ALJDEC

99F-1768-ROC · Registrar of Contractors · 1999-12-06

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: November 19, 1999. APPEARANCES: Complainants were represented by their attorney, Richard L. Cobb, Esq. Respondent was represented by its attorney, Mark Kirkorsky, Esq. ADMINISTRATIVE LAW JUDGE: Brian Brendan Tully _____________________________________________________________________ Evidence and testimony were presented and, based upon the entire record, the following Findings of Fact, Conclusions of Law and Recommended Order are made:

FINDINGS OF FACT

1. On or about December 12, 1995, the parties entered into an agreement for the construction of Complainants’ custom residence in the Desert Mountain subdivision located in Scottsdale, Arizona. The parties subsequently entered into a written addendum to their purchase contract. 2. The original contract price for building Complainants’ residence and guest house pursuant to plans and specifications prepared by their architect was the sum of $1,232.650.00. That price increased due to change orders. 3. The addendum provided that Complainants would deposit a 20% down payment, in the amount of $245,000.00, in escrow with First American Title Insurance Company, who was instructed to disperse those funds to Respondent within five days of its presentation of completed work and lien releases. Complainants’ architect was responsible for approving or rejecting the work as having been completed to specifications. 4. The addendum further provided that the remaining 80% of the contract price was to be paid to Respondent within 10 days of the following:

a) work having been fully completed, including all punch list items as determined during the walk through inspection with Complainants’ and their architect; b) contract documents having been fully performed; c) the final certificate for payment having been submitted by the Respondent to the architect and approved by the architect and Complainants; d) the final and unconditional certificate of occupancy or comparable permit having been issued by the appropriate governmental agencies and by Desert Mountain; and e) all conditions precedent to closing the transaction contemplated by the purchase contract having been fulfilled as determined by the title company and the Deferred Equity Golf Membership to the Club at Desert Mountain having been issued by Desert Mountain Properties.

5. Paragraph 7 of the Addendum addressed the issue of changes as follows: Changes in work may be accomplished after execution of this Purchase Contract without invalidating the Contract by Change Order, or a Construction Change directive or for a minor change in the work determined by the Architect. Any change orders need to be agreed upon by the Buyer and the Architect. These changes must be paid within 14 days of the bill being presented to Buyer. Changes are billed at Seller’s expense with no over-rides or up-charges.

6. The standard colorization and cost allowances dated September 7, 1995, provided that the windows to be installed in Complainants’ residence by Respondent would be thermal insulated glass with a bronze tint in all windows made by Aluminaire. The roof was specified as a three ply built up rubber roof. 7. The design specifications dated October 24, 1995, for Complainants’ home intended for thermal pane glass with bronze tint manufactured by Aluminaire to be used. 8. By letter dated April 3, 1996, Respondent’s president and qualifying party, James Christopher Allen, Jr., informed the Complainants that “(a)ny changes made different than plan will be done by change order, and signed by myself and you”. 9. By letter dated April 22, 1996, James Allen wrote to Complainants to advise, among other things, that Respondent had not received a signed change order from them for the price of the firepit in the front yard. Allen explained that a change order dated May 21, 1996, presented to Complainants was incorrectly dated. 10. The parties executed a change order dated May 7, 1996, for changes to a bathtub, drain relocation, step-down wall and entertainment center. The change order, prepared by Respondent, also advised that Respondent had not received back from Complainants prior change orders signed by them. 11. By letter dated May 8, 1996, Allen wrote to Complainants to again advise that “(a)ll change orders will state the amount of the cost of change and the bill will be presented to Mr. William…(t)he cost will represent the cost to Casa Del Loma Builders”. 12. By letter dated June 11, 1996, Allen’s son David Allen, who served as project superintendent, advised the Complainants that “(a)ny change orders must be approved or rejected within two working days if the change can hold up the construction time”. 13. By letter dated August 14, 1996, James Allen wrote to Complainants to advise, among other things, that “(n)o other changes will be made unless signed change orders are received by Aug. 20”. 14. On or about August 27, 1996, Respondent advised Complainants in writing that “(a)gain, all changes will be gladly done if a change order is signed”. 15. There is credible evidence that the parties executed at least ten change orders for this project. 16. On December 9, 1998, Complainants filed a complaint against Respondent with the Registrar of Contractors alleging the following:

a) interior cabinets and doors are still showing premature cracking/dryness after work done to them by Glenwood - need to address this issue again b) all windows to be bronze tinted per plans and specifications but were not provided c) site drainage inadequate, causing erosion which is greatly impacting integrity of foundation and stem walls d) exterior doors are continuing to deteriorate at an accelerated rate and need to be addressed again e) roof leaks in miscellaneous areas.

