ALJDEC - Licensing

2023A-00187-CHC-ROC · Registrar of Contractors · 2023-05-24

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Krista Williams,

COMPLAINANT,

v.

David Welch and Edward Wharton,

dba Arizona Renovations and Home

Improvements,

ROC License No. 309734,

RESPONDENT.

No. 2023A-00187-CHC-ROC

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: May 17, 2023 at 1:00 PM.

APPEARANCES: Krista Williams (“Complainant”) appeared on her own behalf. David Welch appeared on behalf of David Welch and Edward Wharton (“Respondents”). Arlo Houston appeared on behalf of the Arizona Registrar of Contractors. Jason Munday and Karen Baughman observed.

ADMINISTRATIVE LAW JUDGE: Jenna Clark.

_____________________________________________________________________

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 December 01, 2016, the Registrar issued License No. 309734 Specialty Residential CR-65 Minor Home Improvement contracting license to Respondent. The license was suspended by operation of law on October 28, 2022, for non-renewal. Respondent’s address of record for the license is 1155 S. Power Rd., Ste. 114. Mesa, AZ 85206. Respondent had a $4,250.00 surety bond on the licensed issued by Platt River Insurance Company, effective November 30, 2020, that was cancelled on an unknown date. The license no prior disciplinary record. There is one open complaint listed which is presumed to be related to this matter.

On or about January 05, 2023, the Registrar received a narrative complaint from Complainant against Respondent’s License No. 309734 alleging abandonment and poor workmanship of their stucco repair project. The Registrar designated it Complaint No. 2023-00187 and assigned to Manny Bermudez (“Investigator Bermudez”) for investigation.

On January 06, 2023, Investigator Bermudez issued a Jobsite Inspection Notification Letter to the parties, advising that he would conduct an inspection of the project on January 31, 2023, at 10:00 a.m.

On January 31, 2023, Investigator Bermudez inspected the work that had been performed on the project to date. He also conducted a review project-related correspondence provided by Complainant, including Respondent’s construction contract with the prior homeowners’ (“Kenneth and Anne Pedersen”) and their proof of payments, and took 22 photographs of the project site. Mr. Welch was present. When he was finished, Investigator Bermudez drafted his Inspection Notes. Ultimately, Investigator Bermudez derived a single complaint item from the narrative complaint submitted to the Registrar, which he was able to substantiate based on his firsthand observations. Specifically, Investigator Bermudez observed that Respondent’s stucco work was “bubbling, peeling, and cracking.” Investigator Bermudez concluded that Respondent’s workmanship failed to meet the Registrar’s minimum standards and required Respondent to perform corrective and/or completion work to remediate the identified deficiencies.

Based on his review of Respondent’s stucco contract with the Pedersens, Investigator Bermudez also issued a Warning Letter to Respondent for an alleged violation of Ariz. Rev. Stat. § 32-1158(A) for Respondent’s failure to include all nine (9) required minimum elements in his contracts. Respondent was required to submit a copy of a corrected contract template to the Registrar, in compliance with Ariz. Rev. Stat. § 32-1158.

On January 31, 2023, Investigator Bermudez issued a Written Directive from the Registrar (“Directive”) to Respondent because he substantiated Complainant’s workmanship allegation(s) against Respondent, and also found Respondent to be in violation of Ariz. Rev. Stat. §§ 32-1154(A)(12); 32-1158(A). Respondent was put on notice that it had until 5:00 p.m. on February 23, 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 February 24, 2023, Investigator Bermudez 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 alleged violations of Ariz. Rev. Stat. §§ 32-1154(A)(3); Ariz. Admin. Code R4-9-108(a), 32-1154(A)(12); 32-1158, 32-1154(A)(16), and 32-1154(A)(22). Respondent was given until March 17, 2023, to respond with his Answer or face discipline pursuant to Ariz. Rev. Stat. §§ 32-1154(A)(22) and 32-1155.

On March 09, 2023, the Registrar received Respondent’s Answer whereby Mr. Welch identified himself as the “owner/operator” and noted that in September 2022, Complainant notified him of concerns she had with the stucco on her residence. Because Mr. Welch had relocated to Billings, Montana, he attempted to “get a hold of the people that helped on the project” but was unsuccessful. After Complaint No. 2023-00187 was filed, Mr. Welch “found out that there is a 2 year warranty” imposed by the Registrar on licensed construction that Respondent needed to honor. Moreover, Mr. Welch offered that he was unaware his license did not permit contracting for projects over $5,000.00, and admitted that he “should have been more aware of state laws.” Mr. Welch further noted that he was willing to settle with Complainant and agreed to “split the difference.”

On March 20, 2023, the Registrar referred this matter to the Office of Administrative Hearings (“OAH”), an independent state agency, for an evidentiary hearing on May 17, 2023. Per the April 14, 2023, Notice of Hearing the issues to be determined are whether the Registrar has 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)(12) - A.R.S. § 32-1158

Charge 3: A.R.S. § 32-1154(A)(16)

Charge 4: A.R.S. § 32-1154(A)(22)

Hearing Evidence

Complainant testified on her own behalf, called and Registrar investigator Arlo Houston (“Investigator Houston”) as a witness, and submitted Exhibits 1& 5 into the record. David Welch testified on behalf of Respondent. The Registrar’s agency file, including the Notice of Hearing, was admitted into the record as its own exhibit. The substantive evidence of record is as follows:

Complainant owns residential property located 4346 S. Escalante Ridge Pl. Tucson, AZ 85730 (“Property”), which she purchased from the Pedersens September 22, 2021.

