PDF copy: ALJDEC decisions subject to certification as final

2017A-3447-ROC · Registrar of Contractors · 2019-05-23

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

LAURIE WHITE, No. 2017A-3447-ROC

Complainant, ADMINISTRATIVE LAW JUDGE DECISION v.

1ST CHOICE SURFACES LLC,

Respondent. License No: 242955

HEARING: January 31, 2019 APPEARANCES: Laurie White, Complainant, Krystel Delgado, Esq. and

Timothy M. Collier, Esq., counsel for the Complainant; Jim Dimond, Respondent,

Kenneth Adams, Brian A. Hatch, Esq. Counsel for the Respondent; Marlee

McCormick, Recovery Fund; John Tellier, Esq. Counsel for the Recovery Fund;

ADMINISTRATIVE LAW JUDGE: Randolph D. Wolfson

_____________________________________________________________________

FINDING OF FACTS

1. Respondent, 1st Choice Surfaces LLC, [hereinafter, “1st Choice”] has held Specialty Dual CR-60 Finish Carpentry License Number 242955 since it was first issued by the Registrar on March 25, 2008. 1 2. On December 15, 2017, the Registrar issued its Finial Administrative Decision and Order in 2017A-3447-CHC-ROC finding: During the months of September and December 2016, Laurie White and 1st Choice entered into a home remodeling contract wherein 1st Choice would install tile floors in Mrs. White’s home located at 9520 North 7th Street, #2, Phoenix, AZ 85020. 1st Choice was not licensed to install tile.

1 Administrative Judicial Notice is taken of the entirety of the Registrar’s file pertaining to this case, including but not limited to, any information contained on the Registrar’s public website. Office of Administrative Hearings 1740 West Adams Street, Lower Level Phoenix, Arizona 85007 (602) 542-9826 1st Choice began work on Ms. White’s home in October of 2016. In or around December 2016, 1st Choice stopped work on Ms. White’s home. On or about July 6, 2017, Mrs. White filed a Complaint with the Registrar alleging poor work on the part of 1st Choice.

On or about August 1, 2017, Registrar Investigator Jack Grimm conducted a jobsite inspection…[hereinafter, “JSI”] On August 2, 2017, Investigator Grimm issued a Directive. The Directive provided in relevant part, as follows: After investigation, the Registrar has substantiated that your work fails to meet minimum workmanship standards (see A.A.C. R4-9- 108). You must provide the Registrar with satisfactory written proof of your compliance with this Directive prior to 5:00 p.m. on August 21, 2017. You are hereby directed to remedy the following violations by the appropriate means:

Cracked tiles. Repair cracked tiles. Hollow tiles. Correct hollow sounding tiles. (only observed about four (4) tiles). Unlevel tiles, which also caused large gaps between the tiles and baseboards in some places. Correct tile with lippage greater than 1/32 inch.

Misapplied grout to were certain "remains" appear on the face of the tile. Clean areas of minor grout residue on tile edges….

Damage to newly renovated bathroom, where grout was left on Mrs. White's new shower. Clean residue grout on hall shower tiles. The bathroom sink now needs to be replaced due to certain products being poured down the drain by the laborers. Clean what appears to be residue grout in hall sink basin…

3. Satisfactory written proof of compliance with the Directive was not received from 1st Choice prior to the 5:00 p.m., August 21, 2017 deadline set in the Directive and 1st Choice did not return to the White job site after the issuance of the

Directive.2 None of the Corrective Work Order items [the “CWO”] were attempted before the Directive’s stated deadline.3 4. Thus, on August 23, 2017, the Registrar issued a Citation against 1st

Choice alleging that it violated Ariz. Rev. Stat. sections 32-1154(A)(3)(specifically, Ariz.

Admin. Code section R4-9-108 and Ariz. Rev. Stat. sections 32-1154(A)(22).4

5. Adopting the November 6, 2017 Administrative Law Judge’s Decision, the

Registrar issued its Finial Administrative Decision and Order in 2017A-3447-CHC-ROC

on December 15, 2017. The Order was not appealed and became a final order on

January 24, 2018.

6. It its Finial Administrative Decision and Order on December 15, 2017 in

2017A-3447-CHC-ROC, it was determined:

The preponderance of the evidence shows that the issues found by Investigator Grimm constituted workmanship issues with the remodeling of Ms. White’s home. The preponderance of the evidence shows that Respondent did not perform the work in a professional and workmanlike manner in violation of Ariz. Rev. Stat. section 32-1154(A)(3), namely A.A.C. R4-9-108.

The preponderance of the evidence shows that Respondent failed to comply with the Directive without valid justification in violation of Ariz. Rev. Stat. section 32-1154(A)(22). [emphasis added].

