ALJDEC decisions subject to certification as final

2015A-1668-ROC · Registrar of Contractors · 2015-08-24

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: August 12, 2015, at 8:00 a.m. APPEARANCES: The Arizona Registrar of Contractors (“the Registrar”) was represented by John R. Tellier, Esq., Assistant Attorney General; One Stop Tile Works Inc. (“Respondent”) was represented by Sid A. Horwitz, Robert Stewart & Associates PC. ADMINISTRATIVE LAW JUDGE: Diane Mihalsky _____________________________________________________________________

FINDINGS OF FACT Background and Procedure 1. On or about March 26, 1998, the Registrar issued License No. CR48.133152-D for residential and commercial ceramic, plastic, and metal tile to Respondent. Abraham Dikran Sarkisian (“Mr. Sarkisian”) is listed on the license as Respondent’s Qualifying Party and President. 2. The Registrar on its own motion issued a Citation and Complaint against Respondent’s License No. CR48.133152-D, charging in three counts violations of various statutes as cause to discipline Respondent’s license, as follows: 1. Count One: Respondent violated A.R.S. § 32-1154(A)(3),[1] namely, A.A.C. R4-9-108,[2] in its performance of a contract with Antoine G. Jamouss (“Mr. Jamouss”) to install tile at Mr. Jamouss’s residence located at 5302 E. Hearn Rd. in Scottsdale, Arizona for a contract price of $11,023.58, including labor and materials. 2. Count Two: Respondent violated A.R.S. § 32-1154(A)(12)[3] by not having a written contract with Mr. Jamouss that included all of the elements that A.R.S. § 32-1158(B) requires.[4] 3. Count Three: Respondent violated A.R.S. § 32-1154(A)(22)[5] by failing to comply with the directive that the Registrar issued in Mr. Jamouss’s complaint. 3. After Respondent’s attorney filed a written answer to the Citation and Complaint, denying any that there was cause to discipline Respondent’s license, the Registrar referred the matter to the Office of Administrative Hearings, an independent state agency, for an evidentiary hearing. 4. An evidentiary hearing was held on August 12, 2015. The Registrar submitted ten exhibits and presented the testimony of two witnesses: (1) Mr. Jamouss; and (2) Timothy Pennington, the Registrar’s investigator who was assigned to investigate Mr. Jamouss’s formal complaint. Respondent submitted two exhibits and presented Mr. Sarkisian’s testimony. Hearing Evidence Evidence of Mr. Jamouss and Mr. Sarkisian’s Course of Dealing 5. In 1987, Mr. Sarkisian immigrated to the United States from Iraq. Mr. Jamouss also is an immigrant. Both Mr. Sarkisian and Mr. Jamouss currently are citizens of the United States. They met approximately ten years ago, when Mr. Jamouss admired a tile floor that Respondent was installing at a church at 56th Street and Thomas Road in Phoenix. Since that time, Mr. Jamouss has hired Respondent between twelve and twenty times to install tile floors at Mr. Jamouss’s rental properties. 6. In approximately March 2014, Mr. Jamouss and Mr. Sarkisian on behalf of Respondent made an oral agreement for Respondent to remove existing tile and to install approximately 1,800 square feet of tile at Mr. Jamouss’s residence. Mr. Jamouss and Mr. Sarkisian agreed that Mr. Jamouss would pay Respondent’s cost of the tile, grout, and other materials from the supplier, without any markup, and also would obtain a dumpster and pay other incidental expenses directly. Mr. Jamouss would pay Respondent in cash for the cost of labor to install the tile. 7. At the hearing, Mr. Jamouss and Mr. Sarkisian disagreed about how much Mr. Jamouss agreed to pay Respondent for the tile installation. Mr. Jamouss testified that the agreed-upon price was $2.00 per square foot; Mr. Sarkisian testified that the agreed-upon price was $2.50 per square foot. As noted above, the agreement was oral; no writing exists to commemorate the terms of the parties’ oral agreement. 8. Mr. Sarkisian testified that he brought samples of 20” x 20” tiles for Mr. Jamouss’s selection, but after Mr. Jamouss said he did not like the colors of the samples, Mr. Sarkisian sent Mr. Jamouss to Respondent’s tile distributor. At the second meeting, Mr. Jamouss brought a piece of 12” x 24” porcelain tile, which was bowed. 