ALJDEC decisions subject to certification as final

2019A-03515-CHC-ROC · Registrar of Contractors · 2019-11-01

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: October 24, 2019, at 8:30 a.m. APPEARANCES: Tim Knight (“Complainant”) was represented by Evan L. Thompson, Esq., Thompson Krone, PLC; S M Concrete LLC appeared through Efrain Segoviano, its Member/Qualifying Party. 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 August 8, 2006, the Registrar issued License No. ROC 221116 for Specialty Residential R-9 Concrete to Respondent. 2. On or about July 11, 2019, Complainant filed a complaint with the Registrar that alleged that Respondent had performed poor work on its contract to install brick pavers for a driveway at Complainant’s house at 915 W. Landoran Lane, Tucson, Arizona 85737.[1] 3. Complainant attached to his complaint a copy of Respondent’s Proposal/ Estimate for the following scope of work: [piece] pavers round 6270 sqft, sm concrete llc proposes to grade area, place 2 2” [sleeve], place 1” sand and 3 [piece] pavers, with [mortar] around edges. INCLUDE all materials and labor.[2]

The price for the work was $31,350.00. The Proposal/Estimate did not include provisions for a down-payment, progress payment, or final payment, or an estimated date of completion and did not inform Complainant about his right to file a complaint with the Registrar for violations of A.R.S. § 32- 1154(A) within the time allowed by A.R.S. § 32-1155(A) or provide the Registrar’s telephone number and website address. 4. The Registrar assigned the complaint to its Investigator, John Smith, for investigation. On July 16, 2019, Investigator Smith emailed a letter to Respondent, informing it that its contract with Complainant did not contain the nine elements required by A.R.S. § 32-1158.[3] On July 16, 2019, Investigator Smith also emailed a letter to Respondent, informing it that it appeared that it had contracted beyond the scope of its R-9 concrete license by installing brick pavers at Complainant’s job, which work would require an R-21 or CR21 “Hardscaping and Irrigation Systems” license.[4] 5. On or about July 16, 2019, Respondent’s Qualifying Party/Member Efrain Segoviano sent an email to Investigator Smith, stating that he was not aware that Respondent needed a different license to install pavers, that installation of pavers required subgrade compaction that was similar to what was required for installation of concrete, that over the years, Respondent had undertaken a few jobs that involved installation of pavers, and that Respondent’s customers had always been pleased with its work. Mr. Segoviano stated that he would acquire a license that allowed him to install pavers.[5] 6. Investigator Smith performed a jobsite inspection on August 1, 2019.[6] On August 5, 2019, Investigator Smith issued a directive to Respondent to resolve Complainant’s complaint on or before 5:00 p.m. on August 22, 2019, in relevant part as follows: ***NOTE: THE RESPONDENT CONTRACTED THIS PROJECT OUTSIDE THE SCOPE OF THE RESPONDENT’S LICENSE.

THE RESPONDENT CANNOT PERFORM THE DIRECTED REPAIRS AND CAN ONLY RESOLVE THE COMPLAINT IN THE MANNER PRESCRIBED BY THE BOLD, ITALICIZED AND UNDERLINED PARAGRAPH ON THE LAST PAGE OF THIS DIRECTIVE*** . . . .

Complaint Item 1: “Bricks Sunken in Areas…Bricks are up, Down All Over!!” This was described to include: • Areas of sunken pavers, dips, sags • Areas of lippage exceeding 1/8 inch • Cracked / broken pavers • Rows of pavers not straight

Complaint Item 2: “Brick Discoloration” This was described to include: color variation and stained pavers.

Complaint Item 3: “No Sand Between Bricks” This was described to include: • Areas of pavers with no sand • Excessive and inconsistent gaps between [field] pavers and edge pavers . . . .

