ALJDEC - Licensing

2024A-08839-NPC-ROC · Registrar of Contractors · 2025-01-30

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Saguaro Skies Cabinetry and Design LLC,

COMPLAINANT,

v.

Arizona Construction Plus LLC

ROC License No. 301516,

RESPONDENT.

No. 2024A-08839-NPC-ROC

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: January 13, 2025 at 1:00 PM.

APPEARANCES: Jack Davis appeared on behalf of Saguaro Skies Cabinetry and Design LLC (“Complainant”). Karen Palecek, Esq. appeared on behalf of Arizona Construction Plus LLC (“Respondent”) with Martin Basta and Douglas Donadio as witnesses.

ADMINISTRATIVE LAW JUDGE: Jenna Clark.

EXHIBITS ADMITTED INTO EVIDENCE: The Notice of Hearing on Contested Case (“Notice of Hearing”), including the Arizona Registrar of Contractor’s (“Registrar’s”) attached administrative agency file, Complainant Exhibits 3-4, and Respondent Exhibits B-C 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 license files as shown on the Registrar’s public website. On October 01, 2015, the Registrar issued ROC License No. 301516 for General Residential B contracting to Respondent. Respondent’s license is active, in good standing, and renewed through October 31, 2025. Jessalyn C. Basta is listed as the Manager for the license. The address of record for the license is 8485 E. McDonald Dr. Scottsdale, Arizona 85250. Respondent has a $9,000.00 surety bond for the license issued through RLI Insurance Company, effective September 09, 2015. The license has been disciplined on one (1) prior occasion. Currently, the record reflects that there is one (1) open complaint against the license, which is presumed to be related to this matter.

In or around late-July 2024, the Registrar received a complaint from Complainant alleging nonpayment of services and/or materials against Respondent. Specifically, Complainant alleged that Respondent had failed to remit timely payment(s) on a $24,307.70 invoice issued May 21, 2024, for residential custom cabinetry performed at Respondent’s project located at 8501 N. Golf Dr. Paradise Valley, Arizona 85253 (“Snow Project”). The Registrar designated it Complaint No. 2024-08839 and assigned the case to Shaquira Adebule in their legal department for investigation.

On August 09, 2024, the Registrar issued a Notice of No Pay Complaint letter to Respondent providing notice of Complainant’s complaint, and informed Respondent that it was free to raise any affirmative defense(s) or provide additional information by August 16, 2024.

Respondent did not provide a written response to Complaint No. 2024-08839 to the Registrar.

On August 23, 2024, the Registrar issued a Citation to Respondent for an alleged violation of Ariz. Rev. Stat § 32-1154(A)(10). Respondent was notified that a failure to provide an Answer by September 07, 2024, would be deemed as an admission of Respondent’s commission of the act(s) charged in the underlying complaint, pursuant to Ariz. Rev. Stat § 32-1155(B), and could result in discipline against Respondent’s license including suspension or revocation.

On September 09, 2024, the Registrar received Respondent’s timely Answer whereby counsel for Respondent argued that the Citation should be dismissed because Respondent had not been paid for the project by the homeowner (“Homeowner”), in large part, due to the fact that Complainant “badgered” Homeowner for payment which resulted in Respondent’s termination. Per Respondent, Homeowner had been dissatisfied with Complainant’s workmanship, forcing Respondent to hire another subcontractor to repair/complete Complainant’s deficient work. No additional records were attached to Respondent’s Answer.

On October 18, 2024, the Registrar issued an Order Denying Request to Dismiss in Case No. 2024-08839.

On October 18, 2024, this matter was referred to the Office of Administrative Hearings (“OAH”), an independent state agency, for an evidentiary hearing on December 10, 2024. Per the October 28, 2024, Notice of Hearing the issue to be determined is whether the Registrar has cause to discipline Respondent’s license based on the following charge(s) alleged in the Citation:

Charge 1: A violation of Ariz. Rev. Stat. § 32-1154(A)(10).

Hearing Evidence

Complainant called Jack Davis as a witness. Respondent called Martin Basta and Douglas Donadio as witnesses. The substantive facts of record are as follows:

On June 22, 2020, the Registrar issued ROC License No. 329466 for Specialty Dual CR-60 Finish Carpentry contracting to Complainant. Complainant’s license is active, in good standing, and renewed through June 30, 2026. Mr. Davis is the Qualifying Party and Manager for the license.

On July 27, 2023, the parties entered into a $94,890.00 labor and materials subcontract agreement for the Snow Project, for the construction and installation of custom cabinetry in the residence. That same date, the parties entered into a second labor and materials subcontract agreement for the Snow Project, totaling $140,187.00, for the construction and installation of additional custom cabinetry in the residence.

Per the terms of both agreements, an initial 50% deposit was due at signing, another 40% due at delivery, and the final 10% was due upon completion of installation.

