ALJDEC

01F-2302-ROC · Registrar of Contractors · 2001-11-08

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: September 5 and 26, and October 19, 2001. APPEARANCES: COMPLAINANT: by Noel Hebets, Esq., with Saad Abood and Dan Hawkins. RESPONDENT: by Michael Gottfried, Esq., with Rick Sanetra.

ADMINISTRATIVE LAW JUDGE: Anthony Halas. _____________________________________________________________________ Hearing was convened to determine whether Respondent violated state law as alleged by Complainant and as cited by the Registrar of Contractors. Evidence and testimony were presented, and based on the entire record, the following Findings of Fact, Conclusions of Law, and Recommended Decision are made:

FINDINGS OF FACT 1. Complainant City Construction, Inc. (City Construction) is a corporation licensed as a general commercial contractor in Arizona. Saad Abood is president of the corporation. 2. Respondent Willman & Sanetra Plastering, Inc. (W & S Plastering) holds Arizona Contractor’s License No. 149452, Class K-10, issued by the Registrar of Contractors (Registrar) on October 14, 1999. Richard Sanetra is vice-president of the corporation. 3. On March 16, 2001, Complainant City Construction filed a complaint with the Registrar alleging that Respondent W & S Plastering had refused to perform after submitting a bid, without legal excuse for the abandonment or refusal, in violation of A.R.S. § 32-1154.1. 4. When the complaint was not resolved administratively, Complainant requested a hearing. The Registrar issued CITATION AND COMPLAINT to W & S Plastering on May 2, 2001, charging the contractor with possible violations of A.R.S. §§ 1154.A.1 and A.7, and Respondent timely filed its written answer contending that no contract had been formed by the parties and the complaint should be dismissed. With the issues joined, the matter was set for hearing. 5. A. At hearing, Complainant appeared, through counsel, presented the testimony of Dan Hawkins and Saad Abood, and offered Exhibits A - S, which were marked and admitted without objection. B. Respondent appeared, also through counsel, presented the testimony of Richard Sanetra, and offered Exhibit 1, which was marked and admitted without objection. 6. On the testimony and evidence presented, the following chronology of events and circumstances is found to be relevant and material: A. In the fall of 2000, Complainant City Construction prepared to submit a “bonded” bid for the general contract on a Maricopa County (County) construction project known as the “Partial Remodel Third Floor Maricopa County Administration Building”, at 301 West Jefferson, in Phoenix, Arizona (the Project). In doing so, City Construction called for and received bids from various subcontractors for various portions of the work. B. On October 31, 2000, shortly after 9:00 a.m., Respondent W & S Plastering faxed a “Drywall & Metal Stud Proposal” (the Proposal) to Complainant City Construction, by which Respondent proposed to perform drywall and stud framing work[1] for the sum of $26,724.00 (Exhibit A). The Proposal was drafted by Robert Podojil (Podojil), an estimator for Respondent at the time. Along with specific terms relative to the proposed scope of construction, and five general “additional terms and conditions”, the Proposal contained this language:

Subject to execution of contract … This proposal, together with the terms and conditions set forth shall become a binding contract only if it is signed by Contractor/Owner, and is returned to Willman & Sanetra Plastering, Inc. before December 14, 2000. All prior representations not incorporated herein are superseded. No changes in or additions to this contract will be recognized unless in writing and signed by each of the parties hereto.

