ALJDEC decisions subject to certification as final

06F-1941-ROC · Registrar of Contractors · 2007-01-30

STATE OF ARIZONA IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: January 23, 2007.

APPEARANCES: >The Complainant appeared in his own behalf. >The Respondent was represented by its attorney, Michael G. Wales, Esq.

ADMINISTRATIVE LAW JUDGE: Robert I. Worth _____________________________________________________________________

Evidence and testimony were presented, and based upon the entire record, the following Findings of Fact, Conclusions of Law and Recommended Order are made.

FINDINGS OF FACT

1. Administrative notice is taken of the Registrar’s license records which reveal that Respondent’s Class KB-01 license was revoked for cause on July 26, 2006 in Case Number 06-1416 and was again revoked on August 29, 2006 in that same case for a subsequent failure to have timely paid an imposed civil penalty. Respondent’s said license has also been suspended by operation of law since June 30, 2006 for lack of a proper bond.

2. The presently revoked or suspended posture of Respondent’s license does not preclude the conducting of these disciplinary proceedings on behalf of the Registrar of Contractors, which actions are expressly authorized by statute,[1] nor does such license status preclude the pursuit by Complainant of his potential administrative remedies.

3. Respondent re-asserted its previously filed motion to dismiss the instant action based upon the doctrine of res judicata. Oral argument was presented in support of and in opposition to the granting of Respondent’s motion which was taken under advisement pending the presentation of evidence and testimony on the merits.

4. It was not disputed that these same parties actively participated in a lengthy prior hearing, encompassing seven separate hearing sessions, on another complaint filed by Complainant against Respondent. The numerous issues raised at the initial proceeding based in large part upon a written list containing ninety-one enumerated items or aspects of claimed deficiencies or wrongdoing alleged against Respondent, were the subject of a comprehensive written decision by the assigned Administrative Law Judge. Both the listing and the prior decision were introduced as exhibits at the instant hearing.

5. The initial complaint filed in this action had alleged the existence of a major leak located beneath a drain through the walking deck above the office by the exit door to the stairs. Thereafter, several addenda to the original complaint were filed by Complainant. The first such addendum related to a structural crack in the garage ceiling where drywall had separated. The second addendum consisted of four items or claims; namely, (i) the improper attachment of a wrought iron railing to the East side of a retaining wall on the office deck; (ii) the door to the mechanical room is falling apart;

(iii) two window leaks exist, one at the West side of the office and another at the East side of the guest room; and (iv) no trap primer was installed at the drain in the dog kennel. A final addendum was filed with respect to multiple bubbles in the foam roof.

6. At the outset of the hearing, Complainant stated that two of the enumerated items of complaint, as amended, were no longer in issue at this proceeding, since they were admittedly addressed or resolved as part of other administrative actions or settlement agreements with other parties. The withdrawn issues related to the last two items, (iii) and (iv) on the above-described second addendum, relating to the leaks at the two identified windows and to the trap primer at the drain. Consequently, the evidentiary presentations at the instant hearing did not include the withdrawn items and instead were confined solely to the balance of the items of complaint.

7. The evidence of record and the history of dealings between the two parties revealed that a prior administrative action in Case Number 05-0733 involving the same parties and the many of the same or related issues asserted in the instant case had reached finality in the absence of any further appeals by either party applicable to the issues raised in the filed complaint in the instant case.[2] Long-standing and well-settled legal doctrines of res judicata and collateral estoppel operate to preclude parties from re-litigating such identical issues in subsequent judicial or administrative actions. Consequently, certain issues relating to the identified items of alleged deficiency, to the contracting law responsibilities of Respondent resulting from any prior denial of access or from the termination of Respondent from the project by Complainant must be treated as having been previously determined, whether or not correctly, in the prior quasi- judicial administrative proceedings. Stated alternatively, the previously entered and finalized adjudications are binding upon undersigned Administrative Law Judge, as well as upon both of the parties. This Finding of Fact is also intended to serve as a Conclusion of Law.

8. Respondent had agreed to and did serve at general contractor for the construction of a new home for Complainant. This tribunal is bound by the contents of the prior decision which declined to adjudicate and liquidate the conflicting claims as to monetary entitlements by the respective parties under their contractual arrangements, effectively determining that a civil court and not the Registrar was the more appropriate forum in which to decide such matters. The previously entered decision also found that, in early June, 2004, Respondent had been terminated from the project by Complainant,[3] and further that Respondent had been denied access to the premises for the purposes of completing or correcting construction errors or deficiencies. More specifically, Complainant had arranged for corrective measures through other contractors before the Registrar’s assigned Inspector could view many of the areas of alleged impropriety and, if appropriate, could include any such items or areas in an issued Corrective Work Order.