9. Mr. Sarkisian testified that he orally informed Mr. Jamouss that because Mr. Jamouss wanted a tight 1/8” wide grout joint, Mr. Sarkisian did not recommend using the bowed tile that Mr. Jamouss had selected. At a minimum, Mr. Sarkisian recommended a 3/16” wide grout joint to accommodate the bowed tile. Nonetheless, Mr. Jamouss insisted on proceeding with the job with the tile that he had selected and a 1/8” wide grout joint. 10. Mr. Sarkisian and Respondent’s crew proceeded to lay the tile that Mr. Jamouss had selected with 1/8” grout joints. 11. After Respondent’s crew had made substantial progress on the job, Mr. Jamouss and his wife admired the floor. Mrs. Jamouss exclaimed that the floor was very nice and that the crew did a gorgeous job.[6] Mr. Sarkisian testified that the portion of the floor that Mrs. Jamouss admired was exemplary of the whole project. 12. On April 11, 2014, Mr. Sarkisian on behalf of Respondent acknowledged in a text the receipt of $2,200.00 in cash from Mr. Jamouss. On April 22, 2014, at Mr. Jamouss’s request, Mr. Sarkisian sent a text that said, “I receive full amount $2683 thanks.”[7] 13. Mr. Sarkisian explained that after Respondent did not receive any more payment after the initial $2,200.00 payment, Mr. Jamouss required Mr. Sarkisian to send the text acknowledging full payment before he released any more money. Because Mr. Sarkisian needed the money, he sent the text that Mr. Jamouss required. 14. Mr. Sarkisian subsequently asked Mr. Jamouss for a $2,000.00 loan. Mr. Jamouss declined to make the loan. Mr. Jamouss’s Complaint against Respondent in Case No. 2014-2192 15. On or about June 2, 2014, Mr. Jamouss filed a Complaint with the Registrar against Respondent alleging among other things that “[m]ajority of the tiles installed are dipped and some have a lip.”[8] The Registrar designated Mr. Jamouss’s Complaint as Case No. 2014-2192. 16. The Registrar’s Investigator Timothy Pennington performed a jobsite inspection in Case No. 2014-2192 on September 22, 2014, which Mr. Jamouss, Mr. Sarkisian, and a representative of the tile manufacturer attended. Mr. Jamouss had placed blue tape on numerous tiles that he felt had been improperly installed. On September 23, 2014, Investigator Pennington on behalf of the Registrar issued a Directive in Case No. 2014-2192 to Respondent, requiring it to correct by appropriate means on or before October 23, 2014, the “[t]ile flooring in living room, kitchen, hallways, two bathrooms, and three bedrooms [that] does not meet the minimum standards of 1/32[”.] Uneven tile. (Lippage).”[9] 17. Investigator Pennington testified that he performed a compliance inspection on November 10, 2014. Inspector Pennington testified that no representative of Respondent attended the compliance inspection. Inspector Pennington testified Respondent had not done anything to comply with the September 23, 2014 Directive. Evidence of the Registrar’s and Industry Standards for Tile Floors 18. The Registrar’s Workmanship Standards for Licensed Contractors (June 2009) provides that for ceramic and natural stone floor tile, “[l]ippage of all manufactured Natural Stone Tiles are to be no greater than 1/32" between individual tiles.”[10] If the lippage between adjacent tiles exceeds 1/32”, the contractor must correct the condition. 19. Investigator Pennington testified that credit cards are generally 1/32” thick and that he used a credit card to measure the lippage of certain tiles at Mr. Jamouss’s residence. Investigator Pennington testified that the installer did the same thing with each tile during installation. Investigator Pennington estimated that 60 to 70% of the tiles that Respondent had installed at Mr. Jamouss’s residence had excess lippage and that the difference between most tiles was two credit cards’ width, much more than 1/32”. 20. Respondent submitted an excerpt from the Tile Council of North America’s standards that provided in relevant part as follows: Lippage in Ceramic Tile Installations

