ALJDEC decisions subject to certification as final

2009A-61562347-ROC · Registrar of Contractors · 2011-10-04

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

RECOVERY FUND PAYOUT HEARING: September 15, 2011, at 1:00 p.m. APPEARANCES: Complainant Peter Hermann was represented by Robert Rutila, Esq., Buchalter Nemer, P.L.C.; Respondent Wolf Stucco and Plastering, L.L.C. appeared through Juan Loyola, its qualifying party and member. ADMINISTRATIVE LAW JUDGE: Diane Mihalsky _____________________________________________________________________

FINDINGS OF FACT Background and Procedure In July 2004, the Arizona Registrar of Contractors (“the Registrar”) issued License No. ROC198151, Class K-36 for dual plastering to Wolf Stucco and Plastering, L.L.C. (“Respondent”). On or about June 2, 2009, the Registrar received a complaint from Peter Hermann (“Complainant”) regarding Respondent’s poor workmanship in re- stuccoing Complainant’s home at 9140 Jack Neville Drive in Scottsdale, Arizona. According to the complaint, Complainant paid Respondent the full contract price of $33,684.80. The Registrar designated Complainant’s complaint as Case No. 09-6156. The Registrar’s inspector, Scott Deering, performed a jobsite inspection in Case No. 09-6156. On June 30, 2009, Inspector Deering issued a Corrective Work Order (“CWO”) to Respondent, requiring it to correct the patches and general poor appearance of the stucco. Complainant requested a hearing. On September 17, 2009, the Registrar issued a Citation and Complaint against Respondent in Case No. 09-6156, charging violations of A.R.S. § 32-1154(A)(3), namely A.A.C. R4-9-108,[1] (23),[2] and former (7).[3] Respondent filed a timely written answer to the Registrar’s Citation and Complaint in Case No. 09-6156. The Registrar referred the matter to the Office of Administrative Hearings (“the OAH”), an independent agency, for an evidentiary hearing. An evidentiary hearing was held on March 23, 2010, at the OAH in Case No. 09-6156 before Administrative Law Judge (“ALJ”) M. Douglas. ALJ Douglas issued a decision in Case No. 09-6156, finding that Respondent had failed to comply with the CWO without valid justification and that Respondent violated A.R.S. § 32-1154(A)(3), (23), and former (7) in its application of and failure to repair the stucco. ALJ Douglas also made the following finding: Although the [Registrar] normally allows a contractor reasonable opportunity to correct its own construction deficiencies and errors subsequent to hearing, under all of the salient facts and circumstances presented herein, this Respondent should not be allowed to wreak any further havoc on the life of this homeowner. Thus, any condition placed into this Order for the purpose of allowing the Respondent to accomplish corrective work as a means to reduce or eliminate otherwise appropriate disciplinary penalties should include the requirement that the Respondent cause another properly licensed contractor to comply with the terms and conditions of the Corrective Work Order issued in this matter. Therefore, ALJ Douglas recommended that the Registrar require Respondent to hire a properly licensed contractor to repair the stucco at Complainant’s house to avoid suspension of its license. On April 26, 2010, the Registrar issued a Decision and Order substantially adopting ALJ Douglas’s recommended decision in Case No. 09-6156, with an effective date of June 5, 2010. Respondent requested an extension of time to comply with the Registrar’s final Decision and Order in Case No. 09-6156. Although initially Complainant did not object to an extension, three months later, after Respondent still had not hired another contractor to repair the stucco, Complainant requested that the Registrar enforce the final Decision and Order. The Registrar subsequently redesignated Case No. 09-6156 as Case No. 2009- 6156347. On March 2, 2011, the Registrar denied Respondent’s request for an extension of time, ordered that the April 26, 2010 Decision and Order take effect immediately, and suspended Respondent’s license. On or about April 11, 2011, Complainant filed a claim to the Residential Contractors’ Recovery Fund (“the Fund”) for the cost to repair the stucco that Respondent had applied to his residence. Complainant provided with his claim bids from three contractors to repair the stucco. On July 1, 2011, the Registrar issued a Notice of Claim for Administrative Payout in Case No. 2009-61562347, informing the parties that “[a]fter a review of the claim and all supporting documentation, the Fund has determined that Complainant be awarded $30,000.00 in the form of a payment issued by the Fund.” (Emphasis in original.) After Respondent requested a hearing, the Registrar referred Complainant’s claim to the Fund in Case No. 2009-61562347 to the OAH for an evidentiary hearing. A hearing was held before the undersigned ALJ on September 15, 2011. Complainant testified on his own behalf and submitted eleven exhibits, including subparts. Respondent’s qualifying party