ALJDEC - Licensing

2023A-07737-RFA-LS-ROC · Registrar of Contractors · 2024-11-15

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Tom Philips,

COMPLAINANT,

v.

I Epoxy Floors LLC

ROC License No. 326387,

RESPONDENT.

No. 2023A-07737-RFA-LS-ROC

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: November 15, 2024 at 9:00 AM.

APPEARANCES: Assistant Attorney General Charles Hover III, Esq. appeared on behalf of the Arizona Registrar of Contractors (“Registrar”). Tom Philips (“Complainant”) appeared on his own behalf. Bruce Kriens appeared on behalf of I Epoxy Floors LLC (“Respondent”). Virginia Lees and Roxann Fisher observed.

ADMINISTRATIVE LAW JUDGE: Jenna Clark.

EXHIBITS ADMITTED INTO EVIDENCE: Registrar Exhibits 1-19, including the Notice of Hearing on Appealable Agency Action (“Notice of Action”), and October 08, 2024, Hearing Order were admitted into the evidentiary 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 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 October 01, 2019, the Registrar issued ROC License No. 326387 Specialty Dual CR-61 Carpentry, Remodeling and Repairs contracting license to Respondent. The license is renewed through October 31, 2025. Bruce Lee Kriens, Jr. is listed as the Qualifying Party and Manager on the license. Respondent’s address of record for the license is 712 E. White Mountain Blvd., Box #654 Pinetop, AZ 85935. Respondent has an active $6,750.00 surety bond on the license issued by RLI Insurance Company, effective August 07, 2020. The license has been disciplined on one (1) prior occasion, which is presumed to be related to this matter.

On or about July 11, 2023, the Registrar received a complaint against ROC License No. 326387 alleging poor work of Complainant’s residential pickle ball court project. The Registrar designated it Complaint No. 2023-07737 and assigned to Miles Crosby (“Investigator Crosby”) for investigation.

On July 26, 2023, Investigator Crosby inspected the work that had been performed on the project to date. Respondent was not present. Investigator Crosby also reviewed the contract-related correspondence between the parties, and took 10 photographs of the project site. When he was finished, Investigator Crosby drafted his Inspection Notes. Ultimately, Investigator Crosby derived a single complaint item from Complainant’s submission, of which he was able to substantiate based on his firsthand observations. Specifically, Investigator Crosby noted that Complaint No. 2022-06938 has been filed by Complainant the prior year, regarding the same issue, and although Respondent had acknowledged workmanship deficiencies and agreed to perform corrective work, the concrete slab for the pickle ball court remained in a similar condition – below the Registrar’s minimum workmanship standards.

On July 28, 2023, Investigator Crosby issued a Warning Letter to Respondent because he believed that some of the work on the underlying project required possession of a B-General Residential or CR-9 Concrete contracting license that Respondent did not possess during the relevant time period, in violation of Arizona Revised Statute (“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 July 28, 2023, Investigator Crosby also issued a 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 August 03, 2023, Investigator Crosby issued a Written Directive from the Registrar (“Directive”) to Respondent because he substantiated Complainant’s complaint allegation(s) against Respondent. Respondent was put on notice that it had until 5:00 p.m. on August 18, 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). 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 September 05, 2023, Investigator Crosby performed a compliance jobsite inspection whereby he inspected the corrective work that had been performed on the project and took 7 photographs. Respondent was not present. When he was finished, Investigator Crosby drafted his Compliance Jobsite Inspection Notes. Ultimately, Investigator Crosby determined that Respondent had started corrections on the slab, did not finish, failed to communicate with Complainant about the corrective work, and left behind a concrete grinding machine after failing to return to complete remediations.

On September 15, 2023, Investigator Crosby forwarded the matter to the Registrar’s legal department with the issuance of a Citation Recommendation.

On September 11, 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 September 26, 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 September 25, 2023, the Registrar received Respondent’s timely Answer whereby Mr. Kriens argued that he offered a resolution to Complainant on or about July 23, 2023, by issuing a new contract, but that Complainant had refused to sign the agreement.

On September 27, 2023, the Registrar referred this matter to the Office of Administrative Hearings (“OAH”), an independent state agency, for an evidentiary hearing on November 17, 2023. Per the October 04, 2023, Amended 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)(12) – A.R.S. § 32-1158

Charge 3: A.R.S. § 32-1154(A)(16)

Charge 4: A.R.S. § 32-1154(A)(22)

On November 17, 2023, an administrative evidentiary hearing took place at OAH before the undersigned. On December 01, 2023, the undersigned issued her Recommended Decision to the Director of the Registrar, which suspended ROC License No. 326387 for ten (10) days for Respondent’s violations of Ariz. Rev. Stat. §§ 32-1154(A)(3), 32-1154(A)(12), 32-1154(A)(16), and 32-1154(A)(22), and also assessed a $100.00 civil penalty against Respondent pursuant to Ariz. Rev. Stat. § 32-1154(E).

On December 29, 2023, pursuant Ariz. Rev. Stat. § 41-1092.08(B), the Registrar issued a Final Administrative Decision and Order (“Final Order”) whereby the undersigned’s Recommended Decision was accepted. On February 07, 2024, the Final Order became effective. Neither party appealed.

On April 22, 2024, 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). Attached was a copy of Complainant’s Warranty Deed for the underlying property, proof of the parties’ underlying contract and payments made to Respondent for the project, and bond denial letter from Respondent’s insurance company. Also attached were two (2) repair bids: a $33,300.00 bid from De Leon Concrete, and a $31,200.00 bid from Applegate Construction LLC (“Applegate”).

On August 26, 2024, the Registrar issued a Notice of Claim for Administrative Award (“Notice of Award”) to the parties which held that Complainant was awarded $30,000.00 from the Fund.

