ALJDEC - Licensing

2022A-07877-CHC-ROC · Registrar of Contractors · 2023-10-03

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

The World Egg and Sperm Bank,

COMPLAINANT,

v.

TICBA LLC

dba Modern Lux Group

ROC License No. 314902,

RESPONDENT.

No. 2022A-07877-CHC-ROC

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: May 17, 2023 and August 15, 2023.

APPEARANCES: Adam Anderson, Esq. appeared on behalf of The World Egg and Sperm Bank (“Complainant”) with Diane Thomas and Caderina Carrizosa as witnesses. Mark Nipp appeared on behalf of the Arizona Registrar of Contractors (“Registrar”). Everett Butler, Esq. appeared on behalf of TICBA LLC (“Respondent”) with James “Jaime” Wilke as a witness. Heidi Wilke observed.

ADMINISTRATIVE LAW JUDGE: Jenna Clark.

_____________________________________________________________________

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 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 August 07, 2017, the Registrar issued License No. 314902 General Residential B contracting license to Respondent. Though renewed through August 31, 2023, the license was suspended by the Registrar under operation of law on August 22, 2023, for lack of a bond. On August 31, 2023, the license was further held in suspension by the Registrar under operation of law for non-renewal. Heidi Wilke is listed as Qualifying Party/Manager on the license. M2 Interiors LLC and the Wilke Family Trust are also listed on the license as Subsidiaries and Members. Respondent’s address of record for the license is 3800 N. Central Ave., Ste. 460 Phoenix, Arizona 85021. Respondent had an active $9,000.00 surety bond on the license, effective July 12, 2017, that was cancelled on an unknown date. There is no prior discipline noted for the license, save one (1) open complaint against the license, which is presumed to be related to this matter.

On or about September 09, 2022, the Registrar received a 13-item complaint from Complainant against Respondent’s License No. 314902 alleging poor workmanship on their commercial remodeling project. Specifically, the complaint alleged that after its realtor, Mr. Wilke, assisted in the procurement of the underlying property at issue, the parties entered into a verbal contract for Respondent to remodel the commercial space. The Registrar designated it Complaint No. 2022-07877 and assigned to Mark Nipp (“Investigator Nipp”) for investigation.

On September 22, 2022, Investigator Nipp issued a Jobsite Inspection Notification Letter to the parties, advising that he would conduct an inspection of the project on October 31, 2022, at 9:30 a.m. Correspondence issued to Respondent via email was not returned as undeliverable, but correspondence sent via United States Postal mail was returned to the Registrar as undeliverable.

On October 31, 2022, Investigator Nipp inspected the work that had been performed on the project to date. Respondent was not present. He also took 30 photographs of the project site. When he was finished, Investigator Nipp drafted his Inspection Notes. Based on his firsthand observations, Investigator Nipp substantiated 9 complaint items. Specifically, Investigator Nipp determined that complaint items 1, 3, 5, and 7-12 failed to meet the Registrar’s minimum workmanship standards and required Respondent to complete and/or perform corrective work to remediate the identified deficiencies.

On November 04, 2022, Investigator Nipp issued a Written Directive from the Registrar (“Directive”) to Respondent because he substantiated most of Complainant’s complaint items against Respondent. Respondent was put on notice that it had until 5:00 p.m. on November 30, 2022, to notify the Registrar of its compliance with the Directive or face discipline pursuant to Ariz. Rev. Stat. §§ 32-1154(A), 32-1154(A)(22) and 32-1154(E). Respondent was specifically advised as follows:

RESTRICTIONS

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

Correspondence issued to Respondent via email was not returned as undeliverable, but correspondence sent via United States Postal mail was returned to the Registrar as undeliverable.

No Warning Letters were issued to Respondent.

On January 19, 2023, Investigator Nipp issued a Compliance Jobsite Inspection Notification Letter to the parties, advising that he would conduct an inspection of the project on January 31, 2023, at 10:00 a.m. Correspondence issued to Respondent via email was not returned as undeliverable, but correspondence sent via United States Postal mail was returned to the Registrar as undeliverable.

On January 31, 2023, Investigator Nipp inspected the project site and took 17 photographs. Respondent was not present. When he was finished, Investigator Nipp drafted his Compliance Jobsite Inspection Notes. Ultimately, Investigator Nipp determined that Complainant had modified complaint item 12 and that Respondent could no longer be required to perform corrective work on that item per Ariz. Rev. Stat. § 32-1155(D). Investigator Nipp also observed that no corrective work had been performed on complaint items 1, 3, 5, and/or 7-11, as they remained in the same condition as they were in the jobsite inspection.

