ALJDEC decisions subject to certification as final

2017A-4989-RFA-ROC · Registrar of Contractors · 2018-11-23

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: November 15, 2018, at 1:00 p.m. APPEARANCES: Mark A. Hansen, Esq., The Ledbetter Law Firm, PLC, represented Anthony S. Cullotta DBA: Illumination Window & Door Company (“Respondent”); Linda Earle appeared on her own and her husband Larry Earle’s (“Complainants’’”) behalf; the Arizona Registrar of Contractors (“the Registrar”) was represented by Thomas Raine, Esq., Assistant Attorney General. ADMINISTRATIVE LAW JUDGE: Diane Mihalsky _____________________________________________________________________

FINDINGS OF FACT 1. On August 31, 2018, the Registrar issued a Notice of Claim for Administrative Payout from the Residential Contractors’ Recovery Fund (“the Fund”), notifying the parties that “[a]fter a review of the claim and all supporting documentation, the Fund determined that Complainants are to be awarded $24,437.17 in the form of a payment issued by the Fund.”[1] 2. After Respondent requested a hearing on the amount of the payout, the Registrar referred Complainant’s claim to the Office of Administrative Hearings (“OAH”), an independent state agency, for an evidentiary hearing. 3. A hearing on the merits of Complainants’ claim to the Fund was held on November 15, 2018, before OAH. Respondent submitted 24 exhibits and presented the testimony of Thomas Richard (“Tom”) Munoz, Sr., a representative of Milgard Windows and Doors, and Respondent Anthony Cullotta. The Registrar submitted 14 exhibits and presented the testimony of Marlee McCormick, a Legal Assistant/Claims Reviewer in the Registrar’s Legal Department, who had analyzed Complainants’ claim, and submitted fifteen exhibits. Complainant Mrs. Earle testified on their behalf. Background: The Underlying Workmanship Complaint 4. On July 2017, Respondent installed 17 new windows and two sliding glass doors at Complainants’ house at 9227 N. SummerHill Blvd., Fountain Hills, Arizona 85268 (“the residence”).[2] According to the complaint, Respondent’s contract to install the windows was for the amount of $23,934.34 for the cost of the windows and labor and labor to install them.[3] 5. Because Complainants did not wish to perform extensive stucco and drywall repairs to the residence, they chose retrofit windows. For retrofit windows, the frames of the old windows are left in place and new windows are installed into the existing window openings. The material cost of retrofit windows is higher than windows that will be totally replaced, but the cost of labor to install the retrofit windows is lower. 6. On October 2, 2017, Complainants filed a workmanship complaint with the Registrar, alleging that Respondent had failed to properly install the windows and doors in the following respects: Replacement windows were to fit flush with drywall with clearance for caulk around interior of window but were outfitted with vinyl strips. All windows are not supported properly along the window sill. These are very large windows with four screws holding them in place. Exterior caulk does not match in color and applied sloppily. Steel framing members were distorted and bent during installation of both patio doors which included extensive drywall repair. Windows are uneven on east side of home.[4]

7. The complaint was assigned to the Registrar’s Investigator Steve Nelsen for investigation. On October 18, 2017, and November 3, 2017, Investigator Nelsen performed jobsite inspections. Investigator’s notes of the jobsite inspections provide in relevant part as follows: Complaint Item 2: Replacement windows were to fit flush with drywall with clearance for caulk around interior window, but were outfitted with vinyl strips. Investigator’s Observation: These windows do not allow this type of installation, trim pieces are used to fill any voids. . . . .

Complaint Item 3: All windows are not supported properly along the window sill. These are very large windows with four screws holding them in place. Investigator’s Observation: The windows shown do not appear to be installed correctly. Here was no blocking present and the screws did not follow the [American Architectural Manufacturers Association (“AAMA”)] recommendations . . . . I did meet the manufacturer on site on 11/3/2017 and it was confirmed that the windows were not installed correctly. [They] do not [sit] positively on the base of the old frame and the screw placement is not correct . . . . . . . .

