ALJDEC decisions subject to certification as final

2012A-3231-ROC · Registrar of Contractors · 2013-03-22

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING DATES: March 6, 2013, at 8:00 a.m. and March 7, 2013, at 1:00 p.m. APPEARANCES: Complainants Michael and Amber Labrum were represented by Thomas S. Moring, Esq., Pak & Moring, PLC; Respondent C D C Pools Inc. was represented by William R. Richardson, Esq., Richardson & Richardson, PC. ADMINISTRATIVE LAW JUDGE: Diane Mihalsky _____________________________________________________________________

FINDINGS OF FACT Background and Procedure The Arizona Registrar of Contractors (“the Registrar”) issued License No. B- 5.121372-R for residential general swimming pool contracting to C D C Pools Inc. (“Respondent”). The Registrar received a Complaint from Michael and Amber Labrum (“Mr. Labrum,” “Mrs. Labrum,” or “Complainants” collectively) regarding Respondent’s alleged abandonment of its contract to install Pebble Tec on Complainants’ pool at their property at 2923 East Fruitvale Avenue in Gilbert, Arizona. Complainants attached to their Complaint a copy of one-page contract on Respondent’s letterhead with the name, Treg Baum, and a telephone number handwritten at the top, the owner name, Michael and Amber Labrum, the name, Cory Black, as the source of the referral, and Mrs. Labrum’s signature with the date June 10, 2012. The amount of the contract was $5,876.00 and the bottom of the form contract provided that “ADDITIONAL TERMS AND CONDITIONS ON REVERSE ARE PART OF THIS AGREEMENT.” Complainants did not provide any additional pages of the contract. Complainants also attached to the Complaint that they filed with the Registrar the Town of Gilbert’s Building Inspection Record that indicated that the rebar in Complainants’ pool passed the pre-gunite inspection on April 19, 2012, and that the pool passed that pre-plaster/final inspection on June 15, 2012. The Registrar assigned the Complaint to its inspector, Randy Cason, for investigation. Inspector Cason performed a jobsite inspection. On July 27, 2012, Inspector Cason issued a Corrective Work Order (“CWO”) that required Respondent within fifteen calendar days to take certain corrective actions with respect to the Pebble Tec in Complainants’ pool, in relevant part as follows: Complaint – [Respondent] had installed the Pebble Tec finish material to the new pool’s surface. On completion, [Respondent] determined that the finish product was not up to their standards and had the Pebble Tec removed by jack-hammering it out the next morning. The new Pebble Tec material has not been reinstalled at this time. The Respondent is to correct/complete by appropriate means.

Complaint – While jack-hammering out the Pebble Tec material, the contractor had damage[d] the shotcrete surface, there is now re-bar exposed. Also some of the pool’s tiles are chipped and cracked. The coping stone is scratched and the paver deck has been stained. The Respondent is to correct all correlated damages such as the chipped and cracked pool tiles, shotcrete and exposed re- bar caused by the removal of the Pebble Tec finish by appropriate means.

At Complainants’ request, Inspector Cason performed a second jobsite inspection. On August 30, 2012, Inspector Cason issued an Addendum to the CWO that required Respondent within fifteen calendar days to perform certain additional corrective actions, in relevant part as follows: Addendum complaint #1 – Numerous of the in floor heads were damaged during the removal process of the shot crete. Found 1 in-floor cleaning head and the housing that was damaged by the removal of the Pebble Tec material that the Respondent had installed and then removed[;] it is located next to the south side of the pool[’]s in pool bar at the base of the pool[’]s bar stool; also found numerous in-floor [cleaning] heads that had debris material inside them. The Respondent is to correct these issues by appropriate means.

Addendum complaint #2 – The pool interior removal that [Respondent] performed left a good amount of pebble tec in the pool. We are worried about this for the reinstall of the new pebble tec. Found remains of the Pebble Tec material that the Respondent had installed and then removed left on top of the gray color shot crete pool’s shell; on the walls and floor of the pool also around the in-floor cleaning heads and the water jets heads on the walls. The Respondent is to correct these areas by appropriate means.

