ALJDEC decisions subject to certification as final

2022A-10929-RFA-LS-ROC · Registrar of Contractors · 2026-05-23

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Scot Michael Sidener,

COMPLAINANT,

v.

Housing Evolution LLC

License No. ROC 299087,

RESPONDENT.

No. 2022A-10929-RFA-LS-ROC

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: December 08, 2025 & April 20, 2026.

APPEARANCES: Casey C. Dempsey, Esq. appeared on behalf of Scot Michael Sidener (“Complainant”) with Complainant as a witness. Assistant Attorney General Mona Baskin, Esq. appeared on behalf of the Arizona Registrar of Contractors (“Registrar”) with Lauren Johnston as a witness. No appearance(s) by or on behalf of Housing Evolution LLC (“Respondent”).

ADMINISTRATIVE LAW JUDGE: Jenna Clark.

EXHIBITS ADMITTED INTO EVIDENCE: The Notice of Hearing on Appealable Agency Action (“Notice of Action”), Hearing Order issued November 04, 2025, Continued Hearing Order issued November 20, 2025, Further Hearing Order issued February 23, 2026, Registrar Exhibits 1-10, Registrar Supplemental Exhibit, and Complainant Exhibits B-C and G 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 August 07, 2015, the Registrar issued License No. 299087 to Respondent for General Dual KB-2 Residential and Small Commercial contracting. The license is active and in good standing with the Registrar, and has been renewed through August 31, 2027. Maria De Jesus Olguin Duarte is listed as the Qualifying Party and Member on the license. Sonia Edith Galaviz Duarte is also listen on the license as a Member. Respondent’s address of record for the license is 5431 W. Marietta Dr. Laveen, Arizona 85339. There is an active $14,000.00 surety bond for the license issued by RLI Insurance Company, effective May 11, 2015. The license has not been previously disciplined by the Registrar, but has one (1) open complaint against it which is presumed to be related to this matter.

On or about December 07, 2022, the Registrar received a narrative complaint from Complainant against Respondent’s License No. 299087 alleging abandonment and poor work of a residential property remodel. The Registrar designated it Complaint No. 2022-10929 and assigned to Lisa Melton (“Investigator Melton”) for investigation.

On February 03, 2023, Investigator Melton inspected the work that had been performed on the project to date, and took twenty-nine (29) photographs. Respondent was present. Ultimately, Investigator Melton identified a total of twenty-two (22) complaint items from Complaint No. 2022-10929, ten (10) of which she substantiated based on her firsthand observations. Specifically, Investigator Melton concluded that the work Respondent performed on complaint items 2, 4, 6-8, 10, 13, 18-19, and 22 failed to meet the Registrar’s minimum workmanship standards.

On February 17, 2023, Investigator Melton issued a Written Directive from the Registrar (“Directive”) to Respondent because she substantiated nearly half of Complainant’s allegations against Respondent. The Directive put Respondent on notice that the licensee had until 5:00 p.m. on March 17, 2023, 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 April 14, 2023, Investigator Melton conducted a Compliance Jobsite Inspection whereby she reviewed the state of the project and took fourteen (14) photographs. When she was finished, Investigator Melton drafted Compliance Jobsite Notes. Ultimately, Investigator Melton determined that Respondent only successfully remediated substantiated complaint item 7.

On May 01, 2023, Investigator Melton received correspondence from the individuals who sold Complainant the property at issue regarding permitting for the remodel. As a result, Investigator Melton obtained copies of building permits issued for the project from the local building authority, as follows:

On February 14, 2022, the Planning and Development Department for the City of Phoniex (“Department”) issued Permit #RPBI 22005395 to Respondent for a Non-Permitted Remodel. Specifically, the permit was issued to address a previously non-permitted interior remodel and patio enclosure to a laundry room, roof replacement, wall removal, door widening, window replacement, HVAC and ductwork replacement, new stucco, paint, and finishes.

On February 17, 2022, Permit #RPBI 22005395 passed final inspection by the Department.

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

On May 05, 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 May 22, 2023, to respond with its Answer or face discipline pursuant to Ariz. Rev. Stat. §§ 32-1154(A)(22) and 32-1155.

On May 22, 2023, Respondent submitted a timely Answer to the Registrar whereby Ms. Olguin argued that Respondent had not signed a contract with Complainant and alleged its request to extend the Directive’s compliance period was denied because Respondent had not started corrections until March 06, 2023. Per Ms. Olguin, the laundry room was demolished and rebuilt on an existing concrete slab. The walls were made of plywood. Portions of lumber were replaced per the Department’s request. There was a leak in the laundry room prior to the close of escrow, but was fixed and approved by Complainant.

On May 24, 2023, 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)(3) – R4-9-108(a)

Charge 2: A.R.S. § 32-1154(A)(22)

On July 20, 2023, an administrative evidentiary hearing took place at OAH before ALJ Stone.

