assessing whether something can be repaired or whether it needs to be replaced.

Mr. Cutshalts testified that the only portion of the home that has siding is the side where the deck was to be constructed.

Mr. Cutshalts explained that Respondent was contracted to remove the hearth, paint, and repair the fireplace in order to ensure that the area that was removed looked consistent with the remaining portion of the fireplace. The fireplace was brick, however, because Stronghold could not match the brick, stacked stone was the next best option.

Mr. Cutshalts testified that because the home is in Queen Valley, it was difficult to find contractors that would take on the job. Mr. Cutshalts further testified that he informed Stronghold that he needed an estimate that corresponded to the Written Directive and provided a copy to Stronghold, and did not request additional work or upgrades be performed.

Justen Vickery, Stronghold’s owner, testified that he drafted an estimate for Mr. Cutshalts on July 25, 2024, after inspecting the home and utilizing the Written Directive. Mr. Vickery did not reference the original contract with Respondent. Mr. Vickery testified that everything contained in the bid is work and materials necessary to comply with the Written Directive, however, he inadvertently did not include the cost for the demo of the floor. Mr. Vickery testified that the subfloor needed repair in multiple areas, was “pretty squishy” in some places, and there was no other way to correct the deficiencies than to replace it, requiring replacement of the luxury vinyl tile (“LVT”) flooring, as well as the baseboards that abut the LVT.

Mr. Vickery further testified that the hearth was removed from the fireplace, the area was painted, however, not completed, and there was exposed and broken brick. Stacked stone will be used to repair the damage, however, a mantle will be installed so that the stacked stone does not need to be installed to the ceiling height. Mr. Vickery explained that this was the simplest solution to cover up the deficient work.

Regarding the deck, Mr. Vickery testified that it needed to be constructed to code and could not be repaired because it was “so badly constructed” it could not be walked on. Mr. Vickery explained that the siding on the deck side of the home was “not in great shape” and needed to be removed to ensure that it was waterproof. However, because the original siding was so brittle, it could not be re-used and needed to be replaced. Mr. Vickery testified that as a general contractor, he “was not going to deal with failing siding” which would have been “a nightmare.” Consequently, the entire side of the house and corner moldings required re-siding. The painting that was specified in the estimate was in regard to the new siding, the deck railing, and the fascia board.

Mr. Vickery testified that the countertop could not be repaired because it was quartz and therefore, needed to be replaced with “like for like” material.

Mr. Vickery testified that “sometimes a scope of work starts smaller and becomes larger once you get into it.” Mr. Vickery explained that as soon as you “touch it, you own it” as a contractor. The replacement of the siding was not based on Respondent’s contract with Mr. Cutshalts, but rather was based on the state of the deck and siding. Mr. Vickery testified that new footings were required for the construction of the deck because the deck is required to be built to code and the existing footings are not properly sized for the load of the deck. Mr. Vickery testified that the deck was “very wrong” and required removal and replacement.

Jim Austin, Respondent’s owner, testified that he drafted the parties’ contract and is therefore familiar with its terms. Mr. Austin testified that Respondent removed the fireplace hearth and was to make necessary repairs as some of the mortar was missing between the brick, and Respondent was to paint the fireplace.

Regarding the deck, Mr. Austin testified that it was initially a walkway from the back door to the Arizona room, and that it had deteriorated. Mr. Austin testified that siding and footings were not discussed and that it was a much larger and costly project than anticipated. Mr. Austin testified that because the deck was so deteriorated, he could “not save it” and “did the best he could do with the money allotted.” Respondent installed new railings, new floor boards and a couple of posts. Mr. Austin testified that he hired a “handyman to help him because he does not know how to build a deck.” Mr. Austin testified that he is not a deck builder, however agreed to construct a deck for $4,000.00.”

Mr. Austin acknowledged that he participated in the administrative hearing concerning the underling Complaint and that Respondent did not present any evidence to dispute any of the Written Directive items, notwithstanding having had the opportunity to do so. Respondent did not appeal the Final Administrative Decision.

