ALJDEC decisions subject to certification as final

2010A-308475506-ROC · Registrar of Contractors · 2011-05-10

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: April 20, 2011, at 8:00 a.m. APPEARANCES: Complainant Pioneer Family Investments, L.L.C. appeared through Krishna M. Pinnamaneni, M.D., its managing member; Respondent The Untouchables, Inc. appeared through George Walter Bowling, its qualifying party and president. ADMINISTRATIVE LAW JUDGE: Diane Mihalsky _____________________________________________________________________

FINDINGS OF FACT Background and Procedure In November 2000, the Arizona Registrar of Contractors (“the Registrar”) issued License No. ROC160351, Class C-65 for residential glazing to The Untouchables, Inc. (“Respondent”). On August 27, 2010, the Registrar received a complaint from Pioneer Family Investments, L.L.C. (“Complainant”) against Respondent, alleging seventeen specific deficiencies in Respondent’s installation of glass and glazing at a new house that Complainant was constructing at 13220 N. 136th Place in Scottsdale, Arizona (“the project”). Complainant’s complaint alleged that it paid Respondent $132,678.55 on the contract amount of $190,354.00 and that Respondent closed its doors and abandoned the project. Complainant requested that the Registrar order Respondent to pay $60,000.00 to allow Complainant to complete the project. The Registrar assigned the complaint to its inspector, Rick Oelke, for investigation. Inspector Oelke performed a jobsite inspection and on October 21, 2010, issued a Corrective Work Order (“CWO”) to Respondent, requiring it to perform certain corrective action within fifteen days, in relevant part as follows: License # C-65.160351-R issued to The Untouchables[,] Inc[.] was cancelled on 10.01.2010 and cannot do or subcontract the recommended corrective work listed in this directive. The only available remedy under this license status, if appropriate, would be financial settlement.

1) Break metal observed around the home is incomplete. Plans and specifications define areas requiring break metal as a transition material above the windows. Contractor is responsible for the break metal per plans and specifications.

2) Glass shoe for the exterior glass railings had been installed at the time of the jobsite inspection. Complainant has indicated that the work was performed by a replacement contractor. It is not possible to determine with absolute certainty who installed the materials observed. Complainant may pursue this item with a request for administrative hearing.

Glass panels required for the safety railing have not been installed. Plans and specifications define areas requiring glass railing panels. Contractor is responsible for the glass railing panels per plans and specifications.

3) Glass doors at bathrooms #2 and #3 had been installed at the time of the jobsite inspection. Complainant has indicated that the work was performed by a replacement contractor. It is not possible to determine with absolute certainty who installed the materials observed. Complainant may pursue this item with a request for administrative hearing.

4) Glass stop (weatherstripping) has not been installed at the bottom rail of several exterior window frames. Contractor is responsible to complete all glass stop installation per plan and manufacturer requirements.

5) The interior window wall at the office was observed to not have break metal transition material installed above the perimeter of the window wall. Plans and specifications define areas requiring break metal as a transition material above the windows. Contractor is responsible for the break metal per plans and specifications.

6) Side lite glass panels had not been installed along the sides of the elevator door openings as indicated on the executed revised plans and specifications. Contractor is responsible for the elevator door side lite glass panels per plans and specifications.

7) Glass window panels observed at the west wall of the kitchen pantry are clear glass. Plans and specifications require “insul and sandblasted glass wall system”. Contractor is responsible for the glass window panels per plans and specifications.

8) Interior stair railings and glass panels have not been installed. Contractor is responsible for the stair railings and glazing per plans and specifications.

9) Interior glass doors had been installed at the time of the jobsite inspection. Complainant has indicated that the work was performed by a replacement contractor. It is not possible to determine with absolute certainty who installed the materials observed. Complainant may pursue this item with a request for administrative hearing.

10) Glass swing doors at the first floor garage entry, east side, do not operate as intended. Door panels and glass panels have not been installed in a professional, workmanlike manner. Glass doors and panels should be straight, level and plumb. Doors should operate as intended without obstruction that limits operation and causes damage to the exterior ceiling panel components. Contractor is responsible for properly fitted, properly installed, proper functioning glass doors. Contractor is responsible for damage to ceiling panels damaged as a result of improperly installed doors.

