ALJDEC decisions subject to certification as final

2009A-16830674-ROC · Registrar of Contractors · 2013-08-12

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: July 23, 2013 APPEARANCES: Complainants Thomas Kardys and Michelle Kardys appeared on their own behalf. Respondent Whitewater Pools and Spas Inc did not appear. The Registrar of Contractors was represented by Assistant Attorney General John Tellier. ADMINISTRATIVE LAW JUDGE: Tammy L. Eigenheer _____________________________________________________________________ FINDINGS OF FACT Background and Procedure 1. The Arizona Registrar of Contractors (“the Registrar”) issued License No. B-5.240084-R to Whitewater Pools and Spas Inc (“Respondent”). Respondent’s current address of record is 5115 West Bell Road, Building G, Suite A, Glendale, Arizona 85308-3917. 2. The Registrar received a Complaint against Respondent from Thomas Kardys and Michelle Kardys (“Complainants”) regarding the pool that Respondent built at their home at 2937 East Turquoise, Phoenix, Arizona (“the workmanship complaint”). 3. The Registrar issued a Citation and Complaint in the workmanship complaint against Respondent charging possible violations of A.R.S. § 32-1154(A)(3), namely A.A.C. R4-9- 108,[1] A.R.S. § 32-1154(A)(7),[2] and A.R.S. § 32- 1154(A)(23).[3] 4. Respondent did not submit a response to the Citation and Complaint within the allotted time frame. As a result, the Registrar entered a Default Decision and Order finding that Respondent violated the A.R.S. § 32-1154(A) charged in the Citation and Complaint. 5. Based upon Respondent’s proven statutory violations, the Registrar did not require Respondent to repair the pool but, instead, revoked Respondent’s license, as well as imposing other disciplinary sanctions on the license. 6. On or about May 23, 2012, Complainants filed a claim in the amount of $5,197.00 to the Residential Contractors’ Recovery Fund (“the Fund”) to recover the cost of resurfacing the pool. 7. On or about March 11, 2013, the Registrar issued a Notice and Order of Denial of Recovery Fund Claim, stating in relevant part as follows: I. Background and Procedural History: On or about or about March 8, 2008 the Complainants entered into a contract with Whitewater Pools and Spas Inc, license number 240084, for the construction of a swimming pool. The contracted price for the project was $34,098.00 and is alleged to be paid in full by Complainants. On or about September 22, 2008, the Complainants filed a complaint against the Respondent with the Registrar of Contractors (ROC). Inspector Mark Alyea inspected the alleged poor work and a citation was issued to Respondent, ultimately resulting in the revocation of Respondent’s license on November 2, 2009 as a direct result of the complaint. . . . . On May 23, 2012 the Complainants filed a claim with the Fund. The claim was assigned to and reviewed by Recovery Fund Supervisor Eric Ulinger. . . . . On July 24, 2012 Eric Ulinger called and left messages to the Complainants and inspector Alyea to set up an inspection of the pool. Scheduling conflicts delayed the inspection date to September 12, 2012[4]. Present at the inspection were Complainants Thomas and Michelle Kardys, ROC inspector Mark Alyea and Recovery Fund Supervisor Eric Ulinger. At the inspection the Complainants stated that they repaired the pavers and the salt water system and these issues are no longer a part of the claim. Complainants also stated that the only basis of the claimed damages is the plaster in the pool and spa. It was observed that the pool had been drained by ROC employees present at the inspection. Complainants affirmatively stated that they had drained the pool and spa approximately seven months prior to the inspection, in or around January of 2012, and had not refilled it. This resulted in the pool remaining empty throughout the summer months. Visible in the pool were numerous circles that the Complainants stated were “new issues” and that were not present before the draining of the pool, nor were they part of the allegations raised in the underlying disciplinary case and were therefore not a basis for the discipline imposed on Respondent. Within the circles it was observed that the plaster has spider cracks and some spots where the plaster was loose to the gunite substrate. The deep end of the pool was covered with debris and a small amount of standing water present (less than six inches). No visible etching[5] was observed in a sampling of areas within the deep end, or, within the circles drawn by the Complainants. It is of significance that the Recovery Fund Supervisor, who’s prior experience includes 25 years as a licensed contractor and 8 years as a ROC Inspector, noted that the spider cracking and de-bonding of plaster evident at this job site inspection is most likely caused by leaving a pool drained for extended periods of time and, is more likely to occur when exposed to excessive heat during the Arizona summer months. Evidence in the records of the Registrar show that both Recovery Fund Supervisor Eric Ulinger and Inspector Mark Alyea found at the inspection numerous new issues with the plaster not presented during the initial investigation of Complainants complaint in the underlying disciplinary case. These findings confirm Complainants’ statement at the inspection that the spider cracking and de-bonding of the plaster were new problems not previously evident or complained of in the underlying disciplinary case. On or about January 31, 2013 the Complainants provided copies of the checks paid to Respondent for the construction of the pool after obtaining them from the FDIC. There is no apparent dispute that the contractor performed poor work causing etching of the plaster in the deep end of the pool and the spa, as well as chips in the pool coping in four locations. There is also no apparent dispute that the only issue the Complainants seek an award for is the re-plastering of the entire pool and spa. The issue for disposition is therefore whether Complainants’ bids properly quantify compensable actual damages within the limitations of § 32- 1132(A); that is, do the bids only address the scope of corrective work required to remediate the poor work that was a basis for the underlying disciplinary Order issued by the ROC. II. Analysis: Pursuant to A.R.S. § 32-1134(A)(2)(3) and (5) the Registrar is required to subject all Recovery Fund claim files to examination by an accountant to ensure that all claims paid are appropriate. In order to fulfill this fiduciary responsibility and determine an amount payable (if any), the Registrar must request sufficient documentation to support all payments from the Fund. This includes having conclusive proof of eligibility and of the extent of all claimed damages. Anything less mandates that the Registrar deny the unsubstantiated portion of any claimed loss. . . . . B. Actual Damages: . . . . As set forth in A.R.S. § 32-1132(A), an award from the fund is limited to the actual damages suffered by the claimant as a direct result of the contractor’s violation but shall not exceed an amount necessary to complete or repair a residential structure or appurtenance. Complainants here appear to seek compensation to re-plaster their entire pool. Their claim essentially alleges that the new issues recently discovered were caused by the Respondents poor work. Complainants’ claim, however, does not present a situation where an award can be issued for repairs that exceed the scope of corrective work required in the underlying disciplinary case. In this case, the compensable damages that are a direct violation of the contractor’s violation are those contained in the corrective work order issued on November 5, 2008, where the Inspector verified the following issues: 1) Chips to the pool coping at the south side of the pool, by the spa spillover to the pool and by the west waterfall; 2) Twelve pavers that have sunk by the back door; 3) The salt water system not working; and 4) Etching in the deep end of the pool and the spa. Any additional issues beyond the above were not part of the allegations at issue in the underlying disciplinary case, nor were they the basis for the citation or resulting disciplinary Order. As such, no award from the Fund is available to Complainants except to correct the four items above. In support of their claim, the following bids were provided by the Complainants:

