Opinion
No. 1 CA-CV 12-0118
03-12-2013
AZ PROTEK URETHANE TECHNIQUES, LLC, an Arizona limited liability company; LEO MARK BLACKWELL, d/b/a AZ PROTEK URETHANE TECHNIQUES (Indiv), Plaintiffs/Appellants, v. VICTOR CUADRA and FLORA SCHULE, husband and wife; THE ARIZONA REGISTRAR OF CONTRACTORS, through its Director William Mundell, Defendants/Appellees.
Slaton Law Office, P.C. Sandra L. Slaton Brittany Nicole Lamb Attorneys for Plaintiffs/Appellants Victor Cuadra Flora M. Schule In Propria Persona
NOTICE: THIS DECISION DOES NOT CREATE LEGAL PRECEDENT AND MAY NOT BE CITED
EXCEPT AS AUTHORIZED BY APPLICABLE RULES.
See Ariz. R. Supreme Court 111(c); ARCAP 28(c);
Ariz. R. Crim. P. 31.24
MEMORANDUM DECISION
Not for Publication
(Rule 28, Arizona Rules
of Civil Appellate Procedure
Appeal from the Superior Court in Maricopa County
Cause No. LC2010-000914-001
The Honorable Crane McClennen, Judge
AFFIRMED
Slaton Law Office, P.C.
Sandra L. Slaton
Brittany Nicole Lamb
Attorneys for Plaintiffs/Appellants
Scottsdale Victor Cuadra
Flora M. Schule
In Propria Persona
Phoenix GEMMILL, Judge ¶1 AZ Protek Urethane Techniques, LLC, and Leo Blackwell dba AZ Protek Urethane Techniques, LLC (collectively "AZ Protek"), appeal from the superior court's judgment affirming a decision by the Arizona Registrar of Contractors ("ROC") requiring AZ Protek to pay restitution to Victor Cuadra and Flora Schule (collectively "the Homeowners") for the cost of repairs to the roof and resulting interior damage to their home. For the reasons that follow, we affirm.
FACTS AND PROCEDURAL HISTORY
¶2 AZ Protek Urethane Techniques, LLC, and Leo Blackwell hold contractor's licenses issued by the ROC. In 2006, Ken Moss, a general contractor, hired AZ Protek to construct the roof of a newly built house. After the roof and the majority of the house had been constructed but prior to occupation, the house was foreclosed upon by a bank. The Homeowners subsequently purchased the house from the bank and became the first occupants in August 2009. ¶3 Prior to the Homeowners' purchase of the house, a realtor notified the Homeowners of "roof damage." Schule then met with Blackwell in May 2009 to discuss the roof damage, including cracking and blisters in the roof coating. After the meeting, Schule contacted AZ Protek on multiple occasions requesting the roof to be repaired and noting the interior damage caused by the roof leaks. Schule also informed AZ Protek that three separate roofing contractors, after inspecting the roof, stated the workmanship was sub-standard and provided quotes to make appropriate repairs. In a letter addressed to AZ Protek and dated July 20, 2009, Schule stated,
We have now begun monsoon season and cannot wait any longer to repair the roof to avoid further damage to the interior of the home. This is your last chance to repair the roof. If it is not repaired immediately, we will hire another company to do the job to standard and file a complaint with the Registrar of Contractors.Absent the presentation of a warranty or payment, however, AZ Protek refused to repair the roof. ¶4 The Homeowners, in a letter dated August 12, 2009, requested the ROC to perform an immediate inspection of the roof. The ROC inspection, however, did not occur until after the roof was corrected by another roofing company, Skytop, and the interior damage was also corrected by a separate contractor. ¶5 On November 24, 2009, the ROC received the Homeowners' complaint seeking restitution from AZ Protek for the repair costs to the house. An ROC inspector, Jim Dimond, subsequently arrived to perform the inspection. Due to the repairs having already been performed, however, Dimond was unable to inspect the alleged damage and moved to close the Homeowners' complaint. On or about January 4, 2010, the Homeowners requested an administrative hearing on the matter, which was conducted in May 2010. ¶6 After considering the exhibits and testimony presented at the evidentiary hearing on May 27, 2010, the Administrative Law Judge ("ALJ") found that the entire roof of the Homeowners' house was constructed by AZ Protek and did leak causing interior damage to the house although "applicable workmanship standards require that roofs not leak." Further, the Homeowners' actions to hire contractors to repair the damaged roof and resulting interior damage were "reasonable and justified under the circumstances." The ALJ concluded the evidence established that AZ Protek violated Arizona Revised Statutes ("A.R.S.") § 32-1154(A)(3) (Supp. 2012), namely Arizona Administrative Code R4-9-108, which requires all work done by contractors to be done in a professional and workmanlike manner. ¶7 The ALJ recommended the ROC revoke the licenses of Mark Blackwell and AZ Protek Urethane Techniques, LLC, unless and until the ROC "receives and accepts written proof" that the Homeowners have been paid the sum of $8,296.60 as restitution for the Homeowners' costs in correcting the roof damage and resulting interior damage to the house. The ROC issued a final order adopting the ALJ's recommended discipline, and AZ Protek filed a petition for rehearing. The motion was denied. AZ Protek appealed to the superior court, seeking judicial review of the ROC decision. The superior court affirmed the ROC's decision. AZ Protek timely appeals to this court, and we have jurisdiction under A.R.S. § 12-2101(B) (Supp. 2012).