17. The issues before this tribunal have been narrowed to the following: the windows, the erosion problem and the roof defects.

THE WINDOW ISSUE

18. The Complainants relied upon the superior knowledge and expertise of their architect and Respondent for the selection and installation of the specified bronze tinted thermal pane glass windows manufactured by Aluminaire. 19. The windows in Complainants’ home are a major architectual element in the design of the home. 20. The bronze tint in the glass windows is found to be an integral element in the design of Complainants’ residence. The bronze tint is a design feature not only for its insulation character, but also for its integration in the appearance of the home. 21. Respondent deviated from the approved plans and specifications by installing Low- Emissivity (Low-E) glass windows manufactured by Caradon Better-Bilt Inc. instead of the Aluminaire bronze tint thermal pane windows. 22. Exhibit 10 admitted into evidence is a letter from Craig Johnson, President of Johnson Windows & Doors, Inc., which provides the following comparative analysis between bronze tint windows and low-emissivity windows:

Bronze Tint

A specially processed tinted glass designed to reduce the amount of light passing through the insulated glass unit. Although there are small energy savings with tinted glass, bronze tint is mainly recommended where there is a risk of fading due to exposure.

Low-Emissivity (Low-E)

A fully transparent energy saving high performance glass. Treated with microscopically thin, virtually invisible, metallic oxide layers deposited on the glass surface and sealed into an insulated window unit. Low-E glass was designed specifically to reduce summer heat gain and winter heat loss. Low-E glass also reduces UV rays to help protect furniture and floor coverings from fading.

23. It is determined that Respondent did not have Complainants’ permission to change the specified windows. Respondent was very specific and demanding in its requirement that any changes to the plans and specifications be accomplished by written change orders. It did not request or obtain an approved change order prior to or after the installation of the non-specified windows. 24. While there may be superior qualities to Low-Emissivity windows in comparison to bronze tinted thermal windows as to insulating factors, there is insufficient evidence that those factors outweigh the intended use of the specified bronze tinted thermal windows, which was not only to reduce the opportunity for the fading of furniture and the interior of Complainants’ home but also the intended architectural and aesthetic qualities of the bronze tint. 25. Respondent is responsible for the removal of the non-specified windows, the replacement of those windows with the properly specified windows, and any repairs to damaged areas cause by the removal and installation of the windows. The application of a bronze tint film on the existing windows is not a proper remedial repair to the windows. 26. There is credible evidence that the cost to remove and replace the non- specified windows with the specified ones is approximately $35,000.00. However, such an amount represents less than 5% of the overall cost to construct Complainants’ residence. Such remedial work is found not to constitute economic waste.

THE EROSION ISSUE

27. On or about May 5, 1995, Respondent hired Pinnacle Engineering, Inc., to prepare a Drainage Report for Complainants’ lot. The Drainage Report described the field conditions as:

The north 50 feet of this site is dedicated as drainage easement which encompasses a fairly major wash traveling through the subdivision. Per a drainage study for Desert Mountain, Phase II, Unit 5 by NBS/Lowry dated October 1987, the post-development 100 year peak discharge for this wash is 171 cfs. The portion of the wash that travels through this lot has a braided tributary which diverges from the main wash and converges at a concentrated point downstream. It is estimated that this tributary wash carries a 100 year peak discharge of 45 cfs.

The drainage report stated that one of the measures that would be taken in order to protect walls and footings adjacent to the wash against erosion was the installation of “12” average diameter native river rock erosion protection…along footings and walls adjacent to” the wash. Respondent did not implement that recommendation. 28. Respondent’s grading of Complainants’ property passed the inspection by the City of Scottsdale building inspector. 29. Complainants’ property has experienced serious erosion damage from water. 30. The erosion damage to Complainants’ residence is not the result of an Act of God. 31. Respondent is found to be responsible for the erosion problems at Complainants’ residence. Although Respondent’s grading passed city inspection, the grading is deemed to have failed to perform properly. There is insufficient evidence that Complainants’ landscapers altered the grade causing the erosion damage. Respondent is determined to be responsible for repairing the grading, including the implementation of the recommended work contained in the drainage report, to protect the walls and footings adjacent to the wash against erosion. 32. Respondent is further found to be responsible for repairing any damage to Complainants’ walls and footings caused by the soil erosion.

