ALJDEC

00F-M0819-ROC · Registrar of Contractors · 2000-04-27

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: April 25, 2000; 9:25 A.M.; Phoenix, Arizona APPEARANCES: Complainant: Martin E. Alvarez, President Respondent: Michael L. Rubin, Esq. ADMINISTRATIVE LAW JUDGE: George A. Schade, Jr.

This is a disciplinary proceeding, brought pursuant to Arizona Revised Statutes (“A.R.S.”) § 32-1154. Based upon the evidence presented at the hearing, Administrative Law Judge George A. Schade, Jr. submits this Recommended Decision and Order to the Arizona Registrar of Contractors (“Registrar”). FINDINGS OF FACT BACKGROUND[1] 1. Complainant Sun Eagle Corporation (“Sun Eagle”) is a general contractor. 2. Respondent J R E, Inc. doing business as Custom Fabricating Services (“Custom Fabricating”) holds License No. 139092, Class L-56 (Welding), issued by the Registrar on October 7, 1998. 3. On December 9, 1999, Sun Eagle filed this complaint with the Registrar alleging that Custom Fabricating had abandoned a contract it had with Sun Eagle and had refused to perform work after submitting a bid in violation of A.R.S. § 32-1154. 4. On December 14, 1999, the Registrar forwarded a copy of the complaint to Custom Fabricating. 5. On January 4, 2000, Custom Fabricating informed the Registrar that it disagreed with the allegations stated in the complaint. 6. On January 21, 2000, the Registrar issued to Custom Fabricating Citation and Complaint No. M00-0819 alleging violations of A.R.S. §§ 32- 1154(A)(1); -(A)(7); and, -(A)(9). 7. On February 2, 2000, Custom Fabricating answered the citation and complaint denying the allegations of the complaint. 8. On February 17, 2000, the Registrar issued a Notice of Hearing scheduling a hearing on April 25, 2000. Pursuant to A.R.S. § 41-1092.01, the hearing was assigned to the Office of Administrative Hearings. 9. On April 25, 2000, a hearing was held. Sun Eagle presented the testimony of Martin E. Alvarez, its President; Jeffrey J. Roberts, Custom Fabricating’s President and qualifying party; and, John M. Alvarez, a manager of Sun Eagle. Sun Eagle submitted ten exhibits which were admitted. Custom Fabricating presented the testimony of Mr. Roberts and submitted three exhibits which were admitted. The ALJ took official notice of certain documents in the file of the Office of Administrative Hearings and of Custom Fabricating’s prior two-year disciplinary record with the Registrar. THE COMPLAINT 10. On November 18, 1998, Custom Fabricating submitted a proposal to Sun Eagle, in response to Sun Eagle’s request (placed in an industry publication), for bids related to the construction of a new fire station by the City of Chandler. 11. Custom Fabricating’s proposal stated in pertinent parts: a. “This proposal is valid for 30 days.” b. “CUSTOM FABRICATING SERVICES will require…receipt of a Purchase Order.” Complainant’s Exhibit No. 1B. 12. The amount of the proposal was $46,000.00. 13. On November 20, 1998, Sun Eagle wrote a letter to Custom Fabricating stating in pertinent parts: “Please be advised that this letter serves as a formal Letter of Intent to contract with your firm on the above referenced project….

This correspondence also serves as the official Notice to Proceed. Please provide Submittals and Shop Drawings by Friday, December 11, 1998. Please commence with this process immediately.

Additionally, please supply Certificates of Insurance and the W-9 Tax ID Form immediately, as per the specification requirements. Any and all inclusions will be included in our final contract document, which is forthcoming.” (Bold emphasis in letter.) Complainant’s Exhibit No. 1C.

