Universal Homes v. Mitchell

NOTICE: NOT FOR OFFICIAL PUBLICATION.
UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL
AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.

IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE

UNIVERSAL HOMES CONSTRUCTION LLC, Petitioner/Appellant,

v.

IVY LYNN MITCHELL, et al., Respondents/Appellees.

No. 1 CA-CV 18-0501
FILED 5-21-2019

Appeal from the Superior Court in Maricopa County
No. LC2017-000445-001
The Honorable Patricia A. Starr, Judge

AFFIRMED

COUNSEL

Righi Fitch Law Group, PLLC, Phoenix
By Richard L. Righi, Marcus D. Tappe
Counsel for Petitioner/Appellant
Robert C. Kozak, PLLC, Prescott
By Robert C. Kozak
Co-Counsel for Respondent/Appellee Ivy Lynn Mitchell

Suits Law Firm, PLC, Prescott
By Douglas J. Suits
Co-Counsel for Respondent/Appellee Ivy Lynn Mitchell

Arizona Attorney General’s Office, Phoenix
By John R. Tellier
Counsel for Respondent/Appellee Arizona Registrar of Contractors

MEMORANDUM DECISION

Presiding Judge Lawrence F. Winthrop delivered the decision of the Court,
in which Judge Kent E. Cattani and Judge Diane M. Johnsen joined.

W I N T H R O P, Judge:

¶1 Universal Homes Construction, LLC (“Universal”) appeals
the superior court’s decision affirming the order of the Arizona Registrar of
Contractors (the “ROC”) finding that Universal violated statutory
obligations when performing work for homeowner Ivy Lynn Mitchell and
suspending Universal’s contractor’s license. For the following reasons, we
affirm.

FACTS AND PROCEDURAL HISTORY

¶2 In 2016, Mitchell moved from Alabama to Prescott Valley,
Arizona. She contracted with Universal to build a home with ceramic tile
floors.

¶3 In December 2016, Mitchell informed Universal of what she
believed to be several issues with the tile installation. According to the
Workmanship Standards for Licensed Contractors published by the ROC,
the vertical displacement, or “lippage,” for ceramic tile must be 1/32 of an
inch or less. Mitchell stated that more than twelve tiles contained lippage
ranging from 1/8, 3/16, and 1/16 of an inch. She indicated that the uneven
height of the tile created a serious hazard for her to trip and fall due to her
ALS, or amyotrophic lateral sclerosis, and she asserted the only way to

2
 UNIVERSAL HOMES v. MITCHELL, et al.
Decision of the Court

repair the flooring was to re-tile the entire home. In February 2017,
Universal responded and agreed to replace the non-conforming tiles but
refused to re-tile the entire home. Mitchell then filed a complaint with the
ROC. In addition to the lippage, she identified several hollow and cracked
tiles. Universal timely responded to the complaint and contested the
allegations.

¶4 An inspection of the home occurred on March 28, 2017. The
ROC inspector determined Universal failed to meet minimum
workmanship standards in violation of Arizona Administrative Code
(“A.A.C.”) R4-9-108 and Arizona Revised Statutes (“A.R.S.”) § 32-
1154(A)(22) (2019).1 The ROC issued a directive (the “Directive”)
mandating that Universal fix approximately thirty-five tiles with non-
compliant lippage and replace several hollow or cracked tiles. The repairs
had to be made on or before April 15, 2017. Because Mitchell was in the
process of moving, she requested a ten-day extension on the repair
deadline, and the ROC granted her request. Universal attempted to
conduct repairs on April 12 and April 20, 2017, but Mitchell denied the
workers access to the home because her furniture would need to be moved.
The ROC agreed the repairs could be completed in May 2017. Universal
thereafter provided written notice to the ROC that it had completed those
repairs over a three-day period in May.

¶5 The ROC then sent notice to both Universal and Mitchell that
a follow-up inspection to review the repairs would be conducted on June 2,
2017. That inspection indicated that four tiles still failed to meet the lippage
standard. The ROC issued a citation to Universal stating that it had violated
the workmanship standard under A.A.C. R4-9-108—thereby violating
A.R.S. § 32-1154(A)(3)—and the timeliness requirement for repairs under
A.R.S. § 32-1154(A)(22). Universal requested Mitchell allow access to
attempt further repairs, but Mitchell refused.

