ALJDEC - Licensing

2022A-09176-RFA-LS-ROC · Registrar of Contractors · 2025-04-15

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Eric Phillips,

COMPLAINANT,

v.

ALLTECH Solutions Inc.,

ROC License No. 296000,

RESPONDENT.

No. 2022A-09176-RFA-LS-ROC

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: April 15, 2025 at 9:00 AM.

APPEARANCES: Assistant Attorney General Mona Baskin, Esq. appeared on behalf of the Arizona Registrar of Contractors (“Registrar”) with Tedi Quezada as a witness. Eric Phillips (“Complainant”) appeared on his own behalf. Hoss Kessler appeared on behalf of ALLTECH Solutions Inc. (“Respondent”). Mary Phillips observed.

ADMINISTRATIVE LAW JUDGE: Jenna Clark.

EXHIBITS ADMITTED INTO EVIDENCE: Registrar Exhibits 1-11 were admitted into the evidentiary record.

_____________________________________________________________________

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 Arizona Administrative Code (“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 February 20, 2015, the Registrar issued License No. 296000 to Respondent for Specialty Dual CR-39 Air Conditioning and Refrigeration contracting. The license is active, in good standing, and has been renewed through February 28, 2027. Marat Sorokko is the Qualifying Party and Officer on the license. Respondent’s address of record for the license is 8030 E. Ragweed Dr. Tucson, Arizona 85710. Currently, Respondent has an active $32,500.00 surety bond on the license issued by RLI Insurance Company, effective March 22, 2023. The license reflects discipline by the Registrar on two (2) prior disciplinary occasions, one of which is presumed to be related to this matter.

On or about October 10, 2022, the Registrar received a brief narrative complaint from Complainant against Respondent’s License No. 296000 alleging poor workmanship of an HVAC installation project at Complainant’s home. The Registrar designated it Complaint No. 2022-09176 and assigned to Sheldon White (“Investigator White”) for investigation.

On November 08, 2022, Investigator White conducted a review of the contract executed between the parties, took 7 photographs, and inspected the work that had been performed on the project to date. Respondent was not present. When he was finished, Investigator White drafted his Jobsite Inspection Notes. Ultimately, Investigator White derived two (2) separate and distinct complaint items from Complaint No. 2022-09176, both of which he was able to substantiate based on his firsthand observations. Specifically, Investigator White concluded that the work Respondent had performed on the project failed to meet the Registrar’s minimum workmanship standards, and specifically noted the following:

[R]espondent did not apply for or receive a building permit from the City of Flagstaff. No evidence of a manual J calculation was provided. An email from the manufacture was provided stating that the unit was under sized. The air temperature in the home was between 61 and 66 degrees F., the outside air temperature was 44 Degrees F (minimum state standard 70 Degrees F). I found the air intake for the condensation line to be at a lower level than the line and corollary sheetrock damage had occurred.

Prior to any work beginning started all applicable permits shall be obtained. All required inspections shall be scheduled and passed. Respondent shall correct by appropriate means.

On November 08, 2022, Investigator White issued a Written Directive from the Registrar (“Directive”) to Respondent because he substantiated both of Complainant workmanship allegations against Respondent. Respondent was further put on notice that it had until 5:00 p.m. on November 28, 2022, to notify the Registrar of its compliance with the Directive or face discipline pursuant to Arizona Revised Statutes (“Ariz. Rev. Stat.”) §§ 32-1154(A), 32-1154(A)(22), and 32-1154(E). Correspondence was not returned as undeliverable to Respondent.

On December 01, 2022, Investigator White issued a Warning Letter to Respondent to advise that building permit(s) were not obtained for the project in violation of the International Residential Code and the International Building Code. Respondent was further advised that failure to comply with the building codes was a violation of Ariz. Rev. Stat. § 32-1154(A)(2), which could result in discipline against Respondent’s license including suspension or revocation. Correspondence was not returned as undeliverable to Respondent.

On an unknown date, Investigator White forwarded the matter to the Registrar’s legal department with the issuance of a Citation Recommendation.

On December 05, 2022, the Registrar issued a Citation to Respondent for an alleged violations of Ariz. Rev. Stat. §§ 32-1154(A)(2)(b), 32-1154(A)(3); Ariz. Admin. Code R4-9-108(a), and 32-1154(A)(22). Respondent was given until December 20, 2022, to respond with its Answer or face discipline pursuant to Ariz. Rev. Stat. §§ 32-1154(A)(22) and 32-1155.

