ALJDEC decisions subject to certification as final

2015A-3044-ROC-RF · Registrar of Contractors · 2016-09-07

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: August 29, 2016, at 10:00 a.m. APPEARANCES: James W. Hardina and Marilyn Atalo Hardina (“Complainants”) were represented by Michael Day Morgan, Esq., Shorall McGoldrick Brinkmann; Herman Griego Jr. dba Herman’s Builders (“Respondent”) was represented by David W. Williams, Esq., Davis Miles McGuire Gardner, PLLC; 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 1. On or about August 22, 1996, the Registrar issued License No. B.116716-R for general residential contracting to Respondent.

2. On or about July 14, 2015, the Registrar received a complaint against Respondent from Complainants that alleged that Respondent had improperly compacted the fill for the construction of Complainants’ new home at 3561 W. Kiltie Loop, Flagstaff, Arizona 86002 (“the project”) and that, as a result, the home had settled, the slab was not level, doors were hard to open and close, and furniture had to be propped up so that drawers stayed closed and television sets did not topple onto the floor.[1] 3. Complainants’ complaint included the note: “Also see Inspection Record dated 1-17-14 requiring any fill area exceeding 4’ (which both masters closets exceeded) must be Engineered at compaction. We are not sure that this was done or not as the GC always requested additional money for anything extra.”[2] 4. The Registrar assigned the complaint to Investigator Steve Philpott (“Investigator Philpott”) for investigation. On August 16, 2016, Investigator Philpott performed a jobsite inspection. His jobsite inspection notes provided in relevant part as follows: [A jobsite photograph] shows an area in the Master Bedroom closet where the concrete floor had been cut to allow the installation of a floor safe. Cinders are readily available in the Flagstaff area and are commonly used as a floor fill material. The Volcanic cinder floor fill in the immediate area has settled and left voids between the concrete and the top of the floor fill material. The photo shows cinders embedded in the bottom of the concrete indicating the slab was poured on the cinder fill. The cinder fill material below the house slab was apparently not compacted sufficiently or consisted of non- compactable material. This observation may not be indicative of all the factors contributing to the concrete floor slab/fill failure. This investigator is not equipped to determine if the voids extend beyond the immediate area. Only a comprehensive geotechnical and structural engineering investigation by licensed engineers will be able to determine all of the factors contributing to the failure. . . . The Jobsite inspection card has a note indicating fill area exceeding 4’ must be engineered at compaction. There is no record of this being done. Typically, when a foundation exceeds 4’ of fill, a contractor would hire an engineering company to conduct a compaction test prior to the concrete placement to ensure the fill is properly compacted. A record of this requirement is not present.[3]

With respect to Complainants’ complaint that the concrete slab had been improperly leveled, Investigator Philpott observed as follows: Kitchen/Living room areas with the hardwood floor have been corrected by other – no action required by the Respondent. A.R.S. §32-1155(C)(2)

Bedroom/Bathroom – Carpet and bathroom tile would need to be removed by installer in order to substantiate the allegation. (Complainant installed flooring)

Pantry door in kitchen shall be properly adjusted. Garage Floor fails to meet standards and shall be corrected by respondent.[4]

5. On August 17, 2015, Investigator Philpott issued a Directive to Respondent to remedy by appropriate means the garage floor. With respect to the improper compaction of fill, the Directive required that “Respondent shall provide documentation from the Coconino County Building department, showing that the under slab compaction was inspected and has met county required engineering prior to concrete placement.”[5] The deadline for Respondent to comply with the Directive was 5:00 p.m. on September 1, 2015. 6. On October 19, 2015, Investigator Philpott issued an Addendum to the August 17, 2015 Directive, in relevant part as follows: Complaint Item 1: “Improper Compaction of Fill”

The original directive issued August 17, 2015 stated: “Respondent shall provide documentation from the Coconino County Building department, showing that the under slab compactions was inspected and has met county required engineering prior to concrete placement.” The respondent failed to provide documentation.