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.[7]

7. After Complainant informed Investigator Smith that Respondent had not complied with the August 5, 2019 directive, he referred the complaint to the Registrar’s Legal Department. On August 27, 2019, the Registrar issued a Citation against Respondent’s contractor’s license, charging cause to revoke or suspend the license under A.R.S. § 32-1154(A)(3), namely A.A.C. R4-9-108, A.R.S. § 32-1154(A)(12), namely A.R.S. § 32- 1158(A), A.R.S. § 32-1154(A)(16), and A.R.S. § 32-1154(A)(22).[8] 8. Mr. Segoviano filed a timely written answer to the Citation on Respondent’s behalf. Mr. Segoviano stated that Complainant initially had told Respondent that he was happy with the job, that Respondent had performed some repairs at Complainant’s request during the original installation, that Complainant had requested that Respondent perform additional work, and that Mr. Segoviano had noticed that the pavers needed repairs when he provided Respondent’s estimate for the additional work to Complainant. Mr. Segoviano stated that, after had provided repair dates to Complainant “and explained to him that if the damage was caused by packrats digging under that it will cost him labor and material,” Complainant filed the complaint with the Registrar. Mr. Segoviano stated that he believed the driveway could be repaired for $5,000.00, but that Complainant demanded enough money to replace the driveway.[9] 9. The Registrar referred the matter to the Office of Administrative Hearings, an independent state agency, for an evidentiary hearing. A hearing was held via videoconference from the Registrar’s Tucson office on October 24, 2019. Complainant submitted five exhibits and testified on his own behalf. Mr. Segoviano testified on Respondent’s behalf. Investigator Smith also testified. Hearing Evidence 10. Complainant testified that the job involved installation of a large number of pavers to create a circular driveway around a fountain at his house. Complainant testified that the driveway used to be straight but now is the largest in the neighborhood. 11. Investigator Smith testified Respondent did not attend the August 1, 2019 jobsite inspection, although he saw Mr. Segoviano in his truck on a road near Complainant’s house. Investigator Smith testified consistently with the August 5, 2019 directive. Investigator Smith testified that he performed a prehearing jobsite inspection on October 24, 2019, which Respondent did not attend, and that Complainant informed him that Respondent had not offered a financial settlement to resolve the complaint and that no corrective work had been performed. 12. Investigator Smith testified that there are extensive areas of sunken pavers and dips and sags of up to 1-1/2” on the surface, as well as excess lippage and broken pavers. Investigator Smith testified that the areas of settlement were getting worse. 13. Investigator Smith testified that more than 50% of the pavers should not have been used because they were stained, discolored, or had excess efflorescence. Investigator Smith testified that because most of the pavers were not usable, he did not think the condition of the pavers could be remedied without pulling up and replacing all the pavers. 14. Investigator Smith reiterated that the job was beyond the scope of Respondent’s R-9 concrete license. Because Respondent was not licensed to do the job, it could not perform repairs but could only reach a financial settlement with Complainant for what Complainant would have to pay an appropriately licensed contractor to repair the work. 15. Complainant testified that Respondent chose and purchased the bricks used on the job. It was raining when the bricks were delivered and Complainant did not see the extent of the discoloration until after Respondent installed the brick pavers. Complainant testified that, after Mr. Segoviano stated that some of the deficiencies in the job could have been caused by gophers, Complainant said that gophers did not cause the color variation and efflorescence in the bricks. Complainant testified that more than 90% of the driveway was obviously deficient. 16. Complainant testified that after he filed the complaint with the Registrar, he was able to contact Paul Thomas at Arizona Best Block, the manufacturer of the brick pavers. Mr. Thomas informed him that the manufacturer’s responsibility was “limited to replacement of material deemed unacceptable prior to installation.” Mr. Thomas stated that, if Mr. Segoviano had contacted Arizona Best Block regarding the materials before installation, “he would have been instructed to contact ABC Supply since he bought the pavers from them” and if ABC had asked Arizona Best Block to inspect the block, it would have visited the site to evaluate a possible warranty claim.[10] 17. Complainant testified that he asked other appropriately licensed contractors to inspect the job and to submit bids for repair. Complainant submitted a bid from Beyond Brick, License No. ROC 281336, for $33,175.00 to remove the existing pavers and replace them with new pavers.