ALJDEC decisions subject to certification as final

2011A-4532-ROC · Registrar of Contractors · 2012-04-27

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: March 8, 2012 and April 10, 2012

APPEARANCES: Complainants appeared on their own behalf; Respondent was represented by its corporate President and Qualifying Party Steve Hamilton.

WITNESSES: Daryl McCloskey, ROC Inspector Debra Kilgore Eleanor Stephan Steve Hamilton John Jehle, Owner, Rudy Glass Co. Jim Hinojosa, Owner, JDH Development Brian Carriere, Service Rep., La Habra Stucco

ADMINISTRATIVE LAW JUDGE: Eric A. Bryant _____________________________________________________________________

Complainants bring this action against Respondent alleging abandonment, poor workmanship, and failure to comply with a Corrective Work Order. The complaint concerns stucco work done by Respondent on a new house Complainants are building. Respondent denies abandonment, does not dispute that there were workmanship issues with the stucco, and asserts that Complainants prevented Respondent from correcting those problems by not making a requested payment and then by hiring another contractor to finish the job. This tribunal entered the complaint file received from the Registrar of Contractors (“Registrar” or “ROC”) into the record. The parties presented evidence and testimony from the witnesses above at the hearing, including Complainants’ Exhibits C1 through C33 and Respondents Exhibits A, B and C. Based upon the entire record, the Administrative Law Judge makes the following Findings of Fact, Conclusions of Law, and Recommended Order finding abandonment and recommending that Respondent pay Complainants restitution or have its license suspended. FINDINGS OF FACT 1. Respondent is the holder of License No. K-36.163362-D, a dual specialty commercial and residential license issued by the Registrar. The license authorizes Respondent to install and repair plaster materials and lath products. The Qualifying Party on the license is Stephen Wayne Hamilton. 2. In August 2010, Respondent was hired by general contractor Ron Foster dba Earthscape (“Earthscape”) to do stucco work on a new house that Earthscape was building for Complainants.[2] The contract called for Respondent to lath and stucco the entire house to a smooth finish.[3] It also called for Respondent to provide a “plant on popout detail as per plans.”[4] The plans clearly show the pop out at the top of the walls of the house.[5] They also show a “stack stone veneer” in certain areas on the exterior of the house. The contract price for Respondent’s work was $46,500.00, but the contract does not contain terms for progress payments. There are no written terms for when payments were to be made. In addition, the contract requires written change orders. Finally, no completion date is given in the contract. 3. Earthscape paid Respondent as Respondent progressed. Respondent did the work over the next year. However, Respondent did not put the pop outs on and did not allow for a non-stucco surface for application of the stone veneer. Steve Hamilton testified that Ron Foster told him that the pop outs and stone veneer were not to be put on per the owner’s wishes. There were no written change orders to verify this, even though Respondent’s contract required written change orders. 4. In addition to the lack of conformity to the plans, the stucco application, as described by ROC Inspector Daryl McCloskey, was “lumpy.” Inspector McCloskey issued a Corrective Work Order (“CWO”) on August 25, 2011, that specified six areas for correction of the stucco, finding uneven waves in the finish and too-thin stucco at corners and windows. Respondent attempted to fix these items, but was not successful. At hearing, Steve Hamilton testified that he was about 80% completed with the corrections by late September 2011. 5. The evidence shows, and the parties agree, that Respondent had been paid all but $9,500.00 of the contract price by the end of April 2011.[6] 6. In his testimony, Steve Hamilton stated that in late September 2011 he could not do further work on the project without further payment from Complainants. He verbally requested that Complainants pay him $5,000.00 of the remaining $9,500.00 that was due, leaving $4,500.00 due upon completion.[7] 7. Complainants declined to make further payment by letter dated October 13, 2011. The letter stated that Respondent had until November 1, 2011, to complete the job, including the corrective work and installing the pop outs as per plan. If done, Complainants stated that they would pay the remaining balance ($9,500.00). 8. Respondent did no further work on the project. 9. In December 2011, Complainants hired JDH Development (“JDH”), a sole proprietorship of James Hinojosa, to complete the job. Complainants’ contract with JDH describes the status of work as “Stucco on house is basically completed, but is not to plan” and notes the unevenness.[8] It also notes the lack of pop outs and corner beads and that the finish is not smooth. It includes separately stated amounts for installation of the pop outs, corner beads, smooth finish, and paint. In addition, James Hinojosa testified at the hearing that when JDH removed stucco from the corners in order to install corner beads, stucco in a few wall areas began to separate and fall off. This led JDH to conclude that Respondent had not used a bonding agent at those areas and that the stucco needed to be removed down to the lath and replaced in those areas. This resulted in extra charges for removal of the old stucco. 10. Complainants assert that corner beads should have been installed on the exterior corners by Respondent. However, there has been no documentation submitted to verify that statement. The tribunal has not been shown a calling out for corner beads on the plans or in the written contract. Thus, this tribunal makes no finding that Respondent was required to apply corner beads under its contract with Earthscape or any other contract. 12. Brian Carriere, Filed Service Representative for La Habra Stucco, testified that it is extremely difficult to tell whether or not a bonding agent has been used in stucco unless it is tested in a laboratory. The stucco installed by Respondent was not tested in a lab, so it has not been verified that Respondent failed to use bonder. 13. Complainants submitted documentation in support of their request for restitution. That documentation shows that Complainants paid JDH for installation of the pop outs, cutting out the corners and putting in corner beads then re-stuccoing the corners, removal of the existing stucco in two areas, application of a smooth finish on the entire house, and painting the stucco. Because the evidence does not support it, this tribunal does not find that restitution is proper for the corner beads and the removal and replacement of the stucco in the two areas noted. In addition, painting the stucco was not included in the contract between Earthscape and Respondent. Thus, it is not proper for restitution. 14. The documentation shows that Complainants paid $4,960.00 for installation of the pop outs. The price paid to apply the smooth finish to the entire house is $14, 686.00. This amounts to a total of $19,646,00 that Complainants paid out of their pockets to correct Respondent’s work. Because Complainants still owed $9,500.00 on the contract, Complainants’ restitutionary damages are found to be the difference of $10,146.00. CONCLUSIONS OF LAW 1. The burden of proof at an administrative hearing is generally upon a complainant.[9] Further, the standard of proof at hearing is by preponderance of the evidence.[10] Therefore, the Complainants bear the burden of showing, by a preponderance of the evidence, that Respondent has violated the statutes cited in the Citation and Complaint.[11] The Complainants have met that burden. 2. The Citation and Complaint alleges violations of Arizona Revised Statutes (A.R.S.) § 32-1154(A)(1) (prohibiting abandonment of a project without legal excuse), A.R.S. § 32-1154(A)(3) by way of Arizona Administrative Code (A.A.C.) R4-9-108 (prohibiting poor workmanship), and A.R.S. § 32-1154(A)(23) (requiring compliance with a CWO). This tribunal concludes that Respondent has abandoned the project and failed to comply with the CWO. 3. Finding a violation of A.R.S. § 32-1154(A)(3 for poor workmanship is precluded by A.R.S. § 32-1155(C). That provision states that the Registrar may not cite a contractor for failure to meet workmanship standards if the work has been modified by another contractor. Therefore, although the facts support it, this tribunal cannot legally find a violation of A.R.S. § 32-1155(C) because Complainants had the work modified by JDH. 4. However, concluding that Respondent abandoned the project or failed to comply with the CWO is not precluded by A.R.S. § 32-1155(C), and the evidence supports finding those violations. Respondent admitted that it had only complied with the CWO to 80%. Thus, Respondent failed to fully comply with the CWO. 5. Whether Respondent abandoned the project turns on the reasonableness of Respondent’s requirement to be paid $5,000.00 before it would continue working in October 2011. Under the circumstances of this case, without a written payment schedule and with the other circumstances of the project, this tribunal finds that Respondent’s position was not reasonable and that Respondent should have at least finished the CWO corrections without demanding further payment. Respondent’s failure to do so is considered abandonment of the project. This left Complainants free to hire others to correct and complete the work. 6. Administrative notice is taken of Respondent’s prior license record as reflected on the Registrar’s public website on April 27, 2012. That prior record shows that Respondent has held the license since March 2001 and has never been disciplined. This is an excellent record. 7. The appropriate sanction in this matter is to require Respondent to pay restitution to Complainants. If Respondent does not do so in a timely manner, the license should be suspended until it does so. In addition, Respondent should pay a civil penalty for failing to comply with the CWO. RECOMMENDED ORDER IT IS RECOMMENDED that License No. K-36.163362-D, held by Blue Diamond Lath and Plaster, Inc., be suspended beginning the effective date of the Registrar’s Order until the Registrar receives written proof that Respondent has paid Complainants $10,146.00 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 2011-4532 shall be closed. IT IS FURTHER RECOMMENDED that, along with the sanction provided above, Blue Diamond Lath and Plaster, Inc. pay a civil penalty of $150.00 to the Registrar of Contractors pursuant to A.R.S. §32-1154(D) for failure to comply with the Corrective Work Order. 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 27, 2012.

