ALJDEC decisions subject to certification as final

2020A-04700-CHC-ROC · Registrar of Contractors · 2021-10-13

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Tami Shaffner Papworth,

COMPLAINANT

Munoz Custom Fence, Inc.

License No. ROC 193834,

RESPONDENT

No. 2020A-04700-CHC-ROC

ADMINISTRATIVE LAW JUDGE

DECISION

HEARING: May 11, 2021, with further hearings on July 13, 2021 and September 14, 2021; the record closed on September 28, 2021

APPEARANCES:

May 11, 2021: Gordon Bueler, Esq. represented Complainant Tami Shaffner Papworth, who was present. Daryl Wilson, Esq. represented Respondent Munoz Custom Fence, Inc. Robert Munoz, Sr. was present on behalf of Respondent. Robert Munoz appeared as a witness for Respondent. Investigator David Fagerburg appeared as a witness.

July 13, 2021: Gordon Bueler, Esq. represented Complainant Tami Shaffner Papworth, who was present. Daryl Wilson, Esq. represented Respondent Munoz Custom Fence, Inc. Robert Munoz, Sr. was present on behalf of Respondent. Joseph Clark appeared as a witness for Complainant. Robert Munoz appeared as a witness for Respondent.

September 14, 2021: Gordon Bueler, Esq. represented Complainant Tami Shaffner Papworth, who was present. Daryl Wilson, Esq. represented Respondent Munoz Custom Fence, Inc. Robert Munoz, Sr. was present on behalf of Respondent. Robert Munoz and Shane Smith appeared as witnesses for Respondent.

ADMINISTRATIVE LAW JUDGE: Sondra J. Vanella

FINDINGS OF FACT

Munoz Custom Fence, Inc. (“Respondent”) is the holder of License No. 193834 issued by the Arizona Registrar of Contractors (“Registrar”). Robert A. Munoz, Sr. is Respondent’s qualifying party.

On or about May 20, 2019, Tami Shaffner Papworth (“Complainant”) contracted with general contractor, NE2AZ, LLC (“NE2AZ”), for NE2AZ to perform construction services on Complainant’s property. Complainant’s property is “horse property” and part of Complainant’s contract with NE2AZ included the construction of a fence, a horse arena, and corral.

NE2AZ contracted with Respondent to perform the following scope of work at Complainant’s property:

780 5’6” 3 rail fencing/all welded

5’ x 3’ sheeting/corrugated/3 sides sheeted

Bottom rail/for water run off

(Perimeter) 170’ of front is nonclimb

24’ x 36’ Mare Motel Cover

Corrugated + Track + Sheeting

All sections included + welding

(Shade Cover)

72 + 120 3 rail arena

2” Round Pipe w/2 (illegible) 10’ gates

(Arena)

12 x 24 Corral stalls – 4 Rail

w/Gates and Hardware

(Stalls)

(All concrete included) (All fence set straight top)

The contract price between NE2AZ and Respondent was $43,000.00 and specified payments of 50% down, 25% progress, and 25% upon completion. However, the contract did not specify when the progress payment was to be made. The contract further specified the payment amounts to be $18,000.00, $12,500.00, and $12,500.00. Although the amount of $18,000.00 does not equate to 50% of the contract price which was specified as the down payment, Respondent accepted an $18,000.00 payment from NE2AZ to commence work on the project. The contract between NE2AZ and Respondent was drafted by Respondent.

On or about September 30, 2020, the Arizona Registrar of Contractors (“Registrar”) received a Complaint against Respondent from Complainant alleging abandonment and poor work with respect to Respondent’s scope of work.

The Registrar assigned the Complaint to Investigator David Fagerburg. After an October 19, 2020 jobsite inspection, Investigator Fagerburg issued a November 5, 2020 Written Directive to Respondent that provided as follows:

After investigation, the Registrar determined that you failed to meet the requirements of A.R.S. § 32-1154(A), and now issues this Directive requiring you to take appropriate corrective action. Failure to comply with this Directive constitutes a violation of A.R.S. § 32-1154(A) (22) and may result in the issuance of a citation, discipline of your license, and a civil penalty pursuant to A.R.S. § 32-1154(E) of up to $500.00. You must notify

the Registrar’s assigned Investigator of your compliance with this Directive prior to 5:00 p.m. on Monday 12-7-2020.