C. Dan Hawkins (Hawkins), Complainant’s main estimator at the time (and presently a consultant for Complainant and other companies), testified to describe these events occurring on October 31, 2000 after City Construction received the W & S Plastering Proposal: after reviewing the Proposal, Hawkins telephoned Podojil to confirm Podojil “was comfortable” with the Proposal - which was the only stud and drywall subcontract bid City Construction received prior to the general contract bid deadline later that same day. Because Respondent’s bid was about $8000.00 lower than Complainant’s in-house spreadsheet estimate on the Project (Exhibit B), City Construction revised its bid to the County by that amount and resubmitted it (Exhibit C). Later that day, City Construction was awarded the contract by the County, based on its low general contract bid of $315,385.69. D. The next day, November 1, 2000, Hawkins called Podojil to inform him City Construction had listed W & S Plastering for the drywall and stud subcontract submitted to the County, and that City Construction had been awarded the County contract. E. The County then scheduled a pre-construction conference on November 14, 2000 for owners, inspectors, architects, the general contractor, and the various sub-contractors. Hawkins testified, based on his recollection and memorandum of November 29, 2000 (Exhibit F), that he called W & S Plastering before November 14 and spoke with a man he understood to be Rick Sanetra (Sanetra) to advise of the conference, and was told Respondent’s field superintendent would be there. In his testimony, Sanetra denied speaking with Hawkins then or at any time. F. No one from W & S Plastering attended the pre-construction conference on November 14, 2001. G. On November 15, 2000, City Construction’s general manager at the time, Chuck Michalovic, sent subcontractor packages to all the subcontractors whose bids had been submitted in Complainant’s general contract bid to the County. This included W & S Plastering, and the package to Respondent contained: 1). A fax cover sheet dated November 15, 2000; 2). A “LETTER OF INTENT” of that same date “to award a contract for the Remodel of the Administration Building, Third Floor, Maricopa County"; 3). An unsigned “CONTRACT No. 2” dated November 9, 2000 in the amount of $26,724.00; and 4). A construction schedule indicating the drywall was to start on November 27, 2000 and finish just before the end of December, 2000. (Exhibit D). H. Hawkins testified, consistent with the memorandum he drafted on November 29, 2001 (Exhibit F), that in the week of November 14 - 20, 2000, he telephoned W & S Plastering and spoke with a man who identified himself as Alex Torres (Torres), whom Hawkins understood to be field superintendent for scheduling and mobilization, and he was told by Torres that he would assess the project and begin stocking metal studs on November 27, 2000. I. No one from W & S Plastering showed at the project site on November 27, 2000. J. On November 29, 2000, Respondent’s estimator Kim Miller (Miller) sent correspondence to Complainant’s Michalovic via fax and mail stating that Podojil had been terminated November 20, 2000, and that W & S Plastering had reviewed the bid [Proposal], could not commence work on the project, and did not desire to re-submit the bid (Exhibit E). Hawkins testified that prior to receiving Miller’s letter, no one at City Construction knew that Respondent did not intend to proceed. Sanetra testified that he thought Miller had called City Construction sometime between November 20 (when Podojil was terminated) and November 29 (the date of Miller's letter) with information to that effect. K. City Construction then entered into a subcontract for framing and drywall with Bjerk Builders, Inc. on January 24, 2001(Exhibit I). The price term for the subcontract was $37,362.00, and was based on that subcontractor’s November 28, 2000[2] proposal (Exhibit G) in that amount for metal stud framing and drywall. Bjerk Builders, Inc. completed the work and was paid in full.[3] 7. Hawkins testified to opine that he thought the reason W & S Plastering chose not to proceed was because its estimator Podojil had underbid, and not because City Construction had failed to sign and return the actual Proposal W & S Plastering had presented, since acceptance in that manner was contrary to industry practice (despite the unambiguous language of the Proposal). 8. Sanetra testified that although Podojil's estimate may have been a concern to W & S Plastering, his company routinely required that its proposals be signed and returned in order to be accepted, since the terms and conditions stated on the proposal were of importance to the company’s business. 9. The parties agree that Respondent’s Proposal was never signed and returned to Respondent by Complainant; and that Complainant’s Contract No. dated November 9, 2000, was never signed by Respondent. The parties disagree on whether a binding and enforceable contract was established, but premise their respective positions in this disciplinary proceeding on whether such contract formation occurred: A. Complainant City Construction contends (with citations to case law) that a contract was formed on the conduct of Respondent W & S Plastering after it submitted the Proposal, given Complainant’s reliance on the Proposal from October 31 through November 29, 2000, and its timely and sufficient acceptance of the Proposal when it provided Respondent its LETTER OF INTENT and CONTRACT No. 2 on November 15, 2000, notwithstanding that it did not sign the Proposal as Respondent explicitly required for the Proposal to become a binding contract. It is for breach of such alleged contract that Complainant contends Respondent's license should be disciplined (with the acknowledgment at hearing that the authority of the Registrar in such a disciplinary proceeding does not encompass determining or awarding actual contract damages). B. Respondent asserts (with citations to the same case law but contrary interpretations) that Complainant’s LETTER OF INTENT and unsigned CONTRACT No. 2 merely constituted a counteroffer, never accepted by Respondent, notwithstanding Respondent's conduct, the passage of time, or Complainant’s alleged reliance, such that Complainant's failure to accept the Proposal by means of its explicit requirements - at any time prior to Respondent's November 29, 2000 withdrawal of the Proposal - precluded formation of a binding contract. Because it alleges no contract was formed, Respondent asserts that no discipline should be imposed by the Registrar against its license.

