ALJDEC decisions subject to certification as final

2018A-05999-ROC · Registrar of Contractors · 2019-06-11

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: May 28, 2019, at 8:30 a.m. APPEARANCES: Paul Bruce Warren (“Complainant”) was represented by Ian D. Quinn, Esq., Quinn Law, PLLC; Ashton Holdings LLC DBA: Envision Painting (“Respondent”) was represented by Chase E. Halsey, Esq., Murphy Cordier PLC. ADMINISTRATIVE LAW JUDGE: Diane Mihalsky _____________________________________________________________________

FINDINGS OF FACT Background and Procedure 1. According to the Arizona Registrar of Contractors’ (“the Registrar’s”) public website, on or about May 12, 2012, the Registrar issued License No. ROC 255123 for Specialty Dual CR-34 Painting and Wall Covering to Respondent. On or about August 10, 2015, the Registrar issued License No. ROC 300480 for Specialty Dual CR-42 Roofing to Respondent. Respondent’s member/qualifying party is Peter Schnepp. 2. On or about March 20, 2017, Respondent contracted to paint the Tlaquepaque Office Plaza at 4150 W. Peoria Ave. in Phoenix, Arizona (“the Office Plaza”) for a contract price of $87,695.00. Respondent completed the project. After the layers of paint beneath the freshly applied pain started peeling and deteriorating, at Respondent’s request, on or about December 7, 2018, the Registrar’s Investigator Steve Klein performed a Building Confidence inspection. Investigator Klein stated that “[m]y opinion is the work needs to be corrected. I suggest finding an independent third party inspection firm to determine the cause of the issue.”[1] 3. On or about December 18, 2018, Complainant filed a complaint with the Registrar against Respondent that alleged that it had performed poor work on its contract to paint the office plaza. Complainant alleged that Respondent had failed to prepare the surface adequately and that not all the windows and other areas had been painted.[2] 4. On February 12, 2019, Investigator Klein performed a jobsite inspection. On that same date, Investigator Klein on behalf of the Registrar issued a Directive, requiring Respondent to correct three items of workmanship on or before 5:00 p.m. on March 1, 2019, in relevant part as follows: Complaint Item 2: Paint is chipping and peeling all over property. • Verified paint peeling throughout the project.

Complaint Item 5: Not all windows were painted. • Verified window frame that wasn’t painted, Respondent agreed to paint.

Complaint Item 6: Some areas were left unpainted. • Verified door down stairs that wasn’t painted and low wall area front foyer hall.[3]