You are directed to remedy the following violations by the appropriate means:

Compliant Item 1: Contractor paid 18,000 of 43000 with 2 additional progress payments noted on sales order, 12,500 and last upon completion 12,500. Contractor paid 18K to furnish materials, materials not all delivered, repeated requests

Investigator’s Observation: The respondent is to complete the project per the written signed contract.

Compliant Item 2: many rails installed are falling down, welds not holding pipe

Investigator’s Observation: The respondent is to complete the project per the written signed contract.

Compliant Item 3: contractor demanded more money to deliver materials and return to work. changed his original agreement to fit his needs but not the document he provided Job Invoice dated 5/16/19 clearly stating 18,000/12,500/12,500

Investigator’s Observation: The respondent is to complete the project per the written signed contract.

Compliant Item 4: contractor sent dummy invoices, unsigned proposals, material invoices with items removed, total material not accurate

Investigator’s Observation: The respondent is to complete the project per the written signed contract.

ITEMS NOT REQUIRING CORRECTION

The following complaint items require no action by the Respondent:

Compliant Item 5: contractor submitted proposal for fence install 8 months after fence posts were installed

Investigator’s Observation: This is a statement made by the complainant that does not imply poor workmanship.

Compliant Item 6: Sent 2 demand letters, certified and emailed, requesting contractor to commence work

Investigator’s Observation: This is a statement made by the complainant that does not imply poor workmanship.

All errors in original.

After the issuance of the Written Directive and the expiration of the time period in which to perform corrective work, Investigator Fagerburg learned that Respondent had not performed any further work on the project. Thereafter, Investigator Fagerburg forwarded the matter to the Registrar’s Legal Department. The Registrar issued a Citation against Respondent, charging possible violations of A.R.S. § 32-1154(A)(3), namely A.A.C. R4-9-108(a), and A.R.S. § 32-1154(A)(22).

Investigator Fagerburg conducted a prehearing inspection on May 7, 2021, and found that the condition and the status of the project had not changed since the jobsite inspection.

Investigator David Fagerburg’s Testimony

Investigator Fagerburg testified consistently with his findings contained in the Written Directive. Investigator Fagerburg testified that overall, the project was approximately 40% complete, but regardless of the percentage of completion, the contract does not specify when the progress payment was to be made. Further, Investigator Fagerburg testified that Respondent had asserted that it was unable to perform work on the project because NE2AZ’s license was suspended. However, Investigator Fagerburg testified that Respondent contracted with NE2AZ when NE2AZ’s license was active and in good standing, and therefore, Respondent is responsible to complete the contract terms. Investigator Fagerburg explained that Respondent is obligated to complete the project because Respondent’s license is in good standing, and therefore, NE2AZ’s license status has no bearing on Respondent’s ability to contract. Investigator Fagerburg testified that he explained the afore-mentioned information to Respondent when discussing the Written Directive. Therefore, Respondent was aware, at the time the Written Directive was issued, that NE2AZ’s license status did not impact Respondent’s ability to comply with the Written Directive.

Investigator Fagerburg testified that Respondent asserted that it was still owed $3,500.00 of the 50% down payment. Investigator Fagerburg testified that he explained to Respondent that Respondent agreed to accept the amount of $18,000.00 as the down payment, and further, the contract lacks specificity as to when the progress payment was due, and that the project needed to be completed.

Investigator Fagerburg testified regarding photographs he took at the jobsite inspection and also contained in Complainant’s Exhibit 4. Investigator Fagerburg explained that the welding he observed was all “tack” welding which is performed in order to position material prior to final welding to ensure that the material is properly placed before final welding is completed. Investigator Fagerburg testified that “not one weld was 100% complete,” and that “it is difficult to determine poor work when work is not complete.” However, Investigator Fagerburg testified regarding examples of poor workmanship, holes burned through materials, voids in the top rail, and incomplete welds. Investigator Fagerburg testified there were more holes in the material and gaps in joints than what he would have expected and that such conditions were not within industry standards. Investigator Fagerburg further testified that Respondent did not install a three-rail fence anywhere on the property, nor did Respondent install sheeting or construct the mare motel, and that much of Respondent’s scope of work was not completed pursuant to the contract.

Investigator Fagerburg further testified that Respondent began work on the project prior to the obtaining of a permit. Respondent was told to stop working due to the lack of a permit. Investigator Fagerburg testified that it was the responsibility of the general contractor to obtain the permit.

