ALJDEC decisions subject to certification as final

2014A-5166-RFA-ROC · Registrar of Contractors · 2017-02-14

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

John D. Poole and Katherine L. Poole,

COMPLAINANTS,

-v-

License No. CR34.250232-D of

Exterior Coating Solutions LLC dba Rhino Shield of Arizona,

RESPONDENT.

No. 2014A-5166-RFA-ROC

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: February 13, 2017, at 8:30 a.m.

APPEARANCES: John D. Poole and Katherine L. Poole (“Complainants”) appeared on their own behalf; Exterior Coating Solutions LLC dba Rhino Shield of Arizona (“Respondent”) appeared through Christian Giovanello, its qualifying party/member; the Arizona Registrar of Contractors (“the Registrar”) was represented by Thomas Raine, Esq., Assistant Attorney General.

ADMINISTRATIVE LAW JUDGE: Diane Mihalsky

_____________________________________________________________________

FINDINGS OF FACT

Background: The Underlying Workmanship Complaint

On or about November 5, 2008, the Registrar issued License No. CR34.250232-D for dual painting and wall covering to Respondent. Christian Giovanello is Respondent’s qualifying party and member.

On or about December 23, 2014, Complainants filed a complaint with the Registrar alleging that in September 2009, Respondent contracted to apply Rhino Shield elastomeric paint to their residence at 425 Thorne Ridge, Cottonwood, Arizona, and that the paint had blistered. According to the complaint, Complainants had paid Respondent the entire contract price of $20,900.00. The complaint stated that Respondent applied the elastomeric paint in January 2010, and performed repeated repairs until 2013.

The Registrar verified with Mr. Giovanello that Respondent had been attempting repairs until 2013.

The Registrar assigned the complaint to Investigator Jim Dimond. Investigator Dimond performed a jobsite inspection and on April 29, 2015, issued a directive to Respondent to remedy certain workmanship deficiencies on or before May 13, 2015, in relevant part as follows:

The paint applied to the home and the garage is blistering, cracking and peeling.

The Respondent is to correct the condition in an appropriate manner.

On January 2, 2016, the Registrar issued a Citation charging cause to discipline Respondent’s license under A.R.S. § 32-1154(A)(3), namely A.A.C. R4-9-108, and A.R.S. § 32-1154(A)(22).

On July 21, 2016, a hearing was held before Administrative Law Judge (“ALJ”) Suzanne Marwill in the Office of Administrative Hearings, at which Complainants, Mr. Giovanello, and Inspector Dimond testified. On July 25, 2016, ALJ Marwill issued a recommended decision, finding that Respondent had accepted the surface of the Rastra block construction of Complainants’ house. ALJ Marwill found that because the surface of the paint was blistering, cracking, and peeling, it did not comply with the Registrar’s workmanship standards. ALJ Marwill therefore concluded that Complainants established cause to suspend Respondent’s license under A.R.S. § 32-1154(A)(3), namely, A.A.C. R4-9-108. Because Respondent had not corrected the condition of the paint, despite making numerous attempts over several years, ALJ Marwill also found that Complainants established cause to suspend Respondent’s license under A.R.S. § 32-1154(A)(22). As a consequence of the proven violations, ALJ Marwill recommended that the Registrar suspend Respondent’s license for one day.

On August 8, 2016, the Registrar issued a final decision substantially accepting ALJ Marwill’s recommended decision.

Complainants’ Claim to the Fund

On or about October 12, 2016, Complainants submitted a claim to the Registrar’s Residential Contractors’ Recovery Fund (“the Fund”) to recover the damages for Respondent’s poor work on their project, requesting $24,520.00 to repair the stucco and $7,855.00 to repaint the house. Complainant submitted cancelled checks to demonstrate that they had paid Respondent in full for the job.

The Registrar determined that Complainants were persons who have been injured as defined by A.R.S. § 32-1131(3) who were eligible to receive a payout from the Fund.

