ALJDEC - Licensing
2024A-12563-NPC-ROC · Registrar of Contractors · 2025-08-29
IN THE OFFICE OF ADMINISTRATIVE HEARINGS
Tamayo and Sons Plumbing, LLC,
COMPLAINANT,
v.
Kapella Group, LLC
License No. ROC 330554,
RESPONDENT.
No. 2024A-12563-NPC-ROC
ADMINISTRATIVE LAW JUDGE DECISION
HEARING: May 21, 2025, with further hearing on July 17, 2025; the record closed on August 11, 2025
APPEARANCES: Jose Tamayo appeared on behalf of Complainant Tamayo and Sons Plumbing, LLC. Cody Huffaker, Esq. represented Respondent Kapella Group, LLC. Denis Koval was present on behalf of Respondent Kapella Group, LLC. Jeff Pattek and Bob Titus appeared as witnesses.
ADMINISTRATIVE LAW JUDGE: Sondra J. Vanella
EXHIBITS ADMITTED INTO EVIDENCE: All of Complainant Tamayo and Sons Plumbing, LLC’s Exhibits were admitted; Respondent Kapella Group, LLC’s Exhibits 1- 6, 8, 9, 11, 12, 15; Administrative Notice taken of Agency Record
FINDINGS OF FACT
Kapella Group, LLC (“Respondent”) is the holder of License Number 330554 issued by the Arizona Registrar of Contractors (“Registrar”). Denis Koval is Respondent’s Qualifying Party and sole Member.
On or about November 12, 2024, Tamayo and Sons Plumbing, LLC (“Complainant”) filed a Complaint against Respondent with the Registrar alleging that Respondent had failed to pay Complainant the sum of $61,958.25 for the performance of plumbing work at the Montecito Senior Living Home located in Peoria, Arizona. This amount reflected three combined draw requests submitted by Complainant to Respondent. Respondent was the general contractor for the project and Complainant was a plumbing subcontractor.
The parties were unable to resolve their differences. The Registrar issued a Citation against Respondent for its alleged violation of A.R.S. § 32-1154(A)(10).
Hearing Evidence
In September 2024, Complainant entered into a verbal contract with Respondent, and Complainant began its work on the project on September 19, 2024. Respondent was “pushing to get the work done without a contract.”
Respondent, through its superintendent, contacted Jose Tamayo, owner of Complainant who he had known for years, because Respondent was behind on the project. Complainant performed its work based on a Scope of Work, and the underground plumbing performed by Complainant passed inspection.
Thereafter, Complainant began the top out including the installation of waste and drain pipes, water lines, and gas lines.
Complainant completed the underground plumbing and partial top out.
During the course of the project, Complainant performed the underground saw cutting, opened the floor in the kitchen, “did great work,” and there were “no issues with inspections.” Respondent hired Safe to Core, a company responsible for marking where the saw cuts should occur after assessing where to avoid, in order to not cut any electrical lines. Complainant saw cut the concrete based on the markings indicated by Safe to Core. Complainant properly performed the saw cutting based on these markings, however, because the markings were improperly designated by Safe to Core, Complainant cut electrical conduit.
Complainant left the job on October 30, 2024, due to non-payment by Respondent. Until Complainant left the project, Complainant had manned the project with six workers per day. Complainant had completed the excavation work and Respondent was charged $7,609.50 for such work.
While performing demolition, Respondent verbally agreed to pay Complainant an additional $8,680.00 due to “unforeseen circumstances.” The unforeseen circumstances included a trench for the underground plumbing, four concrete footers, and additional digging and breaking of concrete to lay pipes and lay seven or eight areas for electrical conduit.
Per the terms of the parties’ agreement, Complainant charged Respondent $16,250.00 for the underground plumbing and $22,396.38 for the partial top out. Complainant did not charge the full agreed upon price for the top out because it was incomplete when Complainant left the project. Because Respondent had not completed construction of a required wall to house gas lines, Complainant could not complete the top out.
Complainant completely installed the grease trap, but did not backfill. Complainant charged Respondent $2,400.00 for the construction fixture package scope of work, but credited Respondent for the grease trap in the amount of $21,667.00.
Complainant installed partial gas lines under the “gas system” scope of work and charged Respondent $13,675.87, which equated to fifty percent of this portion of the scope of work. Complainant could not complete this portion of the work because Respondent had not framed a necessary area.
