ALJDEC

01F-T0256-ROC · Registrar of Contractors · 2001-05-30

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: March 20th, and May 16th, 2001; 1:30 p.m. APPEARANCES: The complainant, Schmid Insulation Contractors, was represented by Mr. Jon Snyder, Production Manager, and Ms. Shannon Hooten, Branch Accounting Manager. The respondent, Capital Construction, LLC, was represented by Ms. Brenda J. Lee, attorney-at-law. ADMINISTRATIVE LAW JUDGE: Grant Winston. _____________________________________________________________________

This matter was brought on for administrative hearing in the Office of Administrative Hearings, Tucson, Arizona on March 20th, 2001. Further hearing was held on May 16th, 2001. Testimony was heard and other evidence admitted to the record and, based on the entire record, the following Findings of Fact, Conclusions of Law and Recommended Order are made. FINDINGS OF FACT 1. The respondent in this matter, Capital Construction, LLC, is, and during all times material hereto was, a contractor licensed by and doing business in the State of Arizona, holding Class B-01 License number 147815. 2. The complainant in this case subcontracted with the respondent to work on a project in Tucson, having the respondent as the general contractor. The project was a strip mall known as Azteca Plaza. Complainant furnished and installed the insulation for the project. Complainant performed the work in early 2000, and invoiced respondent at that time. 3. There is no denial by the respondent that it does in fact owe the complainant for its work on the project, as alleged by the complainant. The evidence supports a finding that the respondent owes the complainant at this time $8,500.00. 4. Respondent became delinquent in its payments to the complainant. Financial difficulties plagued the project, and there is no doubt from the record that the respondent’s financial position was troubled as a result of the project. 5. Complainant began raising the payment as an issue in their financial relationship in the spring of 2000. 6. By June 12th, 2000, the respondent had agreed to a payment plan with the complainant, to begin on June 16th, 2000. According to the payment plan, the respondent was going to be able to completely pay off the debt it owed the complainant within two months. Respondent ceased making payments according to the plan around the first part of August of 2000. 7. Complainant filed the instant complaint with the registrar on September 5th, 2000. Citation and Complaint issued from the registrar’s office on January 10th, 2001, citing the respondent with possible violations of A.R.S. §32-1154.A.7., and 11. Respondent filed its written answer to the citation and complaint on January 25th, 2001. 8. By April 30th, 2001, the respondent was writing to the complainant imploring the complainant to be understanding and allow the respondent more time to pay the complainant. In the letter the respondent assures the complainant that brighter financial days are just around the corner, and payment should be forthcoming if only the complainant will wait a little longer. 9. Respondent had still not paid the complainant when, on May 10th, 2001 (six days before the second hearing day), the respondent wrote another offer of a payment plan to the complainant. This plan would have had the respondent completely paying off the debt to complainant by October 10th, 2001. Complainant found this latest offer unacceptable. Complainant no longer has any faith or confidence in the respondent’s promises and wants payment in full. 10. As found, to date the respondent owes complainant $8,500.00. 11. The evidence respondent gave at the hearing was that it simply is unable to pay the debt. Respondent claims that the project is liened heavily, and there is litigation over the circumstances of the project.

12. Respondent’s testimony included the excuse that after August, 2000, no more payments were made to the complainant because respondent was no longer receiving payments on the project. However, even if respondent was not receiving payments on this particular project, that alone does not mean it was unable to pay the complainant. 13. Respondent first testified that it was and has been receiving rent income from tenants at the strip mall, and that it was applying these proceeds first to the mortgage on the property and then to other subcontractors and suppliers other than complainant, despite the fact that the respondent had written agreements to pay the complainant. Later in the hearing the respondent changed its testimony to be that it had not yet begun to receive these rent monies. Respondent’s credibility was severely damaged by this flip-flop on the material issue of its ability to pay. 14. It is found that the respondent has had the ability to pay during the time frame in question, and has been applying what income it has received to suppliers and subcontractors other than this complainant, despite its promises and assurances to complainant. 15. Notice is taken of the respondent’s prior license record with the Registrar of Contractors. CONCLUSIONS OF LAW 1. This hearing was held under authority of and pursuant to A.R.S. §32-1156 and A.R.S. §41-1092. 2. The respondent herein is charged in the instant citation and complaint with possible violations of A.R.S. §32-1154.A.7., and 11. 3. A.R.S. §32-1154.A.11.prohibits a licensed contractor from failing to pay monies in excess of $750.00 when due for materials or services rendered in connection with his operation as a contractor when he has the capacity to pay, or lacking the capacity to pay, when he has received sufficient monies in payment for the particular project or operation to which the services or materials were rendered or purchased. 4. The preponderance of evidence supports a conclusions that the respondent did violate A.R.S. §32-1154.A.11. The evidence shows that, although the respondent’s finances were strained, it was, during 2000 and 2001, able to pay the complainant. Respondent’s evidence showed that they were paying other suppliers and subcontractors during this time. Other facts show that the respondent had the ability to pay because it entered into a payment plan with the complainant, which it failed to keep without justification. Respondent was not unable to pay, and could have paid this debt. 5. A.R.S. §32-1154.A.7. prohibits a licensed contractor from engaging in any wrongful or fraudulent act as a contractor which results in another person being substantially injured. Other than the violation of A.R.S. §32-1154.A.11., as concluded above, there is no evidence that the respondent engaged in any activity amounting to an independent violation of this section. RECOMMENDED ORDER In view of the foregoing Findings of Fact and Conclusions of Law, it is hereby recommended that the respondent’s Class B-01 License number 147815 be indefinitely suspended until such time as the Registrar of Contractors has received proof that the respondent has paid the complaint $8,500.00. It is further recommended that in the event the registrar receives proof, on or before the effective date of this order, that the respondent has paid the complainant $8,500.00, then no license suspension shall take place, and Citation and Complaint number T01-0256, together with the complaint on which it is based, shall be closed. Done this day, May 5th, 2001.

________________________________ GRANT WINSTON Administrative Law Judge

Original transmitted by mail this ____ day of June, 2001, to:

Michael P. Goldwater, Director Registrar of Contractors ATTN: Joyce Armijo 800 West Washington, 6th Floor Phoenix, AZ 85007

By _______________________________

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Office of Administrative Hearings 100 N. Stone Ave., Suite 704 Tucson, Arizona 85701 (520) 628-5488