Complaint Item 4: Exterior caulk does not match in color and applied sloppily. Investigator’s Observation: Exterior caulking was not applied very well, it does appear sloppy, but is within standards. The window caulking will have to be replaced when the Respondent completes the CWO. . . . .

Complaint Item 5: Steel framing members were distorted and bent during installation of both patio doors which included extensive drywall repair. Investigator’s Observation: This item has been corrected, I cannot see any damage to the framing members. . . . .

Complaint Item 6: Windows are uneven on east side of home. Investigator’s Observation: This may be due to existing conditions, I cannot substantiate.[5]

8. On November 15, 2017, Investigator Nelsen on behalf of the Registrar issued a Directive to Respondent to “Install 14 windows and 2 doors according to contract and AAMA guidelines as per manufacturer” on or before December 4, 2017.[6] 9. Respondent did not comply with the Directive and the Registrar subsequently cited Respondent for violations of A.R.S. § 32-1154(A).[7] A hearing on the workmanship complaint was held on February 2, 2018. 10. The Administrative Law Judge’s (“ALJ’s”) decision noted that Investigator Nelsen had informed Respondent that that because Complainants had furnished additional contract information that showed “the installed windows were not ordered with the correct sizing,” Investigator Nelson was rescinding the original Directive and issuing the November 15, 2017 Directive.[8] 11. The ALJ also noted that because Respondent believed that it had installed the windows and doors in compliance with the contract and AAMA guidelines, it did not perform any corrective work at the residence, although it offered Complainants $5,000.00 to have another contractor perform the work required by the Directive.[9] 12. At the February 2, 2018 hearing, Investigator Nelsen testified consistently with his jobsite inspection notes. He acknowledged that the retrofit windows operated correctly and did not shift, bulge, or pop out of their frames.[10] No additional specific evidence was noted in the decision regarding the two sliding glass doors. 13. At the February 2, 2018 hearing, Respondent took the position that the retrofit windows were installed correctly under the contract and AAMA guidelines.[11] 14. On March 14, 2018, the Registrar substantially accepted the ALJ’s decision, finding that Complainants had proven that Respondent violated A.R.S. § 32-1154(A)(3), namely A.A.C. R4-9-108, and A.R.S. § 32- 1154(A)(22),[12] and as a result, suspending Respondent’s license for one day and requiring it to pay a $250.00 civil penalty. Complainants’ Claim to the Fund 15. On May 2, 2018, Complainants filed a claim to the Fund with the Registrar in the amount of $23,934.34.[13] Complainants submitted with their claim Respondent’s May 15, 2017 proposal to install the windows and doors for the total amount of $23,934.34, which including $3,550.00 for “Removal and Installation of 17 Window Units 2 Door Units.”[14] 16. Complainants submitted four itemized bids to remove and replace the windows and doors that Respondent had installed at the residence: (1) A bid from American Vision Windows in the total amount of $38,576.06 to install new Milgard windows and doors;[15] (2) A bid from Lifetime Windows and Doors in the amount of $39,884.34 to install Infinity windows and doors;[16] (3) A bid from Pella Window and Door Showroom of Scottsdale in the amount of $44,116.47 to install Pella windows and doors;[17] and (4) A bid from True View in the amount of $24,437.17 to install Milgard windows and doors.[18] 17. Complainants also submitted bids to repaint the exterior of the evidence from J&M Painting in the amount of $1,950.00[19] and CertaPro Painters in the amount of $2,225.00.[20] 18. The True View bid included installation of two new sliding glass doors for the amount of $4,378.63 each.[21] 19. Complainants also submitted a July 25, 2018 email from Chad Carlson of True View, which explained its bid in relevant part as follows: Tom & I both Discounted you about $7,000 Mostly Tom but I am a lot lower than I usually go. I want to help you too because of this big mess.

We won’t do Flush Flange because we can’t warranty the windows because of the other company that cut off all the old frames, If the old frames were still intact then we can do Flush Flange.

