ALJDEC decisions subject to certification as final

2010A-308472307-ROC · Registrar of Contractors · 2011-02-07

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: January 26, 2011, at 8:00 a.m. APPEARANCES: Complainant Effective Signs, Ltd. appeared through Kathy Irwin French, President; Respondent Southern Arizona Paving and Construction Co. appeared through Neal A. Eckel, Esq., Durazzo & Eckel, P.C. ADMINISTRATIVE LAW JUDGE: Diane Mihalsky _____________________________________________________________________

FINDINGS OF FACT Background and Procedure In March 1989, the Arizona Registrar of Contractors (“the Registrar”) issued License No. ROC082182, Class A for commercial general engineering to Southern Arizona Paving and Construction Co. (“Respondent”). In January 2008, the Registrar issued License No. ROC230810, Class L-38 for commercial signs to Effective Signs, Ltd. (“Complainant”). On April 12, 2010, the Registrar received a complaint from Complainant that alleged that Respondent had failed to pay Complainant $9,619.00 for signs that Complainant had installed at Sahuarita Market Place and Sahuarita High School. The Registrar sent a copy of the complaint to Respondent. On May 12, 2010, the Registrar received Complainant’s request for a citation against Respondent. On August 19, 2010, the Registrar issued a Citation and Complaint against Respondent, charging a violation of A.R.S. § 32-1154(A)(11). Respondent timely answered the Citation and Complaint, denying any statutory violation. The Registrar referred the matter to the Office of Administrative Hearings, an independent agency, for an evidentiary hearing. A hearing was held on January 26, 2011. Complainant presented the testimony of two witnesses: (1) Stephen De Witt French, its qualifying party and vice-president; and (2) Kathy Irwin French, its president and bookkeeper. Complainant submitted four exhibits. Respondent presented the testimony three witnesses: (1) Wade Newsom, the Senior Construction Manager for the Town of Sahuarita, who had supervised the job for his employer; (2) Joe Elias, Respondent’s project manager on the job; and (3) Nena Ashton, Respondent’s president. Respondent submitted four exhibits. Hearing Evidence The Town of Sahuarita hired Respondent to be the general contractor on a project for certain improvements at the Sahuarita Market Place and Sahuarita High School. On or about November 7, 2009, Mr. French, on behalf of Complainant, signed the subcontract that Respondent provided to relocate or refurbish three signs at the project, for a total price of $32,989.83. As part of the subcontract, Complainant agreed to perform the following work in moving a marquee sign at Sahuarita High School: Remove double face high school pole sign. Demo old pipe, install sign as is on new pipe and foundation.

Respondent’s subcontract required Complainant to install “new faces” on the other two signs on the subcontract. The price of moving a sign and installing new faces was greater than the price of simply moving a sign “as is.” Complainant’s subcontract also included “Construction Details” that provided in relevant part as follows: The contractor shall remove and salvage all materials necessary for reconstruction, such as sign legends, supports, electrical service, and light standards and fixtures. . . . The contractor will be required to replace any materials deemed not salvageable, or damaged, with new materials matching in kind, the existing materials. . . .

