ALJDEC decisions subject to certification as final

2010A-13969445-ROC · Registrar of Contractors · 2011-04-28

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: August 30, 2010, October 12-13, 2010, November 15 and 19, 2010, December 13, 2010

APPEARANCES: Complainant appeared on her own behalf, accompanied by her husband Albert Carlotti and represented by attorney Gregory Eagleburger, Sanders & Parks, PC; Respondent was represented attorney Sharon Shively, Sacks Tierney PA and corporate officers Robert Myer (Qualifying Party) and Sherrie Myer.

WITNESSES: Scott Deering, ROC Inspector Anthony Salcito, Salcito Custom Homes Dominic Petrocelli, P.E., Structural Engineer Dale Nowlin, former Superintendent for Respondent Paul Newman, Premier Wood Floors Heidi Harralson, Forensic Document Examiner Tom Granillo, P.E., Civil Engineer John “Jack” Trummer, P.E., Structural Engineer Albert Carlotti, M.D., Complainant Michelle Cabret-Carlotti, M.D., Complainant Phillip Coppola, Construction Consultant Dr. Nancy Selover, State Climatologist David Jarol, P.E., Structural Engineer Garrett Goldman, P.E., Civil Engineer, Tetra Tech Bret Morse, Chief Officer of Operations for Respondent Robert Myer, Respondent Brad Gruver, P.E., Civil Engineer

ADMINISTRATIVE LAW JUDGE: Eric A. Bryant _____________________________________________________________________