Tami Shaffner Papworth’s Testimony

Complainant testified that pursuant to Respondent’s contract, Respondent should have constructed a mare motel which was to consist of four stalls with galvanized sheeting to protect her horses from the weather. Complainant testified that this structure was not constructed. Complainant also testified that none of the 780 feet of three-rail fence was installed, the corral was not constructed, and the side fencing and gates were not installed, and that all were within the scope of Respondent’s contract.

Joseph Clark’s Testimony

Joseph Clark is the owner of NE2AZ. Mr. Clark testified that he was hired by Complainant to remodel the interior and exterior of her home, as well as the detached garage, and to construct a perimeter fence, corral, and mare motel. Mr. Clark testified that at the time he contracted with Complainant, NE2AZ was properly licensed. Mr. Clark testified that Complainant paid NE2AZ in full for Respondent’s contract with NE2AZ to complete all the work encompassed within Respondent’s contract, including all rails, the perimeter fence, the arena and the mare motel.

Mr. Clark testified that Respondent prepared the contract and that he met Mr. Munoz at a restaurant and paid him $18,000.00 as a down payment, and the remaining payments were adjusted to two payments of $12,500.00. Mr. Clark testified that Mr. Munoz placed these terms in the contract.

Mr. Clark testified regarding the scope of work for this project set forth in the contract with Respondent. Mr. Clark testified that Respondent’s scope of work was to: i) install 780 feet of three-rail perimeter fencing with corrugated sheeting on three sides, and no-climb on the front fence; ii) construct a 24 x 26 mare motel, which is a barn without sides to provide shade for the horses; iii) install a three-rail fence around the arena; and iv) install side fencing and gating. Mr. Clark testified that there is no three-rail fencing installed, no siding, no mare motel, no arena, no sides, and no gate. Mr. Clark explained that there is only a partial perimeter fencing installed, but not with three-rail fencing. Mr. Clark opined that approximately 25% of the scope of Respondent’s work was completed, and that the quality is “subpar.”

Mr. Clark explained that Respondent’s work was not properly performed in regard to the footings and the welding. Mr. Clark elaborated that the footings do not meet code, as there is insufficient concrete, the perimeter fence is meant to contain the horses, and as constructed, there is “no way this would happen,” the welding has “huge voids,” which Mr. Clark testified could be repaired, however the process to do so would be “intensive.”

Regarding the permitting issue, Mr. Clark explained that he had received the demo permit, allowing for the “digging of holes.” Mr. Clark testified that he informed Respondent that Respondent was “only allowed to dig holes,” however, Respondent moved forward with more work prior to the issuance of the building permit.

Mr. Clark testified that when he inspected the concrete work performed by Respondent, Mr. Munoz became defensive and stated that he would not perform any more work without receiving another payment. Mr. Clark told Mr. Munoz to bring all materials to the site, including the sheeting. Mr. Clark explained that Respondent was supposed to purchase all materials and bring them to the jobsite, however, Respondent only brought the rails to the jobsite. Mr. Clark testified that he gave Respondent several options to perform various portions of the scope of work or to deliver all materials to the jobsite in order to receive the next payment, however, Mr. Munoz “did not want to hear it” and stated, “If you don’t pay me more, no more work.” Mr. Clark testified that he told Mr. Munoz that he would pay him the next $12,500.00 payment if Respondent delivered all the materials to the jobsite, installed the three sides of perimeter fencing, and the no climb. Mr. Clark testified that the contract did not specify when progress payments were to be made, and Respondent drafted the contract. Respondent could have specified when such payments were to be made and did not do so. Mr. Clark testified that he agreed to pay Respondent a progress payment when Respondent completed the 780 feet of three-rail perimeter fencing, which was never completed.

Mr. Clark testified that after his last conversation with Mr. Munoz regarding payment, Mr. Munoz arrived at the jobsite the following day, very upset, to install the no climb. However, Mr. Clark testified that the no climb was improperly installed without ties and that it would not protect the horses. Therefore, Mr. Clark determined that a progress payment was not appropriate. Mr. Clark asserted that had Respondent complied with the Written Directive, he would have paid Respondent, however, at the time of the jobsite inspection, Mr. Munoz stated that Respondent would not perform any further work.