Mr. French testified that he was told that “the budget was tight” on the project for the Town of Sahuarita and that Respondent instructed Complainant to salvage and reuse all the materials that it could. Complainant installed a new foundation and pipe at the new location for the marquee sign at Sahuarita High School. To move the sign to the newly installed pipe, Mr. French removed one face and the galvanized screws that held the face to the metal frame, and reinstalled the sign on the new pipe. Mr. French testified that he estimated that the faces on the marquee sign were at least five years old and showed signs of fading, but that the faces were not damaged or cracked. Pursuant to Complainant’s instruction in the contract to move the sign “as is,” Mr. French reinstalled the existing box, with its existing faces, on the new pipe and foundation. When Complainant completed moving the marquee sign in late November 2009, the sign was undamaged. On the weekend of December 8, 2009, a windstorm with winds up to 65 miles per hour hit Sahuarita and blew out the sign face of the marquee sign that Complainant had left in place before moving the sign box, cracking the sign face. Mr. French testified that the damage to the sign face probably was caused by the vibration in the wind of the sign face against the metal box that held it. On December 10, 2009, a meeting occurred among representatives of the Town of Sahuarita, Respondent, and Complainant to discuss who should bear responsibility to the damage to the face in the marquee sign. Mr. Newsom testified that Mrs. French pointed out missing screws on the sign and stated that the missing screws would have affected the structural integrity of the sign. On cross-examination, Mr. Newsom admitted that the missing screws were on the sign face that had blown out, that the sign face, with the screws, was on the ground, and that he did not know whether Complainant had done any work on that side of the sign. Mr. Newsom originally considered having the Town of Sahuarita pay Complainant to install a new sign face to replace the one that the storm had damaged. After Respondent called Mr. Newsom’s attention to the “Construction Detail,” quoted supra at Finding of Fact No. 13, however, he decided that the Town of Sahuarita would not pay Complainant to repair the damage to the sign face that the storm caused because when Complainant moved the sign box, it should have anticipated from the condition of the sign face that it would be damaged by weather if it was not replaced. Respondent informed Complainant that if it refused to install a new sign face on the marquee sign at its own expense, Respondent would hire another subcontractor to replace the sign face and would backcharge Complainant. After Complainant refused to install a new sign face on the marquee sign at Sahuarita High School at its own expense, Respondent did not immediately hire another contractor to do so. In February 2010, another storm with high winds hit Sahuarita and damaged the remaining sign face on the marquee sign that Complainant had moved at Sahuarita High School. On June 10, 2010, Respondent paid $4,132.00 to Yesco, L.L.C., License No. ROC260959, Class L-38 for commercial signs, to fabricate and replace the two sign faces on the marquee sign at Sahuarita High School that the two storms had damaged. Respondent subsequently paid the retention that it owed to Complainant. Respondent did not pay $4,132.00 of the contract price that it otherwise would have owed to Complainant, due to the backcharge for Yesco, L.L.C.’s work. Mr. French has worked in the sign business for 30 years, has operated his own business for 20 years,[1] and has completed projects involving all sorts of signs, including monument and box signs, including large projects for other schools and municipalities. Mr. French testified that sign faces like the ones at issue are manufactured from Lexan, a registered trademark for a brand of polycarbonate material manufactured by General Electric Plastics. Mr. French testified that because Lexan sign faces become faded and brittle after years of exposure to the ultraviolet rays in sunlight, the manufacturer only provides a five-year warranty for the material. Mr. French testified that it is impossible to predict when a Lexan sign face will fail, and that the sign face may last for 15 or 20 years, or the sign face may deteriorate and fail within a year or two. Mr. Newsom acknowledged at the hearing that the cost to the Town of Sahuarita would have been less had Complainant been required to replace the sign faces at its own expense. Mr. Newsom testified that if Complainant had informed the Town of Sahuarita that the sign faces could not be salvaged, he would have asked the school district to share in the additional expense of replacing the faces. Mr. Newsom testified that he is “very fair” to contractors, wants the best product for the Town of Sahuarita, and is willing to pay more if necessary. Mr. Newsom testified that because the subcontract did not provide that Complainant was not responsible for damages that occurred due to the age or brittleness of the sign face, he felt that Complainant should be responsible for damage that occurred to the sign faces shortly after it moved the marquee sign box. Mr. Newsom testified that he has lived in Green Valley, near Sahuarita, for several years. The storm events that damaged the faces on the marquee sign at Sahuarita High School were not unusual. The marquee sign had been up for many years, and was not damaged until after Complainant moved it. According to the Registrar’s record, Respondent’s license is current and in good standing. This is the only complaint pending against the license. CONCLUSIONS OF LAW This matter lies within the Registrar’s jurisdiction.[2] Complainant bears the burden of proof and must establish Respondent’s statutory violation by a preponderance of the evidence.[3] Respondent bears the burden to establish affirmative defenses by the same evidentiary standard.[4] “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”[5] 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.”[6] The subcontract’s “Construction Details” generally required Complainant to salvage materials if they were salvageable, but did not specifically mention sign faces. The scope of work specifically required Complainant to install the double-face marquee sign on a new pipe “as is.” “[W]here there are inconsistent provisions in a contract, one general and the other specific, the specific provision qualifies the meaning of the general provision and controls over the general.”[7] An “as is” clause usually shifts the burden of discovering defects that are basic to the transaction to the other party.[8] The only time an “as is” clause does not shift the burden is when the defect is “patent,” or “discoverable upon a reasonable inspection.”[9] A “patent defect” is “one that ‘is plainly visible or which can be discovered by such an inspection as would be made in the exercise of ordinary care and prudence.’”[10] Mr. French credibly testified that Complainant did not damage the sign faces on the marquee sign when it moved the box and that Complainant could not have known at the time that the condition of the sign faces was such that they would be damaged in weather within a matter of days or months. Because Respondent did not challenge or controvert Mr. French’s testimony, the “as is” clause in the scope of work in the subcontract prevents Respondent from backcharging or otherwise making Complainant responsible for the damage that the December 2009 and February 2010 storm events caused to the sign faces. The Registrar may resolve a contractual dispute if such resolution is ancillary to its regulatory mission.[11] Therefore, Complainant has established that Respondent violated A.R.S. § 32-1154(A)(11)[12] by failing to pay Complainant $4,132.00 for its work on the marquee sign at Sahuarita High School. 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 Southern Arizona Paving and Construction Co.’s License No. ROC082182, Class A until Respondent pays $4,132.00 to Complainant Effective Signs, Ltd. It is further recommended that if prior to the effective date of the Registrar’s final order, the Registrar receives satisfactory proof in writing from Respondent that it has paid Complainant $4,132.00 by certified or cashier’s check, the Registrar not suspend Respondent’s license but, instead, close Case No. 2010-[number redacted]. 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, February 7, 2011.

/s/ Diane Mihalsky Administrative Law Judge

Transmitted electronically to:

William A. Mundell, Director Registrar of Contractors ----------------------- [1] According to the Registrar’s record, in March 1992, License No. ROC092987, Class L-38 for commercial signs was issued to Mr. French doing business as Effective Signs. That license was canceled when the Registrar issued License No. ROC239719 to Complainant. [2] See 32-1101 et seq. [3] 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). [4] See A.A.C. R2-19-119(B)(2). [5] Morris K. Udall, Arizona Law of Evidence § 5 (1960). [6] Black’s Law Dictionary at page 1220 (8th ed. 1999). [7] Brady v. Black Mountain Investment Co., 105 Ariz. 87, 90, 459 P.2d 712, 715 (1969). [8] S Development Co. v. Pima Capital Management Co., 201 Ariz. 10, 16 ¶ 13, 31 P.3d 123, 129 (App. 2001) (citing Restatement (Second) of Torts § 551 cmt. j). [9] Id. [10] Id., n. 5 (quoting Black’s Law Dictionary at 779 (6th ed. 1991)). [11] Sunpower of Arizona v. Arizona Registrar of Contractors, 166 Ariz. 437, 441, 803 P.2d 430, 434 (Ct. App. 1990); J.W. Hancock Enterprises v. Arizona Registrar of Contractors, 142 Ariz. 400, 406, 690 P.2d 119, 125 (App. 1984). [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 or, if the licensee lacks the capacity to pay, when the licensee has received sufficient monies as payment for the particular construction work project or operation for which the services or materials were rendered or purchased.”

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