ALJDEC decisions subject to certification as final

2014A-4919-ROC · Registrar of Contractors · 2016-02-11

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: February 5, 2016, at 8:00 a.m. APPEARANCES: Dennis Modglin (“Complainant”) appeared on his own behalf; Oasis Floors and Design, Inc. (“Respondent”) appeared through its qualifying party and officer, Keith Williams (“Mr. Williams”). ADMINISTRATIVE LAW JUDGE: Diane Mihalsky _____________________________________________________________________

FINDINGS OF FACT Background and Procedure 1. On or about March 13, 1998, the Arizona Registrar of Contractors (“the Registrar”) issued License Nos. CR48.132859-D for dual ceramic, plastic and metal tile and CR-8.132860-D for floor covering to Respondent. On or about March 20, 1998, the Registrar issued License Nos. CR-8.133218-D for floor covering and CR48.133219-D for ceramic, plastic and metal tile to Respondent. On or about April 2, 2008, the Registrar issued License No. B- 1.243976-C for general commercial contracting to Respondent. 2. On or about December 5, 2014, Complainant filed a complaint with the Registrar against Respondent alleging poor workmanship in Respondent’s performance of its contract to install El Dorado stone veneer on the columns, fireplace, barbeque countertops, and travertine hearth around the pool on the back of Complainant’s second home at 1671 Cabana Drive, Lake Havasu City, Arizona 86403. 3. The Registrar assigned the complaint to its Investigator, Cliff Corlett (“Investigator Corlett”), for investigation. Investigator Corlett performed a jobsite inspection and on February 11, 2015, issued a directive to Respondent to perform certain repairs on or before 5:00 p.m. on February 27, 2015. The February 11, 2015 directive provided in relevant part as follows: In this Investigator [’] s opinion the stone veneer installation the Respondent performed closely resembles the “sample” and is acceptable with some very minor areas of missing mortar/grout. Respondent should properly “touch-up” those areas of missing mortar/grout where the existing house stucco below was visible, and the mortar/grout missing at top of firebox.

4. Complainant eventually requested a hearing. On July 10, 2015, the Registrar issued a Citation against Respondent’s licenses, charging cause to revoke, suspend, or otherwise discipline Respondent’s licenses under A.R.S. § 32-1154(A)(3), namely A.A.C. R4-9-108, and A.R.S. § 32-1154(A)(22). 5. Respondent filed a timely written answer to the Citation, alleging that the corrections that the February 11, 2015 directive required were minor touchup, that another contractor had installed similar stone veneer on the front of Complainant’s house, and that Respondent had been in business for more than 20 years and had always complied with the Registrar’s rules and laws. 6. Complainant asked the Registrar to amend the July 10, 2015 Citation to charge additional statutory violations. On August 27, 2015, the Registrar issued a Notice of Amendment, charging additional cause to revoke, suspend, or otherwise discipline Respondent’s licenses under A.R.S. § 32-1154(A)(12), namely A.R.S. §§ 32-1124(B) and 32- 1158, and A.R.S. § 32-1154(A)(16). Respondent was deemed to have denied the allegations in the Registrar’s Notice of Amendment. 7. An evidentiary hearing was held on February 5, 2016. Complainant submitted eight exhibits and testified on his own behalf. Respondent submitted one exhibit and presented Mr. Williams’ testimony. Investigator Corlett also testified. Hearing Evidence 8. Complainant is a retired general contractor from California. Complainant has built four houses in Lake Havasu City acting as an owner-builder, including the house at 1671 Cabana Drive where Respondent installed the stone veneer on the back patio. The project to install the stone veneer was a remodeling project on a house whose construction Complainant had already completed at the time. 9. Complainant attached to the complaint that he filed with the Registrar Respondent’s June 25, 2014 proposal that became the parties’ contract when Complainant signed to accept it.[1] Respondent’s June 25, 2014 proposal did not include Respondent’s license number(s), preceded by the acronym “ROC,” or an estimated date of completion, did not advise Complainant that he had the right to file a complaint with the Registrar against Respondent for an alleged violation of A.R.S. § 32-1154(A) within the time allowed by A.R.S. § 32-1155(B), and did not provide the Registrar’s telephone number or website address. 10. Respondent’s June 25, 2014 proposal also did not specify the technique that Respondent would use to make the grout joints for the stone veneer that it contracted to install. 11. Complainant testified that he told members of Respondent’s crew who installed the stone veneer that he wanted a racked standard joint as described in El Dorado’s published materials.[2] 12. Mr. Williams pointed out that the written contract that Complainant signed with Respondent did not specify the grout type and that without such specification, every installer applies a slightly different grout type. 13. Complainant testified that Respondent’s crew also did not follow El Dorado’s published guidelines in installing the stone veneer because they installed the veneer beginning at the bottom and they installed the veneer on a hot day in July when the weather reached 109º. Complainant testified that two days after Respondent’s crew installed the stone veneer, they were working with hammers, chisels, and brushes to remove grout from the stones. 14. Complainant submitted four photographs that showed voids, inconsistent grout depths, and cracked grout in certain locations of the stone veneer.[3] 15. Investigator Corlett agreed that Complainant’s photographs were representative of certain areas of Respondent’s stone veneer installation. Investigator Corlett testified that at the jobsite inspection, Complainant had placed numerous pieces of blue painters tape to mark areas of the stone veneer that he believed were deficient. Investigator Corlett testified that he believed that the overall appearance of Respondent’s stone veneer installation matched the sample board, but that the installation required some minor touchup. Investigator Corlett testified that he was unable to determine whether variations in shading on the stone veneer resulted from the manufacturing process to make the veneer look more natural or grout stains from Respondent’s installation. Investigator Corlett testified that the Registrar’s workmanship standards for primarily aesthetic construction components like stone veneer do not require perfection at close range, but only that the project have a pleasing appearance from a reasonable distance. 16. Respondent submitted an email from Jason Sylvia in Product Support at El Dorado Stone dated August 12, 2014, that provided in relevant part as follows: Based off your photos and as long as [the Masonry Veneer Manufacturers Association (“MVMA”)] guidelines have been followed such as proper mortar, substrate, [etc.] have been used we aren’t seeing anything wrong with the install portion. Grout and placement of stone is an esthetic issue which will not affect the performance of the stone in any way. If the client is unhappy with the depth of grout it can easily be adjusted with an angle grinder.[4]