/s/ Eric A. Bryant Administrative Law Judge

Transmitted electronically to:

William A. Mundell, Director Registrar of Contractors ----------------------- [1] Ms. Kilgore, who lives with her mother Eleanor Stephan and who is building the home in question with her, was added as a complainant at the hearing on March 8, 2012. [2] Earthscape later abandoned the project or was fired by Complainants. [3] Exhibit C1. [4] Id. [5] Exhibit C25. Exhibit C25 is not contradicted by the photos of the plans Steve Hamilton received from Ron Foster on March 7, 2012, which were then electronically filed with this tribunal on the same date. They appear to be the same. [6] Exhibits C3 through C11. [7] At hearing, Steve Hamilton made a claim that even more money was owed to Respondent and attempted to substantiate that claim by providing an electronically transmitted photograph of an invoice rather than the invoice or a copy of the invoice. This is not an appropriate method of substantiation and the photograph of the invoice has not been admitted into evidence. [8] Exhibit C33. [9] Utah Construction Company v. Berg et al, 68 Ariz. 285, 205 P.2d 367 (1949). [10] Smith v. Arizona Dept. of Transportation, 146 Ariz. 430, 706 P.2d 756 (App. 1985). [11] Culpepper v. State, 187 Ariz. 431, 437, 930 P.2d 508, 514 (Ct. App. 1996).

-----------------------

Office of Administrative Hearings 1400 West Washington, Suite 101 Phoenix, Arizona 85007 (602) 542-9826