Robert Munoz, Sr.’s Testimony

Robert Munoz, Sr., owner and qualifying party for Respondent, testified as to his experience in the fence construction industry. Mr. Munoz also testified regarding his contract with NE2AZ. Mr. Munoz testified that the scope of work was to be performed in phases with the perimeter fence encompassing approximately 75% of the project, the corral was a separate phase, and the arena was a further separate phase. Mr. Munoz testified that the contract called for NE2AZ to pay Respondent $21,500.00 at the time the contract was signed, and then at 50% completion, the progress payment was to be made. Mr. Munoz testified that Mr. Clark asked him if he would accept $18,000.00 to start and the remainder of the down payment was supposed to be paid when the progress payment was made. Mr. Munoz accepted the $18,000.00 to start.

Mr. Munoz testified that in May 2020, he emailed Mr. Clark an invoice requesting payment in the amount of $14,250.00 based upon the percentage of work that had been completed. Mr. Munoz testified that he believed he would be paid the progress payment after 50% of the work was completed based on his “calculation experience” over the past 21 years. Such belief was not delineated in the contract terms, nor was there any specification in the contract regarding performance of work in phases, or payment upon a certain percentage of work completed, and Mr. Munoz was the individual who drafted the contract document. Even assuming that the contract called for a progress payment upon 50% completion (which it did not), the credible evidence of record established that 50% of the work had not been completed. The credible evidence of record established that the vast majority of Respondent’s scope of work remained incomplete.

Mr. Munoz testified that Respondent started work on the project a year prior and had been instructed to cease working because a dispute with Complainant’s neighbor regarding an easement needed to be resolved, and then he was informed there was no permit for the project. Mr. Munoz testified that Respondent was pulled off of the project multiple times for various reasons, but that all posts had been set and “most of the welding.” Mr. Munoz testified that Respondent stopped working on the project because Mr. Clark had no contact with Respondent, as Mr. Clark did not answer calls or texts, and Respondent “worked almost two months for free.” Mr. Munoz asserted that he was unaware there was no permit for the project and that NE2AZ had lost its license.

Mr. Munoz testified that he believed that NE2AZ breached its contract with Respondent and further, that NE2AZ’s lack of licensure excused Respondent’s performance. Mr. Munoz further testified that Respondent refused to perform any further work until paid by NE2AZ.

Mr. Munoz testified regarding workmanship issues, that the foundation for the posts was standard for residential fencing, that the welding was completed, but also contradicted himself when he testified that some of the welding was only tacked welded, and therefore, some of the welding is actually incomplete. Mr. Munoz testified that it is not uncommon to repair welds after completion. Specifically as to the Written Directive, Mr. Munoz testified that Investigator Fagerburg was incorrect as to item number 1. As to item number 2, Mr. Munoz testified that the project was incomplete and that Respondent was told to cease working on the project. Regarding item number 3, Mr. Munoz agreed that Respondent has not been paid. Mr. Munoz testified that Respondent did not comply with the Written Directive because Respondent could not perform the work within the 30 day window provided in the Written Directive. Mr. Munoz explained that he “didn’t want to put this before other clients and have them complain.”

Notwithstanding Mr. Munoz’s acknowledgement that the contract called for three rail fencing, there were not three rails on the fence containing the no climb, and Mr. Munoz contended that three rails were not necessary pursuant to industry standard, and that changes were made after the project began. However, Respondent did not provide any documentation establishing any written change orders.

Robert Munoz’s Testimony

Robert Munoz (“Robert”) is a cousin of Mr. Munoz and has been employed by Respondent for 16 years. Robert is Respondent’s foreman. Robert testified that Respondent performed layout, drilled holes, set posts, and had begun to install the top rail. Robert testified that about one month after Respondent began its work, Complainant instructed Respondent to stop working because there was an issue with Complainant’s neighbor and the “right of way.” Robert testified that after a “couple month” delay, Mr. Munoz instructed him to begin working on the project again. Robert testified that after working for approximately a week or two, Mr. Clark instructed Respondent to stop working again because the permit had not yet been issued. Robert testified that thereafter, Respondent retuned to the project for “a couple of weeks” during which time the top rail was welded, and the bottom rail was partially installed, and the no climb was installed. Robert asserted that he was then instructed to start work on the arena and he set the posts for the arena, but did not complete the setting of all posts. Robert testified that he began setting the posts for the arena prior to the completion of the perimeter fencing.

When asked about one of the photographs depicting the bottom rail of the fence contained in Respondent’s Exhibit 14, Robert explained that the tack weld was not complete, and that the purpose of the tack weld is for placement. Robert further explained that the industry standard is to tack weld all rails in place and then perform the welding. Robert acknowledged that there are sometimes errors resulting in holes, however, those holes can be repaired.

