ALJDEC - Licensing
2022A-11477-RFA-LS-ROC · Registrar of Contractors · 2024-01-10
IN THE OFFICE OF ADMINISTRATIVE HEARINGS
John Freitag,
COMPLAINANT,
v.
Big Reds Construction LLC
ROC License No. 342028,
RESPONDENT.
No. 2022A-11477-RFA-LS-ROC
ADMINISTRATIVE LAW JUDGE DECISION
HEARING: January 02, 2024 at 9:00 AM.
APPEARANCES: Assistant Attorney General Mona Baskin, Esq. appeared on behalf of the Arizona Registrar of Contractors (“Registrar”) with Doug Ulmer as a witness. John Freitag (“Complainant”) appeared on his own behalf. No appearance(s) by or on behalf of Big Reds Construction LLC (“Respondent”). Angela Freitag observed.
ADMINISTRATIVE LAW JUDGE: Jenna Clark.
EXHIBITS ADMITTED INTO EVIDENCE: The Notice of Hearing on Appealable Agency Action, Registrar Exhibits 1-6, Complainant Exhibits A-B, and a December 11, 2023, Hearing Order were all admitted into the evidentiary record.
_____________________________________________________________________
Having heard the evidence and testimony and having considered the record in this matter, the undersigned Administrative Law Judge hereby makes the following Findings of Fact and Conclusions of Law and issues the following 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 for ROC License No. 342028, as reflected on the Registrar’s public website. On December 02, 2022, the Registrar issued ROC License No. 342028 for General Residential B contracting to Respondent. Although the license had been renewed through December 31, 2024, it was revoked by the Registrar on May 16, 2023. Jonathan Michael Murillo is listed as the Qualifying Party and Member on the license. Respondent’s address of record for the license is 12725 W. Indian School Rd., Ste. E-101 Avondale, AZ 85392. The license’s $9,000.00 bond from Merchants Bonding Company, effective November 28, 2022, has been cancelled. The license has been disciplined on four (4) prior occasions.
On December 14, 2022, the Registrar received a long narrative complaint filed by Complainant that alleged abandonment and poor work performance of his newly constructed residence. The Registrar designated it Complaint No. 2022-11477 and assigned Chris Fultz (“Investigator Fultz”) for investigation.
On January 23, 2023, Investigator Fultz inspected the work that had been performed on the project to date and took 50 photographs of the project. Respondent was not present. When he was finished, Investigator Fultz drafted Jobsite Inspection Notes. Ultimately, Investigator Fultz derived fifteen (15) separate and distinct complaint items from Complaint No. 2022-11477, of which he was able to substantiate all 15 complaint items. Specifically Investigator Fultz determined that complaint items 1-15 constituted poor and/or incomplete work, and failed to meet the Registrar’s minimum workmanship standards. Investigator Fultz also specifically noted the following:
[Complainant] was having issues with his home and hired an independet home inspection on his home. The inspector found areas of concern. After not getting anywhere with his builder/contractor, he filed those issues with the [Registrar].
(All errors in original.)
On February 08, 2023, Investigator Fultz issued a Written Directive from the Registrar (“Directive”) to Respondent because he substantiated all of Complainant’s allegations that the work Respondent had done on the project failed to meet minimum workmanship standards. Respondent was put on notice that it had until 5:00 p.m. on March 03, 2023, to notify the Registrar of its compliance with the Directive or face discipline pursuant to Ariz. Rev. Stat. §§ 32-1154(A)(3), 32-1154(A)(22), and 32-1154(E).
On or about March 03, 2023, Investigator Fultz escalated the matter to the Registrar’s legal department with the issuance of a Citation Recommendation. Investigator Fultz also provided the following additional information he obtained during the course of his investigation:
Supplement to 2022-11477
On 02/08/2023 the directive was issued in this case.
On 02/10/2013 I had several emails and a phone converstion {In case file) with Jon Plaxco who identified himself as father to Jonathan Murillo. Jonathan Murillo is the Quailifying party of Big Reds Construction LLC. In the Emails, Ptaxco states:
"Yo but big reds construction is my sons 1/c .. but lone my son didn't get his lic naw till after this house was completed .. second it’s an owner builder that was meant to Jive in but ended up selling due to some other things going on in life .l third there was no GC involved .. forth they were oil sub contractors and didn't need to be licensed to do an owner build .. please take big reds construction off this .. the owner is a piece of work and have tried to deal with him and help him out but has been a pain so me and my wife will see him in court for further action when needed .. again check big r de date on approval ~hen he received his license and when this house was bought .. way out of time frame .. this guy John [Freitag] is reaching .. please advise .. "
I advised Plaxco, That because they were now licensed and there are 7 homes built by the contractor, that the ROC has jurisdiction on this base.
Upon researching this case, Consuela Murillo, Jonathan Murillo's mother and wife to Jon Plaxco, listed herself as owner builder for the permits. In the dosing documents, Jonathan Murillo lists himself as Big Reds Construction LLC on 06/16/2022 on the HUD Warranty of Completion of Construction.
