ALJDEC - Licensing

2023A-02661-CHC-ROC · Registrar of Contractors · 2023-08-19

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Larry Euzarraga,

COMPLAINANT,

v.

J.D. Remodeling LLC

ROC License No. 312676,

RESPONDENT.

No. 2023A-02661-CHC-ROC

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: August 16, 2023 at 1:00 PM.

APPEARANCES: James Cool, Esq. appeared on behalf of Larry Euzarraga (“Complainant”) with Pamela Euzarraga and Shellie Rudow as witnesses. Johnny Dragan appeared on behalf of J.D. Remodeling LLC (“Respondent”). David Fagerburg appeared on behalf of the Arizona Registrar of Contractors (“Registrar”).

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 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 April 03, 2017, the Registrar issued License No. 312676 Specialty Dual CR-48 Ceramic, Plastic and Metal Tile contracting license to Respondent. Although the license was renewed through April 30, 2023, on May 01, 2023, the license was suspended by operation of law for non-renewal. Johnny Dragan is listed as the Qualifying Party and Member on the license. Respondent’s address of record for the license is 1149 E. Village Circle Dr. N., Cave Creek, AZ 85331. Respondent has an active $6,750.00 surety bond on the license issued by Merchants Bonding Company, effective March 22, 2017. The license no prior disciplinary record, save one (1) open complaint listed against the license which is presumed to be related to this matter.

On March 02, 2023, the Registrar received a 30-item complaint from Complainant against Respondent’s License No. 337387 alleging abandonment and poor work of their residential remodel project. The Registrar designated it Complaint No. 2023-02661 and assigned to David Fagerburg (“Investigator Fagerburg”) for investigation.

On March 14, 2023, Investigator Fagerburg issued a Jobsite Inspection Notification Letter to the parties, advising that he would conduct an inspection of the project on April 26, 2023, at 11:30 a.m. Correspondence was not returned as undeliverable to Respondent.

On May 22, 2023, Investigator Fagerburg inspected the work that had been performed on the project to date. Respondent was not present. Investigator Fagerburg also reviewed the contract-related correspondence between the parties, and took 30 photographs of the project site. When he was finished, Investigator Fagerburg drafted his Inspection Notes. Ultimately, Investigator Fagerburg substantiated 20 complaint items based on his firsthand observations. Specifically, Investigator Fagerburg determined Respondent’s workmanship on complaint items 1-7, 12-14, 17-19, and 23-27 failed to meet the Registrar’s minimum standards and required Respondent to perform corrective and/or completion work to remediate the identified deficiencies. Additionally, Investigator Fagerburg determined that, based on Respondent’s license type, Respondent was out of scope on all complaint items save 1-3 and 24-27. Investigator Fagerburg also discovered that no permit had been obtained for the project.

On May 03, 2023, Investigator Fagerburg issued a Warning Letter to Respondent because he believed that some of the work on the underlying project required possession of an R-61 Carpentry, Remodeling and Repairs contracting license that Respondent did not possess during the relevant time period, in violation of Arizona Revised Statutes (“Ariz. Rev. Stat.”) § 32-1154(A)(16), which could result in discipline against Respondent’s license including suspension or revocation. Correspondence was not returned as undeliverable to Respondent.

On May 03, 2023, Investigator Fagerburg issued another Warning Letter to Respondent for an alleged violation of 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. Correspondence was not returned as undeliverable to Respondent.

On May 10, 2023, Investigator Fagerburg issued a Written Directive from the Registrar (“Directive”) to Respondent because he substantiated most of Complainant’s complaint allegation(s) against Respondent. Respondent was put on notice that it had until 5:00 p.m. on June 01, 2023, to notify the Registrar of its compliance with the Directive, i.e. the completion and/or correction of complaint items 1-3 and 24-27, or face discipline pursuant to Ariz. Rev. Stat. §§ 32-1154(A) and 32-1154(E). Respondent was specifically advised as follows:

RESTRICTIONS

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

Correspondence was not returned as undeliverable to Respondent.

On June 02, 2023, Investigator Fagerburg forwarded the matter to the Registrar’s legal department with the issuance of a Citation Recommendation.