On January 31, 2023, Investigator Nipp forwarded the matter to the Registrar’s legal department with the issuance of a Citation Recommendation for alleged violations of Ariz. Rev. Stat. §§ 32-1154(A)(3); Ariz. Admin. Code R4-9-108(a), and 32-1154(A)(22).

On February 02, 2023, the Registrar issued a Citation to Respondent for 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 February 17, 2023, to respond with its Answer or face discipline pursuant to Ariz. Rev. Stat. §§ 32-1154(A)(22) and 32-1155. Correspondence issued to Respondent was not returned as undeliverable.

On February 15, 2023, the Registrar received Respondent’s timely Answer. Overall, Respondent denied all allegations of wrongdoing and opined that the Registrar was barred from imposing disciplinary action against License No. 314902 because Respondent did not receive mailed copies of the underlying complaint, jobsite inspection notice, and/or Directive from the Registrar and therefore was not afforded a reasonable opportunity to inspect the project site or address the corrective work order; effectively depriving Respondent of its rights under Ariz. Rev. Stat. § 32-1155(D)(1). Respondent also argued that the property at issue was sold in “as is” condition, that Complainant “inspected and approved” all of Respondent’s work, and that Respondent’s work was “performed in a good workmanlike manner.”

On February 17, 2023, the Registrar referred this matter to the Office of Administrative Hearings (“OAH”), an independent state agency, for an evidentiary hearing on April 18, 2023. Per the March 10, 2023, Notice of Hearing the issues to be determined are whether the Registrar has 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)

Hearing Evidence

Complainant called Diane Thomas, Caderina Carrizosa, and Investigator Nipp as witnesses, and submitted Exhibit 11 into the record. Respondent called Jaime Wilke as a witness and submitted Exhibits 2-4 and 11-14 into the record. The Registrar’s agency file, including the Notice of Hearing, was admitted into the record as its own exhibit. The substantive evidence of record is as follows:

On or about March 02, 2021, Complainant purchased commercial property located at 7826 E. Evans Rd. Scottsdale, AZ 85260 for $2,200,000.00. Mr. Wilke served as Complainant’s realtor in the procurement of the property.

On or about March 08, 2021, escrow on the property closed.

Shortly thereafter, sometime in 2021, the parties entered into a verbal cost plus 10% commercial building construction agreement whereby Respondent agreed to perform a custom remodel of the interior of the property, save 1 exterior window replacement. There was no budget for the project. Respondent obtained a building permit from the local authority and work on the project commenced soon after it was issued. Respondent provided Complainant with a Bill of Quantities that detail the scope of work for the project, which outlined costs for labor and materials by area.

On or about March 13, 2021, Complainant received a visual building inspection report for the underlying property from AJF Inspections & Engineering.

Work on the project stopped or was otherwise completed in September 2021.

Ultimately, Respondent billed Complainant $803,970.73 for the project.

Complainant paid Respondent $777,660.73 towards the contract.

From early-September 2021, through mid-December 2021, Mr. Wilke was employed by Complainant as its Office Manager.

On September 03, 2022, Respondent submitted an update of its contact information to the Registrar, which provided that its email address was [email redacted] and its address of record changed from 5301 N. Pima Rd. Ste. 130 Scottsdale, AZ 85250 to 3800 N. Central Ave., Ste. 460 Phoenix, Arizona 85021. The change(s) became effective on September 15, 2022.

Complaint No. 2022-07877 constitutes Complainant’s punch list items for the underlying project.

November 04-30, 2022, Respondent was legally barred from performing corrective work on the underlying project in adherence with the Registrar’s Directive, including subcontracting out the work to appropriate licensed subcontractors, because the work was out of scope with License No. 314902. Respondent would have had to possess either a KB-2 or KB-1 license issued by the Registrar. Thus, the only means available to Respondent to address substantiated complaint items 1, 3, 5, and/or 7-11 was to enter into a financial settlement agreement with Complainant.

At no point in time did Respondent beseech the Registrar for an extension of the Directive’s compliance period.

At no point in time did Respondent allege a denial of access to the project site during the Directive’s compliance period.

At no point in time did Respondent allege that it did not receive any of the Registrar’s emailed correspondence in this matter.

Additional Evidence

Due to an unfortunate oversight, recommendations for citation(s) in violation of Ariz. Rev. Stat. §§ 32-1154(A)(12); 32-1158, and 32-1154(A)(16) were unintentionally omitted from Investigator Nipp’s escalation to the Registrar’s legal department in Complaint No. 2022-07877. As a result, the charge(s) were not included in the Registrar’s related Citation.