Passion Pool Care LLC, license number 264588: $4747.30 U S Pool Construction Inc dba We Fix Ugly Pools, license number 211511: $7023.00 Aquavida Pools Solutions LLC, license number 221559: $5213.00

As stated above, all three bids include re-plastering of the pool and spa in their entirety, which is well beyond the scope of corrective work allowed based on the underlying disciplinary case.[6] The above bids are therefore unable to be used as an estimated repair quantification of Complainants’ compensable damages. Further, because Complainants failed to mitigate their damages and actually exacerbated their damages by draining their pool, thereby making the plaster conditions worse, new bids to correct the prior deficiencies are no longer possible. An additional barrier to an award arises from a lack of evidence to substantiate full payment on the original contract. The Complainants supplied a copy of one personal check in the amount of $1,000.00 made payable to and endorsed by Respondent. Complainants supplied and four additional checks from their lender totaling $33,098.00 (all of which are dated March 31, 2008) made payable to Thomas Kardys Jr. and Whitewater Pools. Three of these checks were endorsed by both Complainants and Respondent. One check in the amount of $3,309.80 is endorsed only the Complainant. As such, the Fund is not able to verify that $3,309.80 was actually received by Respondent on the original contract and must be considered an unpaid balance due.

Therefore, even assuming, arguendo, that the low bid of $4,747.30 to re-plaster the entire pool and spa was an appropriate quantification of Complainants’ compensable damages, the deduction of the unpaid balance due of $3,309.80 demonstrates that the maximum award from the Fund would be $1,437.50. No award is possible however, as set forth above, since the bids provided are well beyond the scope of corrective work allowed to correct the deficiencies at issue in the underlying disciplinary case.

