ALJDEC decisions subject to certification as final

09F-1878-ROC · Registrar of Contractors · 2009-08-28

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: August 25, 2009 at 1:30 p.m. APPEARANCES: Complainant D N A Floors Inc. appeared through is Qualifying Party and President David Joseph Magri; Respondent Facilitec Inc. appeared through its Commercial Flooring Manager Stacey O’Connell. ADMINISTRATIVE LAW JUDGE: Diane Mihalsky _____________________________________________________________________

FINDINGS OF FACT Background and Procedure On May 3, 2003, the Arizona Registrar of Contractors (“the Registrar”) issued License No. ROC185153, Class L-05 for commercial carpet and vinyl to Complainant DNA Floors, Inc., a corporation. David Joseph Magri is Complainant’s Qualifying Party and President. On March 11, 2008, the Registrar issued License No. ROC243188, Class K-08 for dual floor covering to Respondent Facilitec, Inc., a corporation. Stacey O’Connell is Respondent’s Commercial Flooring Manager. On October 1, 2008, the Registrar received Complainant’s complaint against Respondent’s license, which alleged that Respondent owed $6,291.00 for Complainant’s performance of a contract that the parties had made on September 5, 2008 for installation of carpet at a commercial project at 50th Street and Washington Street. The Registrar referred the matter to Respondent for its immediate attention. On October 27, 2008, Mr. Magri on behalf of Complainant informed the Registrar that Respondent had paid $2,591.20 and that Respondent currently owed Complainant $3,699.80. Mr. Magri requested that the Registrar issue a citation against Respondent’s license. On March 24, 2009, the Registrar issued a Citation and Complaint against Respondent’s license, charging A.R.S. § 32-1154(A)(7), (11), and (13) (namely A.R.S. § 32-1124(B)). On April 3, 2009, the Registrar received Respondent’s written answer to the Citation and Complaint, which denied any statutory violation. Respondent attached to its answer a completed complaint form against Complainant, which alleged that Complainant owed Respondent $615.00, which was what Respondent had paid to another contractor to complete the punch list and to remove trash from the jobsite, which Complainant had failed to do. The Registrar did not process the complaint against Complainant’s license that was attached to Respondent’s answer. The Registrar referred the matter to the Office of Administrative Hearings, an independent state agency, to schedule and to conduct a fair hearing. A hearing was held on August 25, 2009. Mr. Magri testified and submitted twelve exhibits on Complainant’s behalf. Mr. O’Connell testified and submitted six exhibits on Respondent’s behalf. Hearing Evidence Respondent was the flooring contractor in the construction of a four- block long Arizona Disability Resources office building. Respondent subcontracted to Complainant installation of approximately 4,000 square feet of carpet in two phases. Respondent’s subcontract form including the following “Installation Prices and Procedures Agreement,” which included in relevant part as follows: 8. Shortages – All shortages should be reported as soon as possible to the office. Do not wait until the following day to report shortages. You will also be required to supply the following information on your work order . . .

► Reason for shortage, i.e., roll was cut short, estimate was short, material was damaged, etc.

► Cut List.

► Quality, color and dye lot if available.

► Size needed to complete the job. . . . .

17. Jobs are not considered complete until cove base is done, seams are sealed, caulking is done, property is vacuumed, scraps are removed, etc. Leave all houses, units, offices, etc. clean. DO NOT turn in incomplete work orders for pay.

18. Subcontractors are responsible for all materials once materials are in their possession and control. This includes materials left on the job site but not yet installed. All pay will be held until payment in full has been received for lost or damaged material.

19. Subcontractors agree to be held liable for all materials and labor costs incurred due to improper workmanship on work they have completed. All pay that is due to subcontractor for any and all work they have completed may be used to satisfy these expenses.