Lippage is a condition where one edge of a tile is higher than an adjacent tile, giving the finished surface an uneven appearance. Lippage is inherent in all ceramic installation methods and may also be unavoidable due to the tile tolerances, in accordance with [American National Standard for Installation (“ANSI”)] A137.1. The following is excerpted from ANSI A108.02, Section 4.3.7:

4.3.7 Lippage – guidelines, explanation, and caution: Lippage refers to differences in elevation between edges of adjacent tile modules. . . .[11]

21. The Tile Council of North America stated that for all sizes of porcelain tiles with grout joint width of 1/16” to less than 1/4”, allowable lippage was 1/32”. For all sizes of porcelain tiles with grout joint width of 1/4” or greater, allowable lippage was 1/16”.[12] Mr. Sarkisian testified that under this standard, there are only three or four tiles at Mr. Jamouss’s residence that have excess lippage. Mitigation 22. Administrative notice is taken of the Registrar’s public website at www.azroc.gov . The Registrar has never before taken disciplinary action against Respondent’s license. The lack of prior disciplinary action is considered as a factor in mitigation of the recommended penalties. CONCLUSIONS OF LAW 1. This matter lies within the Registrar’s jurisdiction.[13] 2. The Registrar bears the burden of proof to establish cause to discipline Respondent’s license by a preponderance of the evidence.[14] Respondent bears the burden to establish affirmative defenses by the same evidentiary standard.[15] 3. “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”[16] 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.”[17] 4. A.R.S. § 32-1101(A)(3) defines contractor as follows: "Contractor" is synonymous with the term "builder" and means any person, firm, partnership, corporation, association or other organization, or a combination of any of them, that, for compensation, undertakes to or offers to undertake to, purports to have the capacity to undertake to, submits a bid or responds to a request for qualification or a request for proposals for construction services to, does himself or by or through others, or directly or indirectly supervises others to:

(a) Construct, alter, repair, add to, subtract from, improve, move, wreck or demolish any building, highway, road, railroad, excavation or other structure, project, development or improvement, or to do any part thereof, including the erection of scaffolding or any other structure or work in connection with the construction.

Regardless of whether Mr. Jamouss selected and paid for the tile, the Registrar established that Respondent acted as a contractor when it installed the tile in Mr. Jamouss’ residence. 5. Because Respondent did not have any written contract with Mr. Jamouss for installing the tile and Respondent charged and received at least $4,883.00 for the job, the Registrar established cause to discipline Respondent’s license under A.R.S. § 32-1154(A)(12), for its violation of A.R.S. § 32-1158(B), which requires a written contract containing certain terms for all jobs for which the contract price is more than $1,000.00. 6. Regardless of whether the grout joints on the job were 1/8”, as Mr. Jamouss demanded, or 3/16”, as Mr. Sarkisian recommended, under both the Registrar’s Workmanship Standards for Licensed Contractors and ANSI Section 4.3.7, the allowable lippage for porcelain tiles is 1/32”. The Registrar established that many tiles that Respondent installed at Mr. Jamouss’s residence exceed this 1/32” lippage standard. 7. In an administrative proceeding, a property owner’s refusal to pay the contract price is not a defense to poor workmanship in violation of A.R.S. § 32-1154(A)(3), namely A.A.C. R4-9-108,[18] although the contractor may bring a civil claim for nonpayment in a judicial forum. In an administrative licensing proceeding, if a contractor has chosen to perform construction work, his work must meet the Registrar’s and industry standards, regardless of whether he has received full payment. Therefore, the Registrar established cause to discipline Respondent’s contractor’s license under A.R.S. § 32-1154(A)(3), namely A.A.C. R4-9-108. 8. If Respondent could not install the tile that Mr. Jamouss selected in a way that complied with the Registrar’s and industry standards, Respondent should have refused to undertake the job or have obtained a written waiver of warranty signed by Mr. Jamouss.[19] Under well- established authorities, a contractor’s alleged oral disclaimer of warranty does not avoid liability for failing to meet applicable workmanship standards. 9. The Registrar also established that Respondent failed to perform appropriate corrective work to comply with the deficiency noted on the Registrar’s September 23, 2014 directive. Therefore, the Registrar established that Respondent violated A.R.S. § 32-1154(A)(22). RECOMMENDED ORDER Based on the foregoing, it is recommended that on the effective date of the order in this matter, License No. CR48.133152-D of Respondent One Stop Tile Works Inc. shall be suspended for a period of one day. It is further recommended that the Registrar require Respondent to 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 Registrar’s Order, the Registrar revoke Respondent’s license, effective on such deadline date. No future license shall be issued to any entity consisting of persons associated with Respondent, as defined in A.R.S. § 32-1101(A)(5), unless Respondent tenders payment of any outstanding prior civil penalty. In the event of certification of the Administrative Law Judge Decision by the Director of the Office of Administrative Hearings, the effective date of the Order will be five days from the date of that certification. Done this day, August 24, 2015.

