ALJDEC decisions subject to certification as final

2015A-3665-ROC · Registrar of Contractors · 2016-08-17

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING DATES: April 15, 2016, at 10:00 a.m.; July 29, 2016, at 8:30 a.m.; and August 10, 2016, at 8:30 a.m. APPEARANCES: Danu Construction LLC (“Complainant”) appeared through Daniel Ben Mayer (“Mr. Ben Mayer”), its qualifying party/member; Los Lobos Cuellar Enterprises Inc. (“Respondent”) was represented by Fidelis V. Garcia, Esq., Attorney at Law. ADMINISTRATIVE LAW JUDGE: Diane Mihalsky _____________________________________________________________________

FINDINGS OF FACT Background and Procedure 1. On or about October 10, 2002, the Arizona Registrar of Contractors (“the Registrar”) issued License No. B-1.178797-C for commercial general contracting to Complainant. On or about May 29, 2006, the Registrar issued License No. B.220675-R for residential general contracting to Complainant. 2. On or about December 3, 2007, the Registrar issued License No. C- 9.240232-C for commercial concrete to Respondent. 3. On or about August 25, 2015, Complainant filed a complaint with the Registrar against Respondent alleging poor workmanship in Respondent’s performance of its subcontract to install a concrete patio slab at a residential project at 4010 E. Canyon Court, Paradise Valley, Arizona 85253 (“the Paradise Valley project”), which resulted in the slab sinking at least 2 inches. 4. The Registrar assigned the complaint to its Investigator, Matt Gunstra (“Investigator Gunstra”), for investigation. Investigator Gunstra performed a jobsite inspection and on October 16, 2015, issued a Directive to Respondent to repair by appropriate means the concrete settlement. The October 16, 2015 Directive provided in relevant part as follows: Sections of rear patio and adjacent stairs have settled beyond maximum tolerance. Respondent to repair by appropriate means which includes assurance of properly compacted subgrade.

NOTE: Respondent has a C-9 license which only allows commercial concrete work and therefore Respondent cannot perform repairs. See highlighted paragraph below pertaining to Respondent’s available course of action.

NOTE: Respondent’s license is currently under suspension for lack of bond and Respondent must cease all contracting activity until license is current. . . . .

If your license 240232 is suspended for administrative reasons or is revoked, expired, or cancelled, you may not contract in any manner and may remedy the workmanship violations listed above only by paying a properly licensed contractor hired by Complainant to remedy your deficient workmanship or by reaching a financial settlement with Complainant.

You may not perform or hire other contractors to perform work that is outside the scope of your license If any workmanship violations listed above are designated as outside the scope of your license then you may remedy those violations only by paying a properly licensed contractor hired by Complainant to correct your deficient workmanship or by reaching a financial settlement with Complainant.