Unless otherwise specified, we cite the current versions of statutes when no material revisions have been enacted since the events in question.
ANALYSIS
¶8 On review of an administrative agency's decision, the superior court determines whether the agency's action was arbitrary, capricious, or an abuse of discretion. Webb v. State ex rel. Ariz. Bd. of Med. Exam'rs, 202 Ariz. 555, 557, ¶ 7, 48 P.3d 505, 507 (App. 2002). The court defers to the agency's factual findings and if such findings are supported by substantial evidence and no legal error is identified, the court must affirm. Gaveck v. Ariz. State Bd. of Podiatry Exam'rs, 222 Ariz. 433, 436, ¶ 11, 215 P.3d 1114, 1117 (App. 2009) (citations omitted). ¶9 "In our review of the superior court's ruling upholding [an] administrative decision, we independently examine the record to determine whether the evidence supports the judgment." Webb, 202 Ariz. at 557, ¶ 7, 48 P.3d at 507. Whether substantial evidence exists is a question of law for our independent determination. See Havasu Heights Ranch & Dev. Corp. v. Desert Valley Wood Prods., Inc., 167 Ariz. 383, 387, 807 P.2d 1119, 1123 (App. 1990). We view the evidence in the light most favorable to upholding the agency's decision. Hosea v. City of Phoenix Fire Pension Bd., 224 Ariz. 245, 248, ¶ 10, 229 P.3d 257, 260 (App. 2010). Issues regarding witness credibility are for the ALJ to decide and not for the superior court or this court. Siler v. Ariz. Dep't of Real Estate, 193 Ariz. 374, 382, ¶ 41, 972 P.2d 1010, 1018 (App. 1998). If an agency's decision is supported by the record, substantial evidence exists to support the decision even if the record also supports a different conclusion. DeGroot v. Ariz. Racing Comm'n, 141 Ariz. 331, 336, 686 P.2d 1301, 1306 (App. 1984) (citation omitted). ¶10 On appeal, AZ Protek first challenges the Homeowners' complaint as being untimely filed. Under A.R.S. § 32-1155(A) (Supp. 2012), an ROC complaint must be filed within a two year period from "the earlier of the close of escrow or actual occupancy for new home or other new building construction and otherwise shall commence on completion of the specific project." AZ Protek argues that the "new home" exception does not apply here because the house was not purchased from the homebuilder, and therefore the two year period began in 2006, at the time of the roof construction. Under this explanation, the complaint filed in 2009 was untimely because it exceeded the two year deadline. On appeal, however, we need not determine the merits of this argument because it has been waived. ¶11 Arguments not raised before the ALJ are generally waived. See Pavlik v. Chinle Unified Sch. Dist. No. 24, 195 Ariz. 148, 151, ¶ 8, 985 P.2d 633, 636 (App. 1999). This rule derives in part from the requirement that "a party must develop its factual record before the agency and give the ALJ the opportunity to correct any legal error." T.W.M. Custom Framing v. Indus. Comm'n of Ariz., 198 Ariz. 41, 44, ¶ 4, 6 P.3d 745, 748 (App. 2000). Further, the "rationale for this general rule is that a petitioner must exhaust administrative remedies because the court assumes that an ALJ would have decided an issue correctly if the petitioner had presented it to the ALJ." Teller v. Indus. Comm'n of Ariz., 179 Ariz. 367, 371-72, 879 P.2d 375, 379-80 (App. 1994). ¶12 At the administrative level, AZ Protek failed to sufficiently raise a statute of limitations defense under A.R.S. § 32-1155(A). See Sunpower of Ariz. v. Ariz. State Registrar of Contractors, 166 Ariz. 437, 441-42, 803 P.2d 430, 434-35 (App. 1990) (recognizing that A.R.S. § 32-1155(A) constituted a "statute of limitations"). We have reviewed the entire record, including the sections of the ALJ hearing transcript cited in AZ Protek's reply brief. Although a warranty time limit was raised before the ALJ, we do not equate a contractor's warranty with the time limitation expressed in § 32-1155. At the ALJ hearing, AZ Protek failed to reference § 32-1155 or any statute of limitations generally. Consistent therewith, the ALJ made no finding regarding this limitations defense. And we are unable to find any evidence sufficiently raising this issue during the presentation of evidence at the ALJ hearing, particularly given our duty to view the evidence in the light most favorable to affirming the agency. ¶13 AZ Protek argues that its letters dated December 14, 2009, and March 1, 2010, written to the ROC regarding the Homeowners' complaint provided sufficient notice of the limitations