17. Investigator Corlett performed a compliance inspection on March 19, 2015. Investigator Corlett’s Compliance Jobsite Inspection Notes stated in relevant part as follows: [Respondent] had returned and made several repairs, [Complainant] still had hundreds of pieces of tape marking every imperfection he felt was poor workmanship. [Complainant] had broken a “stone” off from the south side of a roof column to expose the wire lath. Lath appeared to be standard [gauge] lath for this type of home/stucco construction.

In this investigator [’] s opinion this installation is supposed to simulate a stacked stone masonry construction of fireplace and building columns. The “stone” is man made simulated granite with multi colors and is supposed to look mortared together. The [Complainant] is examining each stone close up and marking them with tape if he perceives any mastic and or mortar not properly washed from stone surface. I do not believe this type of magnifying glass inspection is a realistic measure of the proper aesthetics of the installation. I believe that for the most part the installation closely resembles the type of stone structure it is supposed to be simulating.

HOWEVER the written directive instructed the [Respondent] to repair the missing grout/mortar and [Respondent] has not complied.

NOTE: The [Respondent] returned to the project before Phoenix advised this Investigator that [Respondent’s] C/R-48 license will not cover this type of work.

Respondent [’] s other licenses will not cover this work either.

18. Investigator Corlett testified that on March 19, 2015, after he issued the February 11, 2015 directive and the time had passed for Respondent to comply with the directive, the Registrar’s Legal Department informed him that a residential general contracting license or dual masonry license was required to install stone veneer. Investigator Corlett explained that before he heard from the Registrar’s Legal Department, he assumed that installing stone veneer on exterior vertical surfaces was similar to installing wall tiles and was within the scope of Respondent’s CR48 licenses. 19. Mr. Williams testified that in 2008, he had contacted the Registrar to determine whether the installation of stone veneer was within the scope of Respondent’s CR48 licenses and had been assured that it was within the scope of the licenses. Mr. Williams testified that Respondent therefore did not obtain another license to install stone veneer. 20. Complainant submitted the MVMA Installation Guide and Detailing Options for Compliance with ASTM C1780 that provided that “[m]ultiple lath materials have been used successfully for the installation of [Adhered Manufactured Stone Veneer] systems, including . . . 18 gauge (or heavier) woven wire mesh meeting ASTM C1032 . . . .”[5] Complainant submitted an email dated January 18, 2015, from Rick Garagliano, the Director of Technical Sales and Quality at Headwaters Stone Division, which manufactures El Dorado stone veneer, stating that the gauge of the lath on Complainant’s house did not appear to be 18 gauge or greater. Mr. Garagliano’s email continued: If the gauge is thinner than 18 (gauge number is greater than 18) then the installation is not according to the international residential building code or the international building code. If the installation is not code compliant, then the veneer must be removed and replaced with code-approved methods.[6]