The deadline for Respondent to comply with the Directive was November 4, 2015, at 5:00 p.m. 5. Complainant requested a hearing. On November 19, 2015, the Registrar issued a Citation against Respondent’s license, charging cause to revoke, suspend, or otherwise 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). 6. Respondent’s attorney filed a timely written answer to the Citation, denying any statutory violations. The Registrar referred the matter to the Office of Administrative Hearings (“OAH”), an independent state agency, for an evidentiary hearing. 7. A hearing was held on between April 15, 2016, and August 10, 2016. Complainant submitted thirteen exhibits and presented the testimony of two witnesses: (1) Mr. Ben Mayer; and (2) Ben Ross Heywood, Jr. (“Mr. Heywood”), the qualifying party/officer for Heywood Builders Inc., License No. B.073020-R for general residential contracting, which specializes in concrete work. Respondent five exhibits and presented the testimony of three witnesses: (1) Ricardo Cuellar (“Mr. Cuellar”), Respondent’s qualifying party/officer; (2) Robert (“Bob”) C. Mechsner (“Mr. Mechsner”), the Registrar’s former Chief Inspector[1]; and (3) Rob Dolson, Respondent’s estimator. Investigator Gunstra also testified. Hearing Evidence 8. Complainant was the general contractor on the residential project in Paradise Valley. Respondent had been Complainant’s concrete subcontractor on a commercial project at a hotel. Complainant requested that Respondent submit a bid for the Paradise Valley project. Mr. Ben Mayer testified that he did not know that Respondent did not possess a residential contractor’s license when Complainant accepted Respondent’s bid for the Paradise Valley project. 9. Respondent poured a large concrete patio slab around a pool that extended to two flights of concrete stairs on the west edge of the slab, some distance away from the pool. Respondent installed a Deck-O-Drain[2] around the pool to drain water away from the pool. The house adjacent to the slab has approximately nine scuppers, some of which drain onto the slab. Both parties agreed that the slab has sunk 1” or 2”, mostly on the west end of the slab around the stairs. The parties disputed why the slab has settled and who was responsible for the settlement. 10. Complainant alleged that Respondent’s failure to backfill and compact the subgrade and failure to install and compact aggregate base course (“ABC”) before pouring the slab caused it to settle. 11. Respondent alleged that Complainant’s removal of the Deck-O-Drain that Respondent had installed around the pool caused water to infiltrate beneath the slab and the slab to settle. Respondent also alleged that Complainant was solely responsible for compacting the subgrade and supervising Respondent’s work. Removal of the Deck-O-Drain 12. At the homeowner’s request, Complainant removed the Deck-O-Drain that Respondent had installed around the pool and put green glass beads in the channel that remained after the drain was removed. Complainant did not inform Respondent that it was making the alteration. 13. Inspector Gunstra testified that the Deck-O-Drain was meant to drain water away from the pool in an orderly fashion. Inspector Gunstra removed the glass gravel and photographed the 2½” deep concrete channel.[3] Inspector Gunstra testified that although the plastic channel of the Deck-O-Drain had been removed, the concrete drain was still functioning and looked intact with positive drainage. Inspector Gunstra testified that the concrete channel performed the same function as the plastic channel and that he did not believe that Respondent’s removal of the Deck-O-Drain caused the slab to settle. 14. Mr. Cuellar showed the Administrative Law Judge a small segment Deck-O-Drain as a demonstrative exhibit at the hearing. The drain consists of a plastic trough with flat slots on top to allow water to enter the drain. Mr. Cuellar testified that he installed the Deck-O-Drain when the concrete was fresh by pushing the plastic trough into the concrete then troweling, over the drain. 15. Mr. Mechsner testified that a Deck-O-Drain is installed flush with the surface of the slab around pools and driveways and functions like a gutter on a house. Mr. Mechsner testified that the Deck-O- Drain is plastic to prevent water from penetrating the slab. Mr. Mechsner testified that the slab was only 4” thick under the Deck-O- Drain and that the removal of the plastic drain could cause the concrete trough to function as a control joint and crack, resulting in water penetrating the concrete and getting under the slab. Mr. Mechsner acknowledged that if Complainant had only cut the slotted top off the Deck-O-Drain, it might not have affected the drain’s function. 16. Mr. Heywood testified that about the method of installing a Deck-O- Drain (or Aco Drain, a competitor of Deck-O-Drain’s). Mr. Heywood testified that after he has poured the footings for a concrete project, he digs a trench, places the drain in the trench, and pours concrete in the trench to keep the drain in place and keep it from floating up when the slab is poured. Mr. Heywood testified that as a result of the trench, there should be at least 8” of concrete under the Deck-O-Drain. Mr. Heywood testified that the drain that Respondent installed was not installed properly. 17. Respondent submitted instructions entitled “Typical Pool Deck Application” from the Deck-O-Drain Manufacturer. The instructions required the drain to be attached to the ground with stakes, then concrete to be poured over the drain and troweled.[4] Mr. Mechsner testified that Respondent had installed the drain correctly according to the manufacturer’s directions. Mr. Mechsner testified that digging a trench would require two days to pour the slab and that he could not find any manufacturer’s specification that required the procedure that Mr. Heywood had described. Backfilling and Compacting the Subgrade and Installation of ABC 18. Respondent’s undated proposal for the Paradise Valley project included “ABC placement & Compaction.”[5] The parties’ May 12, 2014 subcontract, which Complainant drafted, included among the miscellaneous scope of work, “ABC placement.”[6] Neither the proposal nor the contract explicitly mentioned backfill, grading, or compaction of the subgrade. 19. The parties’ subcontract provided that Complainant had the authority to reject Respondent’s work.