After Respondent did not resolve the Complaint and Addendum to Complainants’ satisfaction, they requested a hearing. The Registrar issued a Citation and Complaint against Respondent charging possible violations of A.R.S. § 32-1154(A)(3), namely A.A.C. R4-9-108, and A.R.S. § 32-1154(A)(23). Respondent filed a timely written answer to the Citation and Complaint denying any statutory violations and affirmatively alleging, among other defenses, that the shotcrete to which Respondent applied the PebbleTec was deficient and that Respondent could not have been aware of the deficiency at the time. The Registrar referred the matter to the Office of Administrative Hearings, an independent agency, for an evidentiary hearing. A hearing was held on March 6, 2013, and March 7, 2013. Inspector Cason testified. Complainants submitted seven exhibits, including one exhibit that was comprised of 54 photographs of the pool at various stages of construction, and presented the testimony of Mr. Labrum Respondent submitted 26 exhibits, including some exhibits that had numerous subparts, and presented the testimony of eight witnesses: (1) Ronald Kenneth Gee, Respondent’s Surface Warranty Manager, who ordered that the Pebble Tec that Respondent had applied to Complainants’ pool be removed; (2) Ronald Starling, P.E., S.E., R.L.S. of Starling Madison Lofquist, Inc., a licensed structural and civil engineer who testified as an expert on swimming pool construction and shotcrete; (3) Mrs. Labrum; (4) Jonathan Dongell, the Director of Development and Research at Pebble Technologies and a former journeyman plasterer who testified as an expert on cementitious finishes that are commonly applied to shotcrete shells; (5) Rogelio Perez, the foreman of one of the crews that applied the Pebble Tec to Complainants’ pool; (6) Luis Leyva, Respondent’s employee who inspected the tile in Complainants’ pool; (7) Justin Gonzales, Respondent’s Operations and Sales Manager, who prepared the contract that Complainants attached to the Complaint that they filed with the Registrar; and (8) Amy Mora, Respondent’s attorney’s paralegal, who listened and took notes on two telephone conversations between Mr. Labrum and Respondent’s attorney. Additional Evidence The Construction of the Pool before Respondent Installed the Pebble Tec Mr. Labrum has been listed on several licenses that the Registrar has issued for landscaping and irrigation systems. Mr. Labrum and Mrs. Labrum are currently listed on License No. K-21.255148-D issued to Landscape Management Professionals Inc. Complainants have never been licensed as a general swimming pool contractor, an excavator, a swimming pool tile contractor, a swimming pool plaster removal contractor, or in any trade other than landscaping and irrigation systems. Respondent specializes in pool remodeling rather than new construction. It is one of the largest pool remodeling contractors in Arizona. Mr. Labrum acted as general contractor in the construction of Complainants’ pool on East Fruitvale Avenue. Mr. Labrum testified that he performed the excavation for the pool. Mr. Labrum testified that Complainants hired a licensed contractor to install the rebar for the pool. The contractor who installed the rebar was not identified at the hearing. Mr. Labrum testified that Complainants hired National Shotcrete LLC, License No. K-9.243960-D (“National”) to install shotcrete for the pool. Mr. Labrum testified that the installation of the shotcrete was smooth and uneventful, although during installation, National patched the 6’ x 6’ or 5’ x 5’ transition between the deep and shallow end to make it smoother. Mr. Labrum testified that he prepared the forms for the shotcrete. Photographs that Mrs. Labrum took of the pool after the shotcrete was applied showed smooth surfaces, sharp corners, and no apparent deficiencies in the shotcrete shell. Mr. Labrum testified that he installed the pool tile, marker tiles on the edge of the steps and other ledges, and the coping stone on the edge of the deck next to the pool. Mr. Labrum testified that although he is not experienced in tile installation, he followed the instructions provided and used the thinset recommended by the tile supplier, Monterey Tile. Mr. Labrum testified that he applied the thinset to the side of the pool with a ledger behind it that he also purchased from Monterey Tile and that pursuant to its instructions, he nailed the ledger to the shotcrete with 1” nails. The Parties’ History and the Formation of the Contract In approximately 2008, Respondent contracted to install Pebble Tec on the pool at another house that Complainants owned on Flower Street in Gilbert. After Mr. Labrum informed Respondent that he was not satisfied with its installation of the Pebble Tec in the pool on Flower Street, Respondent removed and reinstalled the Pebble Tec. When Mr. Labrum was still not satisfied, he threatened to file a complaint with the Registrar and to hire a lawyer to initiate litigation against Respondent. On or about October 30, 2008, the parties signed a release, under which Respondent left the Pebble Tec that it had installed in Complainants’ pool on Flower Street and refunded the full $9,700.00 that Complainants had paid for the Pebble Tec.[1] Mr. Gee testified that Complainants’ job on Flower Street cost Respondent approximately $20,000.00. Because the previous job was so unprofitable, Mr. Gee testified that Respondent’s principals, Chris Jones and Roger Runyon, would not have agreed to contract with Complainants again. Mr. Gonzales and Mr. Gee both testified that until Respondent removed the Pebble Tec that it had installed at the pool on East Fruitvale Avenue, they had no way of knowing that Complainants owned the property. Mr. Labrum testified that he wanted to contract with Respondent because based on his experience with the job on Flower Street, he thought that Respondent would stand behind its work. Mr. Gonzales initially submitted Respondent’s proposal for application of the Pebble Tec to the pool on East Fruitvale Avenue to Treg Baum, the qualifying party for Baum Plumbing LLC, License No. K-37.277897-D. Mr. Gonzales testified that he understood that Mr. Baum was soliciting the bid as the general contractor on the project. Mr. Gonzales testified that he assumed that Mr. Baum was properly licensed because Mr. Baum said that Cory Black had referred him to Respondent. Mr. Labrum testified that he asked Mr. Baum to oversee the pool project for Complainants when they went to Las Vegas, Nevada to attend to Mr. Labrum’s ill grandmother. Mr. Labrum denied having intended to hide his involvement in the project from Respondent. Mr. Labrum acknowledged that his wife had signed and had written Complainants’ name on the top of the proposal that Mr. Baum had provided. Mr. Labrum testified that Complainants returned the signed proposal to Mr. Baum to give to Respondent. Mr. Labrum did not state that before Respondent installed the Pebble Tec at the West Fruitvale Avenue property that he had any direct dealings with any of Respondent’s employees about the project. Mr. Gee testified that no one associated with Respondent had seen the copy of the proposal that Mrs. Labrum signed until they received a copy of Complainants’ Complaint from the Registrar. The proposal that Mr. Gonzales submitted to Mr. Baum did not include the property owner’s name.[2] After Mr. Baum verbally accepted the proposal, Mr. Gonzales testified that he asked for the homeowner’s name and that Mr. Baum said to put “Mike @ Baum” on the contract. This notation appeared on Respondent’s file copy of the final contract.[3] Mr. Gonzales testified that he reduced the amount of the proposal by $400.00, to $5,476.00 because Respondent gave Mr. Baum a contractor’s discount in hopes of obtaining future business. Mr. Perez testified that when Respondent’s crews arrived to install the Pebble Tec at the pool on East Fruitvale Avenue, he had a worksheet that Respondent’s office had prepared that described the work to be done. Mr. Perez testified that although Mr. Labrum was present, he did not identify himself as the homeowner and, instead, stated that the homeowner would be back soon with a check. Mr. Perez testified that after Respondent’s crews started installing the Pebble Tec, he did not have time to ask anyone about the check. Mr. Gonzales testified that Respondent generally requires homeowners to pay 50% down, but that Respondent is more lenient with contractors about requiring a down payment to start a job due to the expectation that Respondent will perform more than one job for the contractor. Mr. Gonzales testified that if he had known that the job was for a homeowner, Respondent would have required payment of one-half of the contract price before Respondent’s crews shot the Pebble Tec on the shell of the pool at East Fruitvale Avenue. Respondent played on the record the voicemail messages that Mr. Baum left for Mr. Gonzales when Respondent installed the Pebble Tec. Although Mr. Baum’s messages referred to complaints and concerns by “the homeowner,” they did not identify Mr. Labrum. Respondent submitted the terms and conditions that were included on the reverse side of Respondent’s contract form that provided in relevant part as follows: 1. Contractor warrants the Work to original Owner against faulty workmanship and defective materials . . . .