The subcontract form did not show Respondent’s license number. The carpeting that the owner and the general contractor had selected was Cambridge, which was manufactured by Beaulieu. The carpet showed a somewhat abstract design, which according to Beaulieu’s specifications had a 24” wide and 19.5” long pattern repeat. Phase 1 of the parties’ contract required Complainant to lay two different colors of Cambridge carpet. The parties agreed that Mr. O’Connell on behalf of Respondent told Mr. Magri that Complainant should not match pattern between the two different colors and that it did not do so. Mr. O’Connell testified that he also told Mr. Magri that the pattern should not be matched in the same color of carpet. Mr. Magri denied that Mr. O’Connell told him not to match the pattern in adjacent pieces of the same color of Cambridge carpet. He would not have agreed to perform the work in that manner without an explicit waiver of warranty from the owner. The manufacturer’s specifications required pattern to be matched. If the pattern had not been matched at the seams, the owner of the project would have objected because the seams would have been unsightly and would have been obvious in long unbroken expanses, as in hallways. The Beaulieu Commercial Installation Instructions provided in relevant part as follows: Pattern Matching: All textile products due to their nature and flexibility have some degree of inherent distortion. Thus when introducing a pattern into the construction, additional installation steps are required to assure a suitable pattern match. It is a fact that pattern carpet installations take longer to install versus non-patterned installations. This is due to the additional steps required to assure an acceptable pattern match such as; dry laying carpet, row cutting on pattern, positioning carpet with knee kicker, use of dry lines to check and create a reference point for pattern straightness, power stretching patterns into alignment and possibly stay nailing to hold carpet in place while adhesive sets.

SCOPE OF PROJECT: It is the responsibility of the installation contractor to understand the project scope, which includes the product selected for installation and properly addressing any additional installation steps in the original labor quote. Beaulieu Commercial will not be responsible for any additional labor incurred on pattern installations that should have been addressed in the original labor quote.

Beaulieu Commercial does not guarantee exact pattern match of our products. This is due to the fact that carpet is a textile and cannot be manufactured to exact measurements. We do state that our patterns when within certain parameters are matchable by carefully following the proper pattern steps.

