ALJDEC

01F-F0248-ROC · Registrar of Contractors · 2001-12-26

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: December 7, 2001. APPEARANCES: COMPLAINANT: Randy Hanke. RESPONDENT: by Earl Bakken, authorized representative, president and qualifying party.

ADMINISTRATIVE LAW JUDGE: Anthony Halas. _____________________________________________________________________

Hearing in this matter 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. On or about May 21, 2001, Complainant Randy Hanke (Hanke) filed a complaint against Advanced Commercial Construction dba ACS, Inc. (ACC) with the Registrar of Contractors (Registrar), alleging that ACC had failed to pay $5560.94 for excavation services performed by Hanke in new residential construction at 105 Rock Ridge Road, in Sedona, Arizona. 2. Advanced Commercial Construction, dba ACS, Inc. is a corporation holding Arizona Contractor’s License No. 164933, Class B-. Earl Bakken (Bakken) is a corporate officer, qualifying party on the license, and authorized representative for this proceeding. 3. When the matter was not administratively resolved, Complainant Hanke requested hearing, and the Registrar issued CITATION AND COMPLAINT in Case No. F01-0248 on August 28, 2001, charging Respondent ACC with possible violations of A.R.S. § 32-1154.A.7, A.11, and A.20. On Respondent’s timely answer, the complaint was set for hearing on December 7, 2001, in Flagstaff, Arizona. 4. At hearing, Complainant Hanke appeared and testified, and offered Exhibits 1, 2, and 3, which were marked and admitted over Respondent’s objections to the weight to be given the first two exhibits. Bakken appeared and testified as Respondent’s representative, and offered Exhibit A, which was marked and admitted, without objection. 5. Based on administrative notice and the evidence of record, the undersigned finds that sometime prior to September 15, 2000, Complainant Hanke was hired by Glenn Unseth (Unseth), who was then representing Respondent ACC, which company had been hired by the homeowner (Fishel) to construct a residence at 105 Ridge Rock Road, in Sedona, Arizona (the Ridge Rock project). 6. Hanke stated that Unseth had hired him to be an on-site supervisor of the Ridge Rock project, overseeing the initial aspects of starting up construction, and addressing such concerns as obtaining building permits and arranging for waste disposal. To specify Hanke’s supervisory duties vis-a-vis the work to be done by others, ACC prepared a checklist (Exhibit 2, p. 2). The parties agree that ACC paid Hanke appropriately for his work in that supervisory capacity. 7. As the project progressed, according to Hanke, he discussed with Unseth the possibility of doing additional excavation and haul-off and similar work on an hourly basis. When Unseth asked that he instead submit a bid for the total cost of such work, Hanke did so and submitted a PROPOSAL dated September 15, 2000 to Unseth. Administrative notice is taken of the PROPOSAL, copied to the Registrar with Complainant’s complaint. 8. The PROPOSAL called for particular site work and excavation (with a change work order to be used as an additional bid if hard rock conditions were encountered), to be done for the sum of $11,950.00, of which $4000.00 was to be paid at the start of clearing the lot; $6000.00 at the end of the first week; and the balance of $1950.00 at completion of excavation. 9. Hanke testified that the arrangement he discussed with Unseth was for ACC to hire him to do the proposed work as an employee of the company, rather than as a subcontractor. 10. Hanke confirmed that although no one for ACC formally accepted the PROPOSAL by actually signing it, he proceeded with the work as proposed, with the knowledge of Unseth and Brice [last name unknown] at ACC, and he presumed the PROPOSAL had been accepted when he received the first payment of $4000.00 on about November 11, 2000, and then a second payment of $2000.00 on about November 20, 2000. 11. Hanke described the work he had done relative to the PROPOSAL, stating that he did not intend for the PROPOSAL to require him to remove the dirt excavated from the site, since he believed that to be the homeowner’s responsibility, given language in Fishel’s general contract with ACC (Exhibit 2, p. 1). 12. Hanke stated that for that reason he had moved a significant amount of dirt to the rear of the property as he excavated, where the soil could wait to be hauled off-site (by the homeowner) as necessary. He also contended that a significant amount of the work required hard rock excavation. 13. Hanke noted that early in December, 2000, Unseth had been terminated by ACC, which company then had Hanke deal with Brice and Rustin Clifford (Clifford), who then arranged for excavation and other heavy equipment to do work which destroyed some of the work he had already completed, and interfered with and prevented completion of his remaining work. 14. Hanke contended that the excavation he had completed constituted approximately 85% of the work he had proposed, with essentially only the footings remaining, and that his work accurately met the plans and specifications for site elevation. 15. Based on that estimate of work completed, and taking into account the two initial payments totaling $6000.00 and credits[1] and debits[2] from his original contract price of $11,950.00, Hanke contended in his complaint to the Registrar that a balance of $5560.94 was due from ACC (Exhibit 1). 16. In January, 2001, in an attempt to resolve the dispute, Hanke faxed ACC’s Rustin Clifford an itemization of job costs and recalculation of the balance due in the amount of $4570.25 (Exhibit 3). 17. Hanke contends that the equitable remedy of quantum meruit should apply to require Respondent ACC to pay at least $4570.25 for the work he had done under the PROPOSAL. 18. Earl Bakken testified for Respondent ACC to confirm his awareness of Hanke’s role in a supervisory capacity for ACC on the Ridge Rock project in the fall of 2000, and the separate payments of $6000.00 ACC paid to Hanke under the PROPOSAL. 19. Although he conceded his limited dealings directly with Hanke anytime prior to December, 2000, Bakken questioned Hanke’s contention that he had been hired by ACC to work under the PROPOSAL as an employee of ACC rather than as a sub- contractor, since it was not the company’s practice to hire employees to do work typically bid on by subcontractors, and no arrangements had been made for worker’s compensation coverage and other related concerns. 20. Bakken also disputed the extent to which Hanke had actually completed work under the contract, for several reasons: A. First, Bakken considered Hanke’s reference to the homeowner’s responsibilities to remove excavation spoils under the general contract (to which Hanke was not a party) to be taken out of context relative to the reasonable expectations of the work ACC expected Hanke to do under his PROPOSAL. To that end, Bakken noted that the checklist specifying Hanke’s duties as a supervisor (separate from those related to the PROPOSAL) addressed coordination of import and export of fill (Exhibit 2, p. 2). B. Second, Bakken asserted that Hanke’s excavation work failed to meet the plans and specifications (critical for issuance of the city permit) for site elevation by a matter of several feet, as demonstrated by a site survey done on December 5, 2000 (Exhibit A), which survey had been commissioned by ACC when Clifford, Unseth’s replacement on site, questioned the adequacy of the work Hanke had done. C. Third, Bakken asserted that based on the survey results, ACC had then incurred $3000.00 and other additional expense for heavy equipment and operators to complete the excavation work to meet the plans and specifications for site elevation. By Bakken’s calculation, Hanke should owe ACC monies, rather than vice versa. D. Bakken also disagreed that any significant hard rock dig had been required to meet the site elevation requirements.