Contractor’s warranty does not cover: . . . .

• Loss or damage to the Work arising in whole or in part by events or conditions beyond Contractor’s control including, without limitation, effects of: Acts of God; expansion, contraction, settling or other shifting of soils; abuse or misuse; drying of plaster or pebble stone surface; [or] unsoundness, settling or shifting of pool structure or shell . . . . . . . .

3. Contractor shall not be responsible for damage caused to, or the cost to repair: . . . (b) structural cracks, pool light bulbs, in-floor cleaning systems, cleaning heads, or any other preexisting conditions. . . .[4]

Respondent’s form proposal included a box for “50% DEP REQUIRED” that was not checked on the copy of the proposal that Complainants submitted with the Complaint that they filed with the Registrar. Mr. Gee testified that Respondent submitted a bill to Mr. Baum at 4770 S. Dragon Dr., Gilbert, Arizona in the amount of $5,476.00 plus sales tax for its work at the East Fruitvale Avenue address.[5] Mr. Gonzales testified that the address on the bill was a clerical error by an office employee whose employment was subsequently terminated for having made numerous similar errors. Respondent never billed Complainants for its work at the East Fruitvale Avenue address. Neither Mr. Baum nor Complainants have paid anything to Respondent for its work on the pool on East Fruitvale Avenue. Mr. Labrum testified that when he offered to pay Respondent, its attorney said that he would not accept payment because it would compromise Respondent’s case. Ms. Mora testified that she had heard Mr. Labrum’s telephone conversations with Respondent’s attorney on the speakerphone and that Mr. Labrum never offered to pay Respondent anything for its work. Respondent’s Application and Removal of the Pebble Tec Pebble Tec is a proprietary name for an aggregate finish that is applied through a hose, or “shot,” onto shotcrete or gunite pool shells instead of traditional plaster. Like traditional plaster, Pebble Tec does not provide structural strength to a pool but, instead, primarily provides an anesthetically pleasing, waterproof finish. Witnesses referred to the finish on the pool as “Pebble Tec” or “plaster.” Mr. Perez has worked as a plasterer for eight years, including seven years for Respondent. Mr. Perez testified that Respondent applies Pebble Tec to eight to ten pools per week, regardless of whether the temperature is hot or cool. Mr. Perez testified that Respondent used the same materials and used the same application process on the pool at East Fruitvale Avenue that it uses on every job. Mr. Perez testified that two of Respondent’s crews consisting of thirteen or fourteen total workers started applying Pebble Tec to the pool shell on East Fruitvale Avenue. Mr. Perez testified that although it was a big job, Respondent had more than enough employees on site to manage the job. Mr. Perez testified that the two crews washed and started preparing the pool for application of the Pebble Tec, including covering the pavers with plastic to avoid staining them. Respondent’s crews then started shooting the Pebble Tec through hoses connected to a mixer on a truck. Mr. Perez testified that although he noticed the shotcrete patch in the transition between the deep and shallow ends of the pool, it did not ring any alarms. Mr. Labrum testified that Respondent’s superintendent’s only request before it applied the Pebble Tec was to modify the shotcrete on one of the steps into the pool, and that he modified the step. Mr. Perez testified that the plasterers started troweling the Pebble Tec after it was shot onto the shotcrete shell on East Fruitvale Avenue. Mr. Perez testified that although no one took a long break, the scratch coat got hard “real quick.” Mr. Perez testified that the two crews were trying their best to finish troweling the Pebble Tec as it was shot onto the shotcrete, but that Mr. Labrum kept pointing out spots that he did not like, especially near the bar stools on the swim-up bar and the Baja shelf. Mr. Perez testified that even if the Pebble Tec surface seems to be drying too quickly, Respondent’s policy requires that crews try to finish the job rather than call for help because the Pebble Tec dries in 30 or 40 minutes. Mr. Perez testified that although he knew the job was getting away from him, he did the best job he could and called the office when he was finished. Mr. Perez acknowledged that the appearance of Respondent’s Pebble Tec application on the pool shell at East Fruitvale Avenue did not meet industry standards. On the same day that Respondent’s crew applied the Pebble Tec, Mr. Baum informed Mr. Gonzales that the homeowner on East Fruitvale Avenue was not satisfied with the application. Mr. Gee and Mr. Gonzales went to inspect the pool on East Fruitvale Avenue. Mr. Gee testified that the Pebble Tec surface looked bad and he assumed that the interior of the pool had “fired off,” “gone off,” or “had gotten away” from the installers. These terms are used to describe when a cementitious product dries too fast to be properly hand-finished by the installers’ trowel work. The day after the Pebble Tec surface was installed on East Fruitvale Avenue, Respondent arranged for its subcontractor, D and E Pool Repair LLC, License No. C-5.260870-R for swimming pool plaster removal (“D and E”) to chip-out the Pebble Tec. Mr. Gee testified that Respondent has used D and E for plaster chip-outs for seven or eight years and has been satisfied with D and E’s chip-outs. Complainants submitted 38 photographs of the pool after the Pebble Tec had been chipped out. The photographs showed crumbly shotcrete in the bottom of the pool and other mostly horizontal surfaces, shotcrete that has come off in sheets mostly from horizontal surfaces and where the bottom of the pool met the sides, stripes on the sides of the pool and other mostly vertical surfaces, spots of blue Pebble Tec that remained on various parts of the pool, cleaning heads and lights with debris or Pebble Tec on them, exposed rebar, shotcrete that has been gouged out around cleaning heads and other fixtures, and broken tiles.[6] None of Complainants’ photographs showed scratched coping stones or stained pavers on the pool deck. Complainants did not submit any other evidence to establish these alleged items on their Complaint. Mr. Labrum testified that D and E’s crew used five or six jackhammers to remove the Pebble Tec from all parts of the pool. Two of Complainants’ photographs showed a worker using a single jackhammer on the bottom of the pool.[7] Mr. Gee testified that D and E used a crew of five to seven men to saw- cut under the waterline tile. Mr. Gee testified that one man used a jackhammer to remove the Pebble Tec from the floor of the pool, and that the reminder of the crew to use pneumatic pistols to remove the Pebble Tech from the vertical and other surfaces of the pool. Mr. Gee testified that the goal of a chip-out is to remove most of the surface finish but to avoid removing more than ½” from the shell. Mr. Gee testified that if the Pebble Tec had “gone off,” it would have come off in large sections because it had not formed a chemical bond with the shotcrete. Mr. Gee testified that, instead, after the chip-out, he saw rebound and voids where large pieces of the shotcrete had come off because the shotcrete was too dry. Mr. Gee testified that the surface of the shotcrete looked crumbly and sandy, with loose pebbles of concrete. Mr. Gee testified that the pool at East Fruitvale Avenue could be repaired by removing the shotcrete that had delaminated and flashing over properly hydrated shotcrete at the owner’s expense. Mr. Gee testified that if the shotcrete was not repaired, Pebble Tec would not bond to the existing shotcrete. Mr. Gee testified that it was apparent that the overly dry condition of the shotcrete sucked up the moisture from the Pebble Tec like a sponge, causing it to dry too quickly. Mr. Gee testified that the only way to see if a shotcrete shell is overly dry is take a core sample before shooting Pebble Tec onto the surface and that such destructive testing is not industry practice. Mr. Gee has 18 years of experience in pool construction. Mr. Gee testified that he did not see anything in Complainants’ photographs that caused him to believe that the chippers had been overly aggressive or that they had failed to remove sufficient Pebble Tec from the cleaning heads, lights, or other pool equipment. Mr. Gee testified that after a chip-out, the pool shell and fixtures are acid-cleaned to remove any remaining debris. Mr. Gee testified that the damage that Inspector Cason identified on the August 30, 2012 Addendum to the CWO was purely cosmetic and would be covered by the new Pebble Tec when it was applied. Mr. Gee testified that debris in cleaning heads is not uncommon and could be easily removed with a shop vac. Mr. Gee testified that the remaining color on the shotcrete was evidence of a good chemical bond and that only enough Pebble Tec needed to be removed to install the second layer to be flush with the top of the cleaning heads. Mr. Gee testified that a chip-out may chip but should not break waterline tiles that are properly installed. Mr. Leyva testified that he examined the waterline tiles at the February 26, 2013 prehearing inspection and that the tiles had voids behind them, indicating improper installation by Mr. Labrum. Mr. Leyva testified that as a result of Mr. Labrum’s improper installation of the waterline tiles, the chip-out had caused them to break.

