ALJDEC - Licensing

2023A-04571-CHC-ROC · Registrar of Contractors · 2024-02-19

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Richard Hammond,

COMPLAINANT,

v.

Arizona Pools & Design LLC

dba Arizona Outdoor Landscape & Design

ROC License No. 332472,

RESPONDENT.

No. 2023A-04571-CHC-ROC

CORRECTED ADMINISTRATIVE LAW JUDGE DECISION

HEARING: February 13, 2024 at 1:00 PM.

APPEARANCES: Morgan McCain, Esq. appeared on behalf of Richard Hammond (“Complainant”). John Smith appeared on behalf of the Arizona Registrar Contractors (“Registrar”). No appearance(s) by or on behalf of Arizona Pools & Design LLC (“Respondent”).

ADMINISTRATIVE LAW JUDGE: Jenna Clark.

EXHIBITS ADMITTED INTO EVIDENCE: The Notice of Hearing, including the Registrar’s attached agency file, was admitted into the record along with Complainant Exhibits 1, 12-15, and 21-23.

_____________________________________________________________________

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 March 03, 2021, the Registrar issued License No. 332472 General Dual KA-5 Swimming Pool contracting license to Respondent. The license is renewed through March 31, 2025. Verano A. Vargas is listed as the Qualifying Party, Member, and Manager on the license. Respondent’s address of record for the license is 1870 W. Prince Rd., Ste. 38 Tucson, AZ 85705. Respondent has an active $14,000.00 surety bond on the license issued by American Contractors Indemnity Company, effective March 02, 2021. The license has no prior disciplinary record, save three (3) open complaints against it; one of which is presumed to be related to this matter.

On April 17, 2023, the Registrar received a 7-item complaint from Complainant against Respondent’s License No. 332472 alleging poor work of their residential pool installation project. The Registrar designated it Complaint No. 2023-04281 and assigned to John Smith (“Investigator Smith”) for investigation.

On May 04, 2023, Investigator Smith issued a Jobsite Inspection Notification Letter to the parties, advising that he would conduct an inspection of the project on June 01, 2023, at 9:00 a.m. Correspondence was not returned as undeliverable to Respondent.

On May 22, 2023, Investigator Smith issued a reminder to the parties regarding the scheduled jobsite inspection. Correspondence was not returned as undeliverable to Respondent.

On May 04, 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 May 04, 2023, Investigator Smith issued a Warning Letter to Respondent for an alleged violation of Ariz. Rev. Stat. §§ 32-1154(A)(12); 32-1158.01 for Respondent’s failure to include all statutorily required progress payment provisions 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 May 04, 2023, Investigator Smith issued a Warning Letter to Respondent to advise that building permit(s) were not obtained for the project in violation of the International Residential Code R105.1. Respondent was further advised that failure to comply with the building codes was a violation of Ariz. Rev. Stat. §§ 32-1154(A)(2)(b) and 32-1154(A)(3); Ariz. Admin. Code R2-9-108(b), which could result in discipline against Respondent’s license including suspension or revocation. Correspondence was not returned as undeliverable to Respondent.

On May 04, 2023, Investigator Smith issued a Warning Letter to Respondent to advise that Respondent’s work on the underlying project required possession of an A-9 or B-5 license that Respondent did not possess during the relevant time period, in violation of 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 June 01, 2023, Investigator Smith inspected the work that had been performed on the project to date. Respondent was present. Investigator Smith also reviewed the contract-related correspondence between the parties, and took 13 photographs of the project site. When he was finished, Investigator Smith drafted his Inspection Notes. Ultimately, Investigator Smith substantiated all 7 complaint items against Respondent based on his firsthand observations. Specifically, Investigator Smith determined Respondent’s workmanship on complaint items 1-7 failed to meet the Registrar’s minimum standards and required Respondent to perform corrective and/or completion work to remediate the identified deficiencies.

On June 02, 2023, Investigator Smith issued a Written Directive from the Registrar (“Directive”) to Respondent because he substantiated all of Complainant’s complaint allegation(s) against Respondent. Respondent was put on notice that it had until 5:00 p.m. on June 19, 2023, to notify the Registrar of its compliance with the Directive or face discipline pursuant to Ariz. Rev. Stat. §§ 32-1154(A) and 32-1154(E). Correspondence was not returned as undeliverable to Respondent.

On June 21, 2023, Investigator Smith forwarded the matter to the Registrar’s legal department with the issuance of a Citation Recommendation. Investigator Smith specifically noted the following:

The respondent has not responded to the complaint.