9. In this case, Complainant filed complaints and addenda prior to having remedial work performed by other contractors. Consequently, those portions of the prior decision that effectively relieved Respondent of responsibility based upon the demonstrated lack of an opportunity to be notified formally of the complaint items through the Registrar’s process and to have an independent inspection on its own or through an assigned agency Inspector with respect to the merits of the workmanship allegations are somewhat inapplicable to the uncorrected complaint items that presently remain in issue hereunder. 10. Complainant further asserted that the items set forth in the various complaints filed hereunder related to items which had been subsequently discovered to be deficient or which had failed. The Registrar’s assigned inspector issued two written Corrective Work Orders following separate jobsite visits. In the first such directive, dated March 30, 2006, the Inspector determined that Respondent must rectify the structural crack problem at the garage ceiling and also the leak into the office wall and ceiling above the North office door traceable to a drain through the walking deck above the office. It was not disputed that Respondent declined to perform the specified remedial work, asserting a lack of responsibility for either of the observed conditions that were claimed by Respondent to have been the result of the work of successor contractors who completed the project for Complainant.

11. The Inspector’s second Corrective Work Order, dated June 2, 2006, addressed all of the other remaining items in issue under the filed complaint and addenda. However, as part of such directive, the Inspector expressly made the requirement for Respondent’s action effectively subject to a condition that would eliminate any duty to undertake and complete remedial actions if the Registrar’s prior Order adopting and approving the decision of the Administrative Law Judge had relieved Respondent of construction responsibility based upon either a specific exclusion in the decision of any particular component or upon the timing of the substandard work performance. It must be noted that, notwithstanding the absence of a similar express exclusionary condition for the performance of corrective work on the items contained in the Inspector’s first issued directive, the same treatment of relieving Respondent of any responsibility would necessarily apply if such item or the timing of its performance was addressed in the prior Decision and Order.

12. If the above-described exclusionary condition was not otherwise applicable, the Inspector confirmed in his second directive the need for corrective work on the gaps between the wrought iron railing and the retaining wall on the office deck, the duty to

rectify the mechanical room door problems, and to correct the bubbling condition on the urethane foam roof.[4] Once again, Respondent was shown to have declined to perform the specified remedial work, asserting not only a lack of responsibility for any of the observed conditions that were claimed to be the result of the work of successor contractors who completed the project for Complainant but also that the exclusionary condition set forth in the Inspector’s directive based upon the prior decision and Order operated to relieve Respondent of any remedial responsibilities.

13. Construction is not a perfect science, and it is not unusual for items to require attention by way of correction, replacement or adjustment – often even more than once. No finding of a contracting law violation is generally supportable unless and until, after notice and a reasonable opportunity is given, a licensed contractor fails to rectify construction deficiencies. Additionally, responsibility for undertaking and completing appropriate remedial action must be predicated upon an adequate showing that the resulting deficiency or improper construction is proximately attributable to acts or omissions of the contractor and not caused by others.

Leak into office from walking deck drain

14. The walking deck was to have received several coats of an epoxy material, and at least two drains were to be inserted on the surface through the decking. A water leak condition was experienced that penetrates into the walls and ceiling of the office. Such condition was shown traceable to the walking deck area at which the drain was installed or through the drain piping itself.

15. Credible evidence tended to indicate that Respondent was terminated from the project before all intended deck coatings were applied and before the drain was

finally installed and sealed. Consequently, since other contractors had admittedly performed the deck coating work, including the drain installation, it is found and determined that the subsequent water leaking condition was not sufficiently demonstrated to have been proximately caused by any act or omission of Respondent.

Wrought iron railing on office deck

16. A section of the wrought iron railing mounted between two stucco retaining wall columns along the perimeter of the office deck was shown to have visible gaps at both ends, thereby resulting in a substandard and unacceptable attachment. Respondent denies that the present observable condition is the same as when its last work was performed prior to the termination by Complainant. Of perhaps some significance, the evidence revealed that this deficiency was not included in the lengthy listing of allegations in the initial hearing, indicating either that such condition did not then exist or that it remained unnoticed by both co-Complainants, by their selected expert as well as by the Registrar’s Inspector. A local inspection was passed after Respondent’s initial attachment work on the railing.