Closing Arguments

Respondent’s Closing Argument

In closing, Respondent procedurally argued that on September 03, 2022, Respondent submitted a change of address form to the Registrar through its website’s electronic portal changing its address to 3800 N. Central Ave., Ste. 460, in compliance with Ariz. Rev. Stat § 32-1122(B)(1)(h), which was approved that same date but not completed until September 15, 2022. On September 22, 2022, the Registrar mailed Respondent a notification letter regarding Complaint No. 2022-07877, which scheduled a jobsite inspection for October 31, 2022. The notice was not received by Respondent because the Registrar mailed it to the wrong address, effectively depriving Respondent of its notice rights under Ariz. Rev. Stat. § 32-1155(D)(1). Per Respondent, the Registrar’s use of email correspondence is an uncodified “courtesy,” and thus not a valid form of communication between a licensee and regulatory agency. Respondent further argued that the Registrar’s November 04, 2022 Directive, which was properly mailed to Respondent’s updated address, does not “cure” the Registrar’s Ariz. Rev. Stat. § 32-1155(D)(1) violation.

Respondent substantively argued that no violation of Ariz. Rev. Stat. § 32-1154(A)(3) exists because Respondent did not perform work on the substantiated complaint items at issue. Per Respondent, the workmanship at issue was performed by unidentified persons, and/or preexisting, and/or said items were defective – as identified in the building inspection report. Respondent denied acceptance of the concrete slab surface, and argued that it could not be liable for water “coming through” windows as opposed to “leaking around” windows. Thus, Respondent opined that it was excused or otherwise justified in not performing corrective work in compliance with the Registrar’s Directive.

Ultimately, Respondent argued that no discipline was warranted and asked that the underlying Citation be dismissed.

Complainant’s Closing Argument

In closing, Complainant argued that she hired Respondent to “gut” her commercial space and “rebuild it.” Complainant’s needed the space for labs and recovery areas. Respondent accepted the contract and Complainant paid approximately $800,000 to perform the work. Respondent never reduced the agreement to writing. Respondent is not licensed to perform commercial work. Per Complainant, after Complaint No. 2022-07877 was filed, mailed correspondence issued to Respondent by the Registrar was returned as undeliverable but their email correspondence to Respondent was not. Respondent never disputed the allegation that its workmanship on the underlying project was poor. Respondent did attempt to perform corrective work, but did not timely address the Registrar’s Directive.

Complainant did not request any specific discipline be taken by the Registrar, notwithstanding her assertion that she had sustained her burden of proof in the matter.

CONCLUSIONS OF LAW

The Registrar has jurisdiction over this matter pursuant to Ariz. Rev. Stat. §§ 32-1101 et seq. and 32-1154(A). The matter was properly brought before OAH pursuant to Ariz. Rev. Stat. §§ 41-1092 et seq.

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

The Registrar may resolve contractual disputes if such resolution in ancillary to its regulatory mission and may penalize a contractor’s license by ordering payment of restitution if a proven statutory violation was not remedied by corrective action.

Complainant bears the burden of proof to establish cause to discipline Respondent’s license by a preponderance of the evidence. Respondent bears the burden to establish factors in mitigation of the penalty and affirmative defenses 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.”

Ariz. Rev. Stat. § 32-1154(A)(3) includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license, “[v]iolation of any rule adopted by the registrar.”

Ariz. Admin. Code R4-9-108 requires that “[a]ll work shall be performed in a professional and workmanlike manner” and that “[a]ll work shall be performed in accordance with any applicable building codes and professional industry standards.”

Ariz. Rev. Stat. § 32-1154(A)(22) provides, in pertinent part, that “[a] holder of a license may not fail to take appropriate corrective action to comply with this chapter or rules adopted pursuant to this chapter without valid justification within a reasonable period of time after receiving a written directive from the registrar. The written directive shall set forth the time within which the contractor is to complete the remedial action. The time permitted for compliance shall not be less than fifteen days from the date of issuance of the directive. A license shall not be revoked or suspended nor shall any other penalty be imposed for a violation of this paragraph until after a hearing has been held. The Registrar has the authority to issue license discipline under this provision, including summary suspension, revocation, or imposing a civil penalty or recovery fund award.”

Ariz. Rev. Stat. § 32-1154(E) holds, in pertinent parts, that the Registrar may impose a civil penalty not to exceed five hundred dollars on a contractor for each violation. The failure by the licensee to pay any civil penalty imposed results in the automatic revocation of the license thirty days after the effective date of the order providing for the civil penalty. It also holds that no future license may be issued to an entity consisting of a person who is associated with the contractor, unless payment of any outstanding civil penalty is tendered.

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.”