Complainant and her husband (hereinafter “the Carlottis”) bring this action against Respondent concerning the construction of the Carlottis’ custom home. The Citation and Complaint issued by the Registrar of Contractors for this case alleges that Respondent failed to follow plans, specifications, and building codes, performed with poor workmanship, and failed to comply with a Corrective Work Order.[1] Respondent denies the allegations. This tribunal entered the complaint file received from the Registrar of Contractors into the record. The parties presented Exhibits C1 through C65[2] submitted by Complainant and Exhibits R1 through R176 submitted by Respondent. The parties submitted testimony from the witnesses listed above over the course of six hearing days. In addition, the parties submitted written post-hearing memoranda arguing their positions. At the beginning of the hearing, the Carlottis identified the Corrective Work Order items that were at issue. This identification did not include all items. Only the items identified by the Carlottis at the start of the hearing and later argued in their closing argument are addressed in this Administrative Law Judge Decision. Based upon the entire record, the Administrative Law Judge makes the following Findings of Fact, Conclusions of Law, and Recommended Order finding violation of the contracting laws and recommending that Respondent perform corrective work. FINDINGS OF FACT 1. Respondent is the holder of license B.124872-R, a general residential contracting license issued by the Registrar of Contractors (“ROC”). The license authorizes Respondent to operate as a general contractor for residential projects. Robert Myer is the Qualifying Party on the license. 2. This case arises out of the construction of a large custom home built for the Carlottis by Respondent as a general contractor. In April 2007, the parties entered into a contract for the building of the home.[3] The contract terms for the price of the home were for the Carlottis to pay the cost of the construction plus overhead and a set fee. Respondent was to build the home according to plans and specifications identified in the contract. Respondent built the home, a Certificate of Occupancy was issued in December 2008,[4] and the Carlottis moved into the home. 3. The Carlottis filed a complaint against Respondent with the ROC on October 9, 2009. They also filed addenda to that complaint on November 24, 2009, December 17, 2009, and January 26, 2010. ROC Inspector Scott Deering performed inspections of the home on November 16, 2009, December 28, 2009, and February 9, 2010. He issued Corrective Work Orders (“CWOs”) on December 14, 2009 (hereinafter “CWO #1”), January 22, 2010 (hereinafter “Addendum #1), and February 23, 2010 (hereinafter identified by section “Addendum #1-B,” “Addendum #2,” and “Addendum #3”).[5] The CWOs addressed the items identified by the Carlottis in the complaint and addenda they had filed. Inspector Deering also performed a pre-hearing inspection of the items that were in dispute on August 24, 2010. Floor Trusses 4. The first complaint in CWO #1 concerns floor trusses under the second story fireplace. The Carlottis complaint was about the structural integrity of the trusses after repairs were made to them. Inspector Deering ordered Respondent to obtain a city permit and have the repaired trusses inspected. He testified at the hearing that Respondent complied with that order. The evidence shows compliance of the item in the form of verification of the repaired trusses by structural engineer Jack Trummer and approval by the City of Scottsdale.[6] 5. At hearing, the Carlottis raised several other issues with regard to the floor trusses. Those issues were not identified in the complaint or addenda and are not relevant in this forum. Respondent has addressed the structural integrity of the trusses by obtaining local building authority approval showing that the repaired trusses are in compliance with engineered plans approved by the city. Roof Trusses 6. The second complaint in CWO #1 arose when roof trusses were cut to make room for air conditioner equipment in the attic space of the home. The Carlottis’ complaint addresses the structural integrity of the roof. Inspector Deering again ordered Respondent to “obtain a city permit and provide required inspections.”[7] He testified that Respondent had complied with that order. 7. A permit was issued by the City of Scottsdale on December 2, 2009.[8] Engineer Jack Trummer issued a verification letter stating that he had inspected the field modification of the roof trusses and that they were modified according to the repair drawing he had issued.[9] This evidence complies with CWO #1 and addresses the structural integrity of the trusses. Interior Courtyard 8. Both CWO #1 item 3 (hereinafter “Item CWO1-3”) and Addendum #3 item 8 (“Item CWOA3-8”) concern the interior courtyard of the home.[10] It is undisputed that Respondent did not build the courtyard or the drainage system according to the approved plans. Respondent admits that it deviated from the plans in both the elevation of the courtyard (Item CWO1-3) and the drainage system design (Item CWOA3-8). The elevation of the courtyard floor was raised several inches from the elevation shown on the plans and instead of the dual parallel six inch floor inlets and drain lines called for by the plans, the courtyard has a catch-basin in the floor leading to a single three inch inlet that leads to a single four-inch pipe that runs underground to the edge of the property. 9. With regard to item CWO1-3, Respondent submitted photographic evidence showing that the elevation of the courtyard floor was graded during construction so that there would be a four inch step-down into the courtyard that would afford some protection from water intrusion into the home should the courtyard not drain properly.[11] The four-inch step-down was in accordance with the approved plans. Respondent’s principal, Rob Myer, testified that the Carlottis insisted that the elevation be raised so as to reduce the step-down height into the courtyard. Respondent did not get a written change order, but raised the courtyard floor to create a minimal step-down into the courtyard. This creates a greater potential for water intrusion into the house. 10. The Carlottis deny making the requested elevation change. Based on the evidence submitted, most significantly the lack of a written change order as required by the contract between the parties, the evidence is not sufficient to find that the Carlottis consented to the elevation change of the courtyard floor. 11. Concerning item CWOA3-8, the drainage system for the interior courtyard, Respondent takes the position that its deviation from the plans is not material and prejudicial to the Carlottis. Respondent provided expert testimony and opinion from Garrett Goldman P.E., a civil engineer with experience in sewer design,[12] who evaluated the drainage system and concluded that the drainage system as built could withstand a 100-year storm event.