As of the hearing, Respondent had only paid Complainant $6,000.00 for demolition work that was unrelated to Complainant’s scope of work and that was performed the first week on the job.
On October 1, 2024, Respondent requested that Mr. Tamayo sign a written contract and Mr. Tamayo did so. Mr. Tamayo admittedly only “kinda” read the agreement, as Complainant was “already way into the job big time.” The Master Subcontract Agreement that Mr. Tamayo signed was approximately forty pages in length, single spaced, was very detailed, and included several exhibits. Mr. Tamayo credibly testified that he was never provided a signed copy of the agreement. The Cover Letter for the contract was dated October 8, 2024.
While Respondent had promised payment, when Respondent failed to pay Complainant, Mr. Tamayo sent a letter to the owner of the project regarding the non-payment. Subsequently, Respondent informed Mr. Tamayo that it would not pay until Mr. Tamayo apologized to the owner of the project. Mr. Tamayo asserted that Respondent only threatened non-payment for contacting the owner, not for any alleged defective work.
On November 1, 2024, Respondent sent Complainant a Notice of Breach, Notice and Demand to Resume Work (“Notice”) that was signed with the name of Jeff Pattek, a Project Manager for Respondent for this project. Mr. Pattek testified that he did not author the letter, but rather it was written by Denis Koval. Mr. Pattek testified that all correspondence came from Mr. Koval.
The Notice advised Complainant that it was in breach of contract and cited several provisions of the October 2024 contract. Specifically, the Notice cited Section 17, Unauthorized Client Communication that prohibited Complainant from directly contacting the owner. The Notice further cited Section 20, a non-disparagement clause indicating that Complainant’s communication with the owner included “unsubstantiated and harmful statements” about Respondent’s parent company’s payment practices.
Complainant was verbally promised payments numerous times. In an email to Mr. Tamayo dated November 4, 2024, Bob Titus, Respondent’s Superintendent for the project, stated that Complainant had completed “roughly 80% of the scope of work.” Mr. Titus testified that it was frustrating for him and Mr. Pattek that Complainant was not paid for the work it performed, notwithstanding repeated promises by Mr. Koval.
At hearing, Mr. Titus acknowledged that subcontractors, including previous plumbing and HVAC, left the project due to non-payment. Mr. Titus admitted that Complainant was hired for the plumbing portion of the project, and that “a lot of demo needed to be done.” Mr. Titus, as Respondent’s agent, requested that Complainant perform the demo work, which was outside the scope of Complainant’s work.
Mr. Pattek admitted that Complainant was “rightfully owed money for the work that is in place.”
Mr. Koval testified that Respondent did not pay Complainant because Complainant was seeking to be paid for work it did not perform, Complainant had not complied with the subcontractor agreement, and Respondent is entitled to offsets. Respondent admittedly did not file a complaint against Complainant with the Registrar delineating any concerns with Complainant’s workmanship.
Mr. Koval testified regarding provisions of the contract that he believed Complainant had breached, specifically, 17.2 regarding change orders, 22.6 regarding continuing to work through a disagreement, 23.2 regarding back charges because Mr. Koval asserted that Respondent had to pay other subcontractors to complete Complainant’s scope of work, as well as provisions 23.6, 23.10, and 38.10.
Mr. Koval took issue with Complainant’s pay applications and the percentage of work Complainant asserted had been completed. Mr. Koval asserted that the work was incomplete and “not correct.” However, Mr. Koval did not dispute that Complainant began work on September 19, 2024, that the contract price was $124,363.60, and that Respondent only paid Complainant $6,000.00. Instead, Mr. Koval testified that the master contract required Complainant to continue working through payment disputes and that Complainant was not due to receive payments until the various scopes of work were completed. Mr. Koval also testified that Respondent had to pay for additional work, and consequently he “adjusted” the amount owed to Complainant. Mr. Koval referenced several invoices that were purportedly to repair faulty work performed by Complainant or to complete work not completed by Complainant. However, some of the invoices are dated during the time frame that Complainant was still working on the project, such as the Even Flow Plumbing invoice dated October 30, 2024, and the Quality Septic Service Invoice dated October 3, 2024. Respondent also submitted invoices from the replacement plumbing contractor, State Certified Plumbing, in the total amount of $15,910.00. However, there was no credible evidence presented at hearing that the work for which State Certified Plumbing charged Respondent was for Complainant’s alleged deficient work. Moreover, Respondent did not file a complaint with the Registrar alleging any workmanship deficiencies by Complainant, and Respondent did not call as witnesses any of the subcontractors alleged to have performed corrective work on the alleged deficiencies.
