ALJDEC decisions subject to certification as final

2022A-11333-RFA-LS-ROC · Registrar of Contractors · 2024-08-08

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Bryan Johnson,

COMPLAINANT,

Monument Development, LLC

License No. ROC 327960,

RESPONDENT.

No. 2022A-11333-RFA-LS-ROC

ADMINISTRATIVE LAW JUDGE

DECISION

HEARING: July 3, 2024, with Further Hearing on July 24, 2024

APPEARANCES: Complainant Bryan Johnson appeared on his own behalf. Sterling Pratt appeared on behalf of Respondent Monument Development, LLC. Assistant Attorney General Mona Baskin represented the Arizona Registrar of Contractors. Doug Ulmer appeared as a witness.

ADMINISTRATIVE LAW JUDGE: Sondra J. Vanella

EXHIBITS ADMITTED INTO EVIDENCE: Arizona Registrar of Contractors’ Exhibits 1-9

FINDINGS OF FACT

Background and Procedure

The Arizona Registrar of Contractors (“Registrar”) issued License Number 327960 to Monument Development, LLC (“Respondent”).

On or about December 12, 2022, the Registrar received a Complaint against Respondent from Bryan Johnson (“Complainant”) alleging poor work with respect to Respondent’s contracted scope of work. Respondent had contracted with Complainant for the construction of a new home.

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

Respondent filed a timely answer to the Citation. An administrative hearing was held. In the October 30, 2023 Decision, Administrative Law Judge Adam D. Stone considered Respondent’s arguments and concluded that Respondent violated both of the charged provisions of this State’s contracting laws and recommended that Respondent’s contracting license be suspended for a period of ten (10) days and Respondent pay a $500.00 civil penalty.

On November 7, 2023, the Office of Administrative Hearings certified Administrative Law Judge Stone’s Recommended Decision at Respondent’s request.

Complainant thereafter filed a claim with the Residential Contractors’ Recovery Fund (“the Fund”) to recover the cost of performing the corrective work and completing the project. As part of the claim process, Complainant submitted bids/invoices from various contractors that Complainant had received to perform the completion of and 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 July 3, 2024, with further hearing on July 24, 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:

Compliant Item 1: Brown Coat layer of Stucco: - This brown coat step began in July of 2022 and is about 2/3 completed. We were asked to prepay this work prior to its start and did so in full in May 2022. - We are requesting immediate completion of the brown coat stucco layer. (It should be noted that the incomplete state of this step has severely impacted the exterior build timeline as it is holding up several other steps & completion of the house.)

Investigator’s Observation: Verified. I am able to verify the project is not being completed in a timely manner. The respondent is to complete the project per the price stated in the contract.

Compliant Item 2: Doors (interior, exterior and interior trim):

- We have paid $22,000/$24,200 with payments made in Feb and May of 2022.

- 3/21 interior doors are installed (no trim has been installed) - 0/11 exterior doors installed - We are requesting immediate completion of all remaining door and trim installs as we are being told that lack of doors is severely impacting the interior build timeline of the home.

Investigator’s Observation: Verified. The respondent is to complete the project per the price stated in contract.

Compliant Item 3: Electrical (final installs and finish):

- We have paid $25,025/$28,050 for all portions of the electrical step with the most recent $3000 payment made in May 2022. - We have been told that a sub has been selected and an agreement with the sub to complete the electrical work has been made with a start date given to us. We were told this information three weeks ago. We have been told that the work has been stopped due to a delay in receiving ordered canned lights. We do not see evidence of completed work by this sub. - We are requesting that this work begin immediately on other portions of the electrical finish work (major finish open items that we are aware of are outlets/switches/circuit breakers/canned lights and the install of hanging lights). If his order of the canned lights are still delayed, we are requesting that other work commence in a timely manner.

Investigator’s Observation: Verified. I am able to verify the project is not being completed in a timely manner. The respondent is to complete the project per the price stated in contract.

Compliant Item 4: Roof (the roof is a standing seam metal roof): - We have paid over 60% of this work item with the most recent payment in Feb 2022. - The roof liner was installed in the late summer of 2021. - As the liner has been in place for over a year, it has been exposed to full sun and wind and this lead to a recent water leaks that caused extensive interior drywall damage. He did and inspection and made repairs. As of today, leakage from the 12- 12-2022 storm appears to have caused additional leakage which requires additional repair. -We request that the condition of the roof liner should be inspected/reviewed. - We have been told that roofing material has been purchased and that the start of the roof will begin immediately upon completion of the stucco brown coat.- We are requesting that the roof install begin immediately upon completion of the stucco brown coat.