Further research shows, 10/16/2012 Phoenix PO report that Consuela Murillo identified herself as Jonathan Murillo's mother when filling a runaway Police report .. Further search though Family court services on 03/06/1997 Lists Jon Pl1xco as husband to Consuela Murillo.
On 03/02/2023, Just one (1) day before the deadline of the directive I received my first response from Jonathan Murillo. His Email states the following:
"Excuse me Sir,/ do not know why you are saying that. I am not on any permits nor am I on any blueprints belong to the house in question. And also the way you take peoples word, just saying that I did something when I did not- implies that you are very gullible - and should not be in the position that you are in. Secondly I want you to give me your superior/supervisor contact information. It is time for them to get involved. I I do not receive this information from you I will contact them myself and for wasting my time in doing such, can legally hold you accountable for my time on this matter.
S0 I AM REQUEST1NG THAT YOU DROP THIS MATTER AGAINST ME TODAY!"
In all of the interviews I've conducted reference this contractor, all have stated that they will bully and challenge the homeowners.
This case will be sent to legal for review.
(All errors and emphasis in original.)
On March 10, 2023, the Registrar issued a Citation to Respondent for alleged violations of Ariz. Rev. Stat. §§ 32-1154(A)(1), 32-1154(A)(3); Ariz. Admin. Code R4-9-108(a), and 32-1154(A)(22). Respondent was given until March 27, 2023, to respond with its Answer or face discipline pursuant to Ariz. Rev. Stat. §§ 32-1154(A)(22) and 32-1155.
Respondent did not file an Answer.
On March 30, 2023, the Registrar issued a Final Administrative Decision and Order (Default) to the parties that deemed Respondent’s failure to file an Answer to be an admission of the acts charged in the Citation. Because Respondent was found to be in violation of Ariz. Rev. Stat. §§ 32-1154(A)(1), 32-1154(A)(3); Ariz. Admin. Code R4-9-108(a), and 32-1154(A)(22), the Registrar suspended ROC License No. 342028 for two (2) days, beginning April 06, 2023.
On or about June 09, 2023, 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), for $53,979.00. Attached were copies of a May 10, 2023 bond denial letter, Warranty Deed, Residential Real Estate Purchase Contract, and related loan documentation.
On October 16, 2023, Complainant provided the Registrar with an Affidavit of Occupancy.
On August 04, 2023, the Registrar issued a Notice and Order of Recovery Fund Ineligibility to the parties which held that Complainant was ineligible for a payout from the because Respondent was not properly licensed by the Registrar when the underlying contract was signed by the parties, when Complainant tendered his first payment on the project, or when the work was first commenced per Ariz. Rev. Stat. § 32-1132(C-D).
On October 27, 2023, the Registrar received a timely appeal request for hearing from Complainant.
On November 03, 2023, the Registrar referred the matter to the Office of Administrative Hearings (“OAH”), an independent state agency, for adjudication. Per the Notice of Hearing on Appealable Agency Action (“Notice of Appeal“) sent to the parties on November 28, 2023, the issue(s) for hearing are to determine if the Registrar’s Fund determination was properly made pursuant to Ariz. Rev. Stat. §§ 32-1132 to 32-1133.01, based on the evidence.
On January 02, 2024, an administrative evidentiary hearing took place at OAH before the undersigned.
Hearing Evidence
At the hearing, the Registrar called Doug Ulmer as a witness. Complainant testified on his own behalf. The substantive evidence of record is as follows:
Complainant owns newly constructed residential property located at 417 S. 356th Dr. Tonopah, AZ 85354, which was the site of the underlying project at issue.
On or about May 23, 2022, Complainant and Consuelo Murillo entered into a $489,900.00 contract for the purchase of the aforementioned residential property.
Complainant used a Veterans Affairs Home Loan (“VA Loan”) to fund the underlying project.
Work on the project commenced in early-March 2021, and stopped or was otherwise completed in mid-July 2022.
On June 16, 2022, Jonathan Murillo signed a Warranty of Completion of Construction on behalf of the Warrantor-Builder, which notes the following in pertinent part:
The undersigned Warrantor further to the Purchaser(s)/Owner(s) or his/her (their) successors or transferees, the property against defects in equipment, material, or workmanship and materials supplied or performed the Warrantor or any subcontractor or supplier at any tier resulting in noncompliance with standards of quality as measured by acceptable trade practices. This warranty shall continue for a period of one year from the date of original conveyance of title to such Purchaser(s) or .from the date of full completion of each of any items completed after conveyance of title. The Warrantor shall remedy at the Warrantor's expense, any defect{s) of equipment, material, or workmanship furnished by the ·warrantor. Warrantor shall restore any work damaged in fulfilling the terms and conditions of this warranty.
On June 30, 2022, escrow closed on the property.
On July 01, 2022, Complainant paid Mrs. Murillo $2,222.78 towards settlement of their contract.