On or about February 05, 2021, Respondent and the Pedersons, then owners of the Property, entered into a $7,600.00 stucco repair and painting contract whereby Respondent agreed to “pressure wash, mask, paint, and repair stucco” at the Property. Invoice No. 000022 noted that the work includes a “5 year warranty.”

On January 15, 2021, the Pedersens tendered a $2,000.00 down payment to Respondent on the contract.

On February 01, 2021, the Pedersens tendered a $5,600.00 final payment to Respondent on the contract.

Work on the project commenced in mid-January 2021, and stopped or was otherwise completed in early-February 2021.

The Registrar’s Directive notes, in pertinent part, as follows:

You may not perform or hire other contractors to perform work that is outside the scope of your license.

If your license is currently suspended for administrative reasons, or is inactive, expired, or cancelled, you may not perform any corrective work nor contract in any manner, which includes hiring other contractors to perform work, until the suspension of your license(s) has been lifted or your license(s) has been reactivated.

(Emphasis added.)

Therefore, the only means Respondent had to satisfy the Directive was to enter into a settlement agreement with Complainant.

During the Directive’s compliance period Investigator Houston was reassigned to the underlying investigation. Upon the expiration of Directive’s compliance period, on or about February 23, 2023, Investigator Houston confirmed with Complainant that no corrective work had been performed by Respondent and that the parties had not settled their dispute.

On an unknown date, Investigator Houston issued a Prehearing Jobsite Inspection Notification Letter to the parties, advising that he would conduct an inspection of the project on May 15, 2023, at 10:00 a.m.

On May 15, 2023, Investigator Houston inspected the project and determined that the jobsite was “virtually unchanged” from Investigator Bermudez’s jobsite inspection photos.

Closing Arguments

Respondent declined to provide a closing argument

In closing, Complainant opined that she had sustained her burden of proof, and argued that because approximately 294 days had [assed since her complaint was filed without any remediation(s) to her project, that discipline against Respondent’s license was warranted.

CONCLUSIONS OF LAW

The Registrar has jurisdiction over this matter pursuant to Ariz. Rev. Stat. §§ 32-1101 et seq. and 32-1154(A). The matter was properly brought before OAH pursuant to Ariz. Rev. Stat. §§ 41-1092 et seq.

The purpose of the Registrar’s licensing statutes is to protect the public from unscrupulous, unqualified, and financially irresponsible contractors.

The Registrar may resolve contractual disputes if such resolution in ancillary to its regulatory mission and may penalize a contractor’s license by ordering payment of restitution if a proven statutory violation was not remedied by corrective action.

Complainant bears the burden of proof to establish cause for the Registrar to discipline Respondent’s license by a preponderance of the evidence. Respondent bears the burden to establish factors in mitigation of the penalty and affirmative defenses 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.”

Ariz. Rev. Stat. § 32-1154(A)(3) includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license, “[v]iolation of any rule adopted by the registrar.”

Ariz. Admin. Code R4-9-108(a) requires that “[a] contractor shall perform all work in a professional and workmanlike manner.”

Ariz. Rev. Stat. § 32-1154(A)(12) includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license, “Failure in any material respect to comply with this chapter.”

Ariz. Rev. Stat. § 32-1158(A) provides that a contract between a contractor and property owner amounting to more than $1,000.00 must contain the following information in writing:

The name of the contractor and the contractor's business address and license number.

The name and mailing address of the owner and the jobsite address or legal description.

The date the parties entered into the contract.

The estimated date of completion of all work to be performed under the contract.

A description of the work to be performed under the contract.

The total dollar amount to be paid to the contractor by the owner for all work to be performed under the contract, including all applicable taxes.

The dollar amount of any advance deposit paid or scheduled to be paid to the contractor by the owner.

The dollar amount of any progress payment and the stage of construction at which the contractor will be entitled to collect progress payments during the course of construction under the contract.

That the property owner has the right to file a written complaint with the Registrar for an alleged violation of Ariz. Rev. Stat § 32-1154(A). The contract shall contain the Registrar's telephone number, website address, and shall state that complaints must be made within the applicable time period as set forth in Ariz. Rev. Stat § 32-1155(A). The information must be prominently displayed in the contract in at least ten point bold type, and the contract shall be signed by the property owner and the contractor.

Ariz. Rev. Stat. § 32-1154(A)(16) includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license, “[k]nowingly contracting beyond the scope of the license or licenses of the licensee.”