Investigator’s Observation: Verified. I am able to verify the project is not being completed in a timely manner. The respondent is to correct the damaged caused and complete the project per the price stated in contract.

Compliant Item 5: Pavers (patios/courtyard and driveway): - We have paid

$20,000/$30,000) for the pavers with the only payment of $20,000 made in Feb 2022

- We were told that funds were used to purchase materials needed for this step. – We have been told that a sub has been lined up to install the pavers but that this work is pending completion of the stucco brown. - We are requesting that the paver install begin immediately upon completion of the stucco brown coat.

Investigator’s Observation: Verified. The respondent is to complete the project per the price stated in contract.

Compliant Item 6: Water supply line: - The water supply line was installed about 2 years ago. It is PEC tubing and has been fully exposed to the elements since its install. This type of tubing is damaged /degraded by direct sun exposure which will have compromised the tubing strength. It is not currently leaking but needs to be replaced to avoid future problems. He agreed to do this but has not done this work to date. – The water supply tubing, as currently installed, is not deep enough (We want it to be well below finished grade once that work is done) - We ask to have the water supply replaced and then promptly covered to avoid future damage

Investigator’s Observation: Verified. The respondent is to correct the water supply line exposed beyond the manufacturer UV rating of 1 month by appropriate means, pass all required inspections by the local building authority and complete the project per the price stated in contract.

Compliant Item 7: Material prepays: - The payment schedule shows that we have fully paid for the kitchen appliances, the wood and carpet flooring and kitchen and bath counter tops. Payment has been provided to pay for all pavers. We have been told that the door hardware has been purchased. We have not paid for the hardware. Several bath accessories have also been purchased and are being held by the contractor. – We have asked for a full inventory of all materials purchased to include ones we have paid for and ones that he hasn't asked for payment -Several items to include two electrical light transformers, door dogs, handheld bidet, etc. we're given to the contractor and should be included on requested list. - We would like the inventory list to be provided immediately.

Investigator’s Observation: Verified. I observed and am able to verify the above noted items are no onsite or installed. The respondent is to complete the project per the price stated in contract.

Compliant Item 8: Additional note: Our neighborhood HOA is applying considerable pressure on us, as they believe that a partially completed home exterior that has become "old" degrades the neighborhood and its home values. This problem was expressed to our contractor in mid October 2022, by letter from us and it is our understanding that the HOA also sent a letter with their concerns to him. The HOA is requesting that the stucco (completed brown coat and color layer), the roof and pavers (driveway and patios) be completed immediately to remedy their concern. He has brought in and staged an earthmover to aid in the paver installation. The HOA is reminding us that they can't see any evident progress. Completing the above list should remedy the HOA concerns, as the stalled exterior has become an additional liability to us that he needs to resolve.

Investigator’s Observation: Verified. I am able to verify the project is not being completed in a timely manner. The respondent is to complete the project per the price stated in contract.

All errors in original.

At the Compliance Inspection, the following was determined by Registrar Investigator David Fagerburg:

Investigator Notes:

1: Both parties sent a written request to extend the written directive issued January 27, 2023 with an expiration date of February 14, 2023. The written directive was extended via email on February 15, 2023 with a new expiration date of March 6, 2023 with a note that if significant progress is made related to the completion of the stucco and installation of the exterior doors an additional extension may be considered to facilitate the completion of the project.

2: Both parties acknowledged the stucco installation resumed March 9, 2023. Progress was made correcting the deficiencies in the brown coat previously installed. However, there is still one side of the home that does not have any stucco with the degrading foam and lath exposed.

3: The respondent has installed all but 2 exterior doors with double interior doors and pocket doors partially installed without casing.

4: Some progress has been made installing electrical components and trim. However, numerous can lights, outlets and switches remain incomplete.

5: The roof underlayment remains in poor condition and the only progress has been to try and patch existing underlayment in an attempt to prevent further water damage to the interior of the home. The respondent acknowledged the entire underlayment will need to be replaced prior to the metal roof installation.

6: There has been no progress regarding the paver installation.

7: The PEC main water supply line remains exposed. The respondent acknowledged that a new PEC water supply line is on site.

8: There are no kitchen appliances, wood or carpet flooring, kitchen and bath counter tops or plumbing fixtures installed or onsite. The respondent stated these items are being stored until they are needed.