Respondent argued that Mr. Cutshalts should not be entitled to receive more than $4,000.00 in compensation for the deck because that was the contract amount for that portion of the contracted work, and that Respondent did not cause any damage. Respondent further argued that stacked stone for the fireplace was an upgrade. Respondent took issue with the fact that Stronghold’s bid as not itemized. However, Respondent did not cite to any authority requiring bids submitted for purposes of the Fund be itemized. Respondent argued that at most, Mr. Cutshalts should receive $7,362.24 from the Fund.

CONCLUSIONS OF LAW

This matter lies within the Registrar’s jurisdiction.

A.R.S. § 32-1132(A) provides that “[t]he residential contractors' recovery fund is established, to be administered by the registrar, for the benefit of a claimant damaged by an act, representation, transaction or conduct of a residential contractor licensed pursuant to this chapter that is in violation of this chapter or the rules adopted pursuant to this chapter.” The Registrar’s final decision in the underlying workmanship case giving rise to the instant matter establishes that Respondent’s work violated the sections of A.R.S. § 32-1154(A) that were charged in the Citation.

For the purposes of an award under A.R.S. § 32-1132(A), A.R.S. § 32-1133.01(B) provides as follows:

An award from the residential contractors' recovery fund may not exceed the actual damages suffered by the claimant as a direct result of a contractor's violation. Actual damages:

May not exceed an amount necessary to complete or repair a residential structure or appurtenance within residential property lines.

Must be established by bids supplied by or the value of work performed by a person that is licensed pursuant to this chapter if the person is required to be licensed pursuant to this chapter.

When the Registrar has calculated the amount of a complainant’s compensable damages and proposed a payout from the Fund to which s/he is entitled, the calculation is a prima facie showing of the amount that the complainant is entitled to recover as a payout from the Fund.

The burden of proof falls to the party asserting a claim, right, or entitlement. In this case, Respondent, as the party contesting the Registrar’s Notice of Award, has the burden of proof to establish by a preponderance of the evidence that the Registrar’s proposed payout from the Fund is incorrect or contrary to law.

“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.”

After review of all the evidence and consideration of Respondent’s arguments, the Tribunal concludes that Complainant is eligible for an award from the Fund and that the award proposed by the Fund accurately reflects Complainant’s actual damages. Respondent did not meet its burden of proof. The Tribunal did not find any of Respondent’s arguments persuasive, especially in regard to the deck as Respondent admittedly had no idea how to construct a deck to code, enlisted the services of a handyman as opposed to a licensed contractor, and due to Respondent’s ignorance in this regard, underbid the project. Respondent had ample opportunity to dispute the Registrar’s findings in the underling matter, yet failed to do so at the administrative hearing and did not appeal the Final Order. Consequently, Respondent is barred from challenging those findings. In this case, the credible and probative evidence of record established that Mr. Cutshalts’ damages exceed $120,000.00. Accordingly, Mr. Cutshalts is entitled to a payout from the Fund in the amount of $30,000.00.

RECOMMENDED ORDER

In view of the foregoing, IT IS ORDERED that on the effective date of the final Order in this matter, the Residential Contractors’ Recovery Fund shall pay $30,000.00 to Complainant Fred Cutshalts.

IT IS FURTHER ORDERED that under A.R.S. § 32-1139(B), the Registrar shall charge $30,000.00, plus interest at a rate of ten percent a year, to Respondent Sun State Minor Home Improvements, LLC’s License Number 288411.

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.

-54864001

001

-137160-45720000Done this day, December 16, 2024.

/s/ Sondra J. Vanella

Administrative Law Judge

Transmitted by e-mail to:

Tom Cole, Director

Registrar of Contractors

c/o Legal Department

[email redacted]

Fred Cutshalts

[email redacted]

Ryan D. Bailey, Esq.

Stone Canyon Law

[email redacted]

Sun State Minor Home Improvements, LLC

[email redacted]

Roger C. Decker Esq.

Timothy Butterfield, Esq.

Udall Shumway

[email redacted]

Charles Hover III

Seth T. Hargraves

Assistant Attorneys General

[email redacted]

By: OAH Staff