Flush Flange Windows are meant to be installed over the old frame with about ½ inch of space smaller than the existing frame for room for Expansion and water drainage, Stucco cut-out is the proper way To install new windows and you will have a lifetime warranty on your Windows and our Installation through us & Milgard. . . .[22]

20. The Registrar prepared a spreadsheet that showed it disallowed all bids but True View’s, which it used to calculate the amount of the proposed payout from the Fund.[23] Hearing evidence 21. Respondent did not challenge the Registrar’s determination that Complainants were persons who had been injured as defined by A.R.S. § 32-1131(3) who was potentially eligible to receive a payout from the Fund. 22. Mr. Munoz testified that he inspected the Milgard windows and doors that Respondent installed at the residence at the jobsite inspection. Mr. Munoz testified that any deficiency in the door had been corrected at that time. 23. Mr. Munoz testified that he cannot comment on the quality of the installation because he is not an installer, but he observed that the windows were operational and were not shifting or popping out of the frames. Because he is not an installer, he could not comment on whether there was anything structural that would prevent removal and reinstallation of the windows or whether the installation complied with AAMA guidelines. Although Milgard is presently providing a warranty for the windows, if the windows are not correctly installed, Milgard will not provide a warranty for them. 24. Mr. Munoz testified that he told Investigator Nelson that the only thing that Respondent had failed to do to comply with AAMA guidelines was to install blocking beneath the windows.[24] 25. Mrs. Earle acknowledged that she requested that Respondent cut the portion of the window frames that holds the glass in to make a bigger clear portion of the windows. She acknowledged that she is not a window contractor. 26. Mr. Cullotta testified that the retrofit windows are sealed and have new weep-holes to drain any moisture. Respondent also left some existing weep-holes in the old frames. Mr. Cullotta testified that he understood the directive to require reinstallation of the Milgard windows and that there is no reason that the windows cannot be reinstalled with blocking to provided additional support for the windows. 27. Mr. Cullotta noted that Investigator Nelsen had testified at the workmanship hearing that there was no reason why Respondent could not have installed blocking around the windows, but that it didn’t.[25] Mr. Cullotta testified that another contractor could remove and reinstall the Milgard windows with blocking because no one had testified that they were warped or twisted. 28. Respondent submitted a bid from Fletcher’s Door & Window dated November 8, 2018, in the amount of $3,600.00 to remove and reinstall 14 windows and 2 patio doors.[26] 29. Mr. Cullotta testified that the sliding glass door were not retrofits and that Respondent had removed the old frames completely and installed new frames. There was no reason to replace the sliding glass doors. 30. Ms. McCormick testified that she reviewed the Registrar’s whole file in this matter. She noted that Investigator Nelsen had required Respondent to repair the windows because they did not sit positively in the frames and the AAMA guidelines required blocking. In addition, there was a sizing issue.[27] 31. Ms. McCormick testified that she had conversations with Investigator Nelsen about whether the windows would need to be replaced. Investigator Nelson asked that contractors provide an explanation of why they were proposing to install new windows, and Complainants furnished the July 25, 2018 email from Chad Carlson. In addition, Investigator Nelson stated that contractors do not want to be responsible for modifications that have been made to materials, such as Respondent cutting down the frame of the retrofit windows. 32. Ms. McCormick testified that she disallowed the painting because it was not part of the Directive. She disallowed Pella and Lifetime Windows and Doors’ bids because the materials proposed to be used were a substantial upgrade to what Respondent had installed. She disallowed American Vision’s bid because it had only a California license number on its bid and she could not verify that the entity that was licensed in Arizona had submitted the bid. CONCLUSIONS OF LAW This matter lies within the Registrar’s jurisdiction.[28] Respondent bears the burden of proof to establish that the Registrar’s calculations were erroneous or not supported by a preponderance of the evidence.[29] “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”[30] 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.”[31] Respondent did not establish that the Milgard windows it installed at the residence should be used by another contractor because the windows that Respondent installed were not sized properly. Respondent did not challenge the Registrar’s conclusion in the underlying workmanship complaint that the windows were improperly sized, which issue required Investigator Nelsen to perform a second jobsite inspection and to issue to modified directive. In addition, Respondent acknowledged at the hearing on the Fund claim that it had trimmed the window frames at Mrs. Earle’s request to enlarge the glass portion. Chad Carlson’s email established that modification of the window would void the manufacturer’s warranty and prevent another contractor from re-using the retrofit windows for repairs. Investigator Nelsen’s jobsite inspection notes state that he did not find any workmanship or other deficiency in the two sliding glass doors.[32] No evidence of any deficiency in the two sliding glass doors was submitted at the hearing on the workmanship complaint or at the hearing on the Fund claim. A.R.S. § 32-1132(A) limits payouts from the Fund 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 . . . .” For the purposes of A.R.S. § 32-1132(A), “actual damages” are the reasonable cost of repairing the contractor’s defective work and completing the project, minus any portion of the contract price still unpaid to the original contractor.[33] Upgrades in materials or the scope of the job are generally not available, as Ms. McCormick’s disallowance of Pella’s and Lifetime Windows and Doors’ bids demonstrated. Respondent established that the sliding glass doors do not require repair and that, therefore, Complainants should not recover $8,757.26 to remove and replace the two doors. The total damages that Complainants are entitled to recover from the Fund are therefore $15,679.91.[34] 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 $15,679.91 to Complainants Larry and Gayle Earle. It is further recommended that under A.R.S. § 32-1139(B), the Registrar shall charge $15,679.91, plus interest at a rate of ten percent a year, to Respondent Anthony S. Cullotta DBA: Illumination Window & Door Company’s License No. CR-7.277381-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, November 23, 2018.

