ALJDEC decisions subject to certification as final

2020A-01795-CHC-ROC · Registrar of Contractors · 2020-12-31

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Lakeside Terrace HOA,

COMPLAINANT

Atlas Construction Group LLC,

DBA: Camelback Roofing,

License No. ROC 295244,

RESPONDENT

No. 2020A-01795-CHC-ROC

ADMINISTRATIVE LAW JUDGE

DECISION

HEARING: November 17, 2020

APPEARANCES: Chandler W. Travis, Esq. for Complainant; Vanessa Johnson for Respondent

ADMINISTRATIVE LAW JUDGE: Thomas Shedden

FINDINGS OF FACT

On September 14, 2020, the Registrar of Contractors (“ROC”) issued a Notice of Hearing setting the above-captioned matter for hearing on October 15, 2020 at the Office of Administrative Hearings. The matter was continued by agreement of the parties and the hearing was conducted on November 17, 2020.

Through the Notice of Hearing, ROC alleges that Respondent Atlas Construction Group LLC, d.b.a. Camelback Roofing may have violated Ariz. Rev. Stat. sections 32-1154(A)(3) and (A)(22).

Respondent holds license No. 295244 issued by ROC; Luke Johnson is Respondent’s qualifying party and a member of the LLC.

Complainant is Lakeside Terrace HOA.

Respondent presented the testimony of Mr. Johnson and Matthew Santisteven, who has 33 years’ experience in roofing industry; Lakeside presented no witnesses. ROC investigator Daniel Edwards also testified.

In May 2017, Atlas and Lakeside entered a contract in which Atlas agreed to recoat the existing foam roofs on fourteen of Lakeside’s buildings. A foam roof consists of four layers: a primer, the foam, a base coating, and a top coating. The coating is to protect and seal the foam.

The parties’ contract was limited to recoating the roofs (with a top coat only) and did not include adding foam or making structural modifications to the roof, but Mr. Johnson acknowledged that Atlas did make repairs to damaged foam in some areas, which is common for roofs as old as those at issue.

The contract divided the work into two phases, with each phase covering seven roofs.

The contract shows that the work on Phase 1 would start on May 16, 2017, with an estimated finishing date of June 1, 2017. Phase 1 covered buildings 6, 7, 8, 10, 11, 12, and 14.

Regarding Phase 2, the contract shows that the work would be started and completed in 2018, without specifying any day or month.

The contract shows that the total cost for both phases would be $99,388.06, which was $93,205.20 for the work and tax of $6122.86.

The contract provided a payment schedule for Phase 1, but no details or information about payments for Phase 2.

Regarding Phase 1, the contract required Lakeside to make a down payment of $19,877.61, which was shown to be 40% of 50% of the total cost of both phases, a progress payment of $20,000 after the first five buildings, and the balance of $9816.72 upon “completion.”

Atlas completed the Phase 1 work, Lakeside made all required payments to Atlas, and on August 7, 2017 Atlas issued to Lakeside a Warranty for Phase 1 (buildings 6, 7, 8, 10, 11, 12, and 14).

In 2018, Atlas completed the Phase 2 work, and on August 7, 2018 it issued to Lakeside a Warranty for that work (buildings 1, 2, 3, 4, 5, 9, and 13).

On April 9, 2020, Lakeside filed with ROC a complaint against Atlas alleging that Atlas had applied bad coating to the roofs.

On May 4, 2020, Mr. Edwards inspected seven units, all on West McRae Way. Mr. Edwards determined that there was evidence of ponding water and leaks at all seven units, but that three of the units (9516, 9518 and 9434) had been altered after Atlas completed its work. Consequently, ROC concluded that those three units could not be considered for any potential workmanship violations.

The other units Mr. Edwards inspected on May 4, 2020 were 9455 in building 7, 9446 in building 6, 9504 in building 4, and 9506 in building 4.

Buildings 6 and 7 were completed during Phase 1 and Building 4 was completed in Phase 2.

Mr. Edward’s opinion was that the leaks and other issues were the result of the crickets not providing a sufficient slope for the water to drain from the roof. Mr. Edward’s jobsite investigation notes show that Mr. Johnson had agreed that the roofs did not have an adequate slope, but at the hearing Mr. Johnson testified to the effect the slope was adequate and that the issues were the result of inadequate maintenance, specifically a failure to keep the roofs clear of pine needles.