Mr. Tamayo testified that some of what Respondent proposed to back charge Complainant was not contained within Complainant’s scope of work, such as “sleeves” which are generally within an electrical contractors’ scope of work and cleaning of the grease trap. Mr. Tamayo also noted that Complainant brought in Even Flow to ensure that the sewer line was “clean,” which was not part of Complainant’s scope of work.
Mr. Koval acknowledged that Respondent hired the locating company for the saw cuts. Complainant cut the concrete slab according to the specifications provided by the locating company, and in so doing, cut electrical lines. The locating company marked the locations improperly. Instead of charging the locating company for erroneous markings, Respondent proposed to back charge Complainant in the amount of $11,574.00, for working in reliance on the markings made by the company hired by Respondent.
CONCLUSIONS OF LAW
The burden of proof at an administrative hearing falls to the party asserting a claim, right, or entitlement and the standard of proof on all issues in this matter is by a preponderance of the evidence. A party asserting an affirmative defense has the burden of establishing the affirmative defense 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.R.S. § 32-1154(A)(10) includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license:
Failure by a licensee or agent or official of a licensee to pay monies in excess of $750 when due for materials or services rendered in connection with the licensee's operations as a contractor unless the licensee proves that the licensee lacks the capacity to pay and has not received sufficient monies as payment for the particular construction work project or operation for which the services or materials were rendered or purchased.
The Administrative Law Judge finds that the October 1, 2024 “contract” was not binding upon the parties as there was no “meeting of the minds.” It was signed in the midst of Complainant’s good faith work on the project and as such, Complainant was invested in the project and felt compelled by Respondent to sign the contract. For all intents and purposes, Complainant signed the contract under duress given the fact that Complainant’s work began well before the contract was presented to Complainant for signature. Due to the financial pressure that existed and given the amount of work that had already been performed by Complainant, the contract is not a reflection of a mutual agreement. Moreover, the Administrative Law Judge finds that the contract was overly burdensome and one-sided in favor of Respondent.
Further, Complainant should not be held responsible for any necessary corrective work caused by the acts/omissions of the locating company. Complainant justifiably relied on the markings made by the locating company that was hired by Respondent, not Complainant.
The Administrative Law Judge further finds, based upon the credible evidence presented at hearing, that Respondent’s dealings with Complainant were disingenuous.
The credible and probative evidence established that Respondent continued to owe a total of $61,958.25 for the services and materials provided by Complainant. Respondent’s affirmative defenses regarding back charges/offsets for deficient work was not proven by a preponderance of the evidence. Respondent failed to establish that it lacked the capacity to pay Complainant and that it has not received sufficient monies as payment for the project for which the services or materials were rendered or purchased.
Therefore, Complainant established that Respondent violated A.R.S. § 32-1154(A)(10) by failing to pay Complainant $61,958.25 for services or materials rendered in connection with Respondent’s contracting business.
Based upon Respondent’s violation of the provisions of A.R.S. § 32-1154(A)(10), grounds exist to impose discipline against Respondent’s license.
RECOMMENDed order
Based on the foregoing, it is recommended that the Registrar suspend Respondent’s License Number 330554 issued by the Registrar until it has provided to the Registrar, and the Registrar has accepted, documents that establish that it has paid Complainant $61,958.25 in certified funds.
It is further recommended that when and if the Registrar receives and accepts Respondent’s evidence that it has paid Complainant $61,958.25 in certified funds, the Registrar may close the Complaint in Case Number 2024-12563.
Pursuant to A.R.S. § 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, August 29, 2025.
/s/ Sondra J. Vanella
Administrative Law Judge
Transmitted by either mail, e-mail, or facsimile to:
Tom Cole, Director
Registrar of Contractors
Kapella Group, LLC
[email redacted]
D. Cody Huffaker, Esq.
[email redacted]
Tamayo and Sons Plumbing, LLC
[email redacted]
By: OAH Staff