Notice of Review and Appeal Rights

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                STATE OF OREGON
                                  for the

In the Matter of the Arbitration between:

MICHAEL & ALEXANDRA CORNELIUS,                                 Complaint No: 173374-101

And                                                           ARBITRATION AWARD

                                   STATEMENT OF THE CASE
This complaint was timely filed in accordance with ORS 701.143. All items determined are within
the scope of ORS Chapter 701 and require licensing with the Board. An on-site investigation was
conducted by the Board on May 1, 2008, at which both parties were present. With the assistance of
the CCB Investigator/mediator, the parties entered into a settlement agreement, which called for
respondent to perform additional work in full resolution of the complaint. Complainants allege that
respondent breached the settlement agreement by failing to perform any agreed work within a
reasonable time. Complainant filed a Statement of Damages form seeking monetary damages in
the amount of $16,416.00. On August 5, 2008, the CCB issued a Proposed Default Order for
respondent to pay complainants $15,866.00. Respondent timely filed a request for a hearing.

Pursuant to its authority under ORS 701.148(1), and subject to the provisions of ORS 701.148(4),
the CCB, on September 19, 2008, referred this matter to the Office of Administrative Hearings, as
required under ORS 701.149, for binding arbitration, in accordance with OAR Chapter 812,
Division 10. A Notice of Arbitration Hearing, along with a copy of OAR Chapter 812 Division 10,
was served on the parties. David Marcus was appointed as the Arbitrator. On November 17, 2008,
the Arbitrator conducted a telephone prehearing conference. Both parties participated. Following
the prehearing conference, complainants filed an amended Statement of Damages reducing the
amount claimed to $15,816.00.

The hearing was held on December 8, 2008 in Salem, Oregon. Complainants both appeared in
person with their counsel, Darrell L. Cornelius. Respondent did not appear for the hearing.
Pursuant to OAR 812-010-0300, the arbitration proceeded in respondent’s absence. However, on
that same date, the Arbitrator was advised that respondent’s principal was prevented from attending
the hearing due to a medical reason. A limited telephone proceeding was held on December 16,
2008, after which I issued an Interim Order Granting New Hearing. With the agreement of the
parties, the arbitration hearing was set for December 29, 2008 in Salem, Oregon. Complainants
both appeared in person with their counsel, Darrell L. Cornelius. Respondent appeared through its
Cornelius and Heartstone Inc., CCB complaint no. 173374-101                               Page 1 of 5
president, Michael McVahle. Michael and Alexandra Cornelius both testified. CCB
Investigator/Mediator Susan Stocker and contractor David Cota testified for complainants.
Michael McVahle, Mariel McVahle and Dan Koffel testified for respondent.

Having duly heard the proofs and allegations of the parties, and having considered the entire
record, consisting of Exhibits 1 through 128 and complainants’ Exhibits C1 through C11 and
respondent’s Exhibits R1 through R25 and R1-1, and a digital recording of the arbitration hearing,
I, the undersigned Arbitrator, enter the following:

Complainants entered into a contract with respondent in April 2007, under which respondent was
to install a new Modified Bitumen roof system at complainants’ home in Tigard, Oregon. The
contract price was $8,350.00 after discount. The parties subsequently executed a change order
calling for dry rot repairs and re-stucco outside walls, at an additional cost not to exceed $2,200.00.
Respondent completed all work under the contract by July 1, 2007 and complainants paid
respondent in full for its work.

Shortly after respondent’s work was completed, the roof leaked and caused internal damage to
some ceilings. Although respondent returned and made repairs to the roof on three occasions, its
work was not effective and complainants continued to experience leakage. Mr. Cornelius called
in another contractor and received instruction for making temporary repairs. Mr. Cornelius
performed repair work on a patchwork basis on a couple occasions to resolve leaks as they
occurred and to mitigate damages from the leaks. Complainants filed this complaint in February

On May 1, 2008, the parties met at the home with CCB Investigator/mediator Susan Stocker.
Respondent was represented by its president, Michael A. McVahle. Mr. McVahle acknowledged
that the roof was not properly installed. The parties entered into a written settlement agreement
whereby respondent was to tear off and dispose of the existing roofing and install new roofing in
accordance with the original contract and industry standards and practices. In subsequent
discussions between the parties, complainants agreed to allow respondent to install “peel and seal”
roofing material rather than torch on roofing. Respondent also agreed to complete repairs to the
interior damaged ceilings and walls or reimburse complainants the cost to have that work done.
Finally, respondent agreed to repair a window lock and casing. In consideration for this work,
complainants agreed that the complaint would be considered resolved. Under the terms of the
agreement, respondent was to complete the work within 17 days of starting, and respondent was to
start work June 1, 2008, subject to weather conditions.