An excessive amount of pine needles can impede drainage leading to ponding on a roof. Ponding or standing water on a roof can cause damage to the roof’s coating, which can occur almost immediately.

Mr. Santisteven went on only one roof (building 4) and his opinion was that that roof had sufficient slope, but the amount of debris on the roofs could cause or at least contribute to the ponding on the roof. His opinion was bolstered by his finding that when the roofs were being cleared of pine needles, the leaking stopped.

Mr. Santisteven’s opinion was that pine needles on a roof are not considered ordinary wear and tear because the needles block the scuppers.

On May 14, 2020, ROC issued to Atlas a Directive (the first Directive) in which it provided that although Atlas had not installed the crickets, it was nevertheless responsible to correct that issue because it had “install[ed a] roof over [the] improper crickets” and had therefore accepted the roof surface.

The first Directive required Atlas to remedy the leaks and “roof issues,” including altering the slope, by 5:00 p.m. June 13, 2020.

On June 24, 2020, ROC notified Atlas that Lakeside had filed what ROC considered to be an addendum to its complaint and that ROC would be conducting an inspection on July 2, 2020.

On July 2, 2020, Mr. Edwards conducted a jobsite inspection of units 18626 and 18622, both located on North 94th Avenue, and he conducted a compliance jobsite inspection of units 9455, 9446, 9504, and 9506.

Units 18626 and 18622 are located in building 12, which was completed as part of Phase 1.

During his July 2, 2020 jobsite inspection, Mr. Edwards determined that units 18626 and 18622 showed the same deficiencies as units 9455, 9446, 9504 and 9506, and his opinion was that the cause was improper drainage.

During his July 2, 2020 compliance jobsite inspection, Mr. Edwards found that Atlas had performed work at units 9455, 9446, 9504, and 9506, but the issues were not resolved and the drainage was still inadequate.

On July 6, 2020, ROC issued to Atlas a second Directive in which it provided that although Atlas had not installed the crickets on building 12, because it had “applied a foam roof coating to roofs with improper grading and crickets” and it had not notified Lakeside “of potential pre-existing drainage issues prior to applying a roof coating to these units, Respondent has accepted the surface and is responsible for correcting any potential drainage issues on these units.”

The second Directive required Atlas to remedy the leaks and ponding and to correct “any potential drainage issues” by 5:00 p.m. July 26, 2020.

On August 6, 2020, Mr. Edwards conducted a compliance jobsite inspection of all six units and concluded that the repairs ROC order Atlas to make, including correcting any issues with the drainage, had not been made, and that the coating Atlas had installed was showing signs of significant degradation.

ROC issued to Respondent a Citation dated August 18, 2020, through which ROC alleges that Respondent may have violated Ariz. Rev. Stat. sections 32-1154(A)(3) and (A)(22).

At the hearing, Mr. Edwards affirmed his prior opinions that the deficiencies were the result of inadequate slopes causing poor drainage and that Atlas was responsible to correct the slopes and drainage because it had accepted the surface when it performed its work. Mr. Edwards made clear however, that his opinion regarding acceptance of the surface was based solely on ROC’s workmanship standard for foam roof systems and was not based on ROC’s substantive policy statement SPS 2017.01.

Mr. Edwards was of the opinion that correcting the poor drainage would require making structural changes to the buildings, but he also noted that it might be possible to make the corrections using foam.

At the hearing, in response to Atlas’s argument that the complaints related to the Phase 1 units/buildings had been filed more than two years after the completion of that work, Mr. Edwards testified to the effect that he had spoken to his supervisor and he and the supervisor were in agreement that because the parties had only one contract, the applicable date for purposes of the statute of limitations was August 2018 when Phase 2 was completed.

Mr. Johnson testified to the effect that at the time of the parties’ contract he had not been aware that the roofs had any drainage issues, and as of the hearing date his opinion was that the grade was “decent” and the problems were being caused by an excessive amount of pine needles on the roofs that were impeding drainage from the roof.

Mr. Johnson testified as to Atlas’s willingness to correct any deficiencies with Atlas’s work, but that did not include deficiencies caused by the pine needles.