defense before the ALJ. Both letters, as part of the record before the ALJ, contained a line that stated, "a Protek warranty and the two-year contractor warranty would have expired in 2008." These letters, however, additionally addressed issues expressly raised by AZ Protek before the ALJ, including the Homeowners' lack of an express warranty, the roof was subject to neglect, and the cause of the damage was not attributable to AZ Protek. ¶14 As an analogous case from the Industrial Commission concluded, the "mere admission of evidence," which is relevant both to an issue expressly raised and a defense not expressly raised, does "not fully and fairly apprise the claimant or the administrative law judge" that a new defense has been raised. Magma Copper Co. v. Indus. Comm'n of Ariz., 139 Ariz. 38, 47, 676 P.2d 1096, 1105 (1983). Here, the admission of the letters to the ROC addressing multiple issues, without further evidence, testimony, or argument regarding a statute of limitations defense, was insufficient in itself to apprise the Homeowners and the ALJ of the limitations defense. Therefore, the limitations defense issue was not properly raised at the administrative hearing and is not preserved for appeal. ¶15 AZ Protek also asserts that the ALJ's ruling is incorrect because the ALJ may have decided that an implied warranty of habitability was applicable in favor of the Homeowners. To the extent AZ Protek contends that an implied warranty of habitability is not applicable in proceedings like this before the ROC, we agree. But we find no evidence or indication that the ALJ applied principles of implied warranty rather than statutory and code provisions. ¶16 As an administrative agency, the ROC possesses no inherent or common law powers. Ayala v. Hill, 136 Ariz. 88, 90, 664 P.2d 238, 240 (App. 1983). Consequently, the ROC's authority to suspend or revoke a license extends only to the circumstances set forth in pertinent Arizona statutes. Rosen v. Hadden, 81 Ariz. 194, 198, 302 P.2d 267, 269-70 (1956). ¶17 In this case, the ALJ (and consequently, the ROC) based the decision on statutory authority, which states, "[t]he 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: . . . Violation of any rule adopted by the registrar." A.R.S. § 32-1154(A)(3). The ALJ decision further cites the Arizona Administrative Code, which provides in part, "A contractor shall perform all work in a professional and workmanlike manner." Ariz. Admin. Code § R4-9-108(A). ¶18 At the evidentiary hearing, Schule testified the Homeowners were proceeding on a claim of "substandard workmanship of an inhabitable roof." Further, the ALJ concluded credible evidence established AZ Protek's violation of the charged provision of "[f]ailure to perform work in a professional and workmanlike manner." This was an administrative proceeding based on statutory and code provisions, not a superior court claim for breach of implied warranty damages. The ALJ's determination was not based on an implied warranty of habitability, and the ROC acted within its proper authority. ¶19 AZ Protek additionally challenges its liability to the Homeowners by arguing that the roof was subjected to neglect and modification that precluded adverse action by the ROC. Specifically, AZ Protek cites the following statute:
The registrar shall not issue a citation forA.R.S. § 32-1155(C) (emphasis added). ¶20 First, regarding neglect, AZ Protek contends that the house sat vacant from 2006 to 2009, subjecting the roof to neglect. AZ Protek cites the testimony of the general contractor, Ken Moss, who testified that it is unknown what happened to the house during this time period of vacancy. AZ Protek, however, provides no authority showing why the roof of a vacant house is by definition in a state of "neglect" during this vacancy period. Additionally, AZ Protek failed to offer any evidence to establish the maintenance or care required for this roof, other than non-vacancy, to prevent the occurrence of neglect. Therefore, we are not persuaded by this argument. ¶21 Second, AZ Protek argues the roof construction was subject to "modification." The Homeowners authorized and paid a separate roofing contractor, Skytop, to repair the roof before the ROC inspection was conducted by Dimond. Following the inspection, Dimond moved to close the Homeowners' complaint because the repairs precluded his ability to make an objective assessment of AZ Protek's original work. AZ Protek contends the ROC's action runs "afoul of both the language and the underlying