/s/ Diane Mihalsky Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director Registrar of Contractors ----------------------- [1] See the Registrar’s Exhibit 1. [2] Some documents show that 14 windows were installed and some show that windows were installed. It appears the lower number is based on multiple windows of the same size and style having been installed. For purposes of this decision, the disparity is not material. [3] See the Registrar’s Exhibit 2 at 6. [4] The Registrar’s Exhibit 2 at 7. [5] The Registrar’s Exhibit 3. [6] The Registrar’s Exhibit 4; Respondent’s Exhibit R18. [7] See the Registrar’s Exhibit 5. [8] The Registrar’s Exhibit 6 at 32-33, Finding of Fact No. 14. [9] See id. at 33, Finding of Fact No. 17. [10] See Audio-recording of February 2, 2018 hearing in Case No. 2017A-4989- CHC-ROC at 15m04s – 15m49s. [11] See the Registrar’s Exhibit 6 at 33, Finding of Fact No. 18. [12] See the Registrar’s Exhibit 6 at 36. [13] See the Registrar’s Exhibit 7. [14] The Registrar’s Exhibit 8 at 67. [15] See the Registrar’s Exhibit 10 at 78-89; 146-157. [16] See id. at 90-104. [17] See id. at 105-117. [18] See id. at 137-144. [19] See id. at 118. [20] See id. at 119-133. [21] See id. at 140. [22] Id. at 136. [23] See the Registrar’s Exhibit 14 at 175; Respondent’s Exhibit 24 at 3.. [24] See Respondent’s Exhibit 9 at 6. [25] See Audio-recording of February 2, 2018 hearing in Case No. 2017A-4989- CHC-ROC at 18m19s – 19m02s. [26] See Respondent’s Exhibit 31. [27] See the Registrar’s Exhibit 11. [28] See 32-1101 et seq. [29] 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). [30] Morris K. Udall, Arizona Law of Evidence § 5 (1960). [31] Black’s Law Dictionary at page 1220 (8th ed. 1999). [32] See Finding of Fact No. 7, above, No. 5 on Investigator Nelsen’s jobsite inspection notes. [33] See Ramsey v. Arizona Registrar of Contractors, 241 Ariz. 102, 106, 384 P.3d 316, 320 (App. 2016). [34] $24,437.17 – $4,378.63 - $4,378.63 = $15,679.91.

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Office of Administrative Hearings 1740 West Adams Street, Lower Level Phoenix, Arizona 85007 (602) 542-9826