ALJDEC

00F-M0827-ROC · Registrar of Contractors · 2000-07-17

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

REHEARING: July 17, 2000. APPEARANCES: Complainant appeared through its partner and qualifying party, Earlene Alber. Respondent was represented by its attorney, Michael Rhees, Esq. ADMINISTRATIVE LAW JUDGE: Brian Brendan Tully _____________________________________________________________________ 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. This matter comes on for rehearing on a Citation and Complaint filed by Complainant with the Registrar of Contractors alleging that Respondent has violated the provisions of A.R.S. § 32-1154 (A)(7) and (11). 2. Complainant is the holder of License No. 101390 issued by the Registrar of Contractors. A review of the official records of the Registrar reveals that Complainant’s contracting license is a Class L-05 license for parking lot striping and bumpers. 3. Respondent is the holder of License No. 104143, a Class B-01 commercial general contractor’s license. 4. This matter comes on for rehearing the complaint filed by Complainant with the Registrar of Contractors alleging that Respondent has violated the provisions of A.R.S. § 32-1154 (A)(7) and (11) relative to two projects, Mountain Shadows Elementary School and Desert Winds Elementary School, where Complainant performed work for Respondent.

MOUNTAIN SHADOWS ELEMENTARY SCHOOL

5. The parties executed a Subcontract Agreement dated August 20 1998, which provided, among other things, that Complainant would furnish labor, materials, equipment and supervision to perform parking lot striping on that project for the lump sum of $3,200.00. 6. The parties’ written agreement contained a “pay when paid” clause which provides that the Respondent shall only pay the Complainant after it has been paid by the project’s owner. 7. On August 7 and 16, 1999, Complainant performed work on the project except for the following items: less the concrete coring charge, which Respondent will address; basketball courts, tetherball courts, volleyball courts and arrows. The latter areas were not ready for Complainant’s work at the time it did the striping work and Complainant was never called back to perform the work. The value of Complainant’s work was $1,860.00, which is a sum less than the original contract price. 8. On or about August 17, 1999, Complainant performed additional work in the amount of $1,225.00 pursuant to a verbal change order. Although the change order was not in writing, there is credible evidence that Respondent authorized that the additional work be done for that price. 9. On or about September 15, 1999, Complainant performed work pursuant to the terms of a second verbal change order. The value of that work is $250.00. It is found that Respondent authorized that change order for that amount. 10. Complainant has established an entitlement to payment in the amount of $3,335.00 for the work performed by it on behalf of Respondent on this project. There is no credible evidence that Complainant’s work was deficient. 11. Respondent was ultimately terminated from this project by the owner due to construction delays. Those parties are presently in litigation. The school district has retained approximately one million dollars for liquidated damages. 12. Respondent has not paid Complainant for the work performed on this project. There is no credible evidence to excuse Respondent’s failure to pay Complainant the total sum of $3,335.00.

DESERT WINDS ELEMENTARY SCHOOL

13. The parties executed a Subcontract Agreement dated November 19, 1999, which provided, among other things, that Complainant would furnish labor, materials, equipment and supervision to complete the pavement marking work for this project. Respondent agreed to pay Complainant to total sum of $1,745.00 for that scope of work. 14. Notwithstanding its written agreement with Complainant, Respondent had another company begin the striping on this project. On August 15, 1999, Complainant’s workers arrived on the jobsite to stripe the parking lot and install signage. Complainant performed its work, which has a value of $1,465.00, which is less than the original $1,745.00 contract price due to the work performed by the other contractor and one area not being ready for striping. 15. On or about August 21, 1999, Complainant performed additional work pursuant to a change order. The value of that work is $815.00. It is determined that Respondent authorized such work to be performed. 16. On or about August 28, 1999, Complainant performed more additional work pursuant to a second change order. The value of that work is $170.00. 17. Complainant ceased performing work on this project on the advice of its attorney due to Respondent’s failure to make payment on the Mountain Shadows Elementary School project. Respondent’s offset in the amount of $354.59 against money owed to Complainant is found not to be justified by the evidence of record. 18. Respondent owes Complainant the total sum of $2,450.00 for the work performed on this project. There is no credible evidence to excuse Respondent’s failure to pay that sum to Complainant.

SUMMARY

19. Complainant has established an entitlement to payment from Respondent in the total amount of $3,335.00 for work performed on the Mountain Shadows Elementary School project. 20. Respondent’s failure to pay Complainant for the Mountain Shadows Elementary School project is deemed a wrongful act which has substantially injured Complainant. 21. Complainant has established an entitlement to payment from Respondent in the total amount o $2,450.00 for work performed on the Desert Winds Elementary School project. 22. Respondent’s failure to pay Complainant for the Desert Winds Elementary School project is deemed a wrongful act which has substantially injured Complainant. 23. A review of the official records of the Registrar of Contractors reveals that Respondent has a number of pending complaints involving allegations of non-payment to subcontractors. Also, Respondent’s qualifying party resigned on June 22, 2000, and he has not yet been replaced.

CONCLUSIONS OF LAW

1. Respondent cannot rely upon the “pay when paid” clause in the parties’ subcontract agreements as a defense to not paying Complainant for the work it performed on these projects. There is credible evidence that the dispute between the projects’ owners and Respondent centers on Respondent’s performance, or lack of performance, on those projects rather than on Complainant’s workmanship. 2. The evidence of record is adequate to establish that Respondent has violated the provisions of A.R.S. § 32-1154 (A)(7) and (11). 3. The Registrar of Contractors’ authority in disciplinary matters such as the one presented herein includes the ability to impose reasonable conditions that allow the disciplined contractor to reduce the scope of the disciplinary action taken against it. The exercise of such authority by the Registrar of Contractors is deemed appropriate in this matter. Therefore, based upon all the evidence, a reasonable condition in this case would consist of the payment by Respondent to Complainant in the total claimed sum of $5,785.00. Imposing such a condition on Respondent’s Class B-01 license is preferable to imposing a disciplinary penalty against Respondent’s license without providing a condition to reduce or eliminate same.

RECOMMENDED ORDER

In view of the foregoing, it is recommended that Respondent’s Class B- license be revoked on the effective date of the entered Order in this matter. It is further recommended that if Respondent pays Complainant the total sum of $5,785.00 ( $3,335.00 for the Mountain Shadows Elementary School project plus $2,450.00 for the Desert Winds Elementary School project) on or before the effective date of the entered Order in this matter, then the above-provided license revocation shall not take place, but instead Respondent’s Class B-01 license shall be placed on disciplinary probation for 90 days. This alternative penalty shall commence, if at all, on the effective date of the entered Order in this matter. Done this day, August 7, 2000

______________________________________ Brian Brendan Tully Administrative Law Judge

Original transmitted by mail this ____ day of ____________, 2000, to:

Registrar of Contractors Michael P. Goldwater, Director 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