1st Choice’s license was ordered suspended and a civil penalty of $250.00 imposed by

the ROC’s Finial Administrative Decision and Order on December 15, 2017 2017A- 3447-CHC-ROC. 7. This matter now before the bar for hearing arises from a Claim for Recovery5 filed with the Arizona Residential Contractors Recovery Fund [hereinafter the “Fund”] filed by Complainant Laurie White [hereinafter “White”] on May 29, 2018. 8. On September 20, 2018, the Registrar of Contractors [the “Registrar”], issued its Notice of Claim for Administrative Payout [hereinafter, “The Payout Notice”] See, Agency Record, ¶18 of the Administrative Law Judge’s Decisions’ Finding of Facts. Id. State’s Exhibit 5. 5 State’s Exhibit 2 advising the parties that the Registrar had determined an award to White in the amount of $25,043.75 should be paid from the Fund.6 1str Choice timely requested a hearing to dispute the amount of the award. The matter was referred to the Office of

Administrative Hearings, an independent state agency, which conducted an evidentiary

hearing regarding the Fund Claim on January 31, 2019.

9. The Payout Notice Hearing was limited in scope to determining the

amount and propriety of “payment from the residential contractors' recovery fund to

remedy the violation.”7 Moreover, there is no argument posed and no evidence

received disputing that White is a “Person Injured” eligible to make a claim for payout

from the Fund.8 Relying on the AZ Recovery Fund Cost Spreadsheet9 and the

undisputed testimony at the January 31, 2019 hearing of Marlee McCormick, Fund

Legal Assistant, Ms. White is found by a preponderance of the evidence in this case to

be a “Person Injured” as defined pursuant to A.R.S. § 32-1131(3).10

10. At hearing on the Fund Claim, James Dimond, 1st Choice’s Qualifying

Party, testified. He contests the amount of the Fund Award as inflated, by his

estimation. He stated that his bid for 1,400 square feet of demolition was half the price

State’s Exhibit 1. 7 See, A.R.S. § 32-1154(G). If a contractor's license has been revoked or has been suspended as a result of an order to remedy a violation of this chapter, the registrar may order payment from the residential contractors' recovery fund to remedy the violation. In this case, inasmuch as the Registrar’s December 15, 2017 Finial Administrative Decision and Order in 2017A-3447-CHC-ROC is a Final Order, the fact that 1st Choice’s Contractors license was suspended as a result if 1st Choice’s below standard workmanship on the White job and 1st Choice’s failure without reasonable excuse to comply with the directive in that case on or before the deadline in this Directive are facts already proven. Respondent’s ability to contest such facts are barred by the doctrine of res judicata. See, A.R.S. § 32-1131. To be eligible to access the Fund, an applicant must meet four eligibility criteria set forth at A.R.S. § 32-1131, et seq. See also McMurren v. J.M.C. Builder, Inc., 204 Ariz. 345 (App. 2003). An applicant must meet the definition of a “person injured” set forth at A.R.S. § 32-1131(3) which requires first that the applicant must own residential real property. Second, the property must have had a classification of three under A.R.S. § 42-12003. Third, the owner of the property must have occupied, or intended to occupy, the property as a residence that is damaged by a residential or dual licensed contractor who has paid for financial protection from the Recovery Fund. These criteria must be met at either the time the contract was executed or at the time the injury accrued. Fourth, as set forth in A.R.S. § 32-1132(A), an applicant must have contracted with a residential contractor whose license was in good standing at the time of contract execution. This fourth requirement is only applied at the time the contract was executed, not at the time of injury. McMurren v. J.M.C. Builders, Inc., 204 Ariz. 345 (App. 2003). The uncontested evidence presented at hearing by the Fund from Fund Claim Examiner Marlee McCormick demonstrates by a preponderance of the evidence that Ms. White meets all of the eligibility requirements of A.R.S. § 32-1132(A), et seq. 9 State’s Exhibit 14. of the contractors’ bids submitted by White to support her Fund Claim. He attributed the values of White’s contractors’ bids to the Fund Legal Assistant permitting the repair contractors to bid to re-demo and re-tile the entire job rather than simply repairing or

replacing the individual tiles which were concerned and discussed in this Directive and

CWO. In other words, Mr. Diamond asserts that the Fund Award exceeds his entire

bid by half because the bids are to redo the entire demolition and tile installation that 1st

Choice had done instead of repairing or replacing only the individual problem tiles. He

admits that he is licensed only to provide finish carpentry services under his Dual CR-

Finish Carpentry License and that he does not nor has he ever been licensed to

install stone materials. He acknowledged that the work done for White involved

demolition of existing flooring and installing stone tile.