Mr. Leyva has installed tile in pools for 15 years. Mr. Leyva testified that the proper way to install tile is to apply a coat of a mixture of cement, mortar, and sand to float out the wall to make a good, smooth surface. Mr. Leyva testified that after the wall was floated out, thinset could be applied to the surface and the tile to be installed. With respect to the exposed rebar, Mr. Gee testified that the chip-out would not have exposed rebar that had been installed to the depth required by industry standards. Mr. Gee testified that the industry standard is 3” of shotcrete above and below the rebar. The Non-Party Experts Inspector Cason Inspector Cason has 35 years of experience in construction, including seven years as a general contractor in California and several years as a field superintendent for a large construction company in Arizona. Inspector Cason testified that as a general contractor, he oversaw all phases of construction of custom homes and commercial projects. Inspector Cason testified that although he did not directly construct any pools when he was a general contractor, he subcontracted out the construction of many pools. Inspector Cason testified that he has received training in concrete and cementitious materials. Inspector Cason testified during the 6½ years that he has been employed as an inspector by the Registrar, he has become familiar with industry standards for pool construction in Arizona. Inspector Cason testified that in his opinion, Respondent did not meet such standards. Inspector Cason testified that he performed a prehearing jobsite inspection on February 26, 2013. Inspector Cason testified that both parties informed him at the prehearing inspection that Respondent had not done anything to comply with the CWO and the Addendum to the CWO. Inspector Cason testified that it appeared that a jackhammer had removed the surface of the gunite shell and exposed the rebar. Inspector Cason testified that he saw one cracked cleaning head and numerous cleaning heads that were filled with debris. Inspector Cason testified that in his opinion, the pool could be repaired to bring it up to industry standards. Inspector Cason was not familiar with the term “rebound” in connection with gunite or shotcrete pool shells. Although the Registrar’s Workmanship Standards for Licensed Contractors (June 2009) provides that “[s]wimming pool construction and design should meet or exceed the suggested minimum standards for swimming pools of the National Spa and Pool Institute, applicable building code requirements, as well as these standards,”[8] Inspector Cason did not identify which standard Respondent had violated in its application and chip-out of the Pebble Tec. Instead, Inspector Cason referred to the requirement of A.A.C. R4-9-108(A) set forth at the beginning of the Workmanship Standards for Licensed Contractors and testified that Respondent had not completed application of the Pebble Tec in a professional and workmanlike manner, as indicated by the exposed shotcrete, exposed rebar, and cracked tiles. Inspector Cason testified that it is only when the contractor has completed its scope of work that the Registrar can look at industry standards. Inspector Cason testified that in some cases he might go online or ask his supervisor about the industry standards that may have been set forth in a pool building industry manual. Inspector Cason testified that he did not do so in this case because the Complaint involved incomplete workmanship and lack of professionalism. Inspector Cason acknowledged that he had never personally chipped out a plaster finish from a pool. Inspector Cason testified that in a chip-out, he believed that the contractor should remove 100% of the plaster finish. Inspector Cason acknowledged that did not know the industry or manufacturer’s standard for a chip-out or whether removal of a ½”, ¼ ”, or 1” layer of plaster was required by industry standards. Inspector Cason testified that some areas of D and E’s chip-out were deeper than others. Inspector Cason testified that finished surfaces should be nice and smooth and that the underlying surface might need to be floated out to make it adequate. Inspector Cason testified that a peak in the underlying surface is problematic because it might not allow the surface finish to be applied in the minimum thickness, while still achieving a smooth surface. Inspector Cason testified that he did not make any assessment and that he did not have any first-hand knowledge about whether the shotcrete shell was properly constructed. Inspector Cason testified that he believed that D and E had done a poor job on the chip-out due to the exposed rebar, damaged cleaning head, debris- filled cleaning heads, and the cracked tile. Inspector Cason acknowledged that he did not make any determination about whether the cracked pool tiles had been properly installed. Inspector Cason testified that a pick could have slipped and jumped up, damaging the tile. Inspector Cason testified that such incidents are not uncommon. Inspector Cason testified that he did not test any of the heads to see if they functioned and did not know whether the debris could be removed with a shop vac in 30 seconds. Inspector Cason testified that in his opinion, the Registrar’s workmanship standards required Respondent to clean up the project. Inspector Cason estimated that the exposed rebar was ½ ” or 1” below the surface of the shotcrete that had been removed. Inspector Cason testified that he did not research the proper depth of rebar; it was up to the pool’s engineer or the municipal inspector to determine whether the rebar was installed at an adequate depth. Inspector Cason testified that even if the rebar had been installed too close to the surface of the shotcrete, it still would not have been visible without the chip-out. Inspector Cason testified that the municipal inspector determined that the depth of the rebar was sufficient in the pre-gunite inspection. Inspector Cason testified that he is comfortable relying on municipal building inspectors to enforce building codes. Inspector Cason testified that he did not believe that the rebar would have eventually popped out had it not been exposed in the chip-out. Inspector Cason identified on one of Complainants’ photographs the in- floor cleaning head that he had opined was damaged in the Addendum to the CWO.