[7] Mr. Heywood and Mr. Mechsner agreed that general subcontractors are generally responsible for supervising their subcontractors, although they are not required to micromanage their subcontractors. 20. Mr. Ben Mayer acknowledged that Complainant was responsible for arranging inspections by the local building authority and notifying subcontractors if their work did not pass inspection. 21. Neither Complainant nor Respondent claimed to have performed final grading or compaction of the subgrade beneath the slab. Both parties claimed compacting the subgrade was the other’s responsibility. 22. Investigator Gunstra noted that Complainant had attached to the complaint Respondent’s Invoice #A1026 dated June 5, 2014, which included an extra cost of $225.00 for “extra dirt for grading.”[8] Investigator Gunstra testified that the invoice led him to believe that Respondent had undertaken grading at the site. 23. Investigator Gunstra testified that even if Respondent had not undertaken final grading and compaction of the subgrade, by pouring the slab, Respondent accepted the surface and is responsible for any workmanship deficiencies in the slab caused by an inadequate surface. 24. Mr. Mechsner testified that if a general contractor informs a subcontractor that a project is ready for the subcontractor’s work, but not all work has been performed to make the project ready, the subcontractor is not liable for any deficiencies that result. Mr. Mechsner testified that for the subcontractor to be liable, it must have been able able to see the deficiency. Mr. Mechsner testified that if Complainant told Respondent the Paradise Valley project was ready for Respondent to pour the slab, Respondent was not responsible for inadequate compaction of the subgrade if it was not in Respondent’s subcontract 25. Mr. Heywood testified that he examined the Paradise Valley project and that it was evident that the subgrade was not compacted. Mr. Heywood acknowledged that compaction of the subgrade may not have been in Respondent’s scope of work. 26. Mr. Heywood testified that even of compaction of the subgrade was not in Respondent’s scope of work, a concrete subcontractor should check compaction and if the subgrade consists of dry powder with no moisture, the subcontractor should contact the general contractor to alert it that the subgrade does not appear to be ready for the concrete subcontractor to proceed. 27. Both parties agreed that Respondent had contracted to install and compact ABC before pouring the concrete slab. 28. Mr. Heywood testified that ABC is crushed rock that is put through a sieve that results in gravel that is composed of rocks that are ¾” +/- in diameter. Mr. Heywood testified that a little dirt may be added to help bind the ABC and make it stronger. Mr. Heywood testified that a certain percentage of water is added to help in compaction of the ABC. 29. Mr. Heywood testified that the ABC is meant to cushion the concrete and to provide additional stability in the event that the subgrade consists of expansive soils. It is the industry standard to install and compact ABC before pouring concrete on commercial and residential jobs. Investigator Gunstra testified that the ABC is required by code and the Registrar’s standards.[9] 30. Investigator Gunstra performed a prehearing jobsite inspection on April 12, 2016. At that time, Complainant had cut an approximately 20” x 20” square from the concrete slab. Investigator Gunstra testified that the soil beneath the cutout did not looked disturbed, showed voids beneath the concrete slab, and did not show any evidence of ABC having been installed.[10] Investigator Gunstra testified that the cutout contradicted Mr. Cuellar’s claim that Respondent had installed ABC before pouring the slab. 31. Mr. Cuellar testified that he used ABC on the project. Mr. Cuellar testified that a truck delivered the ABC and put it in different areas. 32. Investigator Gunstra testified that the removal of the square was meant to expose Respondent’s work and the lack of ABC beneath the slab. Inspector Gunstra testified that a significant alteration that would prevent a workmanship complaint under A.R.S. § 32- 1155(C) was one that prevented the Registrar from examining or evaluating a contractor’s work. Because Complainant’s removal of the square did not change Respondent’s work, it was not an alteration that barred Complainant’s complaint under A.R.S. § 32- 1155(C). 33. Pursuant to A.A.C. R4-9-117, administrative notice is taken of Respondent’s prior disciplinary history on the Registrar’s public website. The website reveals no prior discipline against Respondent’s License No. C-9.240232-C, although between January 1, 2010, and January 15, 2016, the license was administratively suspended seven times for non-renewal, lack of bond, or LLC dissolved. On February 18, 2016, License No. C-9.240232-C was cancelled and License No. CR-9.303025-D for dual concrete was issued to Respondent. Respondent’s License No. CR-9.303025-D is current and in good standing. CONCLUSIONS OF LAW 1. This matter lies within the Registrar’s jurisdiction.[11] 2. Complainant bears the burden of proof to establish cause to discipline Respondent’s license by a preponderance of the evidence.[12] Respondent bears the burden to establish factors in mitigation of the penalty and affirmative defenses by the same evidentiary standard.[13] 3. “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”[14] 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.”[15] 4. Complainant modified the slab by removing the Deck-O-Drain without informing Respondent. Although Mr. Mechsner testified that the removal of the drain could cause the concrete trough that was left to function as a control joint and crack, allowing water to infiltrate beneath the slab and cause settlement, Investigator Gunstra actually inspected the slab and testified that the concrete in the trough was intact. Complainant also modified the slab by cutting a 20” x 20” square to determine whether any ABC was beneath the slab. Respondent did not allege that Respondent’s action in cutting out the square caused the slab to settle. Neither modification prevented Investigator Gunstra from investigating the complaint or observing that the slab had settled. 5. A.R.S. § 32-1155(C)(2) provides in relevant part as follows: The registrar shall not issue a citation for failure to perform work in a professional and workmanlike manner or in accordance with any applicable building codes and professional industry standards if . . . . . . .