11. 1st Choice called Kenneth Adams as it expert regarding industry local

standards for charges to comply with the Directive in this case. Mr. Adams stated he

was a licensed contractor and that he previously testified on behalf of 1st Choice and

against White in a civil suit for damages, breach of contract, etc., filed in the Maricopa

County Superior Court in CV-2017-006495, White v. First Choice and Dimond.11

Offered in support of Mr. Adams’ testimony at the January 31, 2019 hearing [and in the Superior Court matter] was a May 25, 2018 report from Adams expressing his qualifications and his opinions.12 Mr. Adams’ report states: Since the summer of 2002, I have been the President/CEO and Qualifying Party of Floor It, Inc.; holding ROC License No. 177830 (CR-8 Floor Covering).

I am a licensed contractor with over 35 years of experience in the construction industry, all 35 years of that in the flooring trade. As the Qualifying Party under the above license, I successfully completed the required examinations and other requirement of the Registrar. My See Footnote 7, supra. In CV-2017-006495, White received a defense verdict. The ALJ was advised during hearing on a Defense Motion to Reconsider just before the January 31, 2019 hearing that time for appeal of this case has not yet run and that judgement in this Superior Court case was filed January 23, 2019. The ROC was not a party to CV-2017-006495 litigation. 12 st Choice, Exhibit K. experience and training is in many commercial and residential projects over the last 1.5 years. I am very familiar with all types of flooring materials including tile and natural stone products, demolition, repairs, and . .construction methods and procedures.

I have been engaged by Defendants' legal counsel, Brian Hatch, to provide an expert opinion on the construction materials incorporated, methods used, repairs necessary and cost of such repairs, all in relation to a dispute between the homeowner/Plaintiff (''Owner'') and contractor/Defendant (''Contractor'') in respect of the stone tile flooring work (Tile ''Work'') at the Owner's home (the ''Jobsite''). Specifically, I have been asked to inspect the Complaint filed in the civil action, the contract documents, the order and invoice documents from Monterrey tile, the photographs of the Work prepared by the Owner or her attorneys, as well as the Directive issued by the Registrar's Inspector, Jack Grimm, on August 2, 2017.13

Mr. Adams opines that: I have calculated an estimate for the removal and replacement of the 15 tiles, the baseboard to tile realignment along with all associated sealing and finish work. The cost to replace the 15 defective tile, if the Owner supplies the tile as per 'the Contract” is between $1,600.00 and $1,800.00…. [I]t is rny professional opinion that the flooring Work was executed properly in accord with accepted standards of workmanship; that the finish arid appearance of the stone tile floor is typical and in accord with good workmanship standards, and in accord with the Contract between the parties; and that the punch list repair referenced above is all that remains to be done to complete the job, at the cost also indicated above.

On Cross-Examination it was revealed that contrary to the statement contained on the face of 1st Choice’s Exhibit K, the Adams Report, Mr. Adams did not prepare this report. Mr. Adams admitted that it was 1st Choice’s attorneys who prepared the entire report. Moreover, prior to his testimony and offering of his Report to the Superior Court in CV-2017-006495 and prior to his testimony in the case at bar, Mr. Adams, a paid expert in the case at bar, had not read the Citation in this case, did no investigation as to the cost to remove and replace the entire White job, did not review a copy of the

13 Ibid. transcript of the November 6, 2017 OAH hearing 2017A-3447-CHC-ROC, did not visit the White jobsite and did not speak with Investigator Grimm. Further it was disclosed that Mr. Adams is not and has never been licensed in Arizona to install stone tile – work

which only a Class CR 48 is qualified and allowed to install and repair stone, ceramic,

mosaic, pavers and stone tiles. Mr. Adams testified he holds only a Class CR 8 license

from Arizona. That license qualifies and allows a duly licensed contractor to install and

repair carpet, wood flooring, vinyl flooring, asphalt and concrete. Mr. Adams presents

no credible credentials to support his testimony as an expert regarding the cost of

demolition, installation or repair of stone tiles.14 Determining the cost of demolition,

installation or repair of Stone tile is outside the scope of Mr. Adams qualifications.

Taken together, the foregoing facts demonstrate that Mr. Adam’s testimony and

opinions are not credible.

12. Ms. White testified that per her agreement with 1st Choice, she purchased

the stone tile that was to be installed by 1st Choice. The tile selected, purchased and

delivered was a premium stone tile known by the name of “Shell Mirabella.”15 All of the

tile purchased for this job was from one single lot.16 She testified that no tile now exists