[13] He also concluded that the drainage system as built meets the city code requirements.[14] He testified in defense of his findings and conclusions, addressing criticisms of his report by civil engineer Thomas Granillo, P.E.[15] 12. The Carlottis submitted evidence in contradiction to Mr. Goldman’s opinion. Thomas Granillo, P.E. wrote reports and testified that the drainage system as built was not adequate to prevent flooding of the courtyard and water intrusion into the home.[16] The initial designer of the system as found in the approved plans, civil engineer Brad Gruver, P.E., also wrote and testified that the drainage system currently in place would not prevent “flooding.”[17] Both of those experts referenced in their opinions a “flooding” event that the Carlottis have asserted occurred in July 2009 in the courtyard. 13. Based on evidence presented by Respondent, it is not likely that the courtyard “flooded” or created water intrusion into the Carlottis’ home. There is no direct evidence of flooding in the courtyard.[18] The State Climatologist for Arizona, Dr. Nancy Selover, testified and wrote a report stating that no 100-year storm events, or any events close to it, occurred in the area of the Carlottis’ home for the two years that they had lived there prior to the hearing.[19] This makes it highly unlikely that any flooding occurred in the courtyard. 14. The Carlottis submitted a video clip taken during a rainstorm that shows some water on the floor inside a door leading to the courtyard of their home.[20] That clip shows a small amount of water inside the door on the floor. It does not show “flooding” or “water inundation” as referenced by other witnesses for the Carlottis, and it does not show the source of the small amount of water. Nor is there other evidence of significant water intrusion into the home. The Carlottis submitted evidence showing that there are some areas on the floor inside a doorway where water damage has occurred. Once again, though, the evidence does not show the source of the water damage. 15. The evidence does not show that there has been flooding of the courtyard or significant water intrusion into the interior of the home. The occurrence of such “flooding” was a premise that both Mr. Granillo and Mr. Gruver relied upon for their opinions. Since that premise is unsupported, the weight of their opinions is diminished. 16. The evidence shows that the courtyard was not built according to the approved plans and does not show that the Carlottis consented to either the elevation deviation or the drainage system deviation. 17. The evidence fails to show, however, that such deviations from the plans are material and prejudicial to the Carlottis. The expert opinion of Garrett Goldman is supported by the greater weight of the evidence. Kitchen and Family Room Floor Tile 18. Items CWO1-5 and CWOA2-4 address “excessive lipping’ of floor tile in various areas where the tile meets wood floor beams inserted between tiles.[21] Inspector Deering testified that Respondent performed corrective work on this item, but at the pre-hearing inspection he still found four areas that exceeded tolerances and need to be corrected. 19. The evidence shows that Respondent has not fully complied with Items CWO1-5 and CWOA2-4. Exterior Fountains 20. The Carlottis complained in Item CWO1-7 that exterior water fountain fixtures were not working properly and were leaking. Inspector Deering confirmed the complaint and ordered Respondent to correct the fountains. Respondent performed corrective work and Inspector Deering could not determine if the fountains were functional at the pre-hearing inspection because they were not turned on at that time. 21. The Carlottis submitted photographs of the two exterior fountains, taken in October 2010,[22] that show that the fountains do not operate as intended. There is a visible ring of water outside the lower basins indicating that water is splashing onto the pavers. This evidence shows that the fountains have not been corrected. Sagging Master Bedroom Floor 22. The next complaint item that was raised at hearing and argued in the Carlottis’ closing argument[23] is Item CWOA2-1 concerning a complaint that the second story Master Bedroom floor is sagging. Because the floor was carpeted at the initial inspections, Inspector Deering was unable to measure the floor for acceptable tolerances. At the pre-hearing inspection, however, the carpet had been removed in one area and Inspector Deering found the floor to not meet minimum workmanship standards. Master Bathroom Tile 23. Item CWOA2-3 complains about tile in the master bathroom that continues to crack despite being replaced.[24] Inspector Deering testified that Respondent had done some work on the item but that it had not been fully corrected in accordance with his CWO. The evidence supports his testimony and Respondent does not dispute that there are still cracks in the master bathroom tile. Marbella Pool Tile 24. The Carlottis made several complaints about exterior tile cracking.[25] Those items were inspected and corrections ordered. Inspector Deering testified that Respondent had corrected the items by the time of the pre-hearing inspection. At the pre-hearing inspection, the Carlottis showed him cracked tiles in a different location that was not covered by the complaints and addenda. The Inspector testified that he could not make any findings on the new cracks because they were not in the complaint. Therefore, the evidence shows that Respondent complied with the order for correction of the exterior tile items. Stucco Cracks 25. The Carlottis complained about stucco cracks and Inspector Deering ordered repairs to be made in Items CWOA1B-2F and CWOA3-6. Inspector Deering testified that those repairs had been adequately made when he inspected them at the pre-hearing inspection. Wine Room 26. The Carlottis complained about the wine room refrigeration unit venting into the interior of the home in Item CWO1-9. When Inspector Deering inspected the unit, he noted that it had been modified so that it vented externally and that there was some water damage in the pantry. He ordered Respondent to correct the water damage, which Respondent did. Construction Cost Documentation 27. Finally, the Carlottis complained that they did not receive the documentation regarding the cost of construction that they are entitled to under the terms of their contract with Respondent.[26] Inspector Deering ordered Respondent to comply with the terms of the contract. 28. The contract contains several terms relating to documentation as follows: 3b. Contractor shall submit to Owner monthly spreadsheets and invoices detailing the costs incurred and fees in the execution of this contract. Copies of all back-up documentation will be available to Owner on request . . . .