[9] Inspector Cason testified that it appeared that there was a pick mark on the retaining ring of the head. Inspector Cason acknowledged that he could not determine whether the cleaning head was still functional because there was no water in the pool. Inspector Cason testified that he did not believe that the damage was cosmetic or aesthetic because he did not believe a new coat of plaster would cover the damage. Inspector Cason testified that that the acceptance of the surface doctrine imposes responsibility on a contractor who applies a product on a surface prepared by an earlier contractor if the second contractor fails to inspect the surface to determine that it meets industry standards. If the surface is inadequate, the second contractor should contact the general contractor or the homeowner to inform them that he will not proceed unless the surface is repaired. Inspector Cason testified that he believed that Respondent had accepted the shotcrete surface and then modified the surface with jackhammers and picks, leaving unacceptable gouges. Inspector Cason testified that he has inspected other pools whose plaster surfaces have been chipped out and has found them to meet the Registrar’s standards. Mr. Starling Mr. Starling has been registered as a professional structural engineer, as a professional civil engineer, and as a land surveyor in Arizona since 1978, and is personally licensed in eight other states. Mr. Starling testified that Starling Madison Lofquist, Inc. is a full structural and engineering firm that is licensed in 44 states and has an entire department that is devoted to swimming pool construction. Mr. Starling testified that Starling Madison Lofquist, Inc. designs between 5,000 and 8,000 pools for Shasta Pools each year but that he has never worked for Respondent until he was asked to testify as an expert in this matter. Mr. Starling testified that his firm has designed many pools and that he has given numerous professional presentations to pool and spa builders. The only time that Mr. Starling inspected the pool on East Fruitvale Avenue was at the February 26, 2013 prehearing jobsite inspection. Mr. Starling testified that after about 10 or 15 minutes, Mr. Labrum asked him to leave and said that if he did not, the police would be called. Mr. Starling testified that although he would have liked to have had more time to inspect the pool and prepare a complete map of observed deficiencies, he was confident of the conclusions that he expressed at the hearing. Mr. Starling testified that shotcrete is pneumatically applied in layers, like an onion, and that the lower levels must be allowed to fully hydrate or the upper levels will not adhere to the lower levels and will delaminate. Mr. Starling testified that hydration is a chemical process through which the Portland cement, water, and other substances becomes a hard cementitious material. Mr. Starling testified that in a hot, arid climate like Arizona’s, extra care must be taken to ensure that shotcrete layers hydrate sufficiently. Mr. Starling testified that the horizontal and other surfaces of the pool on East Fruitvale Avenue showed extensive evidence of delamination and rebound. Mr. Starling testified that the delamination was worst in the cove of the pool, or the areas between the walls and bottom of the pool. Mr. Starling testified that because shotcrete is shot out of a hose during application, small pea-sized bits shotcrete may bounce off the face surface and land elsewhere, which is called “rebound.” The problem with rebound is that as it hydrates, it creates a boundary layer like sand on concrete to which subsequent layers of shotcrete cannot adhere to the substrate, causing the shotcrete to delaminate. Mr. Starling submitted photographs of the pool that he had taken on February 26, 2013, that showed rebound and delamination of layers of the shotcrete.[10] Mr. Starling testified that if the moisture evaporates out of lower layers of shotcrete too soon, it will suck the moisture out of subsequent layers. Mr. Starling testified that as a result of the premature hydration, the lower layers will be the weakest part of the shotcrete and the subsequent layers will delaminate. Mr. Starling testified that normally, a chip-out will not cause a patch to delaminate. However, in this case, the patch that had been applied to the transition between the shallow and deep ends of the pool had delaminated. Mr. Starling testified that the industry standard before applying plaster to a shotcrete shell does not require destructive testing. Mr. Starling testified that unless there is rust from a tie wire, there is no way to tell from a visual inspection whether the layers of a shotcrete pool shell are adequately hydrated when they were applied. Mr. Starling testified that based on the photographs that Complainants had taken of the shotcrete shell before Respondent applied Pebble Tec, there would have been no way for Respondent to know that the shotcrete had problems. Mr. Starling testified that in his opinion, D and E’s chip-out was fine. As a structural engineer, he does not like to see an