8. Complainants requested a hearing on the Registrar’s determination that they were not entitled to a payout from the Fund. The Registrar referred the matter to the Office of Administrative Hearings for an evidentiary hearing. 9. On May 23, 2013, the Registrar issued a Notice of Recovery Fund Eligibility/Payout Hearing setting a hearing on July 23, 2013, at 8:00 a.m. The Registrar sent a copy of the Notice of Recovery Fund Eligibility/Payout Hearing to Respondent at its address of record. 10. A recovery fund payout hearing was held on July 23, 2013, at 1:00 p.m. Complainants submitted seven exhibits and testified on their own behalf. The Registrar submitted three exhibits and presented the testimony of Eric Ulinger, the Fund’s Supervisor. 11. Respondent did not request to appear telephonically and did not request that the hearing be continued. Although the hearing did not conclude until after 3:00 p.m., Respondent did not appear personally or through an attorney. Consequently, Respondent did not present any evidence. Hearing Evidence 12. Complainants testified that immediately after construction of their pool, they began having problems, and they filed the workmanship complaint with the Registrar as a result. 13. The Corrective Work Order issued by the Registrar required that Respondent repair the chips to the pool coping, the twelve sunken pavers, the salt system, and the pool etching at the deep end of the pool and spa. None of the corrective work was performed by Respondent. 14. Following the Default Decision and Order, Complainants contacted the Registrar to inquire about filing a claim with the recovery fund. At that time, Complainants were informed the recovery fund was depleted and they would not be able to recover any damages. 15. In January 2012, Complainants drained the pool and spa in the normal course of maintaining the pool. Once drained, additional damage to the pool surface was visible. 16. Complainants had the pool inspected by Gerard Grenier of Passion Pool Care to evaluate the nature and extent of the damage. After a thorough examination of the pool and spa, Mr. Grenier determined there were numerous hollow areas throughout the entire surface resulting from an improper installation of the quartz surfacing product. Mr. Grenier indicated the surfacing was actually pulling away from the shot crete in the pool. Mr. Grenier recommended leaving the pool and spa empty to prevent further damage until the surface could be redone. Mr. Grenier indicated that if the pool was refilled, the water could get behind the surfacing and cause significant damage to the shot crete behind.[7] 17. Complainants contacted the Registrar regarding a claim to the recovery fund. In attempting to file a claim, Complainants improperly filed a new complaint against Respondent. Eventually, Complainants filed a claim on May 23, 2012. 18. Complainants went to extreme lengths to obtain copies of the checks paid to Respondent for the project. Eventually, Complainants recovered five checks relating to the project. 19. The checks included a personal check from Complainants payable to White Water Pools for $1,000.00. The remaining four checks were from the National Bank of Arizona and were payable to “Thomas Kardys Jr. and Whitewater Pools.” Three of the checks were for $9,929.40 each. The fourth check was for $3,309.80. The fourth check was endorsed by Complainant Thomas Kardys, but was not endorsed by Respondent. However, the check was cashed and was stamped on the reverse by Bank of America, Respondent’s bank, the same way the other three were stamped. 20. Complainants obtained bids from three contractors to resurface the pool. The bids included U S Pool Construction Inc dba We Fix Ugly Pools for $5,607.00; Aquavida Pools Solutions LLC for $5213.00; and two options from Passion Pool Care for $4,115.00 or $4,197.30.[8] 21. One of the three companies that submitted bids went out of business prior to Complainants contracting to have the pool refinished. Complainants obtained a bid from Rondo Pools for $5,452.14. Complainants stated they specifically selected the Pebble Fina® finish because it was smoother than other pebble finishes. Complainants testified the product finish used by Rondo Pools was most similar to what they initially selected and had installed when the pool and spa were constructed. Because it was most similar to their previous finish, Complainants selected Rondo Pools to perform the resurfacing. 22. Complainants indicated they were not seeking funds for the repairs they completed themselves or for damage that still needed to be repaired. 23. Mr. Ulinger testified that, in his experience, leaving a pool empty for a prolonged period of time causes additional damage to the surface that would not have existed or would not have been as severe if the pool were always full of water. As such, Mr. Ulinger believed the damage he observed during a September 2012 inspection was attributable to Complainants failure to keep the pool full rather than to Respondent’s poor workmanship. According to Mr. Ulinger, the damage resulting from Respondent’s poor workmanship could have been addressed with patches rather than resurfacing the entire pool and spa. Mr. Ulinger acknowledged he was not present during the initial inspection or when the pool was drained in January 2012 to observe the existing damage. 24. Mr. Ulinger also testified that the Registrar must determine the contract amount and whether the full contract amount had been paid. If any monies are owed under the contract, the amounts owed must be deducted from the cost of repairing deficient workmanship, and if the amount owed exceeds the cost of repair, the claimant has not suffered any compensable damages. 25. Mr. Ulinger testified that because the fourth check was not endorsed by Respondent, the Registrar could not establish that the $3,309.80 was actually paid to Respondent. Therefore, any possible claim to the recovery fund would be reduced by that amount. 26. Mr. Ulinger testified that because Complainants failed to supply substantial proof of damages sustained as a direct result of Respondent’s poor workmanship, their claim to the recovery fund should be denied. CONCLUSIONS OF LAW This matter lies within the Registrar’s jurisdiction.[9] The Notice of Recovery Fund Eligibility/Payout Hearing that the Registrar mailed to Respondent at his address of record was reasonable. Respondent is deemed to have received notice of the recovery fund payout hearing.[10] A.R.S. § 32-1132(A) provides that “[a]n award from the fund is limited to the actual damages suffered by the claimant as a direct result of the contractor's violation but shall not exceed an amount necessary to complete or repair a residential structure or appurtenance within residential property lines. . . .” Complainants bear the burden of proof to establish the amount, if any, that they are entitled to recover from the Fund under A.R.S. § 32-1132(A) by a preponderance of the evidence.[11] “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”[12] 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.”[13] The checks provided to the Registrar totaled $34,098.00, the full amount of the contract. The Registrar’s assertion that Complainants failed to establish that the final check for $3,309.80 was paid to Respondent is without merit. The circumstances surrounded the contract and the checks make it clear that Respondent received the funds from the final check even though it did not stamp an endorsement on its reverse. Therefore, Complainants established by a preponderance of the evidence that they paid the full amount of the contract in question. Complainants were also credible in their testimony that the damage they were seeking to have reimbursed was present at the time the pool was drained in January 2012. The report from Mr. Grenier supports their argument that they were specifically advised to leave the pool empty to prevent even greater damage to the structure of the pool. Mr. Ulinger acknowledged that he was not present at the time the pool was drained. Therefore, he could not state with certainty that the damage was not present and only occurred as a result of the pool being empty. Complainants were also credible in their testimony that the damages were so extensive that it required a complete resurfacing of the pool to resolve the issue. While Complainants were provided with lower bids, those bids were not for finishes equivalent to the product they contracted for initially. While Mr. Ulinger opined that other quartz finishes would be practically identical, Complainants were credible in their testimony that they personally felt the available finishes that were the subject of the bids and that the finish provided by Ronda Pools was most similar to the original finish. As such, Complainants should not be forced to accept an inferior product than called for in their initial contract. Complainants sustained their burden to establish that they are entitled to recover a payout from the Fund in the amount of $5,452.14. RECOMMENDED ORDER Based on the foregoing, it is recommended that on the effective date of the Registrar’s final order, Complainants Thomas Kardys and Michelle Kardys receive a payout from the Residential Contractors’ Recovery Fund in the amount of $5,452.14. 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 40 days from the date of that certification. Done this day, August 12, 2013.

