ALJDEC

00F-2283-ROC · Registrar of Contractors · 2000-09-05

STATE OF ARIZONA IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: September 5, 2000.

APPEARANCES: Complainant appeared through its authorized officers, Anne P. Hart and Dennis Hart. Respondent was represented by its attorney, Aaron Kizer, Esq.

ADMINISTRATIVE LAW JUDGE: Robert I. Worth _____________________________________________________________________

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. Pursuant to a written proposal and subcontract, Complainant agreed to and did perform specialty work consisting of fabricating, delivering and installing glass windows and doors on a commercial tenant improvement and remodeling project on which Respondent was serving as the general contractor.

2. The agreed total subcontract price was $11,750.00. Although the original proposal from Complainant sent by Fax on November 9, 1999 had specified an advance down payment equal to 50% of the stated contract price, Respondent induced Complainant to modify its proposal and to commence work for a $2,000.00 down payment (approximately 17%), with the entire balance to become payable upon completion of contemplated work. Such modified down payment was duly paid several days later.

3. Most all of the contemplated work under the subcontract was appropriately and fully performed by Complainant by mid-December, 1999, and a few punch list type corrections were accomplished no later than 30 days thereafter. However, despite the agreement’s terms providing for payment upon completion, and despite numerous and repeated requests and demands from Complainant, no portion of the contractual balance of $9,750.00 has been paid or tendered by Respondent. It was uncontroverted that the basis for failing to remit payment when due did not involve any deficient workmanship on the part of Complainant.

4. The testimony revealed that Respondent has not received a substantial portion of the amounts payable under its agreement with the tenant of the remodeled premises with whom it is presently engaged in civil litigation. Respondent is asserting that almost $80,000.00 remains unpaid under a contract for over $300,000.00, and that such arrearages have prompted Respondent not to pay its own subcontractors, including Complainant, the aggregate sum of approximately $40,000.00. It was additionally shown that Complainant not only has filed a lien against the tenant’s interest in the improved property, if any, but also has initiated a separate civil lawsuit against Respondent for the unpaid balance under the subcontract as well as for interest and attorneys fees.

5. The evidence presented at the hearing tended to indicate that the overall project was about 90% complete when Respondent encountered difficulties in obtaining progress payments from the tenant. It also credibly appeared that the specified window and door work under the subcontract with Complainant was at or near to this same percentage of completion. In any event, Respondent decided to terminate its dealings with the tenant and to discontinue any and all jobsite involvement.

6. Although Respondent’s former foreman or superintendent was given permission to continue working directly for the tenant in the completion phases of the project and was additionally instructed to inform all subcontractors of the general contractor’s disassociation and withdrawal from further work on the jobsite, the preponderance of credible evidence reflected that Complainant was never so informed. In any event, any unilateral decision by Respondent to terminate all jobsite involvement and all dealings with its customer should not and would not avoid or relieve already-incurred obligations under the subcontract with Complainant.

7. No part of Respondent’s troubles with its tenant-customer was shown to have been traceable to Complainant’s work on the project, and no factual or mathematical relationship between the balance asserted herein as past due and owing to Complainant (without interest and legal fees) and the almost nine-times higher amount claimed to be remaining unpaid on the general prime contract was demonstrated.

8. Although the evidence admittedly confirmed the existence of a greatly diminished financial capacity for Respondent arising from its dispute with owner, it is found and determined that there was no sufficient showing of a total and ongoing lack of capacity to have paid Complainant. Respondent is presently continuing its contracting activities which appear to be confined to a single project on which rather

stringent financial controls have been placed into effect with respect to the disbursement of construction-related expenses or profits. Respondent is not entitled to pick and chose which obligations to pay and to otherwise prefer some creditors over others, but it has admittedly paid for some services and supplies deemed necessary to continue operating its business.

9. Complainant may not appropriately be made into an insurer that Respondent, as the project’s general contractor, will ultimately receive funds from its own customer. Complainant was, at all times, looking to Respondent for payment under the subcontract arrangement. Whether or not Respondent is ever able to prove entitlement to and is able to collect further monies from the tenant would be of no significance with respect to Respondent’s obligation to pay Complainant for the completed and properly performed work on this project. At most, the problems encountered by Respondent might serve to generate a reasonable deferment of the otherwise applicable due date for transmitting the balance due, but any such time extension has expired long before the hearing date.

10. But for Respondent’s inducing Complainant to modify the quantum of the down payment specified in the original proposal from 50% to 17%, the unpaid balance would have been about $4,000.00 less. Under all the circumstances, the overall course of conduct on the part of Respondent is also found to constitute a wrongful (but not fraudulent) act to the financial detriment of Complainant within the meaning of the charged code provision.

11. It is well settled that the Registrar may include reasonable conditions in a disciplinary Order that serve to reduce or eliminate any otherwise appropriate disciplinary penalties. In this case, the inclusion of a payment condition, in the nature of

restitution, equal to the amount of the long past due subcontract balance is fully warranted. However, remaining mindful of the somewhat difficult circumstances impacting upon Respondent’s business operations, duly considered as a matter in mitigation, it also appears appropriate for the Registrar to decline to impose any additional or lingering penalties against Respondent if and after proof of payment to Complainant is filed.

CONCLUSIONS OF LAW

1. The jurisdiction of the Registrar of Contractors to conduct these administrative disciplinary hearings may properly and concurrently be exercised, notwithstanding the pendency of related civil litigation between the same parties involving the same underlying claim. Moreover, such civil forum is the appropriate place in which to seek and recover all provable consequential damages such as interest and attorneys fees.

The evidence of record adequately established that Respondent has violated the provisions of A.R.S. §32-1154A(7) and (11), by failing to timely pay the $9,750.00 balance due, owing and unpaid under the parties’ subcontractual agreement.

RECOMMENDED ORDER

In view of the foregoing it is recommended, commencing on the effective date of the Registrar’s Order, that Respondent’s Class B-01 license be temporarily and actively suspended until the Registrar receives proof that Respondent has paid or tendered the sum of $9,750.00 to Complainant.

It is further recommended that if Respondent pays or tenders the above- stated monetary amount to Complainant on or before this Order’s effective date, then no

license suspension shall be imposed and the entire Citation and Complaint in Case Number 00-2283 shall be closed.

Dated: September 12, 2000. OFFICE OF ADMINISTRATIVE HEARINGS

______________________________________ Robert I. Worth Administrative Law Judge

Original transmitted on _____________________

by: _____________________________ , to:

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

Attn: Joyce Armijo -----------------------

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