Respondent did not start work June 1, 2008 because of unfavorable weather conditions, which
continued throughout the week. Complainants agreed to allow a later start date after the rainy
weather during the first week of June. Although the weather was favorable as of June 11, 2008,
respondent did not report to the site or otherwise contact complainants. Complainants initiated
contact with respondent on June 20, 2008. Respondent advised complainants that work would start
after delivery of a dumpster on June 23, 2008. However, the dumpster did not get delivered.
Complainants called respondent on Thursday, June 26, and spoke to Mr. McVahle. He advised that
he would check on the dumpster and get back to complainants by noon on Friday. However, by the
afternoon of Friday, June 27, the dumpster was still not delivered and respondent had not returned

Cornelius and Heartstone Inc., CCB complaint no. 173374-101                                Page 2 of 5
complainants’ call. Complainants called respondent on Friday and left a voicemail message, but
respondent never returned the call. Complainants also notified Ms. Stocker of the situation on that
date. Ms. Stocker advised complainants to write to the CCB dispute analyst and they sent a letter
on June 30, 2008. The dispute analyst responded by letter dated July 3, 2008, advising
complainants that the next step in the process was to file a statement of damages along with
estimates from other contractors. A copy of that letter, as well as complainants’ letter to the
dispute analyst, was sent to the respondent by the dispute analyst. Complainants obtained bids and
filed their statement of damages with the CCB on July 18, 2008.

Respondent did not attempt to contact complainants between June 27 and July 18, 2008.
Respondent sent complainants an email on July 18, 2008 advising that he would report the
following day, Saturday, July 19, to begin work. Complainants refused to allow respondent to
perform any work when he arrived at the home on July 19, 2008.

Respondent argued that the reason for the delay in beginning work was due entirely to the weather
forecast. Respondent presented evidence, corroborated by complainants’ witness, that the roofing
material must be applied to a dry deck during dry weather. However, I find that respondent’s
insistence on starting work only when the 15-day weather forecast called for no rain was not
reasonable. No roofing contractor could possibly survive as a business applying such a
precondition for performing work. Further, as noted by complainants and other witnesses, the
weather cannot be reliably predicted two weeks into the future. As documented by complainants,
the actual weather was quite favorable from at least June 11 through June 28, 2008, with no rain
and high temperatures ranging from the mid-50’s to 100 degrees and the low temperatures ranging
from the high 40’s to the mid-60’s. Further, after what little rain fell at the very end of June and
first days of July, there was no rain from July 6 through July 30, 2008.

I find that respondent breached the parties’ settlement agreement by failing to begin work in a
reasonable period of time, even allowing for weather considerations. While respondent asserted
weather concerns as the reason why it did not begin work on the roof, respondent had no
explanation for why it did not perform any of the other repairs specified in the settlement
agreement. I further conclude that a reasonable time, based on the evidence of the weather
conditions, was no later than the end of June. I note, however, that respondent did not make any
good faith attempt to perform under the settlement agreement until July 18, 2008, almost two
weeks after the weather had again been clear with no rain. In short, respondent was already in
breach of the agreement when he showed up at the house on July 19, and complainants were
therefore under no obligation to allow respondent to perform any work. Contrary to respondent’s
assertion, complainant’s did not breach the agreement by refusing to allow respondent to start work
more than a month after the originally agreed upon completion deadline.

Respondent next argues that if it was in breach of the agreement, its breach was not a material
breach. Respondent argues that there was no material breach because the complainants did not
suffer any damages as a result of the failure to start work in the time frame called for in the
settlement agreement, and they had not suffered any damages as of July 19, 2008, when respondent
attempted to start the agreed work. I am not persuaded. The evidence at hearing shows that the
period for performance was a significant issue for both parties in their negotiation of the settlement
agreement. Both parties compromised in setting the period for completion of the work at June 1,
2008 (already a delayed start date in consideration of weather) to June 18, 2008, subject to
extension by agreement of the parties. I conclude that the period for performance was an essential

Cornelius and Heartstone Inc., CCB complaint no. 173374-101                               Page 3 of 5
and integral term of the settlement agreement. Contrary to respondent’s position, I do not find that
complainants agreed to extend the June 18 deadline indefinitely.