17. The concrete deck next to the railing was the subject of subsequent construction work by a specialty concrete contractor pursuant to a settlement agreement with Complainant. The deck was removed and replaced at a different elevation, after the condition of the sub-soils had been examined and re-compacted. Irrespective of the fact that this same specialty contractor was the Respondent’s subcontractor for the initial concrete work on the project, that relationship ended when Respondent was terminated by Complainant. Notwithstanding the Respondent’s separate commitment in the settlement between Complainant and the concrete contractor to contribute to a portion of the costs for the removal and replacement work, Respondent is found not to have assumed any responsibility for the results of such work that resulted from and after the concluding of a settlement agreement to which it (Respondent) was not a party.

18. Although the evidence was inconclusive as to whether or not the railing attachment deficiency had existed prior to Respondent’s jobsite termination and went unnoticed by several persons, including those with considerable construction-related knowledge, such evidence generated a reasonable inference that it was equally, if not more, likely that the specialty concrete contractor may well have temporarily removed and reattached the railing section during performance of its subsequent deck replacement work. It must be held that insufficient proof was presented to demonstrate that the admittedly substandard railing attachment was the product of any work by Respondent prior to the date of termination.

Mechanical room door to the exterior

19. The wood door from the mechanical room to the exterior was shown to have become severely deteriorated at the present time. However, the evidence failed to establish that no form of metal flashing or other moisture barrier materials had been installed by Respondent over that door. Other similar doors were not exhibiting the same deteriorated condition. Additionally, Complainant had requested that Respondent not continue with the installation of hardware for the mechanical room door, prompting both written and oral notifications from Respondent long prior to the date of its termination as to the potential dangers of not installing appropriate hardware to enable effective closing of that component feature in the home and further informing Complainant that Respondent was disclaiming any liability for such door if the warnings were unheeded.

20. Under all the circumstances, it is found and determined that the evidence of record failed to adequately demonstrate that the door’s deterioration was the proximate result of any act or omission of Respondent during the period of its jobsite involvement. ……. …….

Bubbles in foam roofing

21. The testimonial and photographic evidence revealed that the foam roof was and is still exhibiting a substandard and unacceptable bubbling condition, indicative of a lifting of the urethane materials installed over the roof decking and under a subsequently applied thin protective surface coating of ultra-violet (UV) materials at numerous and scattered locations. Credible testimony was given on behalf of Respondent that as of the date of its termination, Respondent had applied only the first of several required applications of urethane foam product onto the roof surface. It was shown that a successor roofing contractor performed the UV coating application plus some repairs to the underlying foam coat.

22. It is found from the evidentiary presentations that the installation of the foam roof was not completed by Respondent and therefore responsibility for the subsequent bubbling condition cannot be attributed to any deficient work performed by Respondent.

Structural crack on garage ceiling

23. Several excessive structural cracks have developed and are visible in the drywall forming the ceiling of the garage. This condition is found under the evidence to be the result of work performed by Respondent prior to its termination. After notification from Complainant in the first addendum to the complaint in this matter, Respondent failed or refused to commence any remedial measures to rectify the excessive cracks. Respondent similarly declined to take any corrective action after the Inspector issued his unconditional written directive.

24. The prior administrative complaint action between the parties did not address this structural crack condition which did not manifest itself until much later in time. Nor was there the potential of causation by another third party contractor

performing work on or adjacent to the cracking locations. The prior decision had indicated that underlying reason for relieving Respondent from any duty to rectify construction errors, especially those of a “punch list” variety, was the depriving Respondent of the ability to take part in a jobsite visit and evaluation by a Registrar’s Inspector. In this case, an opportunity was afforded to address the visible deficiency that had first appeared long after the first complaint was filed.

25. No ongoing denial of access was established with respect to this reported item or area of complaint. In point of fact, Respondent’s license was in good standing at the time the addendum to the complaint was filed on March 15, 2006 as to the structural crack in the garage ceiling. Moreover, the termination of Respondent from the project did not, either under the terms of the previously entered Decision and order or under other applicable legal principles, operate to relieve or exonerate Respondent from all responsibilities to Complainant.

26. A written directive relating to this item of complaint was issued by the Inspector, and although Respondent was certainly entitled to oppose the directive and to request a hearing, the failure to undertake and complete remedial measures can and should result in appropriate sanctions. The excessively cracked condition of the garage ceiling reflects adversely upon Respondent’s workmanship, and the failure or refusal to rectify the problem resulted in non-compliance with the Inspector’s Corrective Work Order. Additionally, the prolonged time period over which Respondent allowed the substandard condition to remain uncorrected is further found to constitute a wrongful (but not fraudulent) act attributable to Respondent resulting in substantial damage to Complainant within the meaning of another contracting law provision charged herein to have been violated by Respondent.

