ALJDEC

01F-2112-ROC · Registrar of Contractors · 2001-07-30

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: July 20, 2001 APPEARANCES: Thecla Anau, co-owner, on behalf of the Complainant James F. Kahn, Esq. on behalf of the Respondent ADMINISTRATIVE LAW JUDGE: Allen Reed _____________________________________________________________________ Findings of Fact-Sunray Charter School 1. On or about June 30, 1999, the Complainant and Respondent entered a contract whereby the Complainant subcontractor would perform certain concrete work at Sunray Charter School (Sunray), in Glendale, Arizona. The initial contract amount was $6,375.00. 2. The ownership and financing for the Sunray project are uncertain. According to the Respondent, an entity identified as Tesseract School (Tesseract) had an ownership interest and a company identified as Eastridge was overseeing the project but may also have had an ownership interest. Eastridge was not a licensed contractor. 3. On July 16, 1999, the Complainant and Respondent agreed to three change orders. The first was in the amount of $23,400.00 for a five foot high site wall of 745 linear feet. The second was in the amount of $63,118.00 for the installation of a sidewalk, patio and basketball courts. The third was in the amount of $17,069.00 for the installation of a site fence of 807 linear feet and gates. The total of the original contract and three change orders was $109,962.00. 4. The Complainant submitted three invoices between July 19, 1999 and August 30, 1999, in the total amount of $41,620.00, to the Respondent. Work which was being billed included installation of footings, masonry retaining wall, grouted blocks, 360 feet of site wall, sidewalk and concrete curb. The Complainant also submitted an invoice for dirt hauling costs in the amount of $730.00. The Respondent made one payment of $5,000.00 to the Complainant by check dated July 29, 1999. The total claimed as owed for work completed at Sunray, is $37,350.00. 5. In August, 1999, Tesseract-Eastridge were unable to obtain financing to continue the project. On August 12, 1999, the Respondent notified the Complainant that the Sunray project was suspended. 6. Shortly after the suspension of work, the Complainant contacted the Respondent and inquired about payment for work done. The Respondent informed the Complainant it had not been paid by Tesseract-Eastridge but the Complainant would be paid once the Respondent was paid. 7. The Complainant presented testimony that it left materials and equipment at the site. This included items such as sand, cement, decoration block, and aggregate. The Complainant testified the cost of these materials was $16,560.00. 8. The area in which the materials were left, was fenced. The fence was rented by the Complainant. In November, 1999, the Complainant discontinued the rental of the fence and it was removed. Taufe Anau, testifying on behalf of the Complainant, asserted the materials were still on site in early 2000, but no longer on site in early 2001. There may have been a two pallets of block left at the site when the Respondent returned to work. There was no specific evidence of what happened to the materials. 9. There was no documentation or other competent evidence presented by the Complainant to specifically identify or quantify materials, or substantiate either the amount or cost of the claimed loss. In addition, the Complainant’s removal of the protective fence when the job site was standing idle, without removing or otherwise securing the materials for which the Complainant now seeks recovery, borders on irresponsible. No portion of the $16,560.00 can be considered as a valid claim. 10. The Respondent acknowledged that a number of items were satisfactorily completed on the Sunray project, by the Complainant. These were the footings, retaining walls and grouted blocks (Exhibit 3-invoice 1, items 1, 2 and 3 in the amount of $6,375.00). The site wall (item 1, C1-C9, $7,020.00) was not the correct elevation but there was no showing that this resulted in a back charge to the Respondent. The Respondent accepted another $12,332.00 of the Complainant’s work as satisfactory (Exhibit 4- invoice 2, items 1 and 2). The total amount of the above cited invoices accepted by the Respondent or not back charged to the Respondent is $20,727.00 ($25,727.00 less the $5,000.00 paid by the Respondent). 11. The Sunray project lay idle for nearly a year. In approximately June of 2000, another contractor (identified as TGI) took over the Sunray project. TGI sent the Respondent notice that it would be expected to finish and correct work done by the Complainant, that was alleged to be defective. According to the Respondent’s president, it had to negotiate with TGI to finish the work and in so doing it had to agree to a $30,000.00 reduction of its claim of $491,000.00 against the owner, because of defective work by the Complainant. There was no satisfactory supporting documentation for the stated amount ($30,000.00.) and in light of the poor quality of evidence generally, little credence is given to it as an accurate figure attributable to the Complainant. 