ALJDEC

00F-G0251-ROC · Registrar of Contractors · 2000-05-30

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: May 24, 2000; 9:00 A.M.; Phoenix, Arizona APPEARANCES: Complainants: Robert M. Damesek and Roberta Damesek Respondent: Harold N. Harding, Jr., Vice President Michael D. Wallace, Secretary and Treasurer ADMINISTRATIVE LAW JUDGE: George A. Schade, Jr.

This is a disciplinary proceeding brought pursuant to Arizona Revised Statutes (“A.R.S.”) § 32-1154. Based upon the evidence presented at the hearing, Administrative Law Judge (“ALJ”) George A. Schade, Jr. submits this Recommended Decision and Order to the Arizona Registrar of Contractors (“Registrar”). FINDINGS OF FACT PROCEDURAL BACKGROUND[1] 1. Complainants Robert M. Damesek and Roberta Damesek contracted with Jada Homes, Inc. (“Jada”), a general contractor, for the construction of a residence in Carefree, Arizona. 2. Respondent Swartz Concrete, Inc. (“Swartz”), a corporation, holds License No. 039539, Class C-09 (Concrete), issued by the Registrar on March 18, 1974. 3. Swartz was the concrete subcontractor for the Damesek residence, working under a contract with Jada, the general contractor. 4. On December 6, 1999, Mr. and Mrs. Damesek filed this complaint alleging that Swartz had failed to install a vapor barrier when Swartz poured the interior concrete floor slab for the house. Subsequently, the complaint was amended to include Swartz’s alleged failures to pour a reinforced concrete slab and to complete the exterior concrete for three sets of stair steps. 5. The Registrar did not conduct a jobsite inspection because Mr. and Mrs. Damesek did not believe one was needed for the disposition of their complaint. 6. On December 20, 1999, Mr. and Mrs. Damesek requested a hearing. 7. On January 25, 2000, the Registrar issued to Swartz Citation and Complaint No. G00-0251 alleging violations of A.R.S. §§ 32-1154(A)(2) and 32-1154(A)(7). 8. On February 7, 2000, Swartz answered the citation and complaint. Swartz denied the allegations of the complaint. 9. On March 2, 2000, the Registrar issued a Notice of Hearing scheduling a hearing on April 27, 2000. 10. On March 6, 2000, upon Mr. and Mrs. Damesek’s motion for a continuance, the hearing was continued to May 24, 2000. 11. On May 24, 2000, a hearing was held. Both Mr. and Mrs. Damesek testified, and they presented twenty exhibits which were admitted. Messrs. Harold N. Harding, Jr. and Michael D. Wallace, corporate officers of Swartz, testified. The ALJ took official notice of Swartz’s prior two-year record with the Registrar and of certain documents to prepare the procedural background for this recommended decision. THE CONTRACT 12. On May 21, 1999, Swartz submitted a “Proposal and Contract” to Jada for the pouring of both interior and exterior concrete, on the Damesek residence which Jada was constructing. Complainants’ Exhibit No. 1. The contract was finalized on July 5, 1999. 13. The proposal stated that Swartz would perform the “Concrete work as per plans and specifications.” Complainants’ Exhibit No. 1, p. 1. 14. An attachment, marked “Page 2 of 2,” stated that the following items were “included in [the] base price” of Swartz’s proposal: a. “Broom finish patios and entry” b. “Rebar in floor” c. “Steps”. Complainants’ Exhibit No. 1, p. 2. 15. The amount of Swartz’s proposal and contract was $28,629.00. 16. Swartz was paid $25,056.00 of the contract amount of $28,629.00. The balance of $3,573.00 represents exterior concrete work (such as the “Steps”) which Swartz did not undertake or complete. THE CONSTRUCTION PLANS 17. Jada gave Swartz a copy of the construction plans prior to Swartz submitting its proposal. Mr. Wallace reviewed the plans prior to submitting Swartz’s proposal. 18. Renaissance Custom Homes (“Renaissance”) prepared the plans in consultation with Mr. and Mrs. Damesek, who then contracted with Jada for the construction of their home. 19. Mr. and Mrs. Damesek requested Renaissance to provide for a vapor barrier[2] as part of the floor of the house. Originally, they had planned for a vapor barrier in the walls, but due to costs, that item was deleted. But the vapor barrier in the floor slab remained a requisite of Mr. and Mrs. Damesek. 20. The plans contained the following “Note” on the top right hand corner of the sheet or page describing the foundations: “1. PROVIDE 4” REINFORCED CONCRETE SLAB (INTEGERAL (sic) COLOR) OVER VAPOR BARRIER (INTERIOR ONLY OVER 4” TERMITE TREATED A.B.C. OVER UNDISTURBED BEARING SOIL OR ENGINEERED FILL.” Complainants’ Exhibit No. 1, p. 3.