and member, Juan Loyola, testified on its behalf. Hearing Evidence Complainant submitted recent photographs of the stucco at his residence to show that the stucco was blistered or cracked on every surface except the patio walls. Complainant testified that the poor appearance of the stucco worsened every time it rained. Complainant testified that the contractors who submitted bids to repair the stucco said that Respondent had applied stucco to the parapet walls with no slope, causing the parapets to absorb rather than shed moisture. With respect to the blistered and cracked surfaces, Complainant testified that the entire wall-to-wall surface needed to be repaired to correct cracks and blisters because patches would be visibly apparent. Complainant testified that Respondent applied the new stucco over existing stucco without any mesh or lath between the two layers, causing cracks in the existing stucco to “telegraph” to the new stucco. UltraKote Products, Inc. (“UltraKote”) manufactured the synthetic stucco that Respondent applied to Complainant’s residence. Complainant submitted UltraKote’s specifications for repairs that would “ensure a restoration warranty,” including preparing the entire surface by washing it and removing loose stucco, embedding mesh over the parapets and all other surfaces, and applying stucco on the parapets to obtain a proper pitch for positive drainage. Complainant testified that he provided UltraKote’s specifications to Highland Residential Builders, L.L.C., License No. ROC267891, Class B for residential general contracting (“Highland”) and to Ingram & Walts Plastering, L.L.C., License No. ROC213114, Class K-36 for dual plastering (“Ingram & Walts”). Complainant submitted Highland’s bid to repair the stucco at his house by applying STO brand synthetic stucco, in the total amount of $38,600.00. Complainant submitted Ingram & Walts’ bid to repair the stucco at his house by applying an unspecified brand of synthetic stucco, in the total amount of $47,619.00. Complainant testified that he did not provide UltraKote’s specifications to Pro Finish Plastering, L.L.C., License No. ROC228248, Class K-36 for dual plastering (“Pro Finish”). Complainant submitted Pro Finish’s bid to repair the stucco at his house by applying STO brand synthetic stucco, in the total amount of $57,328.53. The bids from Highland, Ingram & Walts, and Pro Finish all included installation of mesh over all surfaces. Mr. Loyola argued that the cost of repairing the stucco should not exceed the initial contract price of $33,684.80. He testified he did not use mesh under the parapet walls because Complainant’s construction manager requested sharp corners on the parapets. Mr. Loyola agreed that repairs to the blisters and cracks required application of new stucco wall-to-wall. CONCLUSIONS OF LAW This matter lies within the Registrar’s jurisdiction.[4] Complainant bears the burden of proof and must establish the amount of his compensable damages by a preponderance of the evidence.[5] Respondent bears the burden to establish affirmative defenses by the same evidentiary standard.[6] “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”[7] The Registrar’s final decision in former Case No. 09-6156 established that Respondent violated A.R.S. § 32-1154(A)(23), (3), namely A.A.C. R4-9-108, and former (7), and that Respondent’s statutory violations substantially injured Complainant. With respect to the calculation of Complainant’s damages, 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.” Complainant established that proper repair of the stucco requires reapplication of stucco on all surfaces over mesh because Respondent did not use any mesh. Complainant also established that because Respondent’s work must be covered and completely redone, it has no value. Therefore, Complainant established that the amount of his damages is at least $30,000.00, the maximum payout that the Registrar can make from the Fund under A.R.S. § 32-1132(A). RECOMMENDED ORDER In view of the foregoing, it is recommended that on the effective date of the Registrar’s final order in this matter, the Registrar order the Residential Contractors’ Recovery Fund to pay $30,000.00 to Complainant Peter Hermann. It is further recommended that under A.R.S. § 32-1139(B), the Registrar charge $30,000.00, plus interest at a rate of ten percent a year, to Respondent Wolf Stucco and Plastering, L.L.C.’s License No. ROC198151. 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 five days from the date of that certification. Done this day, October 4, 2011.

/s/ Diane Mihalsky 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)(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.” [3] A.R.S. § 32-1154(A)(7) formerly included 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.” [4] See 32-1101 et seq. [5] 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). [6] See A.A.C. R2-19-119(B)(2). [7] Morris K. Udall, Arizona Law of Evidence § 5 (1960).

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