The Registrar’s Recovery Fund Department prepared an excel spreadsheet and based on the information that Complainants had submitted, calculated their compensable damages to be $30,000.00, the statutory cap on payouts from the Fund to a homeowner. On December 5, 2016, the Registrar issued a Notice of Claim for Administrative Payout, informing the parties that “[a]fter a review of the claim and all supporting documentation, the Fund has determined that Complainants are to be awarded $30,000.00 in the form of a payment issued by the Fund.” Respondent timely requested a hearing on the amount of the intended payout.

A hearing on the amount that Complainants should recover from the Fund was held on February 13, 2017. Mr. Giovanello testified on Respondent’s behalf. Mrs. Poole testified on Complainants’ behalf and submitted thirteen exhibits. The Registrar presented the testimony of Douglas Ulmer, who is employed by the Registrar’s Recovery Fund Department and was assigned to evaluate Complainants’ claim, and submitted nine exhibits.

Complainants submitted three bids from stucco contractors to apply stucco to Complainants’ house: (1) A low bid from Cristman Plastering, Inc. in the amount of $24,520.00; (2) A bid from Integrity Plastering LLC in the amount of $24,754.00; and (3) A bid from Verde Lath and Stucco, Inc. in the amount of $49,148.00.

Mr. Ulmer testified that all three constructors held current active licenses and were qualified to perform the work.

Complainants also submitted three bids from painting contractors to paint the exterior of Complainants’ house after the stucco was applied: (1) A low bid from Arthur Ortiz at Art’s Painting in the amount of $7,855.00; (2) A bid from J & S Painting in the amount of $8,630.00; and (3) A bid from J.D.S. Improvements in the amount of $13,100.00.

Mr. Ulmer testified that J & S Painting’s license had expired in May 2013, but that Art’s Painting’s and J.D.S. Improvements’ licenses were current and active.

Mr. Ulmer testified that because Complainant’s house was large and included a three-car garage, the scope of work to apply stucco or paint to the exterior was extensive.

Mr. Giovanello argued that Respondent’s C34 license was specialized and only allowed it to apply paint, not stucco, it should only be responsible for the portion of the payout that was for painting. Mr. Giovanello argued that Respondent should not be responsible for replacing the stucco on Complainants’ house.

Mrs. Poole testified that when Respondent contracted to apply Rhino Shield to the exterior of Complainants’ house in 2009, she explained to Mr. Giovanello that the house was constructed of Rastra block, which was a very porous material. Nonetheless, Respondent’s crew arrived without Mr. Giovanello and proceeded to powerwash the house with water and then applied the elastomeric Rhino Shield on the same day, without waiting for the block to dry out.

The Registrar submitted Mr. Dimond’s photographs taken at his initial jobsite inspection, which showed extensive blistering, cracking, and peeling in the paint. Complainants submitted more recent photographs, which showed even more extensive blistering, cracking, and peeling in the paint. Mrs. Poole showed an approximately 9” x 5” piece of paint that showed evidence of numerous coats of paint that had nonetheless fallen off the house recently.

Mr. Ulmer testified that because initially he did not understand why Complainants had submitted bids to apply stucco when only the paint had been found to be deficient, he asked Complainants to submit revised bids to include just chipping the paint and repainting the house or to provide an explanation of why applying new stucco to the house was necessary to repair Respondent’s poor work painting the house.

The Registrar submitted Arthur Ortiz’s letter, which provided in relevant part:

This is a courtesy letter from Art’s Painting and Elastomerics. I am a contractor who has been operating in the Verde Valley for the past 20 years, License #113614.

It has been my experience in the past that once an elastomeric coating has bubbled or failed on a sand finished texture, the only surefire method of guaranteeing that it won’t reoccur is to remove 100% of the finish, which also removes the texture, and leads to a lot of thin patchy looking repairs, or to put a new system over it.

Removal procedures are sandblasting, which doesn’t usually work because it bounces off the finish. This leaves scraping the only other method of removal, and this also removes the texture.