21. The plans did not contain any other reference to a “vapor barrier” in either the General Notes or the Detailed Notes of the foundation. The note quoted in Finding of Fact No. 20 contained the only reference to a vapor barrier in the plans. 22. Mr. Wallace, who estimated the job for Swartz, did not remember reading or reviewing the note which mentioned the vapor barrier. 23. The plans indicated as a general specification “reinforced steel” and described the kind and size of the reinforced steel. The plans did not, however, specify a “wire mesh” or a “woven fiber mesh,” and did not contain or show in the Detailed Notes of the foundation any reference to the placement, size or spacing of the reinforced steel in the interior concrete slab. SWARTZ’S WORK The Vapor Barrier 24. On July 31, 1999, Swartz poured the interior concrete slab for the floor. 25. Swartz did not install a vapor barrier. 26. Swartz has not installed many vapor barriers during the time it has been in business. The recollections of Messrs. Harding and Wallace are that Swartz has had very few requests for vapor barriers since it has been in business dating to the 1970’s. Requests for vapor barriers, according to Messrs. Harding and Wallace, are uncommon. This position was stated in Swartz’s letter to Jada, dated October 27, 1999, as follows, “Historically, the installation of vapor barriers in arid climates such as ours are neither usual or necessary, so the lack of one on this project will not affect the warranty on our concrete work.” Complainants’ Exhibit No. 12. 27. As a business practice, Swartz prefers not to install vapor barriers because of the potential problems with leaks and workmanship responsibility after completion of the work. In its proposals, Swartz does not bid on the installation of vapor barriers. 28. Mr. and Mrs. Damesek are agreeable to accepting the installation of a “Sealflex” chemical product (from Sealflex Industries, Inc.), which would be rolled on the existing concrete slab, and would act as an alternative to a polyethylene vapor barrier installed under the concrete slab. Mr. and Mrs. Damesek have been given an estimate of $11,500.00 for coverage of 3,000 square feet. The Reinforced Concrete 29. Mr. Harding informed Jada’s construction supervisor that Swartz would install rebar in the interior concrete floor slab in the customary manner which Swartz has followed for this kind of foundation pouring. According to Mr. Wallace, Jada’s construction supervisor did not question the process or request additional rebar. 30. Swartz placed 3/8 inch No. 3 steel bars, in a “random fashion” (Mr. Harding’s testimony), at approximately a depth of two inches, in one direction (“the long way”), throughout the concrete it poured. After the concrete was poured to a depth of four inches, and while still wet, No. 3 steel bars were placed and tamped into the concrete to a depth of approximately two inches. Messrs. Harding and Wallace testified this is the manner in which Swartz uses rebar in interior concrete floor slabs. 31. Mr. and Mrs. Damesek retained Ricker • Atkinson • McBee & Associates, Inc., a geotechnical engineering and construction materials testing firm, which conducted a pachometer survey[3] of the concrete slab Swartz poured in order “to locate the presence of any reinforcing steel that may be present in the slabs.” Complainants’ Exhibit No. 3. The survey included every room on the ground floor of Mr. and Mrs. Damesek’s two-story house and the adjacent guest house. 32. The pachometer survey showed: “[t]hat at least some steel was present in or below the slabs in some areas, although the placement seemed to be somewhat random, sparse and inconsistent….The size(s) and or depth of cover of the steel could not be determined.

Based on information provided to us, we would agree that the random, sparse and inconsistent locations of the apparent steel would not meet the typical requirements of a reinforced concrete slab, as was reportedly specified on the foundation plans.” (Bold emphasis in document.) Complainants’ Exhibit No. 3.