14. Sun Eagle faxed a copy of its November 20, 1998, letter to Custom Fabricating. The cover sheet of the transmission stated, “COMMENTS: Letter of Intent. Contract to follow in the mail.” Respondent’s Exhibit No. 2, p. 1. 15. On November 24, 1998, Custom Fabricating picked up from Sun Eagle a copy of the project’s Job Set, including Drawings, Specifications, and Amendments. 16. On December 11, 1998, Custom Fabricating requested from its insurance carriers Certificates of Insurance, with Sun Eagle and the City of Chandler as named insureds, to be sent to Sun Eagle. 17. On or about December 14, 1998, Mr. Roberts telephoned Sun Eagle regarding the submission of shop drawings by December 11, 1998, and he informed Sun Eagle that Custom Fabricating would not do any billable work without a contract being signed. 18. On December 16 and 17, 1998, Custom Fabricating’s insurance carriers issued Certificates of Insurance with Sun Eagle and the City of Chandler as named insureds. 19. On December 18, 1998, Custom Fabricating obtained a bid proposal from J B Drafting and Detailing Services for the preparation of shop drawings. Custom Fabricating did not proceed further with the proposal. Mr. Roberts testified that the purpose of requesting the proposal was to reserve time in J B’s work schedule. 20. On December 18, 1998, Sun Eagle informed Custom Fabricating, in a telephone call, that the City of Chandler was having difficulties with zoning and related permits, and the project was on hold until these issues were resolved. 21. Sun Eagle and Custom Fabricating did not engage in negotiations regarding terms, schedules and conditions which would lead to a contract either prior to or after December 18, 1998. 22. Sun Eagle did not send Custom Fabricating a written form or draft contract for the proposed fabricating work either prior to or after December 18, 1998. 23. Sun Eagle did not send Custom Fabricating a purchase order either prior to or after December 18, 1998. 24. On January 21, 1999, Sun Eagle informed Custom Fabricating that the zoning issues had been resolved, and Sun Eagle was ready to proceed with a contract. 25. On January 22, 1999, Custom Fabricating wrote a letter to Sun Eagle informing that as Custom Fabricating’s proposal was valid for thirty days, expiring on December 18, 1998, and a contract had not been signed, Custom Fabricating would not be undertaking the work. Custom Fabricating offered to submit a revised proposal. 26. On January 29, 1999, Sun Eagle received a notice of award from the City of Chandler for the project. 27. On February 16, 1999, Custom Fabricating submitted a revised proposal in the amount of $87,630.00. The revised proposal was valid for thirty days. 28. The higher proposal amount was due primarily to increases in overtime labor, and secondly, to the unavailability to Custom Fabricating of special pricing on steel. 29. Sun Eagle did not accept the revised proposal, but contracted with another fabricator. Sun Eagle and the new fabricator executed a 21-page contract. 30. Sun Eagle paid the fabricator with whom it contracted $84,300.00, or $38,300.00 more than it would have paid Custom Fabricating under the $46,000.00 proposal. 31. In its complaint filed with the Registrar, Sun Eagle answered the question regarding the date of the parties’ contract as follows: “c) DATE OF CONTRACT Contract was never executed by Custom Fabricating Services.” Stipulated official notice taken of Complaint.

CONCLUSIONS OF LAW APPLICABLE STATUTES AND RULES A.R.S. § 32-1154(A) provides in the pertinent subsections: “A. The 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:

1. Abandonment of a contract or refusal to perform after submitting a bid on work without legal excuse for the abandonment or refusal. *** 7. The doing of a wrongful or fraudulent act by the licensee as a contractor resulting in another person being substantially injured. *** 9. Failure in a material respect by the licensee to complete a construction project or operation for the price stated in the contract, or in any modification of the contract.”

CONCLUSIONS OF LAW 1. The complainant has the burden of proof, and the standard of proof on all issues is the preponderance of the evidence.[2] A “preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”[3] It “is evidence which is of greater weight or more convincing than the evidence which is offered in opposition to it; that is, evidence which as a whole shows that the fact sought to be proved is more probable than not.”[4] 2. The proposal which Custom Fabricating presented to Sun Eagle on November 18, 1998, and Sun Eagle’s November 20, 1998, letter of intent did not constitute a legal and binding contract between these parties. These parties did not execute and did not have a legally binding contract.[5] First, Sun Eagle’s letter of intent was not “an actual voluntary acceptance” [6] of the proposal but rather a statement that Sun Eagle intended to engage in negotiations which would lead to a mutually acceptable contract. Secondly, Custom Fabricating’s proposal expired on December 18, 1998. Lastly, these parties never executed a written contract which contained all of the terms, or even the most basic terms[7], upon which they agreed regarding their rights and responsibilities. 3. Standing by itself, Custom Fabricating’s November 18, 1998, proposal did not bind Custom Fabricating to perform any fabricating work for Sun Eagle. 4. Custom Fabricating did not violate A.R.S. §§ 32-1154(A)(1) or -(A)(9). These parties did not have a legally binding contract, and Custom Fabricating was not obligated to perform any work for Sun Eagle. 5. Custom Fabricating did not violate A.R.S. § 32-1154(A)(7). Its actions were not “wrongful or fraudulent” acts or omissions. 6. There are no grounds to impose any disciplinary sanctions on Custom Fabricating’s License No. 139092, Class L-56. RECOMMENDED ORDER It is recommended that the Registrar dismiss Citation and Complaint No. M00-0819. SUBMITTED this 27th day of April, 2000.

George A. Schade, Jr. Administrative Law Judge

The original Recommended Decision and Order of the Administrative Law Judge was mailed on April 27, 2000, for distribution to the parties, to:

Michael P. Goldwater Arizona Registrar of Contractors 800 West Washington, 6th Floor Phoenix, Arizona 85007

George A. Schade, Jr. ----------------------- [1] Official notice was taken of the documents necessary to prepare this procedural history. [2] Culpepper v. State, 187 Ariz. 431, 930 P.2d 508 (App. 1996); Rule R2- 19-119, Ariz. Admin. Code. [3] Morris K. Udall, Arizona Law of Evidence, § 5 (1960). [4] BLACK’S LAW DICTIONARY 1182 (6th ed. 1990). [5] AROK Construction Company v. Indian Construction Services, 174 Ariz. 291, 848 P.2d 870 (App. 1993); Corbin-Dykes Electric Co. v. Burr, 18 Ariz. App. 101, 500 P.2d 632 (1972). [6] Corbin-Dykes, supra, 18 Ariz. App. at 103, 500 P.2d at 635. [7] See Schade v. Diethrich, 158 Ariz. 1, 760 P.2d 1050 (1988).

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