The respondent has not contacted the ROC Investigator at any time throughout this investigation.

The respondent has not performed any corrective actions.

On June 27, 2023, the Registrar issued a Citation to Respondent for alleged violations of Ariz. Rev. Stat. §§ 32-1154(A)(2)(a), 32-1154(A)(2)(b), 32-1154(A)(3); Ariz. Admin. Code R4-9-108(a), 32-1154(A)(3); Ariz. Admin. Code R4-9-108(b), 32-1154(A)(12); 32-1158, 32-1154(A)(12); 32-1158.01, 32-1154(A)(16), and 32-1154(A)(22). Respondent was given until July 12, 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 July 11, 2023, the Registrar received Respondent’s timely Answer whereby Demian Vargas denied all of the allegations in the Citation.

On July 14, 2023, the Registrar referred this matter to the Office of Administrative Hearings (“OAH”), an independent state agency, for an evidentiary hearing on August 31, 2023. Per the July 24, 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)(2)(a)

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)(3) – A.A.C. R4-9-108(b)

Charge 5: A.R.S. § 32-1154(A)(12) – A.R.S. § 32-1158

Charge 6: A.R.S. § 32-1154(A)(12) – A.R.S. § 32-1158.01

Charge 7: A.R.S. § 32-1154(A)(16)

Charge 8: A.R.S. § 32-1154(A)(22)

Hearing Evidence

Complainant testified on his own behalf and called Investigator Smith as a witness. The substantive evidence of record is as follows:

Complainant owns residential property located at 1431 E. Emilie Cir. Oracle, Arizona 85623.

On or about May 23, 2022, the parties entered into an $86,818.00 pool installation contract.

Work on the project commenced on or about June 24, 2023. The project was never completed.

Complainant paid Respondent $55,727.50 for the project.

Between June 02, 2023, and June 19, 2023, Respondent did not perform any corrective work on substantiated complaint items 1-7.

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

On an unknown date after the expiration of the Directive’s compliance period, Investigator Smith was advised by Complainant that Respondent had performed work on the project. As a result, prehearing jobsite inspections were performed on November 27, 2023, and February 09, 2024, by Investigator Smith. Although Compliance Jobsite Inspection Notification Letters were issued to the parties in advance, Respondent did not participate. Neither correspondence was returned as undeliverable to Respondent. Ultimately, Investigator Smith determined that Respondent had not satisfactorily performed corrective work necessary to remediate complaint items 1-7.

Additional Evidence

A permit was not issued for the underlying project until August 21, 2023, and did not pass inspection on November 06, 2023.

On November 14, 2023, the local building authority informed Respondent that the scope of work for the project exceeded the scope of its license.

The only means by which Respondent could have complied with the Registrar’s Directive would have been to request an extension and obtained appropriate licensure and/or entered into a financial settlement agreement with Complainant. Neither occurred.

Closing Arguments

In closing Complainant opined that because it had established Respondent’s violations of all eight alleged statutory provisions in the Citation, that the Registrar had grounds to discipline ROC License No. 332472. Per Complainant, based on Respondent’s actions, revocation was warranted.

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 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.

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 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)(2)(a) includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license, “[d]eparture from or disregard of [p]lans or specifications in any material respect that is prejudicial to another without consent of the owner or the owner's duly authorized representative and without the consent of the person entitled to have the particular construction project or operation completed in accordance with such plans and specifications and code.”

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. Admin. Code R4-9-108(b) requires that “[a]ll work shall be performed in accordance with any applicable building codes and professional industry standards.”

Ariz. Rev. Stat. § 32-1154(A)(12) holds, in pertinent part, that among the grounds for suspension or revocation of a contractor’s license is a “[f]ailure in any material respect to comply with this chapter.” Specifically, Ariz. Rev. Stat. § 32-1158 provides that “Any contract in an amount of more than one thousand dollars entered into between a contractor and the owner of a property to be improved shall contain in writing at least the following information:

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

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

3. The date the parties entered into the contract.

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

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

6. 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.

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

8. 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.

9. That the property owner has the right to file a written complaint with the registrar for an alleged violation of section 32-1154, subsection A. The contract shall contain the registrar's telephone number and website address and shall state that complaints must be made within the applicable time period as set forth in section 32-1155, subsection.”