33. Mr. and Mrs. Damesek contracted with Yankee Builders, Inc., a licensed general contractor, for the completion of the concrete work. Yankee Builders reported the following: “1. There was no vapor barrier installed as per the plans and specifications.

2. There is no evidence of steel reinforcing in the concrete floor at any of the penetrations and/or cut outs through the floor. There is no evidence of a fiber mesh product used in the concrete poured for the floor.

3. The foundation plan was not followed and thus there is a 12” step @ the closet under the front stairs which does not belong there.

4. The wall in the kitchen was poured the wrong dimension and now sticks out from 1” to 5/8” of an inch past the framing thus no sheetrock may be applied to that wall.

5. There are several locations around the building that the floor and/or stem walls are honeycombed and not properly poured.” Complainants’ Exhibit No. 4, p. 1.

34. Mr. and Mrs. Damesek gave Swartz an opportunity to review and correct the deficiencies Yankee Builders found, but Swartz did not do so. 35. Insufficient evidence was presented to show how the existing floor could be brought to a level where it would meet the standards of reinforced concrete. The Exterior Concrete 36. Swartz did not pour the three exterior sets of steps (front entry, patio to pool, and patio to backyard), and accordingly, the broom finish, because Mr. and Mrs. Damesek advised Swartz of their concerns with Jada, and secondly, Swartz had not been paid $1,592.00 for the installation of headwall footings. Swartz was planning on pouring the exterior concrete, but decided not to do that work until all issues between Mr. and Mrs. Damesek and Jada were resolved. To date, Swartz has not been paid the additional $1,592.00 for the headwall footings. 37. Mr. and Mrs. Damesek contracted to pay Yankee Builders the amount of $8,736.00 to complete the concrete work which Swartz was supposed to do. This amount consisted of $7,280.00 for the concrete work (payable to a subcontractor) and $1,456.00 for an “administrative fee” to Yankee Builders. Complainants’ Exhibit No. 19. Mr. and Mrs. Damesek are currently paying the total in monthly payments. 38. Mr. and Mrs. Damesek’s house is almost finished; it is at the “painting stage.” The interior concrete floor has not been tiled pending the outcomes of this case and of the complaint filed by the Dameseks against Jada (Docket No. 00F-G0230-ROC[4]). SWARTZ’S PRIOR RECORD 39. The records of the Registrar show that during the past two years one complaint has been filed against Swartz, and that is Mr. and Mrs. Damesek’s complaint. CONCLUSIONS OF LAW APPLICABLE STATUTES AND RULES A.R.S. § 32-1154(A) provides in the pertinent subsections: “A. The holder of a license or any person listed on a license pursuant to this chapter shall not commit any of the following acts or omissions: *** 2. Departure from or disregard of plans or specifications or any building codes of the state or any political subdivision of the state in any material respect which is prejudicial to another without consent of the owner or the owner's duly authorized representative and without the consent of the person entitled to have the particular construction project or operation completed in accordance with such plans and specifications and code. *** 7. The doing of a wrongful or fraudulent act by the licensee as a contractor resulting in another person being substantially injured.”