2. The contractor's work has been subject to neglect, modification or abnormal use.

The Arizona Supreme Court has provided the following guidance in construing statutes: In interpreting a statute, we must determine and give effect to the legislative intent behind the statute. . . . To determine legislative intent, we examine the policy behind the statute and the evil sought to be remedied. . . . We also consider the context of the statute, the language used, the subject matter, the historical background, and the effects and consequences of the statute. . . .[16]

“[I]n the pursuance of the objective of giving effect to the intention of the Legislature, courts are not controlled by the literal meaning of the language of the statute used.”[17] “If a literal interpretation of statutory language leads to an absurd result, the court has a duty to construe it, if possible, so that it is reasonable and workable. . . . A practical construction of a statute is preferred to one that is absurd, and practical construction is required if a technical construction would lead to mischief or absurdity. . . .”[18] 6. “The goals and objectives of the registrar of contractors are to protect the public health, safety and welfare by licensing, bonding and regulating contractors engaged in residential construction . . . .”[19] “[T]he Registrar is charged with the overall responsibility of protecting the welfare of the public dealing with persons engaged in the building contracting vocations and afford the public protection against incompetent, inexperienced, unlawful and fraudulent acts of building contractors.”[20] Arizona contracting law does not distinguish between general contractors and other members of the public or excuse a contractor from meeting the Registrar’s or industry workmanship standards if the complaining party is an owner-builder or general contractor. 7. Construing A.R.S. § 32-1155(C)(2) to bar a complaint if the contractor’s work has been modified in any respect, regardless whether the modification obscures or exposes the contractor’s poor workmanship, or whether the modification causes or contributes to the observed deficiency, would not promote the Registrar’s goals and objectives to protect the public by regulating contractors who perform poor work. Therefore, A.R.S. § 32-1155(C)(2) does not bar Complainant’s complaint, even though Complainant cut a 20” x 20” hole in the slab to expose the possible cause of the settlement and removed the Deck-O-Drain at the homeowner’s request. 8. Complainant established that Respondent poured the slab when it should have known that the subgrade had not been properly compacted and that, therefore, Respondent accepted the surface and is responsible for any deficiencies in the concrete caused by deficiencies in the subgrade under the Registrar’s statutes.[21] Complainant therefore has established cause to discipline Respondent’s contractor’s license under A.R.S. § 32-1154(A)(3),[22] namely A.A.C. R4-9-108.[23] 9. Complainant established that Respondent either failed to install any ABC or failed to install the ABC uniformly over the area of the slab before it poured the concrete, contrary to the Registrar’s and industry standards and the requirements of the subcontract. Complainant therefore has established additional cause to discipline Respondent’s contractor’s license under A.R.S. § 32-1154(A)(3), namely A.A.C. R4-9-108. 10. The legislature has not empowered either OAH or the Registrar to adjudicate or award money damages.[24] The Legislature also has not empowered either OAH or the Registrar to apportion fault for workmanship deficiencies between the general contractor who had the right to supervise the work and the subcontractor who performed the work.[25] The parties may resolve the issues of damages and comparative fault in a court of competent jurisdiction. The only issue in this administrative proceeding is whether Respondent’s work complied with the Registrar’s and industry workmanship standards and if it did not, whether Respondent complied with the Registrar’s Directive. 11. Because Respondent did not comply with the October 16, 2015 Directive to pay a properly licensed contractor hired by Complainant to correct Respondent’s deficient workmanship, Complainant also established cause to discipline Respondent’s contractor’s license under A.R.S. § 32- 1154(A)(22).[26] The fact that Respondent later obtained a residential license and Complainant’s possible fault in failing to properly supervise Respondent’s work on the job are considered as factors in mitigation of the recommended penalty. RECOMMENDED ORDER Based on the foregoing, it is recommended that on the effective date of the order in this matter, License No. C-9.240232-C of Respondent Los Lobos Cuellar Enterprises Inc. shall be suspended for a period of five calendar days. It is further recommended that Respondent shall pay the sum of $100.00 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. 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 17, 2016.