On August 02, 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)(3) and 32-1154(A)(22), and that the Director also impose a $500.00 civil penalty against License No. 299087 pursuant to Ariz. Rev. Stat. § 32-1154(E).

On August 30, 2023, the Registrar issued a Certification of Decision of Administrative Law Judge to the parties under Ariz. Rev. Stat. § 41-1092.08(I) which affirmed the Administrative Law Judge’s Recommended Decision per Respondent’s August 03, 2023, request. Neither party appealed to a higher court of competent jurisdiction.

On September 10, 2025, Complainant submitted a petition for payment from the Residential Contractors’ Recovery Fund (“Fund”) to the Registrar, pursuant to Ariz. Rev. Stat. §§ 32-1132(A) and 32-1154(G). Complainant attached copies of his Warranty Deed and a bond denial letter dated October 08, 2024. Complainant later submitted his property Residential Resale Real Estate Purchase Contract (“Purchase Agreement”). No repair bids were provided to the Registrar.

On September 19, 2025, the Registrar issued a Notice and Order of Recovery Fund Denial Award (“Notice of Denial”) to the parties which held that Complainant was ineligible for a payout from the Fund. Specifically, that Complainant was statutorily barred as a Subsequent Purchaser per the Registrar’s Substantive Policy Statement 2021.01 since he bought the subject property “as is” and had not suffered actual damages.

On October 01, 2025, the Registrar received a timely appeal from Complainant contesting the Notice of Denial.

On October 20, 2025, the Registrar referred this matter back to OAH for an independent evidentiary hearing. Per the Notice of Action sent to the parties on October 30, 2025, the issue(s) for hearing are to determine whether the Notice of Denial was lawfully and properly issued pursuant to Ariz. Rev. Stat. §§ 32-1132 to 32-1133.01, as justified by the evidence.

On December 08, 2025, and April 20, 2026, an administrative evidentiary hearing in the above-captioned matter took place before OAH.

Hearing Evidence

At the hearing, the Registrar called Lauren Johnston as a witness. Complainant testified on his own behalf. The substantive evidence is as follows:

From about August 31, 2021, to approximately August 30, 2023, Respondent performed a residential remodel of 304 W. Hazelwood Phoenix, Arizona 85013, a single-family property, owned by Mabbott Enterprise LLC (“Mabbott”).

On or about January 06, 2022, Complainant entered into a $705,000.00 Purchase Agreement for the aforementioned residential remodel sold by Mabbott.

On February 23, 2022, Complainant and Mabbott agreed to have a water leak repaired prior to the close of escrow.

The Purchase Agreement, at Sec. 5a WARRANTIES, provides the following, in pertinent parts:

[COMPLAINANT] and seller agree the premises are being sold in its present physical condition as of the date of contract acceptance. Seller makes no warranty to [Complainant], either express or implied, as to the condition, zoning, or fitness for any particular use or purpose of the Premises. [Complainant] and Seller acknowledge and understand they may, but are not obligated to, engage in negotiations or address repairs/improvements to the Premises. Any/all agreed upon repairs/improvements will be addressed pursuant to Sec. 6j.

[Complainant] is advised to conduct independent inspections and investigations regarding the Premises within the Inspection Period as specified in Section 6a.

(Emphasis in original.)

The Purchase Agreement, at Sec. 6a DUE DILIGENCE, provides the following, in pertinent parts:

Inspection Period: [Complainant’s] Inspection Period shall be ten (10) days after contract acceptance. During the Inspection Period [Complainant], at [Complainant’s] expense, shall: (i) conduct all desired physical, environmental, and other types of inspections and investigations to determine the value and condition of the Premises; (ii) make inquiries and consult governmental agencies, lenders, insurance agents, architects, and other appropriate persons and entities concerning the suitability of the Premises and the surrounding area. [Complainant] shall provide Seller and Broker(s) upon receipt, at no cost, copies of all inspection reports concerning the Premises obtained by [Complainant]. [Complainant] is advised to consult the Arizona Department of Real Estate Buyer Advisory to assist in [Complainant’s] due diligence inspections and investigations.

(Emphasis in original.)

The Purchase Agreement, at Sec. 8 Additional Terms and Conditions, provides the following, in pertinent part:

[Complainant] is an Arizona licensed real estate agent.

On January 25, 2013, was issued Real Estate Salesperson License No. SA646412000 by the Arizona Department of Real Estate (“ADRE”). The license is set to expire on January 31, 2027.

On or about January 06, 2022, Complainant and Mabbott executed an Additional Clause Addendum whereby Complainant agreed to waive appraisal of the property and opted out of purchasing a home warranty.

On February 23, 2022, it was brough to Mabbott’s attention that water was entering the laundry room through the exterior wall.

On February 25, 2022, after Complainant informed Mabbott of a “mold like substance” discovered in and around the laundry room, the parties executed a Notice/Disclosure for water and mold remediation. On February 27, 2022, Complainant was credited $5,000.00 as a result.