CONCLUSIONS OF LAW 1. In this disciplinary case, the complainants have the burden of proof, and the standard of proof on all issues is the preponderance of the evidence.[5] A “preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”[6] It “is evidence which is of greater weight or more convincing than the evidence which is offered in opposition to it; that is, evidence which as a whole shows that the fact sought to be proved is more probable than not.”[7] The Vapor Barrier 2. The construction plans should have been more specific[8] as to the installation of a vapor barrier, for example, specifying the type in the General Specifications and identifying the placement of the barrier in the Detailed Notes. But the plans were neither ambiguous nor silent about a vapor barrier. A note identified the desired installation of a vapor barrier. It was the same note which called for a “reinforced concrete slab.” Swartz had the opportunity to read the note and reasonably should be expected to, at a minimum, have inquired as to the need for a vapor barrier. Further, Swartz knew about the use of vapor barriers. A concrete subcontractor is reasonably expected to know about vapor barriers, as the concrete contractor typically installs these barriers.[9] Had Swartz read the note and asked about the vapor barrier, Swartz might have either increased its bid, offered a lower bid for no vapor barrier, or declined to submit a proposal. The note’s reference to a vapor barrier was sufficient to lead a reasonable contractor to inquire about this item. 3. By failing to install a vapor barrier, Swartz violated A.R.S. § 32- 1154(A)(2) in that it departed from or disregarded the plans, in a material way, to the prejudice of and without the consent of Mr. and Mrs. Damesek. 4. By failing to install a vapor barrier, Swartz violated A.R.S. § 32- 1154(A)(7). This “wrongful” omission “substantially injured” Mr. and Mrs. Damesek. Black’s Law Dictionary defines “substantial” as meaning “of real worth and importance; of considerable value; valuable.”[10] Mr. and Mrs. Damesek wanted a vapor barrier installed below the concrete floor for moisture, gaseous and termite protection. The alternative chemical product will be rolled on top of the concrete slab, but more important, will be costly. The Reinforced Concrete and Exterior Concrete 5. Swartz violated both A.R.S. §§ 32-1154(A)(2) and 32-1154(A)(7) by failing to pour a floor slab which meets “the typical requirements of a reinforced concrete slab.” Complainants’ Exhibit No. 3. The same note in the plans which identified the vapor barrier called for a “reinforced concrete slab.” Swartz installed some rebar, but the preponderance of the evidence shows the rebar Swartz installed does not meet the standards of reinforced concrete. The ALJ cannot overlook the results of the pachometer survey and of Yankee Builders’ inspection report. Swartz installed some rebar, but the preponderance of the evidence presented at the hearing “is of greater weight or more convincing” that the rebar Swartz installed did not meet the minimum standards of reinforced concrete.[11] 6. The Registrar has authority to award restitution but not compensatory damages either in tort or in contract.[12] Compensatory damages must be sought in a court of competent jurisdiction or in an appropriate arbitration forum (if the contract requires arbitration of disputes). The Registrar may order full or partial restitution of monies paid and may order the completion of corrective work, but it is not the place to adjudicate contested issues of contractual money claims and award compensatory damages. In short, the Registrar is not a forum for the resolution of contractual money claims between private parties and licensed contractors. In Sunpower, the Court of Appeals upheld the Registrar’s order directing the contractor “to remove the solar equipment it sold and installed and to return the monies paid for the sales and installations.”[13] The Court of Appeals held that “the Registrar’s order was a restitutionary remedy contemplated by the legislature as part of the Registrar’s regulatory authority to take appropriate disciplinary action against those who violate the licensing standards.”[14] Restitution is an “equitable remedy under which a person is restored to his or her original position prior to loss or injury, or placed in the position he or she would have been, had the breach not occurred.”[15] The Arizona Supreme Court has called it “a flexible, equitable remedy” available in construction cases.[16] The remedy restores a party to the position the party would have been if the other party had not breached the contract. In breach of contract cases, the remedy is associated with the return of monies paid. 7. As equitable restitution, in this proceeding Mr. and Mrs. Damesek are entitled (1) to be relieved from any further responsibility to pay Swartz the amount of $3,573.00 due to Swartz for the exterior concrete and (2) to payment of $3,707.00[17] for the completion of the exterior concrete done by another contractor. 8. Regarding the reinforced concrete issue, Mr. and Mrs. Damesek may pursue compensatory damages for breach of contract in the appropriate civil forum. Mr. and Mrs. Damesek wish to be refunded the $25,056.00 paid to Swartz as their remedy for not receiving a reinforced concrete floor. They ask for a rescission of the contract. Both the limited evidence presented at the hearing and the limitations of remedies available to the Registrar preclude this outcome in this proceeding. 9. The Registrar “may temporarily suspend, with or without imposition of specific conditions” a contractor’s license, if the licensee commits any of the acts or omissions specified in A.R.S. § 32-1154(A).[18] The preponderance of the evidence supports the conditional suspension of Swartz’s License No. 039539, Class C-09. 10. Swartz’s prior record may be considered “as a matter in mitigation” when formulating an appropriate recommended disposition of this matter.[19] Swartz’s prior record mitigates a conditional suspension. No further disciplinary sanctions besides those contained in the recommended order should be imposed on Swartz. RECOMMENDED ORDER It is recommended that the Registrar: I. Suspend Swartz’s License No. 039539, Class C-09, but this suspension shall not occur, if on or before ten days after the effective date of the Registrar’s order, the Registrar receives written notification that Swartz has completed or has caused to be completed through other licensed contractors, in a professional and workmanlike manner, the following corrective actions: 1. Application of the “Sealflex” chemical product to the area which Swartz poured in the interior of the Damesek residence. Swartz may retain other licensed contractors to complete this application. The application of this product shall be in lieu of the installation of a vapor barrier below the existing concrete slab. 2. Repairing or removing the 12” step in the closet, under the front stairs, which does not belong there. 3. Repairing the wall in the kitchen which extends 1” to 5/8” past the framing. 4. Repairing all the honeycombed areas where the floor and stem walls were not properly poured. In addition, the following actions shall be executed: 1. Written credit or waiver of payment from Mr. and Mrs. Damesek of $3,573.00 due Swartz for the exterior concrete work not done. 2. Payment of $3,707.00 to Mr. and Mrs. Damesek. II. Close Citation and Complaint No. G00-0251 without suspension, if these corrective actions are timely completed. SUBMITTED this 30th day of May, 2000.

