ALJDEC

00F-0246-ROC · Registrar of Contractors · 2000-02-23

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: February 23, 2000 APPEARANCES: Robert Shull, Esq., on behalf of the Complainant Jay M. Martinez, Esq., on behalf of the Respondent ADMINISTRATIVE LAW JUDGE: Allen Reed _____________________________________________________________________ FINDINGS OF FACT 1. The Complainant, Carson Construction Co. Inc. (Carson) is a licensed contractor (primarily commercial concrete and asphalt projects), and employs from 40 to 50 people. 2. Carson is a corporation which is owned by Rupert Lemons (Lemons). Lemons will be referred in his own name, during the course of this Recommended Order. 3. Gary Faucett (Faucett) responded to an advertisement and after being interviewed by Lemons, began working as a Superintendent for Carson in April 1998. Shortly thereafter he also began working as a salesman- estimator for the Carson. Faucett will be referred to in his own name, during the course of this Recommended Order. 4. Faucett was desirous of obtaining his own contractor’s license and in August of 1998, he was issued the Class A license, No. 137514, on behalf of Nita Constructing, Inc. which is owned by Faucett and his wife. 5. Faucett continued working for Carson after receiving his license. 6. On November 14, 1998, Faucett performed some work which needed to be done over the weekend at one of Carson’s projects being done in Chandler, Arizona, for Gamma Construction Company (Gamma). Lemons was on another project in Flagstaff. Faucett and Lemons had discussed the project and there is disagreement as to whether Faucett was told to do the work. 7. According to Lemons, he never told Faucett to do the work which was required (installation of bollards), before the City would issue a Certificate of Occupancy for the Gamma project (an Outback Steakhouse). Lemons also testified he never received $2,000.00 cash from Faucett as payment for the work. 8. Faucett testified that Lemons telephoned and told him to do the work for Gamma. Faucett had Augustine Montemayer, Jr. (Montemayer), and a friend of Montemayer, help on the job. At the time Montemayer was working for Carson as Sales Assistant and Estimator. Montemayer quit Carson by mutual agreement after working about a month. 9. According to Faucett, he requested payment from Gamma in the amount of $2,811.00, by check made out to himself because he needed to be able to negotiate the check in order to pay Montemayer $300.00 and Montemayer’s friend $200.00, in cash. Faucett testified he paid himself $311.00 and gave the remaining $2,000.00 in cash to Lemons on the following Monday. 10. Faucett signed and gave a handwritten invoice on behalf of Carson in the amount of $2,811.00, to Gamma. The invoice shows labor was charged at $900.00 rather than the $811.00 which was the total labor cost according to Faucett’s testimony. The invoice was never filed at Carson’s nor was a change order recorded to reflect the increased cost for the project even though Faucett subsequently prepared other billings and change orders on the project. The copy of the check and invoice were not sent (faxed), to Carson until May 10, 1999, which was three months after Faucett left Carson. 11. Montemayer testified he and his friend were paid the specified amounts by Faucett for their work at the Outback Steakhouse. 12. Also in November, 1998, Faucett was already doing work on behalf of Nita, (Exhibit 5, United Metro Materials order form dated November 14, 1999, with Nita Construction as the customer). This was apparently the $3,200.00 job for Builders Guild, Inc. which Faucett testified he obtained independent of Carson. Faucett’s testimony on this issue was not rebutted. 13. In January, 1999, Faucett bid a $7000.00 tenant improvement job (Johnson Bank) with Wespac Construction, Inc. (Wespac), on behalf of Carson. Wespac provides anywhere between $250,000.00 to $600,000.00 of annual business to Carson. Wespac payment for work which had been done was sometimes untimely and Lemons would become upset and make comments to Faucett about not doing further work for Wespac, until they paid. 14. The Johnson Bank job was awarded to Carson but Faucett contacted Wespac and told them that Carson was too busy to handle a job that small. Faucet also told Wespac that Carson had a sister company Nita and it could do the work. Faucett then submitted a bid in the amount of $7,000.00 but prepared on Carson’s computer, on behalf of Nita. Aside from the fact that Faucett worked for Carson as well as owning Nita, there is no business relationship between Nita and Carson. This assertion by Faucett to Wespac, that Nita was a sister company of Carson, was a misrepresentation. Faucett’s explanation of why he used the sister company language was not credible. 15. Faucett (Nita) did the Johnson Bank job. Anticipated or ordinary profit is 10% plus 10% overhead. The evidence indicates these amounts were obtained by Nita from the job. 16. Faucett also sent out bids, again using Carson’s computer, in the amount of $4,900.00 and $59,950.00 on behalf of Nita. No work was done on the $4,900.00 bid which may have been less than what Carson would do a job for. According to Faucet the $59,950.00 bid to Reliance Build, Inc. (Reliance), was a tenant improvement project and Carson does not do tenant improvements. Lemons testified that Carson will at times do tenant improvements and the evidence shows that such projects are not categorically declined by Carson. According to Faucett he did nothing on the project but subsequently re-bid the job, completing it in the latter part of 1999 well after he had left Carson in February, 1999.