Robert estimated that approximately 50% of Respondent’s scope of work was performed. However, Robert also testified that the top rail was not completed, the bottom rail was not completely installed, the middle rail was not installed at all, the mare motel was not started, and only the posts were set for the arena, and the gates and stalls were not started.

Shane Smith’s Testimony

Shane Smith testified that he has been in the fence construction industry for 22 years and has known Mr. Munoz for 17 years as a friend and competitor. Mr. Smith prefaced his testimony by stating that he has not seen the contract between Respondent and NE2AZ and has not been to the jobsite.

Mr. Smith testified that tack welding is a common practice used for placement prior to finish welding to ensure that measurements are correct. Mr. Smith also testified that burn holes can happen during welding which can be repaired pursuant to a punch list.

Administrative notice is taken of Respondent’s prior License record on October 6, 2021. Such prior License record reflects that Respondent’s License No. 193834 was first issued on March 17, 2004, and is active. Such prior License record also reflects that there is only the instant open complaint, zero resolved/settled/withdrawn complaints, and no discipline against Respondent’s license.

CONCLUSIONS OF LAW

This matter lies within the Registrar’s jurisdiction.

Complainant bears the burden of proof to establish Respondent’s statutory violations by a preponderance of the evidence. “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”

In this case, Investigator Fagerburg found that Respondent’s work was not in conformity with the Registrar’s standards. Investigator Fagerburg determined the existence of workmanship issues concerning the work that was performed by Respondent. Although Respondent indicated that any deficiencies would have been remedied upon completion of its work, Respondent failed to complete its scope of work pursuant to its contract. Respondent blamed its failure to complete the contract on NE2AZ’s revoked license status and NE2AZ’s failure to pay Respondent a progress payment. Regarding NE2AZ’s license status, such has no bearing on Respondent’s obligation to perform pursuant to contract. The contract was entered into while NE2AZ’s license was in good standing, and moreover, Respondent’s license has been in good standing throughout. Furthermore, Respondent was on notice by Investigator Fagerburg that NE2AZ’s licensure had no bearing on Respondent’s performance of its work. Regarding Respondent’s assertion that it ceased performance due to NE2AZ’s failure to pay the progress payment, the evidence of record established that Respondent drafted the contract and the contract terms were devoid of any specification as to when the progress payment was to be made. NE2AZ paid Respondent $18,000.00 to commence work and Respondent accepted that amount as a down payment. The credible, substantial, and probative evidence of record established that Respondent failed to perform its scope of work. None of the contract specifications were completed. The perimeter fence was not complete, as there was no third rail and the fence was only tack welded, no climb was not installed, the sheeting was not installed, the mare motel was not constructed, the arena was not constructed, the corral was not constructed, and the gates were not installed. Therefore, Complainant established that Respondent did not complete the project in a workmanlike manner in violation of A.R.S. § 32-1154(A)(3), namely A.A.C. R4-9-108(a).

The evidence, including Mr. Munoz’s admission, established that Respondent did not complete the required corrective work following the Written Directive being issued. Mr. Munoz testified that he “didn’t want to put this before other clients and have them complain.” Respondent’s argument that it did not comply with the Written Directive because NE2AZ failed to pay the progress payment is not persuasive as the credible, substantial, and probative evidence of record established that the vast majority of the scope of work was yet to be completed. The Administrative Law Judge concludes based on the evidence of record that valid justification did not exist for Respondent’s failure to comply with the Written Directive. Therefore, Complainant established that Respondent failed to take appropriate corrective action following a Written Directive from the Registrar in violation of A.R.S. § 32-1154(A)(22).

RECOMMENDED ORDER

Based on the foregoing, it is recommended that on the effective date of the Order, the Registrar shall suspend Respondent’s License No. 193834 for a period of seven (7) days.

It is further recommended that the Registrar require Respondent to pay the sum of $500.00 as a civil penalty pursuant to A.R.S. § 32-1154(E).

It is further recommended that if Respondent fails to pay the entire amount of the civil penalty on or before thirty (30) days following the effective date of the Registrar’s final 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)(7), 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 forty (40) days from the date of that certification.

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-137160-45720000Done this day, October 13, 2021.

/s/ Sondra J. Vanella

Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director

Registrar of Contractors

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-137160-45720000