Mr. Johnson testified to the effect that Atlas had made numerous attempts to resolve Lakeside’s concerns, which he characterized as attempts to appease Lakeside and ROC.

An email exchange between Mr. Johnson Lakeside’s property manager shows that Lakeside was aware of the need to clean the roofs and usually did so by blowing the pine needles off the roof.

Atlas and Lakeside had entered into an agreement or agreements through which Atlas cleaned the roofs of pine needles, initially twice a year and then quarterly. The record shows that the first cleaning was in or about August 2018 and the last one in December 2019 or January 2020, and it appears that only three cleanings were actually done.

Mr. Johnson noted that during the time since the parties entered the original contract, he had dealt with at least four different property managers, which apparently stood in the way of the parties agreeing to more frequent cleaning of the roofs.

In Mr. Johnson’s opinion, cleaning the roofs of pine needles four times a year was not sufficient to prevent the drainage problems and that cleaning would need to be conducted more frequently, or perhaps the trees, which are fifty to sixty feet tall, could be removed.

CONCLUSIONS OF LAW

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.

“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).

“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).

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).

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.").

“Statutes shall be liberally construed to effect their objects and to promote justice.” Ariz. Rev. Stat. § 1-211(B).

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).

There was no substantial evidence adduced showing that Atlas is unscrupulous, unqualified, or financially irresponsible.

The Administrative Law Judge may consider ROC’s administrative record. See Ariz. Admin. Code § R4-9-118.

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.

*****

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.

Ariz. Admin. Code section R49108(A) provides that “A contractor shall perform all work in a professional and workmanlike manner.”

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).

Complaints about any specific project must be filed within two years of completion of that “specific project.” See Ariz. Rev. Stat. § 32-1162 and § 32-1155.

Citations for workmanship violations may not be issued when the contractor’s work has been subject to neglect, modification or abnormal use. Ariz. Rev. Stat. § 32-1155.

Although the parties did have only one contract, that contract provided the payment terms and starting and stopping dates for Phase 1, but included no such information for Phase 2. The evidence also shows that Lakeside’s last payment was due on “completion.”

Lakeside did not file its complaints within two years of Atlas’s completion of Phase 1. Under the facts of this matter, each phase is properly considered a “specific project” and extending the two-year statute of limitations would not be a fair reading of the applicable statutes and would not result in a just result. Consequently ROC’s citation related to buildings 6, 7 and 12 (units 9455, 9446, 18622 and 18626) that were completed in August 2017 was inappropriately issued.

The preponderance of the evidence shows that Atlas did not install a foam roof or roof system at Lakeside’s buildings, but rather its work was limited to application of a top coating to the existing roofs. Consequently, ROC’s conclusion that Atlas was responsible for any deficiencies in the existing crickets is in error because the workmanship standard that Mr. Edwards relied upon is not applicable to this matter.

The roof coating that Atlas applied is showing signs of deterioration and there is leaking in the units at issue, with the evidence in the record pointing to two possible causes: ponding due to improper drainage and ponding due to excessive pine needles impeding the drainage. Atlas presented credible evidence showing that the cause is the pine needles. Because the excess of pine needles is appropriately considered neglect or abnormal use, the deterioration in the roofs’ coating and any related leaking does not provide a basis on which a workmanship violation can be sustained.

Although Mr. Edwards’s opinion was that the grade was not sufficient, Lakeside presented no objective evidence to show that this was correct (e.g. no water-testing results or actual measurements of the grade and industry standards as to the required grade for a foam roof).

There was no evidence adduced to show that Atlas’s work was in violation of ROC’s substantive policy statements.

It has not been shown by a preponderance of the evidence that Atlas violated any workmanship standards

Because it has not shown that Atlas violated any workmanship standards, Atlas’s failure to comply with ROC’s Directives was justified and not a violation of subsection (A)(22).

Consequently, this matter should be dismissed.

RECOMMENDED ORDER

IT IS ORDERED that on the effective date of the final Order in this matter case number 2020-01795 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.

-54864001

001

-137160-45720000Done this day, December 31, 2020.

/s/ Thomas Shedden

Thomas Shedden

Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director

Registrar of Contractors

-54864001

001

-137160-45720000