ALJDEC

98F-2439-ROC · Registrar of Contractors · 1998-10-26

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: October 5, 1998 APPEARANCES: COMPLAINANT: Gregory Edin, Trustee; RESPONDENT: Bill Stoner, President ADMINISTRATIVE LAW JUDGE: Anthony Halas _____________________________________________________________________

The hearing in this matter was held to determine whether Respondent violated state law as alleged by Complainant and as cited by the Registrar of Contractors (“Registrar”). Evidence and testimony were presented, and based on the entire record, the following Findings of Fact, Conclusions of Law, and Recommended Decision are made: FINDINGS OF FACT

1. Gregory Edin, trustee for Complainant G.O.E. Trust (“Trust”), resides at 11161 East Betony Drive, in Scottsdale, Arizona. The Trust owns the residence. It was during and after construction of that residence, and specifically the cabinetry within, that questions and concerns arose on Mr. Edin’s part relative to the workmanship and aesthetic quality of that cabinetry, given his perception that over time significant fading and inconsistent color variations were occurring in cabinets throughout the house, most particularly in the kitchen. Those concerns resulted in the complaint (filed with the Registrar of Contractors on January 28, 1998) which lead to this proceeding, with the cabinetry sub-contractor as named respondent. Mr. Edin appeared, to testify and provide evidence on behalf of the Trust.

2. Edin confirmed that at the same time Complainant pursues this matter, it has a separate claim, pending a recommended decision upon hearing, against the general contractor, Geoffrey Edmunds and Toll Associates (“Edmunds”), for complaints which, if not limited to, at least include the same factual matter at issue herein: i.e., whether the cabinetry meets workmanship and aesthetic standards. 3. The Respondent in this case is Cholla Custom Cabinets, Inc. (“Cholla”), holder of class C-30 license no. 086938. Cholla’s interests herein were represented by its president, Bill Stoner, who provided testimony and evidence on its behalf. 4. The evidence establishes that Complainant contracted with the general contractor for the building of the residence, which included cabinetry of one design and color repeated through several rooms in the house: the kitchen, hallways, utility room, and bathrooms. 5. The evidence further establishes that the general contractor hired Cholla as its sub-contractor to fabricate and install that cabinetry, based upon the style, wood, and color and type of finish chosen by Mr. Edin and his fiancee in consultation with a separate design source (Adams Bros.). 6. The evidence does not establish whether Adams Bros. acted as agent for Cholla in representing availability of cabinetry styles, woods, and finishes, or in disclosing other relevant information about the cabinetry. 7. Such information, at least as deemed significant by way of Mr. Edin’s testimony, would include the terms of warranty and repair, and, specifically, the likelihood or risk of color fading or variation. Edin was not so concerned whether the risk was due to failure in workmanship of the finish or wood itself, or whether due to factors unrelated to workmanship, which would include environmental factors such as exposure of the cabinetry (after installation) to sunlight. 8. However, notwithstanding whether Adams Bros. acted as Cholla’s agent, Mr. Edin’s testimony is found to be convincing in his assertion that no one, on behalf of either Edmunds, Adams Bros., or Cholla, provided or disclosed any information, prior to installation, regarding the risk that his (and his fiancee’s) choice of a particular combination of wood and color of finish would increase the likelihood, for whatever reason, of fading and color variation occurring to the cabinetry over time. 9. In addition, Edin specifically denied any independent knowledge, prior to installation, that his choice of light-colored wood and finish increased the risk of fading or color variation, for whatever reason. He further asserted that if only he had known of the risk, he would have chosen a cabinetry combination of wood and finish less likely to fade or change color. His testimony in this regard is deemed credible. 10. The evidence is uncontroverted that Edin chose (through Adams Bros.), and Cholla fabricated and installed (with the installation essentially complete by February, 1997), cabinetry made of pink birch and alder woods, with a “15/35 catalyzed lacquer wisp-white wash” , all chosen intentionally by Edin and his fiancee to be light-colored in appearance. The style, wood, color and finish of the cabinetry remained constant throughout the house. 11. Although the cabinetry did not vary, it is evident, and so found, that the “environmental” factor of sunlight to which it was exposed did vary from room to room, with the kitchen and master bath in particular designed to be sunny, with floor to ceiling kitchen windows, and a glass block window in the master bath. 12. Edin did confirm his general understanding, at that same time (prior to the installation of the cabinets), that exposure to sunlight could harm interior household furnishings such as furniture or carpeting. He stated that it was for that reason that he ordered upgraded “E” rating protection in the windows, as well as “sun screens” (which were not described with any specificity). 13. Finally, Edin described his observations over time, from early 1997 immediately after the cabinets were installed, through the time of his complaint to the Registrar in January, 1998, and to the present, of changes in the color of the cabinetry, which color varied in an inconsistent and unacceptable manner from room to room, and from “white” (that is, normal, as contracted and paid for) to “faded” to “yellow” to “rose” in hue. 14. To corroborate his testimony, Edin submitted Exhibits 1 - 3 (consisting of documents, marked and admitted to the record without objection). He also provided demonstrative evidence (not admitted to the record, but viewed by all, and described in the record) consisting of three pieces of cabinetry (two doors and one drawer), which did in fact vary significantly in color. Edin stated that the individual cabinet pieces were part of the installation in question, and described them as being representative of the range of variation, from the normal “white”, to the unacceptable “yellow” and “rose” variations, with such variations to a greater degree in the kitchen, but occurring throughout the several rooms containing the cabinetry, and, at least as far as he could tell, with such variations not necessarily proportionate to sun exposure (which also varied from room to room). 15. Bill Stoner testified to describe his sub-contracting relationship to general contractor Edmunds with regard to the fabrication and installation of the cabinetry in Complainant’s residence (and others in the same development). He confirmed that, prior to installation, neither he nor anyone on behalf of Cholla had contacted or communicated (orally or in writing) with Edin (or his fiancee or any representative of Complainant) regarding choices in cabinetry style, wood, color or finish, or the risk that their particular choice of wood and finish might fade or change color.