Visual evidence of the massive voids under the concrete is present, and the complainant has submitted third party verification that the under slab compaction has failed. Respondent shall correct the condition by appropriate means.[6]

The deadline for Respondent to comply with the Addendum was 5:00 p.m. on November 4, 2015. 7. On November 5, 2015, Investigator Philpott performed a compliance inspection. His compliance inspection report stated in relevant part as follows: Respondent failed to provide documentation from the Coconino County Building department, showing that the under slab compaction was inspected and has met county required engineering prior to concrete placement. Visual evidence of the massive voids under the concrete is present, and the complainant has submitted third party verification that the under slab compaction has failed. Workmanship standards for Licensed Contractors state: “The contractor should be responsible to correct or ensure correction of settling or heaving if compaction is not according to the licensed soils engineer’s report or if no alterations have been made by the owner or owner’s agent. All concrete should be placed in compliance with applicable codes and standards. This will apply to design strengths, testing, dimensions, frost lines, and reinforcement along with items not specifically contained in the codes, such as proper placement in a good and workmanlike manner to achieve appearance and function of the finished product.[”] . . . .

The Respondent made an unsuccessful attempt to correct [the floor] that failed to meet minimum workmanship standards in the garage. The corrected work is improper with unsightly finishing and has improper expansion and control joints. Control joints shall be placed no more than 10’ apart[.][7]

8. Investigator Philpott referred the matter to the Registrar’s Legal Department. On January 20, 2016, the Registrar issued a Citation,[8] charging cause to discipline Respondent’s license under A.R.S. § 32-1154(A)(3),[9] namely A.A.C. R4-9- 108,[10] and A.R.S. § 32-1154(A)(22).[11] 9. Respondent failed to file a timely written answer to the Citation and on March 2, 2016, the Registrar issued a default Decision that deemed Respondent to have admitted the violations charged in the Citation under A.R.S. § 32-1155(B). As a result, the Registrar suspended Respondent’s license for three days and imposed a $500.00 civil penalty under A.R.S. § 32-1154(E).[12] Respondent did not appeal the default decision. Complainants’ Claim to the Fund 10. On May 9, 2016, Complainants submitted a claim to the Registrar’s Residential Contractors’ Recovery Fund (“the Fund”) to recover the damages caused by Respondent’s failure to correct his poor work on their project.[13] Complainants submitted their contract with Respondent in which he agreed to construct the house for a total of $162,362.00 and proof of payments to Respondent in the total amount of $205,172.47. 11. Complainants indicated that on November 23, 2015, they had received $9,000.00 from Respondent’s bond.[14] 12. Complainants also submitted proof of payments that they had made to others to diagnose and/or repair Respondent’s deficient workmanship, including $540.00 paid to Encompass Inspections on September 8, 2015, to detect the significant voids in the slab, $600.00 paid to Arizona Foundation Solutions on September 24, 2015, to survey the foundation and assess necessary repairs, and $11,594.14 paid to Arizona Foundation Solutions on November 11, 2015, as a 25% down payment to begin repairs. 13. Complainants submitted Encompass Inspections’ Invoice No. 20082 in which it described the results of investigation as detecting “a significant void under most of the entire concrete slab for the household. The voids were detected from approx. 4-9 inches in depth.”[15] 14. Complainants also submitted bids to repair the concrete in the garage from 4M Concrete, Inc. in the amount of $4,603.00, from Shafor Concrete, Inc. in the amount of $5,220.00, and from Foundations Concrete Construction in the amount of $5,500.00. 15. Complainants also submitted a bid from Arizona Foundation Solutions to repair the inadequate compaction and to level the slab for $46,376.40.[16] 16. On June 13, 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.”[17]