[11] 18. Mr. Segoviano testified consistently with Respondent’s written answer to the Citation. Mr. Segoviano also testified that he and Complainant both knew that the driveway project was beyond the scope of Respondent’s C-9 concrete license. Mr. Segoviano testified that the driveway could be repaired and did not have to be replaced. Mr. Segoviano testified that he was trying to schedule repairs when Complainant filed the complaint with the Registrar. 19. Pursuant to A.A.C. R4-9-117, administrative notice is taken of Respondent’s disciplinary history on the Registrar’s public website on this date. Respondent’s License No. ROC 221116 is current and in good standing. No discipline appears on the current record and Complainant’s complaint appears to be the only one pending against Respondent’s license. CONCLUSIONS OF LAW 1. This matter lies within the Registrar’s jurisdiction.[12] 2. Complainant bears the burden of proof to establish cause to suspend or revoke Respondent’s license by a preponderance of the evidence.[13] Respondent bears the burden to establish factors in mitigation of the penalty and affirmative defenses by the same evidentiary standard.[14] 3. “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”[15] 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.”[16] 4. Respondent’s contract with Complainant did not include the nine elements required by A.R.S. § 32-1158.[17] Cause potentially exists to suspend or revoke Respondent’s contractor’s license under A.R.S. § 32-1154(A)(12)[18] for a violation of A.R.S. § 32-1158(A). 5. The scope of an R-9 license, which is the only license that Respondent possessed when it made and performed the contract, is limited to installing and repairing concrete, concrete products, and accessories common to the industry.[19] None of the work that Respondent performed that is at issue here was within the scope of its R-9 license. As Investigator Smith testified, installation of concrete pavers for a driveway requires an R-21[20] or CR21 license.[21] 6. A.R.S. § 32-1154(A)(16) includes among the grounds for suspension, revocation, and other disciplinary action against a contractor’s license, “[k]nowingly contracting beyond the scope of the license or licenses of the licensee.” “‘Knowingly’ imports only a knowledge that the facts exist which bring the act or omission within the provisions of the statute using such word. It does not require any knowledge of the unlawfulness of the act or omission.”[22] “‘Knowingly’ means, with respect conduct or circumstance described by a statute defining an offense, that a person is aware or believes that his or her conduct is of that nature or that the circumstance exists. It does not require any knowledge of the unlawfulness of the act or omission.”[23] It has long been the law in Arizona and elsewhere, however, that “’ [n]otice of facts and circumstances which would put a man of ordinary prudence and intelligence on inquiry is . . . equivalent to knowledge of all the facts a reasonably diligent inquiry would disclose.’”[24] 7. Regardless of whether or not Mr. Segoviano actually knew installation of concrete pavers was beyond the scope of Respondent’s R-9 concrete license, as a licensed contractor, he should have known. Cause therefore exists to suspend or revoke Respondent’s license under A.R.S. § 32-1154(A)(16). Because the work was beyond the scope of Respondent’s C-9 concrete license, it was not entitled to an opportunity to repair its workmanship deficiencies, either before or after Complainant filed the complaint with the Registrar. 8. The mere fact that Respondent contracted beyond the scope of its R-9 license does not establish that its workmanship fell below the Registrar’s or industry workmanship standards. However, Investigator Smith’s Directive, jobsite inspection photographs, and hearing testimony establish that Respondent’s workmanship in installing the pavers for the driveway was deficient in the three ways noted in the Directive. Therefore, Complainant established cause to suspend or revoke Respondent’s contractor’s license under A.R.S. § 32- 1154(A)(3),[25] namely, A.A.C. R4-9-108.[26] 9. Complainant also established that Respondent failed to resolve the three items listed on the Directive before the deadline in the directive. Therefore, Complainant established cause to suspend or revoke Respondent’s contractor’s license under A.R.S. § 32- 1154(A)(22).[27] Although Respondent was ordered to make a financial settlement with Complainant to remedy the workmanship violations for work performed beyond the scope of its contractor’s license, the issue of the proper measure of damages is beyond the scope of this workmanship complaint. RECOMMENDED ORDER Based on the foregoing, IT IS ORDERED that on the effective date of the final order in this matter, License No. ROC 221116 of Respondent S M Concrete LLC shall be suspended for a period of ten (10) business days. IT IS FURTHER ORDERED that the Registrar require Respondent to pay the sum of $250.00 as a civil penalty pursuant to A.R.S. § 32-1154(E). IT IS FURTHER ORDERED that if Respondent fails to pay the entire amount of the civil penalty on or before thirty days following the effective date of the Registrar’s 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. IT IS FURTHER ORDERED that, on or before thirty (30) days after the effective date of the final order, Respondent shall provide its Proposal/Estimate form to the Registrar to demonstrate that it has amended its Proposal/Estimate form to include the nine terms required by A.R.S. § 32-1158(A). If Respondent fails to establish to the Registrar that it has brought its Proposal/Estimate form into compliance with A.R.S. § 32-1158(A) within thirty days, its contractor’s license shall be suspended until it demonstrates that it has done so. 