ALJDEC - Licensing
2024A-09440-NPC-ROC · Registrar of Contractors · 2025-01-10
IN THE OFFICE OF ADMINISTRATIVE HEARINGS
Ocotillo Painting LLC,
COMPLAINANT,
v.
KLB HomeCrafters LLC
ROC License No. 316821,
RESPONDENT.
No. 2024A-09440-NPC-ROC
ADMINISTRATIVE LAW JUDGE DECISION
HEARING: December 30, 2024 at 3:00 PM.
APPEARANCES: Martin Gonzalez appeared on behalf of Ocotillo Painting LLC (“Complainant”). No appearance(s) by or on behalf of KLB HomeCrafters LLC (“Respondent”).
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 agency file, and November 22, 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 license files as shown on the Registrar’s public website. On December 05, 2017, the Registrar issued ROC License No. 316821 for General Residential B-3 Remodeling and Repair contracting to Respondent. Respondent’s license is active, in good standing, and renewed through December 31, 2025. Kelly L. Brown is listed as the Qualifying Party and Member on the license. Kristen Lynn Sapra was listed as a Member, but disassociated from the license effective July 30, 2024. The address of record for the license is 8415 E. Joshua Tree Ln. Scottsdale, Arizona 85250. Respondent has a $9,000.00 surety bond for the license issued through Western Surety Company, effective December 17, 2024. The license has been disciplined on one (1) prior occasion, and has had two (2) other complaints resolved or otherwise settled against it. 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-August 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 $10,770.00 residential subcontract agreement, whereby an outstanding balance of $4,500.00 was owed on the project by Respondent. The Registrar designated it Complaint No. 2024-09440 and assigned the case to Tedi Quezada in their legal department for investigation.
On August 29, 2024, the Registrar issued a Notice of Incomplete Complaint to Complainant, specifically requesting that Complainant provide the principal amount owed by Respondent sans interest and fees. In response, on September 06, 2024, Complainant provided the Registrar with an invoice issued to Respondent dated July 05, 2024, that reflected an outstanding balance, without interest or fees, or $3,800.00.
On September 13, 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 September 20, 2024.
Respondent did not provide a written response to Complaint No. 2024-09440 to the Registrar.
On October 22, 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 November 06, 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 November 05, 2024, the Registrar received Respondent’s timely Answer whereby Ms. Brown argued that there were “many issues” with Complainant’s workmanship that was remediated by another licensed contractor, and that the homeowner of the project refused to pay leaving Respondent unable to pay Complainant. No additional records were attached to Respondent’s Answer.
On November 13, 2024, this matter was referred to the Office of Administrative Hearings (“OAH”), an independent state agency, for an evidentiary hearing on December 30, 2024. Per the November 22, 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 A.R.S. § 32-1154(A)(10).
Hearing Evidence
Complainant called Martin Gonzalez as a witness. The substantive facts of record are as follows:
Respondent is a general contractor that operated out of the greater Phoenix, Arizona area. Complainant is a subcontractor and holder of ROC License No. 346622 for Specialty Dual CR-34 Painting and Wall Covering contracting. On April 13, 2024, the parties entered into a $10,770.00 agreement for Complainant to perform work as part of a whole home renovation project located at 13653 E. Wethersfield Rd. Scottsdale, Arizona 85259. Complainant’s scope of work included painting the interior of the residence and epoxy of the garage floor.
Respondent paid Complainant $4,000.00 towards the project. Complainant reduced the outstanding balanced owed by $2,970.00 as compensation for Respondent’s dissatisfaction with its epoxy work.
In late-June 2024, Respondent completed the project.
July 03-04, 2024, Complainant inquired with Respondent about payment, and issued an invoice for the outstanding balance on July 05, 2024.
On July 10, 2024, Respondent informed Complainant that it anticipated getting paid from the project owner that week, and would in turn pay Complainant for its work. Per Respondent, the homeowner had been dissatisfied with Complainant’s workmanship resulting in Respondent hiring another contractor to perform corrective work. Complainant was never afforded an opportunity to inspect or cure the allegedly deficient work.
On July 14, 2024, and July 17, 2024, Complainant inquired with Respondent about payment. On July 19, 2024, Respondent replied that there were “some issues getting paid on that job,” but that another project was supposed to receive payment, so Respondent would pay Complainant once payment was received in “a day or two.”
July 25, 2024, July 27, 2024, July 29, 2024, August 02, 2024, August 05, 2024, August 07, 2024, August 08, 2024, and August 10, 2024, Complainant inquired with Respondent about payment, receiving little to no response from Respondent.
On July 31, 2024, Complainant again inquired with Respondent regarding payment for its work. Respondent informed Complainant that the project was expected to be complete at the end of that week, whereby Respondent would be paid an in turn would pay Complainant.
Respondent never paid Complainant the $3,800.00 balance owed on the project.
Additional Evidence
Mr. Gonzalez testified Respondent never complained about Complainant’s workmanship. Mr. Gonzalez opined that other trades working on the home could have damaged Complainant’s work because there were a number of contractors on site that were “in and out” throughout Complainant’s time on the project. Regardless, Complainant would have performed “touch ups” if Respondent would have asked.
Per Mr. Gonzalez, that the project involved a whole home renovation that resulted in the homeowner selling the property in July 2024.
Closing Arguments
In closing, Complainant argued that Respondent’s absence from the administrative proceeding was a factor in aggravation, and further argued that it should be paid for the work it completed that was commissioned by Respondent.
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.
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.”
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, 1.5% interest per month on unpaid invoices, and the right to stop work for nonpayment (after notice).
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 hired Complainant for labor and materials subcontract agreements on a residential remodel for $10,770.00. The record also reflects that Complainant, after receiving $4,000.00 from Respondent for the project and comping another $2,970.00, issued a final invoice for $3,800.00 that was received by Respondent. The record also reflects that Complainant was never afforded an opportunity to inspect or repair any alleged poor work, and was instead allegedly replaced by another contractor. The record further reflects that after months of promising to pay, Respondent never tendered final payment to Complainant for its work.
Therefore, the only issue remaining is whether Respondent raised a sufficient justification or excuse for failing to tender payment in full to Complainant. 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, the record reflects that Respondent failed to comply with the payment terms of the parties’ agreement, and did not establish any affirmative defense(s). Ms. Brown knew it owed an outstanding debt to Complainant, but failed to provide the Registrar or Tribunal with an indicia of evidence to support a contention that it lacked ability to pay the debt.
Notably, Respondent’s absence from this administrative proceeding is a factor in aggravation, as it evinces the licensee’s unwillingness to be regulated by the Registrar.
Because Complainant established by a preponderance of the evidence that Respondent violated Ariz. Rev. Stat. § 32-1154(A)(10), Complainant also established cause for the Registrar to discipline ROC License No. 316821.
RECOMMENDED ORDER
Based on the foregoing,
IT IS RECOMMENDED that on the effective date of the Final Order in this matter, Respondent KLB HomeCrafters LLC, ROC License No. 316821, shall be suspended until Respondent provides the Registrar with sufficient proof that $3,800.00 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 2024-09440 may be closed.
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 10, 2025.
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]
KLB HomeCrafters LLC, Respondent
c/o Kelly Brown, Agent
8415 E. Joshua Tree Ln.
Scottsdale, AZ 85250
[email redacted]
Ocotillo Painting LLC, Complainant
c/o Martin Gonzalez, Agent
6441 S. 16th Way
Phoenix, AZ 85042
[email redacted]
By: OAH Staff