16. Stoner explained that the absence of any communication was because his contractual relationship was to Edmunds as general contractor, rather than to the homeowner, but that had his duty to disclose been to the homeowner, he would have advised, as he did with customers contracting directly with Cholla, that the choice of the light-colored woods and particular finish was more likely than darker choices to fade or exhibit color variations as a result of sunlight exposure, other environmental factors, or even otherwise normal changes over time, either in the wood, the finish, or both. 17. He further opined that since the homeowner’s contractual relationship was with the general contractor, it was Edmunds’ responsibility, rather than Cholla’s, to disclose to homeowner the risk of changes in the cabinetry color. 18. In essence, then, Cholla’s defense in this regard was that its absence of privity of contract with the homeowner mooted any duty to disclose. 19. As a separate and supplemental defense, Stoner testified that any changes in the cabinetry color varying from the normal were the result of environmental factors such as exposure to sunlight, and/or the wood itself, and not the result of any workmanship defect in the fabrication, installation, or finish of the cabinetry. 20. To that end, he submitted Exhibits 4 - 10, consisting of documents and photographs, all of which were marked and admitted, without objection. 21. Exhibit 10 is an Inspection Report authored by K.W. Lunsford, based on his on-site inspection of Complainant’s cabinetry on April 6, 1998. Attached to the report is a biographical statement of his experience and qualifications. Lunsford essentially concluded that the cabinetry finish applied by Cholla met industry standards; that “this particular home, with its high windows and the great amount of natural light overwhelms any protective quality the finish may have”; and that differences in the wood stock used (even though of the same type) resulted in a “noticeable difference of drawer face color at the main bathroom.”