7a. Owner shall have the right to obtain copies of all costs incurred and summaries of all money flow in and out regarding the construction of residence . . . .

8j. Contractor shall keep full and detailed accounts as may be necessary for proper financial management under this agreement. Owner shall be afforded access to all of Contractor’s records, books, correspondence, instructions, drawings, receipts, vouchers, memoranda and similar data relating to this contract, and Contractor shall preserve all such records for a period of two years after the final payment.[27]

The Carlottis testified that they have not been given all documentation and that Respondent is in breach of the contract. 29. Bret Morse, Respondent’s Chief Operations Officer, testified that the Carlottis were given monthly spreadsheet reports during the construction and were given all other documentation amounting to thousands of pages.[28] Robert Myer testified that Respondent had given the Carlottis all the required documentation and is not in breach of contract. The testimony of Mr. Morse and Mr. Myer supports a finding that Respondent has a good faith belief that it is in compliance with the contract provisions. Such a good faith contractual dispute is better heard in a civil court and will not be the basis of disciplinary action. 30. In summary, the evidence shows that corrective work is needed on Items CWO1-5 and CWOA2-4 (floor tile lippage), Item CWO1-7 (exterior fountains), Item CWOA2-1 (sagging floor), and Item CWOA2-3 (Master Bathroom tile). CONCLUSIONS OF LAW 1. The burden of proof at an administrative hearing is generally upon a complainant.[29] Further, the standard of proof at hearing is by preponderance of the evidence.[30] Therefore, the Carlottis bear the burden of showing, by a preponderance of the evidence, that Respondent has violated the statutes cited in the Citation and Complaint.[31] The Carlottis have met that burden with respect to several items in the CWOs. 2. The Citation and Complaint alleges violations of Arizona Revised Statutes (A.R.S.) § 32-1154(A)(2)(failure to follow plans, specifications, or building codes), (A)(23)(failure to comply with an ROC Corrective Work Order), and (A)(3) by way of ROC Rule R4-9-108(failure to meet workmanship standards). 3. As found above, Items CWO1-5 and CWOA2-4 (tile lippage), Item CWO1-7 (exterior fountains), Item CWOA2-1 (sagging floor), and Item CWOA2-3 (Master Bathroom tile) do not meet workmanship standards and Respondent failed to comply with the CWOs for those items. This is a violation of subsections (A)(3) and (A)(23). Respondent should be ordered to correct those items or have its license suspended. 4. This tribunal does not find a violation of subsection (A)(2). That subsection prohibits, in pertinent part: Departure from or disregard of plans or specifications or any building codes of the state or any political subdivision of the state in any material respect which is prejudicial to another without consent of the owner . . . . (Emphasis added.)[32]