5. Investigator Klein did not perform a compliance inspection because both parties agreed that Respondent had not completed Item 2 on the directive.[4] 6. On March 7, 2019, the Registrar issued a Citation against Respondent’s licenses, charging cause to suspend or revoke the licenses under A.R.S. § 32-1154(A)(3), namely A.A.C. R4-9-108, and A.R.S. § 32- 1154(A)(22).[5] 7. Respondent filed a timely written answer to the Citation, denying any statutory violations. 8. The Registrar referred the matter to the Office of Administrative Hearings, an independent state agency, for an evidentiary hearing. 9. An evidentiary hearing was held on May 28, 2019. Complainant submitted three exhibits, testified on his own behalf, and presented the testimony of Sharon Harvey, his property manager at the Office Plaza. Respondent submitted six exhibits and presented the testimony of Mr. Schnepp and Tom Wheeler, paint manufacturer Dunn Edwards’ sales representative. Investigator Klein also testified. Hearing evidence 10. Complainant owns several commercial complexes. He does not have much experience with painting contractors because he has only had two of the complexes that owns painted twelve years ago. 11. The Office Plaza includes approximately 47,000 square feet of space. When the City of Phoenix cited the Office Plaza for peeling paint, Complainant contacted Dunn Edwards. Dunn Edwards suggested a premium paint product. 12. On or about February 17, 2017, Dunn Edwards provided Complainant with a Paint Specification for the Office Plaza project, which included the following provisions: 1. Section 2.3 was entitled “Source Quality Control” and provided that the owner reserved the right to engage the services of a qualified testing agency to sample paint materials.[6] Complainant testified that he understood that the existing surfaces of the Office Plaza would be tested. 2. Section 3.2 was entitled “Preparation.” Subsection (D) provided that substrates would be cleaned of substances that could impair the bond of paints, including “dust, dirt, oil, grease, and incompatible paints and encapsulates.”[7] Complainant testified that he later asked Mr. Schnepp whether the subsurface needed to be sand-blasted, but that Mr. Schnepp answered that pressure-washing would remove anything that could cause a problem. 13. Dunn Edwards arranged for several painting contractors to submit bids to perform the work described in the Paint Specification. The painting contractors walked the project with Complainant or his property manager Ms. Harvey. On or about February 23, 2017, Respondent submitted a proposal to paint the Office Plaza.[8] 14. Complainant testified that he had several more conversations with Mr. Schnepp about the possible need to sand-blast the surfaces at the Office Plaza in preparation for painting, but that Mr. Schnepp stated that power-washing and limited priming would be sufficient to prepare the surface. Complainant testified that Mr. Schnepp never recommended that he strip all the surfaces at the Office Plaza. 15. On or about March 16, 2017, Respondent submitted a revised proposal for “exterior preparation & painting per Dunn Edwards Specification dated 2/17/17.”[9] Complainant testified that he understood that Respondent’s proposal incorporated the terms of Dunn Edwards’ Paint Specification, including the provisions for preparation of the subsurface. 16. Both the February 23, 2017 and the March 16, 2017 proposals provided the following Peace of Mind Warranty: Subject to the limitations set forth below, for a period of 24 months (unless otherwise specified) from the date of substantial completion of the work described on the front of your contract, [Respondent] will repair peeling, blistering or chipping paint resulting from defective workmanship. Suitable repainting or touch up will be the sole remedy for warranty matters.[10]

