ALJDEC - Licensing

2022A-11478-RFA-LS-ROC · Registrar of Contractors · 2024-02-29

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Karie Marie Fairchild,

COMPLAINANT,

v.

Service Tucson LLC

ROC License No. 332627,

RESPONDENT.

No. 2022A-11478-RFA-LS-ROC

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: February 26, 2024 at 9:00 AM.

APPEARANCES: Assistant Attorney General Mona Baskin, Esq. appeared on behalf of the Arizona Registrar of Contractors (“Registrar”) with Dylan Warwick as a witness. Karie Marie Fairchild (“Complainant”) appeared on her own behalf. Erik Brown appeared on behalf of Service Tucson LLC (“Respondent”). Phillip Giedraitis and Rachel Brown observed.

ADMINISTRATIVE LAW JUDGE: Jenna Clark.

EXHIBITS ADMITTED INTO EVIDENCE: The Notice of Action, January 26, 2024, Hearing Order, and Registrar Exhibits 1-8 (including Appendix A-B) were admitted into the 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 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 March 16, 2021, the Registrar issued License No. 332627 to Respondent for General Residential B contracting. The license is active, in good standing, and renewed through March 31, 2025. Erik Brown is the Qualifying Party and Manager on the license. Rachel Lee Brown is also listed as a Manager for the license. Respondent’s address of record for the license is 9412 E. Palcita Empire Tucson, Arizona 85715. Respondent has an active $9,000.00 surety bond on the license, effective February 20, 2023. There is one prior disciplinary event noted for the license, which is presumed to be related to this matter.

On December 14, 2022, the Registrar received a narrative complaint from Complainant against Respondent’s License No. 332627 alleging poor workmanship of their cabinetry and countertop project. The Registrar designated it Complaint No. 2022-11478 and assigned to John Smith (“Investigator Smith”) for investigation.

On January 05, 2023, Investigator Smith issued a Jobsite Inspection Notification Letter to the parties, advising that he would conduct an inspection of the project on January 11, 2023, at 11:00 a.m.

On January 05, 2023, Investigator Smith issued a Warning Letter to Respondent for an alleged violation of Arizona Revised Statutes (“Ariz. Rev. Stat.”) §§ 32-1154(A)(12); 32-1158(A) for Respondent’s failure to include all nine (9) required minimum elements in his contracts, including his contract with Complainant. Respondent was further advised that statutory noncompliance could result in discipline against Respondent’s license including suspension or revocation. Correspondence was not returned as undeliverable to Respondent.

On January 11, 2023, Investigator Smith conducted a review of the contract executed between the parties, took 25 photographs, and inspected the work that had been performed on the project to date. Respondent was present. When he was finished, Investigator Smith drafted his Jobsite Inspection Notes. Ultimately, Investigator Smith determined that there were a total of four (4) separate and distinct complaint items contained within Complainant’s original complaint. Of those, Investigator Smith substantiated two (2) total complaint items. Specifically, Investigator Smith concluded that the work Respondent had performed on complaint items 2 and 3 failed to meet the Registrar’s minimum workmanship standards based on his firsthand observations.

On January 20, 2023, Investigator Smith issued a Written Directive from the Registrar (“Directive”) to Respondent because he substantiated a number of Complainant’s workmanship allegations against Respondent. Respondent was put on notice that it had until 5:00 p.m. on February 06, 2023, 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).

In addition to performing corrective work “by appropriate means” on substantiated complaint items 2-3, Respondent was also specifically required to submit an updated contract template in compliance with Ariz. Rev. Stat.”§ 32-1158(A) to the Registrar.

Because Respondent expressed concerns regarding access to the project site, on January 26, 2023, Investigator Smith extended the Directive’s compliance period to February 08, 2023.

On January 25, 2023, Complainant submitted a single-item addendum complaint to the Registrar.

On January 30, 2023, Investigator Smith issued an Addendum Jobsite Inspection Notification Letter to the parties, advising that he would conduct a secondary inspection of the project on February 02, 2023, at 9:00 a.m.

On February 01, 2023, Respondent emailed Investigator Smith that it had completed corrective work on the underlying complaint.

On February 02, 2023, Investigator Smith inspected the addendum complaint item and took 8 photographs. When he was finished, Investigator Smith drafted his Addendum Jobsite Inspection Notes. Ultimately, Investigator Smith determined that the allegation of poor workmanship was not verified.