The Registrar also submitted an email from Jake Underwood, a Sherwin-Williams sales representative, that provided in relevant part as follows:

Yesterday we discussed some of the issues of the exterior walls at the home of [Complainants].

It was explained to me that the exterior walls are bubbling and blistering after it rains.

[These] are usually the results of a stucco home painted with an elastomeric coating where moisture is still getting behind the coating.

An elastomeric coating is designed to protect the substrate from moisture and wind-driven rain. Most elastomeric coatings are considered “waterproof” when the coating dries with fewer than 10 pinholes per square foot. Even when the coating is applied properly to achieve a “waterproof” status, you have to look at some of the many other areas where moisture can penetrate the surface, such as cracks, light fixture mounts, door frames, window frames and so on.

Although an elastomeric coating is designed to prevent moisture from getting in, if any moisture does get behind the coating the moisture vapor is not released fast enough and will cause bubbling, blisters and loss of adhesion.

When a home is having ongoing issues with several blisters every time it rains it can be hard to maintain properly because the bubbling may never go away.

In some situations it would be better to re-stucco the home and use a different paint system. . . .

Mr. Ulmer testified that he also consulted Eric Ulinger, the Registrar’s former Fund Administrator who has more than 20 years’ experience in the construction industry, about the propriety of a payout to Complainants for reapplication of stucco. Mr. Ulmer stated that Mr. Ulinger confirmed that it was appropriate for the Fund to issue a payout for the application of stucco because scraping the paint off would remove the stucco texture.

CONCLUSIONS OF LAW

This matter lies within the Registrar’s jurisdiction.

After the Registrar has calculated the amount of the payout from the Fund to which Complainants are entitled, Respondent bears the burden of proof to establish that the Registrar’s calculations were erroneous or not supported by a preponderance of the evidence.

“A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.” 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.”

The Registrar issued a final order accepting ALJ Marwill’s recommended decision finding that Respondent had accepted the surface of the Rastra block by painting it and that the poor appearance of the paint provided cause under A.R.S. § 32-1154(A)(3), namely A.A.C. R4-9-108, and A.R.S. § 32-1154(A)(22) to suspend Respondent’s license. This final order precludes Respondent from arguing that it is not responsible for the failure of the paint at the hearing on the amount of the payout that Complainants are entitled to recover from the Fund.

A.R.S. § 32-1132(A) describes the measure of damages that an eligible homeowner is entitled to recover from the Fund in relevant part as follows:

The residential contractors' recovery fund is established, to be administered by the registrar, from which any person injured by an act, representation, transaction or conduct of a residential contractor licensed pursuant to this chapter that is in violation of this chapter or the rules adopted pursuant to this chapter may be awarded in the county where the violation occurred an amount of not more than thirty thousand dollars for damages sustained by the act, representation, transaction or conduct. An award from the fund is limited to the actual damages suffered by the claimant as a direct result of the contractor's violation but shall not exceed an amount necessary to complete or repair a residential structure or appurtenance within residential property lines. . . .

(Emphasis added.)

Respondent did not establish that Complainants did not need to reapply the stucco to the Rastra block after the elastomeric Rhino Shield paint was removed to ensure that when the house was repainted, it would have a uniform stucco texture. Therefore, Respondent did not establish that the Registrar erred in proposing a payout in the amount of $30,000.00 from the Fund to compensate them for the damages caused by Respondent’s violations.

RECOMMENDED ORDER

In view of the foregoing, it is recommended that on the effective date of the final order in this matter, the Residential Contractors’ Recovery Fund shall pay $30,000.00 to Complainants John D. Poole and Katherine L. Poole.

It is further recommended that under A.R.S. § 32-1139(B), the Registrar shall charge $30,000.00, plus interest at a rate of ten percent a year, to Respondent Exterior Coating Solutions LLC dba Rhino Shield Arizona’s License No. CR34-250232-D.

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 14, 2017.

/s/ Diane Mihalsky

Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director

Registrar of Contractors