/s/ Diane Mihalsky Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director Registrar of Contractors ----------------------- [1] Since the time that Mr. Mechsner worked for the Registrar, the title has changed from “Inspector” to “Investigator” to be more consistent with the terminology in applicable statute. See A.R.S. § 32-1154(B). [2] The record is not clear whether Respondent installed a Deck-O-Drain or comparable product made by another manufacturer. Because the parties consistently referred to the drain as a Deck-O-Drain, the Administrative Law Judge follows that practice in this decision. [3] See Respondent’s Exhibit B-4. [4] See Respondent’s Exhibit E. [5] Respondent’s Exhibit D. [6] Respondent’s Exhibit A at 11. [7] See Respondent’s Exhibit A at 4 (§ 4.1.5). [8] The Registrar’s electronic record at Intake Complaint Submittal1.pdf at 19. [9] See Complainant’s Exhibit 1 (typical concrete construction with ABC). [10] See Complainant’s Exhibits 5, 6, 8, and 12; Respondent’s Exhibits B-7, B-8, B-9, and B-10 at 2. [11] See A.R.S. § 32-1154(A). [12] 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). [13] See A.A.C. R2-19-119(B)(2). [14] Morris K. Udall, Arizona Law of Evidence § 5 (1960). [15] Black’s Law Dictionary at page 1220 (8th ed. 1999). [16] State ex rel. Ross v. Nance, 165 Ariz. 286, 288, 798 P.2d 1295, 1297 (1990) (citations omitted). [17] State Board of Directors v. Nelson, 105 Ariz. 119, 120 (1969). [18] State Farm Automobile Insurance Company v. Dressler, 153 Ariz. 527, 531, 738 P.2d 1134, 1138 (App. 1987) (citations omitted). [19] Laws 1985, Ch. 334, § 1. [20] Burrows v. Taylor, 129 Ariz. 212, 214, 630 P.2d 35, 37 (App. 1981) [21] As a general principle in construction, a contractor who performs work on top of a surface prepared by another contractor accepts the surface. The second contractor should have inspected the surface for any flaws or defects that would affect the work he proposes before performing the work. If he found the surface to be unacceptable, he should have called any defects to the owner’s or general contractor’s attention so that the owner or general contractor can choose whether to pay for the defective surface to be corrected or if the owner or general contractor is not willing to pay to correct the surface, the subsequent contractor may obtain an explicit warranty disclaimer. See generally cases cited at “Duty of Contractor to Warn Owner of Defects in Subsurface Conditions,” 73 A.L.R.3d 1213 (1976). [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.” [23] 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.” [24] See J.W. Hancock Enterprises, Inc. v. Arizona State Registrar of Contractors, 142 Ariz. 400, 406, 690 P.2d 119, 125 (App. 1984). [25] Courts in Arizona may apportion fault for construction defects among parties and non-parties under the Uniform Contribution Among Tortfeasors Act, A.R.S. §§ 12-2501 to 12-2509. [26] 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.”

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