On July 27, 2023, Complainant issued a deposit invoice to Respondent.

On January 05, 2024, Complainant issued a delivery invoice to Respondent.

On May 21, 2024, Complainant issued final Invoice No. SS215.0 for $24,307.70 to Respondent for the Snow Project. Respondent never forwarded it to Homeowner for approval or payment.

On July 24, 2024, Complainant asked Respondent for final payment on the Snow Project, to which Respondent replied that Homeowner would pay Complainant directly July 24, 2024.

On July 29, 2024, Complainant issued a Demand Letter to Respondent for payment regarding the balance owed on the Snow Project.

Additional Evidence

Mr. Davis testified that Respondent paid all of the invoices it issued for the Snow Project save the final one, and that he did not believe that Respondent had not been paid for the project because Homeowner had informed him that she had paid every invoice issued by Respondent. Mr. Davis testified that he had not intended to harass Homeowner regarding payment, but that he was confused because all prior payments had come from Respondent, Respondent had seemingly delayed final payment, and then told Complainant to obtain it from Homeowner. Mr. Davis admitted that when he spoke with Homeowner “the conversation could have gone better” as it ended with her in tears and asking him to leave the property, sans payment. When Mr. Davis went back to Respondent to ask for final payment, he agreed to “hold back” $1,000.00 for the touch-ups in an act of desperation to be paid. Per Mr. Davis, at no time prior to Complainant’s last day on the Snow Project did Respondent allege that they had any concerns regarding its workmanship. On Complainant’s last day, however, Homeowner did remark about “marks” and told Complainant to do “touch-ups,” but did not point out any specific issues. Mr. Davis testified that Complainant would have returned to the project to perform touch-ups, but Respondent never called Complainant back onsite to do them. A complaint against ROC License No. 329466 was never filed with the Registrar regarding the Snow Project by Respondent.

Mr. Donadio testified that he was Respondent’s Superintendent on the Snow Project. Per Mr. Donadio, Homeowner began complaining about Complainant’s workmanship sometime in April 2024. Complainant’s last day on the project was in July 2024. At that time Complainant was “ninety-five to ninety-six percent done.” Mr. Donadio had created a punch list for Complainant, but did not provide it due to Mr. Davis’ fallout with Homeowner. Subcontractor Spear Cabinetry finished the remainder of Complainant’s work in 3 days.

Mr. Basta testified that Complainant’s deposit and delivery invoices were paid in full by Respondent. Per Mr. Basta, on unknown dates Respondent relayed Homeowner’s complaints regarding Complainant’s workmanship to Complainant. Complainant’s last day on the Snow Project was July 17, 2024, and subcontractor Spear B. Cabinets finished Complainant’s punch list the following week for $1,500.00. Mr. Basta also testified that Respondent was terminated from the Snow Project after Mr. Davis’ altercation with Homeowner, and that Respondent is still owed $80,000.00 by Homeowner.

Closing Arguments

In closing, Respondent argued that it was not required to pay Complainant’s final invoice because Complainant had not completed its scope of work on the Snow Project, and because Homeowner had not tendered final payment to Respondent for the project. Respondent argued that because it lacked capacity to pay, it was not legally required to pay Complainant.

In closing, Complainant argued that it deserved to be paid for the work it did, and that it would have performed touch-ups if asked but never was. Complainant noted that it had offered to accept $1,000.00 less than it was owed to cover the touch-ups Homeowner wanted, but Respondent refused.

CONCLUSIONS OF LAW

This matter lies within the Registrar’s jurisdiction and has been properly brought before OAH for adjudication.

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.”

Statutes should be interpreted to provide a fair and sensible result. Statutes shall be liberally construed to affect their objects and to promote justice.

Ariz. Rev. Stat. § 32-1129 et seq., provides numerous benefits and protections for subcontractors including their right to timely payment.

Ariz. Rev. Stat. § 32-1129.02(A) provides, in pertinent part, that “[p]erformance by a subcontractor in accordance with the provisions of a construction contract entitles the subcontractor to payment from the party with whom the subcontractor contracts.”

Ariz. Rev. Stat. § 32-1129.02(B) provides, in pertinent part, that “[i]f a subcontractor has performed in accordance with the provisions of a construction contract, the contractor shall pay to its subcontractors within seven days of receipt by the contractor of each progress payment, retention release or final payment, the full amount received for such subcontractor’s work and materials supplied based on work completed or materials supplied under the subcontract.”

Ariz. Rev. Stat. § 32-1129.02(E) provides, in pertinent part, that “[i]f a contractor chooses to withhold the application or certification for all or a portion of a subcontractor’s billing, the contractor must prepare and issue a written statement within fourteen days to the applicable subcontractors stating the reasons for withholding the application or certification from the owner.”