from the lot which her stone tile was ordered. Each of the White contractors who tendered bids in support of White’s Fund Claim agreed that use of any other lot of tile will show differences in color and texture.17 In addition to mismatched tiles from differing lots, there are cracks in the foundation that work to result in cracks in any Stone flooring that would be laid that has to be repaired after a demo before new tile could be laid. All bidders indicated that a re-demolition, a repair and a re-install of new stone tile – all selected from the same lot – is required because of the site’s condition, mismatching lots and repair of lippage and cracked tiles.18 13. Testifying for the Fund, Marlee McCormick, Fund Legal Assistant, stated that she reviewed the White Fund Claim for eligibility and actual damages. She It is noted that Mr. Dimond is not qualified, holding only a Class CR-60 Finish Carpentry License, to provide credible evidence regarding bidding, costing, demolition of, repair of or installation of stone tile. That Shell Mirabella was purchased is reflected by State’s Exhibit 10, Invoice from Monterrey Tile. Ibid. State’s Exhibit 11. 18 Ibid. reviewed the three contractor bids submitted by Ms. White. She testified that she communicated with Inspector Grimm regarding whether the entire White job would have to be re-done [as was bid by the three bidders submitted by White] in order to comply

with the issues raised by the Directive.19 Mr. Grimm indicated to Ms. McCormick that

re-demolition, repair and reinstallation of new tile for the entire job was the appropriate

because of color and texture variations of stone tile from one lot to another. She also

stated that she examined the Fund Claim and supporting documents. Based upon the

lowest bids received she determined that the statutory Actual Damages were calculated

by adding $8,260.00 (lowest demo bid)+ $10,735.31 (lowest install bid)+ $8,522.44

(allowable materials) – totaling $27,517.75 Subtracted from this total of lowest bids

was 2,474.00, the amount of any unpaid balance remaining on the 1st Choice contract.

There has been no execution against the 1st Choice performance bond or any other

monetary recovery from 1st Choice. Ms. McCormick testified that the net amount after

the required deductions equaled $25,043.75. This result is the exact amount of the

payout noticed in the September 20, 2018 Notice of Claim for Administrative Payout.

CONCLUSIONS OF LAW 1. This matter lies within the Registrar’s jurisdiction.20 2. Complainant bears the burden of proof to establish the amount that Complainant is entitled to recover from the Fund by a preponderance of the evidence.21 Respondent bears the burden to establish affirmative defenses by the same evidentiary standard.22 3. “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”23 4. In Arizona, “‘[p]ublic policy dictates that there be an end to litigation; that those who have contested the issue shall be bound by the result of the contest; and

State’s Exhibit 12. See 32-1101 et seq. 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, Ariz. 369, 372, 249 P.2d 837 (1952). 22 See A.A.C. R2-19-119(B)(2). that matters once tried shall be considered forever settled as between the parties.’”24 Therefore, the Registrar’s Decision and Order in Case No. 2017A-3447-CHC-ROC conclusively establishes that Respondent violated the charged statutes. The only issue

to be resolved at the hearing on Complainant’s claim to the Fund is the amount of

damages that Respondent’s statutory violations caused.

5. A.R.S. § 32-1132(A) provides the method of calculating the amount that a

homeowner is entitled to recover from the Fund for a contractor’s statutory violations, in

relevant part as follows:

An award from the [F]und 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. Actual damages shall not be established by bids supplied by or the value of work performed by a person or entity that is not licensed pursuant to this chapter and that is required to be licensed pursuant to this chapter. If the claimant has paid a deposit or down payment and no actual work is performed or materials are delivered, the award of actual damages shall not exceed the exact dollar amount of the deposit or down payment….

6. “A cardinal rule of statutory interpretation is to give full effect to each statutory word or phrase so that no part is rendered void, superfluous, contradictory or insignificant.”25 7. The Fund’s calculation of its Award contained in its September 20, 2018, the Registrar of Contractors Notice of Claim for Administrative Payout of in the amount of $25,043.75, by a preponderance of the evidence, was correctly calculated pursuant to the requirements and provisions of A.R.S. § 32-1132(A). The $25,043.75 should be affirmed. RECOMMENDED ORDER

Morris K. Udall, ARIZONA LAW OF EVIDENCE § 5 (1960). Lofts v. Superior Court, 140 Ariz. 407, 410, 682 P.2d 412, 415 (1984) (quoting Baldwin v. Iowa State Traveling Men’s Ass’n, 283 U.S. 522, 525, 51 S. Ct. 517, 518, 75 L. Ed. 1244 (1931)). Westburne Supply, Inc. v. Diversified Design and Construction, Inc., 170 Ariz. 598, 600, 826 P.2d 1224, 1226 (App. 1992). In view of the foregoing, it is recommended that on the effective date of the Registrar’s Final Order in this matter, the Registrar order the Residential Contractors’ Recovery Fund to pay $25,043.75 to Complainant Laurie White.

It is further recommended that under A.R.S. § 32-1139(B), the Registrar charge

$25,043.75, plus interest at a rate of ten percent a year, to Respondent, 1st Choice

Surfaces LLC, License Number 242955.

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

days from the date of that certification.

Done this day, February 19, 2019.

/s/ Randolph D. Wolfson Administrative Law Judge

Transmitted electronically to: Jeffrey Fleetham, Director Registrar of Contractors