While Respondent departed from or disregarded the plans for the interior courtyard without the consent of the Carlottis, the evidence does not show that the departure is prejudicial to the Carlottis because the evidence shows that the courtyard drainage can accommodate any significant rainfall event that is likely to occur. 5. The evidence shows that Respondent has tried to comply with the CWOs but has failed in four areas. A civil penalty of $150.00 is warranted for that violation. RECOMMENDED ORDER IT IS RECOMMENDED that license B.124872-R, held by RFM Contracting, Inc., be suspended beginning the effective date of the Registrar’s Order until the Registrar receives written proof that the items in Finding of Fact 30 above have been corrected by appropriate means and the Registrar of Contractors accepts such written proof. IT IS FURTHER RECOMMENDED that if Respondent provides such written proof on or before the effective date of the Registrar’s Order, the license suspension shall not take place and case 2010-13969445 (formerly 10-1396) shall be closed. IT IS FURTHER RECOMMENDED that, along with the sanction provided above, Respondent RFM Contracting, Inc. pay a civil penalty of $150.00 to the Registrar of Contractors pursuant to A.R.S. §32-1154(D). Failure to pay the entire amount of the civil penalty on or before 30 days following the effective date of the Registrar’s Order entered in this matter shall result in the automatic revocation of Respondent’s license, effective on the deadline date. No future license shall be issued to any entity consisting of persons associated with Respondent, as defined in A.R.S. § 32- 1101(A)(5), unless payment of any outstanding prior civil penalty is made.

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, April 28, 2011.

/s/ Eric A. Bryant Administrative Law Judge

Transmitted electronically to:

William A. Mundell, Director Registrar of Contractors ----------------------- [1] The Carlottis have tried to raise several other alleged violations for the first time at the hearing and in their closing argument, but they have never moved to amend the Citation and Complaint. Only the allegations in the Citation and Complaint are addressed herein. [2] Excluding C64. With regard to C42, a DVD ROM disc, only the video file labeled “flooding” was admitted. [3] Exhibit R36. [4] Exhibit R38. [5] The designations used above are those used by Inspector Deering in the CWOs. [6] Exhibit R78 (Trummer Floor Truss Repair Report), Exhibit R83 (Trummer floor truss repair verification and city approval), Exhibit R85 (same). [7] Exhibit R18. [8] Exhibit R85. [9] Exhibit R87. [10] Hereinafter, the first CWO will be referred to as “CWO1,” the second, addressing Addendum #1, as “CWOA1,” and the portions of the third CWO as “CWOA1B,” “CWOA2,” and “CWOA3.” The numbered items in the CWOs will then appear as -1, -2, and so forth. [11] Exhibit R171 photos S, T, U, and V. [12] Exhibit R118. [13] Exhibit R107. Mr. Goldman testified that the 100-year storm event standard is the applicable industry standard. [14] Exhibit R108. [15] Exhibit R109 (Granillo report of 11/4/09). [16] Exhibits C17 and R109. [17] Exhibits C16 and R110. [18] The video clip admitted as Exhibit C42 does not show “flooding” of the courtyard or “water inundation” into the home. [19] Exhibits R117 and R144. [20] Exhibit C42. [21] Exhibit R138. [22] Exhibit C14 photos A, B, C, and D. [23] Only the items argued in the Carlottis’ closing argument are addressed herein. [24] Item CWOA3-4 is the same complaint. [25] Items CWO1-6 and CWOA2-5. [26] Items CWO1-10, CWOA2-8, and CWOA3-7. [27] Exhibit R36. [28] Exhibits R160, R161, R162, and R163. [29] Utah Construction Company v. Berg et al, 68 Ariz. 285, 205 P.2d 367 (1949). [30] Smith v. Arizona Dept. of Transportation, 146 Ariz. 430, 706 P.2d 756 (App. 1985). [31] Culpepper v. State, 187 Ariz. 431, 437, 930 P.2d 508, 514 (Ct. App. 1996). [32] A.R.S. § 32-1154(A)(2).

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