excessive amount of the shell removed. Mr. Starling testified that he likes to see some Pebble Tec left on the shell because it shows at least some parts of the shell and Pebble Tec have bonded. Mr. Starling testified that veins or stripes from chipping hammers can always be seen after a chip-out and that in this case, the stripes showed that the Pebble Tec had bonded to the shotcrete on the sides of the pool. Mr. Starling testified that the rebar shown in Complainants’ photographs[11] was installed too close to the surface of the shotcrete. Mr. Starling testified that the rebar used in swimming pool construction rusts and that as the rebar rusts, it expands. Mr. Starling testified that eventually rebar that is installed too close to the surface will cause a spall or a pockmark on the surface of the Pebble Tec. Mr. Starling testified that the spall would be the general contractor’s or owner’s responsibility because the location of rebar is impossible for the contractor who installs the finished surface to determine without destructive testing. Mr. Starling testified that the destructive force of a jackhammer would not have changed the location of the rebar. Mr. Starling testified that he does not rely upon municipal building inspectors’ reports to determine whether construction is adequate because he has seen so many projects that passed inspection and later showed evidence of construction deficiencies. Before Mr. Labrum asked Mr. Starling to leave, Mr. Starling attempted to map the areas of delamination by tapping a wood hammer handle on the pool surfaces to ascertain whether it sounded hollow and to avoid damaging the pool. Mr. Starling acknowledged that D and E had used metal tools to chip out the Pebble Tec. Mr. Starling testified that he did not find a single location in the area that did not sound hollow. Mr. Starling testified that the shotcrete shell could be repaired by removing all of the delaminating layers and rebound, sweeping up the debris, spraying or painting a bonding agent onto the clean surface, and reflashing the surface to the original specifications. / / / / / / / / Mr. Dongell Mr. Dongell has been employed in concrete construction had has worked with cementitious materials for over 30 years, including 15 years as a journeyman plasterer. Mr. Dongell is a member of the American Concrete Institute (“ACI”) and the National Plasterer’s Council and wrote approximately 85% of its publication, Technical Manual, Fifth Edition. Mr. Dongell has known Respondent for more than 20 years and within the last 10 years, has been employed by Respondent as an expert five or six times. On only one of these occasions has Mr. Dongell been critical of Respondent’s workmanship. Mr. Dongell testified that he spoke to Respondent’s construction manager and jobsite superintendent about the Pebble Tec that Respondent applied to Complainants’ pool on East Fruitvale Avenue. Mr. Dongell testified that both men told him that the job was uncontrollable and that the Pebble Tec set and dried before the crew could finish it. Mr. Dongell explained that an installation “gets away” from a crew when the material sets before the crew is able to apply a proper finish. The only time that Mr. Dongell saw the pool on East Fruitvale Avenue was at the February 26, 2013 prehearing jobsite inspection. Mr. Dongell testified that he would have liked to look at the broken tile and other items in Complainants’ Complaint, but that after about ten minutes, Mr. Labrum told him to leave. Mr. Dongell took five photographs to show the conditions that he found at the jobsite.[12] Mr. Dongell testified that when application of a pool finish “gets away,” in 99% of the cases it is the plasterers’ fault for not knowing prevailing conditions or failing to properly manage the surface material. Mr. Dongell opined that the poor appearance of the pool finish on the pool on East Fruitvale Avenue was in the 1% of cases in which the problems were not the plasterers’ fault. Mr. Dongell testified that one problem that he saw in the shotcrete was that several areas of the shotcrete showed feathering where the installer had tried to bevel down to the edge of an abutment. Mr. Dongell testified that the ACI requires layers of shotcrete to be a minimum thickness of 1” and that some areas of the feathering were beveled down to nothing. Mr. Dongell testified that because the aggregate in shotcrete is ⅜”, the beveled areas had only fine aggregate, compromising their strength. Mr. Dongell identified a feathered area where the center had just fallen off in the chip-out.[13] Mr. Dongell testified that a second problem he saw with the pool on East Fruitvale Avenue was that the shotcrete had cold joints and was no longer a monolithic pour and that cold joints do not adequately bond. Mr. Dongell testified that a third problem was that the shotcrete was delaminating in the feathered areas and that the delamination covered large areas of the floor and other horizontal surfaces of the pool. Mr. Dongell testified that the delamination showed that a layer of shotcrete had been applied over an older layer in which proper hydration had not occurred, and that the older layer “wicked out” the moisture from the new layer. The result was a weaker area of shotcrete and delamination. Mr. Dongell cited § 1.1 of the “Pool Plaster Guidelines” included in the National Spa & Pool Institute Pool Plaster Technology (January 20, 1992), that provided as follows: The plasterer shall make final inspection of the pool shell prior to plastering and shall notify the builder of any visible defects. The builder is responsible for providing a sound structural shell and in the event of subsequent defects, shall establish responsibility through visible proof.[14]

