ALJDEC

00F-M0230-ROC · Registrar of Contractors · 2000-03-23

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: March 20, 2000 APPEARANCES: Agave Tile, Inc. was represented by attorney, Monty Greek. Mr. Scott Marian, qualifying party of Agave Tile, Inc., was also present. Builders Guild, Inc. was represented by its Vice President, Mark Ostrand. ADMINISTRATIVE LAW JUDGE: Sondra J. Vanella _____________________________________________________________________ Having heard the testimony of the witnesses and having read and considered the entire record in this matter, the undersigned Administrative Law Judge hereby makes the following Findings of Fact, Conclusions of Law and submits the following Recommended Decision to the Director of the Arizona Registrar of Contractors.

FINDINGS OF FACT On November 23, 1998, Builders Guild, Inc. (“Builders Guild”), a general contractor, entered into a contract with Agave Tile, Inc. (“Agave”), a specialty contractor. The contract called for Agave to perform tile work in portions of Tempe High School. The buildings at issue were G and N. The work to be performed in building G was in the women’s locker room. The work in building N was in the cafeteria. The contract price was $31,500. The contract called for progress payments to be made by Builders Guild to Agave, upon application made by Agave on or before the 22nd day of the month in which work was performed. Upon receipt of the application, Builders Guild was to forward to Tempe High School, an application for payment to Builders Guild. The contract further called for progress payments to be made to Agave, no later than seven days after receipt of payment by Builders Guild from Tempe High School for Agave’s work. The contract further called for Builders Guild to provide written notice to Agave to commence correcting any unsatisfactory work within one working day. See Complainant’s Exhibit 1, paragraphs 4.2 and 9.1.1. The tile installation in building G began in mid-January 1999, and was completed at the end of January 1999. Upon completion of the work in building G, Agave was not given a punch list, and apparently there were no problems with Agave’s work in building G. The agreed upon price Agave was to be paid for its work in building G was $13,295. Agave sent Builders Guild an invoice for payment on February 28, 1999. Builders Guild received payments from Tempe High School on February 18, 1999 in the amount of $368,647.20, and on March 25, 1999 in the amount of $447,300.07, however, Builders Guild has not paid Agave for any of its work in building G. See Complainant’s Exhibit 13. It is important to note that Builders Guild has not alleged any defects or poor workmanship regarding building G, and therefore has improperly withheld payment from Agave for work performed in building G. On March 18 or 19, 1999, Agave began work in building N. The start date had been delayed by Builders Guild by approximately one month. Tempe High School had chosen a gray color tile with a Moby Pearl color (vanilla color) grout. Tempe High School chose the color of the grout by looking at the color chart provided by the manufacturer of the grout. Prior to installing the tile, Agave had to grind down the concrete floor. Agave spent two days preparing the floor, and submitted a change order to Builders Guild in the amount of $600. This was one of several change orders submitted by Agave to Builders Guild, totaling $6,966.07, none of which have been paid. Mr. Mike Bowers testified that he installed the tile in building N and supervised the grouting of it. After eight to ten feet of the tile was grouted, he noticed that the color of the grout did not contrast with the tile. He ordered the crew to stop grouting until he obtained approval to continue grouting in that color from Builders Guild’s site foreman, John Hellemn. Mr. Bowers checked the paper work to confirm that Agave was using the correct color grout, and found that it was. Mr. Bowers testified that Mr. Hellemn told him Agave was using the correct color grout, and to continue with the grouting. Mr. Bowers testified that Mr. Hellemn threatened Agave with liquidated damages and back charges if Agave did not finish the tile work on schedule. Mr. Bowers testified that he knew Agave was using the correct color grout because the caulk matched the grout, and the caulk was supplied in tubes directly from the manufacturer. Mr. Bowers further testified that there were no unusual bonding problems with the grout. He also testified that Builders Guild’s cleaning crew used a degreaser to clean the tile, something they should not have done because degreaser could discolor the grout. Agave finished the tile installation in building N on March 30, 1999. Upon substantial completion of the job, Builders Guild informed Agave that the color of the grout was unacceptable to Tempe High School, as it was the wrong color. On April 6, 1999, Agave submitted an invoice to Builders Guild for the tile work in building N, in the amount of $14,730, the agreed upon contract price. On May 6, 1999, Builders Guild received payment from Tempe High School in the amount of $424,526.40. See Complainant’s Exhibit 13. Builders Guild has not paid Agave for any of the tile work in building N. Mr. Scott Marian testified that on April 14, 1999, Builders Guild informed Agave that Agave would have to remove the grout because the color was unacceptable to Tempe High School. Builders Guild alleged that the color of the grout did not match the manufacturer’s color chart and that Agave had mixed the grout incorrectly, resulting in the color of the grout not matching the color on the color chart. The evidence demonstrated however, that the caulk that was used was supplied by the same manufacturer of the grout, and the caulk