ALJDEC - Licensing

2023A-05980-CHC-ROC · Registrar of Contractors · 2024-01-22

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Stephanie Young,

COMPLAINANT,

v.

K10 Companies LLC

ROC License No. 312398,

RESPONDENT

No. 2023A-05980-CHC-ROC

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: January 16, 2024 at 1:00 PM.

APPEARANCES: Stephanie Young (“Complainant”) appeared on her own behalf. Daniel Grover appeared on behalf of K10 Companies LLC (“Respondent”). Todd Anderson appeared on behalf of the Arizona Registrar of Contractors (“Registrar”). Spencer Applegate observed.

ADMINISTRATIVE LAW JUDGE: Jenna Clark.

EXHIBITS ADMITTED INTO EVIDENCE: The Notice of Hearing, including the Registrar’s attached Agency File, was admitted. The Tribunal’s December 12, 2023, Hearing Order was also admitted.

_____________________________________________________________________

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 31, 2017, the Registrar issued License No. 312398 General Dual KB-2 contracting license to Respondent. The license is renewed through March 31, 2025. Spencer Applegate is listed as the Qualifying Party on the license. Melanie Whiting Lunt is listed as the Manager, Kebehn Legacy LLC and PPWK Holdings LLC are also both listed as Subsidiaries on the license. Respondent’s address of record for the license is 1630 E. Southern Ave., Ste. 133 Mesa, AZ 85209. Respondent has an active $20,000.00 surety bond on the license issued by RLI Insurance Company, effective January 21, 2021. The license no prior disciplinary record, save 1 prior complaint that has been settled or otherwise resolved against it. Currently, there is 1 open complaint against the license which is presumed to be related to the matter at bar.

On or about May 24, 2023, the Registrar received a lengthy narrative complaint from Complainant against Respondent’s License No. 312398 alleging poor work of project property Complainant purchased from Respondent. The Registrar designated it Complaint No. 2023-05980 and assigned to Todd Anderson (“Investigator Anderson”) for investigation.

On June 08, 2023, Investigator Anderson issued a Jobsite Inspection Notification Letter to the parties, advising that he would conduct an inspection of the project on June 29, 2023, at 9:00 a.m. Correspondence was not returned as undeliverable to Respondent.

On June 08, 2023, Investigator Anderson issued a Notice of Rescheduled Jobsite Inspection Letter to the parties, advising that inspection of the project had been reset for July 10, 2023, at 9:00 a.m. Correspondence was not returned as undeliverable to Respondent.

On July 10, 2023, Investigator Anderson inspected the work that had been performed on the project to date. Respondent was present. Investigator Anderson also reviewed the contract-related correspondence between the parties, and took 50 photographs of the project site. When he was finished, Investigator Anderson drafted his Inspection Notes. Ultimately, Investigator Anderson derived a total of 26 separate and distinct complaint items, of which he was able to substantiate 21 based on his firsthand observations. Specifically, Investigator Anderson determined Respondent’s workmanship on complaint items 1-14, 16-18, 20-21, 23, and 26 failed to meet the Registrar’s minimum standards and required Respondent to perform corrective and/or completion work to remediate the identified deficiencies.

On July 25, 2023, Investigator Anderson 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 August 11, 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 September 26, 2023, Investigator Anderson issued a Compliance Jobsite Inspection Notification Letter to the parties, advising that he would conduct an inspection of the project on October 04, 2023, at 10:30 a.m. Correspondence was not returned as undeliverable to Respondent.

On October 04, 2023, Investigator Anderson inspected the corrective work that had been performed on the project and took 4 photographs. Respondent was present. When he was finished, Investigator Anderson drafted his Compliance Jobsite Inspection Notes. Ultimately, Investigator Anderson determined that Respondent had satisfactorily remediated all previously substantiated complaint items, save complaint items 1 or 21.

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

On November 06, 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), and 32-1154(A)(22). Respondent was given until November 21, 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 November 20, 2023, the Registrar received Respondent’s timely Answer whereby Mr. Grover argued that complaint item 1 was an unrelated drywall issue, and that complaint item 21 had been successfully addressed. Respondent accused Complainant of “taking advantage” and “being nit-picky,” and noted that Respondent had “got really sick of constantly having to go back and back to work around [Complainant’s] schedules and [Complainant’s] items that were not right.” Respondent opined that it had done all it could to address the Registrar’s Directive.