21. Inspector Corlett testified that he performed a prehearing inspection on December 28, 2015. Although Complainant said that the veneer was falling off the vertical surfaces due to the inadequate lath, Inspector Corlett testified that the job appeared much the same as it had at the March 19, 2015 compliance inspection and that there was no systemic failure of the stone veneer that Respondent had installed. 22. Inspector Corlett testified that he contacted a building official in Lake Havasu City to inquire whether the City required 18 gauge or stronger lath for installation of stone veneer. The building official stated that stone veneer is commonly installed over 20 gauge lath, even though stone manufacturers recommend 18 gauge lath, and that the City’s Building Department accepts installation of stone veneer over 20 gauge lath. 23. Complainant testified that the lath for the stucco on his house was 20 gauge and to correct the job, all the stone veneer needed to be removed, the 20 gauge lath replaced, and the stone veneer properly re-installed with attention to the grout detail. Complainant acknowledged that as part of the remodeling project, another contractor had installed stone veneer to the front of the house and that he had not complained about that contractor’s work, even though the lath for the stucco was 20 gauge over the entire house. 24. Complainant requested that the Registrar award restitution to him in the amount of $7,969.00, the amount of Masonry and More Concrete’s November 20, 2015 bid to remove and replace the stone veneer,[7] but not to replace the 20 gauge lath. 25. Investigator Corlett testified that the Registrar holds owner- builders to the same standards as general contractors insofar as coordinating trades and preparation of surfaces for following trades are concerned, especially if the nature of the surface is not visible and cannot be determined without destructive testing. Investigator Corlett testified that as the owner-builder on the prior construction of the house, Complainant was responsible for knowing that the stucco had been applied over 20 gauge lath. Inspector Corlett testified that, in addition, no evidence indicated that the 20 gauge lath had caused problems with Respondent’s installation of the stone veneer. Investigator Corlett testified that the stone veneer on the back patio did not need to be replaced. 26. Mr. Williams testified that Complainant had not paid Respondent 50% of the contract price and that to settle the complaint,[8] Respondent had offered to return the 50% that Complainant had paid. Mr. Williams testified that overall, the project looked good, even though there are some remaining minor workmanship deficiencies. 27. Administrative notice is taken of the Registrar’s public website. On January 29, 2016, all five of Respondent’s licenses were current and in good standing, had no history of discipline, and showed only a few short administrative suspensions over the past 17 years for non-renewal or lack of bond. CONCLUSIONS OF LAW 1. This matter lies within the Registrar’s jurisdiction.[9] 2. Complainant bears the burden of proof to establish cause to discipline Respondent’s license by a preponderance of the evidence.[10] Respondent bears the burden to establish factors in mitigation of the penalty and affirmative defenses by the same evidentiary standard.[11] 3. “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”[12] 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.”[13] 4. Complainant established cause to discipline Respondent’s contractor’s licenses under A.R.S. § 32-1154(A) (3),[14] namely A.A.C. R4-9- 108,[15] based on the minor voids and cracks in Respondent’s installation of the stone veneer. 5. Complainant also established cause to discipline Respondent’s contractor’s licenses under A.R.S. § 32-1154(A)(22).[16] The main dispute between the parties is the extent of the workmanship deficiencies. Although the remaining deficiencies in the stone veneer are minor and easily corrected, Complainant established that Respondent did not fully comply with the February 11, 2015 directive within the time allowed. 6. Complainant established cause to discipline Respondent’s licenses under A.R.S. § 32-1154(A)(12),[17] namely, A.R.S. §§ 32-1124(B)[18] and 32-1158[19] because Respondent’s June 25, 2014 proposal did not include Respondent’s license number(s), preceded by the acronym “ROC,” or an estimated date of completion, did not advise Complainant that he had the right to file a complaint with the Registrar against Respondent for an alleged violation of A.R.S. § 32-1154(A) within the time allowed by A.R.S. § 32-1155(B), and did not provide the Registrar’s telephone number or website address. Although Respondent should make sure that its contract forms comply with the Registrar’s statutes, Respondent’s violations were technical and did not cause Complainant to suffer any identifiable damages. 7. Although Complainant established that Respondent contracted beyond the scope of its licenses, Complainant did not establish that the violation was knowing. Complainant therefore did not establish additional cause to discipline Respondent’s licenses under A.R.S. § 32- 1154(A)(16).[20] 8. Respondent established that the remaining deficiencies in the stone veneer installation are minor and that it has made significant efforts to resolve Complainant’s complaint, but that Complainant refuses to accept less than the cost of complete removal and reinstallation of the stone veneer, which repair was not warranted by the evidence. Only the CR48 licenses that Respondent reasonably, albeit mistakenly, thought it was working under should be disciplined as a result of this case. RECOMMENDED ORDER Based on the foregoing, it is recommended that on the effective date of the order in this matter, License Nos. CR48.132859-D and CR48.133219-D of Respondent Oasis Floors and Design Inc. shall be suspended for a period of one calendar day. It is further recommended that Respondent shall pay the sum of $250.00 as a civil penalty pursuant to A.R.S. § 32-1154(E). 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 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. It is further recommended that within thirty days of the effective date of the final order, Respondent shall provide to the Registrar copies of its form contract that has been revised to comply with the requirements of A.R.S. §§ 32-1124(B) and 32-1158. If Respondent fails to provide proof that it has so revised its form contracts, it is recommended that Respondent’s licenses be suspended for an additional three days. 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 five days from the date of that certification. Done this day, February 11, 2016.