matched the grout perfectly, therefore the color of the grout was the correct color as chosen by Tempe High School. Mr. Mark Ostrand of Builders Guild testified that the reason Agave did not get paid for the work performed prior to April 14, 1999 was because Builders Guild did not receive an invoice from Agave. Mr. Ostrand further testified that the reason Agave did not get paid after April 14, 1999, was because of the poor quality of work performed in building N. The punch list and correction notice dated April 7, 1999, only identified the color of the grout as a problem. See Complainant’s Exhibit 15. Further, a fax dated April 14, 1999, stating that the grout will have to be removed, indicated the reason for the removal was the color of the grout. See Complainant’s Exhibit 16. There is no mention of poor work in either piece of correspondence. Builders Guild submitted applications to Tempe High School for payment on the premise that the work performed by Agave through the application dates was acceptable. Further, the contract called for progress payments to be made within seven days after payment was received by Builders Guild from Tempe High School. Also, paragraph 4.1.8 of the contact states that “payment to Subcontractor does not constitute or imply acceptance of any portion of the Subcontractor’s work.” See Complainant’s Exhibit 1. The undersigned Administrative Law Judge finds that Builders Guild was not justified in failing to pay Agave for the work Agave had performed. Agave requested that a courtesy inspection be conducted by the Registrar of Contractors (“ROC”). On May 25, 1999, ROC Inspector Robert Dragoon conducted an inspection of the tile installation. Per his inspection report, he found the color match to be acceptable. See Complainant’s Exhibit 3. Mr. Matt Bottema of Daltile conducted an inspection of the tile installation. He testified that the tile installation performed by Agave was a beautiful job, however, the color of the grout chosen by Tempe High School was inappropriate. He further testified that the color of the grout was in fact Moby Pearl (the color Tempe High School had chosen). Mr. Bottema also testified that it is common for a color card sample of grout color to vary from the actual color of the grout. Notwithstanding the findings of Mr. Bottema and Inspector Dragoon, Agave removed the grout in early June 1999. In late June 1999, after a suitable color had been decided upon by Tempe High School, Agave re-grouted the floor. Mr. Marian testified that Agave believed it had no option but to perform the re-grout work or be faced with back charges or litigation. With only 150 square feet remaining to be re-grouted, several school employees walked on the floor and the grout stuck to their shoes. Agave only needed ½ day to complete the remaining 150 feet, the touch up work on the grout that was damaged by school employees, and the clean up, when it received a fax from Builders Guild ordering Agave off the job. Agave had not been given a punch list for building N, nor had they been given an opportunity to cure any problems Builders Guild may have had with Agave’s work. The grout takes about one to two weeks to cure. Builders Guild’s clean up crew began cleaning the floor on July 8, 1999, one day after Agave had grouted the floor. On July 11, 1999, Agave submitted an invoice in the amount of $17,443, to Builders Guild for the removal and re-grouting of building N. See Complainant’s Exhibit 5. Builders Guild has not paid Agave for the removal and re-grouting of building N. On June 28, 1999, counsel for Agave submitted a demand letter to Bob Carter of Builders Guild, for payment to Agave for all work performed pursuant to the contract. See Complainant’s Exhibit 19. On July 19, 1999, after the aforementioned demand letter was received by Builders Guild, the issue of the second application of grout not bonding to the first application was raised for the first time as a defense for non-payment. See Complainant’s Exhibit 5. Builders Guild submitted no evidence of flaking, poor bonding, or any evidence of poor workmanship on the part of Agave, at the hearing of this matter. Mr. Ralph Williamson, a certified ceramic tile consultant, inspected the floor of building N on August 31, 1999. He observed the re-grout of the tile. At that time, Agave had re-grouted the tile in a misty gray color, as specified by Builders Guild, and as instructed by Tempe High School. Mr. Williamson testified that any discoloration in the color of the grout was caused by surface residue, cleaning, or from wear by other trades during the course of construction. He further testified that the condition of the grout was very hard, as it should be and that there was nothing substandard about Agave’s tile grouting. The undersigned Administrative Law Judge finds that Builders Guild breached the contract by failing to provide notice and an opportunity to Agave to cure any claimed defects. Builders Guild further breached the contract by failing to make any progress payments to Agave despite having received applications for payment by Agave and payment from Tempe High School for work performed by Agave. Builders Guild submitted no evidence in support of a good faith dispute as the basis for non-payment. The undersigned Administrative Law Judge finds that Agave is entitled to receive $52,434.07 from Builders Guild as compensation for the work performed by Agave. The undersigned Administrative Law Judge further finds that Tempe High School’s mistake in its selection of grout color should not affect payment to Agave. This is an issue to be resolved between Tempe High School and Builders Guild. The undersigned Administrative Law Judge further finds that grounds exist to revoke Builders Guild’s Class B-01 license.