On February 03, 2023, Investigator Smith issued an Addendum Written Directive from the Registrar (“Addendum Directive”) to the parties to formally note that the only complaint items requiring correction and/or completion by the Registrar were complaint items 2 and 3. The original compliance deadline of February 08, 2023, remained in effect.

On February 07, 2023, Investigator Smith issued a Compliance Jobsite Inspection Notification Letter to the parties, advising that he would conduct a compliance inspection of the project on February 14, 2023, at 9:15 a.m.

On February 14, 2023, based on his firsthand observations, Investigator Smith determined that Respondent had “not taken appropriate action to comply with the Directive” and that although some remediations had been performed, “the current conditions do not meet workmanship standards.” Investigator Smith did, however, determined that Respondent had submitted contract template to the Registrar that complied with Ariz. Rev. Stat.”§ 32-1158(A).

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

On March 02, 2023, the Registrar issued a Citation to Respondent for an 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 March 17, 2023, 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 March 17, 2023, the Registrar referred 2022A-11478-CHC-ROC to the Office of Administrative Hearings (“OAH”), an independent state agency, for an evidentiary hearing on April 28, 2023. Per the March 24, 2023, Notice of Hearing on Contested Case (“Notice of Hearing”) the issues to be determined were 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)(3) – A.A.C. R4-9-108(a)

Charge 2: A.R.S. § 32-1154(A)(22)

On June 05, 2023, an administrative evidentiary hearing took place at OAH.

On July 24, 2023, the Registrar issued a Final Administrative Decision and Order (“Final Order”) to the parties whereby Respondent was held to be in violation of Ariz. Rev. Stat. §§ 32-1154(A)(3); Ariz. Admin. Code R4-9-108(a), and 32-1154(A)(22). As such, the Registrar suspended Respondent’s license for three (3) business days and imposed a $500 civil penalty. On September 02, 2023, the order became effective.

Respondent did not appeal the Final Order. Instead, on August 01, 2023, Respondent submitted Request for Rehearing to the Registrar, which was denied on August 28, 2023, for lack of merit and good cause.

On August 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), in the amount of $3,626.26. Attached were proof of Complainant’s residency for the underlying property, an affidavit from Complainant and her landlord, Phillip Giedraitis, regarding their contract with Respondent, proof of payments made Respondent for the project, an invoice for materials purchased by Complainant that Respondent used on the project, a bond denial letter from Respondent’s insurance company, and a $5,406.00 invoice for corrective work performed on the project by Arizona Cabinet & Countertop Company LLC (“AC&CC”).

On December 22, 2023, the Registrar issued a Notice of Claim for Administrative Award (“Notice of Award”) to the parties which held that Complainant was awarded $5,406.00 from the Fund.

On December 27, 2023, the Registrar received an appeal letter from Respondent contesting both Complainant’s eligibility to access the Fund as well as Complainant’s award amount from the Fund.

On December 28, 2023, the Registrar referred 2022A-11478-RFA-LS-ROC to the Office of Administrative Hearings for an independent evidentiary hearing. Per the Notice of Hearing on Appealable Agency Action (“Notice of Action”) sent to the parties on January 24, 2024, the issues for hearing are to determine whether Complainant is legally eligible for a payout from the Fund, and if so, 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 February 26, 2024, an administrative evidentiary hearing took place at OAH.

Hearing Evidence

At the hearing, the Registrar called Dylan Warwick as a witness. Complainant testified on her own behalf. Respondent called Erik Brown as a witness. The substantive evidence is as follows:

Complainant leases residential property located at 5981 N. Antillon Pl. Tucson, Arizona 85741. The property is owned by Complainant’s landlord and live-in boyfriend, Phillip Giedraitis.

On or about November 03, 2022, Complainant and Mr. Giedraitis entered into a verbal contracting agreement with Respondent for the fabrication and installation of custom cabinetry and countertops.

From their joint credit card account, Complainant and Mr. Giedraitis purchased $1,066.26 in materials for the project from Window Depot, and paid Respondent a total of $2,060.00 for labor.

Mr. Warwick is a Legal Assistant for the Registrar. Mr. Warwick made the determination that Complainant was eligible for an administrative payout from the Fund because she satisfied all statutory requirements for an award. Specifically, Mr. Warwick determined the following:

There is not an unpaid balance on the underlying contract between the parties.