George A. Schade, Jr. Administrative Law Judge

The original Recommended Decision and Order of the Administrative Law Judge was mailed on May 30, 2000, for distribution to the parties, to:

Michael P. Goldwater Arizona Registrar of Contractors 800 West Washington, 6th Floor Phoenix, Arizona 85007

George A. Schade, Jr. ----------------------- [1] The ALJ took official notice of the documents necessary to prepare this procedural history. [2] “Vapor barriers are used to minimize moisture inflow through concrete in contact with water or water vapor. They can protect floor coverings or electronic equipment. They can also minimize the infiltration of radon.” Complainants’ Exhibit No. 6. Mr. and Mrs. Damesek also wanted a vapor barrier for termite protection. A common type of vapor barrier is one made of polyethylene. [3] “A pachometer is an instrument which generates a magnetic field and measures any change due to magnetic material.” Complainants’ Exhibit No. 3. [4] This case is currently being heard in the Office of Administrative Hearings. It is not clear why these two cases were not consolidated for hearing. See Rule R2-19-109, Ariz. Admin. Code.

[5] Culpepper v. State, 187 Ariz. 431, 930 P.2d 508 (App. 1996); Rule R2-19- 119, supra.

[6] Morris K. Udall, Arizona Law of Evidence, § 5 (1960).

[7] BLACK’S LAW DICTIONARY 1182 (6th ed. 1990).

[8] Renaissance’s responsibility, if any, to Mr. and Mrs. Damesek for the proper preparation of the construction plans is not an issue in this proceeding.

[9] Mr. Lewis King, the Registrar’s inspector assigned to this case, wrote a letter stating in pertinent part, “An item like a…vapor barrier called for under a concrete slab typically would be installed by the concrete contractor.” Complainants’ Exhibit No. 13.

[10] BLACK’S LAW DICTIONARY 1428 (6th ed. 1990).

[11] BLACK’S LAW DICTIONARY 1182, supra.

[12] Sunpower of Arizona v. Registrar of Contractors, 166 Ariz. 437, 803 P.2d 430 (App. 1990), review denied (1991).

[13] Sunpower, 166 Ariz. at 440.

[14] Sunpower, 166 Ariz. at 441.

[15] BLACK’S LAW DICTIONARY 1313, supra.

[16] Murdock-Bryant Construction, Inc. v. Pearson, 146 Ariz. 48, 53, 703 P.2d 1197, 2002 (1985), cited with approval in Commercial Cornice & Millwork, Inc. v. Camel Construction Services Corp., 154 Ariz. 34, 39, 739 P.2d 1351, 1356 (App. 1987).

[17] This amount is the difference between $7,280.00 (what was paid to Yankee Builders to finish the exterior concrete) and $3,573.00 (what would have been paid to Swartz for the work).

[18] A.R.S. § 32-1154(B).

[19] Notice of Hearing; Rule R4-9-117, supra.

-----------------------

Office of Administrative Hearings 1400 West Washington, Suite 101 Phoenix, Arizona 85007 (602) 542-9826