Among the exclusions from the warranty was “[p]eeling, blistering or chipping where they are caused by . . . peeling of layers of paint exiting prior to the work performed by the Contractor . . . or any similar causes beyond the control of the contractor.”[11] 17. Complainant accepted Respondent’s March 16, 2017 proposal and Respondent power-washed and then painted the Office Plaza. Complainant testified that the painting work was substantially completed on or about June 13, 2017. 18. Complainant testified that, approximately four months later, paint started coming loose and peeling at the project. Complainant testified that he contacted Mr. Schnepp in January 2018, and that on February 26, 2018, Mr. Schnepp gave Complainant a bid in the amount of $3,000.00 to repair the paint. Complainant testified that he first learned in February 2018, that Respondent did not accept responsibility for the peeling paint because it felt that the substrate was inadequate. 19. Complainant testified that, because only eight months had passed since he made the final payment to Respondent, he did not accept the February 2018 bid because he thought Respondent should honor its warranty. Complainant stated the poor condition of the substrate was the reason he had hired Respondent to paint the Office Plaza. 20. Investigator Klein testified that the Registrar has jurisdiction to discipline contractor’s licenses for two years after they perform work. He suggested at the Building Confidence inspection that the parties consult a third party after the issue of the substrate was brought up. Investigator Klein testified that a contractor who performs work on a surface prepared by another accepts the surface. 21. Investigator Klein testified that he verified that the paint was peeling down to the concrete, but that he does not know why. He knows that Dunn Edwards has stated that the problem is not due to the paint it supplied for the project. Investigator Klein has been in construction since the early 1980’s. He testified that paint peeling down to the bare substrate was unusual and that he had never before seen exterior paint fail to the extent that he saw at the Office Plaza project. 22. Complainant testified that Respondent did not do anything more at the jobsite until Complainant filed the complaint with the Registrar and, then, it painted the doors and windows. 23. Mr. Schnepp testified that Complainant originally told Respondent not to paint the doors and windows because he planned to replace them. Until Complainant filed the complaint with the Registrar, Mr. Schnepp did not know that Complainant wanted the doors and windows painted. Respondent painted the doors and windows to comply with the directive. 24. Complainant acknowledged that he had disclosed Ray Tombaugh, KTA-Tator, Inc. of Palm Springs, California as a witness who was “experienced in consulting with property owners regarding coatings—including paint—for buildings” and that “Mr. Tombaugh inspected Respondent’s work and can offer his opinions regarding the same.”[12] Complainant explained that, although he had consulted with Mr. Tombaugh, Mr. Tombaugh had not inspected the Office Plaza or rendered an opinion for the cause of the paint failing to adhere to the substrate. 25. Complainant testified that the roof on the Office Plaza was 12 years old and had a 20-year warranty. Complainant acknowledged that he had made roof repairs to the southwest corner of the roof of the unit in the southwest corner of the Office Plaza. 26. Ms. Harvey testified that there was cracking asphalt by the air conditioning units on the roof of the building that required repairs. The repairs were not a big deal and were performed by the maintenance man of the Office Plaza. 27. Mr. Schnepp testified that he prepared the proposals that Complainant submitted into evidence based in the Dunn Edwards’ Paint Specifications and his conversations with Complainant. Mr. Schnepp testified that Respondent’s usual process is to power-wash the entire surface of a structure to remove dirt, debris, and loose paint and to rake landscaping materials away from walls. Mr. Schnepp testified that Respondent may also scrape the surface to remove other loose material and spot-prime the surface to be painted. Respondent then masks all windows and other areas that are not to be painted and performs limited stucco repairs. Mr. Schnepp testified that, because the biggest part of a painting job is preparation, Respondent’s crews prep an area and then paint. In a project of this size, it is an ongoing process. 28. Mr. Schnepp testified that Respondent’s superintendent on the Office Plaza project was Victor Ybarra, who has worked for Respondent five or six years and is very competent. Mr. Schnepp testified that he visited the site several times a day and that Mr. Ybarra did not raise any concerns and that he did not see any special concerns with the substrate. Mr. Schnepp testified that, after the project was substantially complete, he did a final walk through with Complainant or his representative. Only a few areas around the windows and doors required touchup. 29. Mr. Schnepp testified that, a year later, he visited the jobsite after Complainant complained that the paint was peeling with Mr. Ybarra, Mr. Wheeler, and a manufacturer’s representative from Dunn Edwards and observed paint peeling down to the bare surface in several areas. Mr. Schnepp testified that he has never had this happen on any of Respondent’s projects on this scale and the peeling looked like it may have been caused by water intrusion. Mr. Schnepp testified that it was clear that the failure of the paint was due to causes beyond Respondent’s control, but that Complainant did not understand and so Mr. Schnepp contacted the Registrar. 30. Mr. Schnepp testified that, after Investigator Klein recommended that a third party inspect the project, he reached out to Dunn Edwards and requested that a chemist or someone in the laboratory analyze the problem. Respondent submitted Mr. Wheeler’s January 10, 2019 letter to Respondent that concluded that, “[o]verall, the top coating of SPARTASHIELD® Flat is in very good condition. All cases of delamination appear to be where old coatings are no longer flexible and able to withstand movement of various substrates.”[13] 31. Respondent also submitted an email dated October 30, 2018, from Moses Hidalgo, the chemist who analyzed the samples from various locations that were taken from the Office Plaza and concluded in relevant part as follows: All paint samples were comprised of four coatings. The backside of the paint samples was either a light orange or pink coating, with fragments of concrete. Again, the issue here might be moisture intrusion and the friability of the concrete substrate.