APPLICABLE LAW A.R.S. § 32-1154.A provides, in pertinent part, as follows: 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: . . . . . 7. The doing of a wrongful or fraudulent act by the licensee as a contractor resulting in another person being substantially injured. . . . . . 11. Failure by a licensee or agent or official of a licensee to pay monies in excess of seven hundred fifty dollars when due for materials or services rendered in connection with the licensee's operations as a contractor when the licensee has the capacity to pay or, if the licensee lacks the capacity to pay, when the licensee has received sufficient monies as payment for the particular construction work project or operation for which the services or materials were rendered or purchased. . . . . . 20. Subsequent discovery of facts which if known at the time of issuance of a license or the renewal of a license would have been grounds to deny the issuance or renewal of a license.

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CONCLUSIONS OF LAW 1. The Registrar of Contractors has jurisdiction over this matter, 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 any one or more 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. Complainant contends the equitable remedy of quantum meruit, or the measure of “as much as deserved”[3] for the work he did, in conjunction with the Registrar’s authority to impose restitution pursuant to A.R.S. § 32-1156.01, should result in a determination that Respondent owes him at least $4570.25 and as much as $5560.94. 4. However, the Registrar of Contractors, acting through an administrative disciplinary proceeding such as this, is not readily authorized or comprised by law to adjudicate and direct payment or restitution of amounts alleged to be due and owing pursuant to contract when there is determined to be a bona fide dispute relative to the performance either required or rendered, or to any amounts owed, under such contract. 5. In this instance, the undersigned finds and concludes that the compelling weight of the evidence herein demonstrates significant, credible, and bona fide disagreement between the parties relative to the terms of the performance called for and the percentage of that work completed under the otherwise valid contract between Complainant Hanke and Respondent ACC, based on Complainant’s PROPOSAL of September 15, 2000 as accepted by Respondent. Therefore, it is further concluded that there is compelling reason to deem any debt or obligation calculated according to such performance also subject to bona fide dispute. 6. Given such dispute, the undersigned must deem the evidence insufficient to sustain Complainant Hanke’s burden of proving, by a preponderance, that Respondent ACC has violated either A.R.S. § 32-1154.A.7 or A.R.S. § 32-1154.A.11. 7. In addition, the evidence is deemed insufficient to demonstrate any violation by Respondent of A.R.S. § 32-1154.A.20. 8. Therefore, unless and until any claimed debt or obligation owed Complainant by Respondent under the subcontract is reduced to judgment by a civil court or forum of competent jurisdiction, no determination can be made that Respondent should be subject to disciplinary sanctions by the Registrar of Contractors.

RECOMMENDED DECISION On the basis of the foregoing, IT IS RECOMMENDED that the Citation in Case No. F01-0248, and the Complaint upon which it is based, be dismissed. Done this day, December 26, 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] $375.00 for brush hauling; $47.94 for dump truck sideboards. [2] $50.00 for not installing culvert; $750.00 for two day’s excavator rental by ACC; $300.00 for operator labor by ACC; $288.00 for [his son] Evans (24 hours times $12.00). [3] Black’s Law Dictionary, Rev. 6th Ed. (1990).

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