[Emphases in original.] Mr. O’Connell testified that, because the project had small offices around the perimeter and low pony walls throughout, the owner and general contractor had specified that the carpet pattern not be matched. Respondent’s work order for Phase I of the job required Complainant to “[i]nstall carpet in glue down manner according to plans/specs provided.” Complainant’s crew laid the Cambridge carpet. Because they matched the pattern at the seams, Respondent’s “take-off” for carpet was short and additional carpet had to be purchased. Respondent paid Complainant the full amount of Complainant’s invoice for Phase I, $1,011.25. Respondent’s work order to Complainant for Phase II of the project required Complainant to “[i]nstall materials per plan and spec . . . . No pattern match required. No border on Phase II.” Mr. Magri did not notice Respondent’s addition that no pattern match was required to the scope of the work for Phase 2. He testified that he still would have matched the pattern. Complainant’s crew started laying the carpet in Phase II, again matching the pattern at the seams. Respondent’s “take-off” for the carpet was again short and additional carpet had to be ordered to complete Phase II. Respondent provided another work order for the additional carpet. The work orders did not show Respondent’s license number. Complainant completed Phase II on September 10, 2008. Complainant submitted an invoice for $6,291.00, which was the amount remaining due under the parties’ subcontract. Respondent did not initially pay Complainant anything for the invoice. After Complainant filed the complaint to the Registrar, on October 3, 2008, Respondent tendered $2,691.20 to Complainant. In the letter to Mr. Magri that accompanied the check, Mr. O’Connell explained that Respondent had reduced the invoice because Complainant had mismanaged materials on the jobsite, including large pieces of fabric and debris, and also had failed to seal all carpet seams or to provide a record of cuts. Although Mr. O’Connell’s October 3, 2008 letter mentioned the additional 169 yards of carpet that Respondent had provided for Phase II, it did not mention that Complainant had been instructed not to match carpet pattern at the seams. Mr. O’Connell’s letter did state that Respondent was deducting $2,628.80 from the amount otherwise due to Complainant for the cost of the additional carpet and freight charge on Phase II. On October 6, 2008, Mr. O’Connell on behalf of Respondent sent a punch list by e-mail to Mr. Magri, requesting that the items on the punch list be corrected no later than 5:00 p.m. on the following date. Complainant did not complete the punch list items. Mr. Magri explained the he did not have time to reschedule his crew to meet Respondent’s deadline. Mr. O’Connell testified that he had paid Heritage Interiors to complete the punchlist. Respondent submitted invoices from Heritage Interiors dated October 10, 2008 for $300.00 and dated October 31, 2008 for $165.00 Mr. Magri testified that he had offered to provide Respondent with Complainant’s cut lists for the job after he had not been paid but that he had never been able to arrange a meeting with Mr. O’Connell or another supervisor to provide them. Mr. O’Connell testified that Complainant did not match the pattern at the seams on Phase II. Mr. O’Connell testified that Respondent had correctly calculated the take- offs for the amount of carpet needed for the Arizona Disabilities job. In support of this testimony, Respondent submitted a letter its employee Richard Kapple, which asserted that he had done a full take off of Phase II and that his quantities, “as a whole, including overage and pattern repeat, came in at 1% less than that of the take off done by Stacey O’Connell.” Respondent also submitted a copy of a letter from Steven F. Smith, Jr., Senior Project Manager for CalibeR Construction, Inc., the general contractor on the project, that asserted that, “[d]uring my various tours of the job site . . . , I noted that there were numerous pieces of carpet remnants (5 or 6) that appeared to be in excess of 100 square feet per piece.” Mr. Magri testified that it is the norm in the industry to leave large remnants for the customer’s use. He testified that his crew had removed all trash from Complainant’s portion of the job site. The Registrar’s records reveal that, if the Registrar accepts this recommended decision, it will be the only final order against Respondent on the current record. Respondent’s record therefore is considered as a factor in mitigation of the recommended penalty. CONCLUSIONS OF LAW This matter lies within the Registrar’s jurisdiction.[1] Complainant bears the burden of proof and must establish Respondent’s statutory violations by a preponderance of the evidence.[2] Respondent bears the burden to establish affirmative defenses by the same evidentiary standard.[3] “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”[4] A preponderance of the evidence is “[t]he greater weight of the evidence, not necessarily established by the greater number of witnesses testifying to a fact but by evidence that has the most convincing force; superior evidentiary weight that, though not sufficient to free the mind wholly from all reasonable doubt, is still sufficient to incline a fair and impartial mind to one side of the issue rather than the other.”[5] The record in this matter, including Respondent’s own exhibits, established that it violated A.R.S. § 32-1154(A)(13)[6] by failing to have its license number, preceded by the acronym “ROC,” on its work order form and subcontract form. Complainant has established that the manufacturer’s specifications and industry practice require repeating carpet pattern to be matched at seams. Respondent’s work order for Phase II was contradictory in that it required Complainant to comply with the manufacturer’s specifications but not to match carpet pattern at the seams. The law discourages warranty disclaimers and strictly construes such disclaimers against the drafter.[7] Under this law, Complainant is correct that, if it had installed the carpet without matching the pattern at the seams, based on a contradictory and ambiguous work order and contrary to the manufacturer’s specifications and industry practice, it would have been potentially liable to the owner of the project, the general contractor, or to Respondent. The letters that Respondent submitted from Mr. Kapple and Mr. Smith are hearsay.[8] Although hearsay may be admitted in an administrative hearing,[9] it should not be relied upon if it is unreliable or not the kind of evidence that reasonable persons would rely upon in serious matters.[10] The letters are not the kind of evidence that reasonable persons would rely upon to decide whether or not to penalize a contractor’s license. Respondent’s evidence was not consistent. Mr. O’Connell testified that he told Mr. Magri not to match the patterns and the work order for Phase II expressly did not require Complainant to match the carpet panel at the seams. Mr. O’Connell also testified that Complainant did not match the pattern at the seams but Mr. Kapple’s letter stated that, under his calculations, Respondent’s take-off was sufficient to accommodate pattern repeat. Mr. Magri’s testimony was consistent and credible. Complainant therefore has established that it matched the carpet patterns, in compliance with the manufacturer’s specifications and industry practice, and that the carpet shortages were due to Respondent’s take-offs having not considered the amount of carpet necessary to match the pattern. Respondent was required to furnish additional carpet to compensate for its own mistake and to allow Complainant to complete the job in a professional and workmanlike manner. Respondent has established that it paid Heritage Interiors $465.00 to complete Complainant’s punch list items. This amount should be deducted from the amount otherwise owed to Complainant. Respondent has not established any other of its affirmative defenses or claimed setoffs against the amount owed to Complainant. Complainant therefore has established that Respondent violated A.R.S. § 32-1154(A)(7)[11] and (11)[12] by failing to pay Complainant $3,234.80. RECOMMENDED ORDER Based on the foregoing, it is recommended that, on the effective date of the Registrar’s final order in this matter, the Registrar suspend Respondent Facilitec Inc.’s License No. 243188, Class K-08, until it pays Complainant DNA Floors Inc. $3,234.80. If, on or before the effective date of the final order, the Registrar receives proof in writing from Respondent that it has paid Complainant D N A Floors Inc. $3,234.80, the Registrar shall not suspend Respondent’s license and, instead, close Case No. 09-1878. If the Director of the Office of Administrative Hearings certifies this Administrative Law Judge Decision, the effective date of the order will be forty days from the date of certification. Done this day, August 28, 2009.