On June 16, 2023, the Registrar issued a Citation to Respondent for alleged violations of Ariz. Rev. Stat. §§ 32-1154(A)(1), 32-1154(A)(2)(b), 32-1154(A)(3); Ariz. Admin. Code R4-9-108(a), 32-1154(A)(12); 32-1158, and 32-1154(A)(22). Respondent was given until July 01, 2023, to respond with its Answer or face discipline pursuant to Ariz. Rev. Stat. §§ 32-1154(A)(22) and 32-1155. Correspondence was not returned as undeliverable to Respondent.

On June 28, 2023, the Registrar received Respondent’s timely Answer whereby Mr. Dragan argued that had been “set up,” “wrongly accused,” and “persecuted” by Mrs. Euzarraga and Ms. Rudow. Specifically, Mr. Dragan alleged that Ms. Rudow was the General Contractor on the project, and that the project was incomplete due to Complainant’s refusal to sign a Change Order and tender final payment to Respondent.

On June 30, 2023, the Registrar referred this matter to the Office of Administrative Hearings (“OAH”), an independent state agency, for an evidentiary hearing on August 16, 2023. Per the July 05, 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)(1)

Charge 2: A.R.S. § 32-1154(A)(2)(b)

Charge 3: A.R.S. § 32-1154(A)(3) – A.A.C. R4-9-108(a)

Charge 4: A.R.S. § 32-1154(A)(12) – A.R.S. § 32-1158

Charge 5: A.R.S. § 32-1154(A)(22)

Hearing Evidence

Complainant called Mrs. Euzarraga, Ms. Rudow, and Investigator Fagerburg as witnesses. Respondent called Mr. Dragan as a witness. The Registrar’s agency file, supplemental agency file, and Notice of Hearing were admitted into the record as their own exhibits. The substantive evidence of record is as follows:

Complainant owns residential property located at 35355 N. 48th St. Cave Creek, Arizona 85331.

Complainant and Mrs. Euzarraga have used Ms. Rudow’s design services for over 20 years. Ms. Rudow has used Respondent’s plumbing services during that time, including for other project for the Euzarragas.

In 2022, when Ms. Rudow asked Respondent to bid on Complainant’s project, Mr. Dragan informed her that since their last project he had decided to be a general contractor. Neither Complainant nor Ms. Rudow verified Mr. Dragan’s avowal with the Registrar.

On or about October 11, 2022, the parties entered into a $39,689.85 contract for the remodel of Complainant’s primary bathroom, including shower drain relocation, electrical work, drywall, paint, and tile.

At that time, Mr. Dragan assured Complainant that the project did not require permit(s).

Respondent’s contract with Complainant included plumbing, framing, drywall, and electrical components within the scope of work.

Work on the project commenced on or about October 17, 2022, and stopped or was otherwise completed mid-February 2023.

Complainant paid Respondent $34,000.00 towards the project.

During the project, Mr. Dragan hired licensed contractors to perform specialized portions of the work.

On an unknown date, Mr. Dragan presented Complainant with a Change Order due to typographical errors in a request for payment and due to changes in material-related costs. The parties’ relationship deteriorated immediately thereafter as no agreement could be reached amongst them.

Had he chosen to do so, Mr. Dragan could have renewed License No. 312676 between May 01, 2023, and June 01, 2023, to perform corrective work within the scope of the license in adherence with the Registrar’s Directive.

Respondent did not make any attempts to perform corrective work on the project during the Directive’s compliance period.

Respondent could not perform corrective work on substantiated complaint items 4-7, 12-14, 17-19, and 23 during the Directive’s compliance period because the work was out of scope with License No. 337387. Thus, the only means available to Respondent to address those items was to enter into a financial settlement agreement with Complainant, as Respondent was unable to subcontract the work to an appropriately licensed subcontractor due to the limitations of License No. 337387.

Respondent could have, however, addressed substantiated complaint items 1-3 and 24-27 as they were within the scope of its license.

On unknown date(s) Mr. Dragan suffered a medical emergency that required him to undergo an operation. He was unable to work for an unknown amount of time.

At no point in time did Respondent beseech the Registrar for an extension of the Directive’s compliance period.

At no point in time did Respondent allege a denial of access to the project site during the Directive’s compliance period.