(Emphasis added.) Mr. Dongell testified that Respondent was not provided with a sound structural shell in this case. Mr. Dongell testified that Mr. Labrum, as the builder, was responsible for providing the sound structural shell. With respect to Mr. Cason’s testimony about the need for a smooth and uniform shotcrete surface to which to apply the Pebble Tec finish, Mr. Dongell testified that it is acceptable for a chip-out contractor to remove more material around the pop-up cleaning heads and other fittings. To support his opinion, Mr. Dongell quoted the National Plasterers Counsel Technical Manual, Fifth Edition, § 3.5 on “Thickness—Tolerance Exceptions,” in relevant part as follows: Another exception to the maximum thickness tolerance of cementitious surface material that is considered an accepted procedure of the trade would be a coating material that is used in the filling of small holes, pits, or dig-outs (indentations around plumbing fixtures or lighting fixtures) in the substrate. Though the thickness of the cementitious surface will be greater than the acceptable maximum tolerance in these spots, it is never-the-less considered acceptable to use the cementitious surface coating material in this application. The cementitious surface material becomes an intricate part of the substrate in these areas by keying, or locking into, the substrate. No structural integrity is lost. Additionally, the surface coating material adequately performs the task of sealing or plugging these holes and dig-outs around fixtures.[15]

Mr. Dongell testified that he looked at the pop-up cleaning heads and other fittings and saw that the Pebble Tec had been ground off completely in these areas, leaving some Pebble Tec in the surrounding areas. Mr. Dongell testified that it was common to remove all the Pebble Tec around the fittings, but to leave bonded Pebble Tec on the surrounding areas to avoid removing more of the substrate than was necessary. Mr. Dongell also quoted the National Plasterers Counsel Technical Manual, Fifth Edition, § 4.1 on “Proper Surface Condition of the New Pool Substrate,” in relevant part as follows: The cementitious substrate should be placed and finished in such a way, that leaves the finish of the substrate rough, coarse, and porous enough to ensure that the subsequent application of the cementitious surface coating can achieve a good mechanical bond to the substrate.[16]