11) Installation of glass panels at the 2nd floor tower to cupola transition has not been done to plan, or in a professional, workmanlike manner. Voids observed along side the steel beam profile are unacceptable. Contractor is responsible for proper materials and installation at both the east and west wall to cupola transitions. Contractor is responsible for associated water damage as evidenced at the jobsite inspection.

12) Break metal above the window frame at the home waiter open I- beam, as observed at the auto court, is not present. Plans and specifications define areas requiring break metal as a transition material above the windows. Contractor is responsible for the break metal per plans and specifications.

13) The two sets of elevator tower glass doors had been installed at the time of the jobsite inspection. Complainant has indicated that the work was performed by a replacement contractor. It is not possible to determine with absolute certainty who installed the materials observed. Complainant may pursue this item with a request for administrative hearing.

14) Glass pocket doors observed through out [sic] the home were observed to rub against the lower portions of the pocket door openings. The rubbing action observed is not acceptable. Contractor is responsible to correct the rubbing condition.

15) Glass panel at the west 1st floor elevation along side the auto court, and glass panel on the south facing elevation at the auto court was [sic] not present. Plans and specifications define areas requiring glass panels. Contractor is responsible for the glass panels per plans and specifications.

16) Window frames observed around the home have not been completely sealed to adjacent materials as indicated in the construction plans. Contractor is responsible for sealing the window frames per plans and specifications.

17) Wooden crate debris had been removed from the site at the time of the jobsite inspection. Complainant has indicated that the work was performed by others. It is not possible to determine with absolute certainty who removed the debris material. Complainant may pursue this item with a request for administrative hearing.