Mr. Dragan did not ever refund a portion of the contract price to Complainant for not timely completing the project, nor did the parties execute a financial settlement agreement for the project. Thus, no recompense was received by Complainant for this matter.

As of the date of the hearing, Complainant’s primary bathroom remains in an unusable state.

Additional Evidence

A recommendation for citation in violation of Ariz. Rev. Stat. § 32-1154(A)(16) was unintentionally omitted from Investigator Fagerburg’s escalation to the Registrar’s legal department. As a result, the charge was omitted from the Registrar’s Citation.

Closing Arguments

Both parties declined to provide closing arguments.

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)(1) includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license, “[a]bandonment of a contract or refusal to perform after submitting a bid on work without legal excuse for the abandonment or refusal.”

Ariz. Rev. Stat. § 32-1154(A)(2)(b) includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license, “[d]eparture from or disregard of a building code of this state or any political subdivision of this state in any material respect that is prejudicial to another.”

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)(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 clear.

The record clearly reflects that Respondent accepted a contract that contained elements that were outside the scope of License No. 312676, and that Mr. Dragan acted as the General Contractor for the project as he hired, oversaw, and paid licensed contractors on the project. The record also reflects that Respondent commenced the project without first ensuring appropriate permit(s) had been obtained. The record also reflects that Complainant paid a majority of the contract price, and that Respondent performed substantially on the project. The record also reflects that Respondent’s contract with Complainant did not satisfy all nine elements of a contract required by the Registrar. The record further clearly reflects that most of Respondent’s work on the project fell below the Registrar’s minimum standards, and that Respondent failed to make any attempts to comply with the Registrar’s Directive or request an extension thereof.

Therefore, the only issue in dispute is whether Respondent raised a sufficient justification or excuse for failing to complete the underlying project, or timely enter into a financial settlement agreement with Complainant and/or perform corrective work within the scope of its license in compliance with the Registrar’s Directive. These are affirmative defenses that Respondent bears the burden to establish. 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, however, a detailed analysis is not necessary. Mr. Dragan’s explanation that he did not finish the project due to a financial dispute with Complainant is insufficient, as is his admission that he made no attempts to perform corrective work within the scope of Respondent’s license on the underlying project and/or enter into a financial settlement agreement with Complainant for substantiated complaint items outside the scope of Respondent’s license. Regarding Mr. Dragan’s medical ailment(s), he neither provided date(s) nor offered an avowal that condition rendered him incapable of requesting an extension of time from the Register, timely or otherwise. Notably, Respondent did not provide an updated contract template with the Registrar in compliance with Ariz. Rev. Stat. §§ 32-1154(A)(12); 32-1158. Thus, Respondent has failed to sustain his burden of persuasion in this matter.

Therefore, because Complainant has established Respondent’s violations of Ariz. Rev. Stat. §§ 32-1154(A)(2)(b), 32-1154(A)(3); R4-9-108(a), 32-1154(A)(12); 32-1158, and 32-1154(A)(22), Complainant has also established cause for the Registrar to take disciplinary action against Respondent’s contracting license.

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

RECOMMENDED ORDER

Based on the foregoing,

IT IS RECOMMENDED that five days after the effective date of the Final Order in this matter, ROC License No. 312676, as issued to Respondent J.D. Remodeling LLC, be suspended for twenty (20) days.

IT IS FURTHER RECOMMENDED that the Registrar require Respondent to pay the sum total of $500.00 (five hundred dollars) 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 Order will be forty (40) days from the date of that certification.

Done this day, August 21, 2023.

Office of Administrative Hearings

/s/ Jenna Clark

Administrative Law Judge

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

Martín Quezada, Director

Registrar of Contractors

c/o Legal Department

1700 W. Washington St., Ste. 105

Phoenix, AZ 85007

[email redacted]

J.D. Remodeling LLC, Respondent

1149 E. Village Circle Dr. N.

Phoenix, AZ 85022

[email redacted]

Larry Euzarraga, Complainant

ATTN: James M. Cool, Esq.

c/o Frazer, Ryan, Goldberg & Arnold, LLP, Counsel for Complainant

1850 N. Central Ave., Ste. 1800

Phoenix, AZ 85004

[email redacted]

By: OAH Staff