ALJDEC decisions subject to certification as final

2010A-308472163-ROC · Registrar of Contractors · 2011-03-08

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: February 17, 2011, at 10:00 a.m. APPEARANCES: Complainant Cindy Reid appeared on Complainants’ behalf; Respondent R L C D, Inc., dba Stallion Stucco appeared through Richard Van Tilborg, its qualifying party and president. ADMINISTRATIVE LAW JUDGE: Diane Mihalsky _____________________________________________________________________

FINDINGS OF FACT Background and Procedure In April 2001, the Registrar of Contractors (“the Registrar”) issued License No. ROC164039, Class K-36 for dual plastering to R L C D, Inc., doing business as (“dba”) Stallion Stucco (“Respondent”). Richard Van Tilborg is Respondent’s qualifying party and president. On March 29, 2010, the Registrar received a complaint from Norman Reid (“Mr. Reid”) regarding Respondent’s repairs to exterior stucco at Mr. Reid’s house at 2220 Lariat Road in Sedona, Arizona 86336. According to the complaint, Mr. Reid’s house leaked after Respondent completed the repairs. Mr. Reid requested that the Registrar require Respondent to reimburse the $8,500.00 that Mr. Reid paid to Respondent, to pay for the water damage to the interior of the house, and to pay for the hotel that Mr. Reid had to live in while the interior of his house was repaired. On April 19, 2010, the Registrar’s inspector in the Flagstaff office, Mark Schweiger, sent a letter to the parties, informing them that he had scheduled a jobsite inspection on May 4, 2010, at 10:00 a.m. Inspector Schweiger informed the parties that Mr. Reid was required to be present at the jobsite inspection. Mr. Van Tilborg attended the May 4, 2010 jobsite inspection on Respondent’s behalf. Mr. Reid was not present for the May 4, 2010 jobsite inspection. On May 13, 2010, Inspector Schweiger sent a letter to Mr. Reid, stating that “[w]e have been unsuccessful in our attempts to contact you” and requesting Mr. Reid to contact him immediately. On June 16, 2010, Inspector Schweiger sent a letter to Respondent, informing it that “[t]he above complaint is now closed because we have not received a reply from the complainant in response to our most recent correspondence.” On or about June 17, 2010, due to the State of Arizona’s budget shortfall, the Registrar temporarily closed the Flagstaff office and reassigned Inspector Schweiger’s job responsibilities to other inspectors. On June 17, 2010, the Registrar’s inspector in the Prescott office, John Prince, sent a letter to the parties, attaching a copy of a complaint that had been reopened against Respondent,[2] and scheduling a jobsite inspection on June 30, 2010, at 11:30 a.m. Mr. Reid, but not Respondent, was present for Inspector Prince’s June 30, 2010 jobsite inspection. Mr. Van Tilborg testified that he did not receive notice of the June 30, 2010 jobsite inspection. On July 1, 2010, Inspector Prince issued a Corrective Work Order (“CWO”) to Respondent, directing it within fifteen days to correct by appropriate means certain items, in relevant part as follows: License # 164039 issued to R L C D Inc[.] dba Stallion Stucco was suspended for Lack of Bond on 3-15-2010 and cannot do or sub- contract the following corrective work until the suspension is lifted

Contractor to correct by appropriate means and do in a good workmanship manner the following item’s [sic]:

Item # 1 incompletion of work to north east wall, bare spots where they missed with stucco and paint Item # 2 parapet caps done improperly (need to be re-done and re- sealed[)] Item # 3 damage in front of house over garage was done by Stallion [S]tucco’s men. There [sic] repair work was unsatisfactory and incomplete and mismatched (different types of stucco and paint used) Item # 4 material they used for parapet caps dripped down sides of walls all around house and textures don’t match old textures Item # 5 damage done to roof (by Contractor) torch down lap seals were torn all around parapet walls when the new metal and stucco was done, and the remnants of the torch down are still on the roof and scuppers were not sealed and leaked and where we temporarily had to seal it with tar due to the stucco Contractor [sic]

Contractor to rectify with the Homeowners the following item: Item # 6 due to the Contractors infalicies [sic] (workmanship work) multiple damage has been done – mold, water (restoration work) carpet and other incoveince [sic] to our lives (such as moving out for 3 weeks[)]