/s/ Diane Mihalsky Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director Registrar of Contractors ----------------------- [1] See the Registrar’s electronic record at Intake Complaint Submittal1.pdf at 4-7. [2] See Complainant’s Exhibit 1 at 2. [3] See Complainant’s Exhibit 3-1 through 3-4. [4] Respondent’s Exhibit A. [5] Complainant’s Exhibit 2 at 7. [6] Complainant’s Exhibit 5; see also Complainant’s Exhibit 7 at 2 (HUD report on El Dorado manufactured brick and stone veneer). [7] See Complainant’s Exhibit 8. [8] Ariz. R. Evid. 408 provides that a settlement offer is not admissible “either to prove or disprove the validity or amount of a disputed claim or to impeach by a prior inconsistent statement or a contradiction . . . .” The Administrative Law Judge considers the reasonableness of Respondent’s settlement offer a factor in mitigation of the recommended penalty. [9] See A.R.S. § 32-1154(A). [10] See A.R.S. § 41-1092.07(G)(2); A.A.C. R2-19-119(B)(1); see also Vazanno v. Superior Court, 74 Ariz. 369, 372, 249 P.2d 837 (1952). [11] See A.A.C. R2-19-119(B)(2). [12] Morris K. Udall, Arizona Law of Evidence § 5 (1960). [13] Black’s Law Dictionary at page 1220 (8th ed. 1999). [14] 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.” [15] 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.” [16] A.R.S. § 32-1154(A)(22) 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.” [17] A.R.S. § 32-1154(A)(12) includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license, “[f]ailure in any material respect to comply with this chapter.” [18] A.R.S. § 32-1124(B) requires that licensed contractors include their license number “preceded by the acronym ‘ROC’“ on “all written bids submitted by the licensee and . . . on all advertising, loan forms, lending institution forms, letterheads and other documents used by the licensee in the conduct of business regulated by this chapter.” [19] A.R.S. § 32-1158(B) provides that any contract in an amount of more than one thousand dollars entered into between a contractor and the owner of a property to be improved after December 31, 2007 must be in writing and must include the following minimum terms: 1. The name of the contractor and the contractor’s business address and the license number. 2. The name and mailing address of the owner and the jobsite address or legal description. 3. The date the parties entered into the contract. 4. The estimated date of completion of all work to be performed under the contract. 5. A description of the work to be performed under the contract. 6. The total dollar amount to be paid to the contractor by the owner for all work to be performed under the contract, including all applicable taxes. 7. The dollar amount of any advance deposit paid or scheduled to be paid to the contractor by the owner. 8. The dollar amount of any progress payment and the stage of construction at which the contractor will be entitled to collect progress payments during the course of construction under the contract. 9. That the property owner has the right to file a written complaint with the registrar for an alleged violation of section 32-1154, subsection A. The contract shall contain the registrar’s telephone number and website address and shall state that complaints must be made within the applicable time period as set forth in section 32-1155, subsection A. The information in this paragraph must be prominently displayed in the contract in ten point bold type. . . .

[20] A.R.S. § 32-1154(A)(16) includes among the grounds for suspension, revocation, and other disciplinary action against a contractor’s license, “[k]nowingly contracting beyond the scope of the license or licenses of the licensee.”

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