Mr. Ulmer is a Legal Assistant for the Registrar. Mr. Ulmer made the determination that Complainant was ineligible for an administrative payout from the Fund because he did not satisfy all statutory requirements for an award. Specifically, Mr. Ulmer determined the following:
On June 08, 2022, the Maricopa County Inspections Department passed the final inspection for the underlying property.
On June 16, 2022, on the Warranty of Completion of Construction, Jonathan Murillo listed himself as the Warrantor and Respondent as the Builder for the underlying property.
When Complainant entered in the Residential Resale Real Estate Purchase Contract and signed the promissory note ROC License No. 342028 had not yet been issued by the Registrar.
In order to obtain an award from the Recovery Fund, an applicant must provide sufficient proof to establish by a preponderance of evidence that he is eligible pursuant to Ariz. Rev. Stat. § 32-1131 et seq. Further, if eligible, an applicant must establish by a preponderance of evidence that damages sought are within the limitations of compensability as set forth in Ariz. Rev. Stat. § 32 1132.01. This evidentiary showing requires documentation to support the original contract price, scope of work, payments made toward performance of the contract and documentation to substantiate costs to complete or repair any work required by the underlying disciplinary proceedings. To be eligible for an award from the Fund, an individual claimant must:
Contract with a licensed residential contractor who was appropriately licensed when the underlying contract was signed, when the first payment was made, or when the underlying work first commenced. A.R.S. §§ 32-1132(C-D).
Complainant only meets two of the three aforementioned eligibility criteria.
Additional Evidence
Complainant is a 100% disabled veteran.
Complainant solely relied on his realtor and the MLS listing for the underlying property when he purchased his home.
Complainant obtained a home inspection for the property. The inspector did not check the status of the builder’s license, as that information is not contained in the resulting report.
Closing Arguments
In closing, Complainant argued that it was categorially unfair to shift the burden upon a prospective homeowner to double-check the status of a residential contractor’s license, particularly when several licensed parties were also involved and in a better position to perform that type of inquiry. Complainant opined that Ariz. Rev. Stat. § 32-1133.01 granted the Registrar an exception by using the word “notwithstanding” to grant him access to the Recovery Fund, regardless of Respondent’s license status during the construction of his home. Per Complainant, the Registrar is obligated to provide him with relief, as they maintain police powers over Respondent.
In closing, the Registrar argued that an administrative award from the Recovery Fund could not be issued to Complainant, as he was statutorily barred because he did not satisfy all eligibility requirements. The Registrar further argued that there was no lawful provision by which an exception could be made for Complainant, and opined that Ariz. Rev. Stat. § 32-1133.01 was inapplicable to the matter.
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 Hearing 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 the Registrar 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 the Registrar as well.
Complainant bears the burden of establishing by a preponderance of the evidence that the Registrar’s Notice and Order of Recovery Fund Ineligibility was incorrectly and/or 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.”
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, the Tribunal concludes that the Registrar soundly established Complainant’s ineligibility to access the Recovery Fund.
Here, Complainant did not establish by a preponderance of the evidence that he was legally eligible to access the Recovery Fund in accordance with Ariz. Rev. Stat. § 32-1131 et seq. Complainant conceded that Respondent was not properly licensed by the Registrar when the underlying contract was signed by the parties, when Complainant tendered his first payment on the project, or when the work was first commenced. While Complainant’s frustrations are certainly valid, Complainant did not provide any information sufficient to overcome the Registrar’s more compelling evidence. Notably, Complainant’s Ariz. Rev. Stat. § 32-1133.01 argument is both technically and legally incorrect.
Based on the credible and relevant evidence of record, the Tribunal must conclude that the Registrar soundly established Complainant’s ineligibility to access the Recovery Fund. Therefore, the undersigned Administrative Law Judge has no choice but to find that Complainant was properly denied access to the Fund.
Thusly, Complainant’s appeal must be denied.
RECOMMENDED ORDER
Based on the foregoing,
IT IS RECOMMENDED that the Registrar affirm the Fund’s August 04, 2023, Notice and Order of Recovery Fund Ineligibility.
IT IS FURTHER RECOMMENDED that the Registrar dismiss Complainant’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, January 10, 2024.
Office of Administrative Hearings
/s/ Jenna Clark
Administrative Law Judge
Transmitted electronically to:
Tom Cole, Director
c/o Legal Department
Registrar of Contractors
1700 W. Washington St., Ste. 105
Phoenix, AZ 85007
[email redacted]
Big Reds Construction LLC, Respondent
ATTN: Jonathan Murillo, Agent
12725 W. Indian School Rd. Ste. E-101
Avondale, AZ 85392
[email redacted]
John Freitag, Complainant
417 S. 356th Dr.
Tonopah, AZ 85354
[email redacted]
Mona Baskin, Esq., Assistant Attorney General
Office of the Attorney General
2005 N. Central Ave.
Phoenix, AZ 85004
[email redacted]
By: OAH Staff