THE ROOF ISSUE

33. The approved plans and specifications for Complainants’ roof provided for the installation of a French drain system which would collect water on the roof and route it through interior plumbing for exterior drainage at ground level. Respondent failed to install that drainage system and is not charged with that failure to comply with plans and specifications. After discovering that it did not install the specified drainage system, scuppers were installed which drain into downspouts enclosed in stucco walls. 34. Complainants experienced both interior and exterior leaks in the installed roofing system. 35. Respondent had notice that its roofing system leaked. 36. Respondent is responsible for performing proper remedial repairs to the scupper/downspout system to assure that is sealed at all connection points, that it is enclosed where necessary to prevent water infiltration or exterior water damage. 37. There is evidence of excessive water ponding. Respondent is deemed to have been on notice of such due to Complainants’ reported roof leaks. Respondent is responsible for accomplishing necessary repairs to areas of the roof that do not meet minimum workmanship standards for ponding water.

FINALE

38. The Registrar’s originally assigned inspector issued a Corrective Work Order to Respondent directing it to correct by appropriate means the installation of the non-specified windows. Respondent had failed to comply with the written directive. 39. Respondent’s above-described deficient workmanship, deviation from plans and specifications as to the windows and failure to comply with the Registrar’s written directive are deemed wrongful acts which have substantially injured Complainants. 40. A review of the official public records of the Registrar of Contractors reveals that Respondent has posted a minimum bond in the amount of $5,000.00, which is an amount for contemplated gross volume of work in the sum of $150,000.00 or less. Respondent had knowledge that its gross volume of work at the time it performed this project and other projects exceeded the scope of that minimum bond.

CONCLUSIONS OF LAW

1. The evidence of record is adequate to establish that Respondent has violated the provisions of A.R.S. §32-1154(A)(2), (7), (23) and (3); namely Rule R4-9-108. 2. The Registrar of Contractors may place conditions on a licensee found to have violated the provisions of A.R.S. §32-1154(A) to reduce any disciplinary penalties. A.R.S. §32-1154(B) It is determined that requiring Respondent to perform remedial work to the above-described areas of its deficient workmanship and an increase in Respondent’s surety bond or cash deposit requirements is warranted in this matter. 3. Pursuant to the provisions of A.R.S. §32-1154(D), the Registrar of Contractors may impose a civil penalty of not to exceed $500.00 on a contractor for each violation of A.R.S. §32-1154(A)(23). The evidence of record supports the imposition of a civil penalty by the Registrar of Contractors against Respondent.

RECOMMENDED ORDER

In view of the foregoing, it is recommended commencing on the effective date of the entered Order in this matter that Respondent’s Class B license be suspended until the Registrar of Contractors receives written proof that the items set forth in the above Findings of Fact Nos. 25, 30, 31,36 and 37 have been appropriately rectified by Respondent.

It is further recommended that if Respondent properly accomplishes the aforementioned corrective work on or before the effective date of the entered Order in this matter, then the above-provided indefinite license suspension shall not take place and the Citation and Complaint in this matter shall be closed.

It is further recommended, in addition to the above-provided penalties, if any, that Respondent pay the sum of $200.00 to the Registrar of Contractors by way of a civil penalty pursuant to A.R.S. §32-1154(D). The failure by Respondent to pay the entire amount of that civil penalty on or before 30 days following the effective date of the Order entered in this matter shall result in the automatic revocation of Respondent’s contracting 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 payment of any outstanding prior civil penalty is tendered.

It is further recommended, in addition to the above-provided penalties, if any, that any restoration of Respondent’s rights to resume contracting, whether or not probationary, shall be subject to a condition that Respondent first post an additional surety bond, cash deposit or alternative deposit for a period of 24 months, including future renewal periods in the amount of $10,000.00, such bond or deposit to be in addition to the required surety bond, cash deposit or recovery fund participation set forth in A.R.S. §32-1152(C). Cash or alternative additional deposits, if utilized, shall be returned only after the expiration of an additional two year period following the above-provided month period and only if no claims are then pending.

Done this day, December 9, 1999

______________________________________ Brian BrendanTully Administrative Law Judge

Original transmitted by mail this ____ day of ____________, 1999, to:

Registrar of Contractors Mr. Michael P. Goldwater ATTN: Joyce Armijo 800 West Washington, 6th Floor Phoenix, AZ 85007

By ___________________________

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Office of Administrative Hearings 1400 West Washington, Suite 101 Phoenix, Arizona 85007 (602) 542-9826