27. There is no entitlement for either party to have remedial work included as condition in Order for reduction or elimination of otherwise appropriate penalties against

a licensee. Mindful of the presently revoked license status of Respondent, and also of the recognized history of a deteriorated relationship between the parties, demonstrating their inability to effectively communicate and cooperate with each other, the inclusion of a corrective work condition, or even restitution for the costs thereof, is deemed unwarranted under all the circumstances. Similarly, a penalty of suspension or probation against an already-revoked license would serve little or no useful purpose. However, an outright third license revocation appears not to be justified under all the facts of the instant case where only one of the six items of claimed deficiency, as originally filed or thereafter added, was sufficiently established as a contracting law violation in this action. The Respondent’s non-compliance with the terms of an Inspector’s written Corrective Work Order would, however, support the imposition of a civil penalty in an amount significantly short of the applicable $500.00 statutory maximum.[5]

CONCLUSIONS OF LAW

1. At these administrative hearings, the complaining party generally has the burden of proof, Vazzano v. Superior Court, 74 Ariz. 369, 249 P.2d 837 (1952) and the standard of proof on all issues is by a preponderance of the evidence. Culpepper v. State, 187 Ariz. 431, 930 P.2d 508 (1996). See also Smith v. Arizona Department of Transportation, 146 Ariz. 430, 706 P.2d 756 (1985); Utah Construction Company v. Berg, 68 Ariz. 285, 205 P. 2d 367, (1949); Rule R2-19-119, A.A.C. A "preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not." Morris K. Udall, Arizona Law of Evidence, §5 (1960). 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." Black's Law Dictionary, 1182 (6th ed. 1990).

2. As previously set forth in Finding of Fact Number 7, the Findings and Conclusions in prior administrative action under Case Number 05-0733 that had reached finality must be treated as binding upon both parties under applicable principles of res judicata and collateral estoppel. In this case, the previously entered determinations with respect to the impact of the Complainant’s termination of Respondent and failure to afford adequate opportunities to rectify various problems with the construction lead to a “law of the case” result in addressing some, but not all, of the items of alleged deficiency in issue under the instant complaint filed by Complainant.

3. Complainant retains his applicable burden of proof to demonstrate that the items of complaint admittedly constituting deficient or substandard work performance were the proximate result of acts or omissions of Respondent as opposed to those of other contractors that were selected to complete the project, whether by separate settlement agreement or by new contractual arrangements. Such burden was not sustained by Complainant as to all but one of the items remaining in issue in this matter.

4. With respect to the complaint allegations relating to the structural crack on the garage ceiling, and only as to that issue, the evidence of record adequately established that Respondent has violated the provisions of A.R.S.§32-1154(A)(7), (23) and (3); namely, Rule R4-9-108, A.A.C. No other violations by Respondent with respect to any of the other complaint allegations were sufficiently proven hereunder.

RECOMMENDED ORDER

In view of the foregoing, it is recommended that Respondent pay the sum of $250.00 to the Registrar of Contractors by way of a civil penalty pursuant to A.R.S. §32-1154(D). The failure by Respondent to pay the entire amount of the aforesaid civil

penalty, on or before 30 days following the effective date of the Order entered in this matter, shall result in the automatic revocation of Respondent’s contractor’s license, effective on such extended deadline date. No future license shall be issued to any entity consisting of persons associated with Respondent, as defined in A.R.S. §32-1101A(5), unless payment of any outstanding prior civil penalty is tendered.

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.

Dated: January 31, 2007. OFFICE OF ADMINISTRATIVE HEARINGS

______________________________________ Robert I. Worth Administrative Law Judge

Original transmitted on _____________________

by: _____________________________ , to:

Fidelis V. Garcia, Acting Director Registrar of Contractors Legal Department 800 West Washington Street (6th Floor) Phoenix, AZ 85007

----------------------- [1] See A.R.S. §32-1154(C).

[2] Although Respondent has filed an appeal or an action seeking judicial review of the previously entered decision by the assigned Administrative Law Judge and subsequent Order of the Registrar, counsel for Respondent avowed that the sole issue raised in such appeal is wholly unrelated to any of the issues to be determined in this administrative action. Therefore, all other aspects or issues that formed part of the prior case have become final and non-appealable. [3] The caption in the prior action reflected that the named Complainants were both Larry Siferd, the sole Complainant in this action, and his wife, Sandi Siferd. No significant difference is perceived or intended in the instant action with respect to the singular or plural use of the designations, Complainant or Complainants. [4] A fourth item contained in the second directive related to the correction of a leaking condition at the guest room East window, an item that was expressly withdrawn by Complainant from the issues to be addressed at the instant hearing. [5] It is noted that Respondent’s future failure to timely pay such civil penalty will automatically result in another revocation penalty.

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