/s/ Diane Mihalsky Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director Registrar of Contractors ----------------------- [1] 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.” [2] 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.” [3] 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.” [4] 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. . . . [5] 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.” [6] See Respondent’s Exhibit B (video). [7] The Registrar’s Exhibit 5 at 6 (attachment to Complaint in Case No. 2014-2192). [8] The Registrar’s Exhibit 5 at 2. [9] The Registrar’s Exhibit 4. [10] See http://www.azroc.gov/Acrobat/Public/Workmanship_Standards.pdf at 43. [11] Respondent’s Exhibit A. [12] See id. [13] See A.R.S. § 32-1154(A). [14] 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). [15] See A.A.C. R2-19-119(B)(2). [16] Morris K. Udall, Arizona Law of Evidence § 5 (1960). [17] Black’s Law Dictionary at page 1220 (8th ed. 1999). [18] Cf. A.R.S. § 32-1129.04 (authorizing a contractor to suspend performance or terminate a construction contract if the property owner fails to make timely payment of the amount certified and approved pursuant to A.R.S. § 32-1129.01). [19] See Nastri v. Wood Bros. Homes, Inc., 142 Ariz. 439, 441-42, 690 P.2d 158, 160-61 (App. 1984) (citing Darner Motor Sales, Inc. v. Universal Underwriters Insurance Co., 140 Ariz. 383, 682 P.2d 388 (1984) and Peterson v. Hubschman Construction Co., Inc., 76 Ill. 2d 31, 389 N.E.2d 1154 (1979)). With respect to warranty disclaimers or waivers, according to the Arizona Court of Appeals’ authority,

Although the implied warranty of habitability is a creature of public policy, we do not consider a knowing disclaimer to be against the public policy of this State. However, we do hold that any such disclaimer must strictly be construed against the builder- vendor. . . . We refer to the well-reasoned opinion of the Supreme Court of Missouri in Crowder v. Vandendeale (Mo. 1978), 564 S.W.2d 879, where it was held that “boilerplate” clauses, however worded, are rendered ineffective in such a disclaimer (564 S.W.2d 879, 881), and the court further stated:

“[O]ne seeking the benefit of such a disclaimer must not only show a conspicuous provision which fully discloses the consequences of its inclusion but also that such was in fact the agreement reached. The heavy burden thus placed upon the builder is completely justified, for by his assertion of the disclaimer he is seeking to show that the buyer has relinquished protection afforded him by public policy. A knowing waiver of this protection will not be readily implied.” (Emphasis in original.) Crowder v. Vandendeale (Mo. 1978), 564 S.W.2d 879, 881 n.4.

Petersen, 76 Ill. 2d at 43, 389 N.E.2d at 1159 (1979) (some authorities omitted; emphases added and in original).

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