12. The Respondent demolished, hauled away and rebuilt portions of the sidewalk and curb which had been completed by the Complainant. Documentary evidence did show $1,950.00 for demolition and haul away costs of some of the Complainant’s work (Exhibits H and G). 13. By June of 2000, the Complainant and Respondent had discontinued an unsatisfactory relationship on another contract (Wal-Mart). That contract is part of this case but shall be discussed separately. Due to the unsatisfactory Wal-Mart experience, the Respondent did not inform the Complainant of the problems asserted by TGI on the Sunray project. This failure to inform is not justified and will be discussed further in the Conclusions of Law. 14. Although the Respondent’s President, Terry Hedges (Hedges), considered the Complainant’s work at Sunray, borderline at the time the project was initially suspended (August, 1999), the Respondent’s supervisor, Bruce Ford (Ford), encouraged Hedges to use the Complainant on a Wal-Mart construction project in Phoenix, commencing in October 1999. Findings of Fact-Wal-Mart 15. On or about October 5, 1999, the Complainant and Respondent entered a standard American Institute of Architects (AIA) contract whereby the Complainant was responsible for the structural footing and column pad concrete at a Wal-Mart store being built in Phoenix. This consisted of 4,150 square feet of perimeter footing and 4,513 square feet of column pad footing and placement of anchor bolts. The date of commencement was October 6, 1999, with anticipated completion on October 22. The dates were subsequently adjusted by four days. The amount of the contract was $13,000.00 ($1.50 per square foot of 12” thick footing including anchor bolt installation). The contract provided for an additional $700.00 for layout. 16. The contract also provided that the Complainant would supply a pour crew at an hourly rate for excavation and installation of re-bar (Article 14.2). This provision was not specifically addressed at the hearing but is part of exhibit A and clarifies certain evidence with respect to payments which were asserted as having been made by the Respondent who claimed to have paid $32,702.40 on the contract. The contract provision when taken in conjunction with all the testimony shows that neither party was specifically aware of the specific labor provision. The provision was not raised during the hearing to explain why the asserted payments by the Respondent were in excess of the contract amount. The Complainant argued that there was an independent labor contract but did not refer to the contract (Exhibit A), to support the argument. The Respondent claimed its asserted payments of $32,702.40 were on the $13,700.00 portion of the contract and that it was not aware of any independent labor provision (specifically referenced in the contract). This does not speak well of either party’s attention to the specifics of their agreement. 17. Based on the evidence, any claimed payment to the Complainant by the Respondent ($32,702.40 is asserted), was on the separate labor contract which based on the evidence may well have included work at another job. In addition there was no competent evidence that the amount was actually paid. Exhibit B (handwritten time sheets with payment notes) only shows payment of approximately $25,000.00 (There may have been a duplication of claimed payments bringing the amount to the $32,702.40 as represented by the Respondent). Such notes do not constitute credible evidence and regardless of the correct amount, the evidence shows that payment was on the labor contract and not the $13,700.00 Wal-Mart contract. These payments by the Respondent cannot be considered a set off on the $13,700.00. 18. Frank Tong (Tonge) was a superintendent for W.M.Grace (Grace), the general contractor on the project. Tonge testified that the Complainant’s work was average to poor. According to Tonge, re-bar had to be reset because the Complainant incorrectly excavated all trenches at the same elevation when there should have been some height deviation. Trenches had to be deepened and straightened, re-bar had to be re-spaced, footers were not truly level, some block had to be shimmed. “Wet stabbed” anchor bolts had to be replaced, and the project was seriously delayed. The Respondent paid Brothers Masonry Corporation $488.00 to correct the “out of level” footing walls (Exhibit E) and another $760.65 to fix west wall footings (Exhibit D). 19. The footings were not completed until November, 1999, and work on the loading docks remained to be done. Tonge testified he sent the Respondent a 48 hour notice in November, 1999, to put qualified workers on the job because it was behind schedule primarily because of the Complainant’s concrete work. 20. The Respondent terminated the Complainant. The date of termination is uncertain with the Complainant testifying it was November 5, 1999, and the Respondent claiming it was November 12, 1999. There was no evidence that the Complainant was given any notice of prior to termination. 