Complainant requested a hearing and on December 3, 2010, the Registrar issued a Citation and Complaint against Respondent, charging violations of A.R.S. § 32-1154(A)(1), (2), (3), namely A.A.C. R4-9-108, and (23). Respondent filed a timely written answer to the Citation and Complaint, denying any statutory violation and affirmatively alleging that Respondent had terminated its performance of the contract under A.R.S. § 32-1129.04(A) after Complainant failed to pay Respondent. The Registrar referred the matter to the Office of Administrative Hearings, an independent state agency, for an evidentiary hearing. A hearing was held on April 20, 2011. Inspector Oelke testified. Complainant presented the testimony of Krishna M. Pinnamaneni, M.D., its managing member, and submitted nine exhibits. Respondent presented the testimony of George Walter Bowling, its qualifying party and president, and submitted two exhibits. Hearing Evidence Inspector Oelke testified that the project was incomplete when he performed the initial jobsite inspection on October 20, 2010, and that Respondent did not attend the initial jobsite inspection. Inspector Oelke testified consistently with the CWO. Inspector Oelke testified that because Respondent’s license remained cancelled, Respondent could only resolve outstanding workmanship issues through a financial settlement with Complainant and that if Complainant established contracting law violations, the only appropriate penalty would be for the Registrar to revoke Respondent’s license. Inspector Oelke testified that he performed a prehearing jobsite inspection on April 19, 2010, and that at that time, other contractors had completed 90 to 95% of the project. With respect to the specific items on the CWO, Inspector Oelke testified in relevant part as follows: 1. The architect’s plans showed, and Respondent’s contract required it to install, break metal transition material above and between the windows. Respondent had installed some break metal, but not enough for Inspector Oelke to gauge whether the installation met the Registrar’s workmanship standards (CWO Item Nos. 1, 5, and 12). 2. Although the plans specifically excluded the horizontal stair treads from Respondent’s scope of work, the safety railings and glass panels were vertical features that in his opinion were included in Respondent’s scope of work (CWO Item Nos. 2, second part, and 8). At the prehearing inspection, another contractor had installed the glass panels for the safety railing that the plans and specifications required. 3. At the initial jobsite inspection, Respondent had not sealed the aluminum storefront glass system (CWO Item Nos. 4 and 16). Inspector Oelke testified that “from a safety standpoint,” a contractor should never pull off a job without installing a glass stop. 4. At the prehearing jobsite inspection, other contractors had installed side lite glass panels along the sides of the elevator door openings (CWO Item No. 6). 5. The plans required the glass window panels on the west wall of the kitchen pantry to be sandblasted glass to obscure the back of the kitchen cabinets that were on the other side (CWO Item No. 7). At the prehearing jobsite inspection, Inspector Oelke testified that although the panels were still clear glass, the back of the cabinets had been modified to be less unsightly. 6. The glass swing doors (CWO Item No. 10) had been installed at the time of the prehearing inspection. 7. At the initial jobsite inspection, there was evidence that the cupola transition leaked and obvious signs of water damage (CWO Item No. 11). At the prehearing inspection, another contractor had sealed the beams and repaired the water damage. 8. Improper installation of glass pocket doors resulting in rubbing that may scratch the doors and damage tile (CWO Item No. 14). At the prehearing inspection, another contractor had installed guides that prevented the pocket doors from rubbing together. Inspector Oelke testified that Complainant added another item to the complaint in its request for hearing, to wit, that the “[g]lass door for outside BBQ trellis bath room, southwest side of pool area, [was] not done or installed and it was part of the contract as noted in the plans.” Inspector Oelke testified that he confirmed this item at the prehearing inspection and that because Respondent could not in any event perform any corrective work due to its cancelled license, Complainant’s complaint was amended to include this additional item. Dr. Pinnamaneni acted as Complainant’s general contractor on the project. However, Complainant hired an architect to prepare plans and certify subcontractors’ applications for payment. Complainant submitted Respondent’s AIA Document G702 that showed that as of July 26, 2010, Respondent had received $132,673.55 in progress payments for the project (“the July 26, 2010 G702”). Dr. Pinnamaneni testified that Complainant’s architect did not approve Respondent’s requested payment of $5,117.57 on the July 26, 2010 G702. Mr. Bowling testified that Respondent’s July 26, 2010 G702 contained a clerical error made by Respondent’s office assistant, whom Respondent subsequently terminated, and that Respondent received only $104,776.00 in progress payments on the job. Mr. Bowling testified that more than enough remained unpaid of the amount allocated in the construction budget for glass and glazing for Complainant to repair and complete Respondent’s work. Mr. Bowling testified that he told Complainant’s architect that Respondent was pulling off the job because it had not been paid and that Complainant’s architect offered to pay Respondent $5,117.57 if it would finish the break metal. Mr. Bowling testified that because Respondent’s suppliers would not get paid under this arrangement, he declined Complainant’s architect’s offer. CONCLUSIONS OF LAW This matter lies within the Registrar’s jurisdiction.[1] Complainant bears the burden of proof and must establish Respondent’s statutory violations by a preponderance of the evidence.[2] Respondent bears the burden to establish affirmative defenses by the same evidentiary standard.[3] “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”[4] The cancelled status of Respondent’s license does not preclude Complainant from pursuing its administrative remedy nor preclude the Registrar from conducting this disciplinary proceeding.[5] However, Respondent’s cancelled license prevented it from performing corrective work to comply with the Registrar’s CWO and prevents it from performing corrective work to avoid revocation of its cancelled license.[6] The legislature has not empowered the Registrar to adjudicate or award money damages.[7] The Registrar may penalize a contractor’s license by ordering payment of restitution if a proven statutory violation cannot be remedied by corrective work.[8] Restitution may be appropriate when the contractor does not immediately respond to a property owner’s complaint and the workmanship deficiency is such that the property owner is justified in hiring another contractor to remedy a health or safety issue or to mitigate its damages.[9] Complainant presented no evidence to establish that the items that it hired other contractors to repair or complete before Inspector Oelke’s initial jobsite inspection created health or safety issues or would cause collateral damage if not immediately repaired or completed.[10] Therefore, Complainant has not established that Respondent violated any contracting law with respect to CWO Item Nos. 2 (first part), 3, 9, 13, and 17. If a contractor performs work, A.R.S. § 32-1154(A)(3) and A.A.C. R4-9- 108[11] require the contractor to perform the work in a professional and workmanlike manner, irrespective of payment. Therefore, Complainant has established that Respondent violated A.R.S. § 32-1154(A)(3), namely R4-9- 108, in its construction of CWO Item Nos. 1, 4, 5, 7, 10, 11, 12, 14, and 16. Complainant also established that Respondent did not comply with plans and specifications in its construction of CWO Item Nos. 1, 4, 5, 7, 11, 12, 14, and 16. Therefore, Complainant established that Respondent violated A.R.S. § 32-1154(A)(2).[12] A.R.S. § 32-1129.04(A) allows a contractor to suspend performance under a construction contract “for failure by the owner to make timely payment of the amount certified and approved,” but requires the contractor “to provide written notice to the owner at least seven calendar days before the contractor’s intended suspension . . . .” Respondent did not submit any evidence that it provided such written notice to Complainant and Complainant’s architect did not certify Respondent’s July 26, 2010 G702. Therefore, Respondent failed to establish under A.R.S. § 32-1129.04 that Complainant’s failure to pay the $5,117.57 requested in Respondent’s July 26, 2010 G702 allowed it to suspend performance under the parties’ contract. Complainant established that Respondent violated A.R.S. § 32- 1154(A)(1)[13] by abandoning the contract and failing to complete CWO Items (second part), 6, 8, and 15, and the additional item described at Finding of Fact No. 12. Respondent could not perform corrective work to comply with the CWO and Respondent did not resolve CWO Item Nos. 1, 2 (second part), 4, 5, 6, 7, 8, 10, 11, 12, 14, 15, and 16 by entering into a financial settlement that was satisfactory to Complainant. Therefore, Complainant established that Respondent violated A.R.S. § 32-1154(A)(23)[14] with respect to these items. Complainant did not submit sufficient evidence to allow the Administrative Law Judge to liquidate the damages that Respondent’s statutory violations caused Complainant to incur or to allow the Registrar to award restitution under A.R.S. § 32-1156.01. 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 revoke License No. 160351, Class C-65 previously issued to Respondent The Untouchables, Inc. It is further recommended that if by the effective date of the Registrar’s final order Respondent produces written proof that is satisfactory to the Registrar that it has resolved to Complainant’s satisfaction CWO Item Nos. 1, 2 (second part), 4, 5, 6, 7, 8, 10, 11, 12, 14, 15, and 16 and the additional item described at Finding of Fact No. 12 through a financial settlement, the Registrar not revoke Respondent’s license but, instead, close Case No. 2010-[number redacted]. 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, May 10, 2011.