CONCLUSIONS OF LAW The Citation and Complaint allege violation of A.R.S.§ 32- 1154(A)(7), a wrongful or fraudulent act by the licensee as a contractor resulting in substantial injury to another. 1. Absent possible contractual provisions not relevant to this case, and addressing the issue in general terms, there is no prohibition that an employee of contractor A is disallowed from working for contractor B or for himself at those times when he is not working for contractor A. However, an employee generally cannot use or otherwise convert the property of contractor A (this would include the employee’s time which is paid for by contractor A), for the benefit, pecuniary or otherwise, of contractor B or himself, without consent from contractor A (Faucet had no such permission). This is even more true if such conversion results in damage or harm to Contractor A. 2. Certain evidence regarding the disarray of Carson’s accounts receivable and other records, as well as the accusatory disposition and volatile temper of Lemons has been considered with respect to the question of the $2,000.00 and other aspects of the case. This evidence does not alter the conclusions which are made. 3. The evidence shows that from November, 1998 until he left Carson, Faucett was engaged in a course of conduct which consisted of using Carson equipment and presumably time to solicit jobs for Nita. The evidence does not support the position that Carson would not have done either the $7,000.00 Wespac job (Lemons testified he would have to weigh the facts), or more significantly, the $59,950.00 Reliance job. The fact that the Reliance job was not completed until well after Faucett left Carson is not the crux of the issue. The crux is that Faucett never even informed Lemons that Reliance was seeking a bid on the job but rather submitted the Nita bid. Had Faucett informed Lemons, it would have allowed Lemons to make a decision of whether he would bid the work. Had Lemons had the opportunity to make a decision, the re-bid might well have gone to Carson with the attendant profit and overhead. With respect to the Johnson Bank job, the evidence shows that the Carson bid had apparently been accepted by Wespac when Faucett told Wespac Carson was to busy to do it. The evidence does not establish that Carson would not have done the job if Faucett had not stated Carson was unwilling and submitted a bid as Nita asserting it was sister company to Carson. The loss of profit and overhead though presumably less than the Reliance bid, is considered in the context of injury. Faucett bid the above jobs for Nita and was doing so in the capacity of a contractor. 4. The issue of the work at the Outback Steakhouse is limited because this work was apparently done by Faucett as an employee. Even so, whether Faucett paid or didn’t pay Lemons is probative of his intent with respect to other matters at issue in this case which matters were done by Faucett as a contractor. The evidence shows Faucett was already doing contracting as Nita (evidenced by exhibit 5). At about the same time (November 14, 1998), Faucett had Gamma pay him for work while preparing an invoice for the work in the name of Carson. Faucett did not file the invoice or document the change order with Carson even when subsequent billing and change orders were submitted to Gamma on the project. The labor cost on the invoice for the job is not consistent with Faucett’s testimony. These inconsistent factors when added to the testimonial denial by Lemons, that he never received the $2,000.00, lead to the conclusion that Faucett did not pay the money as claimed. Presumably, Lemons after being in business since 1980, would know that any payment from Gamma whether cash or otherwise would have to be accounted for on Carson books since it in all likelihood would appear as an expense on the Gamma books. To simply accept $2,000.00 cash without inquiring about how Faucett received payment, whether an invoice was completed, what the total cost and payment was, what the related costs or expenses were, if related documentation including employment, social security and other tax information existed and a myriad of related issues, would be reckless and irresponsible on the part of Lemons. 5. Placing the factors and events into perspective, it is concluded that Faucett was not acting for the benefit of Carson while an employee and in fact, that Faucett by virtue of the fact that he was an employee, was using Carson equipment and time, appropriated actual and potential contracts from Carson for the benefit of himself and Nita by means of misrepresentation to a Carson client (Wespac bid), and non disclosure to Carson (Reliance bid). The facts in their totality establish knowing wrongful conduct with substantial injury. RECOMMENDED ORDER In view of the foregoing it is recommended that commencing on the effective date of the Order issued in this matter that the Class A license of the Respondent shall be suspended for a period of seven (7) days; It is further recommended, in addition to the foregoing license suspension if any, that the Respondent’s Class A license be placed on active probation to commence upon completion of any period of suspension or the effective date of the Order entered in this matter if no suspension is ordered. Done this ___ day of March, 2000.

______________________________________ Allen Reed Administrative Law Judge Original transmitted by mail this ___ day of March, 2000, to:

Registrar of Contractors 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