/s/ Tammy L. Eigenheer Administrative Law Judge

Transmitted electronically to:

William A. Mundell, Director Registrar of Contractors

----------------------- [1] A.R.S. § 32-1154(A)(3) includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license, “[v]iolation of any rule adopted by the registrar.” A.A.C. R4-9-108 requires that “[a]ll work shall be performed in a professional and workmanlike manner” and that “[a]ll work shall be performed in accordance with any applicable building codes and professional industry standards.” [2] A.R.S. § 32-1154(A)(7) 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.” [3] A.R.S. § 32-1154(A)(23) includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license, “[f]ailure to take appropriate corrective action to comply with this chapter or with rules adopted pursuant to this chapter without valid justification within a reasonable period of time after receiving a written directive from the registrar.” [4] The inspector’s presence at the inspection was requested by the Complainants. The inspector was not available between August 3, 2012 and August 27, 2012. September 12, 2012 was Complainants first available date after the inspectors return. [5] Etching of plaster is where the entire surface feels like sandpaper and typically takes on a tannish colored hue. Etching is typically the result of improper balancing of the pool water. Spot etching on the other hand is not rough to the touch and usually about ½ inch in diameter or less. Isolated spot etching is typically overly porous and where a loss of calcium components has occurred. Spot etching is known to be a workmanship issue that can be repaired in the isolated areas. [6] Based upon the records of the Registrar, Recovery Fund Supervisor Ulinger opined, based on his years of experience in the industry, that spot etching can be repaired and does not require resurfacing an entire pool. [7] Complainants’ Exhibit A. [8] Complainants’ Exhibit F. [9] See A.R.S. §§ 32-1131 to 32-1140. [10] See A.R.S. § 41-1092.04; A.R.S. § 41-1092.05(D). [11] See A.A.C. R2-19-119(A) and A.A.C. R2-19-119(B)(1); see also Vazanno v. Superior Court, 74 Ariz. 369, 372, 249 P.2d 837 (1952). [12] Morris K. Udall, Arizona Law of Evidence § 5 (1960). [13] Black’s Law Dictionary at 1220 (8th ed. 1999).

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