¶6 Universal contested the citation, and an administrative
hearing was held in August 2017. The ALJ determined Universal violated
A.A.C. R4-9-108 and § 32-1154(A)(3) but not § 32-1154(A)(22). The ALJ
reasoned that because Mitchell repeatedly refused Universal access to her
home, valid justification existed for Universal not completing the repairs.
The ALJ also determined disciplinary action should not be taken against
Universal and Mitchell’s complaint should be dismissed. Mitchell

1 Absent material revision after the relevant dates, we cite the current
version of the statutes and rules.

3
 UNIVERSAL HOMES v. MITCHELL, et al.
Decision of the Court

requested review of the decision, and the ROC issued a final administrative
decision (the “ROC Decision”) in September 2017. The ROC modified the
ALJ’s decision by removing “conclusion of law #9” and substituting three
new conclusions of law to reflect its decision that Universal violated A.R.S.
§ 32-1154(A)(22). The ROC also imposed a one-day suspension of
Universal’s contractor’s license pursuant to A.R.S. § 32-1154(B).

¶7 Universal appealed to the superior court, and the superior
court affirmed the ROC Decision. Universal timely appealed to this court,
and we have jurisdiction pursuant to A.R.S. § 12-2101(B).2

ANALYSIS

I. The ROC Decision is Supported by Substantial Evidence

¶8 In administrative proceedings, the decision of the agency
director, not the ALJ, is the final administrative decision. J.L.F. v. Ariz.
Health Care Cost Containment Sys., 208 Ariz. 159, 161, ¶ 12 (App. 2004). As
the final decision maker in a contested agency proceeding, an agency,
through its director, has the authority to make independent findings of fact
and conclusions of law, and it is not bound by an ALJ’s findings. Id. at 162,
¶ 12.

¶9 In reviewing a superior court judgment affirming an
administrative action, we determine whether the agency’s decision is
supported by substantial evidence, or whether it is instead arbitrary or
capricious, or otherwise constitutes an abuse of the agency’s discretion.
Sanderson Lincoln Mercury, Inc. v. Ford Motor Co., 205 Ariz. 202, 205, ¶ 8
(App. 2003) (citing A.R.S. § 12-910(E)). If the agency’s decision is supported
by substantial evidence, we will uphold the decision even if the record also
supports a different conclusion. DeGroot v. Ariz. Racing Comm’n, 141 Ariz.
331, 336 (App. 1984).

¶10 An administrative agency’s determination will be set aside as
arbitrary and capricious only if an appellate court determines “there has
been unreason[ed] action, without consideration and in disregard for facts
and circumstances.” Petras v. Ariz. State Liquor Bd., 129 Ariz. 449, 452 (App.
1981). But “where there is room for two opinions, the action is not arbitrary

2 Universal named the ROC as an appellee in this appeal as required
by A.R.S. § 12-908. The ROC filed an answering brief identifying itself as
only a nominal party for the appeal. See Int’l Bhd. of Elec. Workers, Local
Union 640 v. Kayetan, 119 Ariz. 508, 510 (App. 1978) (“[T]he role of the
agency-defendant in [appellate] court proceedings may be a passive one.”).

4
 UNIVERSAL HOMES v. MITCHELL, et al.
Decision of the Court

or capricious if exercised honestly and upon due consideration, even
though it may be believed that an erroneous conclusion has been reached.”
Id.

¶11 Universal contends the ROC erred by modifying the ALJ’s
conclusions of law. Specifically, Universal asserts: (1) it met the exception
under A.R.S. § 32-1154(A)(22), so the agency’s determination of a violation
was not supported by substantial evidence; (2) the modifications are
arbitrary, capricious, and not supported by substantial evidence; and (3) the
modifications are self-contradictory, making them unenforceable.

A. A.R.S. § 32-1154(A)(22) Violation

¶12 Section 32-1154(A) enumerates various acts and omissions
that could subject a licensee to disciplinary action. Section 32-1154(A)(22)
prohibits ROC licensees from failing to take “appropriate corrective action
. . . without valid justification” in response to a written directive by the
ROC. Universal asserts that Mitchell repeatedly refused its workers access
to her home, and therefore a “valid justification” existed for its failure to
make all the necessary repairs in a timely manner. The ALJ agreed with
this argument, but on review, the ROC found the argument unpersuasive.

¶13 The ROC Decision explained that because of the access issues,
the inspector extended the deadline for Universal to comply with the
Directive. Once allowed access, however, Universal still failed to
satisfactorily complete the corrective action directed by the ROC. Thus, the
ROC determined Universal violated A.R.S. § 32-1154(A)(22).

