ALJDEC decisions subject to certification as final

2018A-3190-ROC · Registrar of Contractors · 2019-01-08

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: December 20, 2018 APPEARANCES: Richard Gramlich, Esq. for Complainant; Todd Wenger for Respondent ADMINISTRATIVE LAW JUDGE: Thomas Shedden

FINDINGS OF FACT 1. On November 13, 2018, the Registrar of Contractors (“ROC”) issued a Notice of Hearing setting the above-captioned matter for hearing on December 20, 2018 at the Office of Administrative Hearing. 2. Respondent Matterhorn Industries LLC, holds license No. 297883 issued by ROC. Todd Richard Wenger is the qualifying party and member of the LLC. 3. The Notice of Hearing shows that the hearing was set to consider the charges made in the Citation and complaint.[1] 4. Through the Citation, ROC alleges that Matterhorn Industries may have violated Ariz. Rev. Stat. sections 32-1154(A)(3), (A)(12) and (A)(22). The Citation shows that if the Administrative Law Judge finds that any of the alleged charges are valid, ROC may suspend or revoke Matterhorn Industries’ license. The Citation shows that ROC could not determine whether Matterhorn Industries has actually committed any of the alleged violations, which is why the matter was set for hearing. The Citation also shows that the Citation itself is not evidence that Matterhorn Industries has violated any statute or rule. 5. In January 2016, Complainant Sheryl A. Castaneda contracted to have Matterhorn Industries construct a house. The original contract price was $1,176,668. 6. On July 11, 2018, Ms. Castaneda filed with ROC a complaint of approximately 235 pages against Matterhorn Industries. 7. In response to Ms. Castaneda’s complaint, ROC Investigator Timothy Pennington conducted a jobsite inspection on August 8, 2018. 8. On August 9, 2018, ROC issued to Matterhorn Industries a Directive that ordered Matterhorn Industries to correct the following eleven items[2] by appropriate means: item # 2 reseeding, including at the leach field; item # 6 finish at the base of the patio posts; item # 8 correct location of gutter allowing water to enter at doggie door; item # 10 correct interior paint; item # 11 exposed plywood and missing granite in kitchen; item # 16 install square shower drains in bronze; item # 17 grout in shower walls is more than one color; item # 19 correct wood flooring; item # 25 patch and paint hole for thermostat; item # 26 clean-up concrete debris; and item # 28 trim for sink-faucet is in the grout. 9. The Directive shows that ROC had determined that any other workmanship violations alleged in Ms. Castaneda’s complaint were unsubstantiated. 10. Through her opening statement, Ms. Castaneda acknowledged that the alleged workmanship violations for which Matterhorn was cited are minor in nature and she explained that her real concern was related to the cost of the project, not the workmanship issues.[3] 11. Ms. Castaneda acknowledged that as of the date of the hearing ten of the alleged workmanship violations had been completed to her satisfaction. 12. The item that had not been completed to Ms. Castaneda’s satisfaction was related to the color of the grout in the shower walls, which she believed was not consistent.[4] Ms. Castaneda testified that she expected to see the grout that she had selected. 13. Mr. Wenger’s opinion was that the grout had been corrected to meet the workmanship standards.[5] Mr. Wenger testified to the effect that the grout used was the grout that Ms. Castaneda had chosen and that the package warns that the color of the grout may vary. He also explained that he was of the opinion that some of the purported color variation was actually the result of contrasts created by the various colors in the stone used in the showers. 14. Mr. Wenger explained that Matterhorn was nevertheless willing to conduct additional work on the grout to ensure that Ms. Castaneda found the result to be aesthetically pleasing. 15. As applicable to this matter, the workmanship standard for grout reads: “10. PD Grout discoloration. AT Some discoloration is inherent in all Portland cement based products. Discoloration may occur due to job-site conditions, individual characteristics of ceramic tile, variances in the rate of hydration, etc. Excessive discoloration is unacceptable. … CR Contractor should make necessary repairs within the first year.” 16. Mr. Pennington’s opinion was that at the time of his August 8, 2018 jobsite inspection, the grout did not meet the workmanship standard. 17. The Directive required Matterhorn Industries to provide ROC with written proof that it had made the ordered corrections by no later than 5:00 p.m. August 27, 2018. Mr. Pennington testified that he set the deadline by using the statutory minimum allowable time of fifteen days plus two for mailing of the Directive. 18. Matterhorn acknowledges that it did not comply with ROC’s Directive within the specified time, but asserts that it has a valid justification in that ROC did not respond to Mr. Wenger’s requests for clarification regarding the scope of the Directive, Matterhorn’s concern about the safety of its subcontractors, and that Ms. Castaneda was not initially responsive to Matterhorn Industries’ attempts to make the ordered repairs after Mr. Pennington informed the parties he was going to issue a directive. 19. Mr. Wenger also explained that it took time for Matterhorn to get all the subcontractors scheduled. 20. On August 10, 2018, prior to receiving a written copy of the Directive, one of Matterhorn Industries’ subcontractors appeared at the house to begin making the repairs that ROC ordered it to complete. At that time, a dispute arose and Ms. Castaneda told the workers not to return to the site until the parties received a written notice from ROC detailing the scope of the required repairs. 21. Because Matterhorn Industries’ subcontractors were of the opinion that Ms. Castaneda was behaving aggressively and because her dog, which had previously bitten a subcontractor, acted in an aggressive manner, on August 10, 2018, Mr. Wenger sent Mr. Pennington an email asking him to inform Ms. Castaneda that such behavior was not acceptable, and requesting that the deadline for compliance be extended and that Matterhorn be informed when it was allowed to return to Ms. Castaneda’s house. 22. Mr. Pennington did not respond to Mr. Wenger’s August 10, 2018 email. 23. Through a letter to Mr. Pennington dated August 15, 2018, Mr. Wenger requested clarification regarding the Directive’s order regarding complaint item # 2, and he notified ROC that Matterhorn wished to appeal ROC’s order that it correct items # and # 23. Mr. Wenger also informed Mr. Pennington that Matterhorn Industries was working to correct all other items ROC ordered it to correct. 24. In his letter of August 15th, regarding item # 2 (reseeding at the leach field), Mr. Wenger expressed concern that Ms. Castaneda was requesting gravel, not grass, which was not consistent with the engineer’s specifications and was not included in the plans or budget for the project. Mr. Wenger asked Mr. Pennington to clarify the intent of the Directive regarding item #2. 25. In his letter of August 15th, regarding item # 16 (replacement of shower-drain covers), Mr. Wenger explained that the plans called for round covers, which is what had been installed. Mr. Wenger explained that Matterhorn would however replace the round covers with ones in the appropriate bronze finish. 26. In his letter of August 15th, regarding item # 23 (patch and paint a hole created when a thermostat was moved), Mr. Wenger explained that the thermostat was moved at Ms. Castaneda’s request and that she, and not, Matterhorn, had ordered the subcontractor to do that work. 27. Mr. Pennington did not respond to Mr. Wenger’s August 15, 2018 letter. 28. Through an email to Mr. Pennington dated August 27, 2018, Mr. Wenger informed Mr. Pennington that all items on the Directive had been completed except the three items referenced in Matterhorn Industries’ letter of August 15th and item #11, which was scheduled to be corrected on August 30, 2018. Mr. Wenger informed Mr. Pennington that Matterhorn had not received a response to its August 15th letter and he requested that Mr. Pennington advise Matterhorn regarding the three items referred to in that letter. 29. Mr. Pennington did not respond to Mr. Wenger’s August 27, 2018 email. 30. Through an email to Mr. Pennington dated September 22, 2018, Mr. Wenger informed Mr. Pennington that all items on the Directive had been completed except the three items referenced in Matterhorn Industries’ letter of August 15th, and he requested Mr. Pennington to advise Matterhorn regarding those three items. 31. On September 24, 2018, Mr. Pennington responded to Mr. Wenger’s email of September 22nd and informed Mr. Wenger that “[t]here is no appeal process.” 32. Mr. Pennington testified to the effect that there is no workmanship standard requiring grass over a leach field (item #2) and that he considered that to be a workmanship violation because Matterhorn Industries had agreed to reseed that area. 33. Regarding the hole created when the thermostat was moved (item # 25), Mr. Pennington testified to the effect that Matterhorn was responsible for the repairs because it was his opinion that the subcontractor moved the thermostat to comply with the plans. 34. Mr. Pennington testified to the effect that the remaining items (# 6, # 8, # 10, # 11, # 16, # 19, # 26, and # 28) did not meet the workmanship standards at the time of his jobsite inspection on August 8, 2018. At the hearing, Matterhorn Industries did not dispute that these issues were workmanship violations and it accepted that it had been responsible to ensure that any required corrections were made. CONCLUSIONS OF LAW 1. Unless otherwise provided by law, a party asserting a claim, right, or entitlement bears the burden of proof; a party asserting an affirmative defense has the burden of establishing the affirmative defense. The standard of proof on all issues in this matter is that of a preponderance of the evidence. Ariz. Admin. Code § R2-19-119. 2. “At a hearing on an agency action to suspend, revoke, terminate or modify on its own initiative material conditions of a license or permit, the agency has the burden of persuasion.” Ariz. Rev. Stat. § 41-1092.07(G)(2). 3. “At a hearing on an agency's imposition of fees or penalties or any agency compliance order, the agency has the burden of persuasion.” Ariz. Rev. Stat. § 41-1092.07(G)(3). 4. A preponderance of the evidence is: The 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.