On January 31, 2022, Complainant moved-into the residence. On or about February 28, 2022, Complainant closed escrow on the property.

Additional Evidence

Ms. Johnston is a Legal Assistant II for the Registrar. She made the determination that Complainant was eligible to access the Fund but ineligible for an administrative payout from the Fund because Complainant did not suffer any “actual damages.” Specifically, Ms. Johnston determined the following:

Complainant owns and occupies the residential property at issue.

As a result of Complaint No. 2022-10929 being filed with the Registrar, License No. 299087 was suspended for a period of ten (10) days by the Registrar. The Final Order was not appealed.

Complainant did not receive a bond payout from Respondent’s insurance company.

Complainant purchased the property “as is,” and waived a home inspection prior to the close of escrow. Mabbott promised to remediate the leak and mold before the purchase was completed and Complainant was financially compensated for the water leak issue.

Substantive Policy Statement 2021.01, which is advisory only, provides that while recovery fund statutes do not require that a claimant contract directly with a licensed residential contractor, a purchaser of residential property damaged by a licensed residential contractor may not receive a payout if (1) the purchaser knew of the defect prior to purchasing the property; (2) the purchaser could have discovered the defect by reasonable inspection; or (3) The sales contract included an “as-is” clause which included the claimed defective work. Prohibiting awards in these situations is consistent with the purpose of the Fund, which is established “for the benefit of a claimant damaged by an act, representation, transaction or conduct of a residential contractor.

Ultimately, Ms. Johnston concluded that because Complainant had not suffered actual damages, knew about the complained of defect prior to closing, and purchased the property “as is” that his petition to the Fund was denied.

Ms. Johnston testified that the purpose of the Fund was to make homeowners aggrieved by licensees “whole,” and that because had purchased her property “as is” she could not receive a payout from the Fund because he had not suffered actual damages.

Complainant testified that he served as his own realtor for the purchase of the underlying property. Complainant submitted his petition to the Fund because he did not discover Respondent’s workmanship “latent” defects until after he moved into the property and had an inspection performed. Per Complainant, although he participated in arbitration with Mabbott and won, he did not receive any monetary recompense.

Closing Arguments

In closing, the Registrar argued that Complainant had not sustained his burden of proof and was statutorily barred from receiving a payout from the Fund. The Registrar also argued that Complainant was ineligible for a payout from the Fund because despite his expertise as a licensed realtor he signed an as-is, knew about the water leak and mold prior to close of escrow, and received recompense in the matter from Mabbott as consideration of the issues. The Registrar opined that Complainant had not been actually damaged by Respondent’s conduct, or lack thereof.

In closing, Complainant argued that he could not be barred from accessing the Fund by Substantive Policy Statement 2021.01 alone, as it was advisory only, and vehemently denied that he knew or should have known about the water/mold issues prior to the close of escrow.

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 Notice of Action the Registrar mailed to Respondent’s address of record is sufficient, and Respondent is deemed to have received notice of the hearing in this matter. Because OAH mailed all correspondence to Respondent in the same manner and failed to receive any mail returned as undeliverable, Respondent is deemed to have received all correspondence regarding this matter from OAH as well.

Complainant bears the burden of establishing by a preponderance of the evidence that the Registrar’s Notice of Denial was incorrectly and/or otherwise improperly issued. Both Respondent and the Registrar bear 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 Complainant failed to present any compelling evidence at hearing.

While the credible evidence of record clearly establishes that Complainant was legally eligible to access the Fund, the record is devoid of any credible evidence to establish that any actual calculable damages were sustained. Here, Complainant admittedly purchased the property “as is,” waived a home inspection, and received consideration in the Purchase Agreement for the water/leak issues. In sum, Complainant failed to sustain his burden of proof.

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

Accordingly, Complainant’s appeal must be denied.

RECOMMENDED ORDER

In consideration of the foregoing,

IT IS RECOMMENDED that the Registrar affirm the Fund’s September 19, 2025, Notice of Denial.

IT IS FURTHER RECOMMENDED that the Registrar dismiss Complainant’s appeal, with prejudice.

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, May 26, 2026.

Office of Administrative Hearings

/s/ Jenna Clark

Administrative Law Judge

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

Tom Cole, Director

c/o Lauren Johnston, Legal Department

Registrar of Contractors

1700 W. Washington St., Ste. 105

Phoenix, AZ 85007

[email redacted]

[email redacted]

Casey C. Dempsey, Esq.

Dempsey Law, PLLC, Counsel for Complainant

501 E. Thomas Rd., Ste. 200

[email redacted]

Mona Baskin, Esq., Assistant Attorney General

Office of the Attorney General, Counsel for the Registrar

2005 N. Central Ave.

Phoenix, AZ 85004

[email redacted]

[email redacted]

Housing Evolution LLC, Respondent

c/o Maria Olguin, Agent

5431 W. Marietta Dr.

Laveen, AZ 85339

[email redacted]

By: OAH Staff