Ariz. Rev. Stat. § 32-1129.02(F) provides, in pertinent part, that “[i]f the owner issues a written statement stating that the owner declines to certify or approve all or a portion of the contractor’s billing and if the amounts to be paid from that billing by the contractor to any subcontractors are affected by the owner’s decision not to certify or approve, the contractor shall send a copy of that written statement within seven days after the receipt to any affected subcontractors or material suppliers.”

Ariz. Rev. Stat. § 32-1154(A)(10) holds, in pertinent part, that among the grounds for suspension or revocation of a contractor’s license is a “[f]ailure by [the] licensee . . . to pay monies in excess of seven hundred fifty dollars when due for materials or services rendered in connection with the licensee’s operations as a contractor when the licensee has the capacity to pay, if the licensee lacks the capacity to pay, when the licensee has received sufficient monies as payment for the particular construction work project or operation for which the services or materials were rendered or purchased.”

Ariz. Rev. Stat. § 32-1156.01 states, in pertinent part, that after a hearing an Administrative Law Judge may provide restitution to any person who is injured by an action of a licensee.

In the case at bar, the Tribunal is tasked with determining how much money Complainant is owed by Respondent, if at all, but if so whether said debt(s) constitute a violation of Ariz. Rev. Stat. § 32-1154(A)(10) for which Respondent’s license may be disciplined by the Registrar.

Upon review of the record, the relevant and credible evidence establish that Respondent subcontracted residential cabinetry work to Complainant for labor and materials agreements totaling $235,077.00, to be paid in 3 progress payments; deposit, delivery, and installation. The record also reflects that Complainant, after receiving payments from Respondent for deposit and delivery, issued a final invoice for $24,307.70 that was received by Respondent. The record also reflects that Complainant was never afforded an opportunity to address Homeowner’s punch list, and was instead replaced by another subcontractor who successfully completed all of the punch list items. The record further reflects that after months of inquiring about final pay from Respondent, Respondent told Complainant to obtain payment from Homeowner, knowing full well that it had never provided Homeowner with Complainant’s final invoice but noted that Complainant was owed $22,807.70 for its work.

Therefore, the only issue remaining is whether Respondent raised a sufficient justification or excuse for failing to tender final payment to Complainant for the Snow Project. Here, the record reflects that Respondent failed to comply with the payment terms of the parties’ subcontract agreement, and did not establish any affirmative defense(s) for doing so. Respondent knows it owes an outstanding debt to Complainant, but failed to provide the Registrar or Tribunal with an indicia of evidence to support its contention that it lacks ability to pay the debt. It is a factor in aggravation that Respondent failed to call Complainant back onsite to address Homeowner’s punch list items and tender payment, or alternatively, pay Complainant’s final invoice less payment issued to the subcontractor that completed Complainant’s scope of work on the Snow Project. Under the circumstances, Respondent’s conduct was neither reasonable nor prudent.

Respondent’s conduct is in clear violation of Ariz. Rev. Stat. § 32-1129.02(A) and Ariz. Rev. Stat. § 32-1129.02(B), and further failed to comply with requirements set forth in Ariz. Rev. Stat. § 32-1129.02(E). All of which establishes grounds for discipline pursuant to Ariz. Rev. Stat. § 32-1154(A)(10).

Thus, Complainant has sustained its burden of proof by a preponderance of the evidence in this matter.

Because Complainant admittedly completed “95%-96%” of its scope of work on the Snow Project, and the remainder was completed by another subcontractor for $1,500.00, restitution of $22,807.70 is warranted in the absence of any evidence to establish that Respondent lacks the ability to pay the debt.

RECOMMENDED ORDER

Based on the foregoing,

IT IS RECOMMENDED that on the effective date of the Final Order in this matter, Respondent Arizona Construction Plus LLC, ROC License No. 301516, shall be suspended until Respondent provides the Registrar with sufficient proof that $22,807.70 has been tendered to Complainant in certified funds as restitution.

IT IS FURTHER RECOMMENDED that after the Registrar has received Respondent’s proof of payment to Complainant, Complaint 2024-08839 may be closed with prejudice.

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 is forty days after the date of that certification.

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 30, 2025.

Office of Administrative Hearings

/s/ Jenna Clark

Administrative Law Judge

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

Tom Cole, Director

c/o Legal Department

Registrar of Contractors

1700 W. Washington St., Ste. 105

Phoenix, AZ 85007

[email redacted]

Saguaro Skies Cabinetry and Design LLC, Complainant

c/o Jack Davis, Agent

4811 E. Julep St., Ste. 103

Mesa, AZ 85205

[email redacted]

Karen A. Palecek, Esq.

Palecek & Palecek PLLC, Counsel for Respondent

6263 N. Scottsdale Rd., Ste. 144

Scottsdale, AZ 85250

[email redacted]

By: OAH Staff