Black’s Law Dictionary 1373 (10th ed. 2014). 5. The scope of the hearing is limited to the issues set out in the Notice of Hearing. See Ariz. Rev. Stat. § 41-1092.07(F)(6). 6. Statutes should be interpreted to provide a fair and sensible result. Gutierrez v. Industrial Commission of Arizona, 226 Ariz. 395, 249 P.3d 1095 (2011)(citation omitted); State v. McFall, 103 Ariz. 234, 238, 439 P.2d 805, 809 (1968) ("Courts will not place an absurd and unreasonable construction on statutes."). 7. “Statutes shall be liberally construed to effect their objects and to promote justice.” Ariz. Rev. Stat. § 1-211(B). 8. The purpose of the Registrar’s licensing statutes is to protect the public from unscrupulous, unqualified, and financially irresponsible contractors. See Aesthetic Property Maintenance v. Capital Indem. Corp., 183 Ariz. 74, 900 P. 2d 1210 (1995). 9. There was no substantial evidence adduced to show that Matterhorn Industries is unscrupulous, unqualified or financially irresponsible. 10. The Administrative Law Judge may consider ROC’s administrative record. See Ariz. Admin. Code § R4-9-118. 11. Ariz. Rev. Stat. section 32-1154(A) provides that The holder of a license or any person listed on a license pursuant to this chapter shall not commit any of the following acts or omissions: ***** 3. Violation of any rule adopted by the registrar.