The Registrar received a timely Answer from Respondent.

On December 21, 2022, the Registrar referred 2022A-09176-CHC-ROC to the Office of Administrative Hearings (“OAH”), an independent state agency, for an evidentiary hearing to determine whether the Registrar had cause to discipline Respondent’s license based on the following alleged statutory violations:

Charge 1: A.R.S. § 32-1154(A)(2)(b)

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

Charge 3: A.R.S. § 32-1154(A)(22)

On February 10, 2023, an administrative evidentiary hearing took place at OAH before Administrative Law Judge (“ALJ”) Velva Moses-Thompson. Complainant testified on his own behalf, and Mr. Kessler testified on behalf of Respondent. On March 02, 2023, ALJ Moses-Thompson issued her Recommended Decision to the Director of the Registrar, which suspended License No. 296000 for three (3) days for Respondent’s violations of Ariz. Rev. Stat. §§ 32-1154(A)(2)(b), 32-1154(A)(3) and 32-1154(A)(22), and also assessed a $500.00 civil penalty against Respondent pursuant to Ariz. Rev. Stat. § 32-1154(E).

On March 21, 2023, pursuant Ariz. Rev. Stat. § 41-1092.08(B), the Registrar issued a Final Administrative Decision and Order (“Final Order”) whereby the ALJ’s Recommended Decision was accepted. On April 30, 2023, the Final Order became effective. Neither party appealed.

On June 10, 2024, 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). Attached were proof of Complainant’s ownership of the underlying property, proof of the parties’ underlying contract and payments made to Respondent for the project, and a bond denial letter from Respondent’s insurance company. Also attached were two (2) repair bids: a $15,500.00 bid from One Hour Air Conditioning and Heating (ROC License No. 341144) dated December 07, 2023, and a $8,500.00 bid from Nichols Mechanical (ROC License No. 317870) dated January 18, 2024.

On December 09, 2024, the Registrar issued a Notice of Administrative Award (“Notice of Award”) to the parties which held that Complainant was awarded $8,500.00 from the Fund.

On December 23, 2024, the Registrar received an appeal letter from Respondent. The correspondence did not provide a basis for the appeal.

On January 15, 2025, the Registrar referred 2022A-09176-RFA-LS-ROC to OAH for an independent evidentiary hearing. Per the Notice of Hearing on Appealable Agency Action (“Notice of Action”) sent to the parties on January 21, 2025, the issues for hearing are to determine whether Complainant’s award from the Fund was properly calculated and appropriately issued pursuant to Ariz. Rev. Stat. §§ 32-1132 to 32-1133.01 and 32-1154(F), as justified by the evidence.

On April 15, 2025, an administrative evidentiary hearing took place before OAH.

Hearing Evidence

At the hearing, the Registrar called Tedi Quezada as a witness. Complainant testified on his own behalf. Hoss Kessler testified on behalf of Respondent. The substantive evidence is as follows:

Complainant owns residential property located at 1431 N. Rim Dr. Flagstaff, Arizona 86001.

On or about April 28, 2022, the parties entered into a $4,012.00 HVAC contract.

Work on the project took place from May 19, 2022, through July 06, 2022.

Although ROC License No. 296000 was active and in good standing with the Registrar from November 08, 2022, to November 28, 2022, Respondent did not perform sufficient corrective work necessary to remediate substantiated complaint items 1-2. At no point in time prior to the expiration of the Directive’s compliance period, or anytime thereafter, did Respondent request an extension thereof.

Additional Evidence

Ms. Quezada is a Legal Assistant II for the Registrar. Ms. Quezada made the determination that Complainant was eligible to access the Fund, and also eligible to receive an administrative payout from the Fund, because he satisfied all statutory requirements for an award. Specifically, Ms. Quezada determined the following:

Complainant owns and occupies the residential property at issue.

Respondent’s license was active and in good standing with the Registrar when the underlying contract was entered into, as well as when Respondent first received payment from Complainant for the project.

Complainant paid the contract in full. As such, there was no unpaid remaining balance between the parties.

As a result of Complaint No. 2022-09176 being filed with the Registrar, ROC License No. 296000 was disciplined by the Registrar and assessed a civil penalty.

Though he applied, Complainant did not receive a bond payout for the underlying project from Respondent’s insurance company.