Ariz. Rev. Stat. § 32-1154(A)(12) holds, in pertinent part, that among the grounds for suspension or revocation of a contractor’s license is a “[f]ailure in any material respect to comply with this chapter.” Specifically, Ariz. Rev. Stat. § 32-1158.01 provides that “[A] licensed contractor who enters into a contract for the construction or installation of a residential in-ground swimming pool or spa with a purchaser who resides in the residence or who intends to reside in the residence after the completion of the contract shall include at least the following provisions:

1. A provision providing the purchaser the opportunity to request standard contractor's payment and performance bonds in a form approved by the registrar, securing the completion of the work and payment for services and materials. The cost of the payment and performance bond shall be paid by the purchaser of the swimming pool or spa and the contractor shall not charge a surcharge or a service charge.

2. The following payment provisions:

(a) A down payment payable on the execution of the contract of not more than fifteen percent of the original contract price.

(b) After the completion of the excavation work on the swimming pool or spa, a payment of not more than twenty-five percent of the amount of the original contract price plus any written change orders approved by the purchaser.

(c) After the installation of steel, plumbing and pneumatically applied concrete materials or the installation of a prefabricated swimming pool or spa, a payment of not more than twenty-five percent of the amount of the original contract price plus any written change orders approved by the purchaser.

(d) After the installation of decking materials, a payment of not more than twenty-five percent of the amount of the original contract price plus any written change orders approved by the purchaser.

(e) Before the application of the finishing interior materials or completion of all work on a prefabricated pool or spa, payment of all remaining sums due on the original contract plus any written change orders approved by the purchaser.

3. A provision that gives notice to the purchaser, in a form that is approved by the registrar and that is in at least ten point type, of the purchaser's right to receive written material that advises the purchaser of the provisions of this section and of the procedures provided for by the registrar for the resolution of claims and disputes with licensed contractors.

4. A provision in a form that is approved by the registrar and that is in at least ten point type, advising the purchaser of the purchaser's rights under title 44, chapter 15.

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.

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 the Complainant paid Respondent in full for the underlying pool contract. It is also undisputed that an overwhelming majority of the work Respondent performed on the project did not satisfy the minimum standards set for workmanship by the Registrar. It is further undisputed that Respondent failed to comply with the Registrar’s Directive, and further failed to request an extension thereof.

Therefore, the only issue in dispute is whether Respondent raised a sufficient justification or excuse for failing to adhere to the Registrar’s Directive and remediate Complainant’s project. This is an affirmative defense that Respondent bears the burden to establish. Here, Respondent did not sustain his burden. There is no evidence in the record that excuses or otherwise justifies Respondent’s inaction and/or lack of performance/competence on this project. The record clearly establishes that Respondent was not appropriately licensed for multiple portions of the underlying scope of work; and could not be based on the license it held, and that its contract with Complainant did not contain all statutorily required provisions. The record is devoid of evidence that would establish Respondent updated its contract template(s) with the Registrar to be in compliance as a post-remedial measure. No mitigating evidence exists in the record in favor of Respondent. In fact, Respondent’s absence from the administrative hearing, as well as Respondent’s conduct during the entirety of the complaint process, are glaring facts in aggravation that evinces Respondent’s unwillingness to be regulated by the Registrar.

Because Complainant has established Respondent’s violations of Ariz. Rev. Stat. §§ 32-1154(A)(2)(a-b), 32-1154(A)(3); Ariz. Admin. Code R4-9-108(a-b), 32-1154(A)(12); 32-1158 and 32-1158.01, 32-1154(A)(16), and 32-1154(A)(22), Complainant has also established cause for the Registrar to discipline Respondent’s contractor’s 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, based on the egregiousness of its conduct in this matter, Respondent Arizona Pools & Design LLC, ROC License No. 332472, be revoked.

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, February 29, 2024.

Office of Administrative Hearings

/s/ Jenna Clark

Administrative Law Judge

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

Tom Cole, Director

Registrar of Contractors

c/o Legal Department

1700 W. Washington St., Ste. 105

Phoenix, AZ 85007

[email redacted]

Andrew Rahtz, Esq.

Morgan B. McCain, Esq.

Platt & Westby, P.C., Counsel for Complainant

2916 N. 7th Ave., Ste. 100

Phoenix, AZ 85013

[email redacted]

Arizona Pools & Design LLC, Respondent

1870 W. Prince Rd., Ste. 38

Tucson, AZ 85705

[email redacted]

[email redacted]

By: OAH Staff