22. Stoner stated that although Cholla attempted to match the wood stock used on any particular set of cabinets as closely as possible, it was impossible to match exactly, or to guarantee that any color variations over time would be consistent from piece to piece. This was so, since his wood suppliers provided Cholla with wood stock from various geographic locations and harvest dates, such that consistent changes could not be predicted. 23. Exhibit 5 is a test report of color changes observed on pink birch and alder wood, as well as control tile, after exposure to particular amounts of sunlight. The finish of the wood samples varied from unprotected to protected by different types of colored finish (including the color and finish used on Complainant’s cabinetry). The report was authored by Tracy Simon-LaMadrid of Amalgamated Technologies, Inc.; she found significant variations in color of the wood samples based particularly on type of wood and length of sunlight exposure. 24. Exhibits 6 -9 are photographs taken to demonstrate the test results reported in Exhibit 5. 25. Registrar of Contractors inspector Marty DiAntonio testified to describe his jobsite inspections of the cabinetry on March 14, 1998 and October 2, 1998. The first resulted in his Corrective Work Order of April 22, 1998, which in relevant part determined: “Cabinet finish yellowing: Contractor correct by the appropriate method.” DiAntonio explained that his initial conclusion was that the finish did not meet workmanlike standards, and needed to be corrected. Upon Stoner’s request, he allowed Cholla additional time to have completed and submit the sunlight exposure test results (Exhibit 5) and the report by Lunsford (Exhibit 10). Then, having considered that information, and after conducting the second jobsite inspection, he changed his opinion to conclude that the cabinetry finish was not defective, but rather the color variations were occurring in the wood itself, which he did not consider a workmanship defect. For that reason, his testimony was that he had no specific further action to require of this contractor. 26. On the basis of Exhibits 10 and 5, and the testimony of inspector DiAntonio, as well as his own understanding and explanation of industry practices and standards, Stoner asserted that Cholla’s cabinetry work in Complainant’s residence met all workmanship standards, and should not require further action by Cholla, notwithstanding his concession that color change was evident on his own observation.

APPLICABLE LAW

The Citation and Complaint issued by the Registrar of Contractors on June 25, 1998, charged Respondent with possible violations of A.R.S. § 32- 1154.A.3, .7, and .23, and A.A.C. R4-9-108. In pertinent part, those statutory sections require that a holder of a license or a person listed on a license shall not commit the following: 3. Violation of any rule adopted by the Registrar. …

7. The doing of a wrongful or fraudulent act by the licensee as a contractor resulting in another person being substantially injured. … 23. Failure to take 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 written directive from the Registrar.

A.A.C. R4-9-108 provides that all work shall be done in a workmanlike manner. “Workmanlike manner” is described to be compliance with local building codes of express application to the type of work done and complained of.