Because Investigator White was no longer employed by the Registrar when Ms. Quezada commenced her Fund petition review, she conferred with the Registrar’s Assistant Chief of Investigations, Steve Philpott, on January 08, 2025, who verified that the Nichols Mechanical bid was appropriate and within the scope of the underlying contract and Directive, because the unit Respondent had installed was “insufficient to heath the designed area” and the Nichols Mechanical bid would properly address the deficiencies in Respondent’s workmanship and complete the underlying project.

Ultimately, Ms. Quezada calculated Complainant’s compensable damages by subtracting Complainant’s full payment from the original contract price, and then adding the amount of the Nichols Mechanical bid. Thus, Ms. Quezada deduced that Complainant’s actual damages totaled $8,500.00.

Ms. Quezada testified that the purpose of the Fund was to make homeowners aggrieved by licensees “whole,” and that Ariz. Rev. Stat. § 32-1131 et seq. was specifically limited to the cost of actual construction work, labor and materials. Ms. Quezada clarified that while Nichols Mechanical may have increased the price of its estimate to Complainant, because the original cost of its bid had not been contested by Complainant, an increase of its amount could not be considered by the Registrar.

Complainant testified that the Nichols Mechanical bid included costs associated with removal of the HVAC unit Respondent installed, and that his homeowners insurance covered drywall remediation related costs.

Mr. Kessler testified that Respondent was desirous of removing the HVAC unit from Complainant’s property to reduce the overall cost of the Nichols Mechanical bid.

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, was eligible for a $26,950.00 payout from the Fund. Per the Registrar, it had satisfied its fiduciary duty to comply with the pertinent sections of the law and protect the purpose of the Fund as its fiduciary.

Complainant declined to provide a closing argument.

Respondent declined to provide a closing argument.

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.

The Arizona legislature established the Fund “to provide improved protection for owners and lessees of property who contract for the construction or alteration of residential structures.”

Complainant bears the burden of establishing by a preponderance of the evidence that the Fund’s claim award amount was incorrect or otherwise 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.

The substantive facts in the case at bar are not in dispute.

Here, none of the parties contended that Complainant was not eligible to access the Fund. Thus, the crux of the matter is whether the Registrar correctly calculated Complainant’s $8,500.00 administrative award from the fund, and if so, whether grounds exist to affirm the Registrar’s Notice of Award. After careful review of the credible and relevant evidence of record, the Tribunal finds in favor of the Registrar and, consequently, Complainant.

Here, the Registrar soundly established Complainant’s eligibility to access the fund, as well as the calculation and resulting award therefrom. In making a homeowner “whole” the Registrar is simply required to identify the reasonable cost of repairing or replacing a licensee’s defective workmanship, less any unpaid balance owed on their agreement – which is exactly what the Registrar did in the case at bar. There is no statute, regulation, precedent, or binding authority that requires the Registrar to do anything more; including permitting a licensee to take further action in an attempt to mitigate or otherwise reduce the amount of a Fund payout. Nor are there any laws, rules, or regulations in existence that require an aggrieved homeowner to find the “cheapest” or “least expensive” repair/replacement option available. All that matters is that the relied upon bid not fall below or exceed the scope of work identified in the parties’ underlying contract or Directive, and that the remediating contractor be appropriately licensed by the Registrar. These requirements have been met here.

Respondent’s opinion that the Registrar’s award calculations were incorrect, and that it should be permitted to take action on Complainant’s property to reduce the overall amount of his award from the Fund, without providing an indicia of evidence to support its contentions, are irrelevant and meritless.

Therefore, the Tribunal must conclude that the Registrar soundly established Complainant’s eligibility to access the Fund, as well as the amount of his administrative award. As such, the undersigned must conclude that Complainant was properly awarded an administrative payout from the Fund.

Accordingly, Respondent’s appeal is denied.

RECOMMENDED ORDER

Based on the foregoing,

IT IS ORDERED that the Registrar affirm the Fund’s December 09, 2024, $8,500.00 Notice of Award.

IT IS FURTHER ORDERED 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, April 17, 2025.

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]

[email redacted]

Mona Baskin, Esq., Assistant Attorney General

Office of the Attorney General

Licensing and Enforcement Section

2005 N. Central Ave.

Phoenix, AZ 85004-1592

[email redacted]

Eric Phillips, Complainant

1431 N. Rim Dr.

Flagstaff, AZ 86001

[email redacted]

ALLTECH Solutions Inc., Respondent

c/o. Marat Sorokko, Agent

8030 E. Ragweed Dr.

Tucson, AZ 85710

[email redacted]

By: OAH Staff