ALJDEC

01F-A0195-ROC · Registrar of Contractors · 2001-05-29

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

On May 11, 2001, a hearing was held to determine if the Respondent had violated provisions of A.R.S. §32-1154(A). Sergio Borgognone represented Farwest Construction Corporation of Northern Arizona (the “Complainant”). Karl Schmutz represented Crossbow Enterprises Inc. (the “Respondent”). Evidence and testimony were presented. Based upon a review of the entire record, the undersigned Administrative Law Judge makes the following Findings of Fact, Conclusions of Law and Recommended Decision. FINDINGS OF FACT

1. Mr. Sergio Borgognone is the Complainant’s president. Mr. Karl Schmutz is the Respondent’s president and qualifying party. Mr. Borgognone testified that he was the general contractor on a project (the “Project”) to build an addition to Samaritan Villages (the “Jobsite”). Mr. Borgognone testified that he hired the Respondent to supply and install the steel for the Project.

2. On August 15, 2000, the Respondent submitted a proposal (the “Proposal”) to the Complainant. See Respondent’s Exhibit B. The Respondent’s Proposal stated the following: Steel for Office remodel . . . All material to be delivered by KJ Enterprises. Id. The Proposal amount was $3,437.14 to be paid “50% Down 50% upon Delivery”. Id. (emphasis added). On September 12, 2000, Mr. Borgognone signed an Acceptance of Proposal. Id.

3. Mr. Schmutz testified that the Respondent’s Proposal only included the cutting of the steel, the fabricating of the beams and joists, and the deliverance of the beams and joists to the Jobsite. Mr. Schmutz testified that the Proposal did not include the labor for the installation of the steel at the Jobsite.

4. The undersigned Administrative Law Judge finds that on September 12, 2000, the parties entered into a contract when Mr. Borgognone signed the Acceptance of Proposal. See Respondent’s Exhibit B. This initial contract required the Respondent to supply and deliver the steel to the Jobsite. Id. This initial contract did not require the Respondent to install the steel at the Jobsite. Id.

5. On or about September 16, 2000, the Complainant and the Respondent entered into a written contract (the “Contract”). The Contract stated the following: Scope of Work: To furnish all materials and perform all labor necessary to complete the following: INCLUDES: All Structural Steel and Labor on Project as per plans and specifications NOT INCLUDED: Concrete or Metal Framing See Complainant’s Exhibit 1, Section 2, page 1.

6. The Contract was drafted by the Complainant. However, the Respondent typed the following paragraph on the final page of the Contract:

*Received Check #6501 from Far West Construction in the amount of $1,200.00. Balance of down payment due on September 22, 2000. The Balance is $518.57. Our terms are 50% Down and 50% on Install.

See Complainant’s Exhibit 1, page 5 (emphasis added). Mr. Schmutz signed his name after this paragraph. Id.

7. Mr. Borgognone testified that he made a down payment of $1,718.00 pursuant to the terms of the Contract. Mr. Schmutz testified that he ordered the steel for the Project. Mr. Schmutz testified that the Respondent received the steel at the Respondent’s place of business.

8. Mr. Borgognone testified that the Respondent was contractually bound to supply and install the steel at the Jobsite. Mr. Borgognone relied on the above referenced provisions of the Contract. Mr. Borgognone reiterated that Mr. Schmutz included the paragraph on the final page of the Contract that stated, “Our terms are 50% Down and 50% on Install.” See Complainant’s Exhibit 1, page 5 (emphasis added).

9. Mr. Schmutz testified that his secretary, Lari Bridgeford, inadvertently typed in the word “Install” instead of “Deliver” on the final page of the Contract. See Complainant’s Exhibit 1, page 5. Mr. Schmutz testified that he overlooked this mistake when he signed the Contract. However, Mr. Schmutz testified that it was ridiculous for the Complainant to believe that the Respondent could supply and install the steel for the Project at the Proposal amount of only $3,437.14. Mr. Borgognone conceded that the Complainant ultimately paid $10,400.00 to another contractor to supply and install the steel for the Project.

10. The undersigned Administrative Law Judge finds that on or about September 16, 2000, the parties entered into the Contract. See Complainant’s Exhibit 1. The undersigned Administrative Law Judge finds that the Respondent mistakenly included the language “50% on Install” on the last page of the Contract. The basis for this finding is: (1) the Respondent’s Proposal amount and the Contract amount are exactly identical (i.e., $3,437.14) but the Respondent’s Proposal did not include the installation of the steel; and (2) the Respondent’s Proposal amount is far lower than what the Complainant ultimately paid for the steel and the labor to install the steel at the Jobsite.