Ariz. Rev. Stat. § 32-1154(A)(22) provides, in pertinent part, that “[a] holder of a license may not fail to take appropriate corrective action to comply with this chapter or rules adopted pursuant to this chapter without valid justification within a reasonable period of time after receiving a written directive from the registrar. The written directive shall set forth the time within which the contractor is to complete the remedial action. The time permitted for compliance shall not be less than fifteen days from the date of issuance of the directive. A license shall not be revoked or suspended nor shall any other penalty be imposed for a violation of this paragraph until after a hearing has been held. The Registrar has the authority to issue license discipline under this provision, including summary suspension, revocation, or imposing a civil penalty or recovery fund award.

Ariz. Rev. Stat. § 32-1154(E) provides, in pertinent parts, that the Registrar may “[i]mpose a civil penalty not to exceed five hundred dollars on a contractor for each violation. The failure by the licensee to pay any civil penalty imposed results in the automatic revocation of the license thirty days after the effective date of the order providing for the civil penalty.” It also provides that “[n]o future license may be issued to an entity consisting of a person who is associated with the contractor, unless payment of any outstanding civil penalty is tendered.”

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.”

Statutes should be interpreted to provide a fair and sensible result. “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 material facts in the case at bar are not in dispute.

It is undisputed that Respondent provided a 5-year warranty for stucco and paint work Mr. Welch performed at Complainant’s residence in 2021. It is also undisputed that Complainant provided Respondent with notice of perceived deficiencies with Mr. Welch’s workmanship between August and September 2022. It is also undisputed that Respondent’s workmanship did not satisfy the minimum standards set by the Registrar. It is further undisputed that the only means Respondent could use to satisfy the Registrar’s Directive was to settle with Complainant, as Respondent could not perform work outside the scope of its license or in suspended state. The record also reflects that the parties did not settle.

Therefore, the only issue in dispute is whether Respondent raised a sufficient justification or excuse for failing to adhere to the Registrar’s Directive. This is an affirmative defense that Respondent bears the burden to establish by a preponderance of the evidence. Here, the Tribunal is not at liberty to make presumptions in favor of Respondent or accept facts in mitigation on behalf of Respondent that are not supported by the evidence. Here, Mr. Welch admitted to contracting with the Pedersens outside the scope of his license, and did not provide any evidence to suggest submitted a corrected contract template in compliance with Ariz. Rev. Stat. § 32-1158(A) to the Registrar on behalf of Respondent. Additionally, Mr. Welch admitted that he did not comply with the Directive because Complainant rejected his offer to “split the difference” of the costs of repairs. Thus, the evidentiary record in this matter reflects that Respondent failed to adhere to the Registrar’s Directive and had no affirmative defense(s) for doing so.

Based on the relevant and credible evidence of record, the Tribunal finds that Complainant has established Respondent’s violations of Ariz. Rev. Stat. §§ 32-1154(A)(3); Ariz. Admin. Code R4-9-108(a), 32-1154(A)(12); 32-1158, 32-1154(A)(16), and 32-1154(A)(22) by a preponderance of the evidence, which establishes grounds for the Registrar to take disciplinary action against ROC License No. 309734.

Complainant may petition the Registrar’s Recovery Fund for financial recompense.

RECOMMENDED ORDER

Based on the foregoing,

IT IS RECOMMENDED that five days after the effective date of the Final Order in this matter, Respondent David Welch and Edward Wharton, dba Arizona Renovations and Home Improvements, ROC License No. 309734, be suspended for four (4) days based on its violations of Ariz. Rev. Stat. §§ 32-1154(A)(3), 32-1154(A)(12); 32-1158, 32-1154(A)(16), and 32-1154(A)(22).

IT IS FURTHER RECOMMENDED that the Registrar require Respondent to pay the sum total of $100.00 (one hundred) in certified funds as a civil penalty in this matter.

IT IS FURTHER RECOMMENDED that if Respondent fails to pay the entire amount of the civil penalty on or before thirty (30) days following the effective date of the Registrar’s Final Order, the Registrar shall revoke Respondent’s license, effective on such deadline date. No future license shall be issued to any entity consisting of persons associated with Respondent, as defined in Ariz. Rev. Stat. § 32-1101(A)(5), unless Respondent tenders payment of any outstanding prior civil penalty.

NOTICE

Pursuant to Ariz. Rev. Stat. § 41-1092.08(I), the licensee may accept the Administrative Law Judge Decision by advising the Office of Administrative Hearings in writing not more than ten (10) days after receiving the decision. If the licensee accepts the Administrative Law Judge Decision, the decision shall be certified as the final decision by the Office of Administrative Hearings.

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 Final Order will be forty (40) days from the date of that certification.

Done this day, May 24, 2023.

Office of Administrative Hearings

/s/ Jenna Clark

Administrative Law Judge

Transmitted electronically to:

Martín Quezada, Director

Registrar of Contractors

c/o Legal Department

1700 W. Washington St., Ste. 105

Phoenix, AZ 85007

[email redacted]

Krista Williams, Complainant

4346 S. Escalante Ridge Pl.

Tucson, AZ 85730

[email redacted]

David Welch and Edward Wharton, Respondent

dba Arizona Renovations and Home Improvements

1155 S. Power Rd., Ste. 114

Mesa, AZ 85206

[email redacted]

By: OAH Staff