For all those samples taken from concrete walls and surfaces, it should be clear that the Spartashield is not the issue. Peeling is occurring several layers below, and in no case was the Spartashield delaminating from the previous coating. It is possible that previous coatings are now brittle due to age and do not have the flexibility of the new coating. As the new coating expands and contracts, the previous coatings delaminate and peel. It is also possible that there was lack of or poor surface prep several paint jobs ago.

The last few samples were collected from the back door on the second floor, which was painted with Aristoshield in a dark brown color. Numerous blisters had formed on the door, and when cut, they revealed a chalky, off-white coating left on the door. The blisters had a total of five coatings (including ASHL50) and measured an average of 13.8 mils thick. The backside of the blisters had a water-based orange/pink coating, which had begun to crack. None of the previous coatings appeared to be as dark as the Aristoshield, which might be part of the issue. That dark color would absorb more heat, and ultimately form blisters where a previous poorly adhering coating has delaminated.[14]

32. Respondent also submitted Technical Bulletin SD 2.0 from Glidden Professional, another paint manufacturer, which Mr. Schnepp testified he found on the internet. Multiple coat peeling was caused by loss of adhesion in an underlying paint in a multiple coat paint system, not by poor topcoat adhesion since the topcoat is still adhering to the paint film it was applied over. Multiple coat peeling could be caused by moisture trapped in the substrate, paint film buildup caused by excessive paint thickness, or a previous coat applied over a poorly prepared surface. Multiple coat peeling could be avoided before painting by inspecting and repairing any possible sources of moisture ingress, such as leaky roofs and gutters, scraping off all loose and peeling paint back to a sound surface, and cleaning the surface with liquid detergent to remove mildew, dirt, chalk, and foreign material.[15] 33. Mr. Schnepp testified that he offered Complainant an immediate solution in February 2018, because the peeling was not due to Respondent’s poor work or improper materials. 34. Pursuant to A.A.C. R4-9-117, administrative notice is taken of Respondent’s prior disciplinary history as shown on the Registrar’s public website on this date. Respondent’s License No. ROC 255123 is active and in good standing. No discipline has ever before been taken against the license and Complainant’s appears to be the only complaint pending against the license. CONCLUSIONS OF LAW 1. This matter lies within the Registrar’s jurisdiction.[16] 2. Complainant bears the burden of proof to establish cause to suspend or revoke Respondent’s license by a preponderance of the evidence.[17] Respondent bears the burden to establish affirmative defenses and factors in mitigation of the penalty by the same evidentiary standard.[18] 3. “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”[19] 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.”[20] 4. Respondent established that the cause of the widespread paint delamination at the Office Plaza project was not the quality of the Dunn Edwards paint that it used or its workmanship in applying the paint. Numerous other possible causes were suggested. Although Respondent bears the burden to establish affirmative defenses, Respondent did not establish a cause for the poor appearance of its work a year later or that it could not have addressed the cause for the subsequent poor appearance of its work before it performed the work. 5. 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 could have called any defects to the owner’s attention so that the owner can choose whether to pay for the defective surface to be corrected or, if the owner is not willing to pay to correct the surface, the subsequent contractor may obtain an explicit warranty disclaimer.[21] Moreover, after a second contractor has covered the original contractor’s work, fault cannot be apportioned between contractors because the second contractor’s work may have exacerbated or even caused the observed deficiency.[22] 6. The appearance of the surfaces at the Office Plaza were bad enough that the City of Phoenix inspector cited the owner of the complex. Although the causes of the poor appearance and failure of the Dunn Edwards paint to adhere to the substrate has not been established, Respondent did not present any evidence that Complainant hid the true state of previous paint jobs from Respondent or that Respondent could not have performed additional investigation to ensure that the surface would be adequate before Respondent power-washed, prepped, and painted the Office Plaza. Sometimes it may be necessary to do more than power- wash a surface to prepare it for painting. Indeed, Complainant credibly testified that he asked Respondent about the wisdom of sand- blasting the surfaces and the Glidden internet article suggested special preparation to improve a poor surface. Consumers rely upon licensed contractors to take whatever measures are necessary to perform work that complies with the Registrar’s and industry standards at least as long as the statutory two-year warranty period. 7. Because Respondent accepted the surface at the Office Plaza by painting it and did not obtain any explicit warranty disclaimer signed by Complainant,[23] Complainant established cause to suspend or revoke Respondent’s contractor’s License No. ROC 255123 under A.R.S. § 32- 1154(A)(3),[24] namely A.A.C. R4-9-108,[25] and A.R.S. § 32- 1154(A)(22)[26] by applying paint that failed to adhere to the substrate and by failing to correct the paint. 8. Because Respondent did not use its License No. ROC 300480 for roofing on the project, Complainant did not establish cause to suspend or revoke that license. RECOMMENDED ORDER Based on the foregoing, it is ordered that, on the effective date of the final order in this matter, License No. ROC 255123 of Respondent Ashton Holdings LLC DBA: Envision Painting shall be suspended for a period of three (3) business days. It is further ordered that the Respondent shall pay the sum of $250.00 as a civil penalty pursuant to A.R.S. § 32-1154(E). 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 shall 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, June 11, 2019.