11. Mr. Schmutz testified that he realized that there was a misunderstanding between the parties. Mr. Schmutz testified that he tried to correct the misunderstanding with the Complainant. However, Mr. Schmutz testified that he had a difficult time contacting Mr. Borgognone. On the contrary, Mr. Borgognone testified that he had a difficult time trying to contact Mr. Schmutz. Lari Bridgeford, the Respondent’s secretary, testified that Mr. Borgognone called the Respondent several times.

12. Mr. Schmutz testified that he offered to deliver the steel to the Complainant in exchange for the down payment (i.e., $1,718.00) already paid by the Complainant. Mr. Schmutz testified that the Complainant refused this offer.

13. The Respondent never delivered the steel to the Jobsite. Mr. Schmutz testified that he used a portion of the steel on other projects. Mr. Schmutz testified that he could have returned the steel to the manufacturer. However, Mr. Schmutz testified that the manufacturer required an $800.00 restocking fee for the return of the steel. Mr. Schmutz testified that he offered to return the $1,718.00 down payment to the Complainant minus the $800.00 restocking fee. The Complainant refused this offer.

14. Mr. Schmutz testified that he also offered to install the steel at the jobsite. However, Mr. Schmutz testified that he required an additional $10,000.00 to install the steel. The Complainant refused this offer. Mr. Borgognone testified that the Respondent should honor the terms of the Contract.

15. The Respondent’s name on License No. 129353 is Crossbow Enterprises Inc. Mr. Schmutz admitted that the Respondent has conducted business under the name of KJ Enterprises. The Respondent’s Proposal in this matter was under the name of KJ Enterprises. See Respondent’s Exhibit B. Mr. Schmutz testified that he prefers the name KJ Enterprises. However, Mr. Schmutz testified that the Respondent was not able to incorporate under the name KJ Enterprises.

CONCLUSIONS OF LAW 1. The Complainant has the burden of proof, and the standard of proof on all issues is by a preponderance of the evidence. Culpepper v. State, 187 Ariz. 431, 930 P.2d 508 (App. 1996). A "preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not." Morris K. Udall, Arizona Law of Evidence, §5 (1960). 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 (6th ed. 1990).

2. The undersigned Administrative Law Judge concludes that the preponderance of the evidence shows that the Respondent has violated A.R.S. §32-1154(A)(1). Assuming arguendo that the Respondent correctly interpreted the terms of the Contract, the Respondent was still required to cut, fabricate and deliver the steel to the Jobsite. Without legal excuse, the Respondent failed to deliver the steel to the Jobsite.

3. The undersigned Administrative Law Judge concludes that the preponderance of the evidence shows that the Respondent has violated A.R.S. §32-1154(A)(3) and R4-9-108. Assuming arguendo that the Respondent correctly interpreted the terms of the Contract, the Respondent was still required to cut, fabricate and deliver the steel to the Jobsite. The Respondent failed to deliver the steel to the Jobsite.

4. The undersigned Administrative Law Judge concludes that the preponderance of the evidence shows that the Respondent has violated A.R.S. §32-1154(A)(7). Assuming arguendo that the Respondent correctly interpreted the terms of the Contract, the Respondent was still required to cut, fabricate and deliver the steel to the Jobsite. The Respondent failed to deliver the steel to the Jobsite. Furthermore, the Respondent mistakenly included the language “50% Down and 50% on Install” in the Contract. This mistake harmed the Complainant because it caused confusion and delays in the Project.

5. The undersigned Administrative Law Judge finds that the preponderance of the evidence shows that the Respondent has violated A.R.S. §32- 1154(A)(15). The Respondent has conducted business under the name of KJ Enterprises. The Respondent’s name on License No. 129353 is Crossbow Enterprises Inc.

6. The undersigned Administrative Law Judge concludes that grounds exist to discipline the Respondent’s Class L-56 license pursuant to A.R.S. §32- 1154. However, the undersigned Administrative Law Judge declines to issue a conclusion regarding contractual damages. The undersigned Administrative Law Judge finds that a civil court of law is the more appropriate forum for the determination of contractual damages. RECOMMENDED DECISION

Based upon the foregoing, the undersigned Administrative Law Judge recommends that commencing on the effective date of this Order that the Respondent’s Class L-56 license be placed on active suspension for a period of 1 (one) day.

Done this day, May 31, 2001.

______________________________________ Casey J. Newcomb Administrative Law Judge

Original transmitted by mail this ____ day of May, 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