______________________________________ Diane Mihalsky Administrative Law Judge

Original transmitted by mail this ____ day of August, 2009, to:

William A. Mundell, Director Registrar of Contractors c/o Legal Department 3838 N. Central Ave. Phoenix, AZ 85012

By __________________________ ----------------------- [1] See 32-1101 et seq. [2] See A.R.S. § 41-1092.07(G)(2); A.A.C. R2-19-119(A) and (B)(1); see also Vazanno v. Superior Court, 74 Ariz. 369, 372, 249 P.2d 837 (1952). [3] See A.A.C. R2-19-119(B)(2). [4] Morris K. Udall, Arizona Law of Evidence § 5 (1960). [5] Black’s Law Dictionary at page 1220 (8th ed. 1999). [6] This statutory subsection includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license “[f]ailure in any material respect to comply with this chapter.” The specific statute violated is A.R.S. § 32-1124(B), which requires that licensed contractors to include their license number, which “shall be preceded by the acronym ‘ROC,’“on “all written bids submitted by the license and . . . on all advertising, loan forms, lending institution forms, letterheads and other documents used by the licensee in the conduct of business regulated by this chapter.” [7] See Nastri v. Wood Bros. Homes, Inc., 142 Ariz. 439, 441-42, 690 P.2d 158, 160-61 (App. 1984) (citing Darner Motor Sales, Inc. v. Universal Underwriters Insurance Co., 140 Ariz. 383, 682 P.2d 388 (1984) and Peterson v. Hubschman Construction Co., Inc., 76 Ill. 2d 31, 389 N.E.2d 1154 (1979)). The case that the court in Nastri cited held as follows:

Although the implied warranty of habitability is a creature of public policy, we do not consider a knowing disclaimer to be against the public policy of this State. However, we do hold that any such disclaimer must strictly be construed against the builder-vendor. . . . We refer to the well-reasoned opinion of the Supreme Court of Missouri in Crowder v. Vandendeale (Mo. 1978), 564 S.W.2d 879, where it was held that “boilerplate” clauses, however worded, are rendered ineffective in such a disclaimer (564 S.W.2d 879, 881), and the court further stated:

“[O]ne seeking the benefit of such a disclaimer must not only show a conspicuous provision which fully discloses the consequences of its inclusion but also that such was in fact the agreement reached. The heavy burden thus placed upon the builder is completely justified, for by his assertion of the disclaimer he is seeking to show that the buyer has relinquished protection afforded him by public policy. A knowing waiver of this protection will not be readily implied.” (Emphasis in original.) Crowder v. Vandendeale (Mo. 1978), 564 S.W.2d 879, 881 n.4.

Petersen v. Hubschman Construction Co., Inc., 76 Ill. 2d 31, 43, 389 N.E.2d 1154, 1159 (1979) (some authorities omitted; emphases added and in original). [8] See Ariz. R. Evid. 801(c) (“‘Hearsay’ is a statement, other than one made by the declarant while testifying at the trial or hearing, offered in evidence to prove the truth of the matter asserted.”). [9] See A.R.S. § 41-1092.07(F)(1). [10] See Plowman v. Arizona State Liquor Board, 152 Ariz. 331, 337, 732 P.2d 222, 228 (App. 1986) (citing Begay v. Arizona Department of Economic Security, 128 Ariz. 407, 626 P.2d 137 (App. 1981). [11] This statutory subsection includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license “[t]he doing of a wrongful or fraudulent act by the licensee as a contractor resulting in another person being substantially injured.” [12] This statutory subsection includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license “[f]ailure by a licensee . . . to pay monies in excess of seven hundred fifty dollars when due for materials or services rendered in connection with the licensee’s operations as a contractor when the licensee has the capacity to pay . . . .”

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

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