/s/ Diane Mihalsky Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director Registrar of Contractors ----------------------- [1] The Registrar’s electronic file at pdf page 45; Respondent’s Exhibit 2. [2] See id. at pdf pages 30-31. [3] Id. at pdf page 76. [4] See id. at pdf page 50. [5] See id at pdf pages 20-26. [6] See Complainant’s Exhibit 3 at 5. [7] Id. at 8. [8] See Complainant’s Exhibit 1. [9] Complainant’s Exhibit 2 at 2. [10] Complainant’s Exhibit 1 at 7; Exhibit 2 at 7. [11] Id. [12] Complainant’s May 21, 2019 disclosure at 2. [13] Respondent’s Exhibit 3. [14] Respondent’s Exhibit 4 at 2. [15] See Respondent’s Exhibit 5. [16] See A.R.S. § 32-1154(A). [17] 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). [18] See A.A.C. R2-19-119(B)(2). [19] Morris K. Udall, Arizona Law of Evidence § 5 (1960). [20] Black’s Law Dictionary at page 1220 (8th ed. 1999). [21] No Arizona authority addresses the Registrar’s policy that a subsequent contractor who accepts a surface prepared by an earlier contractor also accepts full responsibility for the outcome. The policy is supported by case law from other jurisdictions. See generally cases cited at “Duty of Contractor to Warn Owner of Defects in Subsurface Conditions,” A.L.R.3d 1213 (1976). A contractor who knew or should have known of a defect in the surface does not perform construction in a workmanlike manner if the contractor fails to notify the owner of the defect and the construction later fails due to the defective surface. See, e.g., Parker v. Thornton, 596 So. 2d 854, 858 (Miss. 1992); Lewis v. Anchorage Asphalt Paving Co., 535 P.2d 1188, 1199 (Alaska 1975). The principle is based on common sense and a need for fair dealings between contractors and property owners:

For the requirements of public order and the obligation implicit in every contract that the work will be done in a good and workmanlike manner would compel us to reject a contention that an undertaker is not responsible for building upon a site which he knows to be defective. In such a case, the barest standards of care would require him to bring the defect to the attention of the owner before proceeding. The owner would then have an opportunity to make the indicated adjustment in the contract to provide against the defective soil condition of which he had no prior knowledge. . . .

Wurst v. Pruyn, 202 So. 2d 268, 271-72 (La. 1967) (citation omitted). [22] 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. The Registrar has no such statutory authority to apportion fault among homeowners and various contractors. [23] 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). [24] 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.” [25] 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.” [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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Office of Administrative Hearings 1740 West Adams Street, Lower Level Phoenix, Arizona 85007 (602) 542-9826