Statutes should be interpreted to provide a fair and sensible result. “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 material facts at bar are clear.

It is well established that a contractor adopts the surface area of the location where there work is performed. It is the responsibility of the contractor to ensure that the surface area is sound prior to commencing work, or alternatively, to knowingly accept a surface area in whatever state it is in. In simpler terms, a contractor must ensure that a project site is ready for construction prior to the commencement of work, make it ready prior to the commencement of work, or accept responsibility for any issues that arise during the course of construction if the contractor fails to act beforehand.

The record clearly reflects that Respondent accepted a verbal contract that far exceeded the scope of License No. 314902’s contracting capabilities, and that the work Respondent performed on the project failed to meet the Registrar’s minimum workmanship standards. The record also reflects that Respondent substantially billed and was accordingly paid for this project. The record further reflects that Respondent failed to address any of the 8 complaint items listed for correction and/or completion in the Registrar’s Directive, or enter into a timely settlement agreement with Complainant. As such, violations of Ariz. Rev. Stat. §§ 32-1154(A)(3); Ariz. Admin. Code R4-9-108(a), and 32-1154(A)(22) have been established by a preponderance of the evidence.

Therefore, the only remaining issue to address is whether Respondent raised a sufficient justification or excuse for failing to timely address the Registrar’s Directive. This is an affirmative defense Respondent bears the burden to establish. The Tribunal is not at liberty to make presumptions in favor of Respondent or accept facts in mitigation on behalf of Respondent that are not supported by the evidence. Because Respondent could not lawfully address the Registrar’s Directive, or subcontract out the work, because remediations were out of scope with its license, the only recourse for satisfying the Registrar’s Directive that was available to Respondent was for Respondent to enter into a financial settlement agreement with Complainant. Here, Mr. Wilke testified that Respondent received nearly all of the Registrar’s correspondence regarding Complaint No. 2022-07877 late, as the agency failed to mail information to Respondent’s updated address of record. Mr. Wilke, however, never alleged that correspondence the Registrar issued to its email address of record was not delivered or received, which Investigator Nipp credibly testified was done timely. Respondent’s contention that email communication is invalid because the Registrar has no statutory obligation to use such means of communication with its licensees is rejected by this Tribunal. Additionally, Respondent’s workmanship denials contradict its Answer insofar as Respondent previously alleged that Complainant had “inspected and approved” all of Mr. Wilke’s work, which was performed in a workmanlike manner. As no other reasons were offered for Respondent’s lack of compliance with the Registrar’s Directive, no good cause exists that would otherwise excuse Respondent’s inaction in this matter. Thus, Respondent did not sustain its burden of persuasion. A violation of Ariz. Rev. Stat. § 32-1154(A)(22) exists.

Because Complainant established violation(s) of Ariz. Rev. Stat. §§ 32-1154(A)(3) and 32-1154(A)(22) by a preponderance of the evidence, and since the outstanding substantiated items are issue are not de minimis, Complainant has also established grounds for the Registrar to take appropriate disciplinary action against Respondent’s contracting license.

RECOMMENDED ORDER

Based on the foregoing,

IT IS RECOMMENDED that on the effective date of the Final Order in this matter Respondent TICBA LLC, ROC License No. 314902, be suspended for fourteen (14) days based on its violation(s) of Ariz. Rev. Stat. §§ 32-1154(A)(3) and (A)(22).

IT IS FURTHER ORDERED that that the Registrar require Respondent to pay the sum total of $500.00 (five hundred) in certified funds as a civil penalty in this matter.

IT IS FURTHER RECOMMENDED that if Respondent fails to pay the entire amount of the civil penalty on or before thirty (30) days following the effective date of the Registrar’s Final Order, the Registrar shall 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 Ariz. Rev. Stat. § 32-1101(A)(5), unless Respondent tenders payment of any outstanding prior civil penalty.

NOTICE

Pursuant to Ariz. Rev. Stat. § 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 is forty days after the date of that certification.

Done this day, October 03, 2023.

Office of Administrative Hearings

/s/ Jenna Clark

Administrative Law Judge

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

Cindy Casaus, Interim Director

c/o Legal Department

Registrar of Contractors

1700 W. Washington St., Ste. 105

Phoenix, AZ 85007

[email redacted]

Adam Anderson, Esq.

Anderson Clarkson Johnson Brown, PLLC, Counsel for Complainant

2812 N. Norwalk, Ste. 106

Mesa, AZ 85215

[email redacted]

Everett S. Butler Esq.

The Butler Law Firm, Counsel for Respondent

3800 N. Central Ave., Ste. 810

Phoenix, AZ 85012

[email redacted]

By: OAH Staff