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 1, 2019. /s/ Diane Mihalsky Administrative Law Judge Transmitted electronically to: Jeffrey Fleetham, Director Registrar of Contractors ----------------------- [1] See the Registrar’s electronic file at pdf page 88-89. [2] Id. at pdf page 24. Complainant also provided Respondent’s invoices for the work, which also did not include the terms omitted from the Proposal/Estimate. See id. at pdf pages 90, 91; see also Complainant’s Exhibit 1. [3] See the Registrar’s electronic file at pdf page 72-73. [4] See the Registrar’s electronic file at pdf page 74. [5] See the Registrar’s electronic file at pdf page 26. [6] See the Registrar’s electronic file at pdf pages 19-20 (jobsite inspection notes). [7] The Registrar’s electronic file at pdf pages 15-16. [8] See the Registrar’s electronic file at pdf pages 146-150. [9] See the Registrar’s electronic file at pdf pages 174-175. [10] Complainant’s Exhibit C-3 at 2-4. [11] See Complainant’s Exhibit C-4. [12] See A.R.S. § 32-1154(A). [13] 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). [14] See A.A.C. R2-19-119(B)(2). [15] Morris K. Udall, Arizona Law of Evidence § 5 (1960). [16] Black’s Law Dictionary at page 1220 (8th ed. 1999). [17] A.R.S. § 32-1158(A) provides that any contract in an amount of more than one thousand dollars entered into between a contractor and the owner of a property to be improved after December 31, 2007 must be in writing and must include the following minimum terms: 1. The name of the contractor and the contractor’s business address and the license number. 2. The name and mailing address of the owner and the jobsite address or legal description. 3. The date the parties entered into the contract. 4. The estimated date of completion of all work to be performed under the contract. 5. A description of the work to be performed under the contract. 6. The total dollar amount to be paid to the contractor by the owner for all work to be performed under the contract, including all applicable taxes. 7. The dollar amount of any advance deposit paid or scheduled to be paid to the contractor by the owner. 8. The dollar amount of any progress payment and the stage of construction at which the contractor will be entitled to collect progress payments during the course of construction under the contract. 9. That the property owner has the right to file a written complaint with the registrar for an alleged violation of section 32-1154, subsection A. The contract shall contain the registrar’s telephone number and website address and shall state that complaints must be made within the applicable time period as set forth in section 32-1155, subsection A. The information in this paragraph must be prominently displayed in the contract in ten point bold type. . . . [18] A.R.S. § 32-1154(A)(12) includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license, “[f]ailure in any material respect to comply with this chapter.” [19] See A.A.C. R4-9-103(B). [20] The scope of an R-21 license for Hardscaping and Irrigation Systems, in relevant part, is as follows: This classification allows the licensee to install, alter, and repair: 1. Non-loadbearing concrete 2. Uncovered patios, walkways, driveways made of brick, stone, pavers or gravel . . . . 9. Water features that are not attached to swimming pools; including any necessary: electrical wiring of 120 volts or less, connection to potable water lines, backflow prevention devices, hose bibs, excavating, trenching, boring, backfilling, or grading. A.A.C. R4-9-103. [21] The scope of an CR21 Hardscaping and Irrigation Systems license is as follows: This classification allows the scopes of work permitted by the commercial C-21 Hardscaping and Irrigation Systems and the residential R-21 Hardscaping and Irrigation Systems licenses. Upon the effective date of these rules, existing CR21 Landscaping and Irrigation Systems licenses will be reclassified as CR-21 Hardscaping and Irrigation Systems. A.A.C. R4-9-104. [22] A.R.S. § 1-215. [23] A.R.S. § 13-105(6)(b). [24] Maricopa Utilities Co. v. Cline, 60 Ariz. 209, 214, 134 P.2d 156 (1943) (quoting Schneider v. Henley, 61 Cal. App. 758, 215 P. 1036, 1038). [25] 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.” [26] 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.” [27] 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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