On September 09, 2024, the Registrar received a timely appeal of the Notice of Award on behalf of Respondent.

On September 18, 2024, the Registrar referred 2023A-07737-RFA-LS-ROC to OAH for an independent evidentiary hearing. Per the Notice of Action sent to the parties on September 25, 2024, the issues for hearing are to determine 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 November 15, 2024, an administrative evidentiary hearing took place at OAH.

Hearing Evidence

At the hearing, the Registrar called Gail Mathews as a witness. Complainant testified on his own behalf. Bruce Kriens testified on behalf of Respondent. The substantive evidence is as follows:

Complainant owns a residential property located at 2628 S. Hart Lake Ln. Pinetop-Lakeside, Arizona 85929.

On or about June 27, 2022, the parties entered into a $27,766.71 contract for the custom installation of a pickle ball court and shed at Complainant’s residence. On an unknown date, a $1,998.00 Change Order was executed on the project. Complaint paid Respondent $29,764.71 for the project.

From August 03, 2023, to August 18, 2023, ROC License No. 326387 was active and in good standing with the Registrar.

Ms. Mathews is a Legal Assistant II for the Registrar. Ms. Mathews made the determination that Complainant was eligible to access the Fund, and also eligible to receive an administrative payout from the Fund, because he satisfied all statutory requirements for an award. Specifically, Ms. Mathews determined the following:

Complainant owns and occupies the residential property at issue.

Respondent’s license was active and in good standing with the Registrar when the underlying contract was entered into.

Complainant paid the full contract price. There was no unpaid balance remaining between the parties.

As a result of Complaint No. 2022-07737 being filed with the Registrar, ROC License No. 326387 was disciplined by the Registrar and assessed a civil penalty.

Though he applied, Complainant did not received a bond payout for the underlying project from Respondent’s insurance company.

On September 12, 2024, Ms. Mathews verified with Investigator Crosby that it would be reasonable for another contractor to “repour the court” as they would “not want to inherit the unknowns” regarding Respondent’s poor workmanship.

Both bids received from Complainant were acceptable because they satisfied the Directive’s scope of work and the contractors were appropriately licensed to perform the corrective work. The $31,200.00 bid from Applegate was accepted by the Registrar because it was the lowest price.

Ultimately, Ms. Mathews calculated Complainant’s compensable damages at $30,000.00, $1,200.00 less than the accepted Applegate bid, for damages sustained as a result of Respondent’s poor workmanship because the award was statutorily capped at $30,000.00 per Ariz. Rev. Stat § 32-1132.01.

Additional Evidence

Per Mr. Kreins, the Registrar incorrectly relied on the Applegate bid because he believed that the project warranted repair over replacement. To that end, Mr. Kreins also opined that corrective work could be completed for far less than the Applegate bid, and further opined that the cost of the Applegate bid was “overkill” and “ridiculous.”

Closing Arguments

Complainant declined to provide a closing argument.

Respondent declined to provide a closing argument.

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, was eligible for a $30,000.00 payout from the Fund. Per the Registrar, it had satisfied its fiduciary duty to comply with the pertinent sections of the law and protect the purpose of the Fund.

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 Recovery Fund claim award amount was incorrect and/or improperly issued, and/or that Complainant was incorrectly and/or improperly deemed to be eligible to access the Fund. Both Complainant and the Registrar bear 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.

The crux of the matter is whether repair or replacement would make Complainant “whole,” and which bid he submitted, if any, could fulfill the corrective work order. In the case at bar, however, a detailed factual analysis is not necessary because Respondent failed to present any compelling evidence at hearing.

Here, the Registrar soundly established Complainant’s eligibility to access the fund, as well as the calculation and resulting award therefrom. Respondent’s opinion that Complainant is ineligible to access the Fund, without providing an indicia of evidence to support his contention, is irrelevant. Mr. Kreins’ vehement assertion that the Applegate bid was “too high” and that he could have performed corrections for less, is immaterial. Additionally, the Registrar’s calculations regarding Complainant’s actual compensable damages are also correct.

The record credibly reflects that in order to remediate the underlying project, Respondent’s workmanship needs to be replaced with competent work. It would be unreasonable to force another contractor to assume latent defects in Respondent’s work in an attempt to perform repairs. Moreover, there is no statute, regulation, precedent, or binding authority that requires the Registrar to force an aggrieved homeowner to permit a contractor to continue to attempt indefinite corrections and/or force said homeowner to find the “cheapest” or “least expensive” repair/replacement option available. All that matters is that the relied upon bid not fall below or exceed the scope of work identified in the parties’ underlying contract or Directive, and that the remediating contractor be appropriately licensed by the Registrar. These requirements have been met here. Although the Tribunal empathizes with Mr. Kreins’ financial concerns for his business, it must be held that Respondent failed to sustain its burden of proof 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 his 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 is denied.

RECOMMENDED ORDER

Based on the foregoing,

IT IS RECOMMENDED that the Registrar affirm the Fund’s August 26, 2024, $30,000.00 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, November 18, 2024.

Office of Administrative Hearings

/s/ Jenna Clark

Administrative Law Judge

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

Tom Cole, Director

c/o Gail Mathews, Legal Department

Registrar of Contractors

1700 W. Washington St., Ste. 105

Phoenix, AZ 85007

[email redacted]

Charles Hover III, Esq., Assistant Attorney General

Office of the Attorney General

2005 N. Central Ave.

Phoenix, AZ 85004

[email redacted]

I Epoxy Floors LLC, Respondent

c/o Bruce Kreins, Agent

4936 Black Panther Loop

Pinetop, AZ 85935

[email redacted]

Tom Philips, Complainant

1831 W. Grove Dr.

Lakeside, AZ 85929

[email redacted]

By: OAH Staff