9: On March 8, 2023 via phone conversation the complainant informed me that there has been little progress since the extension of the written directive and the respondent doesn’t appear to display much urgency in complying with the directive and completing the project on a critical path in a timely manner.

All errors in original.

Investigator Fagerburg determined that Respondent was not in compliance with the Written Directive.

Doug Ulmer, Legal Assistant II and Claims Reviewer for the Fund, testified that he reviewed the Complaint, the Written Directive, the Compliance Jobsite findings, the Administrative Law Judge Decision regarding the underlying Complaint, the parties’ contract, the payments made by Complainant to Respondent, the claim Complainant filed with Respondent’s bonding company, the deed to the property, Complainant’s Proof of Intent to reside at the property (because the home was not habitable during the time of the claim), and bids/costs and payments submitted by Complainant for repair/completion of the project, in determining that Complainant was eligible to file a claim with the Fund and in calculating Complainant’s actual damages.

Mr. Ulmer determined upon his review, that Complainant had satisfied the eligibility requirements for a payment from the Fund.

Mr. Ulmer testified that his calculation of actual damages took into account the contract price of $868,236.99 and the payments made toward the contract price in the amount of $724,427.82, and concluded that there was a remaining balance on the contract in the amount of $143,809.17.

Complainant submitted bids to repair and complete the project, as well as proof of the payments made to do so. Mr. Ulmer reviewed the bids/costs that were submitted by Complainant, and determined that they were appropriate and in line with the Written Directive and the Compliance Jobsite findings. Specifically, Mr. Ulmer testified that he determined that the following bids were appropriate:

JM Precision Development in the total amount of $67,900.00;

Halo Metal Roofing in the amount of $109,600.00;

Elite Drywall in the amount of $19,834.36;

J & M Electric in the amount of $13,430.00; and

Freitag’s Custom Wrought Iron in the amount of $11,562.14.

The total amount of the bids to complete and/or repair the project totaled $222,326.50.

Mr. Ulmer further reviewed the payments made by Complainant for the work performed to repair or complete the project in connection to bids provided. In some instances, specifically for the electrical and drywall work, Complainant paid in excess of the bid amounts. Complainant submitted a written statement to the Registrar explaining why those payment amounts exceeded the bid amounts.

Mr. Ulmer calculated Complainant’s actual damages by subtracting the amount Complainant still owed toward the parties’ contract ($143,809.17) from the amount deemed necessary to repair and/or complete the project, $222,326.50, and arrived at the amount of $78,517.33. This amount exceeds the maximum allowable award from the Fund. Consequently, Mr. Ulmer recommended an award from the Fund in the maximum amount of $30,000.00.

Mr. Ulmer reviewed the documentation submitted by Complainant with Investigator Fagerburg, and Investigator Fagerburg concurred that a $30,000.00 award from the Fund was appropriate in this case.

Sterling Pratt, Respondent’s representative, testified that Respondent performed work after the Compliance Inspection that was not taken into account. Mr. Pratt further contested the amount of JM Precision Development’s bid for the outdoor work, stating that there was money remaining in the budget for hardscape, that it was two-thirds complete, and that the amount of the bid exceeded the amount in the original budget for such work. Mr. Pratt argued that the amounts of the bids for the drywall repairs, the metal roof, electrical work, and the stairs all far exceeded the original budget amounts for those items. Mr. Pratt argued that design and material choices/changes could have increased the prices.

Mr. Pratt acknowledged that if Respondent had performed work after the Compliance Inspection, this information would have been available and considered by the Administrative Law Judge at the underlying hearing.

CONCLUSIONS OF LAW

This matter lies within the Registrar’s jurisdiction.

A.R.S. § 32-1132.01(B) provides, in pertinent part, 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:

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

2. 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.

Respondent, having contested the amount of the proposed payout from the Fund, bears the burden of proof to establish that the proposed payout from the Fund is incorrect/inappropriate by a preponderance of the evidence.

“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.”

Respondent had an opportunity to correct and complete its work following the Written Directive from the Registrar and failed to do so.

After review of all the evidence, the Tribunal concludes that the award proposed by the Fund accurately reflected Complainant’s actual damages. Accordingly, Complainant 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 Bryan Johnson.

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 Monument Development, LLC’s License Number 327960.

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, August 8, 2024.

/s/ Sondra J. Vanella

Administrative Law Judge

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

Tom Cole, Director

Registrar of Contractors

Mona Baskin

Assistant Attorney General

[email redacted]

Bryan Johnson

[email redacted]

Monument Development, LLC

[email redacted]

By: OAH Staff