21. The Complainant submitted invoices to the Respondent in the amount of $9,590.00 on October 25, 1999 and $1,096.00 on December 16, 1999. These invoices assert 78% of the concrete pour for the footings had been completed. Based on the Respondent’s Exhibit C, it determined that only 3460 square feet were completed at $1.50 a square foot for a total of $5,190.00 due with a $1,900.00 back charge for anchor bolts and epoxy. The correctness of the $1,900.00 back charge was not established by competent evidence (it is merely a note on an invoice). Exhibit F shows a company called Pro Steel Erectors charging Grace $1,720.00 for work on the anchor bolts. The Respondent claims it had to take this as a back charge from Grace as a consequence of the Complainant’s work. The Respondent is uncertain if the remaining amount of $3,290.00 ($5,190.00 less $1,900.00), was paid to the Complainant. 22. After the Complainant was terminated from Wal-Mart, the Respondent finished the Complainant’s work. The Respondent claims it had to settle certain matters in dispute with Grace for $30,000.00 but the Respondent did not set forth any specific amount in the settlement which was attributable to the Complainant. 23. The complaint was filed with the Registrar of Contractors (Registrar) on February 21, 2001. Conclusions of Law The allegations in the Citation and Complaint concern A.R.S. §32- 1132(A)(7) a wrongful or fraudulent act and failure to pay in excess of $750.00. Since both contracts were brought as a single case, the allegations will be considered as a single issue. 1. The Complainant is claiming $37,350.00 on the Sunray project (after disallowance of the claimed $16,650.00 for the asserted lost or misappropriated materials and the $5,000.00 payment), and $10,686.00 on the Wal-Mart project (the total amount is therefore $48,036.00). The Complainant’s evidence of the correctness of the amounts is based solely on invoices submitted to the Respondent. The evidence based on the Respondent’s testimony shows the Respondent has not paid approximately $20,727.00 for satisfactory or accepted work on the Sunray project. The Respondent presented evidence that the Complainant was responsible for delays, the work at Wal-Mart was not done in the amount which was invoiced, and that it had a total of $60,000.00 in back charge and settlement costs because of the Complainant’s poor work on both projects (the accuracy of these back charges were inadequately identified and not supported by competent evidence). 2. Considering the presentation of the parties on the crucial issue of amounts claimed as owed by the Complainant and the set off claims by the Respondent, the evidence is inadequate to allow for any reasonable determination of amounts which may or may not be owed to the Complainant. There is little evidence of the actual total costs incurred by the Respondent to demolish and rebuild some of the Complainant’s work at Sunray or the Complainant’s responsibility for any set off on the Wal- Mart project. Under these circumstances, the question of what amounts are properly owed, is primarily one of damages which is more suited to a civil proceeding rather than a regulatory one. 3. However, the evidence does show that the Respondent owed at least $20,727.00 to the Complainant on the Sunray project before the work was apparently rejected after the project had been suspended for almost a year between the August 1999, suspension and the project starting up again in June 2000. The Respondent made no effort to pay any portion of the amount owed even though the Complainant requested payment while the project was on hold. The subsequent back charge rationale for non payment, did not exist while the project was suspended because the Complainant’s work had not been deemed unacceptable at the time payment was requested. In addition and as an independent violation of (A)(11), there was no payment under the Wal-Mart contract and even though the Complainant’s invoice may have been inaccurate, the Respondent could not show payment on the amount ($3,290.00), the Respondent apparently acknowledged as owing (Exhibit C). Given the entirety of the evidence, a violation of A.R.S. §32-1132(A)(11) is found. For reasons already stated, no amount other than the excess of $750.00, is determined. 4. An A.R.S. §32-1154(A)(7) wrongful act violation is found based on the violation of (A)(11) when coupled with the failure of the Respondent to make any effort to inform the Complainant of the asserted problems on the Sunray project. Irrespective of the fact that the Respondent was displeased with the Complainant’s work at Wal-Mart, the Respondent owed a contractual duty under the separate Sunray contract to at least inform the Complainant of the Respondent’s intentions and subsequent actions before the Respondent could unilaterally enter into settlements, accept back charges and do corrective work, the costs of which it intended to assess against the Complainant. Based on the above, it is concluded that the Respondent failed to act in good faith on some crucial issues under the respective contracts.

Recommended Order In view of the foregoing, it is recommended commencing the effective date of the Order entered in this matter that the Class A license of the Respondent shall be placed on probation for period of 120 days.

Done this day, July 30, 2001

______________________________________ Allen Reed Administrative Law Judge

Original transmitted by mail this ____ day of ____________, 2001, 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