¶14 On appeal, Universal does not cite to any authority to support
its argument that it should have been given additional time to comply with
the Directive after the ROC issued the citation following the June
inspection. The record shows that Universal was given an adequate
opportunity to correct its workmanship, but it failed to do so. Although
Mitchell initially made access to her home difficult for Universal, the access
issues were resolved when the ROC extended the deadline for compliance.
Universal gave notice that it had completed the subject repairs within the
time allowed by the ROC, and Universal did not request any additional
time or opportunity to do any further work until after the ROC had issued
its notice of violation.

¶15 Mitchell was not required to allow Universal additional time
beyond the extension granted by the ROC to comply with the Directive.
Indeed, as the ROC Decision later noted, “while the Registrar encourages
parties to continue efforts to resolve a complaint’s underlying issues, there

5
 UNIVERSAL HOMES v. MITCHELL, et al.
Decision of the Court

is no ongoing duty to grant access to the jobsite after the written directive’s
deadline expires.”

B. The ROC Decision Was Not Arbitrary or Capricious

¶16 Universal asserts the ROC Decision disregarded all the
evidence presented at the administrative hearing and imposed an extreme
penalty as a result. However, Universal did not include a transcript of the
hearing in the appeal record; accordingly, to the extent Universal’s
argument turns on what occurred at the hearing, the missing transcript is
presumed to support the ROC’s conclusion. See Myrick v. Maloney, 235 Ariz.
491, 495, ¶ 11 (App. 2014). Further, Universal acknowledges that it was
given an initial opportunity to repair all the tiles, yet it failed to do so. As
such, we conclude the ROC Decision was not “without consideration and
in disregard for facts and circumstances.” Petras, 129 Ariz. at 452.

¶17 Universal also argues the ROC Decision was arbitrary and
capricious because, during the pendency of these proceedings, Mitchell
contacted the inspector’s supervisor and Arizona State Senator Karen Fann
to complain about the ROC inspector’s handling of her claim. Universal
contends the ROC only reversed the ALJ’s decision to “appease” Mitchell
and to encourage her to abandon these additional complaints. Beyond this
bare assertion, however, Universal offers no evidence of any biased conduct
by the ROC, and we will not reverse the decision based on an allegation
alone. See ARCAP 13(a)(7).

C. The ROC Decision is Enforceable

¶18 Finally, Universal argues that the modifications made in the
ROC Decision contradict the findings adopted by the ROC from the ALJ’s
decision. Universal asserts the decision is unenforceable because it
simultaneously stated that Universal did and did not violate § 32-
1154(A)(22).

¶19 Under § 41-1092.08(B), an administrative agency may modify
an ALJ’s written decision. In addition, § 32-1154(B) states the ROC may
temporarily suspend a license if a licensee commits any of the prohibited
acts identified in § 32-1154(A). Here, the ROC suspended Universal’s
license for one day due to its failure to comply with not only
§ 32-1154(A)(22), but also A.A.C. R4-9-108 and § 32-1154(A)(3). Assuming
without deciding that some of the modifications made by the ROC
contradicted other findings adopted from the ALJ’s decision regarding § 32-
1154(A)(22), the ROC nevertheless acted within its authority in suspending
Universal’s license pursuant to § 32-1154(A)(3). Therefore, we conclude

6
 UNIVERSAL HOMES v. MITCHELL, et al.
Decision of the Court

that the administrative decision is enforceable—any error made by the
director in issuing the administrative decision was harmless, and we will
not disturb the ROC’s ultimate determination. Creach v. Angulo, 186 Ariz.
548, 550 (App. 1996) (citation omitted) (“To justify the reversal of a case,
there must not only be error, but the error must have been prejudicial to the
substantial rights of the party. Furthermore, prejudice is not presumed but
must appear from the record.”).

II. Costs on Appeal

¶20 Mitchell requests her costs incurred in this appeal. As the
successful party, we award her costs pursuant to A.R.S. § 12-341 contingent
on her compliance with ARCAP 21.

CONCLUSION

¶21 For the foregoing reasons, we affirm the superior court’s
order affirming the ROC Decision. Ritland v. Ariz. State Bd. of Med. Exam’rs,
213 Ariz. 187, 192 (App. 2006) (explaining that if there is substantial
evidence in the record to support both the ALJ’s finding and the
administrative agency’s decision to overrule it, this court will uphold the
decision of the agency).

AMY M. WOOD • Clerk of the Court
FILED: AA

7