CONCLUSIONS OF LAW The Complainant bears the burden of proof, and the standard of proof on all issues is by a preponderance of the evidence.[1] A “preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”[2] 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.”[3] The undersigned Administrative Law Judge concludes that the preponderance of the evidence shows that Builders Guild has violated A.R.S. (32- 1154(A)(7), as set forth in Findings of Fact ## 3, 6, 7, 9, 12, 13, 16, 18, 19, 20, and 22. It was wrongful of Builders Guild to not pay Agave for the tile work performed by Agave in both buildings G and N. Agave has suffered substantial financial injury, in that it has not received any compensation for the work it performed for Builders Guild. The undersigned Administrative Law Judge concludes that the preponderance of the evidence shows that Builders Guild has violated A.R.S. (32- 1154(A)(11), as set forth in Findings of Fact ## 3, 6, 7, 9, 12, 13, 16, 18, 19, 20, and 22. Builders Guild owes Agave $52,434.07, as Builders Guild has received sufficient monies from Tempe High School.

RECOMMENDED DECISION In view of the foregoing, it is recommended that Respondent’s Class B- license shall be revoked on the effective date of the Order entered in this matter. It is further recommended that if Respondent pays to Complainant the amount of $52,434.07, on or before the effective date of the Order entered in this matter, then the above-provided license revocation shall not take place but instead Respondent’s Class B-01 license shall be placed on active suspension for a period of l4 days followed immediately by a period of disciplinary probation for one year. This alternative penalty shall commence, if at all, on the effective date of the Order entered in this matter. It is further recommended, if the alternative penalty is applicable and in addition to the above-provided alternative disciplinary penalties, that any restoration of Respondent’s contracting rights, whether or not probationary, shall be subject to a condition that Respondent first post an additional surety bond, cash deposit or alternative deposit for a period of twenty-four (24) months, including future renewal periods, in the amount of $1,500.00, such bond or deposit to be in addition to the required surety bond or cash deposit set forth in A.R.S. §32-1152(D). Cash or alternative additional deposits, if utilized, shall be returned only after the expiration of an additional two year period following the above- provided twenty-four (24) month period and only if no claims are then pending.

Done this day, April 3, 2000.

______________________________________ Sondra J. Vanella Administrative Law Judge

Original transmitted by mail this ____ day of April, 2000, to:

Michael P. Goldwater, Director Registrar of Contractors ATTN: Joyce Armijo 800 West Washington, 6th Floor Phoenix, AZ 85007

By ___________________________

----------------------- [1] Culpepper v. State, 187 Ariz. 431, 930 P.2d 508 (App. 1996). [2] Morris K. Udall, Arizona Law of Evidence, (5 (1960). [3] Black’s Law Dictionary, 1182 (6th ed. 1990).

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