Mr. Dongell testified that Respondent could not have known about the deficiencies in the shotcrete until its subcontractor performed the chip- out. Mr. Dongell testified that D and E complied with all industry standards in performing the chip-out. Mr. Dongell testified that the shotcrete in Complainants’ pool on East Fruitvale Avenue could be repaired through application of a brown coat, which would allow Pebble Tec to be applied later. CONCLUSIONS OF LAW This matter lies within the Registrar’s jurisdiction.[17] Complainants bear the burden of proof to establish Respondent’s statutory violations by a preponderance of the evidence.[18] Respondent bears the burden to establish affirmative defenses by the same evidentiary standard.[19] “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”[20] Although a general contractor’s or property owner’s failure to pay a contractor may be a defense to a charge that the contractor abandoned the project in violation of A.R.S. § 32-1154(A)(1), generally if contractors perform a project they must do so in a professional and workmanlike manner, regardless of payment, and must resolve payment issues in a court of competent jurisdiction. Although Complainants alleged that Respondent abandoned the project in the Complaint that they filed with the Registrar, the Citation and Complaint did not charge a possible violation of A.R.S. § 32-1154(A)(1). Complainants’ failure to pay Respondent anything is therefore irrelevant to the issues in this case. Respondent established that it thought that it was contracting with Mr. Baum and that Mr. Labrum concealed his identity until after Respondent installed the Pebble Tec. Although the lack of a contract between the contractor and the general contractor or homeowner may provide a defense to certain common-law claims, it is not a defense to a charged violation of A.R.S. § 32-1154(A)(3) based on the contractor’s alleged failure to perform its construction work in a professional and workmanlike manner, as required by A.A.C. R4-9-108. Because Complainants were beneficiaries of Mr. Baum’s contract with Respondent, they had standing to file this Complaint with the Registrar. Both parties agreed that appearance of the Pebble Tec finish that Respondent applied to Complainants’ pool on East Fruitvale Avenue did not meet industry standards. Respondent established that because the shotcrete substrate was deficient, it could not support application of the Pebble Tec finish and that the poor appearance of the Pebble Tec surface was not due to Respondent’s poor workmanship. Mr. Labrum as the general contractor on the project was responsible for the shotcrete. As a general principle in construction, a contractor who performs work on a surface constructed or prepared by another contractor accepts the surface. The subsequent contractor should inspect the surface for any flaws or defects that could affect the proposed work before performing the work. If the subsequent contractor finds the surface to be unacceptable, it should call any defects to the owner’s or general contractor’s attention.[21] In this case, Respondent established that there was nothing in the appearance of the shotcrete that should have alerted Respondent to possible deficiencies that might cause the Pebble Tec finish to fail. Complainants did not establish that Respondent’s subcontractor D and E’s chip-out was deficient in any respect. Respondent established that the tiles broke due to Mr. Labrum’s deficient installation, that the rebar was exposed because it was installed too close to the surface of the shotcrete, and that Respondent’s contract with Mr. Baum excluded damage to pool fixtures, including the cleaning heads. Because Respondent is not responsible for the construction deficiencies that Complainants alleged in the Complaint and Addendum to the Complaint that they filed with the Registrar, Complainants did not establish that Respondent violated A.R.S. § 32-1154(A)(3), namely A.A.C. R4-9-108.[22] Inspector Cason did not have the benefit of the additional terms and conditions to the contract or of Mr. Starling’s and Mr. Dongell’s expert opinions when he issued the CWO and the Addendum to the CWO and when he testified at the hearing.[23] Because Respondent established that the deficiencies in the shotcrete were unknown and unknowable until the chip- out, the tiles were broken due to Mr. Labrum’s poor installation, and that the contract excluded damage to the pool fixtures, including the cleaning heads, Respondent’s failure to comply with the CWO and the Addendum to the CWO was justified. Therefore, Complainants did not establish that Respondent violated A.R.S. § 32-1154(A)(23).[24] RECOMMENDED ORDER In view of the foregoing, it is recommended that on the effective date of the final Order in this matter, Complainants Mike and Amber Labrum’s Complaint in Case No. 2012-3231 against Respondent C D C Pools Inc.’s License No. B-5.121372-R shall be dismissed. 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 22, 2013.

/s/ Diane Mihalsky Administrative Law Judge

Transmitted electronically to:

William A. Mundell, Director Registrar of Contractors ----------------------- [1] See Respondent’s Exhibit 37. [2] See Respondent’s Exhibit 1 at 1. [3] See Respondent’s Exhibit 36 at 1. [4] Respondent’s Exhibit 1 at 2. [5] See Respondent’s Exhibit 2. [6] See Complainants’ Exhibit 3, photographs 12-30 and 33-53. [7] See Complainants’ Exhibit 3, photographs 10 and 11. [8] Workmanship Standards for Licensed Contractors at 36. [9] See Complainants’ Exhibit 3, photograph 24. [10] See Respondent’s Exhibit 18, Photographs 3-11. [11] See Complainant’s Exhibit 3, Photographs 39 and 40. [12] See Respondent’s Exhibit 17. [13] See Respondent’s Exhibit 17, photographs 3 and 5. [14] Respondent’s Exhibit 33 at 2. [15] Respondent’s Exhibit 34 at 14, § 3.5. [16] Id., § 4.1. [17] See A.R.S. §§ 32-1151 to 32-1169. [18] See A.R.S. § 41-1092.07(G)(2); A.A.C. R2-19-119(A) and R2-19- 119(B)(1); see also Vazanno v. Superior Court, 74 Ariz. 369, 372, 249 P.2d 837 (1952). [19] See A.A.C. R2-19-119(B)(2). [20] Morris K. Udall, Arizona Law of Evidence § 5 (1960). [21] The principle of accepting the surface is supported by case law from other jurisdictions. A contractor who knew or should have known of a defect in the surface does not perform construction in a workmanlike manner if the contractor fails to notify the owner of the defect and the contractor’s construction fails due to the defective surface. See Parker v. Thornton, 596 So.2d 854, 858 (Miss. 1992); Lewis v. Anchorage Asphalt Paving Co., 535 P.2d 1188, 1199 (Alaska 1975); Kuhlman v. Talley, 145 So.2d 101, 103 (La. App. 1962). The principle is based on common sense and a need for fair dealings between contractors and property owners:

[T]he requirements of public order and the obligation implicit in every contract that the work will be done in a workmanlike manner would compel us to reject a contention that [a subsequent contractor] is not responsible for building upon a site which he knows to be defective. In such a case, the barest standards of care would require him to bring the defect to the attention of the owner before proceeding. The owner would then have an opportunity to make the indicated adjustment in the contract to provide against the defective soil condition of which he had no prior knowledge.

Wurst v. Pruyn, 202 So.2d 268, 271-72 (La. 1967) (emphasis added; citation omitted). [22] A.R.S. § 32-1154(A)(3) 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.” [23] Due to a prior professional commitment in another case, Inspector Cason was not available on March 6, 2013, when Mr. Starling and Mr. Dongell testified. Inspector Cason did not testify until March 7, 2013. [24] A.R.S. § 32-1154(A)(23) 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.” (Emphasis added.)

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