APPLICABLE LAW The CITATION AND COMPLAINT issued by the Registrar of Contractors charges Respondent with possible violations of A.R.S. § 32-1154.A.1 and A.7. Those statutory sections require that a holder of a license or a person listed on a license shall not commit the following:

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. …

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CONCLUSIONS OF LAW 1. The Registrar of Contractors has jurisdiction over this complaint, pursuant to A.R.S. § 32-1101, et. seq., which authorizes the Registrar to impose disciplinary sanctions against licenses for violations of A.R.S. § 32-1154. 2. To warrant such sanctions by the Registrar, Complainant must demonstrate by a preponderance of the evidence that Respondent violated either or both of the statutory sections cited. Culpepper v. State of Arizona, 187 Ariz. 431, 930 P.2d 508 (App. 1996). Proof by a “preponderance” means that “the evidence is sufficient to persuade the finder of fact that the proposition is more likely true than not.” In re: Arnold and Baker Farms, 177 B.R. 648 (9th Cir. BAP (Ariz.) 1994). 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.” Black’s Law Dictionary 1182 (Rev. 6th ed. 1990). 3. Although the parties premise their positions on whether or not a contract was formed, and therefore whether it was abandoned, the pertinent statutory authority cited by the Registrar is stated in the disjunctive, and thus does not require contract formation (and abandonment) as a necessary element to prove a violation of the statute: Abandonment of a contract or refusal to perform after submitting a bid on work without legal excuse for the abandonment or refusal. A.R.S. § 32-1154.A.1 (Emphasis added).

In this matter, the undersigned concludes that the preponderance of the evidence demonstrates that W & S Plastering submitted a bid Proposal to City Construction to perform drywall-related work under City Construction's bid for the general contract with the County, that City Construction relied on the Proposal in submitting its bid and scheduling construction, and that W & S Plastering then refused to perform. The question then is whether there is legal excuse for such refusal. 4. The undersigned further concludes that a preponderance of the evidence does not demonstrate that W & S Plastering abandoned any contract, since City Construction has not sustained its burden of proving as more likely than not the existence of a valid and enforceable contract. In any event, whether or not a contract was formed, only to be abandoned, goes to the other disjunctive phrase of the statute, and is not a necessary element of the proof of Respondent’s refusal to perform as determined hereinabove. 5. Nor is the absence of proof of a contract deemed by the undersigned as sufficient legal excuse for Respondent’s refusal to perform. Then, since Respondent’s admitted concern for the possibility that its estimator underbid its Proposal also does not suffice as legal excuse for its refusal to perform, and no other excuses were presented, this tribunal concludes that Complainant has sustained its burden of proving that Respondent’s refusal to perform was without legal excuse. A violation of A.R.S. § 32-1154.A.1 has therefore been demonstrated. 6. Because Respondent’s violation of A.R.S. § 32-1154.A.1 is deemed to have been a wrongful act which resulted in substantial injury to Complainant due to scheduling delays and increased drywall subcontracting costs, the undersigned further concludes that a violation of A.R.S. § 32- 1154.A.7 has also been demonstrated. 7. As set forth in the CITATION AND COMPLAINT issued by the Registrar, Respondent was advised that in the event of a finding of a violation, Respondent’s prior disciplinary record of final Registrar of Contractors’ orders may be considered in mitigation or aggravation. Accordingly, subsequent to conclusion of the instant hearing, notice was taken of official records of the Registrar of Contractors regarding any prior final disciplinary orders against Respondent and said notice revealed that the instant complaint was the only complaint against this license on the Registrar of Contractors’ current record. Therefore, Respondent’s prior record is properly deemed to be excellent and thus, is viewed as a matter in mitigation for any disciplinary penalties to be imposed as a direct result of the violations proven. // // //

RECOMMENDED DECISION On the basis of the foregoing, IT IS RECOMMENDED that, commencing on the effective date of the Registrar’s Order in this matter, the Class K-10 license of Respondent W & S Plastering, Inc., be placed on active suspension for a period of one (1) day, followed immediately by a period of ninety (90) days disciplinary probation. Done this day, November 8, 2001.

______________________________________ Anthony Halas 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 ___________________________

----------------------- [1] As described in Section 9250 of the project plans and specifications. [2] The bid by Bjerk Builders, Inc. was dated the day before the W & S Plastering correspondence notifying City Construction that the subcontractor did not intend to proceed. [3] City Construction received another metal stud framing and drywall bid from subcontractor Pen’s Construction, L.L.C. That bid, for $33,790.00, was dated November 22, 2000 (the week before the W & S Plastering correspondence notifying City Construction the subcontractor did not intend to proceed) (See Exhibit H).

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