On November 22, 2023, the Registrar referred this matter to the Office of Administrative Hearings (“OAH”), an independent state agency, for an evidentiary hearing on January 16, 2024. Per the December 01, 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)(22)

On January 16, 2024, at the commencement of hearing, Respondent submitted a verbal Motion to Continue on the grounds that it was desirous of securing legal representation. The motion was denied, in large part, because Respondent admitted timely receipt of both the Notice of Hearing and Hearing Order and failed to provide reasonable justification or establish exigency for its untimely submission per Ariz. Admin. Code R2-19-106(C).

Hearing Evidence

Complainant testified on her own behalf and called Investigator Anderson as a witness. Daniel Grover testified on behalf of Respondent. The credible and substantive evidence of record is as follows:

Respondent previously owned residential property located at 1630 E. Yellowstone Pl. Chandler, Arizona 85249. Prior to the sale Respondent made a litany of renovations to nearly every room of the house; including, but not limited to, the kitchen, primary bathroom, guest bathroom, and laundry room. Respondent subsequently sold the property to Complainant on or about April 13, 2023.

Between July 25, 2023, and August 11, 2023, Respondent did not perform any remediations in adherence with the Registrar’s Directive. On August 15, 2023, Mr. Grover informed Investigator Anderson that he had believed Respondent had until August 11, 2023, “to agree with the Directive,” and had not realized Respondent’s compliance was due by that date. As a result, Investigator Anderson granted Respondent’s extension request and gave Respondent until September 01, 2023, to comply with the Registrar’s Directive.

On September 01, 2023, Mr. Grover submitted Respondent’s second extension request to Investigator Anderson regarding the Registrar’s Directive. As a result, Investigator Anderson granted Respondent’s extension request and gave Respondent until September 15, 2023, to comply with the Registrar’s Directive.

On September 19, 2023, Investigator Anderson inquired with Complainant regarding the status of project remediations by Respondent. At that time, Complainant informed Investigator Anderson that Respondent had performed corrective work, but expressed concerns regarding Respondent’s workmanship. Complainant asked Investigator Anderson to conduct a compliance jobsite inspection.

At the resulting compliance jobsite inspection held October 04, 2023, Investigator Anderson determined that Respondent had not performed corrective work necessary to remediated substantiated complaint items 1 or 21.

Additional Evidence

At some point Respondent accused Complainant of denying access to the project site August 28-29, 2023, but later clarified that the parties agreed to reschedule Respondent’s access from those dates. There was never a denial of access in this matter.

Closing Arguments

In closing Respondent opined that it had sufficiently addressed complaint items 1 and 21, and argued that discipline should not be imposed against License No. 312398 because Respondent had worked diligently to address the Registrar’s Directive.

Complainant declined to provide a closing argument.

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)(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 Complaint No. 2023-05980 was filed within the applicable Statute of Limitations, and that Respondent was responsible for the workmanship at issue in the complaint. The fact that the parties did not have a contract with one another is immaterial.

It is also undisputed that Respondent’s workmanship fell below the Registrar’s minimum workmanship standards, and that Respondent was timely provided with the Registrar’s Directive to address the deficiencies in its work. The record further reflects that Respondent made no attempts to correct complaint items 1 or 21 July 25, 2023, to August 11, 2023, and did not perform sufficient corrective work necessary to meet the Registrar’s minimum workmanship standards during the 2 extensions it was granted to the Directive.

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 Directive to correct the workmanship deficiencies identified by Investigator Houston. 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 on this project. Respondent’s failure to address the Registrar’s Directive July 25, 2023, to August 11, 2023, and untimely request not one but two extensions and still not remediate 2 complaint items, given the lack of exigent circumstances, is unacceptable. Respondent’s opinions regarding its workmanship of complaint items 1 and 21 are self-serving and do not outweigh Complainant’s more compelling evidence to the contrary.

Because Complainant has established Respondent’s violations of Ariz. Rev. Stat. §§ 32-1154(A)(3); Ariz. Admin. Code R4-9-108(a), 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, Respondent K10 Companies LLC, ROC License No. 312398, be suspended five (5) days.

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

Done this day, January 22, 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]

K10 Companies LLC, Respondent

7143 E. Southern Ave., Ste. 133

Mesa, AZ 85209

[email redacted]

Stephanie Young, Complainant

1630 E Yellowstone Pl.

Chandler, AZ 85249

[email redacted]

By: OAH Staff