Complainants seek $11,456.00 as the cost to tear off and dispose of the old roofing and install new
roofing, based on the bid they received from Griffith Roofing Co. This amount is significantly
higher than the original contract price with respondent. However, I note that the original contract
price was actually $9,350.00, which respondent then discounted by $1,000.00. Further, the original
contract did not call for tear off and disposal, while the settlement agreement does. I conclude that
the bid price of $11,456.00 for the work described, is reasonable.

Respondent argues, however, that the Griffith bid includes work outside the scope of the settlement
agreement and not required by code or manufacturer’s instructions. Respondent points out three
areas: 1) the scope of metal work that is included with complainant’s bid goes beyond the metal
work included in the original contract; 2) the mid-layer torch on base sheet indicated in the
complainant’s bid, was not included in the original contract; and 3) the use of smooth 5 mil and
then painting the surface with Karnak versus using 4.5 mil granulated material. I am persuaded
that complainants would receive a higher quality roof with the Griffith bid than they would have
received had respondent fully performed the terms of the settlement agreement.

I am persuaded that additional metal work is necessary and appropriate with a complete tear off and
installation of new roofing. I therefore include the cost of all the metal work described in the
Griffith bid in this award ($5,227.00). I am, however, persuaded that the mid-layer torch on base
sheet was not contemplated in the settlement agreement and is not required by code, even if
commonly applied as an industry standard. No evidence was presented regarding the cost for
applying that mid-layer. I have considered the total cost of roofing work at $6,229.00 as broken
down in the bid, and the fact that the mid-layer is just a 2 mil material. I find that $1,200.00 is a
reasonable estimate amount to attribute to the labor and material for the mid-layer. I therefore
deduct $1,200.00 from the Griffith bid. Finally, I am persuaded that there is a modest cost
differential between the agreed upon peel and seal application of granulated material the respondent
was going to use versus the use of smooth 5 mil and application of Karnak reflective coating to
finish, as described in the Griffith bid. This cost differential is limited to materials in a total
amount for this job of $300.00. I therefore also deduct that amount from the Griffith bid in
determining the award amount.

Complainants are entitled to recover $9,956.00 (Griffith bid at $11,456.00 minus $1,200.00 minus
$300.00) for removal and replacement of the flat roofing.

Complainants seek an additional $1,300.00 for roofing repair work on the garage and to repair a
window casing. Respondent objected to the cost associated with removing roofing adhesive from
tiles on garage overhang, as that work was not called for in the settlement agreement. I agree. The
bidding contractor attributed $600.00 of his bid to that work and I therefore deduct that amount
from the bid in determining a just award on this issue. Accordingly, I award complainants $700.00
for this item of the complaint.

Complainants seek $1,460.00 to repair and/replace drywall in the interior of the home, and to finish
and paint. This work was also specified in the parties’ settlement agreement and was not
performed by respondent. Respondent agrees that the cost of drywall repair at $860.00 is
reasonable. However, respondent argues that painting the walls is not its responsibility under the
settlement agreement. I find that the agreement calls for sheetrock repairs including numerous
Cornelius and Heartstone Inc., CCB complaint no. 173374-101                              Page 4 of 5
cracks caused by respondent’s jacking up the home during its original work. “Sheetrock repairs” in
this context was clearly intended to mean restoration of the walls to their original condition, which
necessarily requires painting over patched areas. I find the bid amount for this work to be
reasonable and award complainants $1,460.00 for this item of the complaint.

Finally, complainants withdrew item 7 of their complaint for repair to the roof tiles. That item,
originally listed at $1,600.00, is therefore dismissed.

Complainants have established damages in the total amount of $12,116.00 ($9,956.00 + 700.00 +
1,460.00). Pursuant to ORS 701.147(4)(a) and OAR 812-004-0250(2)(c), complainants are also
entitled to recover their complaint processing fee in the amount of $50.00. Based on these
Findings, and in accordance with ORS Chapters 701 and 36, and OAR Chapter 812 Division 10, I
enter the following:

Respondent shall pay complainant $12,116.00, plus $50.00 in costs for complainant’s processing

Dated this 14th day of January, 2009

                                                      David Marcus, Arbitrator

Cornelius and Heartstone Inc., CCB complaint no. 173374-101                               Page 5 of 5

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