17. Respondent timely requested a hearing on the intended payout. The Registrar referred Complainants’ claim to the Office of Administrative Hearings, an independent agency, for an evidentiary hearing. 18. A hearing was held on August 29, 2016. The Registrar submitted 12 exhibits and presented the testimony of two witnesses: (1) Douglas Ulmer, the Registrar’s Recovery Fund Supervisor; and (2) Complainant Mrs. Hardina. Respondent submitted two exhibits and presented the testimony of two witnesses: (1) Respondent; and (2) Paul Zahn, the qualifying party/member for Paul Bunyan Builder LLC, License No. B.217553-R for general residential construction. / / / / / / / / / / / / Additional Hearing Evidence 19. Mr. Ulmer testified that Complainants are persons who have been injured as defined by A.R.S. § 32-1131(3) who are eligible to receive a payout from the Fund.[18] Respondent did not dispute his determination. 20. Mr. Ulmer prepared a spreadsheet of his calculation of Complainants’ compensable damages.[19] Mr. Ulmer testified that he totaled the payments that Complainants had made to Respondent to make sure that they had paid Respondent in full and that their payout should not be reduced by any amounts still owed to Respondent. Mr. Ulmer testified that he recommended a payout from the Fund in the maximum amount based on the total of Arizona Foundation Solutions’ $46,376.54 bid and 4M Concrete Inc.’s low bid of $4,603.00 to repair the garage floor. Even after deducting the payout the $9,000.00 that Complainant’s had recovered from Respondent’s bond, their compensable damages were $41,979.54. 21. Mr. Ulmer testified that he also included in Complainants’ compensable damages the $540.00 that Complainant’s had paid to Encompass Inspections to diagnose the extent of the voids under the slab and that Encompass Inspection’s report was noted in Inspector Philpott’s October 19, 2015 Addendum to the August 17, 2015 Directive. Mr. Ulmer also allowed the $600.00 paid to Arizona Foundation Solutions to diagnose the cause of the failure in the slab and to recommend repairs. 22. Mr. Ulmer testified that he did not require Complainants to provide bids in addition to Arizona Foundation Solutions’ bid to repair the slab that Respondent had poured on improperly compacted fill because it appeared that Arizona Foundation Solutions’ bid was the only one that Complainants had been able to obtain from an appropriately licensed contractor. 23. Respondent submitted Arizona Foundation Solutions’ report on the causes of the failure in Complainants’ slab, which provided in relevant part as follows: After examining the home and performing the manometer survey, Arizona Foundation Solutions believes that the home could be experiencing foundation settlement at the north east portion of the home as shown by the damage and the lower readings. . . . .

It is our opinion that the massive voids have manifested in such a short period of time, that it is clear evidence of improper compaction. Some soil movement is normal during the first year, this amount of movement would not be considered normal. It would be extremely rare for a floor slab to be designed to span over such large voids. As shown on the following page, the slab has already experienced an extreme amount of deflection. . . . .

The primary goal [of repair] would be to stop the floor slab from further movement. Secondarily raise the foundation where settlement pattern is located back up to the point where it functions the best. (Highest practical maximum).[20]

24. Mrs. Hardina testified that Arizona Foundation Solutions drilled approximately 30 core samples to map deficiencies in the slab before it started performing repairs. Mrs. Hardina testified that because her house was continuing to settle, Complainants hired Arizona Foundation Solutions to begin repairs. 25. The Registrar submitted a photograph of the machine that Mrs. Hardina testified that Arizona Foundation Solutions used to pump grout into the slab.[21] 26. The Registrar also submitted the July 18, 2016 Final Engineering Report of Arizona Foundation Solutions’ repairs that was stamped by Registered Professional Engineer (Civil) John A. Ciminski, Certificate No. 20726.[22] The July 18, 2016 report stated that the purposes of its repair work were as follows: 1) Fill voids underneath the slab;

2) Stabilize subgrade;

3) Compact the subgrade; and

4) Prohibit any future movement of the slab.

In September of 2015 we were called out to the residence because of movement of the floor slab and deterioration of the slab. We analyzed several approaches on how to repair the structure and prevent any future movement and we determined that deep compaction grouting would be the best, if not the only method for repairs.

A manometer reading was taken in September of 2015 and it was shown that the house was settling in the NE portion of the home i.e. master bedroom, master bathroom and in the closets for these rooms. It did [not] appear that the exterior footing, stem wall and exterior walls were settling, therefore piers were ruled out. Prior to doing work this month a pre-job manometer was taken and the findings indicated that the center of the master bedroom, master bathroom and corresponding closets had settled further, even as much as 1.5 inches.[23]