On July 14, 2010, the Registrar received Mr. Reid’s request for hearing. On September 28, 2010, the Registrar issued a Citation and Complaint against Respondent, charging violations of A.R.S. § 32-1154(A)(1), (3) (namely A.A.C. R4-9-108), (13) (namely A.R.S. § 32-1124(B)), and (23). Respondent timely answered the Citation and Complaint, denying any statutory violations and affirmatively alleging that Mr. Reid had failed to appear for the jobsite inspection. The Registrar referred the matter to the Office of Administrative Hearings, an independent agency, for an evidentiary hearing. A videoconference hearing was held from the Registrar’s Flagstaff office on February 17, 2010. Because Inspector Prince had left the Registrar’s office, the Registrar’s current inspector for the Prescott office, Cliff Frandsen, testified. After Mr. Reid avowed that he was deaf and could not represent himself and Mr. Reid’s daughter, Cindy Reid (“Ms. Reid”), avowed that she had an ownership interest in Mr. Reid’s house at 2220 Lariat Road, the Administrative Law Judge amended the caption of the complaint to add Ms. Reid as a party complainant and allowed her to represent Complainants. Ms. Reid testified on Complainants’ behalf and submitted four exhibits. Mr. Van Tilborg testified on Respondent’s behalf and submitted three exhibits. According to the Registrar’s record, as of the date of the hearing, Respondent’s license was still suspended by law for lack of bond. Additional Evidence Mr. Reid’s house at 2220 Lariat Road in Sedona was built in 2003 or 2004. The house has a flat roof and framed stucco exterior walls. Before Respondent performed the work at issue in this case, no repair or maintenance had been done to the exterior stucco or roof on Mr. Reid’s house. Mr. Van Tilborg testified that stucco must be able to “breathe,” and that stucco in areas that experience freezing weather must be regularly maintained. Otherwise, moisture in the stucco expands when the outdoor temperature drops below freezing and, after thaw, causes cracks in the stucco that may allow excessive water infiltration if the cracks are not repaired. Mr. Van Tilborg also testified that flat roofs must be regularly maintained, and are notorious for leaks. Because the stucco on Mr. Reid’s house was in poor condition, his neighbor referred Respondent to him. After Mr. Reid told Mr. Van Tilborg that he could not afford to replace or repair all the stucco, on or about November 17, 2009, Respondent submitted a proposal to Mr. Reid to remove and to replace or repair the stucco on the areas of the house that was in the worst condition, specifically, the parapet walls and the northeast wall of the house, for “cost plus 10% fee.” Respondent’s proposal estimated that the work would cost approximately $10,000.00, barring any unforeseen damage or changes to the scope of work. Ms. Reid testified that Respondent also contracted to repair the northeast wall of the house’s garage, and that it failed to complete this work. Mr. Van Tilborg denied that Respondent had ever contracted to repair the northeast wall of the house’s garage. The proposal and invoice that Respondent submitted did not describe this work. Mr. Van Tilborg testified that because the paint and stucco had faded to several different colors and Mr. Reid could not afford to re-stucco or repaint the entire house, Mr. Van Tilborg explained to Mr. Reid before Respondent started the project that the texture and color of the new stucco would be somewhat different than the rest of the house, but that Respondent would blend in the texture and color of the new stucco as well as it could. Respondent did not memorialize its explanation in a written warranty disclaimer, and did not have Mr. Reid sign such disclaimer to indicate his understanding and acceptance. After Respondent started the work, Mr. Van Tilborg discovered additional damage to the front of the garage and entry arches. Mr. Reid asked Respondent to repair this area. At the end of January 2010, Respondent completed the work and submitted an invoice to Mr. Reid, charging $10,675.00 for the original scope of work, $1,370.00 for the garage and entry arches, for a total project cost of $12,045.00. The invoice reflected Mr. Reid’s payments of $7,500.00, and a balance due of $4,545.00. Mr. Van Tilborg testified that he first met Ms. Reid after Respondent completed the work and submitted the final invoice to Mr. Reid. She was not present when he had submitted Respondent’s proposal or when Respondent’s crew had performed the work. Ms. Reid submitted an Adjuster Summary from Encompass Insurance for Mr. Reid’s insurance claim to repair water damage to the interior of Mr. Reid’s house. After Mr. Reid’s $500.00 deductible was subtracted from the cost of repairs, Mr. Reid’s insurance company paid $4,417.05 to various contractors to repair Mr. Reid’s roof and interior water damage. Ms. Reid testified that Versatile Roofing repaired the roof as part of Mr. Reid’s insurance claim, and that its workman pointed out to her areas of the roof around the parapet walls that Respondent had allegedly damaged. Mr. Van Tilborg denied damaging Mr. Reid’s roof; instead, Mr. Van Tilborg testified that Mr. Reid hired Respondent to repair the stucco due to leaks from the roof and stucco. Mr. Van Tilborg denied that Respondent had damaged the front of Mr. Reid’s house. Inspector Frandsen performed a prehearing inspection on February 15, 2011. Inspector Frandsen testified that the stucco on the northeast part of the structure had bare spots, without stucco or paint, that parapet cracks were visible, that damage was visible on the front of the house and on the roof, and that the color and texture on the stucco work did not match on all areas of the house. Mr. Van Tilborg testified that he did not have notice of Inspector Frandsen’s prehearing inspection. CONCLUSIONS OF LAW The matter lies within the Registrar’s jurisdiction.[3] Complainants bear the burden of proof and must establish Respondent’s statutory violations by a preponderance of the evidence.[4] Respondent bears the burden to establish affirmative defenses by the same evidentiary standard.[5] “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”[6] 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.”[7] The administratively suspended status of Respondent’s license does not preclude Complainants from pursuing their administrative remedy nor preclude the Registrar from conducting this disciplinary proceeding.[8] Respondent’s administratively suspended license presently prevents it from performing any corrective work or from subcontracting to others any corrective work.[9] If Respondent could not provide a warranty that the stucco repairs would match the existing stucco to comply with the Registrar’s workmanship standards, it should not have undertaken the job without a written waiver signed by Mr. Reid.[10] Respondent did not obtain such a warranty disclaimer in this case. Complainants established that Respondent’s initial application and failure to repair the parapet caps and the mismatched paint and texture at Mr. Reid’s house (CWO item nos. 2 and 4) violated A.R.S. § 32-1154(A)(3) (namely A.A.C. R4-9-108)[11] and (23).[12] Complainants did not establish that Respondent violated A.R.S. § 32- 1154(A)(1)[13] or (13) (namely A.R.S. § 32-1124(B)).[14] RECOMMENDED ORDER In view of the foregoing, it is recommended that on the effective date of the Registrar’s final order, the Registrar revoke License No. ROC164039, Class K-36 previously issued to Respondent R L C D, Inc. dba Stallion Stucco unless Respondent either reinstates its license and repairs CWO item nos. 2 and 4 in a professional and workmanlike manner, or pays Complainants Norman W. Reid and Cindy Reid sufficient monies to allow them to hire an appropriately licensed contractor to make such repairs. It is further recommended that the Registrar not revoke Respondent’s license and, instead, close Case No. 2010-[number redacted] if on or before the effective date of the Registrar’s final order, Respondent submits written proof that is satisfactory to the Registrar of one of the following: 1) Respondent has reinstated its license and has repaired in professional and workmanlike manner CWO item nos. 2 and 4; or 2) Respondent has paid Complainants sufficient monies to allow them to hire an appropriately licensed contractor of their choice to repair CWO item nos. 2 and 4. It is further recommended that the Registrar require Respondent to pay the sum of $500.00 as a civil penalty pursuant to A.R.S. § 32-1154(D).