purpose of A.R.S. § 32-1155(C)." ¶22 We are not persuaded by AZ Protek's argument, however, on the basis of either statutory interpretation or the evidentiary record. The inclusion of "modification" in A.R.S. § 32-1155(C)(2) is intended to encompass events that would insulate a roofing company from administrative liability. For example, if the homeowner or another contractor changes or modifies the roof, thereby causing or contributing to leaks in the roof, such "modification" will likely shield the original roofing company from responsibility under § 32-1155(C)(2). Here, however, the roof was determined by the ALJ to leak before the repairs. On this record, repairing the leaking roof when facing the threat of the monsoon season is not the kind of "modification" that the statute contemplates. ¶23 Furthermore, although Dimond moved to close the complaint due to the prior repairs, he conceded at the evidentiary hearing that an ROC inspection is not required to occur prior to the performance of remedial work in order to prove a contractor's substandard workmanship. Additionally, the Homeowners provided AZ Protek multiple opportunities to repair the roof and hired a separate contractor to make the repairs only after AZ Protek's refusal. As stated by the ALJ, the Homeowners' action in retaining an alternative roofing contractor to prevent additional damage to the house was "reasonable and justified under the circumstances." The record does not indicate the repair work was completed as an upgrade or improvement to the original work by AZ Protek but was simply a "correction" to repair the leaking roof and interior damage. ¶24 For these reasons, we determine the evidence fails to show AZ Protek's work was subject to neglect or modification within the meaning of A.R.S. § 32-1155(C). ¶25 Finally, AZ Protek alleges that the ALJ's decision was not supported by substantial evidence. AZ Protek claims that "[a]ny substantial evidence that may have supported the ALJ's decision was destroyed when [the Homeowners], prior to the ROC inspection, caused the work of [AZ Protek] to be modified through Skytop's subsequent repairs." Further, AZ Protek points out that Moss testified the roof was in great shape at the time of its completion. ¶26 On appeal, although the determination of substantial evidence is reviewed de novo, if an agency's decision is supported by the record, substantial evidence exists even if the record may also support a different conclusion. See DeGroot, 141 Ariz. at 336, 686 P.2d at 1306 (citation omitted); Havasu Heights Ranch & Dev. Corp., 167 Ariz. at 387, 807 P.2d at 1123. We view the evidence in the light most favorable to affirm the agency. Hosea, 224 Ariz. at 248, ¶ 10, 229 P.3d at 260. We conclude that the ALJ's decision was supported by substantial evidence. ¶27 At the administrative hearing, the following evidence was considered regarding the Homeowners' complaint. The general contractor for the residence, Moss, testified that AZ Protek was the only roofing contractor for the residence. Schule testified that an ROC publication on Workmanship Standards for Licensed Contractors indicated that "roofs aren't supposed to leak." The Homeowners also offered the testimony and exhibits of the roofing contractor hired to correct the defective roof, David Rousu of Skytop. Rousu testified that he observed at least fifteen "blisters" on the prior roof surface and that three or four of them were open as far down as the substrate of wood underneath the roof surface. He further testified that he observed evidence that water penetrated the roofing surface through these blisters. The record contains sufficient evidence to support the ALJ's decision that AZ Protek's construction of the roof was not performed in a professional and workmanlike manner.
failure to perform work in a professional and workmanlike manner or in accordance with any applicable building codes and professional industry standards if either:
1. The contractor is not provided an opportunity to inspect the work within fifteen days after receiving a written notice from the registrar.
2. The contractor's work has been subject to neglect, modification or abnormal use.
CONCLUSION
¶28 The ROC's final order is supported by substantial evidence and was not arbitrary, capricious, or an abuse of discretion. Accordingly, we affirm the ROC's and superior court's decisions in this matter.
_______________________
JOHN C. GEMMILL, Judge
CONCURRING: ____________________
JON W. THOMPSON, Judge
____________________
DONN KESSLER, Judge