***** 12. Failure in any material respect to comply with this chapter. ***** 22. Failure 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. The written directive shall set forth the time within which the contractor is to complete the remedial action. The time permitted for compliance shall not be less than fifteen days from the date of issuance of the directive. A license shall not be revoked or suspended nor shall any other penalty be imposed for a violation of this paragraph until after a hearing has been held.

12. Ariz. Admin. Code section R4-9-108(A) provides that “A contractor shall perform all work in a professional and workmanlike manner.” 13. Ariz. Rev. Stat. section 32-1154(E) provides that ROC may impose a civil penalty of not to exceed five hundred dollars on a contractor for each violation of Ariz. Rev. Stat. section 32- 1154(A)(22). 14. Mr. Pennington’s testimony is sufficient to show by a preponderance of the evidence that Matterhorn Industries violated Ariz. Rev. Stat. section 32-1154(A)(3) in that items # 6, # 8, # 10, # 11, # 16, # 17, # 19, # 25, # 26, and # 28 did not meet the workmanship standards. It has not been shown that Matterhorn violated a workmanship standard as related to item # (reseeding). 15. Because Matterhorn Industries has violated Ariz. Rev. Stat. section 32-1154(A)(3), ROC has authority to discipline its license. 16. In this matter however, no penalty should be assessed considering that by Ms. Castaneda’s own admission the workmanship issues were minor, Matterhorn accepted responsibility to make the ordered corrections and, with the possible exception of the grout, it had done so by the time of the hearing. 17. Regarding the grout, no penalty should be imposed against Matterhorn because the preponderance of the evidence shows that Matterhorn used the grout that Ms. Castaneda wanted used, the workmanship standard is subjective and recognizes that the color of grout will vary and that the variation in stone color will affect the grout’s appearance, Ms. Castaneda objected to Matterhorn’s request for a continuance to allow ROC to re- inspect the grout, and Matterhorn is willing to continue to work with Ms. Castaneda to ensure that she finds the grout to be aesthetically pleasing. 18. Matterhorn acknowledges that it did not comply with the Directive in the time ROC allowed, but argues that it has a valid justification for that failure. ROC did not respond to Matterhorn’s repeated requests for clarification as to the scope of the Directive and its concern about Ms. Castaneda’s dog. In addition, ROC allowed Matterhorn only the minimum amount of time to make the repairs and the evidence of record does not show that this was a reasonable amount of time. These facts provide a valid justification for Matterhorn Industries’ failure to comply with the Directive in the time set out in the Directive. Consequently, the preponderance of the evidence does not show that Matterhorn Industries violated Ariz. Rev. Stat. section 32- 1154(A)(22). 19. If one were to conclude that Matterhorn’s failure to timely comply with the Directive was not justified, these factors, coupled with Ms. Castaneda’s initial refusal to allow Matterhorn access to make the ordered corrections, are sufficiently mitigating to warrant a finding that no civil penalty should be imposed. 20. ROC also alleged that Matterhorn violated Ariz. Rev. Stat. section 32-1154(A)(12) by having violated section 32-1124. There was no substantial evidence adduced in support of this allegation. 21. Consequently, the Citation and complaint on which it is based should be dismissed.

RECOMMENDED ORDER IT IS ORDERED that on the effective date of the final Order in this matter, case number 2018-3190 is dismissed. 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 is forty days after the date of that certification.

Done this day, January 8, 2019.

/s/ Thomas Shedden Thomas Shedden Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director Registrar of Contractors

----------------------- [1] The Notice of Hearing does not provide the date the Citation was issued or when the complaint was issued or filed. There appears to be no dispute that the Citation was issued on October 20, 2018 or that the complaint was filed on July 11, 2018. [2] In its Directive, ROC referred to the items using numbering from Ms. Castaneda’s complaint. [3] ROC’s administrative record shows that through their contract, the parties had agreed that any such dispute was to be resolved through arbitration. [4] Ms. Castaneda had entered into evidence copies of photos of the showers, but she acknowledged that some of those copies did not accurately show the color of the stone tiles. Consequently, these copies cannot be considered to be reliable evidence. [5] Matterhorn Industries requested a continuance to allow ROC to evaluate the grout. Ms. Castaneda objected to that request and consequently the request was denied.

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