/s/ Diane Mihalsky Administrative Law Judge

Transmitted electronically to:

William A. Mundell, Director Registrar of Contractors ----------------------- [1] See 32-1101 et seq. [2] 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). [3] See A.A.C. R2-19-119(B)(2). [4] Morris K. Udall, Arizona Law of Evidence § 5 (1960). [5] 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 . . . .” [6] 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). [7] See J.W. Hancock Enterprises, Inc. v. Arizona State Registrar of Contractors, 142 Ariz. 400, 406, 690 P.2d 119, 125 (Ct. App. 1984). [8] See A.R.S. § 32-1156.01; Sunpower of Arizona v. Arizona Registrar of Contractors, 166 Ariz. 437, 441, 803 P.2d 430, 434 (Ct. App. 1990). [9] In Sunpower, the Arizona Court of Appeals upheld the Registrar’s power to order a contractor to return to a property owner the cost of a solar heater after the contractor had made numerous attempts to repair the heater, but could not make it provide a habitable degree of heat. See id. [10] Although Inspector Oelke testified that Respondent’s failure to install glass stops presented a safety issue, see Finding of Fact No. 11.3, none of the items that Complainant had hired other contractors to correct before the initial jobsite inspection involved Respondent’s failure to install a glass stop or other comparable safety issues. [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, “[d]eparture from or disregard of plans or specifications or any building codes of any state or any political subdivision of the state in any material respect which is prejudicial to another without consent of the owner or the owner’s duly authorized representative and without the consent of the person entitled to have the particular construction project or operation completed in accordance with such plans and specifications and code.” [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 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.”

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