CONCLUSIONS OF LAW

1. The Registrar of Contractors has jurisdiction over this matter, pursuant to A.R.S. § 32-1101, et. seq., which authorizes the Registrar to impose disciplinary sanctions against licenses for violations of A.R.S. § 32-1154. 2. To warrant such sanctions by the Registrar, Complainant G.O.E. Trust must demonstrate by a preponderance of the evidence that Respondent Cholla Custom Cabinets violated any one of the statutory sections cited. Culpepper v. State of Arizona, 187 Ariz. 431, 930 P.2d 508 (Appellant. 1996). Proof by a “preponderance” means that the evidence is sufficient to persuade the finder of fact that the proposition is “more likely true than not.” In re: Arnold and Baker Farms, 177 B.R. 648 (9th Cir. BAP (Ariz.) 1994. It is “evidence which is of greater weight or more convincing than the evidence which is offered in opposition to it; that is, evidence which as a whole shows that the fact sought to be proved is more probable than not.” Black’s Law Dictionary 1182 (Rev. 6th ed. 1990). 3. With specific respect to A.R.S. § 32-1154.A.3, and A.A.C. R4-9- 108, the preponderance of the evidence fails to demonstrate that Respondent’s fabrication and installation of the cabinetry violated that rule requiring such be done in a workmanlike manner. Complainant therefore fails in its burden of proving that violation. 4. With specific regard to A.R.S. § 32-1154.A.23, the preponderance of the evidence does not demonstrate Respondent ’s failure to take corrective action without valid justification: that is, given the inspector’s permission, after initially issuing the Corrective Work Order, for Respondent to have testing conducted, upon which results the inspector subsequently concluded that no further action was required by Respondent, at least with regard to workmanlike standards, it is concluded that Respondent had sufficient valid justification for taking no further corrective action during the pendancy of this proceeding. Complainant fails in its burden of proving that violation. 5. Then, with regard to A.R.S. § 32-1154.A.7, it is concluded that the preponderance of the evidence does not demonstrate any fraudulent act or conduct on the part of Respondent. However, it is further concluded that Complainant has met its burden by a preponderance of the evidence in proving that Respondent’s actions and conduct were wrongful and resulted in Complainant being substantially injured: the substantial injury occurred when the homeowner’s reasonable expectations and benefit of the bargain regarding the contracted-for appearance of the cabinetry were not met, particularly so when all actions by the homeowner were reasonable under the circumstances and based on the information then available. This is so notwithstanding Respondent ’s “privity of contract” argument, since there can be no doubt that the homeowner, and not the general contractor, was the intended ultimate third-party beneficiary of the contract between Edmunds and Cholla for this particular cabinetry, and because Respondent controlled all other factors in its fabrication and installation, including the knowledge, readily communicable to homeowner verbally or in writing, of the risk of color variation or fading. That privity is not required in each instance of a third-party beneficiary is the holding, in part, of Richards v. Powercraft Homes, Inc., 139 Ariz. 242, 245-246, 678 P.2d 427 (1984), which also explains that the purpose of the implied warranties recognized in residential home construction is to protect innocent purchasers and to hold the builder accountable for its work. See also, Columbia Western Corp. v. Vela, 122 Ariz. 28, 592 P.2d 1294 (App. 1979); and Basurto v. Utah Construction & Mining Co. Inc., 15 Ariz. App. 35, 485 P.2d 859 (1971). 6. Respondent ’s failure to disclose that information to Complainant in some reasonable manner constitutes its wrongful act, as a breach of its duty to provide a product meeting its implied warranty as fit for its intended aesthetic purpose. While Respondent ’s inability to control the constancy of the color of the wood it receives from its suppliers is duly noted, that inability is a risk to be borne by Cholla (even if it otherwise meets standards of workmanship), rather than the homeowner as the end-user of the cabinetry, unless sufficient disclosure is made to allow homeowner’s informed consent to the risk. The defense of caveat emptor no longer controls as it once may have, at least with regard to new home construction. See, Columbia Western v. Vela, supra; Hill v. Jones, 151 Ariz. 81 App. 1986); Hershey v. Rich Rosen Construction Co., 169 Ariz. 110, 817 P.2d 55 (App. 1991). 7. It is further concluded that the present “state of the art” of cabinetry building may prevent Respondent (or any other licensed and qualified cabinet maker) from correcting Complainant’s cabinets to the originally-contracted for wood, finish and color, while at the same time eliminating the risk of unacceptable fading or color change over time (thus, the duty to disclose that risk). For that reason, and to prevent a reoccurrence of the same problem, mutually-agreed upon corrective action may require consideration by the parties of alternatives to the specific wood, finish and color originally chosen by Complainant, or such action may require express consent to that risk by Complainant.

RECOMMENDED DECISION

In view of the foregoing, it is recommended that, commencing on the effective date of the Registrar’s Order (thirty-five (35) days after the date of mailing by the Registrar) Respondent ’s Class C-30 license be actively and temporarily suspended until the Registrar receives notice that Respondent has accomplished appropriate corrective action to remedy the fading and color-change deficiencies now present in Complainant’s cabinetry.

It is further recommended that if Respondent accomplishes that corrective action satisfactorily on or before the effective date of the Registrar’s Order, then no license suspension shall be imposed and the entire Citation and Complaint in case no. 98-2439 shall be closed. Done this day, October 26, 1998.

_________________________________ Anthony Halas Administrative Law Judge

Original transmitted by mail this ____ day of ____________, 1998, to:

Michael P. Goldwater, Director Registrar of Contractors 800 West Washington, 6th Floor Phoenix, AZ 85007

ATTN: Joyce Armijo

By _______________________________

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Office of Administrative Hearings 1700 West Washington, Suite 602 Phoenix, Arizona 85007 (602) 542-9826