Complainant did not bond payout for the underlying project. On August 08, 2023, Respondent’s bond company, RLI Insurance Company, denied Complainant’s claim because she does not own the residential property at issue, and because Mr. Giedraitis and AC&CC performed construction on the project after Respondent.

As a result of Complaint No. 2022-11478 being filed with the Registrar, Respondent’s license was suspended for three (3) day and assessed a $500.00 civil penalty.

On December 11, 2023, Mr. Warwick confirmed with Investigator Smith that AC&CC’s March 02, 2023, $5,406.00 invoice was “reasonable” as he opined that “[i]t is very likely the granite tops needed to be replaced to make the proper corrections.”

Therefore, Mr. Warwick concluded that Complainant’s $5,406.00 compensable damages, for compensable damages sustained as a result of Respondent’s poor workmanship, fell under statutorily cap of $30,000.00 per Ariz. Rev. Stat § 32-1132.01.

Additional Evidence

Complainant owns residential property located at 4792 W. Snowberry Ln. Tucson, Arizona 85742-4134. The property is used for her dog breeding business The Paw Palace. On occasion, dogs are also held at the residence she shares with Mr. Giedraitis on N. Antillon Pl.

Mr. Brown testified that Respondent appealed the Registrar’s Notice of Award because he believed Complainant used the N. Antillon Pl. for her business and did not reside there. Mr. Brown also testified that he believed Complainant was ineligible to access the fund because she failed to provide the Registrar with two (2) bids for corrective work. Mr. Brown further testified that Complainant used the Registrar to circumvent her poor choice of stone for her countertops.

Per Respondent, the Recover Fund is punitive.

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, were eligible for a $5,406.00 payout from the Fund. The Registrar also argued that Respondent’s unsubstantiated opinions regarding Complainant’s edibility to access the Fund were baseless and immaterial, and that Respondent’s attempts to re-litigate 2022A-11478-CHC-ROC were impermissible. Per the Registrar, it has satisfied its fiduciary duty to comply with the pertinent sections of the law and protect the purpose of the Fund as its fiduciary.

In closing, Complainant argued that she should not have to “bear the burden of Respondent’s misconduct,” and foot the remediation expense incurred by her employ of AC&CC.

In closing, Respondent argued that it had not been established that his work required removal over repair, and that because the N. Antillon Pl. property was used commercially Complainant could not be granted access to the Fund by the Registrar.

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.

Respondent bears the burden of establishing by a preponderance of the evidence that the Registrar’s Recover Fund claim award was incorrect 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.”

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 Respondent failed to present any compelling evidence at hearing. Respondent’s opinion that Complainant is ineligible to access the Fund, without providing an indicia of evidence to support his contention, is irrelevant. Moreover, Respondent’s arguments regarding the N. Antillon Pl. property being “commercial” are factually and legally incorrect. Nothing in the record establishes that Complainant use of the property for business exceeded her residential use.

Here, the record reflects that Respondent did not have a written contract with Complainant and/or Mr. Giedraitis, but that Mr. Brown performed extensive work at the Antillon Pl. property and received payment from both in line with the labor performed. The record further reflects that AC&CC’s corrective work on the project was in compliance with the Registrar’s Directive and reasonable under the circumstances. As such, it must be held that Respondent failed to sustain its burden of persuasion in this matter.

Based on the credible and relevant evidence of record, the Tribunal must conclude that the Registrar soundly established Complainant’s eligibility to access the Recovery Fund, as well as the amount of her administrative award. Therefore, the undersigned Administrative Law Judge must conclude that Complainant was properly awarded an administrative payout from the Fund.

Thusly, Respondent’s appeal must be denied.

RECOMMENDED ORDER

Based on the foregoing,

IT IS RECOMMENDED that the Registrar affirm the Fund’s December 22, 2023, $5,406.00 Notice of Award.

IT IS FURTHER RECOMMENDED 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, February 29, 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]

Mona Baskin, Esq., Assistant Attorney General

Office of the Attorney General, Counsel for the Registrar of Contractors

2005 N. Central Ave.

Phoenix, AZ 85004

[email redacted]

Karie Marie Fairchild, Complainant

5981 N. Antillon Pl.

Tucson, AZ 85741

[email redacted]

Service Tucson, LLC, Respondent

9412 E. Palcita Eunice

Tucson, AZ 85715

[email redacted]

By: OAH Staff