It is further recommended that if Respondent fails to pay the entire amount of the civil penalty on or before thirty days following the effective date of the Registrar’s final order, the Registrar revoke Respondent’s license, effective on such 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 Respondent tenders payment of any outstanding prior civil penalty. 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, March 8, 2011.

/s/ Diane Mihalsky Administrative Law Judge

Transmitted electronically to:

William A. Mundell, Director Registrar of Contractors ----------------------- [1] The Administrative Law Judge amended the Complaint in this matter to add Cindy Reid as a party complainant.

[2] The Administrative Law Judge was not able to locate Mr. Reid’s request to reopen the complaint in the electronic file that the Registrar’s Legal Department provided. [3] See A.R.S. § 32-1101 et seq. [4] 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). [5] See A.A.C. R2-19-119(B)(2). [6] Morris K. Udall, Arizona Law of Evidence § 5 (1960). [7] Black’s Law Dictionary at page 1220 (8th ed. 1999). [8] See A.R.S. § 32-1154(C), which provides that “[t]he expiration, cancellation, suspension or revocation of a license . . . shall not deprive the registrar of jurisdiction to proceed with any investigation of or action or disciplinary proceeding against such license, or to render a decision suspending or revoking such a license . . . .” [9] It is unlawful for anyone without a contractor’s license in good standing to engage in contracting. See A.R.S. § 32-1151. “Contractor” is defined as anyone who “does himself or by or through others” performs construction. A.R.S. § 32-1101(A)(3) (emphasis added). [10] 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)). With respect to warranty disclaimers or waivers, according to the Arizona Court of Appeals’ authority,

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, 76 Ill. 2d at 43, 389 N.E.2d at 1159 (1979) (some authorities omitted; emphases added and in original). [11] This statutory subsection 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.” [12] This statutory subsection 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.” [13] This statutory subsection includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license, “[a]bandonment of a contract or refusal to perform after submitting a bid on work without legal excuse for the abandonment or refusal.” [14] 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 charged was A.R.S. § 32-1124(B), which requires that licensed contractors include their license number, which “shall be preceded by the acronym ‘ROC,’” on “all written bids submitted by the licensee 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.”

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