27. Respondent argued that the only workmanship deficiencies that Investigator Philpott identified and required Respondent to correct were the voids under the concrete slab and the garage floor. Respondent testified that there were voids under every house and that repairs are not required to correct the void. Respondent testified that the only part of the slab that Investigator Philpott ordered to be repaired was the slab in the garage. 28. Respondent submitted a bid from Paul Bunyan Builders LLC dated August 24, 2016, in the amount of $3,350.00 to pump slurry into the voids under Complainants’ house. The bid included the caveat, “Advise slurry is not needed as this is normal settling and concrete is capable of spanning voids.”[24] 29. Mr. Zahn testified that he did not inspect Complainants’ house before he prepared the bid, but that Respondent had not asked him to make any assumptions. Mr. Zahn testified that the amount of the bid was based on the square footage of Complainants’ house. 30. Mr. Zahn acknowledged that during his 35 years of experience in construction, he has never heard of slurry being pumped into a slab to fill voids. Mr. Zahn also acknowledged that he did not have the manometer tests, engineering studies, or any other information on the extent and effect of the voids in the slab. CONCLUSIONS OF LAW This matter lies within the Registrar’s jurisdiction.[25] After the Registrar has determined 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.[26] “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”[27] 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.”[28] The Registrar’s final default decision in the underlying workmanship complaint established that Respondent’s workmanship violated the Registrar’s and industry workmanship standards and that it failed to repair its poor workmanship, in violation of A.R.S. § 32-1154(A)(3), namely A.A.C. R4-9-108, and A.R.S. § 32-1154(A)(22). The only issue in Complainants’ claim to the Fund is the damages that Respondent’s statutory violations caused Complainants to incur. 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.) Investigator Philpott’s August 16, 2016 jobsite inspection notes did not explicitly note settlement in the slab anywhere but in the garage, in part because all the causes of the slab’s failure could only be determined by “a comprehensive geotechnical and structural engineering investigation,” which was beyond Investigator Philpott’s expertise. Inspector Philpott’s August 17, 2016 Directive unequivocally required Respondent to provide documentation from the Coconino Building Department that the compaction of the fill under the slab met county requirements. Complainants’ complaint and Inspector Philpott’s jobsite inspection notes reference Coconino County Building Department’s requirement that any fill that exceeds 4’ must be engineered. Investigator Philpott’s October 19, 2016 Addendum informed Respondent that the consequences of the inadequate compaction were significant, based on Encompass Inspection’s report. Respondent did not provide any evidence that the Coconino County Building Department did not require fill that exceeded 4’ to be engineered, that the fill that Respondent or its subcontractor placed on Complainants’ property did not exceed 4’ or that the fill was properly compacted and met the County’s engineering requirements, or that if Paul Bunyan Builders, LLC injected slurry to fill the voids in the slab, it would meet the county’s engineering requirements. Respondent did not comply with the August 17, 2016 Directive to provide documentation that compaction of the fill met county requirements. Therefore, Respondent did not bear its burden to establish that the work that Arizona Foundation Solutions performed was not necessary to stabilize the subgrade and prevent future movement of the slab and to comply with the Coconino County Building Department’s requirement that fill that exceeds 4’ must be engineered. Respondent’s appeal must therefore be denied. 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 James W. Hardina and Marilyn Atalo Hardina. 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 Herman Griego Jr. dba Herman’s Builders’ License No. B.116716-R. 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, September 7, 2016.

/s/ Diane Mihalsky Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director Registrar of Contractors ----------------------- [1] See the Registrar’s Exhibit 1. [2] The Registrar’s Exhibit 1 at 2. [3] The Registrar’s Exhibit 2 at 14. [4] Id. at 15. [5] The Registrar’s Exhibit 3 at 19. [6] The Registrar’s Exhibit 3 at 22. [7] The Registrar’s Exhibit 4 at 25-26. [8] See the Registrar’s Exhibit 5. [9] 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.” [10] 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.” [11] 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.” [12] See the Registrar’s Exhibit 6. [13] See the Registrar’s Exhibit 7. [14] See the Registrar’s Exhibit 7 at 39. [15] The Registrar’s Exhibit 8 at 68. [16] See the Registrar’s Exhibit 8 at 71. [17] The Registrar’s Exhibit 15. [18] See the Registrar’s Exhibits 7, 8, and 9. [19] See the Registrar’s Exhibit 9. [20] Respondent’s Exhibit 1 at 11. [21] See the Registrar’s Exhibit 11. [22] See the Registrar’s Exhibit 12. The Registrar’s attorney avowed that he had checked the Arizona Board of Technical Registration and that Mr. Ciminski was registered as an engineer in Arizona. [23] Id. at 2. [24] Respondent’s Exhibit 6 at 3. [25] See 32-1101 et seq. [26] See A.R.S. § 41-1092.07(G)(2); A.A.C. R2-19-119(A) and (B)(1); see also Vazanno v. Superior Court, 74 Ariz. 369, 372, 249 P.2d 837 (1952). [27] Morris K. Udall, Arizona Law of Evidence § 5 (1960). [28] Black’s Law Dictionary at page 1220 (8th ed. 1999).

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